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January 2016

2015 (40) STR 560 (Tri.–Mum.) Kunal IT Services Pvt. Ltd. vs. CCE, Pune-III

By Puloma Dalal
Jayesh Gogri
Mandar Telang Chartered Accountants
Reading Time 1 mins
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The franchisee may be liable to pay service tax only on the amount paid to him by the franchisor provided the total amount is first received by the franchisor.

Facts
The appellants took-up franchise and provided Commercial Coaching and Training Services. The course fees were collected and deposited in the accounts of Franchisor. Service tax was paid on 80% of fees received from the franchisor. Revenue authorities demanded service tax on full amount of the fees received. It was argued that the amount collected and deposited to Franchisor’s account was not in the nature of consideration. In contrast, Department was of the view that the fees received and was ‘gross amount received’ for provision of services.

Held
Appellant were service provider and students were service receiver. Having regard to section 67 of the Finance Act, 1994, it was observed that the gross value charged for provision of services was only 80% of the fees in view of the peculiar fact that the cheques issued by students were directly drawn in the name of Franchisor. Accordingly, appeal stood allowed.

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