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2024 (2) TMI 907 - CESTAT ALLAHABADClassification of services - Franchise Service or Business Auxiliary Service? - Race Promotion Contract dated 13.09.2011 executed between JSIL and FOWC - correctness in issuing SCN dated 09.07.201 in respect of tax liability under the Service Agreement dated 13.09.2011, when the entire service tax liability along with interest on this issue was deposited on 06.06.2012 - Invocation of extended period of limitation - penalties. Whether the Race Promotion Contract dated 13.09.2011 executed between JSIL and FOWC is covered by the expression ‘franchise’ as defined under Section 2(47) of the Finance Act, 1994 and therefore a taxable service under Section 65(105)(zze) of the said Act? - HELD THAT:- This Tribunal in Global Transgeme Limited v. Commr. of Central Excise [2013 (8) TMI 748 - CESTAT MUMBAI] has held that the foremost requisite for a service to qualify as a taxable ‘franchise’ service is that the franchisee should have been granted a representation right and that in a franchise transaction, the franchisee loses its individual identity and represents the identity of ‘franchisor’ to the outside world. In Tata Consultancy Services Ltd. v. Commissioner of Central Excise [2019 (6) TMI 109 - CESTAT MUMBAI], this Tribunal held that the grant of a representational right would imply that the person to whom such a right has been granted undertakes the entire activity as if it had been undertaken by the person granting such rights. The “franchise” means an agreement by which the franchisee is granted ‘representational right’ to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. The sine-qua-non for Franchise Service is therefore grant of ‘representational right’ to sell or manufacture goods, or to provide service or to undertake any process identified with the franchisor. It is not possible to hold that the Race Promotion Contract is a Franchise Agreement, under which FOWC provided franchise service to JSIL and consequently the demand of service tax of Rs.20,36,32,619/- is clearly not sustainable. Whether the show cause notice dated 09.07.2014 was rightly issued in respect of tax liability under the Service Agreement dated 13.09.2011, when the entire service tax liability along with interest on this issue was deposited on 06.06.2012? - HELD THAT:- The demand of Rs.1,12,23,633/- pertains to payment of US $ 20,00,00 to FOM arising out of Service Agreement dated 13.09.2011, for which invoice was issued by FOM on 17.04.2012, payment was made by JSIL on 16.05.2012 and service tax of Rs.1,34,68,358/- (inclusive of interest) was deposited on 06.06.2012, which fact is also recorded in the impugned. Apparently when the entire amount of service tax along with interest was deposited, we find no reason for issuance of show cause notice on this count in view of specific provisions contained in sub-section (3) of Section 73. However, since the ld. counsel for the appellant has fairly not pressed the demand on merits, no further findings in this regard are necessary. Whether extended period of limitation was rightly invoked in the facts and circumstances of the present case? - HELD THAT:- The fact that the entire facts were known to the revenue even before filing of return wherein no tax liability was admitted and in absence of any other positive act on the part of JSIL to deliberately suppress correct information with the intent to evade payment of tax. In these facts, the invocation of extended period of limitation cannot be sustained in view of dicta laid down in Padmini Products Limited [1989 (8) TMI 80 - SUPREME COURT] and Pushpam Pharmaceuticals Company v. CCE [1995 (3) TMI 100 - SUPREME COURT]. Whether penalties imposed under Sections 77 and 78 are justified in the facts and circumstances of this case? - HELD THAT:- Once the demand of Rs.20,36,32,619/- is not found sustainable on merits, the question of imposition of penalty under Section 78 does not arise. The penalty of Rs.1,12,23,633/- is also not sustainable in view of Explanation 2 to Section 73(3), which provides that no penalty is to be imposed when short paid service tax is deposited along with interest prior to the issuance of show cause notice. The demand being not sustainable on merits, the imposition of penalty under Section 77 and demand of interest is also not sustainable. Thus, the demand of service tax to the extent of Rs.20,36,32,619/-, penalty imposed under Sections 78 and 77 and demand of interest cannot be sustained and the same are accordingly set-aside - appeal allowed.
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