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TMI Blog2019 (2) TMI 1567X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. The appellant has a plant breeding team which looks for specific traits from the germplasm and then they cross pollinate such plants with existing parental lines. After cross pollination, they test the varieties so produced continuously for 7 to 9 years across the country in different agro climatic zones to check their performance and stability. After evaluating, they send their reports to their client to M/s Aventis who file a patent application and obtain Intellectual Property Rights (IPR) for hybrid seeds so produced. The first element of the demand from the department is to charge the amount which the appellant received from M/s Aventis under 'scientific and technical consultancy service'. The appellant also has another set of agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esired characteristics and which can produce higher yields. This, in turn, would require collection of a wide variety of plants of the same species but with different characteristics (commonly known as germplasm). The characteristics of each of these plants are tested, seeds of such plants are maintained and through appropriate breeding techniques the characteristics of different plants are combined to develop a variety with the desired characteristics. Since the development of the variety involves considerable cost, the company which produces the variety obtains IPR on it. Thereafter, the company multiplies the seeds of the variety/ hybrid either directly or through farmers and sells them to other farmers for profit. This is the complete b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructions and guidance of their overseas client and communicates the results. He further submits that they are not an organisation qualified as scientific or technical institution or organisation. He submits that the process takes 7 to 9 years and they receive fees from their client. As an alternative argument, he submits that activity carried out by them qualifies as an export of service and hence is not liable to service tax. He submits that impugned order denies exemption only on the ground that the seeds are used in India. He further submits that the Export of Service Rules were introduced in 2005 and prior to their introduction as per notification 21/2003-ST which covers their service from 1-4-2004 to 14.3.2005 they were exempted anywa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not confined to fundamental research but can also be applied research. Learned counsel also tried to impress upon us that plant breeding is not science which we find without any force. If plant breeding is not a science at all then nothing in the modern agriculture which resulted in green revolution is science. We find that the appellant, under the first agreement, rendered scientific and technical consultancy services to their overseas client and received consideration in foreign exchange. For the period 01.04.2004 to 14.03.2005, they are not liable to pay service tax as they were covered by the exemption notification 21/2003-ST. With respect to the service tax post introduction of the Export of Service Rules, in terms of Rule 3(1), whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transaction. After having received the reports the clients in Germany files applications for and obtains IPR and thereafter the second phase of the activity viz., multiplication of the seeds developed and their sale in India begins. The service in question is not relatable to the second phase of the activity which begins only after they have obtained IPR. Therefore, we find that the services in question are delivered partly outside India and partly within India and the payment for the services is received in foreign exchange and hence these services should be treated as export of services and therefore they are not liable to service tax on these services. 6. Insofar as the second element of demand is concerned, we find the appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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