The Chandigarh Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT) has held that if there is a revenue-sharing arrangement on principal-to-principal basis to further the mutual interest of providing healthcare services to the patients, then no service tax can be levied.
The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed 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 360 Degrees Healthcare Pvt. Ltd. and Clearview Healthcare Pvt. Ltd. (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.
Table of Contents
Background
The appellant/assessee 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. (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 topatients 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.
The 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 Finance Act, 1994 to DSPs in lieu of the consideration received in the form of revenue retained by the appellant.
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 periods of limitation while proposing the demand. After following due process, the Adjudicating Authority confirmed the demand of service tax under the category of BSS by giving the benefit of cum tax alongwith interest and penalties raised in the show cause notice.
Arguments
The appellant contended 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 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.
The appellant contended that 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.
The department contended 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‟.
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. 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.
Conclusion
The tribunal held that the 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.
The CESTAT held that the service, if any, rendered by the appellant are not “BSS‟ and rather qualifies as “Healthcare Service‟ which is exempted from service tax.
Read More: No Service Tax On Reimbursable Expenses Towards Advisory Services To Group Companies: CESTAT
Case Details
Case Title: O P Jindal Institute Of Cancer And Research v/s Commissioner of Central Excise, Rohtak
Case No.: Service Tax Appeal No. 55443 of 2014
Date: 16.10.2024
Counsel For Appellant: Krati Singh
Counsel For Respondent: Anurag Kumar
