[2016-TIOL-26-ARA-ST] M/s Steps Therapeutics Ltd

Facts:
The Applicant is in the process of establishing, developing and carrying on research in basic and applied sciences in relation to all kinds of drugs, pharmaceuticals and formulations, health care and bio-technology. The services to be provided include Clinical Pharmacology which is a study carried out for generic drugs. The study is proposed to be undertaken using formulations in the form of tablets, capsules, syrups, inhalers etc. Further they would undertake clinical research which involves project management, monitoring, medical writing etc. In terms of a sample agreement, clinical trials are to be undertaken for the drugs of the customers situated outside India on volunteers in India. These volunteers are kept under observation and their blood samples are tested for identification of various parameters as required by the customer and a consideration is charged on a project to project basis. This is the main activity of providing research assistance services to its customers. The question before the authority is whether the services provided are covered by Rule 3 of the Place of Provision of Services Rules, 2012.

Held:
The Authority noted that the issue to be decided is whether the services of clinical pharmacology and clinical research are covered by Rule 3 viz. location of service recipient or Rule 4 viz. the location where the services are actually performed of the Place of Provision of Services Rules 2012. The service is covered by Rule 4(a) if the service is provided in respect of goods which are required to be made physically available by the recipient of service to the provider of service. In the present case, the study is undertaken using formulations, tablets, inhalers etc. provided by customers outside India on eligible volunteers in India. Therefore it is clear that the goods are required to be made physically available by the customers located outside India to the applicant and therefore the service of clinical pharmacology is covered by Rule 4(a) of the Rules. It was argued that the Education Guide issued by the CBEC categorically mentions that the service of market research is not covered by the said Rule 4. The authority noted that the guide at para 1.2 categorically provides that it is neither a departmental circular nor a manual of instructions and does not command the required legal backing to be binding on either side and in any case the provisions of Rule 4 are clear and therefore the Education Guide cannot take precedence over it. Further if the service of clinical pharmacology is not provided and only the service of clinical research is provided, the said service being in the nature of monitoring, project management etc. the authority held then it will not be in relation to the formulations provided by the service receiver and nor will it require physical presence of any representative of the drug company and therefore such service will not fall in the ambit of Rule 4 and will be covered by Rule 3 of the Place of Provision of Service Rules, 2012.
Note: Readers may note, that Rule 4 of the Place of Provision of Service Rules, 2012 requires the services to be provided in respect of goods. Examples provided in the Education Guide at para 5.4.1. include repairs, reconditioning, cargo handling etc. Accordingly the service is essentially any physical service carried out on another person’s goods. However in the present case the drugs are the object of research whereas the service involves various aspects of research viz. study of the blood samples, the minute observation of the physical changes in the volunteers consuming the drugs, its analysis and then drawing an inference on the basis of their skill/knowledge/expertise etc. on the basis of which a report is sent outside India which is directly consumed outside India.  There is no physical service or manipulation performed on the drugs of the service receiver and therefore its inclusion in the said Rule 4 appears questionable.