2018 (9) TMI 1067 – CESTAT CHENNAI – TMI – Time Limitation – franchise services – case of appellant is that the issue being interpretational and the appellant having no intention to evade service tax, failure to make the payment, being only because of interpretational issue, the demand for the extended period cannot sustain.
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Held that:- The definition of ‘franchise’ had undergone an amendment with effect from 16.06.2005. Prior to this date, in the absence of all the four ingredients in an agreement, the transaction would not fall into the category of ‘franchise’ – On perusal of the agreement of the appellant with vehicle owners, it is seen that Clause No. 5 does not make any obligation on the part of the vehicle owner not to cater to other customers. Thus, the driver/owner can cater to the requirements of other customers also even though they have entered into an agreement with the appellant.
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Thus, the fourth limb of the earlier definition has been given go-by after 16.06
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1994. Aggrieved by the confirmation of demand, the appellant is now before the Tribunal. 2. On behalf of the appellant, the learned Counsel J. Shankaraman, advanced arguments on the ground of limitation. He submitted that the appellant had entered into an agreement with various car owners who had valid tourist permit to ply their vehicle in Chennai City. In terms of the agreement, the vehicle owner has to pay ₹ 3,000/- every month to the appellant for the call centre charges. The appellant had set up a call centre in their office and using this facility could provide service for prospective passengers who are desirous of using services of taxi. The Department alleges that since the brand name Fast Track Call Service was used by the vehicle owners/drivers, the appellant is liable to pay service tax under the category of franchise services. He argued that the definition of franchise service had undergone an amendment with effect from 16.06.2005. Prior to this date, a service would
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non-payment of service tax would not have come to light but for the interference of the Department. That appellants did not intimate the Department that they are rendering franchise services and had suppressed the facts and, therefore, the demand for the extended period is just and proper. 4. Heard both sides. 5. The learned Counsel has advanced arguments on the ground of limitation only. At the outset it has to be stated that the Commissioner (Appeals) has waived the penalties imposed, invoking Section 80 and observing that there is reasonable cause for the appellant for not discharging service tax liability. From the submissions made by both sides, we find that the definition of franchise had undergone an amendment with effect from 16.06.2005. Prior to this date, in the absence of all the four ingredients in an agreement, the transaction would not fall into the category of franchise . On perusal of the agreement of the appellant with vehicle owners, it is seen that Clause No. 5 does
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