" 1 Appeal No. ST/27817/2013 CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL HYDERABAD REGIONAL BENCH - COURT NO. – I Service Tax Appeal No. 27817 of 2013 (Arising out of Order-in-Original No.44/2013-Adjn (Commr)S.T. dated 26.06.2013 passed by Commissioner of Customs & Central Excise, Hyderabad) M/s Albany Molecular Research .. APPELLANT Hyderabad Research Centre (P) Ltd., Phase 1, Sp Biotech Park, Genome Valley, Turkapally, Hyderabad, Telangana – 500 078. VERSUS Commissioner of Central Tax .. RESPONDENT Medchal – GST GST Commissionerate, Posnett Bhavan, Tilak Road, Ramkoti, Hyderabad, Telangana – 500 001. APPEARANCE: Shri Ch. Sumanth & Shri Narendra Dave, Advocates for the Appellant. Shri C. Dhanasekaran (Special Counsel), Authorised Representative for the Respondent. CORAM: HON’BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) HON’BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30340/2025 Date of Hearing:09.05.2025 Date of Decision:08.09.2025 [ORDER PER: A.K. JYOTISHI] M/s Albany Molecular Research Hyderabad Research Centre (P) Ltd., (hereinafter referred to as the appellant) are in appeal against the Order-in- Original dated 26.06.2013, whereby, a demand of Rs. 13,13,61,398/- has been confirmed against them for non-payment of service tax during April 2007 to September 2011 and equal penalty under Section 78 of Finance Act 1994 has been confirmed (impugned order). 2. The brief fact, relevant to the case, is that the appellants are undertaking Biotech and Pharma contract Research and Development Services and are rendering the said services to their parent company i.e. M/s Albany Molecular Research Institute, USA (AMRI, USA). Department felt that 2 Appeal No. ST/27817/2013 the services being provided by the appellant to the AMRI, USA is Technical Testing and Analysis (TTA) Service under Section 65(105)(zzh) of the Finance Act 1994 and therefore, they are required to pay service tax under the category of TTA service and the said service would not be eligible as export of service in view of the facts of the case and the relevant provision of Export of Service Rules 2005 (Rules). The basis for this belief was that in respect of TTA service, it can be treated only as export of service under Export of Service Rules 2005 only if the said service is provided (a) outside India, (b) partly outside and partly in India, or (c) in respect of goods or materials located outside India though performed in India. Whereas, in the case of the appellant, the appellant provided entire service in India and only the result of analysis and testing were delivered to the AMRI, USA outside India, which was construed as their having not exported the said services outside India and therefore, the activity of TTA, performed by the appellant does not fall within the scope of the export as defined under Rules. 3. On Adjudicating, Commissioner has analysed the classification namely Scientific & Technical Consultancy (STC) Service as claimed by the appellant and TTA service as alleged by the Department keeping in view the activities being undertaken by the appellants. He observed that they are conducting the test in India in respect of product so developed and thereafter sending the resultant materials and reports to their parent company at USA through courier i.e. FEDEX and that they are not engaged in STC as their reports are not in the nature of consultancy and advice. In so far as the issue of delivery of report in USA is concerned, the same was held to be related to the technical aspect of the product, which gives details of test undertaken and improvements made by them and has no value of it’s own. The Adjudicating Authority also took into account, the provisions under Section 65A(2)(a) of the Finance Act 1994 which provides for classification of service wherein, 3 Appeal No. ST/27817/2013 interalia, it has provided that the most specific description shall be preferred over general description. It was held that, since the activities covered in the TTA more specifically covered under TTA service as compared to STC services, they will fall in that category of TTA and not STC services. 4. He has also examined the plea of the appellant that they are covered within the scope of Export of Service Rules 2005 and therefore they get exempted from payment of service tax when the services are exported out of country. It was observed that TTA service under Section 65(105)(zzh), would fall under clause Rule 3 (1)(ii) of Export of Service Rules 2005. In terms of said provision, in relation to TTA service, it would be considered as export of service provided even if it is part performed outside India. Further, it provides that if such services provided in relation to any goods or material or any immovable property situated outside India at the time of provision of service through internet and electronic network then such taxable service, whether or not performed outside India, shall be treated as taxable service performed outside India. The Adjudicating Authority has come to the conclusion that since the service has not been performed outside India partly or fully in terms of applicable provisions of Export of Service Rules, therefore, the benefit of export of service cannot be extended. He has held that delivery of Test Report is not a provision of TTA service and only if any testing or analysis is done outside the country then only above service can be considered to have been performed outside India. He also observed that delivery is being made by the appellant at the port and thus the actual delivery is also not being undertaken by them to claim the benefit of export. 5. Learned Advocate for the appellant is mainly contesting that the activity undertaken by them cannot be classified as TTA service as it is apparent in terms of agreement with AMRI, USA which shows that they are 4 Appeal No. ST/27817/2013 interalia, engaged in Synthetic Chemical Research and Analysis, Chemistry consulting, Medicinal Chemical Synthesis, Computational Chemistry Services, manufacturing services for specialty chemical products, cGMP synthesis, analytical method development and validation and release testing etc. Therefore, essentially, in the present appeal, they are engaged in development of a compound called “lead chemicals”, which can be further transformed into various forms of drugs. They are also engaged in development of “analogues”. Therefore, they are essentially engaged in development of compound/analytical, the fact which has already been accepted and noted in the findings of the Adjudicating Authority at para 18.4 and 18.5. He further submits that after developing the final product for AMRI, USA, the same is delivered to them along with a certificate of analysis and other characteristic, which is provided through “Certificate of Analysis”, which is crucial in as much as if the property/composition of product are not diverged to the client, it could not used by them for any further use. Further, an alternate argument, he submits that in terms of Rule 3(1)(iii) of Export of Service Rules 2005, these services were provided in relation to business or commerce to a respondent located outside India and therefore will be export. They have relied on certain judgments namely Bayer Bio-Sciences Pvt Ltd., Vs Commissioner of Customs, Central Excise & Service Tax, Hyderabad [2019 (2) TMI 1567, CESTAT, Hyderabad] and Gland Pharma Ltd., Vs CCT, Hyderabad – GST [2019 (3) TMI 1437]. They are also taking an alternate argument that even if their activities are falling under TTA service, the activity will still be export of service under Rule 3(1)(ii) where, the only requirement is that in order to consider export of service atleast a part of service required to be provided outside the country for treating such service as export of service. He is also relying on the judgment of the Co- ordinate bench in the case of Commissioner of Service Tax, Ahmedabad Vs 5 Appeal No. ST/27817/2013 M/s B.A. Research India Ltd., [2010 (18) STR 438 (Tri-Ahmd)]. He has further relied on various other judgments wherein, it has been held that delivery of report outside India would amount to provision of service partly outside India and hence would be an export of service under Rule 3(1)(ii) of the Export of Service Rules, 2005.  United States Pharmacopeia India Pvt Ltd Vs. CCE in Final Order No. A/30081/2023 dated 20.04.2023.  TNS India Private Limited Vs. CCE, Hyderabad – 2022 (5) TMI 1198 – CESTAT, Hyd  Lotus Lab Pvt Ltd Vs. CST, Bangalore in Final Order No. 20258/2020 dated 25.02.2020  Commissioner of Service Tax, Mumbai Vs. SGS India Pvt Ltd – 2014 (34) STR 554 (Bom.) On the issue of the observation of the Commissioner that the appellant has not exported the service, but it was exported by the agency. He submits that the appellants have engaged the services of courier agency such as FEDEX for shipping of goods and shipping bill filed by the appellant also bears the name of the appellant alone and since the service tax is a contract based levy, provision of service has to be seen qua the contract entered into between the parties. He relies on the judgment of Hon’ble Supreme Court in All India Federation of Tax Practitioners Vs Union of India [2007 (7) STR 625 (SC)], wherein, interalia, it has been held that service tax is a destination based consumption tax. He also relies on the Vodafone Essar Cellular Ltd., Vs CCE, Pune-III [2013 (31) STR 738 (Tri-Mum)] to substantiate that irrespective of whether the report has been delivered through courier to the AMRI, USA or otherwise, they would be the person who provided service or performed the service qua their customer i.e. AMRI, USA. The Learned Advocate is also contesting invocation of extended period primarily on the 6 Appeal No. ST/27817/2013 grounds that this demand is based on audit of their records and no such irregularities were noticed in the previous audits conducted by the Department and therefore there is an inordinate delay in issuing the show cause notice. Further, they have been filing ST-3 returns regularly under the category of STC service and reflecting the amount received from AMRI, USA against the export of service. 6. Learned Special Counsel, on behalf of the respondent/department, interalia, submits that the Adjudicating Authority has rightly held the classification under TTA and also rightly denied the benefit of export considering that no services have performed either partly or fully outside India. 7. Heard both the sides and perused the records. 8. On going through various submissions and the records, we find that there are certain aspects which are not been denied by both the sides. Firstly, that they have an agreement with AMRI, USA and they are developing both lead chemical and its analogue. It is not in dispute that thereafter they are also carrying out certain testing and analysis in respect of these two lead chemicals and analogues and also preparing reports relating thereto termed as “certificate of analysis”. It is also not disputed that both lead chemicals and analogues along with the test report (certificate of analysis) are being sent abroad through courier and actually delivered to USA, AMRI for further use. 9. We find that essentially the agreement is to develop certain basic compound i.e. lead chemicals and also the analogue thereof, which is built on the said lead chemicals. This process requires processing of different chemicals, which are either procured indigeneously or imported by using 7 Appeal No. ST/27817/2013 specific parameters and engaging scientific personnel. It is also obvious that once the lead chemicals and analogues are developed, the same are shipped to AMRI, USA who further undertakes some activity on the said lead chemicals and analogues, keeping, in view the certificate of analysis describing the lead chemicals and the analogue and its properties etc. We now proceed to see the contrasting classification in the backdrop of the same. As per Section 65(106), TTA is defined as under: “Any service in relation to physical, chemical, biological or any other scientific testing or analysis of goods or material or information technology software or any immovable property, but does not include any testing or analysis service provided in relation to human beings or animals”. Further, Scientific or Technical Consultancy Service (STC) under Section 65(105)(za) is defined as under: “Any advice, consultancy or scientific or technical assistance rendered in any manner, either directly or indirectly, by a scientist or a technocrat or any science or technology institution or organization, to any person, in one or more disciplines of science or technology”. 10. Therefore, we find that the agreement with AMRI, USA is not a standalone activity for carrying out certain testing or analysis rather it is a combination of various activities which is required to develop lead chemical and analogues from various chemicals etc., first keeping in view the requirement of the client. This development itself requires not only research but also various other specialized activities under pharmaceutical science including medical, chemical synthesis, analytical method development, synthetic medical research etc. Without carrying out these activities, research and analysis etc., the lead chemicals and analogues cannot be developed by the appellant. Apparently, once these are developed, they are also subjected to certain testing and analysis in order to prepare the full report in terms of the requirements of the client and in terms of the 8 Appeal No. ST/27817/2013 agreement between appellant and AMRI, USA. These materials, per se, have no meaning unless the details thereof in terms of Test Reports are provided. Therefore, we find that while, the development of lead chemical and analogue would be more essential to carry out Tests, however, unless the Tests are conducted, no meaningful reports can be sent. It is important to note whether they are providing the consultancy service or they are merely providing the technical testing and analysis service in the sense that these lead chemicals and analogues are subjected to testing and analysis on one hand but also providing certificate of analysis. It appears to be more in the nature of providing result of the technical testing and analysis in respect of the lead chemical and analogue. The consultancy, by its very nature, requires that apart from narrating some factual information, the opinion of the consultant should also be conveyed as regards the product or activity for which they have been contracted. A plain reading of contract itself does not throw any light that they were required to provide any scientific or technical opinion qua the said products. Therefore, though the whole gamut of activity may have certain part, which requires certain scientific or technical activities also for developing lead chemical and analogue but the same is required to be examined more closely when they are subjected to testing and analysis, which will invaraiably have a detailed description and other relevant details of the lead chemical and analogues. Therefore, we do not find any infirmity in the order of the Commissioner holding that the said service would fall more appropriately under TTA service falling under Section 65(106), being service which covers it more specifically compared to TTA keeping in view that it covers the activity more specifically compared to STC service. 11. Having decided the classification, the next step would be to decide whether in the given factual matrix, the appellants have exported their service or otherwise. We find that undisputedly, both the developed lead 9 Appeal No. ST/27817/2013 chemicals and analogue along with the analysis report thereof (certificate of analysis) have been handed over to their clients namely AMRI, USA. Therefore, the question is whether the services are getting concluded in USA where the said product and the analysis report are actually coming into the possession of the AMRI, USA or for further use or otherwise, and whether the activity of delivery in USA could be considered as a service part performed by the appellant outside India. We have also gone through the case laws relied upon by the appellant. 12. We find that in the case of Gland Pharma Ltd., supra, the facts were different in as much as they were developing complete product for sale based on active ingredients supplied by their client and conducting of testing necessary for the product were to be submitted to the US, FDA for approval, which is not the case herein as much as there is no active ingredients supplied by AMRI, USA. Similarly, in the case of Bayer Bioscience Pvt Ltd., supra, the nature of activity which was considered for classification under STC service was very elaborate and in the given factual matrix it was felt that this would be covered under STC service. We do not find from the record that any such detailed activities were performed right from the scratch and therefore we find that the facts are clearly distinguished. 13. As far as the issue whether in the case of delivery of report outside India can be considered as part performance service outside India, the Co- ordinate Bench in the case of Commissioner of Service Tax, Ahmedabad Vs B.A. Research India Ltd., supra, examined this issue. In that case, the company was engaged in the business of conducting clinical trials for their clients in India and were providing the services under the category of TTA. However, the report of such testing and analysis were sent abroad which was considered as secondary aspect by the Department and therefore it was 10 Appeal No. ST/27817/2013 held that the since the main testing and analysis were performed only in India and not even part of the service was performed outside India, the service cannot be termed as export outside India. On the issue whether it is covered for benefit under export of service rules, it was, interalia, held that for sub-clause 65(105)(zzh), which is covered under Rule 3(1)(ii), the performance is not complete until the testing and analysis report is delivered to the client and therefore when such reports were delivered to the client situated outside India, it would be covered as part performed outside India. Relevant Para of the said judgment is as under: “8. We have considered the submissions made by the learned DR. 9. The issue before us is whether the service conducting clinical trials provided by the respondents are taxable service under the category of technical testing and analysis as defined under the Act. In the instant case the respondent has shown as the service provided to their foreign clients as export of service to know the provisions of the export of service which are reproduced here as under : “Export of Services Rules, 2005 3. Export of taxable service.- (i) Export of taxable service shall, in relation to taxable services,- ………. (ii) specified in sub-clauses (a),......(zzh), (zzi),..... and (zzzp) of clause (105) of Section 65 of the Act, be provision of such services as are performed outside India : Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India; (2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:- (a) such service is delivered outside provided from India and used outside India; and (b) payment for such service provided outside India is received by the service provider in convertible foreign exchange. 8. Reading of the above provisions of Export of Services Rules, 2005 (hereinafter referred to as “the Rules”) makes it amply clear that the taxable service specified in sub-clause (zzh) of Clause (105) of Section 65 of the Act is covered under Rule 3(1)(ii) of the Rules. The performance is not complete until the testing and analysis report is delivered to the client. In the present case, when such reports were delivered to the clients outside India, it amounts to taxable service partly performed outside India. The performance of the taxable service has no validity/sanctity unless its report is submitted to the service receiver/client. The clients do not have any value for merely performance if no report is delivered to them. Consideration of the service is received by the appellants only when they deliver the study report and the 11 Appeal No. ST/27817/2013 certificate of the testing and analysis of the clinical trials conducted by them. Thus, delivery of the report is an essential part of their service and the service is not complete till they deliver the report. The report is delivered outside India and the same is used outside India. These facts also fortify the views taken hereinabove that the service provided by the appellants was export of service and I am inclined to them such taxable service as export of service and therefore not taxable.” 10. From the above provision it is clear that the said services came under Rule 3(1)(2) (sic) of the Rules. It is very much clear that the performance of the service is not complete until the testing and analysis report is delivered to its client. In the present case, when such reports were delivered to the clients outside India it amounts to taxable service partly performed outside India. The performance of testing and analysing has no value unless and until it is delivered to its client and the service is to be complete when such report is delivered to its client. Thus, delivery of report to its client is an essential part of the service report was delivered outside India and same was used outside India. This is not the disputed fact. We hold that the respondent satisfied the conditions of Rule 3(2) and accordingly the respondents are eligible for the exemption under Notification No. 11/2007-S.T. dated 1-3-2007. We do not find any force in the argument made by the learned DR. With this observation, the impugned order is upheld and the appeal filed by the Revenue is rejected. Stay petition is also disposed off accordingly. 14. In the case of TNS India Pvt Ltd., supra, it was held that when the benefit of the services were accruing to the customers located outside India, the service will be qualified to be export of service under the proviso of Export of Service Rules 2005 relying on the judgment of Co-ordinate Benches in the B.A. Research India, supra and Bayer Bio Science Pvt Ltd., supra. 15. We also find force in the submissions that though the actual delivery was made by Courier Company but the facts reveals that they are the one who sent the material and reports through courier to the foreign buyer and hence they continued to be service provider and not the courier company deliver the material and report physically to the company in USA. Their contract includes delivery of material and report to the AMRI, USA. Reliance on Commissioner of Service Tax Vs SGS India [2014-TIOL-580-HC-MUM] and Vodaphone Essar Cellular Ltd., Vs CCE, Pune-III [2013 (31) STR 738 (Tri-Mum)] are relevant and in favour of appellant in so far as this service was not performed by appellant outside India and it was courier company who provided said service, is not correct. 12 Appeal No. ST/27817/2013 16. Therefore, having regards to the various judgments cited supra, what is essential to understand is that if the test and analysis reports etc., in relation to any activities contracted between overseas buyers and Indian entity, gets concluded only once the customers abroad are in receipt of the material so developed, as well as reports etc., then it has to be concluded that service was part performed outside India. Admittedly, AR, USA is not having any establishment in India and they are not receiving any material or report from the appellant in India. They are receiving material as well as report only in USA for consumption in USA. It is also to be noted that the material, per se, will have no meaning if it is not supported by it’s analysis report as the ultimate purpose is to develop drug or analogue in USA. It is also not disputed that in this case, the invoice value has been received in convertible foreign currency. Therefore, in the facts of the case, even though, the lead chemicals and analogues were developed in India from basic chemicals and even the testing and preparation of report has been done in India, but this service has not been concluded till the time it has reached in the hands of the customers situated outside India i.e. AMRI, USA. Therefore, in view of the provisions under the export of Service Rules, and the case laws cited supra, a part of this TTA service has been performed outside India and accordingly, it will be deemed to have been performed outside India and therefore it will qualify as export of service and hence no Service Tax would be payable, and also no penalty under Section 78 would be imposable. 17. Even for period post 01.04.2011, where 65(105)(zzh) was placed in ule 3(iii), since the location of recipient is outside India, no service tax would be payable, as it would be treated as export of service. The impugned order is therefore set aside. 13 Appeal No. ST/27817/2013 18. Since, the demand does not sustain on merit itself, we are not deciding the issue of limitation. 19. Appeal allowed. (Order pronounced in the open court on _08.09.2025_) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) jaya "