AMWAY INDIA ENTERPRISES PVT. LTD. Vs. C.S.T., DELHI
LAWS(CE)-2015-5-7
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on May 14,2015

Amway India Enterprises Pvt. Ltd. Appellant
VERSUS
C.S.T., Delhi Respondents


Referred Judgements :-

DELHI PUBLIC SCHOOL SOCIETY VS. C.S.T.,NEW DELHI [REFERRED TO]
QUEBEC RAILWAY,LIGHT HEAT AND POWER CO. LTD. VS. VANDRY [REFERRED TO]
GAJANAN FABRICS DISTRIBUTORS SANGLI VS. COLLECTOR OF CENTRAL EXCISE PUNE [REFERRED TO]
UNION OF INDIA VS. HANSOLI DEVI [REFERRED TO]
DEEPAK AGRO FOODS VS. STATE OF RAJASTHAN [REFERRED TO]
KALYAN SINGH CHOUHAN VS. C P JOSHI [REFERRED TO]
NEW MANGALORE PORT TRUST LTD. VS. COMMR. OF S.T., MANGALORE [REFERRED TO]
GLOBAL TRANSGENE LTD VS. COMMR. OF C. EX., CUS. & S.T. [REFERRED TO]
COMMISSIONER OF C. EX. VS. GULAB INDUSTRIES (P) LTD. [REFERRED TO]


JUDGEMENT

R.K.SINGH,J - (1.)APPEAL has been filed against order -in -original No. 92 -94/AKM/2012 dated 29.11.2012 passed in respect of three show cause notices dated 21.10.2009, 21.9.2010 and 1.9.2011 covering different periods confirming impugned service tax demands (along with interest and penalties).
(2.)The demand had been raised under two taxable services: (i) Intellectual Property Rights Service (Rs. 20,27,06,713/ -) and (ii) Franchise Service (Rs. 13,12,41,198/ -), for the period 2008 -09 to 2010 -11. No penalty was however imposed under Section 78 of Finance Act, 1994. Brief facts of the case as duly recorded in the impugned order are as under:
(i) The appellant (M/s. Amway India Enterprises Ltd., new Delhi) is a wholly owned subsidiary of Amway Corporation USA which is a large direct selling company. The appellant is registered as a S.T. assessees.

(ii) It was alleged that (a) the appellant had not paid service tax on expenditure incurred in foreign exchange on taxable service namely Intellectual Property Right service received from its associate enterprises based abroad and also under Franchisee service on the income received by it in the form of subscription from various distributors appointed by the company which were given the representational rights to sell the products of the appellant. All these products bore the various brand names belonging to the appellant.

(b) The sale pattern of the company is such that these Amway products are sold by the distributor directly to the consumers and no product of the company is available across the counter in any shop or market. Subscription income basically consists of Joining and Business Fee, Business Renewal Fee and Back to Future Fee which are briefly described below:

Joining Fee Joining Fees is a onetime fee, which is paid as distributorship charges. The distributor is entitled to purchase the products only when he pays the joining fees.

Annual Business Fee Annual Business Fee is allocated on pro rata basis over a period of one year. The distributor is entitled to purchase the products only when he pays the fee.

Renewal Fee Renewal fee is allocated on pro rata basis over a period of one year. The distributor pays the renewal fee to get its distributorship renewed for a period of one year.

Income from Back to Future All such distributors who had discontinued the distributorship in the past, could again join the business on payment of only Annual Business Fee.

(3.)THE adjudicating authority while dealing with the service tax liability with regard to IPR service held the service tax to be payable there -under essentially on the basis of its findings in the following paras of the impugned order:
28. It is seen that the noticees have not disputed that they have received the taxable services from their associated enterprises and they were liable to pay Service Tax under reverse charge in term of Section 66A of the Finance Act, 1994. However, they have made similar contentions that they are liable to pay service tax on these services only when the payment of these services is actually made by them. It was further contended that the amendment made in Section 67 enlarging the meaning of Gross amount charged for associated enterprises is prospective in operation and would not apply in their case. These contentions have already been discussed. Accordingly, the demand raised in the show cause notices secondary & higher education cess on account of taxable services like Intellectual Property Right Service is liable to be demanded and appropriated (amount has already been deposited).

29. Further the noticee contended that they are liable to pay service tax under Intellectual Property Service of the Finance Act only in respect of patents and designs which are registered in India. Accordingly, they paid service tax after claiming 5% deduction from service tax on account of deposit of R & D cess in terms of Notification No. dated September 10, 2004. The noticee was not entitled to the benefit of Notification as the Noticee had not submitted the documentary evidence in this regard. Further, the interest also liable to be charged and recovered from them under Section 75 of the Act ibid.

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