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The Commissioner. C&C. E, Hyderabad-III Versus M/s Avra laboratories Pvt. Ltd.

2016 (11) TMI 107 - CESTAT HYDERABAD

Classification of service - organic synthesis and related process research - classified under Scientific and Technical Consultancy (STC) service or Technical Testing and Analysis (TTA) service? - Section 65 (106) - Section 65 (105) (zzh) - Section 65 (105) (za) of the Finance Act, 1994 - Held that: - the assessee is required to synthesize chemical entities and submit monthly reports of the progress thereof. Merit is found in the departments' contention that these test reports are more about the .....

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the other hand, from the facts on offer, the assessee is only carrying out predominantly testing and analysis work - outsourced by GRUNENTHAL to them. The testing and analysis are primary protocol for carrying out the process research. This conclusion is borne out by the fact that chemicals Euro 150 per item will be additionally reimbursed to the assessee - the services carried out by the assessee are nothing but " technical testing and Analysis" services as defined at the material time in Sec-6 .....

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der Service Tax provisions, had undertaken organic synthesis and related process research for their client GRUNENTHAL, Germany and also to M/s UCL Business, London and declared such services as falling under Scientific and Technical Consultancy (STC) service. Show cause notice was issued to the appellants sought to classify their services under 'Technical Testing and Analysis' (TTA) service. 1.2 After due process of law, Original authority vide Order dated 23-06-2011, confirmed the class .....

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er the guidance of their clients. The activity results in creation of sample compound. The entire validity of service depends wholly on the Analytical testing of the resultant compound. This activity of analysis forms the basis for the entire activity of service. Finally, it is the analysis which is provided to the foreign clients and charged accordingly. Hence, the classification merits under Technical Testing and Analysis services (TTA). 22 Since all laboratory processes necessarily produce a .....

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of determination of the nature of diseased condition, identification of a disease, prevention of any disease or disease or disorder in human beings or animals. 2.4 As stated in the above explanation, assessee undertakes the testing and analysis of the chemical compounds prescribed by their clients. It is the analysis report which is the output and delivers same to the client. Contrary to the requirements of knowledge sharing, advice or consultancy under 'Scientific or Technical Consultancy&# .....

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the department, Ld. AR Shri Nagaraj Naik, reiterated the grounds of appeal. 4, Ld. counsel Shri T.Jagapati Rao, on behalf of the assessee, contended that the services carried out by them are "Scientific and Technical Consultancy "and not 'Technical Testing and Analysis "and that the impugned order was correct in law and did not call for any interferenc. 5. Heard both sides and have gone through the records of the case. For better appreciation of the issue at hand, the definit .....

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For the removal of doubts, it is hereby declared that for the purposes of this clause, "technical testing and analysis" includes testing and analysis undertaken for the purpose of clinical testing of drugs and formulations, but does not include testing or analysis for the purpose of determination of the nature of diseased condition, identification of a disease, prevention of any disease or disorder in human beings or animals. "Technical Testing and Analysis Agency" in terms .....

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y manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organization, to any person, in one or more disciplines or science or technology. Section 65 (105) (za) of the Finance Act, 1994 defines the term taxable service for Scientific or Technical Consultancy Services as under: "Taxable service means any service provided or to be provided to any person, by a scientist or a technocrat, or any science or technology institution or orga .....

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ther ingredients required for conducting the research, the real work of the scientist starts, Hereafter, a chemist working on a project will try to either (a) validate a theoretical process in real life by creating a certain compound form other compounds and inputs(b) create libraries of the same compound, Since all research will necessarily produce a compound, all research done in the chemistry Laboratories have to be necessarily tested in the Analytical labs. These tests tell us more about the .....

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oduced during conducting the research. In fact, very often the tests form the basis of the acceptance or rejection of the research. 7. It is further seen that the Research Agreement dated 18-08-2003 between GRUNENTHAL GmbH and the assessee interalia, lays down the following scope of work to be performed: 1.1 The CONTRACTOR shall Three (3) -months - Pilot - Project to synthesise chemical entities and carry out process research for GRUNENTHAL and provide technical expertise in the area of organic .....

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rts. 2) Execution of the SERVICES 2.1) The CONTRACTOR shall exercise its best efforts to perform the SERVICES applying the state of the art in science and research and observing all applicable laws and regulations. 2.2) CONTRACTOR will provide an experienced PHD level chemist to carry out the work. 2.3) CONTRACTOR shall provide GRUNENTHAL with regular monthly brief reports summarising the progress of the SERVICES. Upon completion of the SERVICES CONTRACTOR shall provide GRUNENTHAL with a detaile .....

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