2020 (9) TMI 258 - AT - Service Tax

Levy of Service Tax - Scientific or Technical Consultancy service or not - export of services - amounts which they received in foreign currency for rendering services to their parent company, M/s. Aventis Cropscience GmbH, Germany - amounts which they charge from the farmers for providing guidance in multiplying the seeds? HELD THAT - The issue decided in the case of BAYER BIO SCIENCE PVT LTD VERSUS CCCE ST, HYDERABAD II 2019 (2) TMI 1567 - CESTAT HYDERABAD in favour of the assessee and it was held that while the nature of service is scientific or technical consultancy service , the service which when rendered qualifies to be called as export of services and therefore, no service tax is chargeable on such service. In these three appeals, there is no demand on this head at all. The second source of income for the appellant is, after the seeds are developed and patented by M/s Aventis, they provide the seeds to the appellant who get them multiplied by the farmers and buy-back such seeds. In order to help farmers efficiently multiply the seeds, the appellant provides guidance to them and charges a fee for providing such guidance. It is the case of the revenue that the amounts which are charged by the appellant from the farmers is chargeable to service tax under the head of scientific or technical consultancy service . After examining this issue at length, this bench had decided that the nature of service rendered by the appellant to the farmers is one of the agricultural extension and it does not qualify to be called as scientific or technical consultancy service . Therefore, no service tax can be levied on the amounts which the appellant receives from the farmers on this count. The appellant is not liable to pay service tax on the amounts which they have received from the farmers for providing guidance in multiplying the seeds - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on amounts received in foreign currency for services to parent company.
2. Liability to pay service tax on amounts charged from farmers for providing guidance in multiplying seeds.

Analysis:

Issue 1:
The first issue pertains to the liability of the appellant to pay service tax on amounts received in foreign currency for services provided to their parent company. The appellant developed high yielding seed varieties for the parent company, which involved a complex scientific process. The Tribunal previously held that the service provided qualifies as "scientific or technical consultancy service" and is considered an export of services, thus exempt from service tax. The Tribunal reiterated this stance for the present appeals, noting that there was no demand for service tax on this head. The service was deemed complete only upon delivering reports to the parent company in Germany, making it eligible for exemption under the Export of Service Rules.

Issue 2:
The second issue revolves around the liability of the appellant to pay service tax on amounts charged from farmers for providing guidance in multiplying seeds. The appellant's activities were considered essential for the plant breeding program and were categorized as "agricultural extension" rather than "scientific or technical consultancy service." The Tribunal emphasized that the guidance provided to farmers did not involve scientific or technical research but focused on transferring agricultural know-how. As per the Tribunal's previous order, the appellant was found not liable to pay service tax on such amounts. The Tribunal upheld this decision for the present appeals, setting aside the demands, interest, and penalties.

In conclusion, the Tribunal allowed all appeals, holding that the appellant was not liable to pay service tax on the amounts received from the farmers for providing guidance in seed multiplication. The decisions were based on the previous rulings and the nature of services provided by the appellant, emphasizing the distinction between scientific consultancy and agricultural extension services.