The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand under ‘franchise service’ on the manufacture and distribution of footwear on the grounds of limitation.
Liberty Group Marketing Division (LGMD), the appellant assessee are engaged in the manufacturing and distribution of footwear and had entered into separate agreements with Liberty Shoes Ltd. for transfer of their business of the respective manufacturing units and they had received payments from Liberty Shoes Ltd. and have paid service under the category of “Intellectual Property Service” and later they started paying service tax under the category of “Franchise Service”.
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the service tax demand under the franchise service category.
R.K Hasija and Shivang Puri, the counsels for the assessee contended that the assessee’s agreement did not satisfy the condition of franchise service that the franchisee was under an obligation not to engage in selling or providing similar goods or services or processes, identified with any other person was not satisfied. Thus the service tax demand under the franchisee service category was not legally sustained.
Nikhil Kumar Singh, the counsel for the department contended that the assessee’s agreement was a franchise agreement and the service tax demand was as per the law and liable to be sustained.
The Bench observed that the assessee had regularly submitted the Service Tax Returns. Therefore, it cannot be alleged that the assessee had suppressed any material fact from the Department with intent to evade payment of duty. Thus the service tax demand was not legally sustainable on grounds of the limitation.
The two-member bench comprising S S Garg (Judicial) and Anjani Kumar (Technical) quashed the service tax demand imposed against the assessee while allowing the appeal filed by the assessee.
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