TMI Blog2019 (12) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... franchise agreement and hence, Service Tax under that head is not leviable - the coordinate bench of the Tribunal held in the case of IMA Mental Arithmetic Academy Pvt Ltd Vs CST, [2018 (3) TMI 709 - CESTAT CHENNAI] that only those amounts directly relatable to 'representational right' granted by the franchisor to franchisee and royalty/franchise fee towards that right alone be part of taxable value under 'franchise' service; admission fee, tuition fee, competition fee and course instructor fee was not liable for service tax under franchise service . Supply of tangible goods service - HELD THAT:- As regards VSAT usage fee, as submitted by Senior Counsel, it is in the nature of telecommunication costs apportioned and recovered as reimbursement. Therefore, such charges are not liable to service Tax as held in the case of Indian National Ship Owners Association [2018 (3) TMI 357 - SUPREME COURT]. The impugned order does not survive both on limitation and merits - Appeal allowed - decided in favor of appellant. - Service Tax Appeal No.218 of 2009 - Final Order No. 21295/2019 - Dated:- 20-12-2019 - HON'BLE SHRI S.S GARG, JUDICIAL MEMBER AND HON' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 87,40,770 with equal penalty under Section 78 and other penalties, invoking the extended period of limitation. Hence, the present appeal is filed. 3. Shri Ravi Shankar, senior Counsel, appearing for the appellants submits that as both agreements with SMU and the parties running Learning Centres did not involve any kind of franchise but were in the nature of auxiliary education services ; the Appellant entertained a bona fide belief that they were not liable for payment of service tax under the category of franchise service as defined in section 65(105)(zze) read with Section 65(47) (48) of the Act; it was understood by the Appellant that VSAT equipment hire charges related to Chattel hire; the same was a transfer of property and right to use falling within the ambit of the definition of sale in terms of Article 366 of the Constitution and not a service as contemplated by law during the relevant period. 4. Learned Counsel submits that the Department is not at all justified in invoking the extended period of limitation since the Department has issued two SCNs for the very same period based on very same relied upon documents; When all f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following reasons (a) There was no franchise service rendered by the Appellant either to Sikkim-Manipal University or to parties of Learning Centres; MOA dated 22.11.04 with Sikkim Manipal University was for providing auxiliary education services in relation to distance education programme of the University; this MOA was not in the nature of franchise as defined in Section 65(47) as it stood both prior to 16.6.2005 and post 16.6.2005 amendment; there was no representational right granted to the Appellant; so is the case with the agreements entered by the Appellant with parties of Learning Centres under LCAs; the thrust of the MOA and LCA was to provide infrastructure facilities and services in relation to distance education programmes. Senior Counsel avers that there is nothing in the impugned order to establish that the ingredients of the definition of franchise in Section 65(47) are present or satisfied; there is no royalty received towards any franchise service ; insofar as the activity of supply of VSAT equipment is concerned, the same was not towards any rendering of franchise service . He places reliance on the following. (i). KEH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) as affirmed by the Supreme Court in 2018 (10) GSTL 401 (SC); the impugned order is wholly devoid of legality. Learned Senior Counsel submits that at best the activity of supply of VSAT could come under the activity of supply of tangible goods vide section 65(105)(zzzzj) of the Act w.e.f.16.5.2008; hence, for the period in question, VSAT management fee charged towards supply of goods cannot be subjected to service tax during the period in question. He places Reliance on the decision in Indian National Ship-owners Association Vs UOI, 2009 (14) SIR 289 (Born.) and Jindal Drilling Industries Ltd Vs CST, 2014 (41) STR 203 (Tri-Mum.). As regards, VSAT usage fee they were wholly in the nature of telecommunication costs apportioned and recovered as reimbursement; this amount has already suffered tax inasmuch as Airtel who is the supplier of the said service has already charged service tax on the same under the taxable category of 'telecommunication service'. 9. Learned AR appearing for the Revenue reiterates the findings of OIO. 10. Heard both sides and perused the records of the case. Brief issues that require consideration in this case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es hereto and neither party by virtue of this agreement, shall have the right, power or authority to act or create any obligation, express or implied, on behalf of the other party. The participant shall not expressly or by implication or conduct under any circumstance, represent itself to be an agent of MUL and no act of the participants as is not specifically authorised by MUL shall be binding on MUL. 13. We find that nothing in the agreement indicates that the learning Centres have been given a franchise by providing the VSAT at the learning Centres; Nothing is forthcoming from the contracts that appellants gives permission to use their name by providing the VSAT facility. We also find that the appellants are not receiving any royalty towards the alleged franchise. Therefore, it is incorrect to classify the same as Franchise service. We find that CBEC circular No.59/8/2003 dated 20-6-2003 clarifies at Para 2.4 that unless the following ingredients are satisfied, the agreement cannot be called as franchise agreement. (i). the franchise is granted representational right to sell or manufacture goods or to provide service or undertake any process ide ..... 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