Customs, Excise and Gold Tribunal - Tamil Nadu
Franch Express Network Pvt. Ltd. vs Commissioner Of Service Tax on 16 April, 2008
Equivalent citations: 2008[11]S.T.R.468
ORDER P.G. Chacko, Member (J)
1. There are two applications before us, both by the appellants, one for waiver of predeposit and stay of recovery and the other for early disposal of the appeal. We take up the first application.
2. The impugned demand is of service tax in the category of "franchise" [Section 65(47) of the Finance Act, 1994] for the period 01.07.2003 to 30.09.2006. Service tax of over Rs. 3.6 crores in this category has been demanded by the Commissioner in adjudication of a show-cause notice dated 12.03.2007, which invoked the extended period of limitation under Section 73(1) of the above Act. Penalties have also been imposed on the appellants. It appears from the records and the submissions of learned Counsel that the above demand of service tax is on the gross amount collected by a network of persons across the country for 'courier service' and passed on to the appellants. The transaction between the appellants and the said persons were under agreements which designated the appellants as "franchiser" and Ors. as "franchisees" These agreements had not expressly provided for any fee to be levied by the appellants from the so-called "franchisees". Admittedly, the so-called "franchisees", who are described by the appellants as mere 'agents', had rendered courier service of picking and delivering articles covered by consignment notes called "waybills" and the amounts collected from the consignors were passed on to the appellants after deducting certain expenses. Service tax on the courier service was paid at the appropriate stage. The impugned demand is on a gross amount which formed part of the corpus on which service tax was paid in the category of 'courier service'. Though the relevant agreements contained mention of "franchise", according to the appellants, these only signified agency contracts. On the other hand, according to the Revenue, these agreements provided for franchise simplicitor satisfying all the requirements of the definition of this term coming under Section 65(47) of the Act. Though these agreements did not expressly provide for levy of fee by the appellants from the other parties to the contracts, the department found that certain amounts were charged by the appellants as lump-sum from time to time and these amounts, according to the Revenue, represented fee for the franchise. The impugned demand is on this basis.
3. Learned Counsel has urged that the real nature of the transactions has to be understood without reference to the words or terms used in the agreements. On other hand, learned JCDR would strictly go by the terms like "franchise" used in the agreements and would submit that the liability of the appellants to pay service tax in this category is undeniable. In a case of this nature, we think we should reserve consideration of the contracts in question and a determination as to the nature of service involved in the transactions, for the final hearing stage. For the present, we would consider the plea of limitation raised forcefully by the appellant's counsel.
4. We have come across a letter dated 03.09.2003 of the Superintendent of Central Excise addressed to the appellants. This letter expressly states thus: "Information available with the undersigned indicates that you are engaged in the services of courier service to clients through your franchisees also". This letter indicates that the Superintendent of Central Excise had sent a letter on the same subject to the party on 02.07.2003. This letter contains a request of the Superintendent to the appellants to advise their franchisees to get themselves registered with the Service Tax Cell. It would appear that the department had occasion to see the so-called 'franchise agreements' entered into between the appellants and the persons through whom courier service was allegedly rendered to clients. It is the case of the appellants, reiterated today by their counsel that, as all the relevant information regarding the subject transactions were available with the department as early as in September, 2003, it was not open to them to invoke the extended period of limitation under Section 73(1) of the Finance Act, 1994 to demand service tax for the aforesaid period. The appellants appear to have a case against the demand of service tax on the ground of limitation. On this basis alone, we think, we will be justified in granting waiver of predeposit and stay of recovery in respect of the amounts of service tax and penalties in this case, and it is ordered accordingly.
5. The remaining application is for out-of-turn disposal of the appeal and the same is not opposed. In the circumstances, having regard to the high stake involved in this case, we direct the appeal to be posted to 07.07.2008 for hearing.
(Dictated and pronounced in open court)