2020 (12) TMI 1013 - AT - Service Tax

Levy of Service Tax - Banking and other Financial Services - amounts/value charged by the foreign bankers while delivering their inward remittance in foreign currencies to the Indian Bankers of the Appellant - services received by the appellant from M/s Dada Consultancy and M/s Phara Dr. D.R. Ivan - demand under Scientific or Technical Consultancy Services - time limitation. Banking and other Financial Services - amounts/value charged by the foreign bankers while delivering their inward remittance in foreign currencies to the Indian Bankers of the Appellant - HELD THAT - The export sale proceeds from their overseas customers are collected by the Appellant s Indian Banker. The Indian Banks, who collect the said amount for the appellant, in the process are required to pay certain charges to the foreign banks who transfer the funds to Indian Banks - following the principles laid down in GREENPLY INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I 2015 (12) TMI 80 - CESTAT NEW DELHI and also in the case of M/S RAJ PETRO SPECIALITIES P LTD VERSUS C.C.E. S.T. - SILVASA 2018 (8) TMI 1179 - CESTAT AHMEDABAD in identical facts and circumstances, we do not find merit in confirming the Service Tax demand for the charges deducted by the foreign banks under the category of Banking and other Financial Services , where it was held that Any bank charges paid by Indian Bank to the Foreign Banks even though in connection with import and export of the goods and the same was debited to the appellant, the service tax liability does not lie on the appellant. Scientific or Technical Consultancy Services - services received by the appellant from M/s Dada Consultancy and M/s Phara Dr. D.R. Ivan - HELD THAT - The learned Commissioner in the impugned order, even though accepted that the overseas firms are providing consultancy services, which meant to be used in obtaining marketing right of the appellant to their manufactured pharmaceutical products, but proceeded to observe that the said consultancy of clinical and non-clinical overviews of the literature were scientific in nature, therefore, the consultancy service provided fall under the category of Scientific and Technical Consultancy Services - Tribunal in the case of M/S IPCA LABORATORIES LTD. VERSUS COMMISSIONER OF CE ST, LTU, MUMBAI 2018 (5) TMI 34 - CESTAT MUMBAI on similar circumstances held that when such services are provided for marketing of the product in the overseas market to meet the regulatory requirement, the same cannot fall under the category of Scientific or Technical Consultancy Services - the contention of Revenue that the consultancy charges paid to M/s DADA Consultancy and M/s Pharphe Dr. D.R. Iban be taxable under the category of Scientific or Technical Consultancy Services is devoid of merit and cannot be sustained. Extended period of limitation - HELD THAT - The demand is barred by limitation as during the course of audit by the Department, specifically the issue of applicability of Service Tax for payments made to M/s DADA Consultancy and M/s Pharphe Dr. D.R. Iban have been examined by the Department to which the appellant filed a reply enclosing the opinion of legal experts on the subject - Also, it is not in dispute that the appellant has started discharging Service Tax on the said services w.e.f. 01.06.2007 under the category of Management and Consultancy Services to which the Department did not raise any objection and the ST-3 returns have been assessed from time to time - there are merit in the contention of the learned Advocate that since they would be eligible to avail credit of the Service Tax paid on reverse charge mechanism, hence there could not be any incentive/intention to evade payment of Service Tax - the demand for the period 2006-07 is not sustainable being barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Levy of Service Tax on the appellant under the category of "Banking and other Financial Services" for charges by foreign bankers.
2. Classification of services received from M/s Dada Consultancy and M/s Pharphe Dr. D.R. Iban under "Scientific or Technical Consultancy Services."
3. Applicability of the extended period of limitation for the demand.

Detailed Analysis:

Issue 1: Levy of Service Tax under "Banking and other Financial Services"

The core issue was whether the charges deducted by foreign banks while delivering inward remittances to Indian banks for the appellant's export sales could be taxed under "Banking and other Financial Services." The appellant argued that there was no direct service provider-service recipient relationship between them and the foreign banks, as the charges were incurred by their Indian bankers. The Tribunal supported this view, citing previous judgments (Green Ply Industries Ltd. and Raj Petro) and a Trade Notice clarifying that Indian banks, not the appellants, should be considered the service recipients. Consequently, the demand for service tax on this count was set aside.

Issue 2: Classification of Services from M/s Dada Consultancy and M/s Pharphe Dr. D.R. Iban

The appellant contended that the consultancy services received were for compiling clinical and non-clinical overviews necessary for regulatory submissions in European markets, not for scientific research or development. The Tribunal agreed, referencing the IPCA Laboratories case, which held that such regulatory compliance services do not fall under "Scientific or Technical Consultancy Services." The Tribunal found that these services were not scientific in nature but rather aimed at fulfilling regulatory requirements for marketing pharmaceutical products. Thus, the demand under this category was dismissed.

Issue 3: Extended Period of Limitation

The appellant argued that the extended period of limitation was not applicable due to the absence of willful suppression or misstatement of facts. They had disclosed all relevant information during audits and had started paying service tax under the "Management and Consultancy Services" category from 01.06.2007. The Tribunal found merit in this argument, noting that the appellant's actions did not indicate any intention to evade tax, especially since they could avail of CENVAT credit. Therefore, the demand for the period 2006-07 was deemed time-barred.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law, effectively ruling in favor of the appellant on all counts. The pronouncement was made in court on 09/09/2020.