TaxTMI 
TaxTMI 
2019 (6) TMI 572
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....assessee vide e-Challan dated 01.10.2014, against the aforesaid confirmed demand. However, the aforesaid service tax claimed to have been paid by the assessee will be subject to the verification of the relevant challans by the jurisdictional Assistant / Deputy Commissioner. 28.2 I also order recovery of interest, at the appropriate rate(s) as applicable during the relevant period, on the demand of service tax as confirmed at para 28.1 above, under the provisions of Section 75 ibid and further order appropriation of the amount of interest of Rs. 14,53,595/- since paid by the assessee vide challan Nos.00067, 00071 and 0072, all dated 30.10.2014, against the aforesaid interest liability. However, the aforesaid interest claimed to have been paid by the assessee will also be subject to the verification of the relevant challans by the jurisdictional Assistant / Deputy Commissioner. 28.3 I impose a penalty of Rs. 40,000/- (Rs. 10,000/- each for every half yearly return filed during the period from July 2012 to March 2014), for their failure to furnish correct details in the ST-3 returns filed, under the provisions of Section 77(2) of the Act, read with the provisions of ....
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....ion 68(1) of the Act read with Rule 6 of the Rules, during the period from 01.07.2012 to 31,03.2014. e) That the assessee are liable to Penalty under the provisions of Section 77(2) of the Act for contravening the provisions of Section 70(1) of the Act read with Rule 7 of the Rules." After summarizing his findings as above Commissioner disposed of the Show Cause Notice as per the order referred to in para 1, supra. 2.4 Aggrieved by the order of Commissioner appellants are in appeal before the tribunal. 3.1 Appellants have in their appeal after explaining the activities undertaken by them under Contract Research Agreement in respect of DMPK research studies and the manner of undertaking the said activities have assailed the impugned order stating that- a. The order is non speaking as it fails to consider and render findings in respect of various submissions made by them before the adjudicating authority. Thus relying on the decisions in case of Cyril Lasardo (Dead) Vs Juliana Maria Lasarado [2004 (7) SCC 431, para 11 &12] and Shukla & Brothers [2010 (254) ELT 6 (SC)] the order needs to be set aside on this account itself. b. The made submissions i....
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.... i. Since they are not liable to pay any service tax, there is no question for imposition of penalty or payment of interest. [Coolade Beverages Limited [2004) 172 ELT 451 (All)]. j. In the case where such complex interpretation of law is involved penalty should not imposed as held in the following decisions: • Sarup Tanneries Limited [2005 (184) ELT 217 (T)] • Explicit Trading [2004 (169) ELT 205 (T)] • Goyal M G Gases Ltd [2004 (168) ELT 369 (T)] • Kathuria Portfolios [2003 (158) ELT 355 (T)] • Goenka Woolen Mills [2001 (135) ELT 873 (T)] k. They were under bonafide belief that service tax was not payable by them and hence they had not paid the tax. In such a situation when their bonafides are clearly established penalty should have not been imposed on them in view of the decisions in case of Flyingman Air Courier (P) Ltd [2004 (170) ELT 417 (T)] and Gamma Consultancy [2006 (4) STR 591 (T)]. l. In case of Vinay Bele & Associates [2008 (9) STR 350 (Bom)] & Ashish Patil [2008 (10) STR 8 (Bom)] it has been held that penalty under section 76, 77 & 78 are not mandatory in view of section 80. ....
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....red in respect of period 01.03.2003 to 11.11.2003, before issue of exemption in respect of export of services on the ground that export of service is always free. d. Issue under consideration of tribunal in case of Advinus Therapeutics Ltd was in respect of Refund under Rule 5 of CENVAT Credit Rules, 2004 read with Rule 6A of Service Tax Rules, 1994. In para 16 and 17 it has been observed that Rule 4 of POPS is not applicable in situation where there is alteration in form in which it was made available to service provider. This observation made by the tribunal is in accordance with the Rules. e. In case of Star India Pvt Ltd [2015 (38) STR 884 (T-Mum)] it has been held that merely because payment was received in foreign currency cannot be determinant for liability/ non liability to service tax. 5.1 We have considered the submissions made in appeal, during course of arguments along with the impugned order. 5.2 Para 1.2 to 1.4, 2.1, 2.6, 2.8, para L on page 29 and para P on page 33 of the Appeal filed by the Appellant are reproduced below: "1.2 The appellants are interalia engaged in integrated drug discovery and development of drugs. The drug discove....
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....e Export of Service Rules, 2005 and the recipient of the service i.e. the foreign clients are located abroad, the appellants is claiming export of service and not paying service tax on the amounts received by them from foreign clients. L. The DMPK study of drugs cannot be regarded as a test undertaken on goods sent by the service recipient. In the present case, innovator samples of NCE are sent by the clients located outside India. These NCE are administered to rats during this study and accordingly, the test reports are prepared and sent to the client. This DMPK study services cannot be said that the activity of testing is being performed on the drugs (NCE). In this example, the above drugs are administered to the rats to determine their efficacy and safety level. P. The (NCE) powder provided by the customer has to be formulated in a suitable vehicle so that it can be given to animals at suitable dose without causing any harm to conduct DMPK studies. The DMPK studies are conducted on the formulation of NCE prepared by the appellant. Without the appellants preparing the formulation of NCE the study cannot be conducted. The formulation preparation requires extensiv....
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....vided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service in order to provide the service: Provided that when such services are provided from a remote location by way of electronic means the place of provision shall be the location where goods are situated at the time of provision of service: Provided further that this sub-rule shall not apply in the case of a service provided in respect of goods that are temporarily imported into India for repairs, reconditioning or reengineering for re-export, subject to conditions as may be specified in this regard. (b) .............. 14. Order of application of rules.- Notwithstanding anything stated in any rule, where the provision of a service is, prima facie, determinable in terms of more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration. 5.5 Rule 6A of Service Tax Rules, 1994 read as follows: a. 6A. Export of services.- (1) The provision of any service provided or a....
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....will be required to report the test results through online medium to the customers. The applicant will be charging consideration from the customers on project to project basis. The above activities form part of the main activity of providing research assistance services to the customers and would not be provided in isolation. However, the activities of Bio-Statistics & Programming and Compliance services may be provided independently. 3. The present application is being filed for a definitive ruling on the following questions : Whether the proposed activities of undertaking Clinical Research and Clinical Pharmacology by the applicant are taxable under the Act in light of Rule 3 of the Place of Provision of Services (POP) Rules, 2012 as the applicant renders the said services to its customers and the place of provision is located outside India? 4. Applicant inter alia submits that since Rules 5 to 12 are not applicable to the applicant's case, the two rules which are to be considered are Rule 4 and Rule 3; that since the scope of proposed activities to be carried out by the applicant are research based advisory services and are neither related to (a) goods....
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....ase before us, if proposed services are covered by Rule 4, then Rule 3 shall not be applicable. 7. Relevant portion of Rule 4 of POP Rules is reproduced as under : "Rule 4. Performance based services. - ................." 8. Applicant submits that a reading of the provisions of Rule 4 provides that the conditions which are required to be fulfilled for the place of provision of services is the place where the services are performed, are as under :- i. Where the services are performed with respect to goods, the said goods should be physically made available to the service provider; ii. Where the services are performed in the ordinary course of business, the said service should require physical presence of the service recipient or his representative; that the activities of the applicant are not with respect to any goods and are not provided in presence of the offshore customers and therefore, the activities of the applicant will not be covered under Rule 4. 9. It is observed from the above referred Rule 4(a) ibid with respect to this case that the place of provision shall be the location where services are actually perform....
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....ble objects or things that can be touched, felt or possessed. Examples of such services are repair, reconditioning, or any other work on goods (not amounting to manufacture), storage and warehousing, courier service, cargo handling service (loading, unloading, packaging or unpacking of cargo), technical testing/inspection/certification/analysis of goods, dry cleaning etc. It will not cover services where the supply of goods by the receiver is not material to the rendering of the service e.g. where a consultancy report commissioned by a person is given on a pen drive belonging to the customer. Similarly, provision of a market research service to a manufacturing firm for a consumer product (say, a new detergent) will not fall in this category, even if the market research firm is given say, 1000 nos. of 1 kilogram packets of the product by the manufacturer, to carry for door-to-door surveys. 13. Based on above, applicant submits that Rule 4 only contemplates a situation where the goods are temporarily handed over to service provider for servicing and returned after servicing; that their interpretation is supported by the example of detergent packets distributed and feedback b....
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....ailable to the applicant (i.e. service provider) by the service receiver located outside India, such service shall be covered under Rule 4(a) ibid. Clinical Research carried out in respect of formulations received from the service receiver, that are consumed in the process of clinical testing, which are necessary for carrying out other processes of Clinical Research, would also be covered under this category, as these services will be provided in respect of formulation. (b) Service relating to Clinical Research provided on stand-alone basis - During personal hearing on 22-7-2016, applicant submitted that services relating to Clinical Pharmacology and Clinical Research would be provided on stand-alone basis and separate invoices would be issued for each service. Applicant submits that the Clinical Research service proposed to be undertaken by the applicant can also not be considered to be service provided in the physical presence of an individual, represented either as the service receiver or a person acting on behalf of the receiver in terms of Rule 4(b) ibid; that the volunteers which are identified, selected and gathered by the applicant are in India and such volunteers ....
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....e materials to conduct these studies; that in cases of stand-alone DMPK services, the compounds are exclusively made by the clients based upon the activity as a part of drug discovery . process, for which the clients have exclusive rights and these will not be available in the market for sourcing. Further, I also find that Shri A. Srinivasa Raju, Director (Corporate Affairs) of the assessee company, in his statement dated 26-08-2014, has, interealia, admitted that the stand-alone DMPK services, wherever client provides the compounds and asks them to perform DMPK studies, may fall under Rule 4 of the PPS Rules and hence service tax may be applicable on these services only and that they would pay service tax in respect of these stand-alone DMPK services w.e.f. 01-07- 2012. 23.1.4 From the above, I find that the assessee have agreed to the fact that in the case of stand-alone DMPK services, the goods / compounds are supplied by the clients for carrying out In-Vitro & In-Vivo studies and thereafter the outcome of the research effort is transferred to their clients located abroad. This is further evidenced by the copies of Invoices and Purchase Orders/Quote Estimates submitted ....
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....nds have come into the possession of the assessee only temporarily, for the purpose of research study and submitting the analysis report thereof. Further, return of the goods/ compounds to the client after the service is provided, is not sine qua non for these services to be covered under Rule 4 of the PPS Rules, because, contrary to the interpretation of the assessee, no such statutory stipulation exists nor does the Guidance Note support this view. In fact, I find that the clients would give certain goods/ samples for testing/inspection/certification/analysis', the intended purpose of which would be the testing/inspection or analysis report relating to these goods/ samples as regards their features/ characteristics, etc. The intention that these goods/ samples would be returned back to them would not be the paramount in the minds of the clients behind offering these goods/samples for such analysis. Further, the assessee's contention that during the course of provision of services, certain goods locally procured by them are also used along with the goods/compounds submitted by the clients, would have no bearing on this case as far as the goods / compounds made available by....
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....form. The exemplification in the 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....
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....t be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well-settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute. 26. Justice G.P. Singh, in his treatise 'Principles of Statutory Interpretation' (14th ed. 2016 p.-879) after referring to Re, Micklethwait, (1885) 11 Ex 452; Partington v. A.G., (1869) LR 4 HL 100; Rajasthan Rajya Sahakari Spinning & Ginning Mills Federation Ltd. v. Deputy CIT, Jaipur, (2014) 11 SCC 672, State Bank of Travancore v. Commissioner of Income Tax, (1986) 2 SCC 11 and Cape Brandy Syndicate v. IRC, (1921) 1 KB 64, summed up the law in the following manner - "A taxing statute is to be strictly construed. The we....
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....ustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity [Mapp v. Oram, (1969) 3 All ER 215]. It has also been said that if taxing provision is "so wanting in clarity that no meaning is reasonably clear, the Courts will be unable to regard it as of any effect [IRC v. Ross and Coutler, (1948) 1 All ER 616]." Further elaborating on this aspect, the Learned author stated as follows : "Therefore, if the words used are ambiguous and reasonable open to two interpretations benefit of interpretation is given to the subject [Express Mill v. Municipal Committee, Wardha, AIR 1958 SC 341]. If the Legislature fails to express itself clearly and the taxpayer escapes by not being brought within the letter of the law, no question of unjustness as such arises [CIT v. Jalgaon Electric Supply Co., AIR 1960 SC 1182]. But equitable considerations are not relevant in construing a taxing statute, [CIT, W.B. v. Central India Industries, AIR 1972 SC 397], and similarly logic or reason cannot be of much avail in interpreting a taxing statute [Azam Jha v. Expenditure Tax Officer, Hyderabad, AIR 1972 SC 2319]. It is well-settled that i....
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....ion 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the Official Gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable u/s. 11AB are declared. The second aspect would be whether there is any discretion not to charge the interest u/s. 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied/short paid/non-levied/unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from the opening part of sub-section (1) of Section 11, which runs thus : "Where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub-section....