2013 (8) TMI 376 - AT - Service Tax

Technical Testing Analysis u/s 65(105)(zzh) or Business support Service u/s 65(105)(zzq) Duty Demand Interest and Penalty - Held that - Prima facie the activities/ operations of the assesse under the research agreement were classifiable as technical testing and analysis service and the assesse could be considered as a technical testing and analysis agency, providing the taxable service specified in Section 65 (105)(zzh) as Technical Testing and Analysis , and not support of business service classifiable u/s 65(105) (zzzq) of the Finance Act, 1994 - Relying on M/s Paul Merchants Limited & Others Versus CCE, Chandigarh 2012 (12) TMI 424 - CESTAT, DELHI In terms of Section 65A (2)(a) the activities of the assesse generically considered should be attributed to the more specific description of taxable services enumerated in the in sub-clauses of Sec 65(105) than the other sub-clause Section 65 (19) , providing a more general description -Further, in respect of reimbursements received the assesse would be prima facie entitled to immunity to levy of service tax, under the Export of Service Rules, 2005, since the services were provided to an overseas company having a permanent establishment outside India, utilised /consumed overseas for the pharmaceutical business of that entity and reimbursements were received by the petitioner in convertible foreign exchange. Waiver of pre- deposit - The assesse had made out a strong case in the substantive appeals full waiver of Pre-deposit allowed and stayed till the pendency of appeal Decided in favor of assesse.

Summary

Issues involved:
1. Allegation of failure to remit service tax for providing Business Support Service.
2. Dispute over the nature of services provided - Technical Testing and Analysis Service vs. Business Support Service.
3. Exemption claim based on Notification No.11/07-ST dated 1.3.07.
4. Reimbursements received for services rendered.
5. Classification of petitioner's activities under the research agreement with Merck USA.
6. Claim for exemption of reimbursements under the Export of Service Rules, 2005.
7. Pre-deposit of adjudicated liability and stay of further proceedings.

Issue 1: The judgment dealt with the allegation that the petitioner failed to remit service tax for providing Business Support Service. The Commissioner's order confirmed the service tax liability for Business Auxiliary Services and Business Support Service, along with education cess, interest, and penalties. The petitioner contended that they provided Technical Testing and Analysis Service, which was rejected.

Issue 2: The dispute arose regarding the nature of services provided by the petitioner - whether Technical Testing and Analysis Service or Business Support Service. The adjudication order concluded that the services provided were Business Support Services to Merck, USA, involving coordination, obtaining regulatory approvals for clinical trials, and other related activities.

Issue 3: The petitioner claimed exemption from service tax based on Notification No.11/07-ST dated 1.3.07, which exempted Clinical Research Organisations approved by the DCGI from service tax for testing and analysis of newly developed drugs. The petitioner argued that they fell under this exemption for services provided to Merck, USA.

Issue 4: Reimbursements were received by the petitioner for various services rendered, such as engaging overseas vendors, organizing studies, and symposia. The judgment discussed the nature of these reimbursements and their relation to the services provided by the petitioner.

Issue 5: The classification of petitioner's activities under the research agreement with Merck USA was analyzed. The judgment considered whether the petitioner's role could be classified as Technical Testing and Analysis Service, making them a technical testing and analysis agency.

Issue 6: The petitioner claimed exemption of reimbursements under the Export of Service Rules, 2005. The adjudicating authority rejected this claim initially but the judgment discussed the applicability of this exemption based on previous tribunal decisions.

Issue 7: The judgment addressed the pre-deposit of adjudicated liability and stay of further proceedings. It noted that the petitioner had a strong case in the substantive appeals and granted a full waiver of pre-deposit to prevent undue hardship, staying all further proceedings pending the disposal of the appeals.