TMI Blog2018 (6) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... ent periods, it is evident that the appellant has not carried out management of any complete organization such as the DST. But what has been done is technical assistance in the operation of the computer systems of DST and management of the Centre. Such activities, definitely are liable to be covered within the terms ‘Technical Assistance in relation to….. any working system of any organization’, In the definition prevalent during w.e.f. 01/05/2006 to 01/06/2007, the activities performed by the appellant would be even more specifically covered under ‘Technical Assistance in relation to…… management of information technology resources’ - the activity performed by the appellant for DST would be covered within the definition of management consultancy services during the period of dispute. Manpower recruitment or supply agency service - the appellant carried out the activities of application data management, pre-examination and post-examination activities. Such activities were in the nature of back end activities and supported the manpower recruitment activity of the client by providing various Services - Revenue was of the view that such activities were covered within the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Description Period Service Tax Period Service tax 1. 25% amount retained on course fee received from student undergoing Diploma in Advance Software Technology at affiliated centers (Franchise Service). 01/07/2003 to 30/06/2004 2,14,225/- 2. Operation and management of computer centers of Department of Science and Technology(Management Consultancy service) 01/04/2003 to 31/03/2006 2,44,99,380 /- 01/04/2006 to 31/03/2007 4,53.0 22/- 3. Preparation of call letters, question papers, evaluation etc. for other parties (Manpower recruitment or supply agency service) 01/04/2003 to 31/03/2006 21,07,763/- 01/04/2006 to 31/03/2007 1,41,8 1,142 /- 2. The appellant is engaged in activities relating to information technology. The disputes can be crystall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities of application data management, pre-examination and post-examination activities. Such activities were in the nature of back end activities and supported the manpower recruitment activity of the client by providing Service such as analyses of application forms, data entry, generation of role numbers, printing of admit cards, instructions and answer sheet etc,. and evaluation of answers. Revenue was of the view that such activities were covered within the definition of Manpower Recruitment and Supply Agency Service falling under Section 65(68) read with Section 65 (105)(k). Service tax demand amounting to ₹ 21.07,763 for period 1/04/2003 to 31/03/2006 as well as ₹ 1,14,81,142 for period 1/04/2006 to 31/03/2007 has been confirmed vide the impugned orders. 3. The adjudicating authority has also ordered payment of interest as well as penalties under various sections of the Finance Act, 1994. The above two orders-in-Original have been challenged before us. 4. In this connection, we have heard Shri Narender Singhavi, Ld. Advocate for the appellant as well as Shri. Amresh Jain, Ld. DR representing Revenue. 5. The case argued by the Ld. advocate on behalf of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Hotels Co Limited v. Commissioner, 2016 (41) STR 913 (Tri-Mum) 2. Sterlite Optical Technologies Limited v. Commissioner, 2009 (13) STR 582 (Tri-Ahmd), upheld by Hon ble Gujarat High Court at 2016 (41) STR J305(Guj). 3. UTI Technology Service Limited v. Commissioner, 2012(26) STR 147(Tri-mum) (d) Without prejudice to the above assessee also submitted that the activities were covered under the scope of Information and Technology Services which became taxable from 16/05/2008 and thus cannot be taxed prior to this act. The argument of time has also been raised. (e) Regarding the demand under Manpower Recruitment or Supply Service, he submitted that the activities undertaken can be categorized as pre/ recruitment activities. Such activities have been included within the definition by insertion of Explanation in Section 65(105) (k)only with effect from 1/06/2007. He submitted that by introduction of the Explanation, the scope of the taxable service has been expanded by including the pre recruitment activities. Such an amendment has to be considered as prospective, since it creates the tax liability on the appellant hence he argued that the demand prior to 1/06/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been run through affiliated centers and out of the fee charged from the students, 25 per cent of the fees has been retained by the appellant. Revenue s case is that Service Tax is liable to be paid on the said amount retained, under the category of Franchise Services. 9. The issue has been decided against the assessee in appellant s own case CMC Ltd. V/s Commissioner Hyderabad (supra). In the said case, the Tribunal has upheld the demand under the Franchisee Service but set aside the penalty by taking recourse to Section 80 of the Act. The observations of the Tribunal are reproduced below:- 12. On the factual matrix on the perusal of the agreement entered by the appellant with one of the franchisees, we find that in clause No. 5, there is a clear cut restriction on the franchisee in the following terms :- 5. Territory, Audience and General curriculum : i. The Franchisee will not conduct their own technical classes/teaching topics similar to those included in the standard CMC Modular DAST Course covered under this agreement. 13. From the above reproduced Clause No. 5(i) of the agreement, it is very clear that the franchisees are not allowed to conduct th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to Franchise . The Franchisor develops the brand name, concept of following the business, promotes the same and establishes the name. As such, by entertaining into an agreement of Franchisee s, it assigns the brand name to other person to carry out the business under his brand name or trade name, in the same manner in which he himself was conducting the business. The definitions of Franchisor under Section 65(48) of the Act, means any person who enters into franchise with an franchisee and includes any associate of franchisor or a person designated by franchisor to enter into franchisee s on his behalf. The agreement as placed before us refers the appellant as the franchisor and the other party as franchisee. In terms of the said agreement there are obligations on the franchisee to set up the adequate premises and to conduct the business in accordance with the terms of the agreement. For the said franchisee, is under an obligation to pay fixed amount to the appellant and in addition recurring franchisee fee at the rate of 15%. The purpose of the agreement of franchisees is to enable franchisee to carry on the business in the manner desired by the franchisor. The agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be viewed in the light of the definitions of such institute given in the notification. The same cannot be extended to franchise services given by the said institute to the franchisee. As such, we hold that the benefit of the said notification is also not to be available to the appellant. It can be seen from the above reproduced portion of the decision and order of the co-ordinate Bench that the issue is now covered in favour of the Revenue and against the assessee on merits. 10. The appellant has submitted that they were under the bonafide belief that no Service Tax is liable to be paid under the Franchise Service. But the Adjudicating Authority has recorded that the appellant has failed to disclose the fact that such amounts were being recovered and retained by the appellant and hence he has concluded that the value retained by the appellant has escaped Service Tax. We are of view that the appellant is liable to make payment of Service Tax under the category of Franchise Service for the full period of demand. However, by following the decision of the Bangalore Bench, we set aside the penalties by taking recourse of Section 80 of the Act. 11. The second part the deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The definition underwent a further change w.e.f. 1-6-2007 and the amended definition read as follows: Management or business Consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management. Taxable service was defined in Section 65(105)(r) as - any service provided or to be provided to a client, by a management consultant in connection with the management of any organization, in any manner . From the above definition, it can be seen that the definition consists of two parts. The first part says that any service either directly or indirectly in connection with the management of any organisation in any manner would be a management consultancy service. The expressions used in the definition, namely, means and includes , either directly or indire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he levy of Service Tax under the category of Manpower Recruitment of Supply Agency Service . As per the agreement entered into by the appellant with M/s Hindustan Aeronautics Ltd. as well as Food Corporation of India, the appellant carried out various backend activities such as analysis of application forms, data entries and processing, generation of roll numbers, answer sheets, printing of test paper, printing of OMR sheet etc. It is evident that such activities are in the nature of pre-recruitment work. Revenue was of the view these activities would be covered within the definition of Man Power or Supply Agency Recruitment Service defined under 65 (105) (k). The definition is reproduced below:- [to any person], by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner.] w.e.f. 01.06.2007 [Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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