TMI Blog2018 (12) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... esents the BCCI, and is designated in terms of the agreement as “Official Broadcaster” - the services as provided by the Appellants to the M/s MSM, Singapore and M/s WSG are squarely covered by the definition of franchise services as defined by the Section 65(47), 65(48) & 65 (105) (zze) of the Finance Act, 1994. The activity of the telecast or broadcast of the IPL matches, has been assigned for a consideration to the licensee, and they have been permitted in terms of the agreement as “official broadcasters of the IPL”. Thus it is quite evident that the appellants have granted representational rights to the licensee, in relation to the telecast/ broadcast of the IPL matches. Since we are holding that the services provided by the appellant in terms of media rights agreement to the licensee to fall within the category of Franchise Services, we do not examine the claim for classification under the category of “Commercial Use or Exploitation of Event.” In our view, the category of “Commercial Use or Exploitation of Event” refers to the services being in relation to the Commercial Use or Exploitation of the Event for one time and is not in relation to grant of representational rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , are for the reason of contraventions of various provisions and acts of omission to perform the task as required to be performed under the provisions of the act. Such penalties are in nature of Civil Liabilities and do not require any contumacious conduct on the behalf of the defaulter. Penalties imposed under the provisions of Section 76 and 77 of the Finance Act, 1994 upheld. Demand of Interest - Held that:- Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted. Appeal allowed in part. - APPEAL Nos. ST/87578-87581/2015, ST/85038/2016, ST/Cross/91030,91032,91031,91033/2016, 91050/2016 - A/88075-88079/2018 - Dated:- 10-12-2018 - Dr. D.M. Misra, Member (Judicial) And Mr. Sanjiv Srivastava, Member (Technical) Shri Shri V. Sridharan, Sr. Advocate, with Shri Vinay Jain, Advocate, for appellant-assessee Shri Roopam Kapoor, Commissioner (AR), for Revenue ORDER Per: Sanjiv Srivastava These appeals (Fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inc (LCM), Canada to design, build, operate, maintain promote the IPL website as the sole IPL website sanctioned by appellant. They also received certain amounts from M/s Pioneer Digadsys under the head of Media Right Incomes but had not produced the copy of agreement with them. 2.3 On scrutiny of the said agreement revenue was of the view that the services provided by the appellants to the licensee were covered by the definition of Franchise Services as defined by Section 65 (47) read with Section 65(48) and Section 65 (105) (zze) of the Finance Act, 1994. Since Appellants had not paid the service tax by classifying the services provided by them and had not filed ST-3 returns, four show cause notices were issued to the Appellants as detailed in table I below: Table 1 Details of Show Cause Notices SCN No Date Period Amount Remarks V/ ST/ HQ/ AE/ E/ 47/ 09 14.10.2009 2007-08 2008-09 36,52,38,000 Extended period as per proviso to 73(1), Interest under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agreement, and in particular clause 2.1 (ii) and (iii) below and the provisions pertaining to exclusivity referred to in clause 2.3 below, licensor hereby grants to licensee during the rights period and within the territory: a) The television rights and internet rights on exclusive basis; b) The audio rights on exclusive basis; c) The mobile rights on an exclusive basis; d) The in flight programming rights; e) The right to make available interactive services to viewers of footage; f) The right to produce unilateral coverage and unilateral commentary for transmission and delivery by means of permitted delivery system. ii. 2.9 The licensor hereby grants to the licensee a non-exclusive royalty free license to exploit during the rights period and within the territory the league logos, league marks and team logos (collectively the licensor marks ), together with these materials provided to licensee pursuant to clause 2.11 below solely in connection with licensee s exploitation to the media rights hereunder and the promotion thereof and the promotion of the channel, in accordance with the brand guidelines and the terms of this agreement (including without limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service as if the outlet is owned by the franchisor. iii. Provisioning of league marks, league logos, and team logos cannot be considered as grant of representational rights to the service recipients. The permission to use these logos is granted for identification of the match with league. This does not imply that they have given representational rights to licensee. There is also no consideration in the agreement for the use of these logos; h. The activities performed by MSM WSG are not covered in either of the limb of Franchise Service i. The second main condition for franchise service is that the franchisor should grant the rights to do certain specific activity. In other word all sort of representational rights are not covered. ii. Show cause do not specify the nature of service which appellant is providing and in turn it has authorized the license to do so; iii. Licensee have not been granted any right to provide the services identified with the franchisor i.e. to organize, control and promote the game of cricket in India. i. The process is not identified with them i. Appellants have given media rights to M/s MSM/ WCG. In turn MSM and WCGH broad cast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange. o. It is undisputed fact that against all these services the payments have been received in convertible foreign exchange. Since the conditions as prescribed for the availing the benefit of Export of Services are satisfied they have correctly availed the benefit of the same. p. Department has admitted that the services provided by the appellant do amount to export of services, because in Show Cause Notice dated 13.03.2013, the demand has been made only in respect of that turnover not shown as export in ST-3 return. To the extent they have disclosed as exports no demand has been made. q. They also rely on the decision of the tribunal in case of Paul Merchants Ltd. [2013 (29) STR 257 (T-Del)] wherein it has been held that destination of service has to be decided on the basis of the place of consumption. (Para 76 (v)) r. Tribunal has in case of Tech Mahindra {[2014 (36) STR 332 (T-Mum)] upheld by Bombay High Court in {2014 (36) STR 241 9Bom)]} held that post 27.02.2010, the only condition that needs to be satisfied for treating a service to be export of service, is that consideration for the service is received in convertible foreign exchange. s. They also rely on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gue logos, league marks and team logos are nothing but representational rights and such services will be correctly classified under Franchisee Services. vi. Since World Sports Group is an organization having its office in India, the question of benefit of export of service does not arise. vii. So far as MSM was concerned, Commissioner held that through several services were concurrently performed during the live telecast of IPL match, the actual service of providing the representational rights along with the media rights were performed in India since the matches were played in India. He also observed that the benefit of services has accrued in India and even the service was consumed in India. b. During the course of hearing had stated that the service is correctly classifiable under Exploitation of Commercial Events to be covered under the scope of Commercial Use or Exploitation of any event organized by any person or the organization which became taxable from 2010. Appellants had submitted that they were filing returns from 2010 onwards under the above category as the services provided by them is more appropriately covered under the above said category. While the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be done in accordance with the brand guidelines. vi. The above said rights are to be used in connection with licensee exploitation of the media rights and thus the use of Logos and Marks owned by BCCI have been granted to MSM, especially when they had to be used in accordance with the brand guidelines, squarely covers the services under the scope of franchise service. vii. The licensee can refer to itself as Official Broadcaster of the IPL . (Para 2.14) viii. Para 5 of the Agreement specifically provides that the licensor shall make the feed available to the licensee, licensor has the right to insert graphics package at its own discretion which may integrate copyright notices, trademark legends, etc. which the licensor may specify and / or require. Specifically para 5.3 obligates the licensee to carry the sponsored logo on the top left hand side of the screen. The quality of the programme, is monitored by the licensor and they also ensure that their logo is displayed at top of screen in the Feed given by them. Thus, at no stage, the programme and the logo associated with it becomes the exclusive right or property of MSM (licensee) but the ownership of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IPL. h. In the case of Podar Jumbo Kids Vs. Commr. Service Tax, Mumbai-I {2017-TIOL-3317-CESTAT-Mum.}, wherein the Hon ble Tribunal held that a franchise is given representational right to provide service(refer to 2.1, 5.5, 5.1 2). i. In essence the gist of the agreement can be summarized as the fact that BCCI owns a Brand under which they conduct the matches, they could have marketed the matches themselves but instead given the rights including the representational rights of these matches as BCCI matches. j. To claim the benefit of export of the service is concerned, Appellant s have submitted that as the service receiver is located outside India and as they have received the money in foreign exchange, the service provided by them should be treated as export. Apparent Fallacies in the said submission of the Appellants are as listed below. i. The export of service Rules till 2010, categorically stated that the service should be used outside India. In the instant case, the franchise service has not used at all outside India. The services provided by BCCI regarding the representational rights of IPL and BCCI so far as it relates to the telecast of IPL matches was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss . iv. The feed is delivered to M/s. MSM in India only as the Host broadcaster truck or facility is to be located at or in vicinity of the venue. k. It was thus submitted that considering the fact that the service has been provided in India only and used in India the simple act of signing contract with an overseas party does not make it an export of service. The payment of a certain sum of money by M/s. Sony Entertainment also corroborates the issue. The simple act of signing a contract with an entity located abroad will not render the service as exports but will need to be examined in light of the provisions of the relevant rules in the regard. l. So far as the imposition of the penalty is concerned appellants had deliberately suppressed the facts of the case and had failed to declare the media right income in their Service Tax Returns. No extended period has been invoked in three of the four Show Cause Notices. m. Even after the issuance of first Show Cause Notice appellants had not declared their turnover in their S.T. Returns in any of the categories. The appellants are thus liable for penal action which has been correctly imposed by the Commissioner in his adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the person renting the car can only use it. He cannot part with it and certainly cannot destroy it. Once the period of hire comes to an end, the car must be returned to the transferor. Therefore, the effective control over the car remains with the transferor. Likewise, in the case of a book library, the books must be returned to the library. With the Kindle Unlimited, one must pay a subscription fee to gain access to an unlimited number of books in the proprietary AZW format. When the subscription expires, all the books are repossessed. ITunes Radio too is a similar concept. A subscription fee is paid, which allows access to music. Once this expires, access to the music is denied. These, in our opinion, are cases of permissive use. The Monsanto India sub-licensing transaction could only be a service in one circumstance, i.e., if the seed companies gave Monsanto India a bag of seeds to mutate and improve with the Bollgard Technology which would, thereafter, be returned to the seed companies. That might perhaps be a service . Para 70. We do not mean to suggest that every franchise agreement will necessarily fall outside the purview of the amended MVAT Act. There is conceivab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the parties would collaborate to set up the school at Leh. Clause 2, sets out that the assessee permits, allows and grants a revocable license to the Society to use the name DPS, its Logo and motto for the purpose of the school to be established at Leh, during currency of the agreement. Under Clause 3, the Society is required to pay the assessee rupees one lakh, in advance commencing from the year the school starts functioning. (iii) Clause 4, provides that the assessee shall be at liberty to grant license for or open more schools in the area of Leh (Ladakh), in collaboration with any other society/organization or on its own. (iv) Clause 5, states that the school shall be established, managed and run by a Board of Management (BOM). Other sub-clauses in this Clause set out the composition of the BOM. Suffice it to notice, that the Chairman of the BOM shall be the Chairman of the assessee or any other nominee of it; and the Vice- Chairman is also a nominee of the assessee; and three of the other six members of the BOM would also be nominees of the assessee. The pro Vice-Chairman and three of the ordinary members of the Board would be nominees of the head of the Societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l expertise in the area of establishing and running of schools. Sub-clause (g) enjoins that the assessee will allow and permit use of the name (DPS), its motto/logo, during currency of the agreement; however without any right/title/interest acquiring thereto to the Society or the school. It is specifically stipulated that the rights in the name/motto/logo are the absolute property of the assessee and use of the name (DPS), the motto or the logo is limited for the purposes of the Leh school; and use of these is prohibited for establishing branches or granting sub-licenses [sub-clause (h)]. (viii) Clause 9, sets out the further agreed terms and conditions between the parties. Accordingly, the school building, furniture, fittings, laboratory, library and sports materials etc., shall be provided by the Society; the Society shall bear the expenditure of the staff and the assessee shall not be liable for the same; and on determination of the agreement all assets will stand transferred to the Society. The entire liability arising out of termination of the faculty, staff shall be to the sole account of the Society, to the total exclusion of the assessee. (ix) Clauses 10 and 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax for having provided the taxable IPS, since even from the show cause notice stage and thereafter as well, the assessee was never put on notice that it would be assessed to tax as the provider of IPS. In this connection, Shri Sahu referred to a Board Circular dated 27-10-2008 which is a clarification of service tax liability in relation to production of alcoholic beverages under a brand licensing arrangement. Para 2.1 of the circular clarifies that wherever licensee/manufacturers alcoholic beverages under the authority to use a brand name granted by the owner of such brand name - the brand owner; and even where the brand owner provides technical staff/assistance to maintain the required quality, alcoholic beverages so manufactured on the user of such brand name and technical know-how would come within the taxable IPS, even where the property, risk and reward of products so manufactured in here with the manufacturer and not the brand owner. We are not inclined to lay much credit on this Board Circular, particularly since there is no apparent analyses in the circular on whether such activity would not comprise the other taxable category namely franchise service. In any event, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that it was not expected to have a mere passive role, of receiving money for allowing the franchisee to exploit its goodwill and had in fact a dominant role in running the school s and anybody having a dominant role is the master of the situation and has a definitive role in managing the organisation by applying its know-how and expertise in running the schools and therefore the assessee cannot be said to have fulfilled the second ingredient of the definition of franchise (prior to 16-6-2005). In our analysis, the adjudicating authority in the abovementioned paragraphs while setting out the contentions of the assessee concluded nevertheless that the second ingredient of franchise is also fulfilled. The adjudicating authority concluded that in order to internalise the know-how expertise etc. of the assessee into the enterprise (the schools), a regular engagement of the assessee with the enterprise is essential and such engagement is not inconsistent with the provision of franchise service, insofar as the second ingredient thereof is concerned. In our considered view, the extent of engagement of the assessee with the enterprise (school) as provided by the terms of the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticed that in accordance with the interpretive principles for classification of services set out in Section 65A of the Act, where composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a) are in issue, these are required to be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable. Considered on the touchstone of this principle, the raft of services provided by the assessee under the several agreements, in their essential character fall within franchise service. On the aforesaid analysis we hold against the assessee on issue C . Since the aspects for determination set out as Issue D are dovetailed into our analysis on issue C , answered as above, issue D is also answered against the assessee and in favour of Revenue. 6.4 In light of the above decisions the activities undertaken by the Appellant in respect of the agreements with M/s MSM Singapore and M/s WSG need to be analyzed. There is no dispute in respect of the activities undertaken by the Appellant. The role and activities undertaken by the Appellant, in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isit the stadium for viewing the said matches. For taking the live telecast of the matches to the home of viewers, Appellant grant media rights to selected party on exclusive basis. The party granted such media rights represents the BCCI, and is designated in terms of the agreement as Official Broadcaster . In light of the above decisions we take note of the observations made by the Commissioner on the terms of agreements entered into by Appellants with the M/s MSM, Singapore and M/s WSG. 6.7 On the basis of the terms of agreements as discussed above when compared with the terms of agreement as considered by the tribunal in case of Delhi Public School Society, supra, we find striking similarities. Commissioner has in his order examined the terms of agreement and has observed as follows: a) On perusal of the various definitions clauses I sub-clauses given in the agreements dt 21.01.2008 between BCCI MSM / WSG, interalia, the following is observed: (i) The licensor (BCCI) as per para 2.1 of the agreement, granted to MIs MSM Satellite, Singapore M/s World Sports Group (both licensees), media rights such as television rights, licensee mobile rights on an exclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Licensee's general obligations were mentioned. The licensee was obliged to follow the terms conditions mentioned in para 8 which were as follows:- Para 8.1 - Interactive Services - Licensee shall be entitled to launch Interactive Services in connection with the exercise of the media rights provided that such Interactive Services shall not (i) offer to make available any gambling service without prior written agreement of Licensor or (ii) be exercised in such manner as to suggest an endorsement by Licensor, IPL, or by any individual or team participating in the IPL of any goods, games or services without the consent, authorization approval of (as applicable) the Licensor, IPL or such individual or team ..... Para 8.2 - Virtual Advertising - Licensee agrees that it will not alter or add to the content of the Feeds whether electronically or otherwise so as to remove, change or obscure any in-venue advertising, any graphics package or live feed Insertions incorporated into the feed by or on behalf of Licensor in accordance with this agreement. ... Para 8.3- Quality Integrity of Broadcast - Licensee shall ensure that all of its transmission of Footage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er with any goodwill attached to each of them shall remain as between the parties, the sole property of the Licensor shall inure solely for the benefit of the Licensor . (viii) Para 12.4 - Any all Intellectual Property Rights that subsisted in the feed footage (including transmissions recordings thereof by Licensees any sub-licensees) shall be owned by the Licensor for the full term of copyright including all renewals, reversions extensions thereof thereafter in perpetuity. 17. On perusal of the contents of the Agreement I observe that the Indian Premier League (IPL) represented the Twenty 20 cricket corn petition / tournament in India. It is a cricket tournament with a unique identity of its own, in the sense that the IPL title or its logos, marks etc cannot be used for any other Twenty 20 cricket tournaments anywhere else in the world. The cricket matches in the tournament are played only among the fixed set of teams which have their own distinct identity are a part of IPL league. Only the BCCI has the authority to admit the teams to hold the players auction for the IPL league. BCCI holds the commercial rights to each of the league teams, the league ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The appellant also tried to explain to us as to how the word franchise is understood in some other countries. These sources may be useful for interpretational purposes in case of ambiguity in the statue, However, the word franchise is defined in Section 65(47) of Finance Act, 1994 and therefore any reference to the meaning of the said word in other countries is of no direct relevance, because for the purpose of this case, we have to go only and only by the definition of franchise given in Section 65 (47) ibid. Therefore, it will be pointless to indulge in any analysis with regard to the meaning of the word franchise in other countries (and in relation to any other Indian law for that matter). In this regard it is useful to extract below the portion of para 9 from the judgment in the case of UOI and Another v. Hansoli Devi and Others (supra): A provision is not ambiguous merely because it contains a word which in different contexts is capable of different meanings. It would be hard to find anywhere a sentence of any length which does not contain such a word. A provision is, in my judgment, ambiguous only if it contains a word or phrase which in that particular context is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... codes that apply to the operation of their Amway business wherever said Amway business may be conducted within the market and they must not conduct any activity that could jeopardize the reputation of the Distributor and/or Amway. Thus the ABO is not merely having right to sell Amway product; he also does presentation of Amway s Sales Marketing Plan which inter alia also includes Amway s system, procedures and policies regarding presentation of Amway s products, the Amway s business and Amway s organization. The ABO is also required to conduct and behave in the manner prescribed so as not to jeopardize the reputation of Amway. As per para 4.13 of the Guide, no distributor shall represent to anyone that there are exclusive franchises or territories available under the Amway Sales and Marketing Plan. No distributor shall represent that he or she or anyone else has the authority to grant, sell, assign or transfer such franchises or to assign or designate territories. Thus the Business Starter Guide clearly delineates as to in what respects/aspects the ABO cannot represent. In other words, it follows that it is incorrect to claim that a distributor has not been granted represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight in respect of the transaction in relation to the services that is being provided by the franchisor. In terms of para 2.14 of the agreement, appellant have authorized the licensee to refer themselves as Official Broadcasters of the IPL . Thus the activity of the telecast or broadcast of the IPL matches which as noted by the Apex Court, in decisions referred earlier, has been assigned for a consideration to the licensee, and they have been permitted in terms of the agreement as official broadcasters of the IPL . Thus it is quite evident that the appellants have granted representational rights to the licensee, in relation to the telecast/ broadcast of the IPL matches. 6.10 The decision of tribunal in case of Direct Internet Solution Pvt Ltd, supra referred to by the Appellant, in their submissions, is also distinguishable, because in that case the ICANN which was proposed to be the franchisor, was not required to provide any services which it got provided through the franchisee. The para 35, 36 39 of the said decision where the issue has been considered are reproduced below: 35. It would be seen from the above-mentioned subclauses, ICANN Accredits the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellants are providing franchise service of the associate franchisor of ICANN (i.e. registries). The facts in that case are clearly distinguishable from the facts of the present case. In terms of the decisions of the Apex Court referred by us earlier, the functions performed by the appellants are not restricted to organizing the match but are much beyond that. Telecasting/ broadcasting of the match for the purpose of viewers who are not in position to visit the venue of match for watching the match is also the function being performed by them. 6.11 The decision of the Delhi High Court in case of Delhi international Airport P Ltd, referred by the Appellant was considered by the tribunal in case of Godfrey Phillips India Ltd [2018 (10) GSTL 467 (T-Mum)] 5.2 In the instant case the appellants are giving machine containing their company logo, which may be illuminated, affixed on the said machine. The said machine in terms of agreement is required to be placed in such manner that the logo/illuminated logo is clearly visible. Ld. CA have relied on the decision of Hon ble Delhi High Court in case of Delhi International Airport P. Ltd. v. Union of India [2017 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices. 12. Under Article 11.1 of the OMDA, in consideration of the Grant of Rights granted under Article 2.1.1 of the OMDA, the petitioners have to, inter alia, pay an Annual Fee to AAI. The Annual Fees payable to AAI is @ 45.99% in the case of DIAL @ 38.7% in the case of MIAL, of the projected Revenue to be received by the petitioners. 13. The Revenue s share payable to AAI is paid through an escrow bank account. Under the escrow mechanism, all receipts from various sources received by the petitioners are deposited into a Receivable Account from which they are transferred to a Proceeds Account. From the Proceeds Account, payments are first made towards statutory dues and out of the balance, AAI is paid the Annual Fees and any other amounts due to it under the OMDA. The balance is transferred to a Surplus Account, which comes to the petitioners as their respective share of the Revenue. In the said case the defence of the appellant was what they are recovering is only share of the Revenue and DIAL is not paying to Airport Authority of India. In paras 28 and 29 of the said order following has been observed. 28. It is further submitted that the AAI s share i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been granted representational right by franchisor (AAI). 56. Merely because, by an agreement, a right is conferred on a party to sell or manufacture goods or provide services or undertake a process, would not ipso facto bring the agreement within the ambit of a franchise. What is also required is to establish that the right conferred is a representational right . 57. The term representational right would necessarily qualify all the three possibilities i.e., (i) to sell or manufacture goods, (ii) to provide service, and (iii) undertake any process identified with the franchisor. 58. A representational right would mean that a right is available with the franchisee to represent the franchisor. When the Franchisee represents the franchisor, for all practical purposes, the franchisee loses its individual identity and would be known by the identity of the franchisor. The individual identity of the franchisee is subsumed in the identity of the franchisor. In the case of a franchise, anyone dealing with the franchisee would get an impression as if he were dealing with the franchisor. The above observations essentially summarized the test for existence of franchi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... top containing a label of Intel or Windows only denotes that the processor or the operating system/software, as the case may be, in the said laptop is that of Intel or Microsoft. By putting such label, the laptop manufacturing company does not represent either Intel or Microsoft or become the franchisee of Intel or Microsoft or become the franchisee of Intel or Microsoft . We find that in the said case there is no logo or mark of the Global Transgene Ltd. on the product being marked. In the instant case product being marked and the machine used for making the product, both contained logo/mark/eliminated signs of the appellant. In view of this fact in case are different. In the instant case the agreement contains following clause. WHEREAS GPI is in the business of selling beverage ingredients (for hot and cold beverages) of different flavours, premixes and syrups (hereinafter called Raw Materials ) as well as placement and maintenance of its branded beverage vending machines. WHEREAS the Franchisee has approached GPI and represented that it has the required location and requisite infrastructure and has offered to run and operate GPI s vending Machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in any manner whatso-ever. (i) Use the fresh and can unexpired stock of the said raw materials for the preparation of the said beverages and undertaken/bear all the liabilities/fines/penalties, etc., as may be brought against/imposed on GPI in case of any violation in this regard. (j) Maintain and keep intact the original logo advertisement and/or any other indication/mark affixed on the said machine and shall neither obstruct, deface or remove the same nor shall add any other logo, advertisement, mark, etc. (other than the ones agreed/approved by GPI) to the said machine. It shall not obstruct, move or remove the said machine from its original place of installation without prior written approval of GPI. In the event the machine contains an illuminated signs, shall keep such sign illuminated at all times. ARTICLE 6 : INTELLECTUAL AND PROPRIETARY RIGHTS : The Franchisee shall not have any rights, titles or interests including intellectual/ proprietary rights or otherwise in or to the GPI trademarks, trade names, logos, said raw materials, machines, etc., supplies by GPI. ARTICLE 7: OWNERSHIP AND TITLES: The ownership rights, titles, interests, etc., in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t through franchisee. In this circumstance, it cannot be denied representational rights have been granted to the franchisee by the appellant. In the media rights agreement under consideration we find that similar conditions as to those in the case of Godfrey Phillips, we are inclined to follow the said decision distinguishing the decision Global Transgene Delhi International Airport Authority. 6.12 Since we are holding that the services provided by the appellant in terms of media rights agreement to the licensee to fall within the category of Franchise Services, we do not examine the claim for classification under the category of Commercial Use or Exploitation of Event. In our view, the category of Commercial Use or Exploitation of Event refers to the services being in relation to the Commercial Use or Exploitation of the Event for one time and is not in relation to grant of representational rights to perform a particular function over period of time. 7.1 Now coming to the second issue framed by us i.e. Whether the Services Provided by the Appellant will qualify as Export of Services for the purpose of Export of Service Rules, 2005 as amended from time to time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas in the continental shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs numbers S.O. 429(E), dated the 18th July, 1986 and S.O.643(E), dated the 19th September, 1996. Amendments were made to the said Export of Service Rules, 2005 from time to time, however the amendment made by Notification No 6/2010-ST, dated 27.02.2010 omitted the clause (a) in sub rule 2 to Rule 3 of the said rules. Thus in their submission of Appellant have stated that by the said amendment that service has been provided from India and used outside India is no longer relevant for treating the services provided as export of service. 7.2 Before the issue is further discussed, manner of provision of the service needs to be examined. In their submissions in para C.8, Appellants have stated- C.8 The first condition says that the service should be provided from India and should be used outside India. In the instant case, media rights are provided to M/s MSM who in turn provide rights to TV channels and other digital media. The appellant engages the services of Programme Producers such as M/s IMG and M/s Hawkeye to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice carries the said feed to the individual viewers. Transfer of media right is only to exclusively authorize the M/s MSM Singapore or M/s WSG to broadcast the said feed as Official Broadcaster for the IPL. Thus we are not convinced by the argument advanced by the appellant that in para C.8 that location of the person to whom the media rights have been transferred will determine the place where the service has been provided, and since in the present case the person to whom the media rights have been transferred is located in Singapore, the service should be treated as export of service.. 7.4 Appellants have heavily relied upon the decision of Tribunal in case of Balaji Telefilms Ltd. [2016 (43) STR 98 (T Mum)]. However in the said case the programmes were exported to Hongkong and uplinked from there for beaming back to viewers in India. Reference is made to para 6 and 7 of the said decision which are reproduced below: 6. In the impugned order, it was held that the appellant provides programme production service to M/s. SGL Entertainment Ltd. while the uplinking from Hong Kong by M/s. SGL Entertainment Ltd. for beaming to the distributors in India was in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment or enterprise by the assessed, or in consideration of technical services rendered or agreed to be rendered outside India to such Government or enterprise by the assessed, under an agreement approved by the Board in this behalf, and such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessed in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of the whole of the income so received in, of brought into, India in computing the total income of the assessed, 6. The question for consideration is whether the petitioner has received payment from the BBC in consideration for the use outside India of information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available to the BBC. The BBC is a commercial corporation interested in knowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement dated 1- 7-2005 entered into by the them with the Microsoft Operations Pvt. Ltd. of Singapore required the appellant to identify the consumers in Indian Territory to provide marketing and technical support services on behalf of the foreign principal while making sale of Microsoft Products in India and maintaining the same. In the said case Microsoft (India) was providing services of market development to their principal located in Singapore for development of their market in India. The case of the department for not allowing the benefit of export of services was that the said market development was to happen in India and hence the services were being used in India. Tribunal has after examination of the facts found that market development was for the sale of the products of the foreign entity and hence cannot be said to be used in India. Accordingly the benefit of export of services was extended. iii) Similarly in case of Vodafone, the services were provided in case of international roaming to service provider providing telecom services to its consumers while they were in India. The services which were being provided were provided to the service providers located outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose in sub-clauses (zzzo) and (zzzv) and those specified in clause (i) of this Rule except when the provision of taxable services specified in sub-clauses (d), (zzzc), (zzzr) and (zzzzm) does not relate to immovable property. Thus, the classification appears to be of taxable service in relation to immovable property which is situated outside India and if it satisfies the conditions in the proviso below sub-rule (1) of Rule 3, then, there is stipulation in relation to taxable services referred to in several sub-clauses of clause (105) of Section 65 of the Finance Act, 1994 and specified in Rule 3(1)(ii). That is in relation to taxable services, specified in these subclauses of clause (105) of Section 65 of the Finance Act, 1994 which sub-clauses have been specified in Rule 3(1)(ii), as are performed outside India. However, in relation to that also if such taxable service is performed partly outside India it shall be considered to have been performed outside India. The further proviso below sub-rule (2) as it then stood stated that for the purpose of sub-rule (2) of Rule 3 of the Export of Services Rules, 2005 any taxable service provided shall be treated as export of service only if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice the location of the service recipient, determines whether the service can be treated as export of service, subject to the requirement that the consideration for the said services are received in convertible foreign exchange. In the show cause notice for the period post 27.02.2010, the benefit of export of service has been allowed to the extent of payment received in convertible foreign exchange from M/s MSM Singapore. It is uncontroverted fact that entire consideration in respect of media rights agreement was not received in convertible foreign exchange. Quiet substantial amount in terms of the said agreement was paid by M/s Sony Picture Entertainment Limited a subsidiary of M/s MSM Singapore from its advertisement revenues to appellant as a consideration for the service provided by the appellant. In para 5, of the adjudication order, the mode of payment has been explained, and is reproduced in table below: Invoice No Amount in INR Date of Receipt Document No Amount in INR Before TDS deduction After TDS deduction MSM-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Singapore. However, on going through the balance-sheet for 2011- 12, it was noticed that out of the total export income from media right of ₹ 533,92,51,537/-, the income of ₹ 498,38,10,769/- pertain to M/s. MSM Singapore, as mentioned in para 05 and 06 above. However, as against the export income of ₹ 498,38,10,769/-, they have claimed only ₹ 160,15,88,396/- from M/s. MSM Singapore, in their ST-3 Returns. For the balance amount of ₹ 338,23,00,002/- they could not offer any explanations or documentations. In the absence of any explanation, the said income of ₹ 338,23,00,002/- appears to be liable for payment of service tax. As such on the balance amount of ₹ 338,23,00,002/- BCCI is required to pay service tax at the rate of 10.30% which works out to ₹ 34,83,76,900/-. In view of this, the BCCI is not entitled to claim export of services on the following amount:- Name of the party Export of Service Amount Disallowed Service tax Payable 10.30% M/s. MSM, Singapore Rs.338,23,00,002/- Rs.34,83,76,900/- M/s. Wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement were not classifiable under the category of franchise service. When the service tax was introduced under the category of Commercial Use or exploitation of any event they started discharging service tax liability under the said category. Thus the invocation of extended period of limitation cannot be justified, for the reason that there was no suppression of facts with intention to evade payment of tax. The issue involved in the matter was that of interpretation. 8.3 It is fact that appellants had not been declaring the income from media right agreements in the ST-3 return filed by them. Further appellants have not in any case brought out any reason for entertaining the bonafide belief to effect that the services rendered by them will not be classifiable under the category of franchise service. 8.4 The tribunal has in case of L OREAL India Pvt Ltd Vs Commissioner of Central Excise Pune [2015 (330) ELT 253 (T-MUM)] has held- 5.11 Reliance is placed on the decision of the Hon ble Gujarat High Court in the case of Neminath Fabrics Pvt. Ltd. [2011-TIOL-10-HC-AHM-CX = 2010 (256) E.L.T. 369 (Guj.)] and the Larger Bench decision in Union Quality Plastic Ltd. [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice dated 29-12-2010 vide reply dated 19th September, 2011, in para 4.1, the appellant has stated as follows :- 4.1 But, with effect from 1-3-2006, the said Notification 15/2004 has been replaced by Notification 1/2006, which also prohibited availment of Cenvat credit on input services. Hence with effect from 1-3-2006, we have stopped paying service tax and sought the benefit of various circulars and judicial pronouncements to the effect that no service tax is payable by the subcontractors, if the main contractor pays service tax. This averment of the appellant clearly shows that the reason for non-payment service tax was not because of any bona fide belief but because Notification 1/2006-S.T. which provided for abatement in value of taxable service stipulated a condition that no Cenvat credit of excise duty paid on inputs and capital goods and service tax paid on input services shall be availed. Since the main contractor was prohibited from availing input service tax credit, the appellant stopped paying service tax on input services. Under the previous Notification 15/2004-S.T., the restriction on non-availment of credit applied only on inputs and capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. It would differ from a case where fraud, etc. are merely alleged and are disputed by an assessee. Hence, by no stretch of imagination the concept of knowledge can be read into the provisions because that would tantamount to rendering the defined term relevant date nugatory and such an interpretation is not permissible. 19. The language employed in the proviso to sub-section (1) of Section 11A, is clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the relevant date and as to whether the show cause notice has been served within a period of five years therefrom. Section 73 of the Finance Act, 1994 is pari materia to Section 11A of the Central Excise Act and therefore, the ratio of the above decision applies squarely to the facts of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined : [Provided that where such duty as determined under subsection (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty so determined : Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso : Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purpose of this section, the duty as reduced or increased, as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 11A(2) there would be no application of the penalty provision in Section 11AC of the Act. On behalf of the assessees it was also submitted that Sections 11A and 11AC not only operate in different fields but the two provisions are also separated by time. The penalty provision of Section 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC. 19. From the aforesaid discussion it is clear that penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section. 20. At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given. 27. Above being the position, the plea that the Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff s case (supra) was not correctly decided but Chairman, SEBI s case (supra) has analysed the legal position in the correct perspectives. The reference is answered......... . 21. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that Section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. 22. There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as follows : 5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court has in case of Gujarat Travancore Agency held as follows: 4. Learned Counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under Section 271(1)(a) of the Act involves the element of mens rea and in support of his submission that it does he has placed before us several cases decided by this Court and the High Courts in order to demonstrate that the proceedings by way of penalty under Section 271(1)(a) of the Act are quasi criminal in nature and that, therefore, the element of mens rea is a mandatory requirement before a penalty can be imposed under Section 271(1)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions claimed that benefit of CENVAT Credit of the service tax paid on input services used for providing the output services should be allowed to them. The said preposition is well founded and they should be entitled to the admissible CENVAT Credit on the input services. 12.1 Commissioner has while adjudicating the matter allowed the benefit of cum tax value, while determining the Service Tax payable. The said benefit allowed is well supported by the decision of Tribunal in case of CCE Patna Vs Advantage Media Consultant {[2008 (10) STR 449 (T-Kol)] maintained by the Apex Court in {2009 914) STR J49 (SC)]. Accordingly we are in agreement with the benefit allowed. Accordingly the appeal filed by the revenue also needs to be dismissed. 13.1 Commissioner has while adjudicating the demand in respect of the development of website developed and maintained by M/s. Live Current Media (SCN F.No.V/ST/HQ/AE/E/47/09/1190 dtd 19.4.2011) has held that services provided to M/s Live Current Media were taxable services but for the reason that appellants had not received the consideration against the provisioning of the said service till the time of adjudication dropped the demand and has or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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