TMI Blog2019 (5) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract for allowing the exemption under this notification. Commissioner has in his order analyzed the relevant agreements very lucidly along with the case laws on the subject and have concluded in favour of the assessee. Appeal dismissed - decided against Revenue. - Appeal No. ST/86825/2016, ST/CO/91125/2016 - A/85777/2019 - Dated:- 17-1-2019 - Dr. D.M. Misra, Member (Judicial) And Mr. Sanjiv Srivastava, Member (Technical) Shri M.K. Sarangi, Authorised Representative for the Appellant Shri Prasannan S. Namboodiri, Advocate for the Respondent ORDER PER: SANJIV SRIVASTAVA This appeal is directed against Order In Original No 91-92/STC-IV/MRRR/15-16 dated 22.03.2016 of the Commissioner Service Tax IV Mumbai. By the said order Commissioner has held as follows: I drop the proceedings initiated under Show Cause cum Demand Notice No Centralized Registration No COMMR/STIV/ AE/48/2015-16 dated 13.10.2015 issued under F No V/ST-4/AE/Eurokids/86/2014 demanding Service Tax of ₹ 13,54,06,034/- (Rs Thirteen Crores Fifty Four Lakh Six Thousand and Thirty Four Only) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notice Centralized SCN No COMMR/ST-IV/Dn-03/89/2015-16 dated 02.03.2016 issued under F No V/ST-4/AE/Eurokids/86/2014 demanding Service Tax of ₹ 5,44,32,583/- for the period 2014-15 under Section 73 (1) of The Finance Act, 1994 along with interest under Section 75. Penalties were also proposed under Section 76 77 of the Finance Act, 1994. 2.5 Both the show cause notices have been adjudicated by the Commissioner as per the order referred in para 1 supra. 3.1 In their appeal revenue has challenged the order of Commissioner stating that- i. Commissioner has wrongly granted the benefit of Notification No 12/2003-ST dated 20.06.2003. This notification granted exemption to so much value of taxable services as was equal to the value of goods and materials sold by the service provider to the service recipient, subject to the condition that there is documentary proof of such value of goods and materials. Under the negative list regime, the transactions that involve transfer of title are excluded. Thus if the goods are being sold by the service provider under a distinct and separate contract then sale of such goods is excluded from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educational materials, teaching aids, techniques, systems and formats is developed through considerable expense of time, effort and money and is identified by and with certain proprietary names and mark owned by Franchisee. Respondents have not been able to show that the consideration received towards the Method and Equipment or any other material bearing their proprietary marks/ logo being integral part of the Franchisee Service as prescribed by franchiser so as to make the training of children fruitful and meaningful, are in no way useful to the enrolled children and the same are readily available in the market as such for sale. The very essence of the franchise agreement in the instant case is bounding and compelling the franchise to buy/ sourcing or using the format/ Method/ Equipment, identified by and with certain proprietary names and marks owned by Franchisor. viii. There is also no evidence to suggest that these study method and equipment enjoy exemption under law and are not taxable under the category of Franchisee Service. ix. From the Annexure E, Banking Instructions for Gross Fee Collection as per the direct Franchise Agreement , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssues raised in the show cause notice. 3.2 In the cross objections filed respondents have not raised any issue but have only supported the order of Commissioner. Hence the cross objections are not being detailed here. 4.1 We have heard Shri M K Sarangi, Joint Commissioner, Authorized Representative for the Appellant Revenue and Shri Prasannan S Namboodiri, Advocate for the Respondent. 4.2 Arguing for the Revenue learned Authorized Representative submitted- i. There is no dispute about the fact that the respondents are providing taxable service under the category of Franchisee Services . In fact they are paying Service Tax on the services provided. ii. The dispute in present case is in respect of the valuation of taxable service. iii. Respondents are paying service tax on the value received by them as consideration under the head franchisee/ Royalty Fee from their Franchisee. iv. Apart from the above they are receiving consideration under various other heads as sale of Method and Equipment, Administrative Fees, Admission Fees etc , which are part of the gross consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpn Ltd [2009 (243) ELT 0408 (T-Bom)], Hi Tech Electronics Industries [2014 (314) ELT 0689 (T-Del)], Gauri Components (P) Ltd [2013 (292) ELT 0332 (ALL)], Samruddhi Cement Ltd [2014 (034) STR 0592 (TDel)], Elgi Tyres Tread Ltd. [2003 (155) ELT 0612 (T-Bang)] ii. As per the agreement the Franchisee are required to provide, keep and maintain certain equipments, install facilities, amenities and other material as approved by them. This is necessary to maintain uniform standard. If the equipment needed replacement due to loss or damage the same was required to be purchased by the franchisee from them or their approved vendor. They were purchasing the equipments from the market and supplying the same to franchisee. These equipments were not uniform in all case and depended on the requirement of franchisee. These transactions are purely of sale of goods and have no connection with the provision of services. They had raised separate invoices on their franchisee or the vendors as the case may be for sale of these equipments and have paid VAT on the same. iii. They also sold the welcome kit comprising of school uniform, Tiffin box, water bottle etc. These w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner Order wherein the issue has been discussed and Commissioner has rightly held in favour of admissibility of exemption. It is also admitted fact they were raising two invoices one towards the sale of goods and other for the recovery of franchisee Fee. Against the recovery of franchisee/ Royalty Fees they have paid the service tax. x. Reliance was placed on the decision of tribunal in case of Tirupati Cylinders Ltd [2016-TIOL-316- CESTAT-ALL], Tanya Automobiles Pvt Ltd [206-TIOL- 166-CESTAT-ALL], APM Terminals (I) P Ltd [2014- TIOL-1854-CESTAT-MUM], CSC Computer Education (P) Ltd [2014-TIOL-569-CESTAT-MAD], Cerebral Learning Solutions Pvt Ltd [2013-TIOL-834-CESTATDel]. Mahendra Engineering Ltd {2015 (38) STR 233 (ALL)] xi. Demand is time barred. They were audited and had acted under bonafide belief hence invoking extended period would not be justified. Further there was no intention to evade payment of Service Tax and all the facts were disclosed to the department and were in the knowledge of department hence extended period not invokable. xii. Hence the appeal filed by the revenue needs to be dismissed. 5.1 We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The department has issued clarification vide Circular No. 59/8/2003-S.T., dated 20-6-2003 and as per the said clarification, it was clarified that in case of commercial training and coaching institutes, the exclusion shall apply only to the sale value of standard textbooks, which are priced. Any study material or written text provided by such institute as a part of service which does not satisfy the above criteria will be subjected to service tax. On the basis of this clarification, the demand has been confirmed against the appellant. The said issue came up before this Tribunal in the case of Pinnacle (supra) and the same was considered in para 8 of the said decision and it was observed that It is not in dispute that the activity of the company is to provide coaching. The Revenue has not disputed the fact that the study materials were purchased by the appellants from M/s. Bulls Eye. Therefore, there is nothing in the Notification No. 12/2003-S.T. which would help Revenue in their arguments. The Circular of C.B.E. C. quoted by the learned DR states that such exemption will be applicable only if material sold is standard textbooks . The question as to what is a standard tex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting [2016 (41) STR 208 (T-Mum)] the tribunal rejected the argument of revenue in respect of the usage of phrase in relation to by sating as follows: 5.2 The argument of the Revenue as held in the adjudication proceedings is that the words in relation to used in the definition of franchise service signify that any activity in connection with the franchise service will also be considered as part of the franchise service. Since the course fees is part of the franchise activity, it should be included in the value of the service for purpose of Service Tax. In our view the words in relation to have to be read in the context in which they are used. Thus words are in the context of franchise service. But the issue before us is the course fees or training fees. The Service Tax law nowhere states that if two distinct activities are undertaken or provided in a single agreement, they should be taxed under the same service category. The activity of coaching for which course fees is received is not even remotely connected to the franchise granted by the appellant in the form of Authorisation. In our view, the provisions of law have not been appreciated properly by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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