Export of services treatment applied to breeding and product development work, supporting waiver of pre-deposit and stay of recovery.

Breeding and product development work performed in India for a foreign company, with results transmitted abroad and consideration received in foreign currency, was treated prima facie as export of services. The alleged imported technology was viewed as an independent transaction, not affecting that characterisation. On this basis, the demand relating to these services was not considered fit for pre-deposit at that stage, and waiver of pre-deposit with stay of recovery was granted for the service tax demand, connected penalties, education cess and interest.

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Issues: Whether the demand raised on breeding and product development services rendered to a foreign company was prima facie covered by the export of services regime, and whether waiver of pre-deposit and stay of recovery should be granted.

Analysis: The appellant had received crop seeds from the foreign company, carried out breeding and product development activities in India using its own personnel and resources, and transmitted the results to the foreign company for consideration received in foreign currency. On these facts, the activity was prima facie treated as export of services. The technology allegedly imported by the appellant was regarded as an independent transaction. In view of the materials placed, the demand relating to these services was not considered fit for pre-deposit at this stage.

Conclusion: Waiver of pre-deposit and stay of recovery were granted in respect of the demand relating to breeding and product development services, along with the connected penalties, balance service tax, education cess, and interest.

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