Franchise services

2016 PTD 1736 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S.2(12a)Federal Excise Rules, 2005, R.43-A(1)S.R.O. No.561(I)/2006, dated 5-6-2006Franchise servicesProofFederal Excise Duty, recovery ofShow cause noticeAlternate remedy

Petitioner company assailed show cause notice issued for recovery of Federal Excise Duty on the ground of franchiser and franchisee relationship

Plea raised by authorities was that alternate remedy was available to petitioner

Validity

In order to attract levy of Federal Excise Duty for services rendered, which included franchise services within the contemplation of law, authorities were under a legal duty to establish an identifiable link between franchiser and franchisee of services rendered against a fee or consideration

Authorities proceeded on ill-founded assumptions as there was nothing on record to prove that petitioner had paid for services either to franchiser

In absence of such payments there was no question of any amount to be payable by way of Federal Excise Duty for 'services' rendered

Authorities failed to bring on record any franchise agreement or any proof of payments for services rendered by alleged franchiser against a fee or consideration

Show cause notice issued by authorities was without any lawful basis and was declared to be illegal and of no legal effect

High Court observed that no purpose would be served in requiring petitioner to pursue alternate remedies

Constitutional Petition was allowed in circumstances.