Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs Family Health Plan on 25 May, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CIRCUIT BENCH AT HYDERABAD Appeal(s) Involved: ST/479/2008-DB, ST/487/2008-DB [Arising out of Order-in-Original No. 8-2008 dated 24/03/2008 passed by CC,CE&ST, Hyderabad] For approval and signature: HON'BLE SHRI JUSTICE G. RAGHURAM, PRESIDENT HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Commissioner of Central Excise, Customs and Service Tax HYDERABAD-II L.B STADIUM ROAD, BASHEERBAGH, HYDERABAD, - 500004 ANDHRA PRADESH Appellant(s) FAMILY HEALTH PLAN LTD, PLOT NO-25, MCH NO-8-2-334, ROAD, NO-3, AZAM COLONY BANJARA HILLS,. HYDERABAD,(A.P) Appellant(s) Versus FAMILY HEALTH PLAN 3RD FLOOR, ADITYA JR TOWERS ROAD, NO-2, BANJARA HILLS, HYDERABAD, ANDHRA PRADESH Respondent(s)
Commissioner of Central Excise, Customs and Service Tax HYDERABAD-II L.B STADIUM ROAD, BASHEERBAGH, HYDERABAD, - 500004 ANDHRA PRADESH Respondent(s) Appearance:
Shri G. Natarajan, Advocate SWAMY ASSOCIATES G-8, FORTUNA ICON APARTMENTS, JODIDHAR ASWATHAPPA FARM, BEHIND NAGARJUNA, SAHAKAR NAGAR, BANGALORE - 560092 KARNATAKA For the assessee Shri L. Dandem, Authorised Representative For the Revenue Date of Hearing: 25/05/2015 Date of Decision: 25/05/2015 CORAM:
HON'BLE SHRI JUSTICE G. RAGHURAM, PRESIDENT HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER Final Order No. 21265-21266 / 2015 Per : B.S.V. MURTHY M/s. Family Health Plan Ltd. (FHPL), the appellant, is registered for payment of service tax under the category of Insurance Auxiliary Service. On the basis of investigations conducted, it was observed that appellant was rendering Business Auxiliary Service(BAS) to various customers and were not paying the tax. This was on the basis that appellant has received certain amounts under the heads discounts, healthcare, receipts and self-funded schemes. In all these cases, they have not paid service tax on the consideration received. Accordingly proceedings were initiated and after completion of due process, demand for service tax of Rs.2,15,63,970/- with interest was confirmed for the period from August 2002 to March 2006. An amount of Rs.16,29,562/- was demanded towards BAS from August 2002 to March 2006.
2. There is no dispute about confirmation of demand for service tax on Insurance Auxiliary Service and the entire amount of tax along with interest has been paid and it is their claim that approximately an amount of Rs.4.5 lakhs was paid in excess of the liability.
3. The appellant functioned as a 3rd party administrator between insurance companies and the hospitals. Appellants follow up with various insurance companies on behalf of the hospitals in settling the bills for the services provided to the insured persons. For the services provided to get claims settled and the hospitals, the appellants are also paid by the hospitals and it is the contention of the Department that this amount from the hospitals is liable to tax under the head discounts.
4. It was submitted by the learned counsel that this service cannot be considered as insurance auxiliary service. The period covered in the show-cause notice is upto March 2006 and during the relevant period, the definition of insurance auxiliary service means any service provided to a policy holder or insurer by an actuary or an intermediary or insurance intermediary or an insurance agent in relation to insurance auxiliary services concerning general insurance business. The definition was amended and the words policy holder was replaced by words policy holder or any person w.e.f. 01/05/2006. Therefore during the period prior to 01/05/2006, service provided to a policy holder, insurer including reinsurer was only liable to service tax and the amount received by the appellant is for the service provided to the hospitals. Therefore during the relevant appellant was not liable to pay tax at all. We find this submission to be valid since the service provided to insurer or policy holder was only liable to tax prior to 01/05/2006.
5.1. The nex demand has arisen on the ground that amounts received as healthcare receipts/self-funded schemes are liable to tax as BAS. The healthcare receipts is the amount received for service provided by the appellants to corporate clients such as advise, monitoring, implementing, verifying claims received from the hospitals and submitting various reports to the client. This is the service which is limited to the healthcare of the employees of corporate clients. The second item which is called as self-funded schemes by the appellants is the service rendered by them in implementing a landmark initiative for the farming community handled by the Govt. of Karnataka named as Yeshasvini Co-operative Farmers Health Care Scheme (YCFHCS). This scheme was implemented w.e.f. 01/06/2003. Under the scheme, any farmer who is a member of the co-operative society in Karnataka can get the necessary treatment and for an access to the expensive medical procedure by becoming member of the scheme. The scheme was initiated by Narayana Hrudayalaya, implemented by the Govt. of Karnataka and the appellant was the implementing agency. This is a self-funded scheme and implementation lies with Special Purpose Trust named Yeshasvini Trust of which the appellant is also a part. This is a contributory scheme wherein the beneficiaries contribute a small amount of money every year and beneficiaries were offered cashless treatment in over 135 hospitals in Karnataka. The appellants are providing various service to implementing agencies which are discussed in para 32 of the impugned order. For better appreciation, the same is reproduced below:-
32. The departmental contention is that the receipts under the Head Self-funded Schemes is for providing services to clients, like maintaining data to beneficiaries, assisting to issue identity cards, identification of networking hospitals, processing the request of hospitals for pre authentication, proposed course of treatment, liaisoning with hospitals for smooth implementation of scheme, verifying claims received from hospitals and arranging payments/remittances etc. Further the perusal of the agreement entered in to with Yeshaswini Co-operative Farmers Health Care Scheme (Yeshaswini) makes it clear that according to which M/s.Health, inter alia, are required to maintain data to beneficiaries, assist to issue identity cards, identify networking hospitals, process the request of hospitals for pre-authentication, proposed course of treatment, liaison with hospitals for smooth implementation of scheme, verify claims received from hospitals and arrange payments/remittances etc. Therefore it is the contention of the department that the services as such would fall within the ambit of Business Auxiliary Service as defined under Section 65(19) of the Finance Act, 1994.
5.2. The question that arises is whether the services rendered and discussed above can be treated as taxable services as envisaged under clause (iii) and (vii) of the BAS. For better appreciation, the definition of BAS is reproduced below:
Business Auxiliary Service means any service in relation to, -
i) .. ..
ii) . .
iii) any customer care service provided on behalf of the client; or
iv) . .
v) .
vi) . .
vii) service incidental or auxiliary to any activity specified in sub-clause (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance inventory management, evaluation or development of prospective customer or vendor
viii) 5.3. The service provided by the appellants to corporate clients as submitted is a service limited to the healthcare of the employees of corporate clients. It cannot be said that this service is provided on behalf of a corporate client to the employees. Therefore we agree with the submission that this service is not covered by BAS. As regards Yeshaswini scheme, any member of any co-operative society in the State of Karnataka can become a member of the scheme. None of the parties viz. Govt. of Karnataka or the Trust is doing any business. It cannot be said that members are clients of the Trust or buyers of any service from the Trust. It cannot be said that appellant has provided customer care service or provided service on behalf of the Trust or Govt. of Karnataka. This is a self-funded scheme and the expenses are met from the contributions of the members and Karnataka Govt. etc. and therefore it cannot be said that a BAS is being provided.
5.4. The above discussion would show that appellants have made out a case that demand cannot be sustained. Therefore the appeal is allowed with consequential relief, if any, to the appellant.
6. As regards insurance auxiliary service, the appellants have paid the entire amount with interest and an excess amount of more than Rs.4.5 lakhs has also been paid before the issuance of show-cause notice. Since they have registered and have been paying the tax and have paid the entire amount before the issue of show-cause notice, according to provisions of Section 73 of Finance Act, 1994, penalty under Section 76 is not imposable. As regards the other two demands amounting to Rs.16,29,562/-, we have already held that on merits, the demand is not sustainable. Under the circumstances, penalties under Sections 76 or 78 of Finance Act, 1994 is not imposable on the appellant. Penalty under Section 77 also is not imposable in view of the above observations.
7. Revenue is in appeal seeking revision of rate of penalty under Section 76 of Finance Act, 1994 on the ground that the law was amended. Since we have held that no penalty is liable to be imposed, question of enhancing the penalty or revising the penalty would not arise. Therefore appeal filed by the Revenue cannot be sustained and has to be rejected.
8. In the result, appeal filed by the appellant/assessee is allowed with consequential relief, if any and appeal filed by the Revenue is rejected.
(Operative part of this order pronounced in court on conclusion of the hearing) JUSTICE G. RAGHURAM PRESIDENT B.S.V. MURTHY TECHNICAL MEMBER Raja..
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