Custom, Excise & Service Tax Tribunal
O P Jindal Institute Of Cancer And ... vs Rohtak on 16 October, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 55443 of 2014
[Arising out of Order-in-Original No. 12/ST/COMMR/DM/RTK/2014-15 dated
31.07.2014 passed by the Commissioner of Central Excise, Rohtak]
O P Jindal Institute Of Cancer And ......Appellant
Research
Model Town, Hisar,
Haryana 125001
VERSUS
Commissioner of Central Excise, Rohtak ......Respondent
SCO No. 6-8 & 10, Sector 1, Huda Martek, Rohtak, Haryana 124001 APPEARANCE:
Ms. Krati Singh, Ms. Shreya Khunteta & Ms. Samiksha Uniyal, Advocates for the Appellant Sh. Anurag Kumar, Authorized Representative for the Respondent CORAM:
HON'BLE Sh. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60579/2024 DATE OF HEARING: 04.07.2024 DATE OF DECISION: 16.10.2024 PER : S. S. GARG The present appeal is directed against the impugned order dated 31.07.2014 passed by the Commissioner of Central Excise Rohtak, whereby the learned Commissioner has confirmed the demand of service tax amounting to Rs.73,88,947/- under proviso to
2 ST/55443/2014 Section 73(1) of the Finance Act, 1994 under the head „Business Support Services (BSS)‟ for the period 2008-09 to 2012-13 along with interest under Section 75 ibid and also imposed penalty of Rs.10,000/- under Section 77 ibid and an equivalent penalty under Section 78 ibid.
2. Briefly stated facts of the present case are that the appellant is registered with the Service Tax department under „Healthcare Services‟ and „Renting of Immovable Property‟. For providing the pathology lab and other diagnostic services in the hospital, the appellant entered into agreements with Dr. Lal Pathlabs Pvt. Ltd., Mangalam Lab, 360 Degrees Healthcare Pvt. Ltd. and Clearview Healthcare Pvt. Ltd. (collectively known as „Diagnostic Service Providers‟ or in short „DSPs‟). Further, as per the agreements, the appellant provides basic amenities such as space, water, electricity etc to DSPs and DSPs are allowed to install and operate their equipments in the appellant‟s premises. DSPs render services to patients within the hospital premises or outside the premises. The appellant and DSPs agree to share the revenue earned by way of rendering diagnostic and other services by DSPs to the patients, in an agreed percentage. DSPs and the appellant reconciled the amount of collections and the administrative charges. Thereafter, DSPs would raise monthly bills on the appellant for their share of revenue. The department initiated an investigation against the appellant alleging that the appellant was rendering „Business Support Services (BSS)‟ under Section 65(104c) read with Section 65(105)(zzzq) of the 3 ST/55443/2014 Finance Act, 1994 to DSPs in lieu of the consideration received in the form of revenue retained by the appellant. On these allegations, the department issued the show cause notice to the appellant proposing the demand of service tax amounting to Rs.82,20,316/- on the ground that the appellant provided BSS by providing infrastructural support services to DSPs. It was also alleged that the revenue retained by the appellant is against the BSS rendered by the appellant to DSPs. The department also invoked extended period of limitation while proposing the demand. After following due process, the Adjudicating Authority vide the impugned order confirmed the demand of service tax amounting to Rs.73,88,947/- under the category of BSS by giving the benefit of cum tax alongwith interest and penalties raised in the show cause notice. Hence, the present appeal.
3. Heard both the parties and perused the material on record. 4.1 The learned Counsel for the appellant submits that the impugned order is not sustainable in law and is liable to be set aside as the same has been passed without properly analyzing the agreements produced on records and without following the binding judicial precedents.
4.2 The learned Counsel further submits that the appellant is not providing any service to DSPs and as per the agreements, the appellant and DSPs have agreed for a revenue sharing model on principal-to-principal basis wherein they share the revenue generated 4 ST/55443/2014 from the diagnostic services provided to the patients by DSPs with the help of infrastructure and other facilities provided by the appellant in an agreed percentage.
4.3 She further submits that the agreements which are placed on record provide for revenue sharing in agreed percentage. The entire amount received by the appellant in respect of the services rendered by DSPs is booked under the laboratory charges and share of the DSPs is debited after DSPs raises the monthly bill as per agreed rates. She places reliance on Circular No. 109/03/2009-ST dated 23.02.2009 which clarifies that when two contracting parties enter into revenue sharing arrangement then both parties act on principal- to-principal basis and there is no provision of service amongst the parties.
4.4 She further submits that the appellant and DSPs have formed a joint venture with common intention of providing the healthcare services to the patients. The „joint-venture or co-venture‟ is a term used very widely and understood to mean an intention to do business with a mutual gain. In order to constitute a joint venture, there must be a contractual arrangement with an objective of undertaking common enterprise. She submits that in the instant case, the appellant and DSPs have agreed to a revenue sharing arrangement on principal-to-principal basis to further their mutual interests of providing healthcare services to the patients. She relies on the 5 ST/55443/2014 following cases wherein it has been held that there is no provision of service in the revenue sharing arrangements:
Mormugao Port Trust vs. CCE - 2017 (48) STR 69 (Tri. - Mum.) [Affirmed in 2018 (19) GSTL J118 (Supreme Court)] M/s Fazilka Coop Sugar Mills Ltd. vs. Commissioner of Central Excise, Chandigarh-II - 2024 (3) TMI 1231
- CESTAT Chandigarh M/s Sikri Multiplex Cinema (P) Ltd. vs. Commissioner of CGST, Ludhiana - 2024 (6) TMI 582 - CESTAT Chandigarh-LB SJS Healthcare Limited v. Commissioner of Central Excise & Service Tax, Ludhiana - 2024 (4) TMI 300 - CESTAT Chandigarh Aashlok Nursing Home Pvt. Ltd. vs. Principal Commissioner of Central Excise & Service Tax, Panchkula - 2024 (5) TMI 888 - CESTAT New Delhi M/s Jaipur Golden Hospital vs. Commissioner, Service Tax-Delhi III, 2023 (3) TMI 693 - CESTAT New Delhi Apollo Hospitals International Limited vs. CCE & ST - Ahmedabad-III - 2023 (12) TMI 953 - CESTAT Ahmedabad M/s Maharaja Agrasen Hospital Charitable Trust vs. CST Delhi-III - 2023 (1) TMI 391 - CESTAT New Delhi M/s Sir Ganga Ram Hospital vs. Commissioner of Service Tax, New Delh - 2020 (43) G. S. T. L. 390 (Tri. - Del.) M/s Sir Ganga Ram Hospital, Bombay Hospital & Medical Research Centre, Appollo Hospitals, M/s Max Health Care Institute Ltd vs. CCE Delhi-I, CCE & ST Indore, CCE & ST Raipur, CST, New Delhi and CST, Delhi vs. M/s. Indraprastha Medical Corporation Ltd.
- 2018 (11) G. S. T. L. 427 (Tri. - Del.)
6 ST/55443/2014 KPH Dream Cricket Pvt. Ltd. vs. CCE & ST, Chandigarh-I (vice-versa) - 2020 (34) G.S.T.L. 456 (Tri.-Chan.) Pala Marketing Co-Operative Society Ltd vs. Commissioner of Central Excise, Customs and Service Tax - 2017 (6) TMI 859 - CESTAT Bangalore 4.5 She further submits that if any service is rendered in the instant case, then the same is rendered by DSPs to the appellant and not by the appellant to DSPs. The patients approach the appellant‟s hospital by its name for availing the healthcare services. In the instant case, the appellant has provided the area on the premises of the hospital to DSPs for installing their equipment so that the diagnostic services can be provided to the patients. The reports of such diagnostic services are also issued in the name of the appellant. The billing for such services is also done by the appellant. Further, there is no consideration flowing from DSPs to the appellant for the alleged provision of services under BSS. In nutshell, the provision of diagnostic services by DSPs is part of the appellant‟s venture of providing the healthcare services. Hence, the appellant cannot be said to provide any service to DSPs.
4.6 She also submits that since the appellant and DSPs are acting on principal-to-principal basis, there is no provision of service by the appellant to DSPs and hence, question of levying the service tax does not arise.
4.7 Further, the ld. Counsel took us through the definition of „Business Support Services‟ as provided in Section 65(104c) of the 7 ST/55443/2014 Act. She submits that in the impugned order, the department has confirmed the demand of service tax under the head BSS alleging that the appellant is rendering infrastructural support services to DSPs as the appellant provided space on its premises and other amenities such as security, housekeeping, air conditioning, internal intercom lines, garbage disposal etc to DSPs to enable them to provide diagnostic services.
4.8 She also refers to the definition of „Infrastructural Support Services‟ to show that the said definition seeks to include services, for example, office utilities like intercom services, ensuring proper response to visitors and other facilities attached to the office. Hence, these services are required to be provided within the office. She submits that in the instant case, the appellant has allowed DSPs to set up their equipments in its premises and provides basis amenities like security, intercom, housekeeping etc to DSPs in order to provide the diagnostic services to the patients coming to the hospital. The appellant directly charges the patients and share the revenue with DSPs in agreed ratios. Further, the basic amenities such as water, electricity, sewage, garbage disposal etc are part and parcel for inhabiting any premises. Therefore, these services cannot be construed as support services. In this regard, she relies on the following case-laws wherein in similar placed transactions, it has been held that service tax is not payable under BSS:
8 ST/55443/2014 CCE & ST, Panchkula, Delhi-IV vs. Alchemist Hospital Limited, Artemis Medicare Services Limited (Vice-
Versa) - 2019 (3) TMI 1331 - CESTAT Chandigarh M/s Fortis Healthcare (India) Limited vs. CCE & ST, Chandigarh-I - 2019 (9) TMI 462 - CESTAT Chandigarh M/s Ivy Health & Life Sciences Pvt. Ltd. vs. CCE, Chandigarh-II/Ludhiana - 2019 (4) TMI 178 -
CESTAT Chandigarh M/s Gujarmal Modi Hospital & Research Centre for Medical Sciences vs. CST, Delhi-II - 2019 (1) TMI 378 - CESTAT New Delhi 4.9 The ld. Counsel further submits that the primary venture of establishing and running the hospital is that of the appellant. DSPs are merely provided a space in the appellant‟s premises to render the diagnostic services to the patients. The patients approach the appellant based on its name for availing the diagnostic services. The consideration in respect of the diagnostic services flows from the patients to the appellant who further share the same with DSPs in agreed percentage.
4.10 She also refers to a clarificatory instruction D.O.F. No. 334/4/2006-TRU dated 28.02.2006 which clarifies that the intention behind introducing BSS was to tax the services outsourced by business entity to the third party. Further, Circular dated 23.02.2009 also clarifies that the provision of independent services does not fall within the scope of BSS.
4.11 She further submits that the appellant is running a hospital for providing healthcare services to public and the diagnostic services 9 ST/55443/2014 provided by DSPs are an integral part of such healthcare services provided by the appellant. The appellant and DSPs both are jointly providing the healthcare services to the patients. She also submits that the healthcare services were out of the tax net till 25.04.2011 and w.e.f. 25.4.2011, the healthcare services were exempted by virtue of Notification No. 30/2011-ST dated 25.04.2011. Further, w.e.f 01.07.2012, healthcare services provided by clinical establishment have been exempted by the virtue of Notification No. 25/2012-S.T. dated 20.06.2012. Therefore, the healthcare services provided by the appellant are not exigible to service tax. 4.12 As regards extended period of limitation, the ld. Counsel submits that the appellant has not suppressed any material facts from the department and the earnings of the appellant from the revenue sharing model agreed with DSPs was recorded in the balance sheets and the department was in the knowledge of the same. Further, the appellant was under a bona fide belief that it is not liable to pay service tax under BSS. The present case also involved the interpretation of complex issues; hence, extended period of limitation cannot be invoked. In this regard, she places reliance on the following decisions:
The Commissioner, Central Excise and Customs and Anr. vs. M/s Reliance Industries Ltd. and Commissioner of Central Excise and Service Tax vs. M/s Reliance Industries Ltd. - 2023-TIOL-94- SC-CX Mahanagar Telephone Nigam Ltd. vs. Union of India and Ors. - 2023-TIOL-407-HC-DEL-ST 10 ST/55443/2014 4.13 As regards the demand of interest and penalty, the ld.
Counsel submits that when the demand of service tax itself is not sustainable, then the question of interest and penalty does not arise.
5. On the other hand, the learned AR for the Revenue reiterates the findings of the impugned order. He has also filed the written submissions rebutting the appellant‟s arguments. He further submits that from the agreements and the definition of „Support Service of Business or Commerce‟, it is clear that the appellant has provided infrastructural support, which is constituted as a „support service‟ under the category of „Support Service of Business or Commerce‟. He further submits that as per the agreement, revenue sharing is done where the hospital retained a portion of fees collected from patients for services provided by the DSPs and this retention was deemed as consideration received indirectly for the infrastructural support provided. He also justifies the invocation of extended period on the ground that the appellant suppressed the material facts from the department and the same was detected during the audit.
6. We have considered the submissions made by both the parties and perused the material on record; and have also gone through the various judgments relied upon by the appellant. We find that the only issue involved in the present case is whether the appellant is liable to pay service tax under the category of „Support Service of Business or Commerce‟ as defined under Section 65(104c) read with Section 65(105)(zzzq) of the Finance Act, 1994 to the DSPs by providing 11 ST/55443/2014 them infrastructure, equipments, facilities and administrative support. For deciding this issue, it is essential to reproduce the definition of „Support Service of Business or Commerce‟, which is reproduced herein below:
"Section 65(104c) : "support services of business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, [Operational or administrative assistance in any manner], formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
[Explanation -- For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security;] Section 65(105)(zzzq) : to any person, by any other person, in relation to support services of business or commerce, in any manner;"
7. Further, we have also seen the terms and conditions of various agreements entered into by the appellant and the various DSPs, which are produced on record. All the agreements provide in details the revenue sharing between the parties out of the total receipts collected from the patients for all the tests conducted by the DSPs. The department entertained the view that the infrastructural support service provided by the appellant to various DSPs is tantamount to the service under "Support Service of Business or Commerce" and 12 ST/55443/2014 therefore, the appellant is liable to pay service tax on that. Further, perusal of the agreements between the parties clearly shows that the contracts between the appellant and various DSPs are on principal-to- principal basis and are in the nature of sharing-revenue. As per the contracts, the appellant is required to provide infrastructure and DSPs are required to install their equipments; and the revenue earned from the patients is shared between the appellant and the DSPs and no taxable service is being provided by the appellant to DSPs. Here, it is pertinent to extract the relevant clauses of such agreements with regard to sharing of revenue. The relevant clauses of one of the contracts with one of DSPs, Dr. Lal Pathlabs Pvt Ltd („LPL‟), is reproduced herein below:
"Revenue Sharing:-
"The Hospital" and LPL will share the net revenue as below. Net Revenues for this purpose means all revenues earned out of pathology tests of the hospital subject to discounts, rebates etc. In respect of the work referred by the Hospital and are carried out at the lab in the hospital itself as per the attached Annexure C, LPL and the Hospital will share revenue in the proportion of 50:50.
In respect of the work referred by the Hospital and are carried out at any other Lab of LPL (Annexure E) LPL and the Hospital will share revenue in the proportion of 75:25.
In respect of samples collected from corporate, camps, referral doctors, insurance companies, hospitals and any other networking of LPL and performed in the LPL lab inside the Hospital premises, LPL and the Hospital will share revenue in the proportion of 95:5. This will also be applicable to tests sent outside India.
13 ST/55443/2014 The revenue in respect of work referred to by the Hospital shall be collected by the Hospital and LPL will collect revenue for the balance work. The accounts in respect of the Revenues collected by the Hospital will be audited by the LPL at its own cost and the Hospital hereby agrees to make available such audited accounts to LPL for reconciliation to determine the mutual shares. The Revenues shall be shared on a monthly basis. As per details given by the Hospital, the yearly net revenues at present is Rs. 1.6 cr. which has been taken as basis for arriving at the above mentioned revenue share. The hospital will help LPL and try to make sure that at least this revenue is generated out of the pathology lab. Any deviation beyond 10% on lower side will attract a revision of the revenue sharing clauses mutually.
The Hospital will be responsible for all cash collections for the tests referred by the Hospital The Hospital will allow LPL to perform tests of samples collected from the network other than the Hospital in the LPL lab situated inside the hospital premises." The perusal of above clauses reveals that there is absolutely no stipulation of payment of any service charges by the DSPs to the appellant and the contract is purely for sharing of revenue.
8. We also find that the Circular No. 109/03/2009-ST dated 23.02.2009 relied upon by the appellant also recognizes that the transactions between two contracted parties on principal-to-principal basis are not to be treated as service. Though the circular was issued in context of levy of service tax on movie theaters, but the context is applicable in the present case also, because in the present case, the appellant and the DSPs are dealing with each other on principal-to- principal basis.
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9. We also find that as per the terms of the contracts, the appellant has allowed the DSPs to install their equipments and machines and operate their respective centers in the hospital. In fact, diagnostic services are provided by the Hospital through the patients using the expertise and machinery of the DSPs. All reports of such diagnostic services are issued under the name of the Hospital. Further, the billing of such services is also done by the appellant‟s Hospital to the patients directly. Further, the entire revenue from the diagnostic centers is accounted for in the books of account as „revenue of the appellant‟ and the appellant pays for the services provided by the DSPs to the appellant after retaining its own percentage. It clearly shows that the service, if any, has been provided by DSPs to the appellant and not by the appellant to DSPs.
10. We also note that it is the appellant who established the Hospital and providing healthcare services to the patients and DSPs are, in fact, a part of the appellant as a joint venture who are providing diagnostic services to the patients; it is the patient, who is ultimate recipient and beneficiary of medical services in the appellant‟s Hospital. In fact, the Hospital provides the healthcare services to the patients and whenever any diagnostic service is required, the appellant and DSPs jointly provide the same to the patients. The revenue flow from the patients to the appellant which is shared by the appellant with DSPs as per the contract.
15 ST/55443/2014
11. Further, we are of the view that mere providing of a building alongwith some basic amenities like electricity, water, sewage etc cannot be qualified as „support service‟ for running a business. These facilities are provided to the DSPs to enable them to provide the services to the appellant; and without these facilities, DSPs would not be in the position to provide the service to the appellant. We also note that it is the appellant who is engaged in running the Hospital for providing the healthcare services to public and the diagnostic services provided by the DSPs are an integral part of such healthcare services provided by the appellant. Healthcare services are fully exempted from the tax w.e.f. 25.04.2011 vide Notification No. 30/2011-ST dated 25.04.2011. This notification was rescinded w.e.f. 01.07.2012, but healthcare services are not liable to service tax in the negative list regime also.
12. We also find that the case-laws relied upon by the appellant regarding the revenue-sharing arrangement clearly held that if there is a revenue-sharing arrangement on principal-to-principal basis to further their mutual interest of providing healthcare services to the patients, then no service tax can be levied.
13. Further, we are of the view that in the present case the service, if any, rendered by the appellant are not „BSS‟ and rather qualifies as „Healthcare Service‟ which is exempted from service tax.
14. As regards the invocation of extended period of limitation, we are of the view that the appellant has not suppressed any material 16 ST/55443/2014 facts with intent to evade payment of tax and the entire earning of the appellant from the revenue-sharing modal was recorded in the balance-sheet, which is a public document. Moreover, the appellant was under a bona fide belief that healthcare services are not liable to service tax and the issue involved is that of interpretation; hence, extended period of limitation cannot be invoked. Therefore, substantial demand raised for the period 2008-09 to September 2011 is barred by limitation. Since the demand itself is not sustainable, therefore, the question of interest and penalty also does not arise.
15. In view of our discussion above, we are of the considered view that the impugned order is not sustainable in law and therefore, we set aside the same by allowing the appeal of the appellant with consequential relief, if any, as per law.
(Order pronounced in the court on 16.10.2024) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) RA_Saifi