2024 (10) TMI 453 - AT - Service Tax

Liability of Interest on cenvat credit availed by the appellant prior to registration - Clinical Research Management and Resourcing Services (CMR services) provided by the appellant qualify as export of service or not - suppression of facts or not - extended period of limitation - penalty. Whether, cenvat credit availed by the appellant prior to registration requires payment of interest? - HELD THAT - In the present case, the department has not challenged the eligibility of credit availed by the appellant on merits and there is no demand issued to the appellant alleging that the credit is ineligible or recoverable. In the absence of valid demand and confirmation thereof in an adjudication, demanding interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 is not permissible in law. Therefore, the demand of interest is not sustainable. Whether, Clinical Research Management and Resourcing Services (CMR services) provided by the appellant qualify as export of service? - HELD THAT - It is found that in the show cause notice as well as in the impugned order, the allegation is with regard to CRM services whereas the demand has been confirmed against the appellant for entire turnover comprising of Data Management services as well as CRM services, which is bad in law because the turnover for Data Management services was 58% of the total taxable value and the turnover for CRM services was to the tune of 42% of the total taxable value and therefore confirming the entire demand under CRM services is not tenable. Further it is found that with regard to Data Management services, the department has accepted it as an export and has been granting regularly the refunds to the appellant, which is clear from the various refund orders placed on record. These refund orders have not been challenged and have attained finality which clearly establishes that Data Management services fulfill all the conditions of export as required in law. The services performed by the appellant are in the nature of testing and analysis service, even then, it will amount to export of service because the said service partly performed outside India, to the extent of delivery of reports outside India and thus, qualifies as export of service under Export of Service Rules, 2005 as held in the cases COMMISSIONER OF SERVICE TAX VERSUS BA RESEARCH INDIA LTD. 2009 (11) TMI 213 - CESTAT, AHMEDABAD , M/S. APOTEX RESEARCH PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX BANGALORE-III 2022 (1) TMI 256 - CESTAT BANGALORE and C3I CONSULTANTS INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX - HYDERABAD-II 2014 (3) TMI 736 - CESTAT BANGALORE . Extended period of limitation - suppression of facts or not - penalty - HELD THAT - The appellant has not suppressed any material facts because the appellant has been filing returns regularly for Data Management services and was getting the refunds, which clearly establishes that the appellant has not suppressed any material facts; therefore, invocation of extended period is bad and thus, penalty imposed under Section 78 of the Act is not sustainable. Similarly, penalty of Rs.2,42,20,838/- imposed under Rule 15(4) of the Cenvat Credit Rules read with Section 78 of the Finance Act, 1994 is not sustainable because once the availment of cenvat credit without registration is valid in view of the various case-laws, then in the absence of any demand for recovery of alleged cenvat credit, imposition of penalty equal to credit amount is not sustainable in law. The impugned order is not sustainable in law and therefore, set aside - appeal allowed.

Summary

Issues Involved:

1. Whether Cenvat credit availed by the appellant prior to registration requires payment of interest.
2. Whether Clinical Research Management and Resourcing Services (CRM services) provided by the appellant qualify as "export of service."

Issue-wise Detailed Analysis:

First Issue: Cenvat Credit and Interest Payment

The Tribunal examined whether the appellant was liable to pay interest on Cenvat credit availed before obtaining registration. It was noted that the law does not mandate obtaining registration prior to availing of Cenvat credit. The Tribunal referenced its own previous decision in the appellant's case, where such credits were allowed, and cited consistent rulings from multiple cases affirming that Cenvat credit availed prior to registration is valid. The Tribunal found that there was no challenge to the eligibility of the credit on merits, nor was there any demand issued alleging the credit was ineligible or recoverable. Consequently, demanding interest under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 75 of the Finance Act, 1994, without a valid demand and confirmation, was deemed impermissible. Therefore, the Tribunal held that the demand for interest was not sustainable.

Second Issue: Export of CRM Services

The Tribunal addressed whether CRM services provided by the appellant qualified as "export of service." The show cause notice and impugned order focused on CRM services, yet the demand was confirmed for the entire turnover, including Data Management services. The Tribunal found this approach flawed, as Data Management services constituted 58% of the total taxable value and had been consistently accepted as export, with refunds granted regularly. These refund orders were not challenged and had attained finality, confirming the export status of Data Management services.

For CRM services, the Tribunal analyzed the nature of the services, which involved supervision and support for clinical trials conducted by hospitals on behalf of Ingenix. The appellant did not conduct clinical trials or testing but provided supervisory services, classifiable as "business auxiliary services" (BAS) or "business support service" (BSS). Under Rule 3(1)(iii) of the Export of Services Rules, 2005, services rendered to a client located outside India qualify as "export of services," with no dispute over foreign exchange receipt. The Tribunal disagreed with the classification of these services as "Technical Testing and Analysis services" in the impugned order, as the appellant did not perform any testing or analysis. Even if assumed to be testing and analysis services, the delivery of reports outside India would qualify them as "export of service."

Extended Period and Penalties

Regarding the extended period of limitation and penalties, the Tribunal found no suppression of facts by the appellant, as they had been filing returns and receiving refunds for Data Management services. Consequently, the invocation of the extended period was deemed unjustified, and the penalties under Section 78 of the Finance Act, 1994, and Rule 15(4) of the Cenvat Credit Rules were not sustainable.

Conclusion

The Tribunal concluded that the impugned order was not sustainable in law, set it aside, and allowed the appeal with consequential relief as per law.