Custom, Excise & Service Tax Tribunal
Healthware Pvt Ltd vs Hyderabad-Ii on 10 October, 2025
(1)
ST/20380/2014
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench - Court No. - I
Service Tax Appeal No. 20380 of 2014
(Arising out of Order-in-Appeal No. 144/2013 (H-II) ST dt.29.10.2013 passed by
Commissioner of Customs, Central Excise & Service Tax (Appeals-III), Hyderabad)
M/s Healthware Pvt Ltd
8-2-623/A, 4th & 5th Floors, Serene Towers, ......Appellant
Road No.10, Banjara Hills, Hyderabad - 500 034
VERSUS
Commissioner of Central Excise &
Service Tax, Hyderabad - II
Kendriya Shulk Bhavan, LB Stadium Road,
......Respondent
Basheerbagh, Hyderabad - 500 004 Appearance Shri S.C. Kamra, Advocate for the Appellant.
Shri K. Raji Reddy, AR for the Respondent.
Coram: HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30407/2025 Date of Hearing: 23.06.2025 Date of Decision: 10.10.2025 [Order per: A.K. JYOTISHI] M/s Healthware Pvt Limited (hereinafter referred to as Appellant) are in appeal against the Order of the Commissioner (Appeals) dt.29.10.2023 (impugned order), whereby, he upheld the Order-in-Original dt.28.08.2012 passed by the adjudicating authority.
2. The brief facts of the case are that the appellants are, inter alia, engaged in procuring and leasing out expensive medical equipments to hospitals across the country, who use the same in their premises for treatment of patients. The appellants have entered into an agreement with the hospitals for leasing the said equipment and are also paying sales tax/ VAT in the bills raised to the hospitals considering the said transaction as (2) ST/20380/2014 one which involves transfer of right to use the goods and therefore, taxable under State VAT Act as deemed sale.
3. The department, based on the scrutiny of financial records and agreements, etc., observed that they were receiving certain lease charges from their customer/hospital and were also paying Central Sales Tax (CST). However, on going through the said agreements, it was felt that said activity would fall under the category of "Supply of Tangible Goods Services" (SOTG) under section 65(105)(zzzzj) of the Finance Act, 1994 and therefore, demand was raised. On adjudication, relying on certain paras of the agreement, the adjudicating authority held that there has not been any transfer of effective control and legal right of possession to the hospital. On appeal, the Commissioner (Appeals) upheld the adjudication order observing, inter alia, that their customer/hospital was not possessing the goods and the space to accommodate the equipment is earmarked and other facilities were arranged by the hospital only to facilitate the appellant in installing the equipment within the hospital premises. Therefore, the appellants were engaged in SOTG services without transferring the right of possession and effective control to the hospital.
4. Learned Advocate has primarily contested that their transaction would fall in the category of deemed sale in terms of Article 366(29A) of the Constitution, whereby, any transfer of right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration is deemed to be a sale. He has also relied on the judgment of Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd Vs UOI [2006 (2) STR 161 (SC)], whereby, certain criteria were laid down in para 91 to determine whether a transaction involves transfer of right to use or otherwise. His main contention is that a holistic reading of the agreement would clearly establish that this is a case where there has been transfer of legal right to use as well as effective control from the appellant to the hospital and therefore, will be covered under the category of deemed sale and not SOTG service. He has relied on certain clauses viz., clause 4, 5, 6, 7, 8 & 15 and has also submitted that the clauses relied upon by the adjudicating authority and upheld by the Commissioner (Appeals) viz., clause 9, 10(c), 10(e) & 11 have not been properly appreciated and have been interpreted out of context to prove that there is no transfer of (3) ST/20380/2014 possession or effective control. Therefore, in terms of submission, it is a case of deemed sale and not that of SOTG.
5. Learned AR reiterated the findings of the Commissioner (Appeals) and has also submitted that this issue is also covered in the judgment of Hon'ble Supreme Court in the case of KP Mozika Vs Oil & Natural Gas Corporation Ltd [2024 (388) ELT 11 (SC)].
6. Heard both sides and perused the records.
7. The issue to be decided is whether in terms of agreement between the appellant and the hospital, there has been any transfer of legal right to possess and effective control to hospitals or otherwise. This needs to be decided because in case there is no transfer of legal right to possess as well as effective control, then it would fall within the category of SOTG service, however, if there is such transfer, then it would be covered within the category of deemed sale and therefore, there will not be any scope for levying service tax. This issue has been dealt with extensively by the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd Vs UOI (supra), where certain guidelines were indicated for deciding whether in the given set of facts, based on the contract/agreement, etc., it could be said that there has been transfer of legal right to possess and effective control or otherwise and therefore, amounting to deemed sale or otherwise. Therefore, before we proceed further, we have to examine the definition of SOTG service, which provides as under:
"Section 65(105) - taxable service means any service provided or to be provided -
(zzzzj) to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances."
8. Therefore, in order to be covered within this service, the terms and conditions of the agreement should clearly spell out that while providing the tangible goods there is no transfer of right of possession and effective control of such equipment, etc. The Hon'ble Supreme Court has in the case of Bharat Sanchar Nigam Ltd Vs UOI (supra), at para 91 stated as under:
"91. To constitute a transaction for the transfer of the right to use the goods the transaction must have the following attributes:
a. There must be goods available for delivery;(4)
ST/20380/2014 b. There must be a consensus ad idem as to the identity of the goods;
c. The transferee should have a legal right to use the goods- consequently all legal consequences of such use including any permissions or licenses required therefor should be available to the transferee;
d. For the period during which the transferee has such legal right, it has to be the exclusion to the transferor this is the necessary concomitant of the plain language of the statute - viz. a "transfer of the right to use" and not merely a licence to use the goods;
e. Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others."
9. Therefore, what is required to be examined in the present context is whether the terms and conditions in the agreement passes these 5 tests so as to fall in the category of deemed sale or otherwise. We also find force in the reliance placed by the appellant on the judgment of State of Andhra Pradesh Vs Rashtriya Ispat Nigam Ltd [2013 (31) STR 513 (SC)], wherein, inter alia, it was held that in order to determine whether there is any transfer of right to use or not, it will be a question of fact and the same cannot be determined with reference to any particular word or clause in the agreement and therefore, the agreement has to be read as a whole to determine the nature of transaction. Similarly, in the case of GS Lamba & Sons Vs State of Andhra Pradesh [2015 (324) ELT 316 (AP)] also, inter alia, it was held that the intent of the document must be understood by reading the entire agreement and reading a word here or there would not be sufficient. Therefore, we find that what is required that while on one hand, the appellants are relying on certain clauses in their favour, whereas, department is relying on some other clauses in their favour, but what is required is to evaluate the whole agreement before coming to the conclusion that whether this involves transfer of right of possession and effective control or otherwise. Therefore, the terms and conditions of the agreement must be studied carefully vis-à-vis criteria laid down by the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd Vs UOI (supra) in order to determine whether there is any transfer of legal right to use or otherwise because after going through the clauses and conditions of the agreement, if transfer of goods without transfer of right to use, then it would be covered within the ambit of service tax.
10.1 Learned AR has relied on the agreement entered by the appellant with M/s Fortis Healthcare Ltd (FHL) in their SCN even though they have also (5) ST/20380/2014 been providing similar equipment on almost similar terms and conditions to other hospitals. Therefore, for the purpose of analysis, we have taken up the agreement between the appellant and FHL. The agreement dt.15.06.2007 starts on the premises that FHL is desirous of undertaking and performing Laser Prostectomy and other laser procedures on patients on/with a Lisa Revolix Laser (hereinafter referred to as equipment), which has been described in detail in Annexure-I. It also provides in clause (C) that the appellants were to provide the equipment to FHL as and when required to perform laser procedures and also to render specialized services relating to application training, support, operational guidelines and assume responsibility of servicing and maintenance of the equipment to assist FHL to perform the treatment. Therefore, what emerges from combined reading of clauses (A), (B) & (C) is that FHL wants to perform certain treatment for which the appellants are required to provide the equipment as and when required by the FHL and also impart certain training, etc., to operate the same. Clause (D) indicates that the appellant on certain terms and conditions has agreed to act as service provider as aforesaid and for this purpose to provide the equipment.
10.2 With this background, we now proceed to examine the terms and conditions agreed upon to the extent relevant for deciding the issue. Clause 4 requires the FHL to provide necessary premises and other related infrastructure. Clause 5 provides for appellant to provide certain equipment for performing procedures in the earmarked premises and for which FHL shall facilitate to provide all necessary and required infrastructure and support and make available utilities. In fact, FHL also provided certain equipment (as described in Annexure-II) for performing the procedures. There is also provision for moving the equipment to other hospitals after informing the appellant. Clause 6 provides for FHL taking complete responsibility and medical liability relating and/or connected to the management, operation and administration of the equipment. However, they will not be liable for primary equipment failure. Clause 7, inter alia, provides for FHL being responsible for obtaining and maintaining all licenses, permits and approvals including but not limited to patient authorization and consent and releases. It also provides that currently there are no licenses, permits or approvals required as declared by appellant, however, if any such requirement arises, the appellant will inform FHL. Clause 8 provides that the (6) ST/20380/2014 ownership will be with the appellant along with right to repossess. Clause 9 provides for appellant to provide certain operational guidelines and servicing and maintenance at no additional costs. Clause 10 provides for fee based on the aggregate number of patients to whom the treatment is offered/ provided/given/undertaken in a year and/or from whom any charges are levied, received and/or related or connected to the treatment and it has to be procedure-wise and per patient-wise, for which the appellant would be required to raise an invoice. Clause 11 provides for insurance; As per this clause, appellants are responsible for insuring the equipment at their own cost, whereas, the requisite infrastructure including premises and/or the site housing the equipment shall be kept fully and comprehensively insured by FHL. It also indemnifies the appellant from any additional cost on account of damage, etc., while moving the equipment between various FHL hospitals and also during transaction. Clauses 12, 13 and 14 are giving options for termination and premature termination. Clause 15 provides for giving right of repossession to the appellant at the end of contract or for any non- compliance of terms and conditions. Clause 16 provides for arbitration. Clause 17 provides for consequential losses; this clause indemnifies the appellant from any loss or liability arising out of, inter alia, operation, usage and/or application of equipment, which will be the responsibility of FHL, who will be responsible for medical supervision of the use of the equipment in the treatment of FHL patients. Clause 18 provides for indemnification of the appellant against any claim or demand due to any personal injury or death. Clauses 19 to 25 are not relevant to the issue in this appeal.
11. The appellants are relying on certain clauses like clause 4, 5, 6, 7, 8 & 15 in support that there has been a transfer of legal right of possession and effective control in the transaction. We have gone through these clauses and we find that the premises and site is being provided by the FHL for installing the equipment within their hospital, however, for installing the same, FHL are also providing certain additional infrastructure and equipments. It is also apparent that while FHL assumes complete responsibility and medical liability but the fact is that the staff, who were to use the equipment were trained by the appellant themselves. Further, though the appellants are not responsible for obtaining Government approval or licenses for use of the equipment for the hospital and that absolute ownership has always (7) ST/20380/2014 remained with the appellant, however, the appellants have right to inspect and/or verify the same to carry out any audit in respect thereof.
12. We have also perused the specimen sample invoice submitted by the appellant raised on Apollo Hospital Enterprise Ltd, wherein, it shows that the appellants have charged fee/lease charges and on which CST has been made. We have also perused another invoice dt.31.11.2008 raised on FHL where the invoice itself is showing the description of the service as Procedure-Laser Prostectomy (TURP) and procedure details are also indicated. Therefore, from a holistic reading of all the clauses including invoices, it appears that FHL were interested in setting up laser prostectomy facility in their hospital, however, in order to operate that facility they had asked the appellant to provide the equipment, whereby, they had not only provided equipment but also have integrated equipment with other equipment provided by FHL and have also trained their staff. There is another clause which says that these equipments would be required to be placed by the appellant to the FHL "as and when required". In other words, it was not available for their use at their own will at any point of time and it was the appellant, who used to place machine as per instructions as and when procedure was required to be performed on a patient by the FHL. Therefore, had it been under their effective control, there was no need to ask them every now and then to place the equipment. It is apparent that as and when there is requirement for undertaking any specialized procedure by the hospital, they were requesting the appellant to place the machinery at their disposal in the designated space where the procedure was performed. The bills were raised patient wise and it was not on a fixed monthly rental, etc. Therefore, there is no transfer of legal right to possess and the effective control was still retained by the appellant insofar as these equipments are concerned, which have been installed inside a designated space in the hospital but were being made available for specialized procedure, as and when required. Thus, it is a case where FHL were hiring the equipments on need basis and only for the sake of convenience these were installed by appellant in their premises. Thus, the agreement is providing them right to use equipments in terms of agreements but not an absolute legal right to use and operate at their own sweet will during the currency of the entire agreement period. It is a case of hiring of equipment. Therefore, keeping in view the guidelines of Hon'ble Supreme Court in the case of Bharat Sanchar (8) ST/20380/2014 Nigam Ltd Vs UOI (supra), all the conditions cannot be said to have been satisfied so as to consider this transaction as transaction of deemed sale and in view of the same, we cannot agree with the submissions of the appellant that it is a case of deemed sale.
13. In view of the same, we find that the transaction is that of SOTG service and not of deemed sale. Accordingly, the appeal is devoid of merit and is accordingly, dismissed.
(Pronounced in the Open Court on 10.10.2025)
(A.K. JYOTISHI)
MEMBER (TECHNICAL)
(ANGAD PRASAD)
Veda MEMBER (JUDICIAL)