The Ahmadabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the fees paid by Cadila Pharmaceuticals Ltd (the appellant) to the United States Food and Drug Administration (USFDA) can be considered as service under the Finance Act (mention the year) and was leviable by the CST of Ahmedabad.
The appeal was filed by Cadila Pharmaceuticals Ltd to examine the issue regarding the legality of the order by the Commissioner of Service Tax of Ahmedabad demanding service tax for the amount paid to the USFDA for approval of medicaments. The main issue was whether the amount paid for the approval of medicament be treated as a service under the Finance Act and consequently liable to service tax on reverse charge basis under Section 66A of the Finance Act.
The counsel appearing on behalf of the appellant submitted the order by the adjudicating authority which stated that the fees paid to the USFDA are not against any service on the ground that it was a statutory fee paid to the Government of USA therefore no service was involved hence dropped service tax liability. The counsel further stated that the revenue filed the appeal before the commissioner (Appeals). However, whether the activity was a service or otherwise was not challenged. Therefore, the remand by the Commissioner (Appeals) is not legal and proper.
The Assistant Commissioner appeared on behalf of the revenue reiterated the findings of the impugned order and submitted that the entire case involved the taxability of the amount paid to USFDA as fees. Therefore, the issue of whether the activity was service or otherwise was a part of the overall dispute raised by the revenue. Accordingly, the Commissioner rightly remanded the matter to CESTAT.
The two-member bench consisting of Ramesh Nair (Judicial member) and CL Mahar (Technical member) stated that whether the activity was a service or otherwise depends on whether the USFDA should be treated as a Government in terms of ‘Negative List’ under Section 65B(37)of the Finance Act.
Therefore, the amount paid is taxable. Accordingly, the bench did not find any infirmity in the impugned order in the appeal whereby the matter was remanded to the Commissioner(Appeals). Therefore, the impugned order was upheld and the appeal was squashed.
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