TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 148
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....er under Section 73 both bearing reference no. ZD290324079816V dated 28.03.2024 issued by the Respondent No. 1 (Annexure B1 and B2). iv. Pass such other or further order as this Hon'ble Court may deem fit in the facts and circumstances of the case, and in the interests of justice and equity." 2. Heard the learned Senior counsel for the petitioner, learned AGA for the respondents and perused the material on record. 3. Learned Senior counsel for the petitioner invites my attention to the impugned order passed by the Adjudicating Authority at Annexure-B dated 28.03.2024 and the impugned order passed by the Appellate Authority in order to point out that despite having come to the conclusion that the petitioner was involved in the activity of conducting clinical trials, which would amount to export of services and in terms of Section 13(2) of the IGST Act since the place of recipient of the services was situated outside the territory of India and Section 13(3)(a) of the IGST Act was not applicable and in view of the Notification No. 04/2019-Integrated Tax dated 30.09.2019 issued by the Central Government, respondent Nos. 1 and 2 have come to the erroneous conclusion that ....
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....o 'export of services' in pharmaceutical sector Ref: Association of Biotechnology Led Enterprises (ABLE) Pharma sector in India is made to pay GST of 18% on services given to foreign clients due to lack of clarify on place of supply of pharma R & D Services. Indian pharma companies are losing competitiveness as pharma R & D services given to foreign clients are not treated as exports. This has led to loss in export contracts as other countries service providers are cost effective. Govt is also losing export revenue of Rs 170 Crores per year. Recommendation: A notification may be issued under Section 13(13) of IGST Act, to notify that the place of supply of specific R & D services as listed in para 2 when provided by Indian pharma companies to foreign service recipients, shall be the place of effective use and enjoyment of a service i.e location of the service recipient. Analysis: Indian pharmaceutical industry supplies various kinds of R&D services to recipients located outside India against consideration received in foreign exchange. Some of the example of such services are integrated discovery and development services (involving research, development, prototy....
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....riments using rat and mice. 6 Safety Assessment/Toxicology Safety assessment involves evaluation of new chemical entities in laboratory research animal models to support filing of investigation al new drug and new drug application. Toxicoogy team analyses the potential toxicity of a drug to enable fast end effective drug development. 7 Stability Studies Stability studies are conducted to support formulation development and safety and efficacy of a new drug. It is also done to ascertain the quality, shelf life of the drug in their intended packaging configuration. 8 Bio Equivalence and Bio Availability Studies Bioequivalence is a term in pharmacokinetics used to assess the expected in vivo biological equivalence of two proprietary preparations of a drug. If two products are said to be bioequivalent it means that they would be expected to be, for all intents and purposes, the same. Bioavailability is a measurement of the rate and extent to which a therapeutically active chemical is absorbed from a drug product into the systemic circulation and becomes available at the site of action. 9 Clinical trials Every drug that is developed for human....
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....ice provider", under section 13(3)(a) of IGST Act, 2017. Education Guide of Service Tax released by CBEC answers the questions as below:- Services that are related to goods, and which require such goods to be made available to the service provider or a person acting on behalf of the service provider so that the service can be rendered, are covered here. The essential characteristic of a service to be covered under this rule is that the goods temporarily come into the physical possession or control of the service provider, and without this happening, the service cannot be rendered. Thus, the service involves movable 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, packing 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 ....
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....goods 'for any other treatment or process' without being put to use in India other than required for such treatment or process. Sample molecules used in pharma R&D activities undertaken by Indian pharma companies. Such sample molecules are not used in India for any other purpose. 11. Instead of tweaking IGST Act which may have implicaiton for place of supply of other intermediary services too, as there is provision under Section 13(13) of IGST Act which empowers the Central Government to notify any service or circumstances in which the place of supply shall be the place of supply of effective use or enjoyment of service in order to prevent double taxation or non-taxation of the supply of service, we may issue a notification under Section 13(13) of IGST Act, to notify the place of supply of specific R&D services as listed in para 2 when provided by Indian pharma companies to foreign service recipients, to be the place of effective use and enjoyment of a service i.e. location of the service recipient. 7. As can be seen from the aforesaid recommendations by the GST Council in its aforesaid meeting, it was recommended to issue a notification under Section 13(13) of the....
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....ndia, 1950, if the said provisions are construed so as to provide for the levy of tax under the Karnataka Tax on Luxuries Act, 1979, on the charges for facilities provided to patients admitted in Intensive Care Units; (v) declaring that the levy of tax under the provisions of the Karnataka Tax on Luxuries Act, 1979, on the charges for facilities provided to patients admitted in Intensive Care Units is ultra vires Article 14 and 21 of the Constitution of India, 1950; and (vi) pass such other or further orders as this Hon'ble Court may deem fit in the facts and circumstances of the case, and in the interests of justice and equity. In W.P.No.9378/2021: (i) stay the operation of the impugned reassessment order dated 31.03.2021 passed by the 1st Respondent for RC 544413134 under Sections 9(1)(b), 5-A(2-A) and 7of the Karnataka Tax on Luxuries Act, 1979, read with Rule 6(3) of the Karnataka Tax on Luxuries Rules, 1979 (Annexure 'A'); (ii) stay the operation of the impugned demand notice in Form VI dated 31.03.2021 for Regn. Certificate No. 544413134 issued by the 1st Respondent under the provisions of the Karnataka Tax on Luxuries Act, 1979 (A....
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....he Karnataka Tax on Luxuries Rules, 1979 (Annexure 'A'); (ii) quashing the impugned demand notice in Form VI dated 31.03.2021 for Regn. Certificate No.532412727 issued by the 1st Respondent under the provisions of the Karnataka Tax on Luxuries Act, 1979 (Annexure 'B'); (iii) quashing the impugned Clarification dated 02.07.2015 bearing No. KTL/CR-08/2013-14 issued by the 2nd Respondent under the provisions of the Karnataka Tax on Luxuries Act, 1979 (Annexure 'C'); (iv) declaring that Sections 3-E(1) and 2(1-C) of the Karnataka Tax on Luxuries Act, 1979, are ultra vires Article 246(3) read with Entry 62 of List II in Schedule VII to the Constitution of India, 1950, if the said provisions are construed so as to provide for the levy of tax under the Karnataka Tax on Luxuries Act, 1979, on the charges for facilities provided to patients admitted in Intensive Care Units and Neo-Natal Intensive Care Units; (v) declaring that the levy of tax under the provisions of the Karnataka Tax on Luxuries Act, 1979, on the charges for facilities provided to patients admitted in Intensive Care Units and Neo-Natal Intensive Care Units is ultra vires Articles 14 and 2....
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....uries Act, 1979 (Annexures C-1 and C-2), are ultra vires Article 246(3) read with Entry 62 of List II in Schedule VII to the Constitution of India, 1950, if the said provisions are construed so as to provide for the levy of tax on the charges for facilities provided to patients admitted in Intensive Care Units; (v) declaring that the levy of tax under the provisions of the Karnataka Tax on Luxuries Act, 1979, on the charges for facilities provided to patients admitted in Intensive Care Units is ultra vires Articles 14 and 21 of the Constitution of India, 1950; and (vi) pass such other or further orders as this Hon'ble Court may deem fit in the facts and circumstances of the case, and in the interests of justice and equity." 3. A perusal of the material on record will indicate that the petitioners are hospitals having Intensive Care Unit ('ICU' for short) facilities, comprising of exclusive / independent ICU units for its patients. On 25.03.2021, 20.12.2019, 23.03.2021, 20.12.2019, 05.03.2022, and 04.01.2022, the first respondent issued notice to the petitioners' hospital respectively proposing to levy luxury tax on ICU charges collected by the petitioners....
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.... it stood prior to amendment by Act 5/2016 with effect from 01.04.2016, which reads as under: ""There shall be levied and collected tax at the rate of 8% on the charges collected for luxuries provided in a hospital in a hospital in a room such as accommodation, air- conditioning, telephone, telephone calls, television, radio, music, extra beds and the like, where such charges are more than Rs. 1000/- per day per room." 6. By Act 5/2016 with effect from 01.04.2016, the aforesaid provision was amended to read as under: "3-E. Levy and collection of tax on luxury provided in a hospital.- [(1) There shall be levied and collected a tax at the rate of eight per cent on the charges collected for luxuries provided in a hospital in a room such as accommodation, air conditioning, telephone, telephone calls, television, radio, music, extra beds and the like, [other than facilities provide in a Intensive Care Unit (ICU)] where such charges are more than one thousand rupees per day per room.]" 7. The said amendment was preceded by the State Government Notification dated 20.01.2016, which also reads as under: NOTIFICATION Whereas Section 3-E of the ....
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....xt, it is relevant to state that it is trite law that any amendment / legislation, which merely clarifies, elucidates or declares an earlier existing provision would be retrospective as held by the Constitution Bench of the Apex Court in the case of COMMISSIONER OF INCOME TAX (CENTRAL)-I, NEW DELHI V. VATIKA TOWNSHIP PRIVATE LIMITED in (2015) 1 SCC 1, wherein it is held as under: "19.1. Dealing with the first question, the Court noted the contention of the assessee that Chapter XIV-B, which was inserted by the Finance Act, 1995 with effect from 1-7-1995 was a self-contained chapter as it lays down a special procedure for assessment of undisclosed income found during search for the "block period". It was argued by the assessee that this Chapter contains a charging section (Section 158-BA), a computation section (Section 158-BB), a procedural section for block assessment (Section 158-BC), limitation provision for completion of block assessment (Section 158-BE) and the provisions for imposition of interest and penalty (Section 158-BFA). It was also argued that the scheme of assessment of "undisclosed income" under Chapter XIV-B is different from the scheme of assessment of "t....
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....umptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then ex....
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....the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by outweighing factors. 32. Let us sharpen the discussion a little more. We may note that under certain circumstances, a particular amendment can be treated as clarificatory or declaratory in nature. Such statutory provisions are labelled as "declaratory statutes". The circumstances under which provisions can be termed as "declaratory statutes" are explained by Justice G.P. Singh [Principles of Statutory Interpretation, (13th Edn., LexisNexis Butterworths Wadhwa, Nagpur, 2012)] in the followin....
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....ourt in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas [AIR 1968 SC 1336 : (1968) 3 SCR 623], while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows : (AIR p. 1339, para 8) "8. ... The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from Section 115 of the Code of Civil Procedure, and the legislature has by the amending Act not attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act." 34. It would also be pertinent to mention that assessment creates a vested right and an assessee cannot be subjected to reassessment unless a provision to that effect inserted by amendment is either expressly or by necessary implication retrospective. (See CED v. M.A. Merchant [1989 Supp (1) SCC 499 : 1989 SCC (Tax) 404].) 35. We would also like to repr....
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....telephone calls, etc., where charges are more than Rs. 1000/- per room. However, pursuant to the Notification dated 20.01.2016 and the amendment to Section 3-E of the said Act of 1979, the said charging provision, which directed levy of luxury tax on charges collected from the hospital towards accommodation, air condition, etc., has been clarified by stating that the charges collected from patients admitted in ICU would be exempt; it follows there from while originally / free amendment, all facilities attached to a room / accommodation in hospital would be available to payment of luxury tax come on the amendment, merely clarifies / declares that the said liability to pay luxury tax would not apply to the patients admitted to ICU and charges collected in this regard by the hospitals. 10. Learned AGA submits that in the event the petitioners had already collected luxury tax along with ICU charges from the patients for the assessment year 2015-16, the question of granting any relief in favour of the petitioners would not arise in the facts and circumstances of the instant case. 11. It is also relevant to state that by way of an amendment, the phrase "other than facil....
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....larify and elucidate certain existing facts and situations and consequently, having regard to the specific observations made in the 37th GST Council Meeting, whereby it was resolved to clarify the tax liability in GST liability in relation to foreign recipients for R & D services provided by Indian pharmaceutical companies, the impugned notification at Annexure - G dated 30.09.2019 is clearly retrospective being clarificatory and elucidatory in nature and consequently, both the respondents clearly fell in error in coming to the conclusion that the said notification is prospective and not retrospective and would not be applicable for the period prior to 30.09.2019. It follows there from that if the notification dated 30.09.2019 is held construed and treated to be retrospective in nature, application and operation, the petitioner would be entitled to the benefit of the said notification and cannot be saddled with the liability to pay GST, as wrongly demanded by the respondents. 11. Under identical circumstances, the Apex Court in the case of Suchitra Components Ltd. v. Commissioner of Central Excise, Guntur reported in (2006) 12 SCC 452, has come to the conclusion that apart from ....