2023 (6) TMI 898 - AT - Service Tax

Tax Appeal Tribunal Rules Bariatric Surgery Not Cosmetic

M/s Mohak Hi-Tech Speciality Hospital Versus Commissioner of Central Goods & Service Tax and Central Excise, Indore (MP)

The Tribunal allowed the appeal in favor of the appellant, setting aside the Commissioner's order confirming the tax demand for the period in question. ... Nature of activity - bariatric surgery - To be classified as cosmetic surgery or plastic surgery - HELD THAT:- The issue involved in this appeal has been decided in favour of the appellant in the appellant’s own case in M/S. MOHAK HI TECH SPECIALITY HOSPITAL VERSUS PRINCIPAL COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, INDORE MP [2020 (11) TMI 152 - CESTAT NEW DELHI] for the period 01.11.2011 to 31.03.2015. Bariatric surgery performed by the appellant on patients suffering from morbid obesity coupled with life-taking diseases like Type-II diabetes and Hypertension, arthritis, lipid disorder or obstructed sleep apnea or disease of a like nature, cannot not be subjected to service tax under section 65(105)(zzzzk) of the Finance Act. The present proceedings arise out of the show cause notice for the subsequent period from 01.04.2015 to 31.03.2016 - Appeal allowed. Issues involved: The issue involved in this appeal is whether bariatric surgery performed by the appellant would be classified as cosmetic surgery or plastic surgery for taxation under section 65(105)(zzzzk) of the Finance Act, 1994.Details of the judgment:Issue 1: Classification of bariatric surgery The appellant, part of a hospital, claimed to perform bariatric surgery on morbidly obese individuals with associated medical conditions. The surgery involves various methods like folding & stitching, fat removal, stomach cutting, insertion of outer bodies, or stomach bonding. The appellant argued that bariatric surgery is aimed at treating obesity and related ailments, not for cosmetic purposes. The surgery is performed based on specific criteria like a Body Mass Index above 32.5 with co-morbidities, following international guidelines. The appellant contended that since the surgery is medically necessary, it should not be classified as cosmetic or plastic surgery.Issue 2: Show cause notice and tax demand A show cause notice was issued to the appellant for not paying service tax on surgeries performed to cure obesity, alleging that they fell under cosmetic or plastic surgery as per the Finance Act. The surgeries were claimed to be solely for weight reduction without relation to reconstructive or restorative purposes for body defects or diseases. The Commissioner upheld the demand for service tax along with penalties and interest.Issue 3: Legal precedent and decision The appellant cited a previous case in their favor to support their argument. The Department did not dispute this fact. Based on the precedent and reasoning from the earlier case, the Tribunal set aside the Commissioner's order confirming the tax demand for the period in question (01.04.2015 to 31.03.2016). The appeal was allowed in favor of the appellant.This judgment clarifies the classification of bariatric surgery for taxation purposes, emphasizing the medical necessity and purpose of the surgery in treating obesity and associated health conditions rather than being considered cosmetic or plastic surgery.