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2016 (9) TMI 143 - AUTHORITY FOR ADVANCE RULINGS

2016 (9) TMI 143 - AUTHORITY FOR ADVANCE RULINGS - 2017 (49) S.T.R. 114 (A. A. R.) - Taxability – activity of clinical trials of the drugs of the customers situated outside India on volunteers in India – Rule 3 of the Place of Provision of services (POP) Rules, 2012 - Held that: - It is noticed that applicant’s proposed service of Clinical Pharmacology is study carried out for generic drugs. Further, study is proposed to be undertaken using formulations in the form of tablets, capsules, gels spr .....

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(POP) Rules, 2012, as the services are proposed to be provided in respect of goods that are required to be made physically available by the service receiver to the service provider (applicant). - Further, Clinical Research service provided in respect of goods that are required to be made physically available by the service receiver to the service provider (applicant) are also taxable under the Act in light of Rule 4 of the Place of Provision of Services (POP) Rules, 2012. - However, w .....

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44/ST-I/ 27 /2016 in Application No. AAR/44/ST-1/13/2015 - Dated:- 12-7-2016 - V.S. Sirpurkar, Shri S.S.Rana and Shri R.S.Shukla, JJ. For The Appellant : Sh. Tarun Gulati, Sh. Kishore Kunal, Sh. Manish Rastogi For The Department : Shri Ranjan Khanna (AR) Ruling M/s Steps Therapeutics Limited (hereinafter also referred to as applicant) is in the process of setting up its business of Contract Research Organization whereby, the applicant will be establishing, developing and carrying on research in .....

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contracts with various customers located outside India. The agreement for the proposed research services and clinical trials to be conducted by the applicant, provides that the following heads of service will be rendered by the applicant to its customers:- i. Clinical Pharmacology: The Service involves Bio-equivalence and Bio-availability clinical studies (studies carried out for generic drugs) which includes fasting and fed conditions, single and multiple dose in healthy subjects, drug-drug in .....

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service which includes serving as the primary resources and point of communication for sponsor/project team, undertaking study/site feasibility assessment, updating the sponsor and participation in telecom; b) Regulatory Affairs: Assistance in regulatory submissions at all phases of drug development and obtaining approvals from DCGI, DGFT and ICMR including approvals for conduct of clinical trials in India, for importing test drug and for exporting biological samples; c) Medical Writing: Assista .....

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ase audit, study document reviews. 2. In terms of the sample Agreement, the applicant will be undertaking clinical trials of the drugs of the customers situated outside India on volunteers in India. The said volunteers will be given dosages of the drug as prescribed by the customers and medical professionals and thereafter, the applicant will be conducting screening of such volunteers wherein the volunteers are kept under observation and their blood samples are tested for identification of vario .....

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ervices may be provided independently. 3. The present application is being filed for a definitive ruling on the following questions: Whether the proposed activities of undertaking Clinical Research and Clinical Pharmacology by the Applicant are taxable under the Act in light of Rule 3 of the Place of Provision of services (POP) Rules, 2012 as the applicant renders the said services to its customers and the place of provision is located outside India? 4. Applicant inter-alia submits that since Ru .....

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utionary or performance based service as envisaged in Rule 4 of POP Rules and therefore, the said services are not covered under Rule 4. 5. Revenue submits that in terms of Rule 4(a) of POP Rules, the essential ingredient to levy Service Tax on any service is the location, where the service is provided in respect of goods required to be made physically available by the recipient of service to the provider of service. Further, in terms of Rule 6A (1) (d) of the Service Tax Rules, 1994, any servic .....

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pplicant, the service provider, in India and location of actual performance of services is the premises of the applicant. Thereafter, only the report is being sent to the service recipient. As the said samples are entirely available in India either provided by the foreign customer or otherwise, the provisions of Rule 4(a) of POP Rules are aptly applicable to the instant case. Further the fact of location of actual performance of service also confirms the applicability of Rule 4 (a) of POP Rules. .....

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f more than one rule, it shall be determined in accordance with the rule that occurs later among the rules that merit equal consideration. Therefore, in the case before us, if proposed services are covered by Rule 4, then Rule 3 shall not be applicable. 7. Relevant portion of Rule 4 of POP Rules is reproduced as under: Rule 4- Performance based services: - The place of provision of following services shall be the location where the services are actually performed, namely:- (a) services provided .....

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a reading of the provisions of Rule 4 provides that the conditions which are required to fulfilled for the place of provision of services is the place where the services are performed, are as under:- i. Where the services are performed with respect to goods, the said goods should be physically made available to the service provider; ii. Where the services are performed in the ordinary course of business, the said service should require physical presence of the service recipient or his represent .....

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by the recipient of service to the provider of service. 10. It is noticed that applicant s proposed service of Clinical Pharmacology is study carried out for generic drugs. Further, study is proposed to be undertaken using formulations in the form of tablets, capsules, gels sprinkles, syrups, sprays, inhalers etc. provided by applicant s customers located outside India, on eligible volunteers in India. Therefore, it is clear that the formulations in various forms (goods) shall be provided by ap .....

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es, it is mandatory that the services are provisioned qua the specific goods and not class thereof. It is observed that the language of said Rule 4 (a) do not state that services provided be in respect specific goods. Therefore, the contention of the applicant is not correct. 12. Further, applicant placed reliance on paragraph 5.4.1 of the Educational Guide published by TRU, which is one of the Wings under Central Board of Excise & Customs (CBEC). Said paragraph is reproduced as under: 5.4 R .....

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this rule is that is goods temporarily come into the physical possession or control of the service provider, and without this happening, the service cannot be rendered. Thus, the service involves movable objects or things that can be touched, felt or possessed. Examples of such services are repair, reconditioning, or any other work on goods (not amounting to manufacture), storage and warehousing, courier service, cargo handling service (loading, unloading, packaging or unpacking of cargo), techn .....

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1000 nos. of 1 kilogram packets of the product by the manufacturer, to carry for door-to-door surveys. 13. Based on above, applicant submits that Rule 4 only contemplates a situation where the goods are temporarily handed over to service provider for servicing and returned after servicing; that their interpretation is supported by the example of detergent packets distributed and feedback by such prospective customers are not said to be covered by Rule 4. It is to be observed that the Education G .....

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f formulation by the applicant for the purpose of clinical trials is crucial to rendering of services. Therefore, service relating to Clinical Pharmacology will be covered under Rule 4(a) ibid, even as per Education Guide relied upon by the applicant. It is noticed that paragraph 1.2 of Education Guide clarifies that it is neither a Departmental Circular nor a manual of instructions issued by CBEC. Further, it states that it does not command the required legal backing to be binding on either sid .....

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ubmitted that 2 services proposed to be provided by him i.e. Clinical Pharmacology and Clinical Research, would be on stand-alone services, for which separate invoices would be issued and Clinical Research service cannot be considered as service under Rule 4(b) ibid, as same is not provided in the presence of service receiver or a person acting on behalf of service receiver. 15. It is observed from the application submitted by the applicant that he would be charging consideration from the custom .....

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s, Medical Writing, Project Monitoring, Bio-Statistics and Programming and Compliance is carried out in respect of formulations that are required to be made physically available to the applicant (i.e. service provider) by the service receiver located outside India, such service shall be covered under Rule 4 (a) ibid. Clinical Research carried out in respect of formulations received from the service receiver, that are consumed in the process or clinical testing, which are necessary for carrying-o .....

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posed to be undertaken by the applicant can also not be considered to be service provided in the physical presence of an individual, represented either as the service receiver or a person acting on behalf of the receiver in terms of Rule 4 (b) ibid; that the volunteers which are identified, selected and gathered by the applicant are in India and such volunteers having nothing to do with the Drug Company i.e. the service recipient, and therefore the said volunteers cannot be said to be acting on .....

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