No Service Tax on Consideration Received for Sale of Books and Materials to the Franchise: CESTAT [Read Order]

The New Delhi bench of CESTAT has held that consideration received for Ssale of Books and materials to the franchise not subject to Service Tax.

The Assessee in the instant appeal is a public limited company engaged in IT Training in hardware and networking for the past many years. They are registered with service tax department under the category of “Commercial Training or Coaching Service” and “Franchise Services”. They are paying service tax for the income earned from the franchise.

The sole issue raised was appellant claimed an exemption for not paying service tax on the consideration received for sale of books and materials to the franchise. Revenue rejected the claim by reasoning that course materials are provided at free of cost from franchiser.

R.M. Saxena, Advocate on behalf of Assessee while perused the franchise agreement contended that the appellant sells study material to its franchises and the same is a commercial transaction of sale of goods and not service. Accordingly benefit of Notification No.12/203 is available as value equal to the sale of goods and materials by the service provider to the service recipient is exempted.

While considering the case between M/s Jetking Infotrain Ltd versus CC Delhi-I before the bench comprising Justice Satish Chandra and Technical member B.Ravichandran has held that, one of the grounds for denial of exemption is lack of documentary evidence as required for the Notification. Subsequently bench perused various sample invoices raised by the appellant to the franchisee wherein they got crystal clear proof regarding the transaction.

The Tribunal considered the decision in M/s Cerebral Learning Solutions Pvt Ltd-2013 (32) STR 379 (Tri.-Ind.) wherein if this illegal and unauthorized condition imposed on the generality of exemption granted by the Central Government through Notification No.12/2003-S.T., dated 20.6.2003 is ignored, as it must, the assessee/appellant is clearly entitles to the benefit of the exemption.

The Tribunal also held that the impugned order denying the exemption claimed by the appellant under Notification 12/2003-ST is not legal and sustainable and, as such, the same is set aside and appeal is allowed.