The Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), allowed the appeal and held that service tax cannot be levied on clinical trials on drugs supplied by foreign client.
In this case, the appellant, Veeda Clinical Research P Limited, provided clinical study reports to its foreign client through email, courier, or the internet while performing services in India, and the same was found out after an audit of the appellant’s records. The goods provided by the foreign client were used for the clinical trials.
Service tax was not paid by the appellant on the amount shown under the heading ‘Export of Service’. The department is of the view that as the clinical study was carried out in India on the goods supplied by the foreign client, thus, the service of the appellant does not fall under the category of export of service in terms of Rule 4 of the place of provision of Service Rules, 2012.
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A show cause notice was issued by the adjudicating authority, who is the Principal Commissioner of Service Tax, Ahmedabad. The applicant, being aggrieved by the above order approached CESTAT for relief.
The Chartered Accountant appearing on behalf of the appellant, Vipul Khandhar, contended that the exclusion provided under Rule 4 of Place of Provision of Service Rules, 2012 is not applicable to goods in the present case and is applicable to goods such as machinery, and equipment, etc. He further submitted that in the present case, the goods are not significant as the main activity of the applicant is to analyze the drugs supplied by the service recipient and submit the report of the same.
The bench held that service tax cannot be charged on the appellant as the activity of clinical trial on the drugs supplied by the foreign client to the appellant amounts to the export of service.
The bench, comprising Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member), allowed the appeal in favor of the applicant and directed to set aside the impugned order.
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