Page 191 - ELT_3rd_1st May 2020_Vol 372_Part

2020 ] MANIPAL UNIVERSAL LEARNING PVT. LTD. v. COMMR. OF C. EX., MANGALORE 413

the provisions of this agreement will be deemed to constitute a Joint Ven-
ture, agency, a partnership or principal-agent relationship between the par-
ties hereto and neither party by virtue of this agreement, shall have the
right, power or authority to act or create any obligation, express or implied,
on behalf of the other party. The participant shall not expressly or by impli-
cation or conduct under any circumstance, represent itself to be an agent of
MUL and no act of the participants as is not specifically authorised by MUL
shall be binding on MUL.”
13. We find that nothing in the agreement indicates that the Learning
Centres have been given a franchise by providing the VSAT at the Learning Cen-
tres; Nothing is forthcoming from the contracts that appellants gives permission
to use their name by providing the VSAT facility. We also find that the appel-
lants are not receiving any royalty towards the alleged franchise. Therefore, it is
incorrect to classify the same as ‘Franchise’ service. We find that CBEC Circular
No. 59/8/2003, dated 20-6-2003 clarifies at Para 2.4 that unless the following in-
gredients are satisfied, the agreement cannot be called as franchise agreement.
(i) the franchise is granted representational right to sell or manufacture
goods or to provide service or undertake any process identified
with franchiser, whether or not a trade mark, service mark, trade
name or logo or any such symbol, as the case may be, is involved;
(ii) the franchiser provides concepts of business operation to franchise,
including know how, method of operation, managerial expertise,
marketing techniques or training and standards of quality control
except passing on the ownership of all know how to franchise;
(iii) the franchise is required to pay to the franchiser, directly or indi-
rectly, a fee; and
(iv) the franchise is under an obligation not to engage in selling or
providing similar goods or services or process, identified with any
other person.
It was also clarified it includes that the franchisee requires to follow the concept
of business operation, managerial expertise, market techniques of the franchiser.
14. 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. v. CST, 2019 (22)
G.S.T.L. 234 (Tri-Che.) that only those amounts directly relatable to ‘representa-
tional right’ granted by the franchisor to franchisee and royalty/franchise fee
towards that right alone be part of taxable value under ‘franchise’ service; admis-
sion fee, tuition fee, competition fee and course instructor fee was not liable for
Service Tax under “franchise service”.
15. We find that Learned Senior Counsel rightly submits that the activi-
ty at best could come under the activity of “supply of tangible goods” vide Section
65(105)(zzzzj) of the Act w.e.f. 16-5-2008; hence, for the period in question, VSAT
management fee charged towards supply of goods cannot be subjected to Service
Tax during the period in question. However, the Show Cause Notice has not de-
manded duty under this category and therefore discussion on the same is not
warranted. We further find as regards VSAT usage fee, as submitted by Senior
Counsel, it is in the nature of telecommunication costs apportioned and recov-
EXCISE LAW TIMES  1st May 2020  191