Law: Federal Excise Act, 2005

Section: 2(3),2(12a),3,FirstSched.

Federal Excise Act (VIII of 2005)-----Ss. 2(3), 2(12a), 3 & First Sched.---Federal Excise General Order No. 4 of 2006, dated---Imposition of Federal Excise Duty on franchise services---"Franchise services"---Definition, nature and scope---Petitioner, engaged in the business of manufacture and sale of automobiles, challenged levy of federal excise duty for franchise services provided to the petitioner under a Licence and Technical Assistance Agreement with a foreign automobile manufacturer---Contention of petitioner, inter alia, was that it did not receive "franchise services", in terms of the definitions of the words "franchise" and "services" under Ss. 2(23) & 2(12a) of the Federal Excise Act, 2005, respectively---Validity---Franchising was a business relationship between the parties where the franchisor serviced and facilitated the business of the franchisee within defined parameters---In the present case, perusal of the agreement between petitioner and the foreign automobile manufacturer revealed that the petitioner ran its business in accordance with the foreign automobile manufacturer's model and the petitioner essentially purchased a business package from the foreign automobile manufacturer which entailed provisions of services aimed at guaranteeing a uniform operation and style of the product and for such services, the petitioner paid a fee and royalty---Fact that technical assistance and know-how under the agreement remained the proprietary right of the foreign automobile manufacturer did not mean or suggest the same was not a service provided by the foreign automobile manufacturer; and furthermore, the fact that the petitioner manufactured the automobiles did not take the ambit of the agreement out of franchise services, as the petitioner manufactured and sold said automobiles in Pakistan and also proved after sale services---Franchise services provided by the foreign automobile manufacturer were for manufacture, sale and all related services provided by the petitioner and the same fell within the ambit of "franchise" and "services" under the Federal Excise Act, 2005---Agreement between the parties in fact provided a way of doing business to…

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