2018 (2) TMI 1681 - AT - Service Tax

Business Support Services - testing and analysis of newly developed drugs on human participants - The claims of the appellant are that these are clinical trial operations, exempted from service tax in terms of N/N. 11/2007-ST dated 01/03/2007 - Held that - the appellant are directly engaged in the activities of conducting clinical trial studies. They did obtain no objection approval from the concerned drug authorities in India. These services are in fact provided in terms of agreement with M/s Merck, USA who paid the consideration in convertible foreign exchange. The beneficiary of service as per the terms of the agreement is M/s Merck, USA - it is clear that these services are for delivery and consumption of an entity located outside India. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability of the appellant for activities related to clinical trials - Exemption under Notification 11/2007-ST - Qualification for export of service criteria.

Analysis:
The appellant, a clinical research organization, entered into agreements with M/s Merck, USA for conducting clinical trials in India. The Revenue demanded service tax under business support service, which the appellant claimed exempt under Notification 11/2007-ST or qualified as an export of service. The Original Authority rejected the appellant's claims, confirming service tax liability.

The appellant argued that the services provided were exempted under Notification 11/2007 for testing and analyzing newly developed drugs on human participants, which aligned with their activities. Additionally, they contended that the services were carried out for M/s Merck, USA, fulfilling the export of service criteria, citing a Tribunal decision supporting their stance.

The Revenue contended that the appellant only provided support for clinical trials conducted by SIRO, thus liable for business support service tax. However, upon review, the Tribunal found that the appellant was directly engaged in conducting clinical trial activities, including obtaining necessary approvals and coordinating with M/s Merck, USA, thus qualifying for the exemption under Notification 11/2007.

Furthermore, the Tribunal noted that the services were provided as per the agreement with M/s Merck, USA, with payment received in foreign exchange, and the beneficiary of the service being M/s Merck, USA. Citing a previous Tribunal decision, the Tribunal concluded that the services were for delivery and consumption outside India, supporting the appellant's case.

Conclusively, the Tribunal set aside the impugned orders, allowing the appeals in favor of the appellant, emphasizing the exemption under Notification 11/2007 and the fulfillment of export of service criteria.