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Issues: (i) whether the services rendered by the appellant were taxable as cosmetic and plastic surgery services or were exempt as healthcare services under the mega exemption; (ii) whether assessment based on the kacha register and best judgment method was sustainable; (iii) whether demand confirmed beyond the scope of the show cause notice could be sustained; (iv) whether cum-tax benefit was admissible; and (v) whether the extended period of limitation could be invoked.
Issue (i): whether the services rendered by the appellant were taxable as cosmetic and plastic surgery services or were exempt as healthcare services under the mega exemption
Analysis: The relevant statutory framework distinguished taxable cosmetic or plastic surgery from healthcare services provided by a clinical establishment, an authorised medical practitioner or paramedics. The services in question included a mixed range of dermatological and trichological procedures, and the record showed that each service had not been separately examined to determine whether it was undertaken for beautification or for diagnosis, treatment or care of illness, injury, deformity or abnormality. The earlier decisions cited showed that the character of each procedure must be tested on its own facts, including the underlying condition treated and the post-treatment care.
Conclusion: The matter required fresh examination item-wise by the adjudicating authority, and the existing classification finding could not be sustained.
Issue (ii): whether assessment based on the kacha register and best judgment method was sustainable
Analysis: The kacha register was only a tentative appointment and estimate record and not the final account of receipts, whereas the audited balance sheet and other records reflected the actual figures. At the same time, the software data was not furnished despite the Department's effort to obtain it from the software owner, which justified resort to best judgment under the statutory scheme. Thus, the kacha register by itself was not a reliable basis for quantification.
Conclusion: Reliance on the kacha register for quantification was rejected, while the use of best judgment assessment was upheld only because the relevant data was not made available.
Issue (iii): whether demand confirmed beyond the scope of the show cause notice could be sustained
Analysis: The show cause notice proposed a specific amount of service tax demand, and the adjudication order confirmed a higher amount without notice for the excess. A demand which exceeds the quantified proposal in the notice is not legally sustainable because the assessee must be put to notice of the precise liability proposed for adjudication.
Conclusion: The excess confirmation beyond the notice amount was held unsustainable.
Issue (iv): whether cum-tax benefit was admissible
Analysis: Service tax is an indirect levy and, where tax is not separately collected, the gross amount received is ordinarily to be treated as inclusive of service tax for working out the taxable value. The record did not show separate collection of service tax from the clients, and the statutory valuation principle therefore required recomputation on a cum-tax basis.
Conclusion: Cum-tax benefit was held admissible.
Issue (v): whether the extended period of limitation could be invoked
Analysis: The assessee had filed returns and maintained audited accounts, and the controversy turned on the character of the services and their proper legal classification. In a dispute centred on interpretation, suppression or wilful misstatement could not be attributed merely because the Department later took a different view, particularly when the relevant information was already on record.
Conclusion: Invocation of the extended period of limitation was rejected.
Final Conclusion: The classification and quantification required fresh adjudication on an item-wise basis, the excess demand could not survive, the assessee was entitled to cum-tax adjustment, and the extended limitation was not available to the Department.
Ratio Decidendi: Where mixed medical and aesthetic procedures are involved, each service must be individually examined to determine whether it is healthcare service or taxable cosmetic or plastic surgery, and in an interpretational dispute with filed returns and available records, extended limitation and unsupported excess quantification cannot be sustained.
Healthcare service classification for mixed medical procedures required item-wise review; excess demand, extended limitation, and cum-tax dispute were addressed.
Mixed dermatological and trichological procedures must be examined item-wise to determine whether each service is healthcare service or taxable cosmetic or plastic surgery; the existing classification could not stand and fresh adjudication was required. Quantification could not rest on the kacha register alone because it was only a tentative record, although best judgment assessment was permissible where relevant software data was not produced. Demand confirmed beyond the specific amount proposed in the show cause notice was unsustainable. Cum-tax adjustment was admissible because service tax had not been separately collected. Extended limitation was not available, as the dispute was one of classification and the filed returns and audited accounts were already on record.
Classification of goods - services as Health care services vis-à-vis Cosmetic and Plastic Surgery - Benefit of Mega Exemption Notification in relation to clinical establishment and authorised medical practitioner - Best judgement assessment - Reliance on provisional or kachcha records - Extended period of limitation and suppression/misstatement - Entitlement to cum-tax benefit - Notification No.25/2012-ST - HELD THAT:- There is no doubt that the appellant is a ‘clinical establishment’ as it provides services or facilities requiring diagnosis, treatment/care for illness, injury, deformity and abnormality. Secondly, the appellant is an ‘authorised medical practitioner’ and the treatments are administered by doctors, who are registered with the Medical Council of India. It is apparent that there is a fine line of distinction in between an activity to be covered either as a cosmetic and plastic surgery or as a Healthcare service. The Commissioner has not examined the true nature of each of the services rendered by the appellant. It is necessary to set out the details of the diagnosis or procedure as well as the post treatment care which may be provided to the patient. The definition of healthcare service although specifically excludes hair transplant or cosmetic or plastic surgery but still covers the same when undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma. Perusal of the impugned order shows that the Commissioner has mainly taken an overall view that these procedures result in physical enhancement and beauty without analysing the respective services. We, therefore, find it appropriate to remand the matter to the adjudicating authority to give reasoned findings on each of the services rendered by the appellant. The appellant was, therefore, directed to show cause as to why service tax be not recovered from them under proviso to Section 73(1) read with Section 66/66B and Section 68 of the Act. We, therefore, hold against the appellant on this submission. The grievance of the appellant for invocation of best judgement assessment under Section 72 needs to be rejected as the pursuant to the enquiry, details/data was sought from M/s. Urenok Software, who owned the software Zenoti, but they refused to furnish and the option available with the Department was to resort to best judgement under Section 72 of the Act. Denial of cum-tax benefit u/s 67(2) - HELD THAT:- We do not find merits in the submissions of the Revenue for the simple reason that the appellant had filed all the ST-3 Returns and maintained the audited accounts. The Department had resorted to best judgement assessment under Section 72, and therefore, in view of the decision of the Tribunal in G.D. Goenka Pvt. Ltd. Vs. Principal Commissioner, CGST [2023 (8) TMI 995 - CESTAT NEW DELHI] the error, if any, was on the part of the officer, who was responsible for the assessment. Further, there is no doubt that the issue is one of interpretation as to whether the service rendered by the appellant would fall under the health care service and would therefore, be entitled to exemption or they would be covered under the cosmetic and plastic surgery leviable to service tax. It is a settled principle of law that where the issue is one of interpretation, the element of suppression or misstatement cannot be attributed on the assessee and therefore, the extended period cannot be invoked. Thus, the Adjudicating Authority is required to recalculate the duty liability, accordingly. For the reasons stated above, the impugned order is hereby set aside. The appeal is allowed by way of remand.