The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has observed that no service tax is payable on the activity of clinical trials on the drugs supplied by the foreign service recipient.
During the course of the audit of the appellant’s record, it was noticed that the appellant, Veeda Clinical Research P Limited had performed service in India and delivered a clinical study report to their foreign client through e-mail, courier, or website. The clinical study was carried out on the goods supplied by the service recipient. The appellant had not paid service tax on the amount shown under the heading Export of Service.
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The department opined that since the performance of service is in India and the clinical study was carried out on the goods supplied by the service recipient, therefore, 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. The show cause notice was issued.
The appellant contended that the exclusion provided under Rule 4 of the Place of Provision of Service Rules, 2012 is in respect of goods such as machinery and equipment and not the goods. The activity is to analyze the effect of the drugs supplied by the service recipient, and it is not a case of testing the drug; the objective of testing is the analysis of the effect of the drug and submission of the report of the same. Therefore, the goods are not significant. The clinical trial conducted on drugs was approved by the Drug Controller.
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The two member bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed that the activity of clinical trials on the drugs supplied by the foreign service recipient to the appellant amounts to export of service.
While quashing the order, the Tribunal found that the appellant had carried out the clinical study on the drugs supplied by the foreign-based service recipient. After carrying out the clinical study on the goods supplied by the service recipient, the technical report thereof was supplied to the service recipient. The service recipient is located outside India.
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The Bench held that the activity of clinical trial on the drugs supplied by the foreign service recipient to the appellant amounts to export of service, hence, same is not liable to service tax. Further set aside the impugned order and allowed the Appeal.
Vipul Khandar appeared on behalf of the appellant and Rajesh R. Kurup appeared on behalf of the appellant.
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