TaxTMI 
TaxTMI 
2026 (3) TMI 1525
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....ndia. On thorough verification of records, invoices, purchase orders and other relevant information by the department, in course of the audit, it appeared that they were rendering TTA in their service division (CADEM) for their customers located outside India. It was also noted that for rendering the said services the appellants were receiving various drawings and designs in respect of compressors/welded roof panels and have been testing and analyzing the same for various parameters like material properties, stress/strain, modal analysis, spectrum analysis, drop test analysis and have been sending the analysis reports to their clients situated outside India. Based on further scrutiny of information furnished by the appellant, the department felt that the said service would fall under section 65(105)(zzzh) as 'Technical Testing and Analysis service' and accordingly, the demand was raised. It was also noted by the department that the said service was under the second category i.e., clause (ii) of Rule 3(1) of Export of Services Rules, 2005, which was shifted to the third category i.e., clause (iii) of Rule 3(1) w.e.f. 01.04.2011 and in view of the same, the services were not performa....
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.... rendering the service has to undertake testing or analysis of the products and submit his reports. He has also relied on the purchase order submitted by their client to come to the conclusion that it was not in the nature of consultancy service as they were also undertaking technical testing and analysis. He has gone through some of the invoices and purchase orders wherein it has been shown as 'Design Services for Stimulation of Draft test', 'Design Services analysis reports and drawings' etc., to come to the conclusion that they were not doing any consultancy service and were in fact undertaking technical testing and analysis of the product. Further, on the claim made by the appellant that the CADEM center was not providing any services in the nature of technical testing and analysis of any goods or material, the adjudicating authority held that the said affirmation is not borne by the facts of the case as discussed by him as the purchase order/invoice clearly show that they are undertaking technical testing and analysis of the products and that they have not adduced any evidence to show clearly that they are rendering consultancy services and that they have not produced any copy....
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.... that extended period of limitation has been provided by the law makers with the clear intention that if on account of fraud, willful misstatement or contravention of the act or Rules with an intent to evade payment of duty, the department can deprive him of his legal benefit and/or demand duty due to the government within a period of five years from the relevant date. He also denied the plea of waiving the penalty in terms of section 80 of the Finance Act, 1994 on the said ground by holding that there was no evidence to show that there was some reasonable cause because of which the service tax could not be paid. 6. Learned Advocate for the appellant has mainly contested that in this case they are not receiving any goods or material from their customers located abroad. They are basically receiving various drawings and designs in respect of compressors/welded roof panels through email electronically and the physical product itself was never provided by the client to the appellant nor tested upon by them. Thereafter, the appellant analyses the product in terms of various parameters set by the client on the computer itself with the help of various software installed in the computer....
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....reflect that physical goods were also received in the appellant's premises in relation to conducting of technical testing and analysis. He has invited our attention to purchase order placed by Zamil Air Conditioners dt.16.01.2008, where there is a clear indication that there was supply of 25 prototype base pan samples. Similarly, in the case of debit note issued in relation to invoice dt.22.08.2006 to M/s Vairex, there is an indication that physical goods were handled. While the learned Advocate has vehemently opposed the argument of the learned AR that in certain cases, physical goods have also been received and used in relation to testing and has submitted that while in some cases, the goods might have been received but the said goods were never got tested, per se, and a simulated models of the said goods were created using CADEM software and the same were thereafter analyzed, keeping in view the objective of the tests and the requirement of the customer. She has submitted certain documents relating to M/s Zamil Air Conditioners and M/s The TORO Company in support that they have not dealt with physical goods and have only used CADEM software to analyze the drawing and various ana....
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....es of this clause, "technical testing and analysis" includes testing and analysis undertaken for the purpose of clinical testing of drugs and formulations; but does not include testing or analysis for the purpose of determination of the nature of diseased condition, identification of a disease, prevention of any disease or disorder in human beings or animals;" From 16.05.2008 onwards: "(106) "technical testing and analysis" means any service in relation to physical, chemical, biological or any other scientific testing or analysis of goods or material or information technology software or any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals." Section 65(105)(g): "(105) "taxable service" means any service provided or to be provided (g) to any person, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering including the discipline of computer hardware engineering." 14. The first issue that needs to be decided in this matter is whether the definition of Technical Testing and Analysis c....
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.... of agreement entered between them and their client for so called consultancy services. We find that from the limited information furnished by the appellant, they have not been able to establish that their services were more in the nature of CES and not in the nature of TTAS. However, there is still no clarity as to whether the physical goods were actually used, as such, or were used only on some occasions for carrying out such testings or while offering any consultation, if any, based on said tests. It is obvious that they were given certain work seeking certain technical opinion, advice, etc., and it is also apparent from some of the specimen reports submitted by them in relation to the work performed by them. Therefore, while department is proposing classification under TTAS, for which one of the essential ingredients would be testing on physical goods, the appellants are clearing it under CES, for which there has to be a technical advice or consultancy as the core of the service provided. While all the relevant facts could be culled out of invoices, purchase orders, test reports, etc., for the relevant period, the adjudicating authority has brushed aside the contention of the a....