2018 (7) TMI 1127 - AT - Service Tax

Tribunal upholds service tax demand under BSS, sets aside MMR demand, partly allows appeal

The Tribunal upheld the demand for service tax under Business Support Services (BSS) and the respective interest and penalties but set aside the demand ... Diagnostic centres services - arrangement with the doctors - activity in the nature of Renting of Immovable Property Services or not - Held that:- It is the appellant who shall be employing its own staff for billing and receiving the payment at such rate as to be decided by the appellant. Thereafter such percentage of the Revenue as collected shall be given to the diagnostic centre as mentioned in the respective agreement - The bare perusal of these terms and conditions makes one thing clear that there is no element of rent is involved in the transaction between the appellant and diagnostic centre - demand do not sustain. Business Support Service - facilitation of customer relationship to the diagnostic centres by employing their own staff to collect the amount from the patients against the diagnostic services to be received by them but to be provided by the diagnostic centres in the appellants premises - whether same can be classified to be held as Business Support Service, as alleged - Held that:- The fact remains is that in the given arrangements/agreements with the diagnostic centres the appellant is not providing any health service. It is merely collecting money on behalf of the diagnostic centres for providing them the number of patients. Hence, the share of revenue so collected in the hands of the appellant cannot be categorized as a consideration for rendering the health service to the patients - there is no role of the appellant for providing diagnostic health services to the patients except retaining revenue share on that pretext - considerations received undoubtedly is for such activities as are enumerated in the definition of the BSS - Demand under BSS upheld. Management Maintenance & Repair Services - Held that:- As apparent, the agreement of the appellant with the FCs is to provide basic amenities as water, electricity, air-conditioning, power back-up etc. It is also apparent that appellant while allowing the FCs to operate in its premises, it charges a fixed amount and also receives a fixed percentage from the sale of these FCs. The activity is opined to not to fall under definition of MMR in Section 65 (64) of the Act - the demand of service tax as levied vide SCN dated 30.01.2015 for rendering Management, Maintenance & Repair Services is hereby set aside. Appeal allowed in part. Issues Involved:1. Classification of services provided to diagnostic centers as Business Support Services (BSS).2. Classification of services provided to food courts as Management, Maintenance, and Repair Services (MMR).3. Imposition of interest and penalties.Detailed Analysis:1. Classification of services provided to diagnostic centers as Business Support Services (BSS):The appellant, a hospital, outsourced diagnostic services to three diagnostic centers and entered into agreements allowing these centers to install and operate their equipment on the hospital premises. The diagnostic centers reimbursed the appellant for electricity and water usage and shared revenue, with the hospital retaining 25%. The Department categorized this arrangement as Business Support Services (BSS) under Section 65 (105) (r).The Tribunal examined the agreements and found that the hospital provided infrastructural support, including space, billing, and payment collection services, to the diagnostic centers. The Tribunal concluded that this arrangement fell under BSS as defined in Section 65 (104) (c) and Section 65 (105) (zzzq) of the Finance Act, 1994. The hospital's revenue share was deemed consideration for providing infrastructural support, not health services. The Tribunal upheld the demand for service tax under BSS, rejecting the appellant's argument that the revenue share was for exempt health services.2. Classification of services provided to food courts as Management, Maintenance, and Repair Services (MMR):The appellant provided basic amenities like water, electricity, air-conditioning, and power backup to food courts on its premises, charging a fixed amount and a percentage of sales. The Department categorized this arrangement as Management, Maintenance, and Repair Services (MMR).The Tribunal observed that the appellant was already discharging its liability under Renting of Immovable Property Services since 01.06.2007. The Tribunal referred to the case law Aravali Construction Company Pvt. Ltd. vs. CCE, Jaipur, and concluded that the arrangement did not fall under MMR as defined in Section 65 (64) of the Act. The Tribunal set aside the demand for service tax under MMR for Rs. 1,84,913/-.3. Imposition of interest and penalties:The Tribunal upheld the imposition of interest and penalties, stating that the appellant, being a significant health service provider, could not claim ignorance of the law. The Tribunal opined that the non-deposition of tax, relying on the exemption for health services, was a deliberate act to evade tax.Conclusion:The Tribunal upheld the demand for service tax under Business Support Services (BSS) and the respective interest and penalties but set aside the demand under Management, Maintenance, and Repair Services (MMR). The appeal was partly allowed, providing consequential benefits to the appellant.