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TMI Blog2007 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Tax along with Education Cess payable by the appellants for the period from 1-7-2003 to 31-12-2004 under Section 73 of the Finance Act, 1994. Interest was demanded under Section 75 of the Act. He imposed penalty @ Rs.100/- under Section 76 of the Act for every day during which they failed to pay the amount of tax. Further a penalty of Rs.1000/- was imposed under Section 77 of the said Act for contravening the provisions of Section 70 of the said Act. Finally he imposed a penalty equal to the Service Tax demanded under Section 78 of the Act, for suppressing material facts from the notice of the department with an intent to evade the payment of tax. The appellants are highly aggrieved over the impugned order. Therefore they have come before the Tribunal for relief. 3. Ms. Sreelatha Nair, learned Advocate appeared on behalf of the appellants and Mr. K. Sambi Reddy, learned JDR for the Revenue. 4. We heard both the sides in the matter. 5. The learned Advocate pointed out that the appellants are actually rendering 'Courier Services'. They have also entered into an agreement with various persons for rendering courier services in different parts of Kerala independently. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary careful consideration of the issue, we find that as per Section 65 of the Finance Act, 1944, "franchise" means an agreement by which - (i) 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; (ii) the franchisor provides concepts of business operation to franchisee, including knowhow, method of operation, managerial expertise, marketing technique or training and standards of quality control except passing on the ownership of all knowhow to franchisee. (iii) the franchisee is required to pay to the franchisor, directly or indirectly, a fee; and (iv) the franchisee is under an obligation not to engage it selling or providing similar goods or services or process, identified with any other person. The Commissioner has examined the issue with reference to the agreement entered by the appellants with various franchisees. Let us take a typical agreement. The agreement is described as 'Franchise Agreement'. The Franchise Agreement has been entered between the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers within the franchisees' territory in the designated areas, shall be received by the franchisee from Speed & Safe Courier Service, Ernakulam Operations Office/Railway Station as the case may be. Similarly articles that are booked by the franchisee for different destinations, shall also be handed over at the Speed & Safe Courier Service, Ernakulam Operations office/Railway Station as the case may be at the franchisees cost. Franchisee shall distribute/deliver the same to the consignees against acknowledgments in the prescribed form/forms free of charge and the proof of delivery (POD) should be returned to the franchisor forthwith. All inbound articles are to be delivered on topmost priority. 6. Time is the essence of this business and franchisee shall therefore ensure that the articles are collected from the customers and the same is delivered to them expeditiously without any delay and without giving any room for any compliant. 7. Franchisees shall employ or engage the required personnel for the operation of their business and they shall be the franchisees' employees and Speed & Safe Courier Service shall have absolutely no responsibility or liability viz. Labour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities to clients, other than approved by the franchisor, will be at the franchisees risk and commission on such booking will be paid to the franchisee only on recovery for such bills. The amounts payable to the franchisor shall be paid by the franchisee every week by demand draft payable at Emakulam without fail. Further it is agreed that franchisee shall not open Bank in the name of M/s. Speed & Safe Courier Service, without the franchisors written consent." On a very careful reading of the ingredients of 'Franchise Services' as given in Section 65 of the Finance Act, 1994, and also the 'Franchise Agreement', it is very clear that the appellant has entered into franchise agreement with various persons for providing courier service. It is difficult to hold that franchisees are agents of the appellants. No doubt, the franchisees are rendering courier services and service tax liability has been discharged on the amount collected by the franchisee. However in terms of the agreement, for example, Paragraph 12 of the agreement, the commission which is given to the franchisee is mentioned and the balance of the amount collected by the franchisee is payable to the fran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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