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TMI Blog2025 (4) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... eement" dated 3rd Feb, 2005 ('Agreement') was entered into between the Noticee and Microsoft Licensing, GP, USA ('Microsoft'). Under the Agreement, Microsoft had granted the Noticee the non-exclusive and limited right to order and deliver packages of Microsoft OEM System Builder Software and hardware in geographical territory assigned to the Noticee. For each package of software or individual software license that was to be delivered by the Noticee, they were to pay royalty, applicable at the time of shipment by Microsoft as mentioned in the relevant 'royalty and price list'. The Noticee were also to pay the prevalent price of hardware as mentioned in the relevant 'royalty and price list'. * It was alleged that the royalty paid by the Noticee to the Microsoft for purchase of software was not the cost of the software as was evident from the accounts of the Noticee. The royalty represented fees paid by the Noticee to the Microsoft and had been alleged to be the consideration for "franchise service" received by the Noticee from Microsoft in terms of the Agreement. * It was also alleged that as Microsoft permitted the Noticee to use their corporate name, technol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into an agreement with Microsoft. Under the said agreement, the respondent were authorized to purchase the software packs from authorized replicators of Microsoft and subsequently sell the CD packs to customers in India. The respondent were never engaged in reproduction or replication of software of Microsoft. They were only selling the software developed by Microsoft and replicated by person authorized by Microsoft. 2.3 After considering the reply of the respondent, the learned Commissioner, vide the impugned order, dropped the proceedings initiated against the respondent. Aggrieved by the said order, the Revenue has filed the present appeal. 3. Heard both the parties and perused the material on record. 4.1 The learned Authorized Representative for the appellant-Revenue submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the definitions of 'franchise' as defined under Section 65(47), 'franchisor' as defined under Section 65(48) and 'taxable service in relation to franchise' defined under Section 65(105)(zze) of the Finance Act, 1994. 4.2 The learned Authorized Representative further submits that the agreement bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods does not ispo facto bring the agreement within the ambit of a franchise. He relies on the following decisions: a) Tata Consultancy Services Ltd - 2019 (6) TMI 109 CESTAT MUMBAI b) Global Transgene Ltd - 2013 (32) STR 86 (Tri. Mumbai) c) ITW India Limited and Hemal Zaveri - 2023 (9) TMI 134 CESTAT AHMEDABAD d) Tally (India) Pvt Ltd - 2024 (11) TMI 665 CESTAT BANGALORE 5.2 The learned Consultant further submits that the learned Commissioner after considering the various clauses of the agreement dropped the proceedings by holding that the respondent were only a conduit for delivery of packages from replicators and Microsoft to the persons to whom the packages were delivered. 5.3 The learned Consultant further submits that the learned Commissioner has held that the agreement between the respondent and Microsoft did not create any franchise and the respondent were not selling goods on representational basis; they were not manufacturing goods under a license from Microsoft; no service was provided by the respondent with same characteristics and quality as that of Microsoft; the respondent have been clearly described as license distributor in the agreement; from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n granted under takes the entire activity as if it had been undertaken by the person granting such right. In this case the so called Sub Certifying authorities and Sub CA Administrators (Sub CAA), Registering Authorities and RA-Administration appointed by appellants have any authority to issue DSC certificates, representing them to be issued by appellant. Such transfer of right granted to appellant, by the certifying authority in terms of IT Act, 2000, is also not permissible. It is only the Appellants who could have issued the Digital Signature Certificate and this could not have been done by any other person or agency appointed by appellant. Hence mere act of collecting the applications and verification of the same for onward submission to the appellant cannot be termed as "grant of representational rights". We are supported in our view by the decision of Hon'ble Delhi High Court in case of Delhi International Airport P Ltd [2017 (50) STR 275 (DEL)] wherein it has been laid down: "56. Merely because, by an agreement, a right is conferred on a party to sell or manufacture goods or provide services or undertake a process, would not ipso facto bring the agreement within the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he packages contain a mark "Fusion BT" which only denotes that the seeds being sold contain Fusion BT genes, and it does not denote that the said mark is either a logo or a trademark or hallmark of the appellant. The department could not show that any logo or hallmark belonging to the appellant has been put on the packages manufactured/marketed by the sub-licensees. We further find force in the contention of the appellant that a laptop containing a label of 'windows', only denotes that the processor or the operating system/software, as the case may be in the said laptop and by putting such label, the laptop manufacturing company does not represent 'Microsoft' or become the franchisee of 'Microsoft'. Admittedly, in a franchisee transaction the franchisee loses his individual identity and represent the identity of franchisor to the outside world, as in the case of 'McDonald' the customers are not concerned with who owns the 'McDonald's restaurant (franchisee). The customers identify it with 'McDonald (the franchisor)." f. Thus we do not find any merits in order of the Commissioner confirming these demands under the category of Franchisee Services." 9. We also find that similar vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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