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TMI Blog2018 (4) TMI 1399X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,73,71,800/- 2,38,93,871/- 7,12,65,671/- Service Tax Paid for normal period of limitation 1,51,57,422/- Nil 1,51,57,422/- Appeal Filed 3,22,14,378/- 2,38,93,871/- 5,61,08,249/- 2. The brief facts of the case are that M/s Jubilant Chemsys Ltd. are registered with the Service Tax Department for providing services namely Online Information & Data Retrieval Service', Business Auxiliary Service, Scientific & Technical Consultancy Service and Transportation of Goods by Road. They are engaged in the research and development of drug chemicals and export thereof under the hundred percent EOU scheme. The appellant have been granted permission for carrying out manufacturing operations in a bonded warehouse under the Customs Act and also registered under the Central Excise Act as a manufacturer. The present appeal by the assessee have been filed against the order passed by the Commissioner, Customs, Central Excise & Service Tax, Noida, demanding service tax under Section 73 to the Finance Act, 1994 and also imposing penalty under Sections 78 and 76 of the Finance Act, 1994 for the reason that the supply of small quantities of or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in the medicinal chemistry business, the sale and production of such services cannot be expressed in any generic unit, hence it is not possible to give the quantitative details of sales and certain information as required under paragraph 3, 4C and 4B of part II of schedule VI to the Companies Act. From the above it appeared that the compounds generated during the process of R&D undertaken by the assessee are secondary or only ancillary to the principal activity of the said medicinal chemistry services. The copy of approval/renewal letter issued by Department of Scientific and Industrial Research in the Ministry of Science & Technology, Government of India, states that the appellant company is registered as R&D Centre and is involved in research and development. Further, in their application for setting up EOU submitted to the SEZ, the assessee have not declared any item or capacity for production. Further, in the column VI of the said form, the quantity of production is not shown as the same is not required in case of a service unit. These facts are also evident from the letter of Commissioner, SEZ, Noida, wherein the approval has been given for the "Drug Discovery Services i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds) syntheses and analytical procedures. (2) synthesis completion dates and lot numbers and (3) a copy of all analytical data of compounds(s) obtained by Company hereunder. ........ ............ 8. Ownership and Licenses: All information received from Jubilant Biosys or obtained as a result of Company's performance hereunder, including but not limited to, core structure, batch records, Results, data, reports, Final Reports, laboratory work sheets. methods, Compound information, process information, improvements and the like shall be the sole property of .Jubilant Biosys....... Until the expiration of Company's obligations of confidentiality and non-use under paragraph 9 thereof, Company covenants to promptly disclose to Jubilant Biosys all discoveries inventions, improvements, innovations and the like made by the Company hereunder or otherwise..... 5. From the above clauses of the agreement, it appeared that the appellant is engaged in carrying out Research & Development Services in relation to the chemical processes. It further appeared that whatever results are obtained by the appellant assessee as a result of the research/synthesis, the same are to become the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gy, biosciences, bio informatics, structural biology, medicinal, chemistry, etc.., including contract research services related to drug discovery, such as process and/or product development. Further, Para-6 titled 'records' in the Master Agreement, read with Para-8 of the said agreement, titled 'ownership and licenses'; all records of the synthesis/manufacturing of the compounds in the shape of lab notebook, have to be delivered to Biosys on periodic basis. As per Para-8 of the Master Agreement, all the rights, ownership and licenses in respect of the activities undertaken in the appellant premises will be with Biosys Ltd., only. Further on going through the contents of ARE-! dated 26th April, 2007 and 27th January, 2006, wherein certain goods namely Non Haz Lab Chemicals, in powder form and lab chemicals were exported to Austin Chemicals, USA and on being asked to explain the quantity and price of the goods as mentioned in the said ARE-1 and as to whether the price was realized, it was stated that, I have gone through the ARE-1 dated 26/04/2007, vide which 1.460g of Non Haz Lab Chemicals have been exported and value shown in the invoices is notional, USD 419.51, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion/advice in regard to scientific or technical feasibility or any other scientific or technical aspect of a project process design recommending an apt technology, suggestion for improvement in existing technology process, etc. The appellant has been providing services with regard to improvement of chemical processes by conducting synthesis of various chemicals. The consultancy/advice is being given in the form of records/reports being prepared by the appellant as a result of the synthesis carried out by them and the results achieved become property of the customer that is JBL. Thus, it appears that the services provided by the appellant to JBL are covered under the said service under Section 65(92) of the Finance Act, 1994. 8. The audit objection dated 9th April, 2010, communicated to the appellant, directed the appellant to deposit the proposed amount on the grounds: (i) That the master agreement dated 26th June, 2005 and the work orders issued in accordance with the said master agreement are for manufacture and supply of compounds and no services have been rendered and all the payments have been received against supply of compounds. In support of their claim they have state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocation of extended period of limitation is concerned it is observed in the SCN that tax is leviable on the amount billed during the period 2007-8 to 2009-10 for the services rendered and the payment received. Therefore, on the basis of information available in the trial balance of the Unit for the period in question, a total tax of Rs. 122.79/- lakhs was demanded. Further, it appeared that the appellant have suppressed these facts from the Department. Although they were registered under the said category of 'Scientific or Technical Consultancy' services, but did not discharge their liability of service tax on the said taxable service. The said transactions with regard to value of taxable service and the service tax payable thereon was never mentioned in the ST-3 returns filed by appellant. These facts came to notice of the Department when audit of their account was conducted in January, 2010. It is further mentioned in the SCN that scrutiny of ST-3 returns shows that there has all along been an attempt by the appellant to conceal the material facts of provision of taxable service as the entire amount of receipts against said services under the category of Scientific or Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Total Eli Lily 153.84 489.45 448.23 1091. (19.01) (60.49) (46.17) 52 (125. 67) Endo 22.59 (2.33) 22.59 (2.33) Orion 71.91 (7.41) 71.91 (7.41) Merck 19.40 (2.0) 19.40 (2.0) Amgen 15.61 (1.93) 66.28 (6.83) 81.89 (8.76) Sub-Total 153.84 (19.01) 505.06 (62.42) 628.41 (68.86) 1327. 31 (146. 17) Forest 14.50 (1.79) 206.15 (21.23) 220.65 (23.02) AstraZene ca 209.73 (21.60) 209.73 (21.60) Sub-Total 14.50 (1.79) 415.88 (42.83) 429.78 (44.62) Grand Total 153.84 (19.01) 519.56 (64.21) 1044.29 (111.69) 1717.69 (194.91) Value of Services Provided and Service Tax Payable in Lakh Based on Audited Accounts and Auditor's Certificate Customer Apr 10 To Mar 11 SCN dated 19/10/2011 Apr 11To Mar 12 SCN dated 18/09/2012 Total Eli Lily 730.70 (75.36) 833.26 (85.83) 1563.96 (161.19) Endo 87.24 (8.99) 300.31 (30.93) 387.55 (39.92) Orion 44.08 (4.54) 44.08 (4.54) Merck 135.34 (13.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the orders including the order for the period January, 2008 to March, 2008 record the following facts: (i) The Appellant has provided services to overseas clients which are covered by Rule 3 of Export of Service Rules, 2005; (ii) The Jurisdictional Range Officer has verified and checked proof of export in respect of output services and verified the receipt of payment in convertible foreign exchange in respect of exports effected by the Appellant. (iii) That no sale has been effected by the Appellant in Domestic Tariff Area. The Learned Counsel further submits that four of the refund claims for the period are for amounts in excess of Rs. 5 lakhs and accordingly have been pre-audited by the audit wing in the office of the same Commissioner. Therefore, it is case of difference of opinion on the issue between different teams in the audit wing.The Counsel relies upon the decision by the Supreme Court in the case of Umang Chand Bhandari Vs Commissioner of Central Excise, Madras in 2004(167) E.L.T. 491 (SC). In addition, the Counsel submits that the entire transaction is Revenue neutral and has not resulted in any loss to the revenue or gain to the Appellant. The Appellant would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally the same as has been decided in Final Order No. ST/A/70562-70564/2017-CU(DB) dated 02/05/2017. However, he relies upon the impugned order including the applicability of proviso to Section 73(1) of the Finance Act, 1994, imposition of penalty under Section 76 and demand of interest on the duty paid by the Appellant. 18. Having considered the rival contentions, we find that the issue on merits is covered by the Final Order No. ST/A/70562-70564/2017-CU(DB) dated 02/05/2017. The Commissioner in the impugned order has held that under all the agreements the services have been ultimately exported by Jubilant Biosys Limited. The Commissioner has examined and discussed the agreement between Eli Lilly and Company and Jubilant Biosys Limited (JBL), Jubilant Chemsys Limited (JCL) and Jubilant Life Sciences Limited (JLL) and has denied the benefit of export of services to the Appellant for the reason that they have not produced anything to establish that JBL Bangalore has acted as their agent. 19. We find that in the precedent Final Order dated 02/05/2017, we had examined the same agreement and have held as follows: "15. Having considered the rival contentions, we are satisfied that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble foreign currency in India. Accordingly, we allow appeals by the appellant - assessee (No. ST/546/2012 & ST/5175/2014) with consequent benefits and set aside the impugned order." 20. As regards applicability of proviso to Section 73(1) of the Finance Act, 1994, we find that the fact of disclosure of the value of disputed services in the ST-3 returns is admitted in the Show Cause Notice. Further, SCN also records that the Appellant during the relevant period was claiming refund of the accumulated CENVAT credit. The refund orders passed by the Assistant/Deputy Commissioner record the fact that entire export turnover and receipt of the export proceeds in convertible foreign exchange has been verified by the Jurisdictional Range Superintendent. It is also on record that the Show Cause Notice has been issued in pursuance to an audit objection. Therefore, it is not a case of mis-declaration or suppression of facts but a case where there is a change of opinion on the manner of assessment by the Department. We hold that in the fact and circumstances of the case proviso to Section 73(1) and provisions of Section 78 of the Finance Act, 1994 are not applicable. Accordingly, demand for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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