2009 (8) TMI 411 - AT - Service Tax

Technical Testing and Analysis Services- The applicants have entered into manufacturing agreement with customers and as per agreement they are required to manufacture the goods out of raw materials and packing materials supplied by the customers and clear the same on payment of duty. During the process of manufacture the customers required them to make in process analysis of semi-finished goods as well as final products so that the goods meet the Pharmacopoeial specifications as well as specifications provided by these customers. Department asked service tax as the services fall in the category of Technical testing and analysis services. Commissioner (Appeals) held that applicants are providing service of testing and also analysis while undertaking research work and that they are charging separately for testing and analysis and the value of the services provided are available. Hence the same are taxable under the category of technical and analysis services tribunal upheld the order of Commissioner (Appeals)

Summary

Issues involved:
Determining whether the services provided are research and development service or technical testing and analysis service.

Analysis:
The case involves a stay petition filed against an order confirming a demand for service tax, interest, and penalties. The applicants, engaged in manufacturing P&P medicaments, entered into agreements with customers for manufacturing goods and conducting in-process analysis to meet statutory requirements. The issue revolves around whether the services provided are research and development services, as claimed by the applicants, or technical testing and analysis services, as held by the Department.

The Commissioner (Appeals) upheld the demand for service tax and interest, reducing the penalty. The Commissioner found that the applicants were providing testing and analysis services separately and charging for them, making the services taxable under technical and analysis services. The applicants argued that the services were part of research and development activities, essential for product development, and not provided separately. They contended that they were not liable for service tax under scientific or technical consultancy services as they were not a Science or Technology Institution or Organization.

The case involves a detailed examination of the nature of services provided by the applicants and the classification under tax categories. The applicants highlighted the importance of testing in research and development work, emphasizing that testing was integral to determining the quality of developed products. The issue is complex, requiring further detailed arguments during the final hearing. The Tribunal directed the applicants to pre-deposit a sum towards service tax, with the balance amount subject to waiver pending appeal disposal.

In conclusion, the judgment delves into the distinction between research and development services and technical testing and analysis services, analyzing the nature of services provided by the applicants and their tax implications. The case highlights the importance of detailed examination and arguments to determine the tax liability accurately.