9911796707
TMI Blog2024 (5) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... on 49), the appeal of the Appellant is not admitted. The application of the appellant, being incomplete for want of deposition of requisite fee as mandated under the GST law, deserves to be rejected. Therefore, the appeal filed by M/s. Subway Systems India Private Limited (Now Eversub India Pvt. Ltd.,) Gurugram-122002, Haryana, Is not admitted. - SH. UPENDER GUPTA, AND SH. ASHOK KUMAR MEENA, MEMBER Represented By : Sh. Abhishek A. Rastogi Sh. Pratyushprava Saha, Advocates Preamble 1. In terms of Section 102 of the Central Goods Service Tax, Act 2017/Haryana Goods Service Tax Act 2017 of the Act, in Short), this Order may be amended by the Appellate Authority, so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate Authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the Appellant within a period of six months from the date of the Order. 2. In terms of Section 103 (1) of the Act, this advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only: - (a) on the Appellant who had sought it in respect or any matter referred to in sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perate and franchisee others to operate SUBWAY restaurants in India using the System. 1.4 The aforesaid license has been granted to the Appellant by way of a Master License Agreement dated 01 October 2002 ( MLA ) by subway International B.V., Netherlands. The said MLA also authorized the Appellant to further license the System and the brand name 'Subway' to franchisees in India. The relevant extracts of the MLA are reproduced below: 1.00 The Company hereby grants to Master Licensee the right to franchise itself and others to establish and operate Sandwich Shops in the Territory, Master Licensee shall use the System and the Proprietary Marks solely in connection with the development and franchising of Sandwich Shops pursuant to this Agreement. The Company grants to Master Licensee the license to use all of the Company's rights in and to the System and the Proprietary Marks, and to license the System and the Proprietary Marks to Franchisees in the Territory. . . . . . 1.5 The Appellant has also been granted the right to use and sub-license others to use the System and trademark in India by way of Trademark License Agreement ( TLA ) dated 18.11.2019 entered into between Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OF THIS AGREEMENT WE GRANT TO YOU : a. Continued access to the system Including the loom of a copy of the operations Manual and same being a confidential information as defined in Sub-Paragraph 5(n), subject to restrictions and terms and conditions stated in Subparagraph 5(n) applicable to a Confidential Information and or access to the electronic version of the operations Manual on our website. b. Continued access to Information pertaining to new developments, improvements, techniques and process in the system. c. A limited, non-exclusive sublicense to use the marks in connection with the operation of the Restaurant at One (L) location at a site we and you approve. 1.9 Along with the aforesaid License, the Appellant also conducts a training and assistance program for the franchisees and provides on call consultation services concerning operation of the restaurant. 1.10 The Franchisees are responsible for making their own business a success. The franchisees independently run their respective restaurants. However, the Appellant ensures minimum quality and safety standards to ensure similar service offerings in all SUBWAY restaurants. 1.11 As a consideration of granting license to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice Description Chapter 99 All Services Section 7 Financial and related services; real estate services; and rental and leasing services Heading 9973 Leasing or rental services without operator Group 99733 Licensing services for the right to use intellectual property and similar products 997339 Licensing services for the right to use other intellectual property products and other resources nowhere else classified. 1.15 As per Notification No. 11/2017-Integrated Tax (Rate) dated 28 June 2017, both the aforesaid service codes carried a CGST rate of 6% up to 30 September 2021. The relevant extract of the Notification is provided below: Chapter, Section or Heading Description of Service Rate (percent) Condition Heading 9973 (Leasing or rental service without operator) (i) Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology Software 6 - Thus, the combined GST rate for the aforesaid service codes was at 12% for intra-state supply of services. COMPETING SERVICE CODE 1.16 The Appellant is conscious that Trademarks and Franchises are covered underservice code 998396. However service code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration [Para 5(f)) 1.23 It is the case of the appellant that: (a) transaction (b) and transaction (c) above i.e. permitting the use or enjoyment of IPR (in other words, licensing the right to use IPR, being the Appellant s services under the Franchise Agreement) and transfer of right to use IPR are covered under service codes 997336/997339; and transaction (a) and (C) above, i.e. transfer of right to use goods or in goods, in the context of trademarks and franchises, are covered under service code 998396. Re: Service Codes 997336/997339 1.24 The Scheme of Classification of Services adopted for the purposes of Indian GST Laws a modified version of the United Nations Central Product Classification (UNCPC) and the explanatory Notes for the said scheme are based on the Explanatory Notes to the UNCPC (refer Para 1-2 of the preface of the Explanatory Notes). The relevant extracts of the Explanatory Notes are reproduced below: Explanatory Note to Group. 99733 This group includes permitting, granting or otherwise authorizing the use of intellectual property products and similar pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain IP products with certain conditions and restrictions. The said service codes contemplate a permissive use of the underlying IP and in that sense, confer a very limited and conditional right. 1.28 This is further substantiated by the fact that the explanatory note to Group 99733 specifically states that the group includes permitting, granting or otherwise authorizing the use of intellectual property products, which covers licensing to third parties. 1.29 By way of the Franchise Agreement, the Appellant grants to the franchisees the license to use/permissive use of the System (including the brand name, trademarks, proprietary and confidential information) for setting up and operating a SUBWAY restaurant franchise. The said license or permission is a very limited right and subject to various conditions and restrictions. Re: Service Code 998396 1.30 The relevant extract of the explanatory Notes are reproduced below: Explanatory Notes to Service Code 998396 This service code includes original trademarks and franchises, i.e. the legally registered ownership of a certain brand name. Note : These products are produced on own account with the intent of deriving benefits from allowing ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subway Systems India Private Limited v Union of India Ors, 2016 (8) TMI 717-Bombay HC. 1.35 Based on the law laid down in the aforesaid precedents, the general features of the expression transfer to right to use are given below: a) Transfer should not be of the property (ownership) in goods, but of the right to use property in goods; b) The transfer must be divested of the right or goods and the same should be vested in the transferee, to the exclusion of all others; c) Effective or general control; over the goods must pass to the transferee. Effective or general control does not always mean physical control and even if the manner, method, modalities and the time of the use of goods is decided by the transferee, it would be under the effective or general control over the goods. d) The approvals, concessions, licenses and permits in relation to the goods would also be available to the transferee, even if such licenses or permits are in the name of the transferor of the goods; and e) The transferee should have a legal right to use the goods and consequently all legal consequences should fail upon the transferee. 1.36 The Appellant states that since the Franchise Agreement entered int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive use of the System and the SUBWAY brand for operating Subway restaurant franchise, subject to several restrictions and conditions: a) The Appellant permits the franchise to access the System, including the Operations Manual subject to restrictions, terms and conditions of the Franchise Agreement. The Franchisee is granted a limited non-exclusive sub license to use the SUBWAY trademark in connection with the operation of the restaurant [clause-3] b) The franchisee is obliged to use or display trademarks on materials and stationary only as permitted by the Appellant. The franchisee is required to specify at a prominent place in the restaurant that it is an independent franchised operator of the restaurant and a licensed user of the SUBWAY trademarks. [clause 5(m)] c) The Appellant has exclusive and unrestricted right to sell food products and beverages under the SUBWAY trademark at any location and the Franchise would not have any right to impose any conditions in this regard. [clause 11(m)] d) The term of the Franchise Agreement has been specified to be twenty years with provisions for further renewal (clause-7] e) The franchise has not been conferred any territorial rights and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the franchisees use of the System and operation of the restaurant. The License granted is non-exclusive, for a defined period of time and is subject to several restrictions and conditions required to be met by the franchisee. 1.43 The franchisee required to use the SUBWAY trademark only as directed by the appellant and is not authorized to sub license the same. The Appellant is authorized to terminate the agreement in case of the franchisee s failure to comply with the conditions. Upon termination the franchisees rights and privileges would return to the Appellant and the appearance of the restaurant must be changed so that it can no longer be identified as a SUBWAY restaurant. 1.44 The Franchise neither obtains general or effective control over the system nor does it acquire any rights in the System to the exclusion of the Appellant or other Licensors. The license In the System is not territorial in nature and the Appellant has unlimited rights to compete with the franchisee. The franchisee does not possess any property rights in the SYSTEM and is only conferred with a limited, representational right. 1.45 Based on the above it can be concluded that the Franchisee Agreement is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -license agreement with franchisees entered by the Appellant, the decision of Gujarat AAR in RE; M/s Tea Post Pvt. Ltd., 2001 (1) TMI 424-AAR I not applicable in the facts and circumstances of the present case d) Grant a personal hearing through video conferencing mode in view of COVID pandemic; and e) Pass any such further or other order(s) as may be deemed fit and proper in facts and circumstances of the case. 5. GROUNDS OF APPEAL: A. SEVERAL SUBMISSIONS HAVE NOT BEEN CONSIDERED BY AAR; THE RULING HAS BEEN PASSED WITHOUT ANY INDEPENDENT APPLICATION OF MIND AND THIS RENDERS THE ORDER A NON-SPEAKING ORDER 5.1 It is submitted that the Impugned Ruling dated 08.12.2021 passed by the Hon ble AAR is a non-speaking order and has hence been passed in violation of the principles of natural justice. 5.2 It is submitted that the Written Submissions filed by the Appellant were Ignored by the AAR, while some of the submissions are reproduced in the Ruling, there is no finding given to that effect in the impugned order. To this extent, the Impugned order is violating of natural justice being non-speaking and is liable to he set aside on this ground alone. 5.3 The AAR has conveniently ignored cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions on relevant facts. This is virtually the Life blood of judicial decision making justifying the principle that reason is the soul of Justice. i) Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants faith in the justice delivery system. j) Insistence on reason Is a requirement for both Judicial accountability and transparency. k) If a Judge or quasi-Judicial authority is not candid enough about his/her decision-making process then It is impossible to know whether the person deciding Is faithful to the doctrine of precedent or to principles of incrementalism. l) Reasons in support of decisions must be cogent, clear and succinct. A pretense of reasons or rubber-stamp reasons is not to be equated with valid decision-making process. m) It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency In decision making not only makes the judges and decisionmakers less prone to errors bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the doctrine of precedent or to principles of incrementalism (I) Reasons in support of decisions must be cogent, clear and succinct. A pretense of reasons or rubber-stamp reasons is not to be equated with a valid decision-making process . (o) In all common law jurisdictions judgments play a vital role In setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of Due Process. 5.7 It has been clearly established in the above decisions that a quasi-judicial order should contain proper reasons and the absence of the same is in gross violation of the principles of natural justice. The action of the Hon ble AAR in making such classification of the Appellant without adducing any reason/ relying upon any provisions for the same is grossly in violation of the principles of natural justice. 5.8 Hence, it is submitted in this regard that impugned ruling is non-speaking and arbitrary in its very essence and shall be set aside to the extent It Is against the Appellant on this count alone. THE IMPUGNED RULING HAS BEEN PASSED WITHOUT AN ADEQUATE OPPORTUNITY OF BEING HEARD PROVIDED TO THE A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the principles of natural justice in affording the opportunity of personal hearing, the Appellant relies on the following judgments: (1) Swadeshi Cotton Mills v. Union of India [1981(1) SCC 664]; (2) JT (India) Exports vs. UOI [2002 (144) ELT 288 (Del)]; (3) Alfred Berg Co.(1)(P) Ltd. vs. Cestat, Chennai [2011 (273) ELT 373 (Mad)]; (4) Automotive Tyre Manufacturers Association vs. Designated Authority [2011 (263) ELT 481(SC)]; (5) Khaitan Chemicals Fertilizers Ltd. vs. UOI [2013 (292) ELT 44 (Bom)] (6) Tinplate Co. of India Ltd. vs. UOI (2013 (288) ELT 59 (Jhar)); (7) Manohar Vs. State of Maharashtra [2013 (295) ELT 358 (SC)); (8) Reema Gases (P) Ltd. vs. Commissioner [2014 (309) ELT A50 (Cap]; (9) Kantilal B. Mobile vs. UOI [2014 (306) ELT 51 (Bom); (10) Baboo Ram Mari Chand vs. UOI [2014 (304) ELT 371 (Guj)]; (11) Logic Transware India Pvt. Ltd. vs. CC. [2014 (302) ELT 228 (Del.)]; (12) Adhunik Power Transmission Ltd. vs. UOI [2015 (325) ELT 865 (Jhar)]; (14) CC, Bangalore vs. Fly Jac Logistics Pvt Ltd [2015 (323 ELT 730 (Kar)]; (15) Shrushthi Plastics Pvt. Ltd. vs. CCE, Puducherry [2015 (323) ELT 515 (Mad)j; (16) Confidence Petroleum India Ltd. vs. ADDL. C.C., C.E. S.T., Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s authorized representative and the concerned officer or his authorized representative, by order, either admit or reject the application: Provided that the Authority shall not admit the application where the question raised in the application is already pending or decided in any proceedings in the case of art applicant under any of the provisions of this Act: Provided further that no application shall be rejected under this subsection unless an opportunity, of hearing has been given to the applicant: Provided also that where the application is rejected, the reasons for such rejection shall be specified in the order. (3) A copy of every order made under sub-section (2) shall be sent to the applicant and to the concerned officer. (4) Where an application is admitted under sub-section (2), the Authority shall, after examining such further material as may be placed before it by the applicant or obtained by the Authority and after providing an opportunity of being heard to the applicant or his authorised representative as well as to the concerned officer or his authorised representative, pronounce its advance ruling on the question specified in the application. (5) Where the members of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , [1999] 7 JT 256 (SC)] 5.22 The AAR has in grave non-compliance of the procedure laid down in section 96, it is submitted that firstly, no opportunity of hearing was granted to the Appellant to present its case and facts; the Impugned Ruling was received beyond the period on 90 days i.e. on 13.12.2021; till date the AAR has failed to upload the Impugned Ruling on GST Portal; and the Impugned Ruling has been passed neglecting the submissions of the Appellant and is in non-speaking in nature. GROSS FAILURE OF THE MACHINERY OF ADVANCE RULING AUTHORITY IS ATTRIBUTED TO ABSENCE OF A JUDICIAL MEMBER: 5.23 In absence of a judicial member, the constitution of Authority for Advance Rulings (Respondent no. 2) is unconstitutional. 5.24 In support of this contention, the Petitioners rely on the judgment of the Hon ble Supreme Court in Columbia Sportswear Company vs. Director of Income Tax, Bangalore, reported at (2012) 11 SCC 224, wherein It was held that the Authority for Advance Ruling constituted under the provisions of Income Tax Act, 1962 is a tribunal within the meaning of Article 136/227, as it is exercising judicial powers. In terms of the test laid by the Hon ble Supreme Court in Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CGST Act, which deems the following transactions to be supply of services: (a) Any transfer of right in goods without the transfer of title thereof [pare 1(b)); (b) Temporary transfer or permitting the use or enjoyment of any intellectual property right [pare 5(c)]; (c)Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration (pare 5(1)). 5.31 It is the case of the Appellant that: transaction (b) above i.e. permitting the use or enjoyment of intellectual property right (in other words, licensing the right to use intellectual property right, being the Appellant s services under the Franchise Agreement) is covered under service codes 997336 (Entry 1)/997339 (Entry 2); and transactions (a) and (e) above, i.e. transfer of right to use goods or in goods, in the context of trademarks and franchises, are covered under service code 998396 (Entry 3). transactions (a) and (e) above, Le. transfer of right to use goods or In goods, in the context of trademarks and franchises, are covered under service code 998396 (Entry 3). Re: Service Code 997336 (Entry 1)/997339 (Entry 2) 5.32 The Scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark. 5.34 The mark SUBWAY and other mark have been duly registered in India under the Trade Marks Act, 1999. Accordingly, these marks fall within the meaning of the term Trademark as referred in the scheme of classification of services for the purpose of Indian GST Law. Sample certificates evidencing registration of the mark name SUBWAY in India under the Trade Marks Act, 1999 were provided. 5.35 The term license means permitting someone to do something . Accordingly, the services covered under the said codes involve a mere permission to use certain Intellectual Property products with certain conditions and restrictions. The said service codes contemplate a mere permissive use of the underlying Intellectual Property products and in that sense, confer a very limited and conditional right. 5.36 This is further substantiated by the fact that the explanatory note to Group 99733 specifically states that the group includes permitting, granting or otherwise authorizing the use of Intellectual property products, which covers licensing to third parties. 5.37 By way of the Franchise Agreement, the Appellant grants to the franchisees the license to use/permissive use of the System (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 12; Rashtriya Ispat Nigam Limited vs. Commercial Tax Officer, (1990) 77 STC 182; Aggarwal Brothers v State of Haryana (1999) 9 SCC 182; State of Andhra Pradesh v Rashtriya Ispat Nigam Limited, (2002) 3 SCC 314; Bharat Sanchar Nigam Limited v Union of India, 2006 (2) 5TR 161 (SC), G.S. Lambe Sons v State Of Andhra Pradesh (2011) 43 VST 323 (AP HC), McDonalds India Private Limited v. Commissioner of Trade and Taxes, New Delhi, 2017 (5) TMI 999- Delhi HC; and finally in the Applicant s own case in Subway Systems India Private Limited v Union of India Ors, 2016 (8) TMI 717 - Bombay HC. 5.43 Based on the law laid down in the aforesaid precedents, the general features of the expression transfer of right to use are given below: a) Transfer should not be of the property (ownership) in goods, but of the right to use property in goods: b) The transferor must be divested of the right or goods and the same should be vested in the transferee, to the exclusion of all others; c) Effective or general control over the goods must pass to the transferee. Effective or general control does not always mean physical control and even if the manner, method, modalities and the time of the use of goods i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve basis, within the territory of India, the transaction would be regarded as a transfer of right to use goods in the hands of Microsoft Corporation, USA. On the other hand, if one Mr. ABC were to purchase a Windows operating system license for its personal computer from Microsoft India, the transaction would be regarded as a mere license / permission to use goods. Extracts from the Franchise Agreement 5.49 The Appellant wishes to highlight certain clauses from the enclosed sample Franchise Agreement demonstrating the fact that the services provided by it constitute a mere permissive use of the System and the SUBWAY brand for operating a SUBWAY restaurant franchise, subject to several restrictions and conditions: a) The Appellant permits the franchisee to access the System, including the Operations Manual, subject to restrictions, terms and conditions of the Franchise Agreement. The franchisee is granted a limited, non-exclusive sublicense to use the SUBWAY trademark in connection with the operation of the restaurant (clause 3); b) The franchisee is obliged to use or display trademarks on materials and stationery only as permitted by the Appellant. The franchisee is required to spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion if its rights and privileges (clause 11(b) and m) The Appellant would enter into a primary lease with the landlord and corresponding leave and license agreement with the franchise owner. In case the franchise owner is authorised to directly sign a lease with the landlord, the franchise owner would be required to get the lease terms approved from the Appellant and provide the Appellant with an assignable interest in the lease (clause 5 (a)(iv)]; 5.50 The above referred clauses demonstrate that the license to use the System is not-absolute and the Appellant exercises considerable control over the franchisee s use of the System and operation of the restaurant. The license granted is nonexclusive, for a defined period of time and is subject to several restrictions and conditions required to be met by the franchisee. 5.51 The franchisee is required to use the SUBWAY trademark only as directed by the Appellant and is not authorised to sub-license the same. The Appellant is authorised to terminate the Agreement in case of the franchisee s failure to comply with the conditions. Upon termination, the franchisee s rights and privileges would return to the Appellant and the appearance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gives Subway deep and pervasive control and dominion over the franchisee s daily operations, without, at the same time, ceding to the franchisee the slightest hint or latitude in what it may do with the permitted marks and technology 73 Indeed, it seems to us clear that if we accept that a franchise agreement is, by definition, one that requires territorial exclusivity, then the Subway agreements are not franchise agreements at all, but purely licensing agreement. 74 What must be looked at is the real nature of the transaction and the actual intention of the parties. The agreement must be considered holistically, and effect must be given to the contracting parties Intentions. The label or description of the document is Irrelevant. An agreement styled as a franchise might, on a proper examination, turn out to be nothing more than a mere license (as in Subway s case) As discussed above, we find that Subway s franchise agreement grants to the franchisee nothing more than mete permissive use of defined Intangible rights. 5.55 Further, the Delhi High Court, in the Appellant s own case ( Subway Systems India Private Limited v. Government of NCT of Delhi Ors., W.P. (C) 5340/2018] has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the trade mark licensee (or in GSK s petition the trade mark licensee), are empowered to safeguard violation of the mark, through enforcement mechanisms such as filing suits for injunction or damages. This underlines that the most important attribute of ownership or transfer even in the most evanescent sense) is absent. Furthermore, by reason of section 48 of the Trade Marks Act, the utilization of the mark by the franchisee/licensee would accrue to the trade mark owner. Therefore, the reputation or brand building which accrues on account of increased volume of business because of the franchise/licensing arrangement, continues to be with the owner. No brand building or brand benefit accrues or arises to the franchisee/licensee. 48. From the above analysis, what irrefutably follows is that the franchise agreements in the three cases (and trade mark licensing agreement in GSK s petition) permit a limited right to use the composite system of the respective businesses of the Appellant and the Petitioners to the franchisors/licensee, and the dominant intention, as well as the specific provisions arising from the franchise agreements are not of a transfer of the right to use good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited. 2021 (1) TMI 424 - AAR, Gujarat , wherein the authority laid down a test to determine whether an arrangement constitutes licensing or franchising . Briefly, the Appellant in the said case had entered into a franchise agreement whereby the Appellant therein had granted Its franchisees the right to use trademark, brand name and other proprietary knowledge, against a periodic royalty calculated as a percentage of the sales made by the franchisee. The question before the Gujarat AAR was whether the services would be classified under service code 997336(Entry 1) or 998396 (Entry 3). The Gujarat AAR ruled that the services would be classified under service code 998396 (Entry 3). Re: Test laid down by the Gujarat AAR has no universal applicability 5.65 The Appellant submits, at the outset, that the Gujarat MR has not considered the fact that the service code 997336 (Entry 1) does not cover licensing services simpllciter but covers licensing services in the context of franchisees. The test laid down by the Gujarat AAR compares licensing simpaciter and franchising . The Appellant submits that the aforesaid test is not relevant to the present discussion, because the term licensing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nchisor), permits another party (henceforth referred as the franchisee) to use its brand name or business model for a fee in order to conduct the business as an independent branch of the franchisor. However, Licensing is an agreement between two parties where the, one party (henceforth referred to as the Licensor), sells another party (henceforth referred to as the Licensee) the rights to use its intellectual property or manufacture the licensor s products in exchange of royalty. i) It appears that the Gujarat AAR has agreed that franchising and licensing can both involve permitting another use one's intellectual property: 2) Licensing arrangements are not restricted to the manufacturing sector and are equally prevalent in the service sector (for example, the Appellant's present case). 3. Licensing deals with Products Goods like software patented technologies etc. However, Franchising is mostly related to service businesses like food chains, Service Centres of automobiles, etc. i) Licensing arrangements are restricted to goods and are equally prevalent in the service sector; ii) Similarly, franchising arrangements are not restricted to service sector and are equally prevale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Franchise Agreement. Re: The ruling of the Gujarat AAR cannot he regarded as a precedent on contentions grounds which have passed sub-silentio. 5.69 Without prejudice to the above, it is submitted that the Gujarat MR has not considered Inter alia, the following contentions raised by the Appellant in this application: a) Distinction between a mere license to use / permissive use and transfer of right to use ; b) Existence of licensing services in franchisee models; c) Specific entries [service codes 997336 (Entry 1) / 997339 (Entry 2)] vs. General /residuary entry [service code 998396 (Entry 3)]. 5.70 Accordingly, the decision of the Gujarat AAR cannot be regarded as a precedent on the aforesaid contentions / grounds which have passed sub-silentio. The principle of sub-silentio and its application in the present case is explained below. 5.71 In certain matters, more than one point of law may be involved in a case. If the Court has decided a case on only one point either because other points were riot argued or because of inadvertence or conscious negligence, such other points are saw to pass sub-silentio and the decision cannot be applied as a precedent on those other points. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd would not he followed. The rule that a precedent sub silentio is not authoritative goes back at least to 1661 (in),when counsel said: An hundred precedent sub sllentio are not material ; and Twisden, J., agreed: Precedents sub silentio and without argument are of no moment . This rule has ever since been followed. b) Tika Ram v. State of U.P. [(2009) 10 SCC 689] 104. We do not think that the law laid down in these cases would apply to the present situation. In all these cases, it has been basically held that a Supreme Court decision does not become a precedent unless a question is directly raised and considered therein, so also it does not become a law declared unless the question is actually decided upon. We need not take stock of all these cases and we indeed have no quarrel with the propositions settled therein. c) Arnit Das v. State of Bihar [(2000) 5 SCC 488] 20. A decision not expressed, not accompanied by reasons and not proceeding on a conscious consideration of an issue cannot be deemed to be a law declared to nave a binding effect as is contemplated by Article 14) That which has escaped in the judgment is not the ratio decidendi. This is the rule of sub silentio, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptable because their submissions have not been considered and GST on the said transactions has already been discharged. As connected AAAR was pending on the issue and writ petition was coming for hearing on 03.07.2023, they requested for a virtual hearing on 09.07.2023. The Appellant, received letter bearing CBIC DIN 202308ADGEE000210645 dated 03.08.2023 for Personal Hearing before issuance of SCN on 16.08.2023. 6.1.2 The Appellant filed CWP No. 23895 of 2023 in the High Court of Punjab Haryana for directions to dispose the Appeal against the advance ruling No. HR/ARL/02/2021-22 dated 08.12.2021 In time bound manner as the same is pending and it has been directed by the Hon ble High Court vide Order dated 19.10.2073 to complete the proceedings within 6 weeks and that the notice of hearing be given in 10 days advance to the Appellant. 6.2 The Appellant was offered the opportunity of Personal Hearing on 27.10.2023 vide letter dated 20.10.2023 and the Appellant vide their c-Mail dated 27.10.2023 submitted that they have no objection for appearing on 27.10.2023 as per the directions of the Hon ble Punjab Haryana High Court s Order dated 19.10.2023. 6.4 Sh. Abhishek A. Rastogi Sh. Praty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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