M/s. Consim Info Pvt. Ltd. (formerly known as M/s. BharatMatrimony. com Pvt. Ltd.) Versus Commissioner of GST & Central Excise Chennai South Commissionerate
Service Tax
2018 (9) TMI 1657 – CESTAT CHENNAI – 2019 (21) G. S. T. L. 447 (Tri. – Chennai)
CESTAT CHENNAI – AT
Dated:- 23-7-2018
ST/Misc. /41100/2017 and ST/551/2010 – Final Order No. 42186/2018
Service Tax
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
Shri Akhil Suresh, Advocate for the Appellant
Shri S. Govindarajan, AC (AR) for the Respondent
ORDER
Per Bench
Brief facts are that the appellant is a private limited company having branches all over India and are providing matrimonial services through online information on website, providing private employment exchange for employers and job seekers to find the candidates and jobs respectively. They are also aiding property transactions in the websites by creating a common meeting ground for those dealing in
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notice was issued raising allegations and also demanding service tax for the period January 2006 to March 2007. After due process of law, the original authority confirmed the demand and dropped the penalty under section 76 of the Finance Act, 1994, however, confirmed the penalty under section 78 of the said Act. In appeal, Commissioner (Appeals) upheld the same. Hence this appeal.
2. On behalf of the appellant, ld. counsel Shri Akhil Suresh appeared and argued the matter. He adverted to the agreement entered into by the appellant with their associate centers and submitted that the agreement is mere granting of right to use the trademark of appellant company. As per the definition of franchise service, as it stood prior to 16.6.2005, there was specific condition and characteristics in order to classify the services under franchise service. After the introduction of Intellectual Property Service from 10.9.2004, the definition of franchise service underwent a change with effect from 16.
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not fulfilled in the instant case and does not make the activity a taxable service under this category. He placed reliance in Ashok Enterprises reported in 2007 (5) STR 153 (Commr. Appl.) which held that where agreements are lacking concept business operation, managerial expertise and market techniques of franchisor to be followed by franchisee, then the agreement grants limited use of intellectual property of trademark and would be covered under Intellectual Property service. Thus, the ld. counsel has argued that the services would not fall under franchise service but would be more akin to Intellectual Property service.
3. In addition, it was submitted that the demand cannot sustain as the show cause notice has been issued invoking the extended period alleging suppression of facts. That the appellant has not suppressed any facts. In fact, an internal audit was conducted in 2006 wherein the agreement was scrutinized by the officers during the course of audit and there was no objection
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nt is for transfer of intellectual property. The agreement shows that the franchisor agreed to the franchisee to establish and administer bharatmatrimony.com center for providing a matrimony service in the name of franchisor. Further, there is a fee charged by the franchisor in the name of royalty upon the franchisee for continuous use of the name together with the past and present goodwill of the franchisor along with minimum support service like design of marketing know-how, technical know-how etc. That these would clearly show that it is not an agreement for transfer of intellectual property but an agreement for franchise service. With regard to limitation, he submitted that the appellant have suppressed the activity of rendering franchise service, with intent to evade payment of service, the show cause notice issued invoking the extended period is proper.
5. Heard both sides.
6. The main ground that has been argued by the ld. counsel is that the activity does not fall under franc
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g of various BharatMatrimony Centers throughout the country. The FRANCHISEE acknowledges that he does not presently know the special skills, techniques or business policies, nor does the FRANCHISEE have business forms or access to the FRANCHISOR'S body of knowledge”
7. The above would show that it is not an agreement for mere transfer of intellectual property. In fact, the franchise agreement stipulates for payment of franchise fee charged by the franchisor upon the franchisee. The argument of the ld. counsel that it involves only transfer of intellectual property cannot be accepted for the reason that the agreement involves conditions wherein the manner of functioning and operation of the associate center is laid down. Thus the franchisor has a right to dictate or direct how the franchisee has to carry on the business. There is also a condition for the franchisee to attend the training conducted by them. Clause 5.3 states that the administration of centre shall be by the Centre Manag
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