Order Date – 07 July 2023

Parties: M/s. Kitco Ltd. Vs The Commissioner of Central Excise and Service Tax

Facts – 

• The Appellant, M/s. Kitco Ltd., are registered with the Department for providing various taxable services vi z., Consul ting Engineering, Market Research Agency, Manpower Recruitment Agency, Management Consultant Service, etc., during the relevant period. 
• A Show cause notice was issued to them relevant period alleging that the appellant had provided Franchisee Service during the period May 2006 to November 2006, by an agreement dated 20.5.2006, appellant entered with The Institute of Hotel Management Studies. The Commissioner confirmed the demand and imposed penalties under Section 76, 77 and 78 of the Finance Act, 1994.

Issue –

• Whether the appellant is required to discharge service tax on Franchisee Service provided?

Order – 

• The Tribunal observed that there is no arrangement of sharing of profits and losses between the parties nor there is contribution of asset by the appellant in implementing the project entire burden of raising the infrastructure, maintenance etc., rests with the Institute only. Also, there is no participation in preparing the syllabus but exclusively under the control of the appellant. The Trade name or logo of the appellant has been used and displayed for advertisement of the course and it cannot be liberally used by the Institute. 
• Therefore, the agreement is in the nature of franchisee agreement. It undoubtedly satisfies the basic criteria for attracting levy under the franchise services inserted through amendment dated 16.6.2005 that is grant of representational right to sale or manufacture goods or provide service or undertake any processes identified by the franchisor, etc.
• It was also observed that the demand is issued for normal period on the basis of interpretation of the relevant provisions in scrutinizing the claim of the assessee that that the arrangement with the institute is not a franchisee services but joint venture agreement, hence imposition the imposition of penalty, in the facts of the present case under various provisions of Finance Act ,1994, is not sustainable.

Case laws on gst