TMI Blog2015 (5) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. products identified with it - Held that:- appellant does not dispute that it gave right to sell products identified with it to the distributors. To decide this issue, one necessarily has to refer to Amway s Business Starter Guide and Distributor Application and Terms and Conditions . As per the terms and conditions of distributors, an Amway distributor is also governed by Rules of Conduct - ABO/distributor is not merely granted right to sell Amway products but he has the representational rights to sell such products. - ABOs clearly had representational right to sell goods indentified with Amway. The impugned order therefore, cannot be faulted for concluding accordingly on the basis of the Amway Business Starter Guide, Distributor Application and Terms and Conditions etc. Adjudicating authority did not impose penalty under Section 78 of the Finance Act, 1994. As the ingredient for invoking extended period under proviso to Section 73 (1) ibid are identical to those required for imposing penalty under Section 78 ibid., it follows that the extended period is not invocable in this case and the finding of the primary adjudicating authority in para 44 of the impugned order (refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the distributor directly to the consumers and no product of the company is available across the counter in any shop or market. Subscription income basically consists of Joining and Business Fee , Business Renewal Fee and Back to Future Fee which are briefly described below: Joining Fee Joining Fees is a onetime fee, which is paid as distributorship charges. The distributor is entitled to purchase the products only when he pays the joining fees. Annual Business Fee Annual Business Fee is allocated on pro rata basis over a period of one year. The distributor is entitled to purchase the products only when he pays the fee. Renewal Fee Renewal fee is allocated on pro rata basis over a period of one year. The distributor pays the renewal fee to get its distributorship renewed for a period of one year. Income from Back to Future All such distributors who had discontinued the distributorship in the past, could again join the business on payment of only Annual Business Fee. 3. The adjudicating authority while dealing with the service tax liability with regard to IPR service held the service tax to be payable there-under essentially on the basis of its findings in the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Right in Section 65 (55a) of the Finance Act, 1994 which is reproduced below: intellectual property right means any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property , under any law for the time being in force, but does not include copyright. Referring to the above definition, it stressed that service tax under IPR Service was payable on such IRPs which were registered in India. In support of this contention, it cited Board Circular No.80/10/2004-ST dated 17.9.2004 which clarified as under: Application of intellect, which may be in the form of an invention, design, product, process, technology, book, goodwill etc. in India, legislations are made in respect of certain Intellectual Property Rights (i.e. IPRs) such as patents, copyrights, trademarks and designs. The definition of taxable service includes only such IPRs (except copyright) that are prescribed under law for the time being in force. As the phrase law for the time being in force implies such laws as are applicable in India, IPRs covered under Indian law in force at present alone are chargeable to service tax and IPRs like integrated circuits or undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he representational right to sell. It reiterated that it had only granted the distributors right to sell goods identified with it and not the representational right to sell such goods. It referred to the provisions relating to Franchise in some other countries and the dictionary meanings of representation or representational . 7. Ld. A.R. for Revenue on the other hand argued that (i) the non-speaking order can be set aside only by way of remand and the judgment of the Supreme Court in the case of Kalyan Singh Chouhan vs. C.P. Joshi (supra) was given in a different context. He cited the following judgments to the effect that in the case of non-speaking order, the case has to be remanded to the adjudicating authority for passing a speaking order: i) Deepak Agro Foods vs. State of Rajasthan 2008 (228) ELT 510 (SC). ii) Delhi Public School Society vs. C.S.T., New Delhi 2013 (32) ELT 179 (Tri-Del.). iii) C.C.E. , Ludhiana vs. Gulab Industries (P) Ltd. 2015 (316) ELT 657 ( P H) (iv) Musashi Auto Paradise Pvt. Ltd. vs. C.S.T., Delhi III CESTAT Final Order No.57226 dated 30.7.2013 and v) Gajanan Fabrics Distributors vs. C.C.E., Pune 1997 (92) ELT 451 (SC). (ii) It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der being clearly non-speaking in respect of impugned demand under intellectual property service and it not being open for CESTAT to improve upon the same, the impugned order in relation to impugned demand under intellectual property service has to be summarily set aside. In this regard, it placed reliance on the judgment of Supreme Court in the case of Kalyan Singh Chouhan vs. C.P. Joshi (supra). However, we find that the said judgment deals with the Representation of People Act, 1951 and was delivered in totally different context and the Supreme Court s observation (quoted earlier) sought to be relied upon by the appellant was made in that context. In any case, the said judgment in no way leads itself to necessarily convey that a non-speaking quasi-judicial order has to be summarily set aside without recourse to remand. In the case of Deepak Agro Foods vs. State of Rajasthan (supra) the Supreme Court held that all irregular or erroneous or even illegal orders cannot be held to be null and void. In the case of Gajanan Fabrics Distributors vs. C.C.E., Pune (supra), the Supreme Court remanded the matter to the Commissioner of Central Excise, Pune because the order passed by the Coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that he is required to append all relevant documents with the show cause notice, and if not appended, to provide copies to the noticee within reasonable time, before proceeding to adjudicate the show cause notice. Admittedly, documents were not supplied to the respondent. The negligence does not end here. The appellant authority granted time to the Department to furnish documents to the respondent so that it could reply to the show cause notice but this opportunity also did not elicit any response , compelling the appellate authority to reverse the order passed by the adjudicating officer for violation of principles of natural justice.The Tribunal has dismissed the appeal and the application for restoration , on the ground of violation of principles of natural justice. 9. While we find no error in the impugned orders as far as the violation of principles of natural justice are concerned, we cannot ignore the fact that negligence or collusion by officers, enjoined with duty to collect taxes, detect evasion and/or to impose penalties, etc., cannot be a ground to allow a delinquent to go scot-free. Where an order discloses violation of principles of natural justice, it is incum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word. A provision is, in my judgment, ambiguous only if it contains a word or phrase which in that particular context is capable of having more than one meaning . 12. It is evident that the only issue involved in the present case to the extent it relates to the impugned demand under franchise service is whether the appellant gave to the distributors representational right to sell its products i.e. products identified with it; the appellant does not dispute that it gave right to sell products identified with it to the distributors. To decide this issue, one necessarily has to refer to Amway s Business Starter Guide and Distributor Application and Terms and Conditions . As per the terms and conditions of distributors, an Amway distributor is also governed by Rules of Conduct. According to the Business Starter Guide, a distributor is also known as an Amway Business Owner (ABO). Top 10 Rules prescribed for ABOs inter alia stipulate that the ABO is to be truthful and accurate in offering Amway business opportunity or selling Amway products . In other words, an ABO does not merely sell Amway product but also offers Amway business opportunity. In terms of Code of Ethics of Amway distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, it follows that it is incorrect to claim that a distributor has not been granted representational rights to sell products identified with Amway It becomes further evident from para 8.2 of the said Guide which states that. At the first contact with prospective customers and Distributors, a Distributor should (8.2.1) Introduce himself by name; (8.2.3) As soon as practicable, he should make himself known in a suitable fashion as an Amway Distributor and should provide information concerning his name and address as well as concerning Amway; (8.2.3) Indicate purpose of contact, namely the sale of Amway Products and/or the introduction of the prospect to the Amway business (emphasis added). Thus, at the first contact, the distributor is expected to make himself known is a suitable fashion as an Amway distributor and provide information concerning his name and address as well as concerning Amway and the purpose of contact, including introduction of the prospect to the Amway business. Thus it again becomes evident that the ABO has been given right to represent Amway business. Para 12.12 of the Guide also clearly states that if the distributor makes a serious misrepresentation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide, Distributor Application and Terms and Conditions etc. 14. In para 44 of the impugned order, the adjudicating authority has held that extended period of limitation is applicable in terms of proviso to Section 73 (1) of Finance Act, 1994 . However, we find that the adjudicating authority in para 49 of the impugned order has observed as under: 49. The penalty under Section 78 is not leviable as the earlier SCN has been adjudicated vide Order-in-Original No.01-ST/PKJ/CCE/ADJ/2011 dated 31.01.2011 wherein penalty under Section 78 has been imposed an account of fraud, suppression and willful misstatement, since these SCNs are for the subsequent period penalty cannot be imposed under Section 78. In the wake of the said para 49, the adjudicating authority did not impose penalty under Section 78 of the Finance Act, 1994. As the ingredient for invoking extended period under proviso to Section 73 (1) ibid are identical to those required for imposing penalty under Section 78 ibid., it follows that the extended period is not invocable in this case and the finding of the primary adjudicating authority in para 44 of the impugned order (referred to above) is totally inconsistent with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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