2015 (11) TMI 1416 - AT - Service Tax

Waiver of pre deposit - mandatory pe-deposit - Scientific or Technical services - Penalty u/s 77 & 78 - Held that - Appellants are the manufacturer of Bulk Drugs and formulations falling under chapter heading 29 and 30 of the first schedule to teh CETA, 1985. They have entered into an agreement with their Principal Company Actavis Elizabeth LLC, USA for development of new products. Once the contract is approved, the commercial production of new products would be carried out by the appellants in India. Therefore, prima facie, the appellants are not made out a case for waiver of pre-deposit. In this regard, the Hon ble High Court of Rajasthan (2015 (6) TMI 110 - RAJASTHAN HIGH COURT) held that the amendment of Section 35F of Central Excise Act, 1944 for mandatory deposit of 7.5% or 10% applies for the earlier period prior to 06.08.2014. In view of the above, the appellant is directed to make pre-deposit of an amount - Partial stay granted.

Summary

Issues Involved:
1. Failure of the appellant to appear for hearings and seek adjournments.
2. Demand of service tax on Scientific or Technical services not exported.
3. Imposition of penalties under Sections 77 and 78.
4. Interpretation of the agreement with the Principal Company for development of new products.
5. Requirement of pre-deposit for waiver of tax, interest, and penalty.

Analysis:

1. The appellant failed to appear for multiple hearings and seek adjournments, leading to the matter being taken up for disposal on merits. This behavior was noted by the tribunal, emphasizing the importance of timely participation in legal proceedings to avoid adverse consequences.

2. The demand of service tax amounting to Rs. 77,12,821 on Scientific or Technical services not exported but used in India for commercial manufacture of drugs was confirmed by the adjudicating authority. The tribunal considered the arguments presented by the Ld. AR and referred to relevant sections of the law and judicial decisions to uphold the authority's findings.

3. Penalties were imposed under Sections 77 and 78 by the adjudicating authority. The Ld. AR reiterated the authority's findings and highlighted specific sections of the show-cause notice and order-in-original to support the imposition of penalties. The tribunal considered these submissions in conjunction with the facts of the case.

4. The interpretation of the agreement between the appellant and their Principal Company Actavis Elizabeth LLC, USA, for the development of new products was crucial in determining the liability for service tax. The tribunal analyzed the nature of the agreement and the commercial production arrangements to establish the appellant's obligations regarding tax liability.

5. Regarding the requirement of pre-deposit for waiver of tax, interest, and penalty, the tribunal referred to a decision of the Hon'ble High Court of Rajasthan to support the directive for the appellant to make a pre-deposit of Rs. 5,78,000 within a specified period. Compliance with this directive would lead to the waiver of the balance amounts of tax, interest, and penalty, with the recovery stayed during the appeal's pendency.

This comprehensive analysis of the judgment highlights the key issues addressed by the tribunal, providing a detailed understanding of the legal reasoning and decisions made in the case.