2019 (6) TMI 572 - AT - Service Tax

Export of Services or not - Place of Provision of Services - Scientific or Technical Consultancy Services - demand of interest and penalties - HELD THAT - For the services to be treated as export of service post 2012 the service provided needs to be tested in terms of rule 6A of the Service Tax Rules 1994 read with POPS Rules. As per (d) of Rule 6A(1) for service to be export of service the place of provision of service should be outside India. Appellants have argued relying on the provisions of the POPS Rules and para 5.4.1 of the Education Guide that place of provision of the service in their case is outside India. We are not in agreement with the submissions made by the appellant that in case of DMPK Standalone Studies where NCE has been made available to them by the overseas client for undertaking the said studies the services will be covered by Rule 3 of POPS and hence Export of Services under Rule 6A of Service Tax Rules 1994. Appellants have relied upon the decisions in their own case to argue that the services provided by them should be considered as export of services. From the facts of the present case we find that appellant have conducted DMPK Studies in respect of the NCE s provided to them by the overseas client. Rule 4 do not put any conditions in respect of alteration or alternation of the goods provided by the service recipient. Reading anything beyond what has been provided in the rules/ statue cannot be proper interpretation put to rules - In the present case we find that the activities under taken by the appellants in terms of DMPK studies squarely fall within the scheme of Rule 4 of POPS Rules and hence the location of service provider shall be place of provision of service which is in India and hence cannot be treated as export of service in terms of Rule 6A of Service Tax Rules 1994. Demand of interest and penalties upheld. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Demand of Service Tax and Education Cess.
2. Recovery of interest on the demand of service tax.
3. Imposition of penalties for failure to furnish correct details and pay service tax.

Detailed Analysis:

1. Demand of Service Tax and Education Cess:
The Commissioner of Central Excise Pune I confirmed the demand of Service Tax and Education Cess amounting to ?72,72,046/- for standalone DMPK services provided by the assessee from 01.07.2012 to 31.03.2014. The Commissioner held that these services fall within Rule 4 of the Place of Provision of Services Rules, 2012, and do not qualify as "Export of Services" under Rule 6A of Service Tax Rules, 1994. The Appellants argued that the place of provision of service is the location of the service receiver, which is outside India, thus qualifying as export of services. However, the Tribunal upheld the Commissioner’s view, stating that the DMPK studies are conducted on goods (NCEs) provided by the overseas clients, making Rule 4 applicable. Consequently, the location of the service provider (India) is the place of provision of service, and the services do not qualify as export.

2. Recovery of Interest:
The Commissioner ordered the recovery of interest on the confirmed demand of service tax under Section 75 of the Finance Act, 1994. The Tribunal upheld this order, emphasizing that interest is a civil liability for the delayed payment of taxes. The Tribunal cited the Bombay High Court’s decision in P V Vikhe Patil SSK, which stated that interest on duty evaded is compulsory, even if the evasion is not intentional.

3. Imposition of Penalties:
The Commissioner imposed penalties under Sections 76 and 77 of the Finance Act, 1994. A penalty of ?40,000/- was imposed for failing to furnish correct details in ST-3 returns, and an additional penalty was imposed for the delayed payment of service tax, capped at 50% of the service tax payable. The Tribunal upheld these penalties, stating that they are civil penalties imposed for failing to fulfill statutory obligations. The Tribunal rejected the Appellants' plea for waiver of penalties under Section 80, noting that Section 80 is not a license to condone irregularities in tax payment and return filing, especially given that the service tax regime had been in place since 1994.

Conclusion:
The Tribunal dismissed the appeal, upholding the demand of service tax, recovery of interest, and imposition of penalties as ordered by the Commissioner. The Tribunal emphasized strict adherence to the statutory provisions and rejected arguments based on equitable considerations or previous decisions that did not consider the Place of Provision of Services Rules, 2012.