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2018 (9) TMI 1657 - AT - Service TaxClassification of services - appellant had outsourced their matrimony activity to other associate centers and had entered into franchise agreement with these associate centers - whether classified under Franchise service or under transfer of intellectual property service? Held that:- The recital of the agreement in the first paragraph itself states that the appellant (formerly Bharatmatrimony.com) is referred as a franchisor and the associate member with whom the agreement is entered is referred to as the franchisee - it is not an agreement for mere transfer of intellectual property. In fact, the franchise agreement stipulates for payment of franchise fee charged by the franchisor upon the franchisee. The argument of the ld. counsel that it involves only transfer of intellectual property cannot be accepted for the reason that the agreement involves conditions wherein the manner of functioning and operation of the associate center is laid down. Thus the franchisor has a right to dictate or direct how the franchisee has to carry on the business. There is also a condition for the franchisee to attend the training conducted by them - demand with interest upheld. Time limitation - Held that:- The mere fact that audit was conducted cannot be a ground to contend that the extended period cannot be invoked. Further, in the present case, show cause notice is issued on 14.3.2008 for the period January 2006 to March 2007. The appellants have not disclosed in the ST-3 returns that they were engaged in franchise service - time limitation not applicable. Penalty - Held that:- Taking note of the fact that the audit had occasion to see the agreement in 2006, the penalties are unwarranted and requires to be set aside. Demand with interest upheld - penalty set aside - appeal allowed in part.
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