2020 (3) TMI 263 - AT - Service Tax

Denial of benefit of export of services - services of Technical Testing and Analysis Services being rendered by the appellant for its clients, viz. M/s. Actavis Elizabeth LLC and M/s. Actavis Group HF, Iceland abroad - HELD THAT - It is an admitted fact that the services have been performed from India. Further the principal or the service receiver is located outside India. Thus the technical testing and analysis service (reports by the appellant), have been delivered by the appellant outside India and have been used by the service receiver outside India. The contention of the Revenue is rejected that as the clinical tests were performed on persons in India, the services are performed in India. Further the appellant also has undisputedly satisfied the other conditions by receiving the service charges in convertible foreign exchange. CENVAT Credit - input services - catering services - period May 2006 to September 2009 - HELD THAT - The issue stands settled in favour of the appellant by several precedent judgments of this Tribunal and High Courts viz. Resil Chemicals Pvt. Ltd. Vs.CCE Bangalore-I 2015 (1) TMI 948 - KARNATAKA HIGH COURT - Credit allowed. CENVAT Credit - input services - rent paid for the premises acquired by them at Jakkur - period July 2007 to March 2009 - HELD THAT - It is an admitted fact that such premises were taken for business purposes. We hold that rent paid even for the period, the premises were under repair/renovation to make them suitable for the use of the appellant/assessee, is also deemed to be used for business purposes. Appeal allowed - decided in favor of appellant.

Summary

Issues:
i. Denial of benefit of export of services for "Technical Testing and Analysis Services"
ii. Denial of cenvat credit on catering services
iii. Denial of cenvat credit on rent paid for premises

Analysis:

Issue i: Denial of benefit of export of services for "Technical Testing and Analysis Services"
The appellant conducted clinical and pharmaceutical research on new drugs through testing and analysis, with data evaluated by experts abroad. The Department sought service tax despite services being delivered and used outside India, with payment received in foreign exchange. The Department claimed service tax due to testing on volunteers in India. The appellant argued fulfilling conditions of Export of Services Rules, 2005, and receiving payment in foreign exchange. The Tribunal rejected the Revenue's contention, stating services were performed outside India, satisfying all conditions.

Issue ii: Denial of cenvat credit on catering services
The appellant was denied cenvat credit on catering services for staff, deemed unrelated to the technical testing service. The Tribunal referenced precedent judgments favoring the appellant, establishing catering services as eligible for cenvat credit. The denial of cenvat credit on catering services was overturned in favor of the appellant.

Issue iii: Denial of cenvat credit on rent paid for premises
The appellant was denied cenvat credit on rent paid for premises undergoing modifications for business purposes. The Tribunal held that even during repairs or renovations, the premises were deemed used for business purposes. Thus, the rent paid for the premises was considered an input service for providing output services. The denial of cenvat credit on rent was overturned in favor of the appellant.

In conclusion, all issues were decided in favor of the appellant against the Revenue. The Tribunal allowed the appeal, setting aside the impugned order and entitling the appellant to consequential benefits according to law.