Full Judgment
3. Commissioner confirmed a demand of duty of Rs. 84,74,048/- along with interest within the normal period of limitation.
4. Ld. Advocate raises a preliminary objection that the pre-deposit of service tax is not mandatory before hearing appeals as Section 35F of the Central Excise Act, 1944, which is sought to be relied seeking pre-deposit of amount demanded, applies only to cases where "the decision or order appealed against relates to any duty demanded in respect of goods which are not under the Central Excise authorities or any penalty under this Act". As this case involves services rendered and since no goods are involved, the provisions of Section 35F, which relates to excisable goods, cannot be applied.
5. Ld. Advocate also submits that the Commissioner has relied upon the contents of website www.medicalnewstoday.com to come to the conclusion that any test of drugs in any manner is included under the head of "Technical testing and Analysis services". This evidence has not been disclosed to them before relied upon by the Commissioner and hence the order has been passed in violation of principles of natural justice.
6. The ld. Advocate submits that the applicant was conducting clinical trials of medicines using selected patients through agreement with some hospitals. He submits that from 1/5/2006, there is an amendment to Section 65(106) by way of adding an explanation which states that "technical testing analysis" includes testing and analysis undertaken for the purpose of clinical testing of drugs and formulations and therefore, prior to 1/5/2006, the, services undertaken by them cannot be brought under taxes.
7.2. Regarding the submission by the ld. Advocate that there is no need for depositing the service tax confirmed prior to hearing of appeal, we are unable to agree with the same. Section 83 of Finance Act 1994, which has made applicable Section 35F to service tax matters is reproduced below: Section 83. Application to certain provisions of Act 1 of 1944: The provisions of the following sections of the Central Excise Act, 1944, as in force from time to time, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise.: 9C, 9D, 11B, 11BB, 11C, 12A, 12B, 12C, 12D, 12E, 14, 15, 33A, 35F to 35O(both inclusive), 35Q, 36, 36A, 36B, 37A, 37B, 37C, 37D and 40.
Section 35F. Deposit, pending appeal, of duty demanded or penalty levied: Where in any appeal under this Chapter, the decision or order appealed against relates to any duty demanded in respect of goods which are not under the control of Central Excise authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the adjudicating authority the duty demanded or the penalty levied: Commissioner(Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner(Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue.
Provided further that where an application is filed before the Commissioner(Appeals) for dispensing with the deposit demanded or penalty levied under the first proviso, the Commissioner(Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing.
7.3. By the Finance Act, 1994 which levy service tax on services, the Parliament has made applicable certain provisions of Central Excise Act which deals with levy of taxes on commodities. The Section 35F is one such provision made applicable to service tax matters. It is to be noted that the provisions of Central Excise Act, 1944 has been made applicable "so far as may be, in relation to service tax as they apply in relation to a duty of excise". Section 35F, as it is applicable to demand of excise duty and imposition of penalty is concerned, provides for pre-deposit of duty and penalty before hearing the appeal unless it is specifically waived. There is an exception to this condition of pre-deposit when the goods are under the control of the excise authorities. The reason for the same is obvious. The duty is on the goods. If the goods have been seized and confiscated and they are lying in the custody of the Department without being released or without release being taken, the question of pre-deposit of duty confirmed will be doubly harsh and therefore, the exception is made. While applying such a provision to service tax matters, in a case like this where the service already has been rendered and service charges have already been realized by the service provider(service tax payable only at the time of realization), it is akin to a situation where the central excise assessee has cleared the goods and duty being demanded on such clearances. Therefore, we hold that pre-deposit of service tax is mandatory in terms of Section 35F unless the same are waived partly or fully by the appellate forum.
7.4. We do not, prima-facie, agree that there has been violation of principles of natural justice. The Commissioner has relied on the definition/literature from a website like referring to the contents of a dictionary. He has also produced the entire text in the order-in-original. He has relied on this material to support his decisions which has been taken on other evidences. The appellant was not able to submit that the reliance placed on the contents of the website are incorrect.
8. We find that the definition of the services for "Technical testing and Analysis" as existed prior to 1/5/2006 prima-facie covers the services undertaken by them and the explanation is only clarificatory in nature and therefore, the case of the applicant is an arguable one.
We, therefore, hold that they have not made a strong case for total waiver of deposit as ordered by the Commissioner.
9. The Tribunal in a case involving similarly situated assessees have ordered pre-deposit of 40% of the duty confirmed against them vide order No. S/1355-1356/WZB/AHD/2007 dt.30/11/2007.
10. In view of the above, we direct the applicant to deposit a sum of Rs. 32 lakhs within 8 weeks from today and to report compliance on 16/4/2008. Subject to deposit of the amount as above, pre-deposit of balance amount of duty demanded from them is waived and recovery thereof stayed.