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TMI Blog2013 (9) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Jubilant Biosys Ltd. are 100% EOUs of service sector and in terms of their agreements with overseas clients provide the service of scientific and technology consultancy taxable under Section 65(105)(za) of the Finance Act, 1999. While the appellant unit develops the process for synthesis of the drug molecules, M/s. Jubilant Biosys Ltd. conduct research on biological properties and the information regarding the synthesis of the molecule and its therapeutic value Biological properties is communicated to the offshore clients. The appellant in course of developing the process for chemical synthesis of drug molecules, manufacture drug on laboratory scale which according to them is sent either directly or through M/s. Jubilant Biosys Ltd. to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of scientific and technical consultancy covered by Section 65(105)(za) to Finance Act, 1994 to M/s. Jubilant Biosys Ltd., Bangalore and that the same does not constitute export of services under Export of Services Rules, 2005, confirmed the service tax demand of Rs. 2,94,80,000/- against the appellant along with interest and besides this imposed penalty of equal amount on them under Section 78 ibid. 1.3 Against the above order of the Commissioner, this appeal has been filed along with stay application. 2. Heard both sides in respect of stay application. 3. Shri Devendra Sharma, Consultant, ld. Counsel for the appellant, pleaded that the service tax demand is in respect of the services regarding research on chemical synthesis of the drug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of those agreements of M/s. Jubilant Biosys Ltd. with their offshore clients where the appellant was not a party, the appellant have paid the service tax on the amount received by them for their services from M/s. Jubilant Biosys Ltd., that the present demand is only in respect of the cases where the appellant together with M/s. Jubilant Biosys, Bangalore had entered into an agreement with the offshore clients for research and development in respect of drug molecules, that while the appellant were to develop the process of synthesis of the drug molecules, M/s. Jubilant Biosys Ltd. were to conduct research on its biological properties, that for the purpose of receipt of payment for the services, it is only M/s. Jubilant Biosys Ltd., who w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder and drawing our attention to the Master Service Agreement entered into between the appellant and Jubilant Biosys Ltd., Bangalore, pleaded that the appellant have provided taxable services to M/s. Jubilant Biosys Ltd., Bangalore and the same cannot be treated as export of services. He also pleaded that the appellant have suppressed the relevant facts from the department and hence the extended period under proviso to Section 73(1) of the Finance Act, 1994 was correctly invoked and penalty under Section 78 ibid has been correctly imposed and, therefore, this is not the case for waiver from the requirement of pre-deposit. 5. We have considered the submissions from both the sides and perused the records. The undisputed facts are that while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jubilant Organosys Ltd. In this regard, the first two paragraph of the agreement are reproduced below :- "THIS RESEARCH SERVICE AGREEMENT ("Agreement") is made and entered into as of the 4th day of November, 2005, by and between Eli Lilly and Company, Lilly Corporate Centre, Indianapolis, IN46285, ("Lilly"), and JUBILANT BIOSYS LTD., Bangalore, India (together with its subsidiaries and affiliates, including Jubilant Chemsys Ltd., and Jubilant Organosys Ltd., "JUBILANT"). RECITALS WHEREAS Lilly is engaged in the discovery, development, manufacturing and marketing of pharmaceutical products; and WHEREAS, JUBILANT is engaged in the business of providing biology and chemoinformatics and related services; and WHEREAS, Lilly proposes to reta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie has been received by the overseas clients for the use in their business, the payment for which has been received in foreign currency, in our view, the service provided by the appellant has to be treated as an export of service and hence, in terms of Rule 4 of the Export of Services Rules, no service tax would be chargeable. Thus, prima facie, the impugned order does not appear to be sustainable and as such, the appellant have prima facie case in their favour. The requirement of pre-deposit of service tax demand, interest thereon and penalty is, therefore, waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal. Stay application is allowed.
(Order pronounced on...........) X X X X Extracts X X X X X X X X Extracts X X X X
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