Teena Labs Ltd Vs Commissioner of Central Tax (CESTAT Hyderabad)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad allowed the appeal filed by M/s Teena Labs Ltd against the Order-in-Original dated 28.02.2013 concerning levy of service tax on activities undertaken for M/s Aurobindo Pharma Ltd (APL).
The appellant was engaged in manufacture of bulk drugs and formulations and had entered into a job work agreement with APL for manufacturing products at the appellant’s facility. Under the agreement, the appellant received fixed conversion charges of Rs.23 lakhs per month for the first 12 months and Rs.25 lakhs per month for the next 12 months. The agreement also provided that if actual conversion charges exceeded the fixed amount, APL would reimburse the excess. Apart from conversion charges, APL reimbursed expenses relating to power, fuel, water, filter pads and machinery maintenance incurred in connection with the job work services.
The Department viewed the arrangement as falling under “Renting of Immovable Property Services” (RIPS) under Section 65(105)(zzzz) of the Finance Act, 1994. According to the Department, the agreement indicated exclusive use of the appellant’s premises, plant, land and building facilities by APL for manufacturing operations. The adjudicating authority concluded that APL was effectively paying rent for using the appellant’s premises and facilities rather than paying conversion charges for job work.
