2018 (7) TMI 275 - AT - Service Tax

Technical testing and analysis services - clinical trial to new drugs for various manufacturing companies (sponsors) - Benefit of N/N. 11/2007 ST dated 01.03.2007 and a subsequent N/N. 25/2012 ST dated 20.06.2012 - Department formed an opinion that respondent are participating in various drug trials in the capacity of trial site, in as such, their activity is not exempted vide the said Notification - Held that - Perusal of both these Notifications makes it a mandate that the exemption is for such technical testing and analysis service as are provided or to be provided by a Clinical Research Organisation approved to clinical trials by the Drug Controller General of India. Thus, it becomes clear that the claimant of exemption of this Notification should be a Clinical Research Organisation. The Commissioner has held the respondent as a CRO despite the apparent fact that as per the mandatory contracts for the purpose to be entered into by the sponsor, the respondents are mentioned as trial sites. Not only this, in addition thereto, the CRO is also named in the contract itself, i.e., J.S. Icon Clinical Research India Ltd. Once two different entities are apparent from the contract itself, distinguishing the respondent to be called as mere trial site with someone else as the CRO and the exemption of the impugned Notifications is available only to the CRO, the Commissioner (Appeals) has wrongly allowed the respondents to avail the said exemption. Appeal allowed.

Summary

Issues:
1. Interpretation of exemption notifications for technical testing and analysis services under the Finance Act, 1994.
2. Determination of whether the respondent qualifies as a Clinical Research Organization (CRO) for exemption eligibility.
3. Assessment of the respondent's role as a trial site in clinical trials and its distinction from a CRO.

Analysis:
1. The appeal concerns the interpretation of exemption notifications (Notification No. 11/2007 ST and Notification No. 25/2012 ST) for technical testing and analysis services under the Finance Act, 1994. The notifications provide an exemption for services provided by a Clinical Research Organization (CRO) approved for clinical trials by the Drug Controller General of India. The key issue is whether the respondent qualifies as a CRO to avail of the exemption.

2. The contention revolves around whether the respondent, engaged in clinical analysis under Section 65(106) of the Act, meets the criteria to be considered a CRO. The guidelines define a CRO as an entity to which a sponsor can delegate tasks related to clinical studies. The distinction between a CRO, trial site, sponsor, and investigators is crucial. The adjudicating authority must determine if the respondent's role aligns with the definition of a CRO to qualify for the exemption.

3. The respondent argues that as an approved trial site conducting clinical testing, they are equivalent to a CRO and entitled to exemption benefits. However, the Department asserts that the respondent's role as a trial site, as evidenced by their own documents, does not meet the criteria of a CRO as per the guidelines. The adjudicating authority's decision to categorize the respondent as a CRO is challenged based on contractual agreements and the distinct roles outlined in the guidelines. The order is set aside, emphasizing the necessity for entities to meet the specific criteria to qualify for exemption benefits.

This detailed analysis of the judgment highlights the complexities involved in determining exemption eligibility for technical testing and analysis services in the context of clinical trials, emphasizing the importance of adhering to defined roles and criteria outlined in the relevant regulations.