Counter Point Management Plus Versus Commissioner of GST & CE Chennai South Commissionerate
Service Tax
2019 (1) TMI 436 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 13-12-2018
Application No. ST/Misc/41103/2017, Appeal No. ST/587/2011 – FINAL ORDER No. 43175/2018
Service Tax
Shri Madhu Mohan Damodhar, Member (Technical) And Shri P. Dinesha, Member (Judicial)
Shri S. Murugappan, Advocate For the Appellant
Shri B. Balamurugan, AC (AR) For the Respondent
ORDER
Per Shri Madhu Mohan Damodhar
The facts of the case are that pursuant to audit conducted by the department, it emerged that appellants during the period January 2007 to December 2008 paid an amount of Rs. 1,68,23,658/- for the use of logo and study material to their USA based franchiser, namely, M/s. Crest Com International Limited, USA. Department took the view that the activity of the appellants would fall under ambit of 'Franchise services' as per section 65 (105) (zze) of the Finance Act, 199
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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 from the initial franchise fee paid by the new distributor is to be divided between the appellants (master distributor) and the USA company (producer) in the ratio of 40:60 i.e. 40% to master distributor and 60% to the producer. Apart from the above, the distributors are required to pay 35.5% of their gross revenue as royalty which is to be shared between the producer and master distributor as per the percentages mentioned in the agreement.
(iii) The original authority has treated the amounts shared with the USA producer as payment of royalty and has demanded service tax which was affirmed by the Commissioner (Appeals). Such a demand is not sustainable on the following grounds :
(a) The actual distributor or the abov
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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 service and the franchisees.
3. On the other hand, Ld. A.R Shri B. Balamurugan supports the impugned order. He drew attention to para 5.4 and 5.5 of the impugned order where Commissioner (Appeals) has analysed the agreement between the appellant (Franchisee) and M/s. Crest Com International Limited, USA. (Franchisor). The appellant had not produced any evidence that the service tax collected had been paid to the department and further onus is on the appellant to substantiate any contention that the royalty paid by them to foreign service provider had also suffered service tax and the same had been paid to the department.
4.1 Heard both sides. On going through the facts on record, we find that in the reply dt. 18.0
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f 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, 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. In the interests of justice, we therefore are of the opinion that the matter requires to be remanded to original authority to cause necessary verification on this aspect, namely, whether the payouts made to Crest Com International Ltd., U.S.A. did indeed suffer service tax earlier. Needless to say, appellants should be given suitable opportunity to present their case includ
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