CESTAT, AHMEDABAD BENCH
Synchron
Research Services (P.) Ltd.
v.
Commissioner of Service Tax, Ahmedabad
Mrs. Archana Wadhwa,
Judicial Member
and M. Veeraiyan,
Technical Member
Order
No. S/106/WZB (Ahd.) of 2008
Application
No. ST/S/1320 of 2007
Appeal No. ST/192 of
2007
February 14, 2008
TECHNICAL TESTING AND ANALYSIS SERVICE
Section 65, read with section 86, of the
Finance Act, 1994 - Technical testing and analysis service - Assessee was engaged in activity of clinical research,
testing and analysis for various pharmaceutical companies - Revenue demanded
service tax from assessee under category of
‘Technical testing and analysis service’ - Commissioner relying upon
definition/literature from contents of a website concluded that testing of
drugs in any manner was included under head of ‘Technical testing and analysis
services’ and confirmed said demand - Assessee’s case
was that impugned order had been passed in violation of natural justice, as
contents of website relied upon by Commissioner had not been disclosed to it,
and that from 1-5-2006, amendment to section 65(106) by way of adding
Explanation states that technical testing analysis includes testing and
analysis undertaken for purpose of clinical testing of drugs and formulations,
and, therefore, services undertaken by it could not be brought under tax prior
to that date - Whether since Commissioner had relied on definition/literature
from contents of a website like referring to contents of a dictionary and
nothing was submitted by assessee to say that
contents of website were incorrect, there was prima facie no violation of
principles of natural justice by Commissioner - Held, yes - Whether definition
of services for ‘Technical testing and analysis’ as it existed prior to
1-5-2006 prima facie covered services undertaken by assessee
and Explanation inserted in section 65(106) is only clarificatory
in nature - Held, yes - Whether in such circumstances it could be said that assessee had not made a strong case for total waiver of
pre-deposit - Held, yes [Paras 7.4, 8, 9 and 10]
Section 83 of the Finance Act, 1994, read
with section 35F, of the Central Excise Act, 1944 - Application of certain provision
of Act 1 of 1944 - Whether pre-deposit of service tax is mandatory in terms of
section 35F unless same is waived partly or fully by appellate forum - Held,
yes [Para 7.3]
>> Facts
The assessee was
engaged in the activity of clinical research/testing and analysis for various
pharmaceutical companies. The revenue demanded service tax from the assessee under the category ‘Technical testing and analysis
services’. The Commissioner confirmed the demand relying upon the contents of a
website and concluded that any test of drugs in any manner was included under
the head of ‘Technical testing and analysis services’.
On application, the assessee
raised preliminary objection that the pre-deposit of service tax was not
mandatory before hearing appeals as section 35F of the Central Excise Act, 1944
applies only to cases where excisable goods are involved and since instant case
involved a service rendered, provision of section 35F could not be applied. The
assessee further contended that since the contents of
website relied upon by the Commissioner (Appeals) in arriving its conclusion
had not been disclosed to it, order had been passed in violation of natural
justice; and that from 1-5-2006, there was an amendment to section 65(106)
by way of adding Explanation which states that technical testing
analysis includes testing and analysis undertaken for the purpose of clinical
testing of drugs and formulations and, therefore, services undertaken by it
prior to that could not be brought under taxes.
>> Held
It could not be said that there was no need
for depositing the service tax confirmed prior to hearing of appeal. [
By Finance Act, 1944 which levies service tax
on services, the Parliament has made applicable certain provisions of the
Central Excise Act, 1944 which deal with levy of taxes on commodities. Section
35F is one such provision made applicable to service tax matters. It is to be
noted that the provisions of the 1944 Act, have been made applicable ‘so far as
may be, in relation to service tax as they apply in relation to a duty of
excise’. Section 35F, as far as its application to demand of excise duty and
imposition of penalty is concerned, it provides for pre-deposit of duty and
penalty before hearing the appeal unless it is specifically waived off. There
is an exception to this condition of pre-deposit requirement when the goods are
under the control of the excise authorities. The reason for the same is
obvious. The duty is on the goods. If the goods have been seized and
confiscated and are lying in the custody of the department without being
released or without release being taken, the question of pre-deposit of duty
confirmed will be doubly harsh and, therefore, the exception is made. While
applying such a provision to service tax matters, in the instant case where the
service had already been rendered and service charges had already been realized
by the service provider [service tax payable only at the time of realization],
it was akin to a situation where the assessee has
cleared the goods by paying central excise and duty is being demanded on such
clearances. Therefore, pre-deposit of service tax is mandatory in terms of
section 35F unless the same is waived partly or fully by the appellate forum. [
Prima facie, it could not be said that
there had been violation of principles of natural justice. The Commissioner had
relied on the definition/literature from contents of a website like referring
to the contents of a dictionary. He had also produced the entire text in the
order-in-original. He had relied on this material to support his decisions
which had been taken on other evidences. The assessee
was not able to submit that the reliance placed on the contents of the website
was not correct. [
The definition of the
services for ‘Technical testing and analysis’ as it existed prior to 1-5-2006, prima facie cover the services undertaken
by the assessee and the Explanation is only clarificatory in nature. Therefore, it had not made a strong case for
total waiver of pre-deposit as ordered by the Commissioner. [
The Tribunal in a case involving similarly
situated assessees had ordered pre-deposit of 40 per
cent of the duty confirmed against them vide Order No. S/1355-1356/WZB/AHD./2007, dated
30-11-2007. [
In view of the above, the assessee
was to be directed to deposit a part of the demand. [
Mihir Thakore,
P.P. Jadeja and Gaurav Mathur
for the Appellant. Sameer
Chitkara for the Respondent.
nn