The New Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the service tax cannot be levied on the amount paid to the USFDA to obtain their approval for the export of drugs. Sidmak Laboratories (India) Private Limited, the appellant assessee manufactures pharmaceutical products, which it also exports.
It was registered with the Service Tax Department for providing various taxable services. The assessee appealed against the order passed by the adjudicating authority for confirming the demand that the service tax of Rs. 4,55,734/- from the assessee under the proviso to section 73 (1) of the Finance Act,1994 along with interest under section 75 of the Finance Act. Akshay Soni, the counsel for the assessee contended that the payment was made to USFDA, which was a sovereign authority and amounts paid as fees to sovereign authorities are not chargeable to service tax. S.K. Meena, the counsel for the department contended that the short payment of service tax was unearthed during an audit of the records of the assessee.
The Bench observed that in the case of Vidhi Dyestuff Mfg. Ltd. vs Raigad, the court held that the payments made to USFDA are not liable to service tax and the payments made to the Governments/sovereigns are not liable to tax. The two-member bench comprising Dilip Gupta (President) and Subba Rao (Technical) held that the USFDA was a statutory authority mandated by the US laws to regulate the import of pharmaceuticals into the country.