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2019 (2) TMI 1567 - CESTAT HYDERABADClassification of service - place of supply of service - export or not - Scientific and technical consultancy service or works contract activity - developing seeds of new varieties and hybrids - process of multiplication of the hybrid seed or the variety - entire activity is done in India - Report is sent to overseas client - Held that:- The activities undertaken by the appellant form the heart and soul of the entire plant breeding programme which results in development of new varieties such seeds are the essence of modern agriculture and green revolution. These activities start from testing germplasm to cross pollination to developing varieties and testing them in agro climatic zones continuously for a period of 7 to 9 years to ascertain their performance in Indian conditions. The activity undertaken by the overseas client is accepting those reports and filing for necessary patents. He also provides guidance to the appellant on conducting the research. Under these circumstances, it is found that the appellant is only rendering scientific and technical consultancy services - there is also no force in the argument of the appellant that they are not a scientific or technical research institution or an organisation. The service is complete only when the reports are also sent to their client as per the agreement in Germany. Until the report is delivered the service is not complete and the appellant is not entitled to the consideration for the service. Therefore, in this particular case that the service by the appellant is rendered partly outside India and partly in India although the part rendered outside India is very small. In terms of Rule 3(1) of the Export of Services Rules such services should be treated as export of services - the services in question are delivered partly outside India and partly within India and the payment for the services is received in foreign exchange and hence these services should be treated as export of services and therefore they are not liable to service tax on these services. Amounts which the appellant collected from the farmers for providing such technical guidance under the head ‘scientific and technical consultancy service’ - Held that:- The appellant is providing guidance to farmers in cultivating crops to multiply the seeds of the variety so developed. The appellant himself buys the seeds so multiplied by the farmers and pays a price for that. In order to help the farmers multiply these seeds effectively the appellant provides guidance. Such guidance, in the field of agriculture is known as extension-education which is a branch of agricultural science which deals with transferring the knowhow to farmers. This does not involve any scientific or technical research but only in passing on know-how to the farmers about the agronomic practices to be followed and guiding them from time to time if there are any pest infestations, diseases etc. These services cannot be termed as scientific or technical consultancy services - demand set aside. The appellant is not liable to pay service tax on both the services rendered by them and the demands, interest as well as the penalties are liable to be set aside - appeal allowed - decided in favor of appellant.
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