TaxTMI 
TaxTMI 
2026 (3) TMI 1247
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....he Revenue that the respondents have themselves conducted clinical trials as the same were conducted in India, the same did not qualify to be considered as export of services; accordingly, a show cause notice dated 21.05.2019, demanding service tax of Rs.2,69,77,242/- along with interest and penalty were issued to the respondents invoking extended period of limitation. Commissioner of CGST, Panchkula vide Order dated 07.06.2011 has dropped the proceeding initiated against the respondents. Being aggrieved by the order of the Commissioner, Revenue is in appeal. 2. Ms. Amita Gupta, learned Authorized Representative for the Revenue reiterates the grounds of appeal which are summarized as follows: • The terms of the agreement give a clear understanding that the respondents have been appointed by M/s Eli Lilly USA to conduct clinical trials through third noticee providers; the noticee entered into various agreements with respective hospitals and doctors; the respondents received permission from Drug Controller General of India; the samples of drugs imported by the respondents was for further supply to respective hospitals; the hospitals/ doctors submitted the report....
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.... the Drug Controller General of India clearly indicated that the clinical trial must be supervised by doctors; the hospitals which were carrying clinical trials on their request were charging service tax and paid the same to the Government. 5. Learned Counsel further submits that the show cause notice was issued on an incorrect understanding of the Drugs and Cosmetics Laws, the guidelines of which clearly define the terms "investigator" and "sponsor"; the sponsor is the company responsible for initiation, management, financing of the clinical trials done by the doctors/ hospital i.e. the investigator. He submits that Rule 4 of POPS Rules does not apply to the impugned issue as it is the doctors/ hospitals who conduct the clinical trials and not the respondents; the respondent merely initiates and finance the same; the hospitals pay applicable service tax and charge the same to the respondents; even if it is assumed that the clinical trials are conducted by the respondents, as the reports are sent to overseas company who is the beneficiary of the trials, the service constitutes export of service; this was correctly appreciated by the impugned order. He relies on Sai Life Sciences....
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....ospitals/ doctors and would enter into suitable agreements with them. Therefore, the agreements give a clear understanding that the respondent is only rendering support services to their masters in USA in getting the clinical trials/ tests conducted. We find that the Revenue wrongly raises the issue of intermediary and submits that the services rendered by the respondents are intermediary in nature. As we find that there is no tripartite agreement between the respondents, their masters in USA and third-party service providers and therefore, the services cannot be called intermediary services. We find that the services rendered by the respondents are nothing but support services to their masters in USA, in connection with getting clinical trials/ tests conducted in India. Therefore, the allegation of the Department that the respondents are rendering clinical trials service has no substance. At the same time, the arguments of the respondents that even if it is assumed that they have conducted clinical trials, the same should be considered as export of service in terms of Rule 3 of POPS Rules, is stretching the law beyond certain limits. This argument could be valid in the cases like ....
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.... clinical trial of new drugs shall be filed under Rule 122DA of the Rules ibid. The licensing authority grants permission to conduct clinical trials of new drugs under Rule 122DAC of the Rule, ibid. The noticee had applied to Directorate General of Health Services Contral Drugs Standard Control Organization (Global Clinical Trial Division), Govt. of India for conducting clinical trial who, vide their letter dated 12.02.2018, granted permission to conduct such clinical trials under supervision of investigators mentioned therein who conduct such clinical trial as per provisions of Drugs & Cosmetics Rules. I observe that Schedule Y to the Drugs and Cosmetics Rules, 1945 provided requirements and guidelines for permission to import and/or manufacture of new drugs for sale or to undertake clinical trials. Para 2 of the said Schedule Y pertains to clinical trial wherein it is mentioned that all trial Investigator(s) should possess appropriate qualifications, training and experience and should have access to such investigational and treatment facilities as are relevant to the proposed trial protocol. A qualified physician (or dentist, when appropriate) who is an investigator or a sub-inve....