2019 (1) TMI 436 – CESTAT CHENNAI – TMI – Franchise services – use of logo and study material to their USA based franchiser, namely, M/s. Crest Com International Limited, USA – Held that:- While appellants have been consistently contending that the amount sent to Crest Com International Ltd., U.S.A has already suffered, both the lower authorities have chosen to disregard the same on the grounds that such claim is not backed up with necessary documentation. On the other hand, appellant has argued that they have supplied necessary evidence to substantiate their averment before both the lower authorities, however the same has not been adequately considered – the matter requires to be remanded to original authority to cause necessary verification.
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Penalty u/s 78 – Held that:- Penalty imposed under Section 78 is an overkill and requires to be set aside.
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Appeal allowed in part and part matter on remand. – Application No.ST/Misc/41103/2017, Appeal No.ST/587/2011 – FINAL ORDER No.
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provisos of law. In adjudication, original authority vide an order dt. 31.07.2009 confirmed the demand as proposed in SCN with interest and also imposed penalty under Section 77 & 78 of the Act. In appeal, Commissioner (Appeals) vide impugned order dt. 27.07.2011 upheld the order of original authority. Hence this appeal. 2. When the matter came up for hearing, on behalf of appellant, Ld. Advocate Shri S. Murugapan made oral and written submissions which can be broadly summarized as under : (i) The appellants have a Technical Business Services and Marketing Agreement with M/s.Crest Com International Ltd., USA for distributing the USA company s management programmes. The appellant who is the master distributor as per the above agreement has a right to appoint other distributors for marketing and actually implementing the training programme. The agreement defines the person who conducts the management training programme as an Active Distributor. (ii) As per the agreement the proceeds
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is not a single case where service tax was not collected and not remitted in respect of training programmes conducted. The revenues earned from these transactions by the appellants was shared as per the percentages mentioned in the distributor agreement. Therefore, it can be seen that such sharing of the revenue are after payment of applicable service tax only. (b) There is no separate service envisaged from the USA supplier to the master distributor i.e. the appellant here. After discharge of service tax, the income earned is shared in their role as master distributor and producer and accordingly, there cannot be any further levy of service tax. (c) The appellants also rely upon the judgment of the Kerala High Court in the case of Speed and Safe Courier Services Vs. Commissioner reported in 2010 (18) S.T.R.550, where the Hon ble High Court of Kerala negative the department s contention for charging Service Tax for the second time when the revenues were shared between the courier serv
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e tax for which a detailed working had been enclosed as an annexure. However, we find that these averments of the appellant have not been critically analyzed by the original authority. 4.2. We find that as per the grounds of appeal, summarized in para-3 of the order, all the payments made to Crest Cam International Ltd., U.S.A were paid only after payment of service tax in India. However, even the lower appellate authority has dismissed the prayer on the grounds that onus is on the appellant to substantiate the contention that royalty paid by them to foreign service provider already suffered service tax and that the same had been paid to the department. The original authority has not accepted the contention of the appellant concerning payment of service tax in absence of proof of documentary evidence . From the discussions, what comes to the fore is that while appellants have been consistently contending that the amount sent to Crest Com International Ltd., U.S.A has already suffered,
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