TMI Blog2017 (6) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... hnocrats Pvt. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT] - the electricity and diesel charges have to be deducted from the gross value to arrive at the net value of taxable services - For this limited purpose, the matter will be required to be remanded to the adjudicating authority who shall re-quantify the demand of service tax after deducting the electricity and diesel expenses - appeal allowed by way of remand. Parking income - shooting income - Held that: - It is very much clear that the appellant has received the parking income from the vehicles parked in the area allotted for parking. Similarly, the shooting income is received while the premises are let out by the appellant for the shooting purposes - demand upheld. Appeal allowed in part by way of remand - other matters decided against appellant. - ST/678/2012 - 40914/2017 - Dated:- 12-6-2017 - Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri Joseph Prabhakar, Advocate for the Appellant Shri A. Cletus, Addl. Commissioner (AR) for the Respondent ORDER Per Bench Brief facts of the case are that the appellants had entered into a franchise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from 1.7.2003 under Business Auxiliary Services. 2. On intelligence that the appellant is not discharging service tax on the agency commission, the department issued summons to the appellant to provide details of the agency commission received by them and statements were also recorded. The appellants replied stating that though the agreement is a franchise agreement, the transaction in reality is only renting of immovable property and that they are receiving the amount, as rent towards the property leased to M/s. PRIL. It was contended by the appellant that the services of Renting of Immovable Property have become taxable only with effect from 1.6.2007 and later in view of the decision of the Hon ble High Court in the case of Home Solutions Retail India Ltd. reported in 2009 (227) ELT 209 (Del.) , which held that no service tax can be levied on Renting of Immovable Property services, the appellants are not liable to pay service tax on the amounts received from M/s. PRIL. On perusal of documents, it was also noticed that the appellant was receiving parking income for parking vehicles of customers of Big Bazaar and shooting income earned for letting out the building for fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion is also to be the same. Thus, effectively it can be seen that ₹ 18,47,220/- is the fixed rent agreed to be paid by M/s. PRIL as tenant to the appellant and the appellant has received only this rent and nothing else. 4.3 Though the Franchisee Agreement stipulated certain activities to be performed by appellant, it is not the case of the department that the appellant has carried out such activities or rented such services as mentioned in the Franchise Agreement. In essence, the amount received and shown as agency commission in the accounts was only rent for the property leased out to M/s. PRIL. 4.4 That very same issue on identical facts came up for consideration in the case of Shakeel Afzal Ladak Vs. Commissioner of Central Excise, Mumbai-I - 2014 (34) STR 144 (Tri. Mumbai) and Heera Laxmi Amusement Pvt. Ltd. Vs. Commissioner of Central Excise, Nagapur - 2015 (40) STR 783 (Tri. Mumbai). In Shakeel Afzal Ladak case, the franchise agreement was entered by the appellants therein with M/s. Amalgamated Bean Coffee Trading Company Ltd. and the property belonging to the appellant was leased out to the said counterparty for conduct of Cafi Coffee Day. Similarly, in He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of M/s. PRIL or other products, approved by M/s. PRIL. That this would clearly go to show that appellants were acting as franchisee for the products of M/s.PRIL. The terms and conditions are set out in the agreement. As per the agreement, the appellant is appointed to stock and sale the products of M/s. PRIL. The term used for payment of consideration is franchisee commission and not rent. The appellant is entitled to commission @ 5% of net sales and what is net sales as agreed between the parties is also explained in the agreement. The Supplementary Agreement fixes the minimum guaranteed commission to be ₹ 18,47,500/- which is to be paid before 10th of each succeeding month. All these terms and conditions categorically establish that the agreement is a Franchise Agreement and the appellant is receiving franchisee commission based on net sales of the product of Franchisor M/s. PRIL. 5.2 Merely because the appellant has so far not received any amount other than the stipulated minimum guaranteed commission, the same will not convert the agreement into an Agreement for Lease. There is nothing in the agreement to show that the parties at the time of entering into the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sell the products of PRIL or other products as approved by PRIL from the showroom/premises of the Franchisee admeasuring in the aggregate built up area 54,330 square feet located in the ground floor at 45-47, Arcot Road, Saligramam, Chennai 600 093. (hereinafter referred to as Showroom Premises). DUTIES AND RESPONSIBILITIES OF THE FRANCHISEES The Franchisees undertake to ensure that adequate finance is available with them to enable them to perform the obligations contained in this agreement. The Franchisees shall exclusively stock and sell products of PRIL that will be supplied by PRIL to them only in their Showroom Premises. The Franchisees shall not be entitled to stock or sell any other articles / products manufactured by any other person / Company / Firm in the showroom during the period of this agreement without express written consent of PRIL. In addition the Franchisees shall pay for the Electricity, Water and Telephones usage at the said Showroom Premises based on the actual bills from respective agencies. It is hereby agreed and understood that the said Telephone, Electricity, Water meter shall always be in the name of the Franchisees. The Fran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N To cease forthwith to advertise or make use of the Brand Names / products of PRIL and shall return all products, materials, signs and other items of PRIL then in their possession or under their control owned by or relating to PRIL whether or not they shall have been supplied by PRIL or not and PRIL shall have the right to enter upon the premises of the Franchisees to ensure that all of the obligations of this Agreement are complied with; MISCELLANEOUS Nothing contained herein shall be construed as creating any right, title, interest, easement, tenancy or sub-tenancy in favour of PRIL in or over the said Showroom Premises for transferring any interest therein in favour of PRIL other than entitling PRILs Products being put up for sale from the said Showroom Premises through the Franchisees. 2. SUPPLEMENTARY AGREEMENT ADPL and PRIL agree that in the event of the showroom premises measuring less that what is stated in the original franchisee agreement i.e., 54,330 Sq. ft. (which is carpet area plus 10%) then the commission payable would be varied pro-rata depending on the exact floor space which is made use of by ADPL for its franchisee operations. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises. (ii) The Principal shall be entitled to add more products in the product range from time to time. (iii) The Agent shall exclusively stock and sell products of the Principal only through the aforesaid showroom premises. (iv) This Agreement is only for the sale of the products belonging to the Principal by the Agent from the showroom premises and does not create any agency in respect of any other business or activity or transaction or exports. (v) It is agreed that the Agent will cater to the needs of the customers who approach the Agent only in the showroom premises above mentioned. (vi) The Principal shall despatch, subject to Force Majeure conditions, the products from their places of business in Tamil Nadu, warehouses inside the State or purchase goods from suppliers and direct the delivery of goods to the location of the Agent on Consignment Basis to the Agent from time to time. (vii) The Agent shall sell the aforesaid goods to the customers visiting The Show Room Premises in the territories specified herein above only at the prices agreed between the parties hereto from time to time and shall raise the Invoice in the name of customers in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the agreement remaining as a Franchise Agreement, there is no bar on the appellant to claim or receive 5% of the net sales at any time, over and above the minimum guaranteed commission already received. Against, on the debit notes raised by appellant to receive the amount every month, it is clear that the counterpart to the agreement, namely M/s. PRIL treats the agreement as Franchise Agreement. If that be so, the appellant being one party to the agreement cannot unilaterally consider the agreement as an agreement for renting of immovable property. As already stated, the appellant was receiving agency commission by issuing debit notes. They did not discharge the service tax liability on the amount received. Suppression of facts and willful mis-statement is writ large in the given set of facts of this case and the show cause notice issued invoking extended period, in our view, is legal and proper. 6.7 Be that as it may, the electricity charges and diesel charges are seen included in the total value of taxable service to arrive at the demand. Such reimbursable expenses cannot be included in the gross value of taxable services as held in the case of Intercontinental Consultan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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