2011 (8) TMI 357 - AT - Service Tax

Demand -Technical Testing and Analysis Services - whether the appellants services i.e. conducting clinical trials for their customers would get covered under the category of the services technical testing and analysis services for the period July 2003 to 30.04.06 - Notification No. 11/97-Customs, dated 1-3-1997 by amending Notification No. 03/98-Customs, dated 11-2-1998 - The amendments brought out by introduction of explanation, conclude that this explanation cannot have retrospective effect. - On this ground alone, appellants succeed - the demand of service tax from the appellant for the period June 2003 to 30.04.06 cannot be sustained and is liable to be set aside and we do so. As regards the demand of the service tax for the period May 2006 and June 2006, we hold that the assessee, is liable to pay the service tax on the services rendered by them to various customers for the clinical trial purposes and remit the matter back to the original adjudicating authority for limited purpose of quantifying the demand for the period of May 2006 to June 2006 along with interest and penalty if any on this amount of demand that is quantified.

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax for the period prior to 01.05.2006.
3. Imposition of interest and penalties.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The primary issue revolves around whether the clinical trials conducted by the appellant fall under the category of "Technical Testing and Analysis Services" as defined under Section 65(106) of the Finance Act, 1994. The Revenue Authorities contended that the services rendered by the appellant were indeed technical testing and analysis services, which included physical, chemical, and biological testing on human beings and animals. The appellant argued that prior to the amendment on 01.05.2006, the definition did not encompass clinical trials on humans and animals, and the explanation introduced by the Finance Act from 01.05.2006 expanded the scope of the definition.

2. Applicability of Service Tax for the Period Prior to 01.05.2006:
The appellant contested the imposition of service tax for the period from July 2003 to 30.04.2006, arguing that the services rendered did not fall under the definition of technical testing and analysis services before the amendment. The adjudicating authority, however, held that the explanation introduced on 01.05.2006 was clarificatory and did not expand the scope of the definition. The Tribunal disagreed with this view, stating that the explanation introduced by the amendment indeed expanded the scope of the services included in the earlier definition. The Tribunal referenced the case of B.A. Research India Ltd., which held that the explanation could only come into play from 01.05.2006 and prior to that, there was no liability to pay service tax.

3. Imposition of Interest and Penalties:
Given that the demand for service tax for the period prior to 01.05.2006 was set aside, the Tribunal also set aside the demand for interest and penalties for that period. For the period from 01.05.2006 to 30.06.2006, the appellant did not dispute their tax liability and was ready to pay the same. The Tribunal remitted the matter back to the original adjudicating authority to quantify the demand for this period along with any applicable interest and penalties.

Conclusion:
The Tribunal concluded that the demand for service tax from the appellant for the period from June 2003 to 30.04.2006 could not be sustained and was liable to be set aside. Consequently, the demand for interest and penalties for this period was also set aside. For the period from May 2006 to June 2006, the appellant was held liable to pay the service tax, and the matter was remitted back to the adjudicating authority for quantification of the demand, interest, and penalties. The appeals were disposed of as indicated above.

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