2023 (12) TMI 178 - AT - Service Tax

Tribunal Rules Cleaning Services to Govt Hospitals & SEZ Units Exempt from Service Tax; Overturns Prior Decision.

The tribunal set aside the impugned orders regarding service tax liabilities. For Issue 1, it ruled that cleaning services provided to government ... Non-payment of service tax - service provided to G. P. Pant Hospital (GPPH) and Maulana Azad Institute of Dental Sciences (MAIDS) located in New Delhi - benefit of Notification No. 25/2012-ST dated 20.06.2012 (Sr. No. 25) availed - non-payment of service tax in respect of the taxable services provided to M/s Cummins Technology India Ltd. SEZ Unit as well - Services provided to Government, a local authority or a governmental authority - Public health services. Service provided to G. P. Pant Hospital (GPPH) and Maulana Azad Institute of Dental Sciences (MAIDS) located in New Delhi - HELD THAT:- The period of dispute involved in this case is from 2009-10 to 2014-2015. In exercise of the powers conferred under Section 93 of the Finance Act, 1994, the Central Government had issued the Notification No.25/2015-S.T. dated 20.06.2012 in exempting various taxable services from payment of Service Tax. The two hospitals in this case viz., GPPH and MAIDS are run by the Government of N.C.T. We have examined the agreements entered into between the Appellant and G. B. Pant Hospital, Government of N.C.T., New Delhi. Such agreement was entered into by the service recipient on behalf of the President of India, meaning thereby that the said hospital is a Government Hospital. Since, the appellant is a provider of the taxable service, and has provided services to the government authority, such services were exempted in view of the Notification dated No.25/2015-S.T. dated 20.06.2012. However, for the subsequent period w.e.f. 11.07.2014, there was confusion inasmuch as the phrase provision of service to the Government was not specifically finding place in such amended Notification. The recipient of service in this case since is a Government body, the services provided by the Appellant, should also be considered for exemption in terms of both the un-amended Notification dated 11.07.2014 and the subsequent Notification dated 11.07.2014. Services provided by the Appellant to M/s Cummins Technology India Ltd - HELD THAT:- It is an undisputed fact that such unit is located in the Special Economic Zone (SEZ). In respect of claiming exemption for payment of service tax on the services provided to SEZ Unit/Developer, the Notification No. 09/2009-S.T. dated 03.03.2009 as amended, in explicit terms provides that the services provided to the SEZ should be considered to grant of the benefit of exemption - In the case in hand, since the appellant had in fact provided the services to an unit of SEZ unit, in our considered view the benefit of the exemption provided under the Notification dated 03.03.2009 should also be available. Thus in this connection, there are no merits in the impugned order passed by the learned Commissioner (Appeals). The impugned order passed by the learned Commissioner (Appeals) is set aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether services provided by a taxable service provider to hospitals run by the Government of N.C.T. qualify for exemption under Notification No.25/2012-ST (Sr. No.25) and its substituted text as per Notification No.06/2014-ST dated 11.07.2014. 2. Whether services provided by a taxable service provider to a unit located in a Special Economic Zone (SEZ) qualify for exemption under Notification No.09/2009-ST dated 03.03.2009 (as amended). ISSUE-WISE DETAILED ANALYSIS Issue 1: Exemption for services provided to Government hospitals under Notification No.25/2012-ST and its substitution Legal framework: The exemption entry at Sr. No.25 of Notification No.25/2012-ST dated 20.06.2012 exempts 'Services provided to Government, a local authority or a governmental authority by way of (a) water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation; or ...'. This entry was subsequently substituted by Notification No.06/2014-ST dated 11.07.2014 (w.e.f. 11.07.2014) to read: '(a) carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation or'. Precedent treatment: No prior judicial or statutory precedent was relied upon or applied in the judgment; statutory text and administrative clarification were the primary sources. Interpretation and reasoning: The Court examined the agreements and factual matrix showing the service recipients are Government-run hospitals (contracts executed on behalf of the President of India). The Tribunal noted literal inconsistency/ambiguity introduced by the 11.07.2014 substitution, which does not explicitly restate 'services provided to Government.' To resolve this ambiguity, the Tribunal relied on a Ministry of Finance communication (D.O.F. No.334/15/2014-TRU dated 10.07.2014) clarifying that the amendment was intended to make the exemption more specific and that 'services by way of water supply, public health, sanitation conservancy, solid waste management or slum improvement and up-gradation will continue to remain exempted' when provided to Government or local authorities; the exemption was not intended to be extended to unrelated services (e.g., consultancy) not directly connected with the specified activities. Applying that clarification to the agreements and the nature of services, the Tribunal held the services provided to the Government hospitals fall within the exemption scope both prior to and after the substitution. Ratio vs. Obiter: Ratio - The Tribunal's holding that services provided to Government hospitals carrying out functions in relation to public health and sanitation are exempt under Sr. No.25 of the Notification, taking into account the statutory text and the administrative clarification, is a dispositive ratio on the exemption claim. Obiter - Observations about the general non-extension of the exemption to consultancy or unrelated services are explanatory but align with the administrative clarification and are ancillary to the decision. Conclusions: The Tribunal concluded that the adjudged service tax demands for services provided to Government hospitals are not sustainable and must be set aside; the exemption under the notification applies to those services for the relevant periods, including after the 11.07.2014 substitution, in light of the Ministry's clarificatory instruction. Issue 2: Exemption for services provided to SEZ unit under Notification No.09/2009-ST Legal framework: Notification No.09/2009-ST dated 03.03.2009 (as amended) grants exemption for services provided to SEZ Unit/Developer, subject to its terms and conditions. Precedent treatment: No judicial precedent discussed or applied; determination based on statutory notification and undisputed fact of the recipient's SEZ status. Interpretation and reasoning: The Tribunal found as an undisputed factual matter that the service recipient was an SEZ unit. Given the explicit terms of Notification No.09/2009-ST which provide exemption for services provided to SEZ units, the Tribunal held that the appellant is entitled to the benefit of that exemption for services rendered to the SEZ unit. Ratio vs. Obiter: Ratio - The Tribunal's determination that services provided to an SEZ unit qualify for exemption under Notification No.09/2009-ST (as amended) is the operative ratio disposing of that component of the demand. Obiter - There are no material obiter observations beyond the statutory application to the undisputed fact of SEZ location. Conclusions: The Tribunal concluded that the adjudged demands for services provided to the SEZ unit are unsustainable and must be set aside; the appellant is entitled to exemption under the SEZ notification for the relevant period. Relief and disposition (cross-reference) Having found both categories of services (to Government hospitals and to an SEZ unit) exempt under the respective notifications and administrative clarification, the Tribunal set aside the impugned appellate order upholding the service tax demands and allowed the appeals. Cross-reference: Issue 1 and Issue 2 together dispose of the department's confirmed demands for the periods in dispute.