Hospital wins appeal on service tax liability for retained doctor fees under infrastructure support arrangements

CESTAT Ahmedabad ruled in favor of appellant hospital regarding service tax liability on amounts retained from doctor fees for infrastructure support. The tribunal held that such retained amounts are not liable for service tax, citing established precedents. Additionally, despite appellant's procedural lapse in not providing intimation for opting Rule 6(3A), the demand under Rule 6(3) was unsustainable since the correct amount was paid under Rule 6(3A). The tribunal emphasized that mere procedural non-compliance cannot justify demand when substantive compliance exists. The impugned order was set aside and appeal allowed.

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Issues Involved:
1. Liability of service tax on the amount retained by the appellant from doctor fees for infrastructure support.
2. Demand under Rule 6(3) of Cenvat Credit Rules due to non-compliance with Rule 6(3A) procedure.
3. Whether the demand is time-barred.

Summary:

Issue 1: Liability of Service Tax on Retained Doctor Fees
The Tribunal examined whether the appellant is liable to pay service tax on the amount retained from doctor fees for infrastructure support. Citing several judgments, including Sir Ganga Ram Hospital (2020) and others, it was established that the arrangement between hospitals and doctors for shared infrastructure does not constitute a taxable service. The Tribunal concluded that the retained amount is not liable to service tax as it is part of a joint benefit arrangement for providing healthcare services, which are exempt from service tax under various notifications and the negative list regime.

Issue 2: Demand under Rule 6(3) for Non-compliance with Rule 6(3A) Procedure
The Tribunal addressed whether the demand for Cenvat credit is sustainable under Rule 6(3) due to non-compliance with the procedure prescribed under Rule 6(3A). It was found that the appellant had correctly paid the amount required under Rule 6(3A) but failed to give intimation to the department. The Tribunal, referencing judgments such as Cranes & Structural Engineers (2017) and Emami Limited (2023), held that procedural lapses do not invalidate the substantive compliance of reversing the credit. Therefore, the demand on this count is not sustainable.

Issue 3: Time-barred Demand
Regarding the issue of whether the demand is time-barred, the appellant argued that there was no suppression of facts or mis-declaration. The Tribunal, while not delving deeply into this issue due to the decision on merits, noted that the demand is not sustainable based on the substantive compliance of Rule 6(3A).

Conclusion:
The Tribunal set aside the impugned order, concluding that the demand for service tax on retained doctor fees and the demand under Rule 6(3) for procedural non-compliance are not sustainable. The appeal was allowed.

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