Law: Federal Excise Act, 2005

Section: 2(12)(a),2(23),3(1)(d),

JUDGMENT Ayesha A. Malik J: Through this petition, the Petitioner has challenged the levy of federal excise duty on the Petitioner for the franchise services provided to the Petitioner under its License and Technical Assistance Agreement dated 01.04.1994 between the Petitioner and Honda Japan. 2. Briefly the facts of the case are that the Petitioner is engaged in the business of manufacture and sale of Honda automobiles. The Petitioner entered into a License and Technical Assistance Agreement ("Agreement") with Honda Motor Company Japan, a corporation registered under the laws of Japan, with its principal office in Tokyo Japan. In terms of the Agreement, the Petitioner has been granted a license to assemble, manufacture and sell automobiles using the Honda patent. The Petitioner also receives technical assistance to use the Honda patent to manufacture and sell Honda automobiles in Pakistan. The Respondents have levied federal excise duty under the Federal Excise Act, 2005 ("Act") on the franchise services received by the Petitioner under the Agreement. The Petitioner is aggrieved by this levy, hence this Petition. 3. Learned counsel for the Petitioner argued that the Petitioner does not receive any franchise services under the Agreement, hence is not liable to tax under the Act. Learned counsel explained that "franchise" is defined under Section 2 (12a) of the Act whereas "services" is defined under Section 2(23) of the Act. He argued that in terms of the definition of the two words, the Petitioner does not receive any franchise service which can be taxed under the Act. He argued that there is a contractual arrangement with Honda Japan whereby the Petitioner has been granted a license to assemble and sell Honda automobiles using the Honda patent and its Know How. He argued that in terms of Section 3(1)(d) of the Act no services are being provided to the Petitioner by Honda Japan which are subject to the levy of Federal Excise Duty. It is the case of the Petitioner that the use of a patent under the Agreement is not a service but is use of a movable property which cannot be called a service. He argued that Honda Japan is the owner of the patent and merely shares…

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