Case Law Details
Manipal Universal Learning Pvt. Limited Vs The Commissioner of Central Excise (CESTAT Bangalore)
Brief issues that require consideration in this case or as to Whether VSAT (Very Small Aperture Terminal) fee (both one-time fee for supply of goods and actual usage charges) charged for supply of VSAT equipment is liable for service tax under “franchise service’ under sections 65 (105) (zze) read with Sections 65(47) & (48) of the Finance Act, 1994 and as to Whether demands are wholly barred by limitation.
It is evident on records that the appellants are registered with the department and are in continuous correspondence with the department and various visits of Audit teams have taken place. Moreover, the department has issued a Show Cause Notice dated 11.3.08, demanding service tax in respect of (i) Affiliation fee; (ii) Inspection Fee; (iii) Licence Fee, under the category of “franchise service”. The SCN is based on the same set of contracts and other documents. Therefore, we hold that the department is not within their right to issue a second show cause notice alleging suppression. Going by the ratio of Apex Court’s judgment on the case of Nizam Sugar Factory (Supra) we find that the SCN and the OIO are liable to be set aside.
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 Therefore, it is incorrect to classify the same as ‘Franchise’ service.
We find nothing related to grant of representational rights present in the instant case and all the ingredients listed above are not present. Therefore, the agreement cannot be termed as ‘franchise’ agreement and hence, Service Tax under that head is not leviable. We find that the coordinate bench of the Tribunal held in the case of IMA Mental Arithmetic Academy Pvt Ltd Vs CST, 2019 (22) GSTL 234 (Tri-Che.) 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”.
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