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2024 (6) TMI 1265 - AT - Service TaxIssues Involved: 1. Levy of service tax on product registration fees paid to foreign regulatory authorities. 2. Applicability of Section 65 B (44) of the Finance Act, 1994. 3. Definition of "person" under Section 65 B (37) and its applicability to foreign governments. 4. Place of Provision of Service Rules, 2012. 5. Availability of Cenvat credit. 6. Invocation of extended period of limitation and the allegation of suppression of facts. Detailed Analysis: 1. Levy of Service Tax on Product Registration Fees: The primary issue is whether service tax is leviable on the product registration fee paid by the appellants to foreign regulatory authorities for the sale of their products in foreign markets. The appellants argued that the fees paid to foreign regulatory authorities are not for any service provided to them but are statutory fees for regulatory approval, which is a sovereign function. They cited the decision of the Hon'ble Delhi Tribunal in Sidmak Laboratories India Pvt Ltd vs. CCE & ST, Dehradun, where it was held that no service tax is leviable on such fees under the reverse charge mechanism. 2. Applicability of Section 65 B (44) of the Finance Act, 1994: The appellants contended that no service was provided to them in terms of Section 65 B (44) of the Finance Act, 1994. The fees paid for product registration do not constitute a service liable to service tax. They supported their argument with Board Circular No. 89/7/2006 dated 18.12.2006, which states that fees collected by public authorities while performing statutory functions are not subject to service tax. 3. Definition of "Person" under Section 65 B (37): The appellants argued that foreign governments do not fall under the definition of "person" under Section 65 B (37) of the Finance Act, 1994. Therefore, the fees paid to foreign government regulatory authorities are not liable to service tax. They emphasized that the definition of "person" under Section 65 B (26A) does not cover foreign governments. 4. Place of Provision of Service Rules, 2012: The appellants asserted that even if the activity is considered a service, it was provided outside India, which is outside the taxable territory. Therefore, the service is not chargeable to service tax. They argued that the service recipient is not located in India as per Rule 3 of the Place of Provision of Service Rules, 2012. 5. Availability of Cenvat Credit: The appellants contended that if any service tax is leviable on the fees paid, it would be available as Cenvat credit to them, making the entire exercise revenue neutral. They cited several judgments, including M/s. Stahl India Pvt Ltd, Chiripal Polyfilms Ltd, M/s. NCR Corporation India Pvt Ltd, and M/s. Ashima Microfin Ltd, to support their argument. 6. Invocation of Extended Period of Limitation: The appellants argued that there was no suppression of facts, and the show cause notice issued for the period 2014-2015 was time-barred. They emphasized that revenue neutrality is involved, and therefore, no suppression of facts can be alleged. Consequently, the entire demand is time-barred. Judgment: The Tribunal, after careful consideration of the submissions and records, found that the service tax was demanded on fees paid to foreign governmental regulatory authorities for the approval of pharmaceutical products to be sold in respective foreign countries. The Tribunal referred to the judgment in Sidmak Laboratories India Pvt Ltd, which held that fees paid to foreign regulatory authorities for statutory functions are not liable to service tax. The Tribunal concluded that the facts and legal issues in the present case are identical to those in the Sidmak Laboratories case. Therefore, the demand for service tax in the present case is not sustainable. The Tribunal did not address other issues raised by the appellants, such as the location of service and limitation, as the case was decided on merit. Conclusion: The impugned order was set aside, and the appeal was allowed, establishing that the product registration fees paid to foreign regulatory authorities for statutory functions are not subject to service tax.
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