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TMI Blog2024 (11) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... service is considered as export of service or otherwise. 2. Ms. Swetha Garge learned Counsel appearing on behalf of the appellant at the outset submits that this issue is no longer res-integra as in the appellant s own case this Tribunal in the following orders decided the matter in the favour of the appellant:- i) Final order No. 11772/2024 dated 14.08.2024 ii) Final order No. 12278-12283/2024 dated 01.10.2024 She submits that in view of the above orders, the present appeal also deserves to be allowed. 3. Shri Anoop Kumar Mudvel, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. 4. On careful consideration of the submission made by both the sides and perusal of record, we find that the issue involved in the present case is no longer res-integra as submitted by the learned Counsel vide two orders this Tribunal has decided the matter in favour of the appellant. One of the said orders, the final order No. 12278-12283/2024 dated 01.10.2024 is reproduced below:- In all these appeals the common issue involved is that whether the appellant is liable to pay service tax on the service of clinical trial on drugs for the foreign se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to main IP / molecule are also obtained from domestic market and administered to the Volunteers along with the IP molecule, and an analysis is conducted on the pharmacokinetic samples (blood, urine) to study the effects of the drugs. This analysis is submitted to the Sponsors in the form of Clinical Study Reports (CSR). In every case, the scenario of obtaining IP molecule may differ. 8. We find that Rule 4 of POPS Rules is applicable when the service provider provides service on the goods supplied by the recipient of the service. After performance of the service, the goods on which the service provider provided the services, will have to be returned to the recipient of service. In the present case, the services of the Technical Testing Analysis Service are performed on the blood samples of the Volunteers obtained during the human trials and not on the samples supplied by the recipient of the service (Sponsor). The IP molecule of the Sponsor which is administered to the Volunteers is sometimes mixed with ancillary products. The test does not take place on the IP molecule sent by the Sponsor but the Appellant studies the effect of this molecule when administered to the humans. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pune-I. M/s. Sai Life Sciences Ltd., registered as providers of scientific and technical consultancy service to clients located outside India, also offers research and development expertise in new compounds of pharmaceutical products. Unable to utilise the accumulated Cenvat credit, three refund claims for Rs. 79,55,273/- for July, 2012 to September, 2012, Rs. 73,39,010/- for October, 2012 to December, 2012 and Rs. 96,57,578/- for April, 2013 to June, 2013 were filed. The refund claims were rejected on the ground that in accordance with Rule 4 of Place of Provisions of Service Rules, 2012 performance of the service was within the country and hence the activities of M/s. Sai Life Sciences Ltd. did not amount to export of services. The first appellate authority has concluded that the two necessary conditions for classifying the place of provisions of service are that the goods are to be made available to the service provider and services are to be provided in respect of the goods. While acknowledging that some of the chemicals required for research and development are provided by the clients of the appellant and hence the condition that goods be made available by the service recipien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of withdrawal of Notification No. 6/99-S.T. The Board dispelled this apprehension by clarifying that export of services would continue to remain tax-free even after withdrawal of Notification No. 6/99-S.T. This clarification is certainly binding on the Revenue. Consequently, it has to be held that the reinstatement of the above exemption through Notification No. 21/2003-S.T., dated 20-11-2003 cannot detract from the correct legal position clarified by the Board. For this reason, we hold that there can be no demand of service tax on the appellant on the ground that exemption Notification No. 6/99-S.T. was withdrawn in March, 2003 and identical exemption was reintroduced in November, 2003. As a matter of fact, none of the notifications referred to export of services . Again, as a matter of fact, the Central Board of Excise Customs held export of services to be tax-free notwithstanding the notifications. The law which categorically exempted export of services from payment of service tax was brought into force for the first time through the Export of Services Rules, 2005. Undoubtedly, the period of demand, in the present case, is prior to 2005. 9. The view taken hereinbefore is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that refund amount of Rs. 4844/- cannot be granted since the input service in three cases do not have any nexus with output service. Learned Chartered Accountant for the Appellant on the other hand submitted that the service provided by the Appellant is in the nature of Research and Development Service which is covered under Rule 3 of Place of Provision of Service Rules and not under Rule 4 of ibid. He also submitted that the refund claim was filed under Notification No. 27/2012-C.E. (N.T.),dated 18-6-2012 under Rule 5 of the CCR, 2004 which provides that in case refund claim sanctioned is less than the refund claim, then the difference shall be allowed as re-credit and therefore the difference of Rs. 13,27,192/- is accruing to the Appellant under the existing law. He also submitted that Scientific and Technical Consultancy Services performed by the Appellant has been considered as export of service by the department in previous years. According to him, the turnover of Scientific and Technical Services provided by the Appellant shall be considered under Rule 5 of CCR of 2004 when the amount due is received in foreign currency. 4. The reading of the provision of Rule 4 of Place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore there is no reimbursement of goods involved in the matter. Since the research activity performed by the Appellant leads to formation of a new product different from the original raw material therefore Rule 4 of Place of Provision Of Service Rules, 2012 (hereinafter referred to as Rules, 2012 ) will not be applicable. In my opinion, the research development service falls under Rule 3 of Rules, 2012, according to which, the location of service provider shall be constructed as the location of recipient. In the present case, the location of service recipient i.e. DITC is outside India and therefore the said service shall be treated as export of service. The same is supported by the following decision also : (i) Advinus Therapeutics Ltd; 2017(51) S.T.R. 298 (Tri.-Mum) (ii) Sai Life Sciences Ltd; 2016 (42) S.T.R. 882 (Tri.-Mum) (iii) Midas Care Pharmaceuticals Pvt. Ltd.; 2014-TIOL-1484-CESTAT-MUM = 2015 (37) S.T.R. 346 (Tribunal) In view of the above, it can be safely said that the Research Development Service performed by the Appellant is export of service in terms of Rule 3 of Rules, 2012. Earlier also for the period July, 2012 to September, 2012, October, 2012 to December, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Testing and Analysis Service/Scientific and Technical Consultancy Service various input services were used on which they availed Cenvat credit. Since the services are exported, they claimed cash refund under Rule 5 of Cenvat Credit Rules, 2004, but Revenue rejected it alleging that the services since performed in India, therefore, do not fall under the scope of export of service . I find that in their own case this Tribunal has already taken a view that the services rendered by the appellant are in the nature of export service and hence eligible to cash refund of accumulated Cenvat credit. Also, in the case of Advinus Therapeutics Ltd. (supra), this Tribunal more or less under similar circumstances discussing all aspects of the issue held that scientific or technical consultancy service provided for the development of drugs to the overseas recipient of service was held to be export service . This Tribunal observed as follows :- 13. In the context of a catena of judgments and decisions that exports are not taxable and, with the most palpable manifestation of export of invisibles being the receipt of convertible foreign exchange from a recipient of service located outside the coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er insights. The special provision, which may be seen as an exception to the general Rule 3, deals with services in respect of goods as well as those provided to individuals. Not unnaturally, the services that require the physical presence of the person is taxed where the consumer receives the service and not at his location which as per Rule 2(i)(iv) would be his usual place of residence. In what can be considered as a most telling example of the scope of this portion of Rule 4, we could do a lot worse than refer to a decision of the Hon ble High Court of Delhi that, in the course of dealing with other, more weighty matters in Orient Crafts Ltd. v. Union of India [2006-TIOL-271-H.C.-DELS.T. = 2006 (4) S.T.R. 81 (Del.)], took note of, and answered, one of the submissions thus 4. The contention of the Learned Counsel for the petitioner, based on the interpretation of Section 66A of the Act, is that any service that is obtained by a person who has a fixed place of business in India is liable to tax for services availed by him in a foreign country. By way of an example, Learned Counsel for the petitioner has cited that if such a person in India goes abroad, and has a haircut, he would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Education Guide referred supra renders it pellucid. Certification is an important facet of trade and such certification, if undertaken in India, will not be able to escape tax by reference to location of the entity which entrusted the activity to the service provider in India. This is merely one situation but it should suffice for us to enunciate that Rule 4(1) is intended to resorted when services are rendered on goods without altering its form that in which it was made available to the service provider. This is the harmonious construct that can be placed on the applicability of Rule 4 in the context of tax on services and the general principle that taxes are not exported with services or goods. 17. The goods supplied to the respondent, minor though the proportion may be, are subject to alteration in the course of research. It is not asserted anywhere that these goods, in its altered or unaltered form, are sent back to the service recipient; if it were, the provisions of Customs Act, 1962 would be invoked to eliminate tax burden. If the goods cease to exist in the form in which it has been supplied, it cannot be said that services have been provided in respect of goods even if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulate the admissibility of refund amount except the credit availed on input services viz. Building maintenance charges and rent-a-cab service. 9. Appeals are disposed of accordingly. In the case of Principal Commissioner Of C. Ex., Pune-I Vs. Advinus Therapeutics Ltd (Supra) the division bench of this tribunal on the identical issue passed the following order:- 6. We find from a perusal of the decision in re Sai Life Sciences Ltd. that it has, in the context of claim of Revenue that Place of Provision of Service Rules, 2012 should, notwithstanding agreements with overseas client and payment in convertible foreign currency, determine whether exports have occurred for the purposes of refund of Cenvat credit, accorded a primacy to the principle that exports are not liable to be taxed. In support, it relied upon an earlier decision of the Tribunal in SGS India Pvt. Ltd. v. Commissioner of Service Tax, Mumbai [2011 (24) S.T.R. 60 (Tri.-Mumbai)] which found approval of Hon ble High Court of Bombay. 7. We find that, in view of the contentions put forth by learned Authorized Representative for not acknowledging the applicability of the decision supra, we are called upon to elaborate the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit Rules, 2004. In the course of our determination, we may, perchance, answer the larger aspect too because the ground of appeal canvassed by Revenue is that one of the ingredients of export of service in Rule 6A of Service Tax Rules, 1994 is that the service is not provided in India. 10. We take note that Rule 5 of Cenvat Credit Rules, 2004 has been substituted with effect from 1st April, 2012 and has, with effect from 1st July, 2012, incorporated a definition of export of services in lieu of the erstwhile reference to Export of Service Rules, 2005 in response to the compulsions arising from the new paradigm in taxation of services. The definition of export for the purpose of rebate of tax on exported services and on inputs/input services used in exported services, as well as for refund of accumulated credit of duty/tax on inputs/input services, have thus been aligned. 11. That the following ingredients which crystallize an activity as export of service for the purposes of Rule 6A of Service Tax Rules, 1994, viz., that provider of service is in taxable territory, that recipient is outside India, that the service is not in the negative list , that payment is received in convertibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the scope of Rule 4 must necessarily be scrutinized to ascertain if there was, indeed, legislative intent to deny acknowledgement as exporter to a certain category of service providers that were so privileged tell them. There is no dispute that the recipient of service is located outside India and that the consideration is received in foreign convertible currency. Yet, Revenue insists that performance of service is in India. A service is not necessarily a single, discrete, identifiable activity; on the contrary, it is a series of invisibles that cater to the needs of a recipient; it is upon the consumption of the service by the recipient that service is deemed to have become taxable. This has been so held by the Hon ble Supreme Court in All India Federation of Tax Practitioners v. Union of India others [2007 (7) S.T.R. 625 (S.C.)] below : 7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable on services provided within the country. It would appear from the expositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 66A of the Act. 5. We are not at all convinced by this argument of learned Counsel for the petitioner. The rules that have been framed by the Central Government make it absolutely clear that taxable service provided from outside India is liable to service-tax. In the example given by the learned Counsel for the petitioner, there is no question on the service of haircut having been received in India. The intent in Rule 4 to remedy out some specific situations that would, otherwise, have enabled escapement from tax or leviability to tax where Rule 3 of Place of Provision of Services Rules, 2012 may not serve to confer jurisdiction becomes increasingly obvious. 15. Accordingly, we can infer that the location of performance of service in respect of goods is not an abstract, absolute expression for fastening tax liability on services that involve goods in some way; for that, Rule 3 would have sufficed. A contingency that is not amenable to Rule 3 has been foreseen and remedied by Rule 4 and in the process, the sovereign jurisdiction to tax is asseted. It is, therefore, not by the specific word or phrase in Rule 4(1) of Place of Provision of Services Rules, 2012 that the taxabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods. Consequently, the provisions of Rule 4(1) are not attracted and, in terms of Rule 6A of Service Tax Rules, 1994, the definition of export of services is applicable thus entitling the appellant to eligibility under Rule 5 of Cenvat Credit Rules, 2004. 18. By this elaboration, we have amplified our earlier decision in (re Sai Life Sciences Ltd.) that it is contrary to law to isolate an expression in a rule to deny the general principle built into all indirect tax statutes for exempting export of services from levy. Reiterating the consistent judicial stand, we hold the respondents to be entitled to refund of accumulated Cenvat credit. 19. Appeals of Revenue are dismissed. Cross-objections are also disposed of. In the case of Apotex Research Pvt. Ltd Vs. Commissioner Of C. Ex. S.T., Bangalore-I (Supra) similar view was taken by the division bench which is as under:- 5. We find that this Bench vide Final Order Nos. 21890-21891/2014, dated 1510-2014 has decided the issue of Export of Services following the decision of the Tribunal in the case of B.A. Research Ltd. (supra), the Bench observed as follows : However we find that the reliance of the appellant on the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by them. Thus, delivery of the report is an essential part of their service and the service is not complete till they deliver the report. The report is delivered outside India and the same is used outside India. These facts also fortify the views taken hereinabove that the service provided by the appellants was export of service and I am inclined to them such taxable service as export of service and therefore not taxable. 10. From the above provision it is clear that the said services came under Rule 3(1)(2) (sic) of the Rules. It is very much clear that the performance of the service is not complete until the testing and analysis report is delivered to its client. In the present case, when such reports were delivered to the clients outside India it amounts to taxable service partly performed outside India. The performance of testing and analysing has no value unless and until it is delivered to its client and the service is to be complete when such report is delivered to its client. Thus, delivery of report to its client is an essential part of the service report was delivered outside India and same was used outside India. This is not the disputed fact. We hold that the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice tax when such services are rendered to clients situated in India, when the services are rendered to clients abroad, assessee treats such services as export and does not pay service tax. 4. A showcause notice dated October 18, 2019 was issued to assessee proposing to deny benefits of export of services and a demand of Rs. 17,71,79,316/- was raised. The Commissioner of Central Tax passed an O-I-O confirming the demand and denied the benefit of export of services holding that the said services are within the taxable territory of India in terms of Rule 4 of Place of Provision of Service Rules, 2012. On appeal, CESTAT allowed assessee s appeal holding that place of provision of service is clearly outside India and assessee has satisfied the conditions required for treating the service as export of service. Feeling aggrieved, Revenue has preferred this appeal. 5. Smt. Preetha, for the Revenue, praying to allow the appeal submitted that : assessee receives samples from hospitals and research centres within India; PoPS Rules, provides that generally place of provision shall be the location of the service recipient, and if recipient is not available, then the place of provision will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has raised various grounds wherein it is categorically stated that the respondent authority has straight way rejected application on technical ground and has failed to assigned reasons. At the outset, we notice that the impugned order is a non-speaking order. Further, the respondent authority without giving any opportunity of hearing has straight way passed the impugned order on highly technical ground. We find that the respondent authority acted de hors the basic principles of natural justice. Hence, on the sole ground of violation of principles of natural justice, the writ petition is required to be allowed. 10. At this stage, we notice that by impugned order 2-12-2020, at Annexure-A, the Deputy State Tax Commissioner, Circle-2, Ahmedabad has solely rejected the application of writ applicant company on the ground that instead of online application seeking refund, the writ applicant has submitted manual/physical application. So far as rest of the contentions raised in the affidavit in reply file by the Principal Commissioner, such contentions questioning locus of the writ applicant to seek refund is first time raised before this Court. The same are not forming part of reasons ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a distinct person in accordance with Explanation 1 in Section 8. Location of the recipient of services has been defined in sub-section (14) of Section 2. Since this definition is also relevant, the same is quoted hereunder :- 2. location of the recipient of (14) services means, - (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient; From the above what is deducible is that location of the recipient of services would mean where a supply is received at a place of business for which registration has been obtained, the location of such place of business; where a supply is received at a place other than the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look into few relevant provisions of the Act. Section 2(84)(h) which reads thus : Section 2(84)(h) anybody corporate incorporated by or under the laws of a country outside India. Section 54(1) reads thus : Section 54 : Refund of tax. Any person claiming refund of any tax and interest, if any, - (1) paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed. Rule 89(1) of the Rules reads thus : Rule 89 : Application for refund of tax, interest, penalty, fees or any other amount. - (1) Any person, except the person covered under notification issued under Section 55, claiming refund of any tax, interest, penalty, fees or any other amount paid by him, other than refund of integrated tax paid on goods exported out of India, may file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Center notified by the Commissioner. Rule 97A of the Rules reads thus : Rule 97A : Manual filing and processing. - Notwithstanding anything contained in this Chapter in respect of any process or procedure prescribed herein, any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anual filing of the said application. 14. The Bombay High Court in the case of Laxmi Organic Industries Ltd. (supra) has explained the true purport of Rule 97A of the Rules referred to above in following words, we quote the relevant observations in Para 6, 7, 8, 9, 10 and 11. The origin of the impugned circular can be 6. traced to section 168 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act , for short), which empowers the J.V. Salunke, PS 2-WP.7861.2021 Central Board of Indirect Taxes and Customs (hereafter the Board , for short) to issue such orders, instructions or directions to the central tax officers as it may deem fit and thereupon all such officers and all other persons employed in the implementation of the CGST Act shall observe and follow such orders, instructions or directions. There can hardly be any dispute that the said Superintendent was under an obligation to follow the terms of the impugned circular. However, it is axiomatic that the said Superintendent is also equally bound by the CGST Act and the CGST Rules and could not have turned a blind eye to rule 97A of the CGST Rules. In our considered opinion, the said Superintendent failed to appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said application. If indeed the argument of Mr. Mishra that no application in any form other than online can be received and processed is accepted, rule 97A would be a dead letter and rendered redundant. Rule 97A cannot be construed in a manner so as to defeat the purpose of legislation. We, therefore, conclude that the impugned circular J.V. Salunke, PS 2-WP.7861.2021 would certainly be applicable to all applications filed electronically on the common portal, but the impugned circular cannot affect or control the statutory rule, i.e., rule 97A of the CGST Rules or derogate from it. The proposition of law laid down in 10. F.S. Enterprise (supra) that officers and all other persons employed in the institutions governed by the CGST Act and the CGST Rules are bound by instructions issued by the Board under section 168 of the CGST Act admits of no doubt. However, such decision did not lay down the law, as it could never have, that in a given case governed by a statutory rule the tax officers would be at liberty to elect and apply the orders, instructions or directions issued under section 168 of the CGST Act ignoring such statutory rule framed under section 164 thereof while di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es-integra. Accordingly, we are of the view that the activity of clinical trial on the drugs supplied by the foreign service recipient to the appellant amounts to export of service, hence, same is not liable to service tax. 5. Accordingly, we set aside the impugned order. Appeal is allowed with consequential relief. 11. In view of above judgment, we find that the issue is no longer res-integra as the same issue in the assessee s own case has been decided considering various precedent judgments, in their favour that the service of clinical trial provided on the drugs supplied by the foreign service recipient is export of service and is not taxable, therefore the activity in the present case is not liable to service tax. Therefore, the demand in the present assessee s appeals is not sustainable. 12. In the Revenue s appeals, the Revenue has sought to reject the refund claims on the same ground that service is not export of service. Since this Tribunal has already taken a view that the very same service is export of service therefore, Revenue s appeals are not sustainable hence the same are liable to be dismissed. 13. As a result, assessee s appeals are allowed with consequential reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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