2015 (2) TMI 888 - AT - Service Tax

Sale of all assets and liabilities on going concern basis - Lump sum consideration as well as royalty received - Scientific or technical consultancy service - Held that - We find that for services to get covered under the said service category, there has to be a scientific or technical institution or organisation and they should have rendered the services in a one or more disciplines of science or technology as an institution; or scientists or technocrats, it is on record that the appellants herein are manufactures of pharmaceutical goods and had their own set up, which they have sold to Universal Medicaments Pvt. Ltd. On this factual matrix, we find that the judgement of the Tribunal in the case of Modi-Mundipharma Pvt. Ltd. 2009 (4) TMI 113 - CESTAT, NEW DELHI squarely covers the issue in favour of the appellants. The same views was taken in the case of Just Textiles Ltd. 2014 (10) TMI 280 - CESTAT MUMBAI . In view of the foregoing and the judicial pronouncements and factually appellants being manufacturers; not rendering any advice or consultancy, we find that impugned orders are liable to set aside and we do so. Decided in favour of appellant.

Summary

Issues:
1. Taxability of amounts received under "scientific or technical consultancy service" for the sale of business assets and liabilities.

Analysis:
The judgment pertains to two appeals concerning the taxability of amounts received by the appellants for the sale of their business assets and liabilities under the category of "scientific or technical consultancy service." The Revenue authorities contended that the amounts received were taxable under this category, leading to the issuance of a show-cause notice demanding service tax, interest, and penalties. The adjudicating authority and the first appellate authority upheld the demands. The appellant argued that the transaction involved the sale of entire production facilities, technical staff, and other assets to the buyer, which should not be considered as falling under "scientific or technical consultancy services." The appellant relied on previous Tribunal decisions in similar cases to support their argument.

Upon examination, the Tribunal noted the definition of "scientific or technical consultancy" under Section 65(92) of the Finance Act, 1994, which requires services to be rendered by a scientific or technical institution or organization in disciplines of science or technology. The Tribunal found that the appellants, being manufacturers of pharmaceutical goods, had sold their setup to the buyer, Universal Medicaments Pvt. Ltd., and were not engaged in providing advice or consultancy services. Citing precedents like Modi-Mundipharma Pvt. Ltd. and CST, Mumbai vs. Just Textiles Ltd., the Tribunal concluded that the transaction in question did not fall under the ambit of "scientific or technical consultancy services."

In light of the factual matrix and legal principles, the Tribunal rejected the Revenue's contention and set aside the impugned orders, allowing the appeals with consequential relief. The judgment emphasized that the appellants, as manufacturers, were not involved in rendering advice or consultancy, thus not meeting the criteria for taxation under "scientific or technical consultancy services."

This detailed analysis of the judgment highlights the core issue of taxability under the specified category, the arguments presented by both sides, the legal framework governing such services, and the Tribunal's reasoning in arriving at its decision to set aside the demands and allow the appeals.