2020 (3) TMI 1276

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....ugs (Active Pharmaceutical Ingredients or API) and formulations in India. Manufacture of pharmaceutical requires a lot of Research & Development in terms of product development, testing, process improvements, cost reduction and meeting the legal certification requirements of various authorities such as Drugs Controller of India and his counterparts in other countries. 3. The appellant has created a single Integrated Product Development Organisation Unit (IPDO) at Bachupally to undertake research and development activities of their products. It caters to the requirements of various manufacturing units of the appellant. The appellant had taken CENVAT Credit on the services used in the IPDO. Revenue is of the opinion that the IPDO not being....

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....l Excise Registration Certificate and is not a manufacturing unit at all. It is his further finding that as an input service distributor, the appellant is not entitled to distribute the input service credit of service tax attributable service used in IPDO. He, therefore, ordered recovery of the CENVAT Credit availed by the appellant along with interest at applicable rates. He also imposed penalties under Rule 15 of CCR 2004 read with Section 76 & 78 of the Finance Act, 1994. 6. Ld. Counsel would submit that the short point to be decided if the R&D unit of the manufacturer of pharmaceuticals is located, not as a part of the manufacturing unit but is located elsewhere, whether the assessee can avail CENVAT Credit on the input services used....

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....ed at IPDO by the appellant is admissible. Therefore, the appeals may be rejected. 8. We have considered the arguments on both sides and perused the records. Pharmaceutical industry is a specialised industry distinct from other industries. Not only is the manufacturer required to manufacture the correct drug but is also required to make it of the requisite quality and standards. Further, a manufacturer is also required to obtain the necessary clearances and certifications from the authorities before the product can be marketed. Without any of these activities, the product cannot be manufactured and sold. Therefore, for a marketable pharmaceutical product to come into existence, the certifications and quality control are absolutely essent....