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2013 (8) TMI 92 - CESTAT NEW DELHITaxable Service - franchise of the school (DPS) - classification - Whether any taxable service under any category was provided by the assesse - Held that:- The assesse provided service not to itself but to the other parties to the agreements – following the decision of FAQIR CHAND GULATI Versus UPPAL AGENCIES PVT. LTD.[2008 (7) TMI 159 - SUPREME COURT] - There was no element of service to the assessee itself - an agreement which placed the entire financial burden of establishing and maintaining the school, including the liability to fund the entire capital and non-capital expenditure - under writing the entire financial liability - liability arising out of any litigation and obligating further that all available and remaining assets on determination of the agreement would revert to the other party alone would not tantamount to a joint venture arrangement - description of the arrangement as a joint venture or a collaborative arrangement was regardless - The fact that the other party was required to pay a specified amount to the assessee clearly and compellingly indicates that the assessee was remunerated for services provided to the other party to the agreement – Decided against assesse. Scope of the activity - whether prior to 16.06.2005 the activities of the petitioner fall outside the ambit of franchise defined in Section 65(47) - Held that:- The assessee had provided the taxable service - the agreement clearly fulfills the all the four ingredients of the definition of franchise - franchisee being granted a representational right to provide service or undertake any process identified with the assessee was not involved - the assessee provided the concept of business operations to the franchisee including knowhow, method of operation, managerial expertise, marketing techniques, standard of quality control but excluding the passing of the ownership of all the knowhow to the franchisee was equally satisfied - the agreement enjoined obligation on the franchisee not to engage in providing similar services or process identified with any other person – Decided against assesse. Applicability of amendment - Whether on and after the amendment of the definition of franchise the activities of the assessee fall outside the ambit of the taxable franchise service - since no representational right was granted by the assessee to the franchisee to provide service or undertake any process identified with the assessee - particularly since under a joint venture agreement / arrangement no representational right was conferred on one joint venture partner to represent the other parties – Held that:- The services provided by the assessee do not fall within Intellectual Property Services - except the temporal permitting of the use or enjoinment of the assessees intangible property other services performed under the agreements were outside the purview of Intellectual Property Service - The services falls appropriately and clearly within the framework of the taxable franchise service rather than the other namely Intellectual Property Service – Decided against assesse. Classification of service - Whether the activities of the assessee always constituted Intellectual Property Service and outside the ambit of franchise service even prior to 10.09.2004 - the assessments cannot also be justified as Intellectual Property Service after 10.09.2004 as well - since the assessee was never put on notice - classification of services as set out in Section 65A where composite services consisting of a combination of different services cannot be classified in the manner - these were required to be classified as if they consisted of a service which gives them their essential character – services provided by the assessee under the several agreements in their essential character fall within franchise service – Decided against assesse. Period of Limitation - Whether the adjudication orders invoking the extended period of limitation to the extent the extended period was invoked were unsustainable – Held that:- The extent of the liability of the assessee to service tax within the normal period of limitation u/s 73(1) was required to be remitted to the adjudicating authority for de novo computation of the liability - the extended period of limitation could not be invoked when there was a bona fide dispute between the parties in regard to issues as to tax liability – following the judgements of Tecumseh Products India Ltd. vs. C.C.E., Hyderabad [2004 (5) TMI 76 - SUPREME COURT OF INDIA] and Fedders Lloyd Corporation Pvt. Ltd. vs. C.C.E., New Delhi [2007 (12) TMI 8 - SUPREME COURT OF INDIA] - the department was aware of the essential ingredients of the transactions on which liability to tax could be determined and no suppression could be inferred when the assesee had categorically sensitized the Department as to the relevant facts on which a view could have been taken as to the liability to tax – Decided in favor of assesse. Penalty - Whether imposition of penalty was unsustainable since the failure of the assessee to remit service tax was on account of a bonafide belief as to its immunity to service tax arising out of a bonafide interpretation of the relevant provisions – Held that:- There was no reason to interfere with imposition of penalties u/s 76 and 77 – There was no justification for a generic invocation of the provisions of Section 80 to eschew levy and collection of penalties u/s 76 and 77 - quantum of tax and the penalties imposed u/s 76 and 77 as adjudicated were confirmed – Decided against assesse.
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