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2023 (9) TMI 134 - AT - Service TaxLevy of service tax - franchisee service - exclusivity charges for granting rights of distribution and sale of its products - HELD THAT:- From the explanation provided by the Circular No. B-1/6/2005-TRU dated 27.07.2005, it can be seen that merely because by an agreement a right is confirmed on the party to sale of goods or service undertaken was not ipso-facto bringing the agreement within the ambit of franchisee. What is essentially required is to establish that as per the agreement the rights has not conferred on franchisee which amount to representational rights - the representational right would mean that for all practical purposes the franchisee losses its own identity and acquire with that of the franchisor. The agreement is primarily for marketing, promotion and distribution of the products in India by the distributors appointed by the appellant for the various territories. The amount of “Exclusivity Fee” of Rs. 30 Lakh being charged by the appellant from its distributors in the five equal installments of Rs. 6lakh each is an amount of deposit with the appellant and if any distributorship get cancelled before the period of five years, the deposit which has been made by the appointed distributors under the category of “Exclusivity Fee” is being returned on the pro-rata basis by the appellant - The Exclusivity Fee which is being charged by the appellant from its distributors is a kind of guarantee amount rather than any franchisee fee. From the terms of agreement, appellant is not given any representational right to its distributors to sale or manufacture goods or provide service or undertake any process identify with the franchisor and the agreement is purely for marketing of product and therefore same cannot be termed as agreement between the franchisor and franchisee. This Tribunal in the case of M/S. SITI CABLE NETWORK LTD. (FORMERLY KNOWN AS WIRE & WIRELESS (I) LTD.) VERSUS COMMISSIONER OF SERVICE TAX, DELHI-III (VICE-VERSA) [2020 (8) TMI 79 - CESTAT NEW DELHI] where it was held that “Representational right” means a right that is available with the “franchisee” to represent the “franchisor” and in that case the “franchisee” loses its individual identity and is known only by the identity of the “franchisor”. The impugned order-in-appeal is devoid of any merits - Appeal allowed.
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