By TIOL News Service

MUMBAI, DEC 06, 2012: THE applicant is a manufacturer of bulk drugs and they are having separate Research and Development Division and they are providing technical knowhow service to M/s. Doctors Organics Chemical Ltd. and M/s. Bravo Healthcare Limited during the period April 2004 to March 2009. They have raised invoices to these concerns for providing the service of technical knowhow and business auxiliary services.

Alleging that Service tax is payable, a demand was raised and the same has been confirmed by the CCE, Raigad.

The applicant is before the CESTAT seeking waiver of pre-deposit of Rs.1,56,71,018/- along with interest and various penalties imposed under the Finance Act, 1994.

It is submitted that -

+ the applicant has not received any amounts towards providing the above service, therefore, they are not liable to pay any service tax at all.

+ prior to May, 2008 service tax was payable on actual receipt of the amount of service rendered from the service recipient.

+ It is a fact on record that only entries were made in the books of accounts of service recipient as well as the service provider but no amount for service rendered has been recovered.

+ the adjudicating authority has classified their service of ‘technical knowhow' under the category of 'Scientific and Technical Consultancy Service' and which is improper so they are not liable to pay service tax post May, 2008 also.

The Revenue representative submitted that as the appellant has raised invoices for technical know services which is correctly classified by the adjudicating authority under the category of ‘Scientific and Technical Consultancy Services', it is immaterial whether they have received or not the amount for service rendered.

The Bench observed -

"5. … Prima facie we are convinced with the argument advanced by the learned counsel that, prior to May, 2008 service tax is payable on receipt basis and it is a fact on record that the applicant has not received any amount towards rendered service at all although they have made entries in their books of account. Therefore, prima facie they have made out a case for the period prior to May, 2008. Further, we have gone through the definition of ‘Scientific and Technical Consultancy Services' as defined under Section 65(92) of the Finance Act, 1994 and we are of the view that the applicant does not qualify under the said definition also. Therefore, the applicant have made out a case for 100% waiver of pre-deposit for the period post May, 2008 also."

Holding that the applicant had made out a case for complete waiver of the pre-deposit of the adjudged dues, Stay was granted.

(See 2012-TIOL-1789-CESTAT-MUM)