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2014 (8) TMI 591 - AT - Service TaxFranchisee service - registration of website domain names - Reverse charge mechanism - whether the appellants are a franchisee service provider - Held that:- demand notices have been issued under the Franchise Service. The terms "Franchisee" and "Franchiser" have been defined under Section 65 (47) and 65 (48) of the Finance Act, 1994 - It would thus be seen from the definitions that franchisee means an agreement by which the franchisee is granted representational rights to sell or manufacture goods or to provide service or undertake any process identified with franchisor. Appellants provided registrar service as per the powers under Article II of powers for ICANN, ICANN is prohibited from acting as registrar. From the agreements or from the bylaws, we are not able to find any process that has been developed by the ICANN and being used by the appellants. We find what is being done by the ICANN is to set minimum standards for the performance of registration function and recognize that the appellants are meeting those standards. Revenue has not been able to pinpoint to us either any service or any process for which ICANN is known and that process is being used or being provided by the appellants. In the absence of any such service or process we are unable to agree with the Revenue that the appellants are franchise service of ICANN. Even the agreement which permits the use of ICANN symbols clearly indicates that appellants are ICANN Accredited Registrar and nothing beyond that. Agreement between ICANN and Registry has not been produced either by Revenue or the appellant. We find that Revenue have not been able to bring on record any service or process identified with ICANN which is required to be provided by various registries accredited by ICANN. It appears that registries are also accredited like registrars. ICANN might have provided minimum standards for registries but that does not imply that registries are providing any service or process identified with ICANN. Resellers are specifically prohibited from using the name of ICANN. They only represent the appellant. In fact they are reselling the services of registrar being provided by the appellant. After selling the services of the registrar they remit the money to the appellant as per the agreement. We find that the agreement is of a nature of principal to principal basis and resellers cannot be considered as franchisee or associate franchisor of ICANN. Appellant cannot be considered as a franchisee of ICANN and therefore resellers cannot considered as franchisee of the associate franchisor. In view of above position, in our view the Revenue's contention that the resellers are providing the franchisee services of the ICANN does not hold water. In view of the above analysis we do not find any strength in the second demand notices also. Accordingly we hold no service tax is leviable under the franchise service and hence demand and penalties are not sustainable - Decided in favour of assessee.
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