2026 (3) TMI 1247 - AT - Service Tax

Clinical trial support service, not intermediary or taxable trial service, where the respondent only arranged and monitored studies.

The respondent's work connected with clinical trials in India was treated as support service for the overseas principal, not as taxable clinical trial ... Export of services - Nature of service - activity of trading and import of pharmaceuticals - clinical trials - Intermediary services. Clinical trial support services - Nature of service - Intermediary services - Export of services - HELD THAT: - The Tribunal found from the agreement that the respondent had no human or infrastructural facilities to conduct clinical trials itself and was only required to identify hospitals and doctors, enter into arrangements with them, and provide support for getting the trials conducted. It noted that, under the regulatory permission, clinical trials were to be conducted by doctors or hospitals, and that the Department's case that the respondent itself rendered clinical trial service had no substance. The plea that the services were intermediary services was also rejected since there was no tripartite agreement between the respondent, its USA principal and the third-party service providers. The Tribunal therefore held that the respondent rendered only support services to its USA principal in connection with clinical trials conducted in India. Though the respondent's alternative contention that even self-conducted clinical trials would qualify as export under Rule 3 was not accepted as such, the appeal nevertheless failed because the very basis of the demand, namely that the respondent itself provided clinical trial service in India, was found unsustainable. [Paras 8, 10] The demand was held unsustainable as the respondent provided support services to its USA principal and not clinical trial services on its own; the Revenue's appeal was therefore dismissed. Final Conclusion: The Tribunal upheld the dropping of the proceedings and dismissed the Revenue's appeal. It held that the respondent merely facilitated and supported the conduct of clinical trials by hospitals and doctors for its USA principal, and did not itself render taxable clinical trial service in India. Issues: (i) Whether the respondent's activity in relation to clinical trials in India constituted clinical trial services or merely support services, and whether it could be treated as intermediary service or export of service.Analysis: The agreement and surrounding documents showed that the respondent did not itself conduct clinical trials, lacked the human and infrastructural capability to do so, and was engaged to identify hospitals and doctors, arrange and finance the studies, obtain regulatory permissions, and keep the overseas principal informed of the progress and reports. The clinical trials were actually performed by hospitals and doctors acting as investigators under the Drugs and Cosmetics Rules, 1945 and Schedule Y, while the respondent functioned as sponsor and support provider. There was no tripartite arrangement needed to characterise the activity as intermediary service. On these facts, the demand could not proceed on the footing that the respondent had rendered clinical trial services in India.Conclusion: The activity was held to be support service to the overseas principal and not intermediary service or taxable clinical trial service as alleged; the Revenue's appeal failed.