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2016 (4) TMI 598 - CESTAT MUMBAI

2016 (4) TMI 598 - CESTAT MUMBAI - 2016 (43) S.T.R. 226 (Tri. - Mumbai) - Demand of Service tax - Scientific or technical consultancy service and business auxiliary service - providing material procurement assistance and technical knowhow as per agreement - Appellant contended that their activity is not covered by the definition of 'scientific or technical consultancy' - Held that:- the appellant has been procuring material for M/s. Doctors' Organic Chemicals Ltd under an agreement and the perio .....

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the impugned order is upheld only to the extent of ₹ 9,19,094/- for rendering 'business auxiliary service' with interest thereon. The demand of tax for rendering 'scientific or technical consultancy service' does not survive. Penalties are set aside - Appeal disposed of - Appeal No. ST/311/2012 - Final Order No. A/86620/2016-WZB/STB - Dated:- 23-9-2015 - M. V. Ravindran, Member (J) And C J Mathew, Member (T) For the Appellant : Shri L Badrinarayanan, Adv For the Respondent : Shri AK Goswa .....

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nical consultancy service' chargeable to service tax under section 65(105) (za) of Finance Act, 1994 to M/s Doctors' Organics Chemicals Ltd and M/s Bravo Healthcare ltd. The tax liability that has been confirmed for rendering this service to the two recipients was held to be ₹ 112,80,000/- and ₹ 34,71,924/- respectively. 3. The appellant also has apparently rendered 'business auxiliary service' chargeable to tax under section 65(105)(zzb) of Finance Act, 1994 to M/s D .....

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nowhow. It is also claimed that, in relation to services rendered to M/s Doctors' Organic Chemical Ltd which merged with the appellant in accordance with the rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act,1985, the tax liability after 1 st April 2007 cannot arise as it would be tantamount to taxing service rendered to itself. 5. Learned Counsel for appellant placed reliance on the definitions of the two services to claim exclusion and cited the decisions o .....

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sions. It was also contended that the takeover of M/s Doctors' Organic Chemicals Ltd was a consequence of conversion of the royalty amount unpaid into shares and hence, in accordance with section 67 of Finance Act, 1994, the value of the company taken over is taxable as gross receipts for rendering the service. 7. We observe that the original authority did not have the benefit of the decisions of this Tribunal supra cited on behalf of the appellant. In re Just Textiles Ltd., the bench held t .....

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nd conditions of the agreement under which the brand name and formulae are transferred t M/s Dhariwal Industries Ltd., we find that the demand under 'scientific and technical service' is not sustainable hence set aside.' 9. Following the finding of the Tribnal in re Just Textiles Ltd and Modi-Mundipharma Pvt Ltd. v. Commissioner of Central Excise Meerut = 2009-TIOL-968-CESTAT-DEL, it was held in re Universal Pharmacy that the appellant, being a commercial enterprise, is not a scienti .....

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opran Ltd (supra) The relevant paragraphs are reproduced….. 5…..In the result, the argument of the counsel that the service rendered by the appellant-company to Cadila under the relevant agreements cannot constitute "scientific or technical consultancy" as defined under section 65 of Finance Act, 1994 merits acceptance. This argument also stands fortified by the view taken in Matrix Laboratories case wherein it was held that "scientific or technical consultancy" .....

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Act, 1994 that caused Revenue to initiate and adjudicate the tax demand. After all, there is no sphere of human activity that is unconnected with science; and there is no industrial activity that can be divorced from technology. If that were the intent, considering the scope and reach of science and technology, most of the taxable services in section 65(105) did not have to be enumerated. The error lies in not assigning due importance to section 65(92) of Finance Act, 1994. 12. One of the imper .....

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esearch is most visible as capital goods and production processes. It is not improbable that, in the early stages of industry, the entire gamut of activities commencing with scientific research and proceeding through design and development to marketing and customer service were undertaken in the same business organization. Economic viability and market scale, however, render it commercially prudent to outsource those activities that are, strictly speaking, outside the core competency of any orga .....

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