2023 (3) TMI 693 - AT - Service Tax

Hospital's Services to Doctors not Taxable: Tribunal Overturns Tax Demand

M/s Jaipur Golden Hospital Versus Commissioner, Service Tax-Delhi III

The Tribunal held that the hospital's services to doctors did not fall under 'business support service' for service tax purposes. The Tribunal found that ... Levy of service tax - business auxiliary service - appellant engages professional/doctors/ consultants on contractual basis - HELD THAT:- This precise issue had come up for consideration before two Benches of the Tribunal in Ganga Ram Hospital. The first decision rendered on M/S SIR GANGA RAM HOSPITAL, BOMBAY HOSPITAL & MEDICAL RESEARCH CENTRE, APPOLLO HOSPITALS, M/S MAX HEALTH CARE INSTITUTE LTD VERSUS CCE DELHI-I, CCE&ST INDORE, CCE&ST RAIPUR, CST NEW DELHI AND CST DELHI VERSUS M/S INDRAPRASTHA MEDICAL CORPORATION LTD [2017 (12) TMI 509 - CESTAT NEW DELHI] was considered in the subsequent decision in M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI [2020 (11) TMI 536 - CESTAT NEW DELHI]. Paragraphs 5,6,9 and 11 of the first decision rendered by the Tribunal on December 06, 2017 relate to the period before and after July 01,2012. The Tribunal, after a consideration of the conditions prescribed in the agreement held that the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits and, therefore, no service was provided by the hospital to the doctors. The Commissioner was not justified in confirming the demand of service tax under the head 'business support services'. The order dated March 20, 2017, passed by the Commissioner, therefore, cannot be sustained and is set aside - Appeal allowed. Issues Involved:1. Classification of services provided by the hospital to doctors.2. Applicability of service tax under 'business support service'.3. Examination of contractual agreements between the hospital and doctors.4. Precedents and previous decisions on similar issues.Issue-wise Detailed Analysis:1. Classification of Services Provided by the Hospital to Doctors:The core issue was whether the services provided by the hospital to doctors could be classified under 'business support service'. The appellant, a hospital, engaged doctors on a contractual basis and provided them with facilities and administrative support. The show cause notice issued to the appellant alleged that these services constituted 'business support service'.2. Applicability of Service Tax under 'Business Support Service':The Commissioner confirmed the demand for service tax under 'business support service' with penalty and interest. However, the appellant contended that the demand was unjustified, relying on previous Tribunal decisions, particularly in the cases of Sir Ganga Ram Hospital. The Tribunal had previously held that such arrangements were for the joint benefit of both parties with shared obligations, responsibilities, and benefits, and thus, no service was provided by the hospital to the doctors.3. Examination of Contractual Agreements Between the Hospital and Doctors:The Tribunal examined the agreement between the hospital and the doctors, which outlined various terms and conditions, including responsibilities, fees, and operational guidelines. The agreement indicated a mutual benefit arrangement rather than a service provided by the hospital to the doctors. The Tribunal noted that the retained amount by the hospital from the total charges collected from patients was not for providing infrastructural support to the doctors but was part of a revenue-sharing model for healthcare services.4. Precedents and Previous Decisions on Similar Issues:The Tribunal referred to its previous decisions in the cases of Sir Ganga Ram Hospital and others, where it was held that such arrangements did not constitute 'business support service'. It was emphasized that healthcare services provided by clinical establishments were exempt from service tax under various notifications, and the revenue's view that a part of the consideration received should be taxed as 'business support service' was untenable. The Tribunal cited multiple cases, including M/s. Gujarmal Modi Hospital, M/s. Fortis Healthcare, and others, to support its decision.Conclusion:The Tribunal concluded that the Commissioner was not justified in confirming the demand for service tax under 'business support service'. The order dated March 20, 2017, was set aside, and the appeal was allowed. The Tribunal's decision was based on a thorough examination of the contractual agreements and consistent with previous rulings that such arrangements were for joint benefit and did not constitute taxable services under 'business support service'.