2010 (2) TMI 230 - AT - Service Tax

Technical testing and analysis service- whether the services rendered by the appellants can be considered to be export of service would be required to be examined, only if it is held that amendment has retrospective effect? Held that- this explanation cannot have retrospective effect. On this ground alone, appellants succeed. whether the explanation introduced by way of amendment with effect from 01.5.2006 has retrospective effect or not? Held that-in the light of the various decisions concludes that this explanation cannot have retrospective effect.

Summary

Issues:
1. Whether the explanation introduced by way of amendment with effect from 01.5.2006 has retrospective effect or not.
2. Whether the services rendered by the appellants can be considered as export of service.

Issue 1: Retrospective Effect of the Explanation Introduced by Amendment (01.5.2006):
The case involved three appellants engaged in Clinical Research/ Testing and Analysis for pharmaceutical companies. The issue was whether the explanation introduced by amendment with effect from 01.5.2006 had retrospective effect. The appellants argued that the amendment cannot have retrospective effect based on legal precedents. They highlighted that the department's stand on the notification's retrospective effect was not justified solely based on the declaration in the explanation. The appellants also pointed out that the department had not demanded service tax before 01.5.2006, indicating that the amendment should not be retrospective. On the contrary, the Revenue argued that the explanation's starting sentence indicated its retrospective nature. They cited various legal decisions supporting the retrospective effect of similar explanations in notifications. The Tribunal analyzed the Commissioner's observations and concluded that the amendment indeed expanded the scope of the definition, making it not merely clarificatory. The Tribunal found support in legal precedents where explanations restricting or enhancing scope were not held to be retrospective without additional evidence. Ultimately, the Tribunal held that the explanation introduced could not have retrospective effect, leading to the appellants' success on this ground.

Issue 2: Consideration of Services Rendered as Export of Service:
The Tribunal did not delve into the question of whether the services rendered by the appellants to foreign companies constituted export of services. This decision was based on the conclusion regarding the retrospective effect of the explanation introduced by the amendment. As the appellants succeeded on the retrospective effect issue, the Tribunal did not proceed to analyze the export of services aspect. Therefore, the judgment did not address this issue given the outcome of the retrospective effect analysis.

In conclusion, the Appellate Tribunal CESTAT, Ahmedabad, in the cited judgment, extensively examined the retrospective effect of the explanation introduced by amendment and concluded that it did not have retrospective effect. This decision was crucial in determining the appellants' liability for service tax, and as a result, the Tribunal did not explore the separate issue of whether the services rendered could be considered as export of service.