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2019 (4) TMI 25 - CESTAT NEW DELHIValuation - Franchise services - Whether bifurcating the amount of weekly gross sales into the payment of royalty (@ 8% thereof) and the payment towards Franchise Advertisement Fund (@ 4.5% thereof) takes the later value out of the ambit what is called as transaction value/the gross value? - Held that:- Both prior and after the amendment the value on which service tax is payable has to satisfy that (i) the value is the gross amount charged i.e. the entire contract value between the service provider and the service recipient without deduction of any expenses ; (ii) the amount charged should be for “for such service provided” that the gross amount charged by the service provider has to pay for the service provided. By using the word “for such service provided”, the Act has provided a nexus between the amount charged and the service provided. By merely mentioning that for master licensee 33% of all the fees collected shall exclude advertising fee does not takes that amount out of the tax net of the amount received from franchisees for providing them the ‘Franchise Service’. Thus the sole reason of this advertisement fee is also the part of the contract value. More so, this value is not at all the expense incurred by the franchise for advertising his own outlet but this is the amount out of his income from the sales passed on to the service provider SSIPL in lieu of the franchise agreement between the two. Hence, this ‘Franchise Advertisement Fund’ is despite a different nomenclature of being a different fund but actually is the value received by the appellant for providing franchise service to its franchisees. The amount of weekly gross sales @ 4.5% but for franchise advertisement fund is nothing but the part of gross value of the contract for providing the franchise service and, hence, was equally taxable as 8.5% of the said weekly gross sales is taxable. Time limitation - Held that:- The bifurcation of weekly gross sales by the appellant is a mere strategy to cut short its tax liability. Thus, the element of mis- representation is very much apparent on part of the appellant that too with an intent to evade payment of tax - Show cause notice dated 13/02/2009 proposing the demand for the period w.e.f. April 2007 to March 2008 is therefore denied to be barred by time. Appeal dismissed - decided against appellant.
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