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TMI Blog2019 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ing them the Franchise Service . Thus the sole reason of this advertisement fee is also the part of the contract value. More so, this value is not at all the expense incurred by the franchise for advertising his own outlet but this is the amount out of his income from the sales passed on to the service provider SSIPL in lieu of the franchise agreement between the two. Hence, this Franchise Advertisement Fund is despite a different nomenclature of being a different fund but actually is the value received by the appellant for providing franchise service to its franchisees. The amount of weekly gross sales @ 4.5% but for franchise advertisement fund is nothing but the part of gross value of the contract for providing the franchise service and, hence, was equally taxable as 8.5% of the said weekly gross sales is taxable. Time limitation - Held that:- The bifurcation of weekly gross sales by the appellant is a mere strategy to cut short its tax liability. Thus, the element of mis- representation is very much apparent on part of the appellant that too with an intent to evade payment of tax - Show cause notice dated 13/02/2009 proposing the demand for the period w.e.f. April 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) The service tax amounting to ₹ 1,44,624/- on account of non-payment of service tax on value of withholding tax ; (iii) Service tax amounting to ₹ 30,86,667/- on account of non-payment of service tax on the amount recovered as Franchise Advertisement Fund ; (iv) Service tax amounting to ₹ 3,83,711/- on the amount shown as amount received but unidentified in balance sheet. 1.2 The said show cause notice was originally adjudicated vide order No. 28/NK Mallick/2013-14 dated 18/02/2014 vide which the demand on the amount received but unidentified and the demand on account of Franchise Advertisement Fund alongwith the respective education cess was confirmed alongwith the interest and the proportionate penalties. Being aggrieved, the appeal was preferred. Commissioner (Appeals) vide the orders under challenge/order-in-appeal No. 56/ST/DLH/20 dated 30 October 2015 rejected the appeal resultantly the appellant is before this Tribunal. 2. We have heard Shri Abhishek A. Rastogi, learned Advocate for the appellant and Shri Vivek Pandey, learned DR for the Department. Learned Counsel for the appellant had conceded the liability as confirmed about the amount re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that the amount collected by the appellant in the name of Subway Franchise Advertisement Fund, in the account of SFAFT is nothing but a bifurcation of the gross value received by the appellant, for providing the service of franchise . The bifurcation is with the intend of evading/short paying the service tax liability. Section 67 of the Finance Act is being impressed upon to submit that the amount of Franchise Advertisement Fund is not the expenses but is the part of the income of the franchisor being paid to him as is very much part of the payment clauses of the franchise agreement. From any set of imagination same cannot be considered being excluded from the gross value/transaction value. Justifying the impugned order appeal is prayed to be dismissed. 3. After hearing both the parties at length, keeping in view the rival contentions and perusing the entire record including the impugned Franchise Agreement , we are of the considered view as follows :- Out of the several demands proposed vide impugned show cause notice, the original Adjudicating Authority confirmed two demands : (a) on the unaccounted amount of liability shown in balance sheet (b) on the amount col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoval of doubts, it is hereby declared that the value of a taxable service, as the case may be, includes, - (a) the aggregate of commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub-broker; (b) the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit; (c) the amount of premium charged by the insurer from the policy holder; (d) the commission received by the air travel agent from the airline; (e) the commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer; (f) the reimbursement received by the authorised service station from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer; and (g) the commission or any amount received by the rail travel agent from the Railways or the customer, but does not include (i) initial deposit made by the subscrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation. - For the purposes of this section. (a) consideration includes any amount that is payable for the taxable services provided or to be provided; (b) money includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value; (c) gross amount charges includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called suspense account' or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.] 8. After the amendment, Section 67 of the Act is as follows : Section 67. Val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.] 5. On the reading of above definition, it is clear that both prior and after the amendment the value on which service tax is payable has to satisfy that (i) the value is the gross amount charged i.e. the entire contract value between the service provider and the service recipient without deduction of any expenses ; (ii) the amount charged should be for for such service provided that the gross amount charged by the service provider has to pay for the service provided. By using the word for such service provided , the Act has provided a nexus between the amount charged and the service provided. 6. For appreciating the first ingredient we revert to the master license dated 01/10/2002 between the SIBV and SIIPL authorizing the later to enter into series of franchise agreements to develop franchise and service sandwich shops in the territory of Republic of India. Clause 3 thereof is the payment clause vide which SIBV is entitled to receive 33% of all the fees and royalties derived by SSIPL. Clause 3.03 talks about the payment recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising service is not the part of franchise service and that the amount is not to be retained by SSIPL but is to be diverted back to the respective franchisees for advertisement in their local area the same has been rebutted by the department submitting that it is SSIPL only which ultimately is getting the benefit out of the said service. To adjudicate, the same we first look into the definition of franchisees/franchise service. As per Section 65 (105) (zze) franchise service is : any service provided or to be provided to a franchise by the franchiser in relation to franchise. 8.1 The Finance Act, 2005 had substituted this definition w.e.f. 16/06/2005 as follows :- Franchise means an agreement by which the franchise is granted representational right to sale or manufacture the goods or to provide service or undertake any process identified with franchiser, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. 8.2 Thus after the amendment, the franchise service is not confined merely to the representational right to sale or manufacture goods or to provide the service but it extends to any process identified wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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