Whether promotion of services of ICICI bank amounts to providing services under brand name ineligible for SSI exemption?

PJ/CASE LAW/2015-16/2720

Case:-COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH VERSUS A.S. FINANCIAL

Citation:-2015 (37) S.T.R. 400 (Tri. - Del.)

Brief facts:-The respondent in terms of their agreement with ICICI Bank are providing service of promotion and marketing of the ICICI bank’s services and also providing assistance to the prospective customers of the ICICI bank in getting loan sanctioned and for these services, they were getting a commission. These services are covered by definition of Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994. However, during the period of dispute i.e. during the period from 1-2-2005 to 31-3-2007, they were not paying any Service Tax on the ground that on the basis of their annual turnover, they were covered under the exemption Notification No. 6/2005-S.T., dated 1-3-2005 applicable to small scale provides whose aggregate value of taxable service in a financial year does not exceed Rs. 4 Lakhs. The department was of the view that the respondents were providing the services under the brand name/trade mark of ICICI Bank Ltd. and hence, they would not be eligible for the exemption under Notification No. 6/2005-S.T. On this basis, the jurisdictional Asstt. Commissioner vide order-in-original dated 31-3-2008 confirmed the Service Tax demand of Rs. 33,831/- against the respondent along with interest and imposed penalty on them under Sections 77 and 78 of the Finance Act, 1994. The Service Tax demanded was for the period from 1-2-2005 to 31-3-2007. On appeal being filed to the Commissioner (Appeals) against this order, the Commissioner (Appeals) vide order-in-appeal dated 4-2-2009 set aside the Asstt. Commissioner’s order holding that the respondent cannot be said to be providing the Business Auxiliary Services of marketing of the ICICI Bank loans under brand name/trade name of ICICI bank and that since there is no dispute that during each financial year, their turnover was within the limit stipulated in the Notification No. 6/2005-S.T., the benefit of the exemption cannot be denied. Against this order of the Commissioner (Appeals), this appeal has been filed by the Revenue.

Appellant’s contention:- The Appellant has reiterating the grounds of appeal and emphasized that from various clauses of the respondent’s agreement with the ICICI Bank, it is clear that the respondent were providing the Business Auxiliary Service of marketing of the ICICI Bank’s service products under ICICI Bank’s brand name, as in terms of the Clause 10 of the Agreement, the ICICI Bank was to make available to the respondent, referred to as the Franchisee, the advertisement materials including posters, leaflets, displays, flyers, stickers, signs, cards and notices, which the respondent were to prominently display, maintain and distribute at their own expense. She also pointed out to Clause 6 of the Agreement, according to which, the respondent shall use only such letter heads, invoices, signs, display materials, promotional literature, equipment and other items in connection with the Business as shall be approved in writing by ICICI and to immediately desist from the use or display of any signs, materials or objects if ICICI directs. She, pointing out to Clause 2 of the agreement with ICICI Bank, according to which the Respondent were required to display the sign - “Franchisee of ICICI Bank Ltd.” on their business premises. She, therefore, emphasized that the respondent were providing the Business Auxiliary Service of marketing of the ICICI bank’s various service products under the brand name/trade name of ICICI Bank and, therefore, they were not eligible for the small scale provider’s to exemption.

Respondent’s contention:-None appeared for the respondent.

Reasoning of judgment:-We have considered the submissions of the ld. DR and have gone through the records of this case. There is no dispute that the services provided by the respondent to ICICI Bank are the services of marketing of the services of ICICI Bank and also assisting the customers in obtaining loans from the bank and this service is Business Auxiliary Service taxable under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994. There is also no dispute that the turnover of the respondent during each financial year, during the period of dispute, is less than Rs. 4 Lakhs. The only point of dispute is as to whether the respondent are eligible for small scale provider exemption under Notification No. 6/2005-S.T. and in this regard, the only point of dispute is as to whether the respondent were providing the Business Auxiliary Service to their client ICICI Bank Ltd. under brand name of another person, as if the service being provided by a small service provider is under the brand name of another person, the exemption under Notification No. 6/2005-S.T. would not be available. In this regard, the department’s contention is that from the various clauses in the respondent’s agreement with the ICICI Bank Ltd., it is clear that the marketing services and customers assistance services being provided by the respondent to the ICICI Bank Ltd. is under the brand name of the ICICI Bank and in this regard, the department refers to Clause 2, Clause 6 and Clause 10 of the respondent’s agreement with the ICICI Bank. Clause 2 of the agreement appoints the respondent as a franchisee of ICICI Bank for marketing its services and for doing all such acts, deeds and things as prescribed in the agreement and as instructed by ICICI Bank from time-to-time and in terms of this clause, the respondent shall, on the premises from where they are going to conduct their business, display a sign bearing the words “Franchisee of ICICI Bank Ltd.” and shall also mention the words, “Franchisee of ICICI Bank Ltd.” on their visiting cards and the in the newspapers advertisements issued by them for marketing/promoting the services of ICICI Bank Ltd. Clause 6 of the agreement mentions that the Franchisee shall use only such letter head, invoices, signs, display materials, promotional literature, equipment and other items in connection with the promotion of service products of ICICI Bank Ltd. as approved by the ICICI bank in writing. In terms of Clause 10 of the agreement, ICICI Bank shall make available to the respondent the advertisement materials including posters, leaflets, displays, flyers, stickers, signs, cards, which the respondent shall prominently display, maintain and distribute at their own expenses. In Tribunal’s view, there is nothing in the above clauses from which it can be inferred that the respondent were providing the Business Auxiliary Services to ICICI Bank Ltd. under the brand name of ICICI Bank Ltd. Just promoting the service products of ICICI Bank Ltd. and for this purpose, using the advertisement and publicity materials, etc. provided by the ICICI Bank Ltd., or displaying the banners with the words “Franchise of ICICI Bank Ltd.” on their premises would not mean that the respondent are providing the Business Auxiliary Services of marketing to their client ICICI Bank under the brand name of ICICI Bank Service provided by the Respondent is “Business Auxiliary Service” of promoting and marketing the services being provided by ICICI Bank Ltd. and the services being provided by ICICI Bank Ltd. are banking and financial services. Just by providing the “Business Auxiliary Service” to ICICI Bank Ltd. by using the promotional material provided by ICICI Bank Ltd., the Respondent cannot be treated as using the brand name of ICICI Bank Ltd. and providing their service under the brand name of ICICI Bank. In fact the Respondent is not the Franchise of ICICI Bank Ltd. in the sense that they are providing financial services by using the business model and brand name of ICICI Bank. It is not the case of the department that the respondent were using the brand name or trade name of ICICI Bank Ltd. and were paying some amount to the bank. On the contrary, it is the ICICI Bank which is paying to the respondent for providing the marketing services. The respondent, therefore, cannot be treated using the brand name of ICICI Bank Ltd. We, therefore, do not find any infirmity in the impugned order. The Revenue’s appeal is dismissed.

Decision:-Appeal Dismissed.

Comment:-The gist of the case is that the assessee providing service under Business Auxiliary Service whereby the assessee is engaged in promoting the services provided by ICICI bank by way of materials supplied by ICICI bank will not be considered as provision of service under the brand name so as to be ineligible to claim the benefit of small service provider exemption.

Prepared by:- Mahesh Parmar

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PJ/CASE LAW/2015-16/2720

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