2024 (9) TMI 243 - AT - Service Tax

Hospital service charges to medical shops qualify as healthcare services, not taxable business auxiliary services

CESTAT New Delhi held that service charges collected by a hospital from medical shops constitute healthcare services rather than business auxiliary ... Invocation of the extended period of limitation - classification of services - health care services or Business Auxiliary Service - service charges taken by the appellant from the medical shop - HELD THAT:- In the case of M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI [2020 (11) TMI 536 - CESTAT NEW DELHI], the Revenue had alleged that the “collection charges/facilitation fee” retained by the hospital are liable to service tax under the category of “business support services”. The claim of the Revenue was that the hospital had provided infrastructural services to various doctors and the amount retained by the hospital out of the total charges collected from the patients should be considered as an amount for providing infrastructure like rooms and certain other secretarial facilities to the doctors to attend to their work in the appellant’s hospitals was rejected by the Tribunal observing that the appellant’s hospitals are engaged in providing health care services, which can be done by appointing the required professionals directly as employees and same also can be done by having contractual arrangements. There are no necessity to decide the issue of invocation of extended period of limitation or imposition of interest and penalty on the appellant - the demand proceedings against the Appellant hospital are hereby dropped - appeal allowed. Issues Involved:1. Classification of service charges received by the appellant.2. Applicability of service tax on the service charges.3. Invocation of extended period of limitation.4. Imposition of interest and penalty.Issue 1: Classification of Service Charges Received by the AppellantThe primary issue was whether the service charges taken by the appellant from the in-house medical store were covered under 'health care services' and thus exempt from service tax, or if they were collected as 'Commission' and fell under 'Business Auxiliary Service.' The appellant argued that the charges were part of their health care services, which involved preparing and processing mediclaims for patients, including medicine charges from the in-house medical store. The appellant relied on the definitions of 'Clinical Establishment' and 'health care service' under Notification No. 25/2012, asserting that these services were exempt from service tax.Issue 2: Applicability of Service Tax on the Service ChargesThe Tribunal examined the statutory provisions and definitions of 'Clinical Establishment' and 'health care service,' noting that they broadly included various services connected with health care. It was determined that the provision of medicines is directly connected to health care services, and thus the charges retained by the appellant for processing mediclaims were part of the health care services. The Tribunal referenced the case of Sir Ganga Ram Hospital, where it was held that retained charges by hospitals for health care services were not taxable under 'business support services.' Consequently, the Tribunal concluded that the service charges retained by the appellant were part of the exempt health care services and not subject to service tax.Issue 3: Invocation of Extended Period of LimitationThe appellant challenged the invocation of the extended period of limitation. However, since the Tribunal decided the issue on merits in favor of the appellant, it found no necessity to address the invocation of the extended period of limitation.Issue 4: Imposition of Interest and PenaltySimilarly, the Tribunal did not find it necessary to decide on the imposition of interest and penalty on the appellant, given the favorable decision on the merits of the case.Conclusion:The Tribunal concluded that the demand proceedings against the appellant hospital were to be dropped. The impugned order confirming the demand of service tax under 'business auxiliary service' was set aside, and the appeal was allowed.