The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has remanded the matter Back to decide refund of accumulated cenvat credit.
The Bench of Ajay Sharma (Judicial Member) and C J Mathew (Technical Member) has observed that the first appellate authority had not appreciated the issue in dispute before it which is essential in determining applicability of rule 4 of Place of Provision of Services Rules, 2012. Instead, the first appellate authority ruled on the taxability of the appellant as ‘intermediary’, under rule 9 of Place of Provision of Services Rules, 2012, which was neither proposed in show cause notice nor proposed in appeal of the jurisdictional Commissioner of Service Tax.
The issue in the appeals of M/s Getz Pharma Research Pvt Ltd is denial of entitlement to refund of CENVAT credit accumulated between July 2013 and June 2014, admittedly pertaining to procurement of ‘inputs’ and ‘input service’ for undertaking ‘development of pharmaceutical stable coleman hydrochloride tablets’ under agreement with foreign entity that were claimed to have been exported.
The appellant had preferred claims totaling to Rs.54,82,697 for the four quarters in the period under dispute which the original authority partially allowed for the first two quarters to the extent of ₹ 16,68,766 while rejecting Rs.2,29,830 thereof for lack of ‘nexus’ and the claims for the other two quarters in entirety for not being in conformity with rule 6A of Service Tax Rules, 1994.
On challenge before the first appellate authority by M/s Getz Pharma Research Pvt Ltd on the rejection of Rs.38,13,895 and by the jurisdictional Commissioner of Service Tax over the sanction of Rs.16,68,766 Commissioner of Service Tax (Appeals-II), Mumbai, by order, disallowed the claims in full leading to the present appeals.
The dispute is to be resolved by ascertainment of compliance with the stipulation for export of service, as set out in rule 6A of Service Tax Rules, 1994, which, inter alia, requires ‘place of provision of service’ to be India.
The cavil in appeal of the jurisdictional Commissioner of Service Tax before the first appellate authority was that the original authority had not considered the applicability of rule 4 of Place of Provision of Services Rules, 2012 despite the agreement of the appellant requiring activity to be undertaken on source material within the taxable territory of India.
The first appellate authority concurred with the view of the appellant- Commissioner on non-fulfilment of rule 6A of Service Tax Rules, 1994 by holding that the output was ‘intellectual property rights’ crystallised in the taxable territory for the overseas entity.
The appellate authority held that the appellant was an agent of the overseas entity owing to which, in accordance with rule 9 of Place of Provision of Services Rules, 2012, service having been rendered outside India is out of question.
The tribunal held that a right relating to ‘intellectual property’ is not, as expressed by the first appellate authority, a provision for incentivizing innovation but is very much for securing property in the manner peculiar to each national jurisdiction. It is not policy but a prescription in law and the vestment of such right must meet the test of law. A right that is not registered in India cannot be deemed to have come into existence in the territory of India. The finding of the first appellate authority is, thus, mis-directed.
The tribunal set aside the order and remand the matter back to the first appellate authority for adjudging the validity of the grounds preferred by the respective appellants in accordance with the law as set out in Place of Provision of Services Rules, 2012 and judicial pronouncements now in place.
Case Details
Case Title: Getz Pharma Research Pvt Ltd Versus Commissioner of Service Tax
Case No.: Service Tax Appeal No: 85284 To 85287 Of 2017
Date: 19/02/2025
Counsel For Appellant: Mahesh Raichandani, Advocate
Counsel For Respondent: Shashank Kumar Yadav, Additional Commissioner
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