2013 (12) TMI 149 - AT - Service Tax

Eligibility of CENVAT credit - Testing and Analyses Service - Receipt of new drugs from foreign based companies for testing and analyzing on human beings/volunteers - Held that - The testing of new drugs has been done in India with the help of volunteers and reports are being submitted to foreign based drugs companies. Prima facie we do not find any service being rendered to the volunteers in connection with the testing of the drugs. The service is contained in the form of test reports which have been submitted to foreign based drugs companies. Further the alternative plea of the appellant that the service of testing and analysis relating to new drugs are exempted is also relevant - Following decision of Commissioner of Service Tax Ahmedabad v. B.A. Research India Pvt. Ltd. 2009 (11) TMI 213 - CESTAT AHMEDABAD - Stay granted.

Summary

Issues:
1. Waiver of pre-deposit of Service Tax demand.
2. Determination of whether the service can be treated as exported.
3. Dispute regarding the eligibility of CENVAT credit.

Analysis:
1. The appellant sought waiver of pre-deposit of Service Tax demand amounting to Rs. 13,58,18,217, primarily concerning the treatment of services as not exported and the eligibility of CENVAT credit. The department contended that since the trial and testing of new drugs occurred in India, the service cannot be considered exported, leading to the demand confirmation and penalty imposition.

2. The appellant, engaged in testing new drugs from foreign companies on volunteers in India, argued that the services provided fall under "Testing and Analyses Service." They highlighted the utilization of foreign experts for analysis, submission of reports to foreign drug companies, and compliance with export service conditions. Reference was made to a Tribunal decision supporting the claim that such testing and analysis activities constitute 'Export of Service.'

3. The Tribunal examined the submissions and records, noting that the service involved testing new drugs in India with volunteers, and reports were shared with foreign drug companies. It was observed that services were not directly rendered to volunteers, but in the form of test reports to foreign entities. Additionally, the appellant's contention on the exemption of testing and analysis services for new drugs was deemed relevant. Despite a challenge to a Tribunal decision in another case, no stay was claimed. Consequently, considering the circumstances and the precedent set by the Tribunal, the pre-deposit of dues was waived, and recovery stayed pending appeal disposal.