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TMI Blog2019 (1) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... to MRP based valuation, the activity of testing and analysis which was hitherto considered by the appellant as a part of their manufacturing costs and which has not been disputed by the department becomes a distinct service rendered to their principals. We find it difficult to hold such a view - The testing and analysis is not a distinct separate service being offered by the appellant to their principals but it is a part and parcel of the manufacturing process. Unless such testing including stability tests and validation tests are conducted the product cannot be marketed at all. Therefore, no service tax can be leviable separately on this component of the processing charges which they received. On identical facts in the case of Midas Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests which they conduct on the pharmaceuticals before clearing them. The appellant used to pay excise duty under Sec.4 of Central Excise Act including the amounts which they received as testing charges because these also form part of the assessable value of the goods. From 01.07.2005, these products have been notified under Sec.4A and the duty has to be paid on the basis of MRP of the product and the cost of manufacture etc., are immaterial. They have been paying the duty accordingly. Since the excise duty is based on MRP, the question of adding either the job work charges or the testing charges which they received from their principals does not arise. A show cause notice was issued to the appellant in this background demanding service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that entire matter was fully within the knowledge of the department at all relevant time. Therefore, extended period of penalty is not sustainable. (4) The imposition of penalty in terms of Sec.78 is not sustainable because there was no fraud, mis-declaration or suppression of facts. (5) No interest is chargeable because the tax itself is not leviable in the first place. 3. Learned counsel for the appellant reiterates the above submissions and forcefully argued that the technical testing and analysis must have been rendered to some other entity as a separate service for it to be charged to service tax. In this case, they were testing their own products as per the directions of the principals. Although they were getting paid s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts which they manufacture. She also relies on the CBEC circular 334/1/2008-TRU dated 29.02.2008 in which it was clarified in Para 3.2 that for the purpose of classification of a service covering a number of separate services, a view has to be taken as to whether an individual service is merely a component of overall supply or is itself a distinct and independent supply that is whether the component is merely ancillary to the principle supply or the component can be considered as a separate taxable service in its own right. A service which does not constitute for a customer an aim in itself but a means of better enjoying to principle supply is considered as a supply ancillary to the principle supply . Thus, she argues that the services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey can be sold in the market. It is not in dispute that the appellant is conducting such tests only before releasing the goods into the market. However, they are getting paid separately for this testing and analysis and separately for job work. As long as the pharmaceuticals were not under MRP based valuation, the excise duty was paid by the appellant reckoning the processing charges including the testing and analysis charges. Since, the pharmaceuticals are now under MRP based valuation, the amounts which they received under the two heads is irrelevant. The question is whether because of change of the valuation under Central Excise to MRP based valuation, the activity of testing and analysis which was hitherto considered by the appellant a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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