If a service falls under two heads, there is no provision in Finance Act, 1994 to tax very same service charges twice under two heads
Where the appellant rendered courier service with the assistance of agents/franchisees, the only provision under which tax can be levied for the entire transaction involving the appellant and franchisees/agents is the tax on courier service covered under section 65(33) read with section 65(105)(f); therefore, the assessment and demand of tax from the appellant under section 65(47) read with section 65(105)(zze) was untenable.
HIGH COURT OF KERALA Speed & Safe Courier Service v. CCE CEA No. 21 of 2009 November 5, 2009 RELEVANT EXTRACTS: ** ** ** ** ** ** ** ** ** ** ** ** 5. Admittedly, the appellant’s activity is essentially rendering courier service, which is, collection of articles from customers at various places and delivery of the same at the destination requested by the customers. The counsel contended that the appellant transports goods between major centres and local collection and deliveries are done by engaging agents/franchisees. So much so, the services of agents/franchisees and appellant together will only constitute the complete courier service. Facts seen from the agreement and accepted by the lower authorities is that the courier service charges collected from the customers for booking the cargo is shared between the appellant and the agents/franchisees in an agreed manner. The question therefore to be considered is whether the service charges collected from the customers on which full tax is paid for rendering courier service under Section 65(33) read with Section 65 (105X0 by the agents/franchisees after registration with the Department could be subject to a further tax for franchisee service under section 65(47) read with 65(105) (zze) to the extent of the net amount received by the appellant. The Department has admitted the liability for the agents/franchisees for payment of service charges on the entire courier service charges recovered from customers and have therefore permitted them to register and remit the tax on regular basis. Therefore, the remaining question to be considered is whether net service charges recovered from customers for courier service retained by the appellant after payment of the portion due to the agents/franchisees again assessable for service tax under the head franchise service' under Section 65 (47) read with 65(105) (zze) of the Act In the first place we find from Section 67 that taxable service is the gross amount in money consideration received from the customers for service provided, in terms of section 67, the entire amount collected from the customers for rendering courier service is subject to tax at the hands of agent/franchisee. In our view, if a service falls under two heads, there is no provision in the Finance Act, 1994 to tax the very same service charges twice under two heads. In this case, what was done is double assessment on part of the service charges collected, for rendering courier service at the hands of the appellant. Further, we do not think Section 65(47) read with 65(105Xzze) has any application in regard to rendering of courier service by appellant with the assistance of agents/franchisees. Franchise is defined in section 65(47). "(47) "franchise" means an agreement by which- (j) franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, 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 franchisor provides concepts of business operation to frachisee, including know-how, method of operation, managerial expertise, marketing technique or training and standards of quality control except passing on the ownership of ail know-how to franchisee; (iii) the franchisee is required to pay to the franchisor, directly or indirectly, a fee; and (iv) the franchisee is under an obligation not to engage in selling or providing similar goods or services or process, identified with any other person;" From the above, it is dear that under franchise agreement, the franchisor gives a right to the franchisee to do business in a representative manner by using franchisor's trade mark or trade name. In such case, the franchisee is to make payments to the franchisor for using their name, trade mark etc., in respect of the goods sold or the service rendered. In this case, in feet, the agent/franchisee is not doing independent business but is only acting as agent for collection and delivery of parcel agent in the courier service. Apart from appointing the agent / franchisees, the appellants are not rendering any service to the franchisees. The franchisees also do not make any payment to the appellant which alone could be subject to tax under the I.T. Act. In fact franchisee gets paid only for the work done for the franchisor, i.e. In the courier service by acting as agent for collection and distribution of articles for customers, the only provision under which tax can be levied for the entire transaction involving the appellant and franchisees/agents is the tax on courier service covered under section 65(33) read with Section 65(105Kf) of the Act. We therefore hold that the assessment and demand of tax from the appellant under section 65(47) read with Section 65(105Xzze) is untenable Consequently, we allow the appeals by vacating the impugned orders of the Tribunal and that of the lower authorities in regard to levy of tax and penalties. However, it would be open to the department to cross check the amounts received by the appellant from agents/ franchisees and verify whether all the franchisees who have made payments have remitted service.