TaxTMI 
TaxTMI 
2026 (9) TMI 417
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....hey were heard together at and are disposed of by this common Final Order. 2. The relevant facts are that CCRP is a Clinical Research Organisation ("CRO") based at Coimbatore. It provides contract research services to the pharmaceutical, biotechnology and medical device industries, including bio-pharmaceutical development, bio-assay development, preclinical and clinical research, clinical trial management and pharmacovigilance in relation to the testing and analysis of newly developed drugs on human participants. 3. As early as the year 2010, the Superintendent (Preventive), Coimbatore Commissionerate addressed letters to CCRP calling for particulars of its clinical research activities. It is not in dispute that CCRP responded to each of those letters and placed before the Department the entire nature and character of its business. No proceedings followed at that stage. 4. In the year 2014 investigation was conducted stating that intelligence gathered by the Service Tax Survey, Research and Intelligence Wing indicated that CCRP had rendered "Technical Testing and Analysis Service" without discharging the applicable Service Tax. CCRP was called upon to furnish audited balan....
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....by "a Clinical Research Organisation approved to conduct clinical trials by the Drugs Controller General of India." On this footing, CCRP took the position that its testing services stood exempt, and that it could not, in consequence, have collected Service Tax from its Sponsors, who were themselves not liable to bear such a levy. 8. Apart from reiterating its stand on exemption in its replies dated 06.05.2015 and 09.10.2015, CCRP also pointed to the correspondence of the year 2010 as showing that the Department was throughout aware of, and had inquired into, the very activity now sought to be taxed, so that no suppression could be attributed to it. While disputing liability generally, CCRP did not specifically contest the proposal to demand Rs. 2,19,395/- on the "Commercial Training or Coaching" head. 9. After due process of law, the Adjudicating Authority, vide the impugned order dated 30.06.2016, held that the extended period of limitation under the proviso to Section 73(1) of the Act was rightly invoked. The demand of Rs. 63,06,120/- towards Service Tax on "Technical Testing and Analytical Service" for the period 01.10.2009 to 31.07.2014, was confirmed on the finding that....
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....e Department and were actively inquired into by it as far back as 2010, several years before either show cause notice came to be issued. There was, in these circumstances, no suppression, and much less, any suppression accompanied by an intent to evade tax, of the kind indispensable to a valid invocation of the proviso to Section 73(1). 11. Ms. Anandalakshmi Ganeshram, learned Authorised Representative for the Respondent Department, supported the impugned order in its entirety. On the larger demand, she submitted that the plain language of the exemption notification requires the Clinical Research Organisation itself to be the approved entity, and that CCRP has at no stage produced any approval issued in its own name. The benefit of an exemption notification, she argued, must, particularly after the law declared by the Constitution Bench in Commissioner of Customs v. Dilip Kumar and Company, be construed strictly against the assessee. On the demand relating to Commercial Training or Coaching, she supported the reasoning of the Adjudicating Authority and submitted that the true nature and correct characterisation of the amount collected is a matter for appreciation of the evidence....
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....itself must be the holder of an approval issued by the DCGI. Finding that no such approval had been issued to CCRP, and that the approvals on record had instead been granted to the Sponsors, M/s. Ind-Swift Ltd., M/s. Issar Pharma (P) Ltd. and M/s. Accutest Research Laboratories (I) Pvt. Ltd., the Adjudicating Authority held the exemption to be inapplicable. The Ld. Authorised Representative has defended this reading by reference to the rule of strict construction of exemption notifications restated by the Constitution Bench in Commissioner of Cus (Import) Mumbai v. Dilip Kumar & Company, 2018 (361) ELT 577 (SC), where it was held that any ambiguity in the eligibility clause of an exemption notification must enure to the benefit of the Revenue and not the assessee. 16. We have given this submission our careful and anxious consideration, for it raises a question of some difficulty, and we would not wish to be understood as diluting the discipline that Dilip Kumar and Company enjoins upon this Tribunal. That discipline, however, applies where a notification is genuinely ambiguous, that is, where the text is reasonably capable of being read in more than one way and a Court is asked ....
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....ption of "a Clinical Research Organisation approved to conduct clinical trials by the Drugs Controller General of India" in Notification No. 11/2007-ST and, correspondingly, in Entry 7 of Notification No. 25/2012-ST. 19. Ld. A.R. relied on Commissioner of CGST, Central Excise & Service Tax, Indore v. Diabetes Thyroid Hormone Research Institute Pvt. Ltd., 2019 (24) GSTL 560 (Tri-Del), a decision that cuts the other way on its own facts. In the said decision the assessee claiming the exemption was, on the facts found, merely a trial site, being the institution at which the clinical trial was physically conducted, and not itself a Clinical Research Organisation. Since the CRO function, the Sponsor, the trial site and the investigator are separate and distinct roles in the scheme of a clinical trial, this Tribunal held that the exemption, being available only to the entity actually functioning as the CRO, could not be claimed by a participant occupying merely the trial-site role, and it set aside an order of the Commissioner (Appeals) that had held otherwise. That decision does not assist the Department here, for CCRP's role in the present case is not that of a trial site. CCRP ....
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..../- confirmed under this head cannot be sustained. The other decision relied on by the Ld. A.R. i.e. Synchron Research Services P. Ltd. is distinguishable in the facts of the case. 22. Coming to the second issue, we find that the show cause notice and the impugned order proceeded on the footing that the sum of Rs. 2,19,395/- represented a fee collected by CCRP for commercial training or coaching rendered by it as a business. The record, does not reveal any evidence relied upon by the Department in the SCN. However, the Adjudicating Authority has chosen to rely on a portion of the statement of the MD of the appellant, which to our mind discloses a materially different transaction. CCRP recruited certain employees for training and appointment on the condition that each such employee would serve CCRP for a minimum guaranteed period of one year. A deposit was taken from the employee at the time of such training and appointment, refundable on completion of that period. Where an employee resigned before completing the guaranteed period, the deposit already collected was retained, or an equivalent amount was recovered from the employee's dues. It is this recovery, and not any fee ch....
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....etion of a minimum agreed period of service, holding such amounts to be compensation for breach of the employment contract and not consideration for any agreement to tolerate an act or situation. This reasoning applies with equal force to a deposit taken from an employee and forfeited on premature resignation, which is compensation of precisely this character. For these reasons, the demand of Rs. 2,19,395/- confirmed on the head of Commercial Training or Coaching cannot be sustained on merits. Whether tested against the pre-negative list definition of commercial training or coaching service or against Section 66E(e) of the post-negative list regime, the amount in question is not consideration for any taxable service. It is compensation recovered from certain employees for breach of their undertaking to serve CCRP for a minimum guaranteed period, and stands on the same footing as the notice pay and bond forfeiture recoveries considered in GE T & D India Limited, The Lalit Mumbai and Cosmo First Limited. Whether this demand is also barred by limitation, along with the balance of the demand on Technical Testing and Analysis Service, is examined next. 25. As to the third issue, i.e.....
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.... that inquiry. A suppression contemplated by the proviso to Section 73(1) is a suppression from the Department. It is difficult to conceive how CCRP can be said to have suppressed from the Department a fact the Department had itself elicited and was already investigating several years in advance of the show cause notices. The most that can be said against CCRP is that it did not, of its own motion, register itself or file returns during the disputed period. That omission proceeded, as the record bears out, from a stated and consistently maintained belief that its testing services stood exempt under Notification No. 11/2007-ST, a belief resting on a tenable, if ultimately debatable, reading of that notification. An interpretation of a fiscal exemption that is open to genuine debate, honestly entertained and disclosed the moment the Department made inquiry, is the very antithesis of the deliberate, positive act of concealment that the law requires before the extraordinary period of five years can be pressed into service. We are accordingly unable to sustain the finding in the impugned order that the extended period was rightly invoked. 28. This finding disposes of the demand of Rs....