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TMI Blog2021 (9) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... is the contents of the agreement that unveil the franchisor-franchisee engagement by the congruity of intent to assign representational rights of product, service or process by one to the other. The relationship intended by the agreement between the appellant and M/s Shri Sai Transport and Courier Pvt Ltd must find fitment within the framework of the definition for establishing that franchise was intended - brief overview of bus services in India would not be out of place as, unlike goods transport, stage carriage of passengers was of sufficient import to public policy even before representational governance was made fully operational and, in the infancy of the Republic, a national enactment, viz,. The Road Transport Corporations Act, 1950, enabled the federating states to participate in servicing of the travelling public. Chapter IV-A, comprising section 68-A to section 68-J was engrafted in 1956 in the Motor Vehicles Act, 1939 to further empower state governments to nationalize bus routes. The offering of M/s Shri Sai Transport and Courier Pvt Ltd to its customers are the services associated with Maharashtra State Road Transport Corporation to which they obtain rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king offices at bus stations to be carried on roofs of buses, to the appellant as successful bidder of tender process which, in turn, was assigned to M/s Shri Sai Transport and Courier Pvt Ltd for consideration of ₹ 16,47,44,850 during the period of dispute. The original authority held that the appellant had granted representational rights , inherent in the contract so awarded, to the de facto operator and the amount received thereon was liable to tax under section 65 (105)(zze) of Finance Act, 1994 with the appellant as franchisor and to M/s Shri Sai Transport and Courier Pvt Ltd as franchisee within the meaning of section 65(48) of Finance Act, 1994. The determination that the contractual agreements among the three parties aggregated as franchise was founded upon the terms and conditions of the arrangement and the presence of the marks, associated with the transport corporation and with the appellant, in the invoices issued by M/s Shri Sai Transport Courier Pvt Ltd. 2. A proposition put forth on behalf of the appellant by Learned Chartered Accountant is that the taxable service fastened on them by the adjudicating authority was legislatively intended only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 65 (105) of Finance Act, 1994 to be invoked, which was relied upon by the Tribunal in Commissioner of Service Tax, Ahmedabad v. Gujarat State Road Transport Corporation [2014 (33) STR 283 (Tri-Ahmd)], he contended that the notice for recovery was faulty. 5. Learned Authorised Representative elaborated upon the ingredients in section 65(47) of Finance Act, 1994 after 16th June 2005 that, taken together, altered the approach to the levy by eliminating some of the hitherto restrictive determinants of franchise and, according to him, the amended version intended the expression identified with franchisor to qualify each of the foregoing activities. The principle expounded on this aspect of statutory interpretation by the Hon ble Supreme Court, in Union of India v. Ind-Swift Laboratories Ltd [2011-TIOL-21-SC-CX], thus 17. . The issue is as to whether the aforesaid word OR appearing in Rule 14, twice, could be read as AND by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole we find no reason to read the word OR in between the expressions taken or utilized wrongly or has been erroneously refunded as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being qualified by the latter of the two would reduce the definition to consequence that was not intended in re Delhi International Airport P Ltd. 7. Franchise is a business model that affords access to market by riding on the back of a product or offering that is well-entrenched in the minds of consumers and for which the franchisor is entitled to recompense from the franchisee. Many national jurisdictions have special laws for governing such commercial engagement but we do not and remedies are enforceable only within the generality of Indian Contract Act, 1872. The expression is evocative of congruity of intent between two parties with stipulations that obligate, along with indebtment of, the beneficiary in exchange for specific offering from the benefactor. The range of contract is, thus, too vast for encapsulation within the confines of a statutory definition. The initial foray, effective from 1st July 2003, by incorporation of section 65(47) of Finance Act, 1994 subjected the consideration in transactions of a highly restricted business arrangement to tax. With effect from 16 th June 2005, taxability was enlarged to accord primacy to representational rights associated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be published in the Official Gazette and also in such other manner as the State Government may direct. in section 68C of Motor Vehicles Act, 1939. Later versions of the law retained this empowerment and every state of the Union has actively pursued this objective. 10. The ubiquitous state transport corporations are integral to the transport sector in India with nationalized bus routes acquiring a firm grip on the road network. Among the several operators offering transport of passengers and goods across the length and breadth of the country, nationalized operations, through the agency of transport corporations unified or disaggregated are numero uno. Though catering primarily to passengers, the roofs of state transport buses piled with luggage and goods portrays our Indian way of life almost as much as our attire and spicy curries do. Not only does this serve a practical requirement, but they also represent an activity, with concomitant assurances, that resonates with the teeming millions that make for the diverse and dispersed populace of a nation. 11. Pragmatic considerations and the tyranny of the bottom-line have compromised the looming presence of these pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent appeals fall within the taxable - franchise service . It cannot be gainfully contended by the assessee that provision of buildings and infrastructure and footing of the expenditure therefore by the other parties to the agreements are the foundational premises of the enterprise nor does the contention commend acceptance that these are the essential integers of the enterprise. The dominant component of the enterprise is the provision by the assessee of the four ingredients of franchise service as per the definition upto 15-6-2005 and the ingredients of the definition subsequent thereto; namely granting of a representational right to provide service or undertake any process identified with the assessee. The fact that buildings and infrastructure are requisite for the pursuit of the enterprise would not derogate from the fact that without the transfer of the expertise; know-how; operational methodology; brand name and other incidents of the assessee s experience in the field, the enterprise would not have fructified. Fertilisation and impregnation of these core competencies of the assessee into the schools to be established and for their functioning, is all that the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sustain their claim for exclusion from tax. In these decisions, the transactions related to goods sold by service providers which has no bearing on the nature of service in the present dispute. 15. The taxability of the impugned service was in place since 2003. As far as the present dispute is concerned, the relationship between the appellant and M/s Shri Sai Transport and Courier Pvt Ltd has always been covered by the taxable service , as initially conceived, thus precluding any confusion engendered by the expansion in the amended definition of franchise and the lack of certainty, as argued by Learned Chartered Accountant, does not appear to be an acceptable submission. Neither does the claim for discard of extended period; as the taxable service , incorporating essential elements of the service, did not offer an alternative even if subsequent introspection may have suggested otherwise. Mere correspondence does not evince absence of suppression or misrepresentation. Consequently, the plea for limiting the demand to the normal period lacks support. 16. The appeal is, accordingly, dismissed by affirmation of the impugned order. (Order pronounced in the open court on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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