2009 (4) TMI 121 - AT - Service Tax

Scientific or technical consultancy and Market Research Agency Classification of taxable Services Section 65A - transfer of trade marks - transfer of know-how of the formulations - transfer of know-how for bulk drugs - Marketing Assistance Agreement held that - the applicants having transferred the trade marks on a permanent basis to CHCL are not covered by the new service relating to transfer of intellectual properties introduced with effect from 10-9-2004 and hence this point raised by the applicants is not relevant - product promotion services is nothing but the service of a market research agency - In other words, once the Department forms a final view on a matter, it cannot invoke extended time-limit for the subsequent period. This is not a case here. Hence, prima facie extended period of limitation seems to be invokable stay granted partly

Issues Involved:
1. Classification of services provided by the applicant under "Scientific or Technical Consultancy" and "Market Research Agency".
2. Applicability of service tax on the transfer of know-how and marketing assistance agreements.
3. Invocation of the extended period of limitation for the demand of service tax.
4. Prima facie case for waiver of pre-deposit and financial hardship.

Detailed Analysis:

1. Classification of Services:
- Scientific or Technical Consultancy:
- The core issue is whether the services provided by the applicant fall under "Scientific or Technical Consultancy" as defined under section 65(92) of the Finance Act, 1994.
- The applicants argued that they are a manufacturing company and cannot be classified as a "scientist or technocrat or a science or technology institution or organization."
- They cited the Tribunal's decision in Mitra Hang (India) Ltd. v. CCE, which supported their contention that manufacturers do not fall under the specified categories.
- However, the Tribunal noted that the applicants, having a 100% subsidiary Kopran Research Laboratories Ltd., could be considered a research organization, thus falling under the definition of "organization."

- Market Research Agency:
- The applicants contended that their marketing assistance services did not involve market research and thus should not be classified under "Market Research Agency" services.
- The Tribunal found that the services provided, such as product promotion and market development, involved market research activities as defined under section 65(41) of the Finance Act, 1994.

2. Applicability of Service Tax:
- Transfer of Know-How:
- The applicants had entered into agreements for the transfer of know-how for formulations and bulk drugs, arguing that these did not involve advice, consultancy, or technical assistance.
- The Tribunal observed that the transfer of know-how was intrinsically linked with the transfer of trademarks and involved technical assistance, thus falling under "Scientific or Technical Consultancy."

- Marketing Assistance Agreements:
- The applicants provided marketing assistance services, which the Tribunal found to be in the nature of market research, thus classifiable under "Market Research Agency" services.

3. Invocation of Extended Period of Limitation:
- The applicants argued that the extended period of limitation could not be invoked as the facts were within the knowledge of the Department, citing the Supreme Court's decisions in ECE Industries Ltd. v. CCE and Nizam Sugar Factory v. Collector of Central Excise.
- The Tribunal held that the extended period of limitation was applicable as the earlier show-cause notice was dropped on grounds other than time bar, and the present demand was within the permissible period from the relevant date.

4. Prima Facie Case for Waiver of Pre-Deposit:
- The Tribunal concluded that the applicants did not make a strong prima facie case for a total waiver of pre-deposit.
- Considering the financial hardship plea, the Tribunal directed the applicants to pre-deposit Rs. 2 crores towards service tax within eight weeks, with the balance amount and penalties stayed pending the appeal's disposal.

Conclusion:
The Tribunal determined that the services provided by the applicants fell under "Scientific or Technical Consultancy" and "Market Research Agency" services, making them liable for service tax. The extended period of limitation was deemed applicable. The applicants were directed to make a partial pre-deposit, with the balance and penalties stayed pending appeal.

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