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TMI Blog2019 (6) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices and Commercial Training and Coaching Services. The same i.e. Rs. 1,17,65,723/- (Rupees One Crore Seventeen Lakhs Sixty Five Thousand Seven Hundred and Twenty Three only) is ordered to be recovered along with interest at appropriate rate under Section 75 of the Finance Act, 1994. 5.02 Penalty of Rs. 1,17,65,723/- (Rupees One Crore Seventeen Lakhs Sixty Five Thousand Seven Hundred and Twenty Three only)is imposed on the noticee under Section 78 of the Finance Act, 1994. 5.03 Proceedings demanding service tax on other services dropped. 5.04 CENVAT Credit of Rs. 5,12,27,873/- (Rupees Five Crore Twelve Lakhs Twenty Seven Thousand Eight Hundred and Seventy Three only) disallowed and ordered to be recovered under rule 14 of CENVAT Credit Rules, 2004 read with Section 73 of the Finance Act, 1994 along with interest at appropriate rates under Rule 14 ibid, read with Section 75 of the Finance Act, 1994. 5.05 Penalty of Rs. 5,12,27,873/- (Rupees Five Crore Twelve Lakhs Twenty Seven Thousand Eight Hundred and Seventy Three only) imposed on the noticee under Rule 15(3) of the CENVAT Credit Rules, 2004 read with section 78 of the Finance Act, 1994." 2.1 A show cause notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or logo i.e. similar to any trade mark, service mark, trade name or logo of the appellant's. The agreement also provides that these registering authorities are not agents, employees or joint venture of appellant and they have no authority to bind the appellant for contractual liability. The registration Authorities collect the DSC Fee from the applicants to be remitted to the appellant when they would raise periodical invoices on the registering authorities for receiving these DSC Fee collected from the applicants. Though the Show Cause Notice demands service tax under the category of Franchisee Service for period from 01.04.2005 to 30.04.2006 and from 01.05.2006 onwards under the category of Business Support Services, the entire demand has been confirmed under the category of Franchisee Service. These services do not qualify as Franchisee Service as has been held in case of- i. Sify Technologies Ltd [2018 (14) GSTL 268 (T-Chennai)] ii. Global Transgene Ltd [2013 (32) STR 86 (T-Mum)] iii. Direct Internet Solutions P Ltd [2014 (36) STR 849 (T-MUM)] iv. Delhi International Airport P Ltd [2017 (50) STR 275 (Del)] v. Franch Express Network 9P) Ltd [2008 (12) STR 370 (T-C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to information technology software including maintenance thereof was brought under tax, by introduction Information Technology Software Services with effect from 16.05.2008. {Reliance on SAP India Pvt Ltd [2011 (21) STR 303 (T-Bang)], Persistent Systems Ltd. [2016 (42) STR 890 (T-Mum)], Larsen & Tuobro Limited [2017 (4) GSTL 271 9T-Mum)]} vii. Even the explanation appended to the definition of Management Maintenance and Repair Service definition clause w.e.f 01.06.2007 cannot have retrospective effect as this being substantial expansion to create a levy of tax on software maintenance, it cannot be applied retrospectively. Reliance on {Martin Lottery Agencies Ltd [2009 (14) STR 593 (SC)], Kasturi & Sons Ltd [2011 (22) STR 129 (Mad)], Financial Software Systems Pvt Ltd [2014 (3) STR 393 (T-Chennai)], Phoenix IT Solutions Ltd [(22) STR 400 (T-Bang)], NCR Corporation India Pvt Ltd [2008- TIOL-1322-CESTAT-BANG], India Switch Co Pvt Ltd [2015 (39) STR 288 (T-Chennai)]. Further by stating, "For removal of doubts" in the explanation inserted w.e.f 01.06.2007, it is admitted that there existed a doubt in the minds of taxpayers and hence extended period of limitation cannot be invok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on [2018 (18) GSTL 448 (T-Mad)]. Since the issue has been settled in favour of revenue by the said decisions the order of Commissioner dropping the demand cannot be sustained. 4.1 We have considered the impugned order along with the appeals filed by both appellant and revenue and the submissions made during the course of argument and in written submissions filed. 4.2 Issues for consideration can be grouped in two categories as follows: I. Demand of Service Tax on services provided by the appellants in category of- i. Franchisee Service; ii. Management Consultancy Services; iii. Commercial Coaching and Training Services; iv. Management Maintenance & Repair Service; & v. Manpower Recruitment or Supply Services. II Demand of CENVAT Credit disallowed for non production of documents. 4.3 Demand of Service Tax on services provided by the appellants in category of- 4.3.1 Franchisee Service- a. As per the order of Commissioner demand under this category has been confirmed for the period from 04/2005 to 12/2006. While confirming the demand under this category Commissioner has considered demand made under two categories as per the show cause notice Annexure 1 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. However, there is nothing on record to show that TCS provided the concepts of business operation to the service receivers. There is nothing to show that they provided any know how, method of operation, managerial expertise, marketing technique or training or standards of quality control to them. Thus, the agreement doesn't pass test of second clause. vi. It has been rightly noted in the show cause notice that in order to be recognized as a 'franchise' for the period prior to 16/06/2005, the agreement must fulfill all the four conditions. Since the agreement doesn't meet terms of second clause, it cannot be termed as Franchise. Consequently the, the demand for the period upto 15.06.2005 is dropped. vii. For the period from 16/06/2005 onwards, the clause (ii) to (iv) were absent in the definition and only the first clause was retained. It has already been noted above that the agreement completely meets requirement of first clause. Therefore, the agreement did amount to a franchise for the period from 16/06/2005" d. The findings recorded by the Commissioner clearly show that he has not been able to appreciate as to what is meant by "grant of representational right". Gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the franchisee should have been 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. Board, vide Circular No. 5918/2003-S.T. and Circular No. B1/6/2005-TRU, has recognized this aspect. 5.3 Undisputedly, the appellants have imported the Technology which is owned by BTC and patented in China. The said technology is imported in the form of the mother seeds and the same are multiplied in the laboratory by or on behalf of the appellants and given to the sub-licencee to further multiply for onward sale by them to the farmers for the purpose of growing commercial crop. The appellants are not granted any 'representational right' from BTC to represent them in India, nor entitled to grant or they have actually granted any representational right to the sublicensees. 5.4 The Revenue's case rests on the premise that the logo or hallmark belonging to the appellant is put on the seed package manufactured/marketed by the sublicensees. The appellants produced a few samples of the product pac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services of the Contractor to provide project management services including but not limited to on site job coordination, delivery and job execution scheduling, technical support on design of the solution and installation of the Products and related services thereto." c. As per the Annexure-II PO No 38187 dated 18/07/2005, (Purchase Order of Honeywell Automation India Ltd) following is scope of work assigned to appellant: 1. Technical Support and consultancy on design of smart card. 2. Project Management, Scheduling and Delivery Coordination. 3. On site job coordination for front availability and implementation infrastructure. 4. Develop customized interface software between Honeywell EBI and Ultimatix 5. User acceptance test support to HAIL on solution developed. 6. Integration of solution developed with Ultimatix, CMC Biometric Solution and TCS smart card management system. 7. Work with Hail To stabilize the solution post implementation/ integration. 8. Work with hail for final acceptance test on the system developed. c. From the scope of work as indicated above, Honeywell has contracted appellants to provide technical support and consultancy for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was performing the management function." This case lays down the test that Management itself cannot be management consultant. Since that's not the issue in dispute in present case we do not find that this decision is applicable. g. The issue in consideration in decision at 'iii' was in relation to Consulting Engineer Services and not Management Consultancy Service. Hence that decision to is distinguishable. 4.3.3 Commercial Coaching and Training Services: a. Commercial Training or Coaching as per Section 65(26) of Finance Act, 1994 means any training or coaching provided by a commercial training or coaching centre. As per Section 65(27) ibid, Commercial Training or Coaching Centre" is any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force." b. The definition is wide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of service provided by the appellants in respect of annual maintenance contracts of softwares, under taxable category "Management Maintenance and Repair Services" has been dropped by the Commissioner on the ground of limitation holding that extended period of limitation shall not be available. Revenue has challenged the said order referring to certain circulars dated 7.10.2005 and 7.03.2006, and amendments made subsequently. We are not impressed by any of such submissions. Commissioner has relied upon the letter dated 14.06.2005, which was issued specifically to the appellants stating that services provided by them are not taxable under this category. Revenue has sought to brush aside the letter stating that the same was in respect of Chennai Unit and not in respect of Hyderabad Unit, against whom this demand is made. The fig leaf distinction sought to be made do not help the cause of revenue. When a clarification whether write or wrong has been issued by the Board it should apply to all similarly placed units till it is withdrawn. However this letter is enough to give rise to bonafide doubt in the mind of a rationale person/ taxpayer. Issuance of this letter by the Board clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to, would mean 'pertaining to'. Thus, the service of supply of manpower will fall under this service. The scope of this service is found explained in paragraph 22 of Service tax Instructions F. No. B1/6/2005-TRU, dated 27-7-2005. Paragraph 22.2 is extracted below for ready reference. "A large number of business or industrial organizations engage the services of commercial concerns for temporary supply of manpower which is engaged for a specified period or for completion of particular projects or tasks. Services rendered by commercial concerns for supply of such manpower to clients would be covered within the purview of service tax." Service tax is on the service rendered. The taxability has to be decided with reference to the activity undertaken. The principal purpose of the agreements is for supply of manpower, and following the judgment of Kerala High Court in Kerala Colour Lab Association v. UOI, 2006 (2) S.T.R. 554 (Ker.) = 2003 (156) E.L.T. 17 (Ker.), the services rendered by the appellant falls squarely within manpower supply services. Taxability is not dependent on the work turned out by the persons supplied. Supply of men precedes, and that is when the Service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n decide with regards the admissibility of CENVAT Credit against those documents. 4.5 Since the matter is being remanded back to Commissioner on various issues as discussed above, Commissioner should in remand proceedings also quantify the penalty to be imposed depending on his findings in remand proceedings and demand upheld by us in these appeals. 4.6 Thus we summarize the outcome of discussions as follows: I. Demand of Service Tax on services provided by the appellants in category of- i. Franchisee Service: Demand is not maintainable on merits ii. Management Consultancy Services: Demand upheld iii. Commercial Coaching and Training Services: Demand Upheld iv. Management Maintenance & Repair Service: Order of Commissioner dropping the demand on ground of limitation upheld v. Manpower Recruitment or Supply Services: Demand maintainable on merits but matter remanded for consideration of issue on limitation and penalty. II Demand of CENVAT Credit disallowed for non production of documents: Matter remanded back to Commissioner to allow appellants to produce the documents as prescribed under Rule 9 of CENVAT Credit Rules, 2004, for determining the admissibility o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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