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TMI Blog2023 (7) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... sued to them for recovery of service tax amounting to Rs.2,04,419/- for the said period with interest and penalty on 28.08.2007. On adjudication, the show-cause notice was dropped by the Assistant Commissioner. Later, a review by the Commissioner of Service Tax, notice was issued to the appellant in this regard under Section 84(1) of the Finance Act, and after affording an opportunity to the appellant, the Commissioner confirmed the demand and imposed penalties under Section 76, 77 and 78 of the Finance Act, 1994. Hence, the present appeal. 3. The learned advocate for the appellant has submitted that the appellant is an Engineering, Management and Technical Consulting firm. By an agreement with The Institute of Hotel Management Studies proposed a project item "KITCO Hotel Management Education Project" for imparting theoretical and practical knowledge in the field of hotel management. It is his contention that a careful reading of the said agreement, it is evident that the same is an arrangement whereby the appellant and The Institute of Hotel Management Studies have agreed jointly to offer training in hotel management, dividing various responsibilities between two of them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed by the appellant and The Institute of Hotel Management Studies required to follow it strictly. The overall responsibility of conducting the course as per the agreement was on the institute which also required to submit reports/records to the appellant periodically or whenever required. The percentage of fee sharing has also been prescribed under the said agreement. Under Clause 2(b) of the agreement, a detailed 'Guidelines to Franchisees' was also issued to the institute, a copy of which even though asked to be presented during the hearing but not submitted by the appellant. The infrastructure and facilities for training at its own premises and its costs was the responsibilities of the institute and for using the Kitco logo / emblem, name board, etc., for exhibiting the same in the institute was the decisive factor to arrive at a conclusion by the adjudicating authority that the agreement is a 'franchisee agreement' since it granted representational right with the institute. 4.1 Further, referring to the definition and scope of the 'franchisee service', the learned Authorised Representative has submitted that after amendment brought into the said agreement with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and the matter be decided on the basis of records. 8. It is his contention that mere mention of the words 'franchisee' in the agreement cannot be construed that the arrangement between the appellant and Institute of Hotel Management Studies is a franchisee agreement. The learned advocate submitted that the project to impart training in the area of hotel management to interested students has been mooted by the appellant and accordingly, the agreement for execution of the said proposal viz., project titled "KITCO Hotel Management Education Project" for imparting theoretical and practical knowledge in the field of hotel management emerged and consequently the agreement dated 20.5.2005 executed. 9. To understand the implication of the arrangement between the appellant and the Institute of Hotel Management Studies, the crucial document which need to be analysed is the agreement dated 20.05.2006. The clause (1) indicates that the Institute will conduct the said course and the syllabus and training of the students will be prescribed by KITCO, who will conduct the final examination and provide certification to successful candidates. Clause (2) of the said Agreement stipulates the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd lay down the characteristics in identifying between Joint Venture agreement and that of a franchisee. After referring to the principles relating to interpretation of the agreements laid down by the House of Lords in series of cases, the Tribunal observed: "In Para 4 (supra) we have reiterated the relevant clauses of the representative agreement relevant to the present lis. On a true and fair analyses of the agreements between the parties it is clear that no only is the assessee wholly immune to any losses arising out of the enterprise - the educational institution to be established pursuant to the agreement but has also no entitlement to any share in the profits arising therefrom. Any accretions to the enterprise, accruing as a result of profitable running of the schools would constitute assets which would be transferred only to the other party (not the assessee) vide clause 9 of the agreement. The participation of the assessee in the agreement of the schools, through its representation on the BoM is calibrated only for effectuation of the assesses perceived expertise and experience, in establishing and running quality English Medium Schools. For this service provided, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly invited proposals for a Joint Developer Partner for implementation of the project. Similarly, in Delhi International Airport P. Ltd. (supra) also, the Airport Authority of India invited proposals for Long Term Operations, Management and Development Agreements for Delhi and Mumbai Airports and consequently, a Joint Venture agreement was entered into with the successful bitter viz., The consortium led by the GMR Group. Thus, the principles referred in the said judgments are totally on a different factual matrix, hence are not applicable.
14. We find that the demand is issued for normal period, on the basis of interpretation of the relevant provisions, in scrutinising the the claim of the assessee that that the arrangement with the institute is not a franchisee services, but joint venture agreement, hence imposition of penalty, in the facts of the present case under various provisions of Finance Act,1994, in our opinion is not sustainable and accordingly, set aside.
15. In the result, the impugned Order is partly upheld except the penalties imposed. The appeal is partly allowed to the extent mentioned above.
(Order pronounced in Open Court on 07.07.2023.) X X X X Extracts X X X X X X X X Extracts X X X X
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