2025 (2) TMI 419 - AT - Service Tax

CESTAT sets aside Rs.1 crore demands after appellant reversed CENVAT credit on exempted services with interest

M/s. Park Hospitals Versus Commissioner of Service Tax, Kolkata

CESTAT Kolkata allowed the appeal, setting aside demands totaling Rs.1,00,76,186 on multiple grounds. The tribunal found that appellant had reversed ... Non-reversal of CENVAT Credit attributable to exempted services - classification and taxability of services under 'Business Support Service' and 'Business Auxiliary Service' - demand under 'Health Care Service' as a 'Pure Agent' - applicability of Service Tax on 'Renting of Immovable Property' and under 'Health Care Service' for amounts received from corporates - demand under 'Import of Service' without specific classification in the Show Cause Notice (SCN) - Invocation of extended period under Section 73(1) of the Act. Demand of Rs.1,00,76,186 on account of Cenvat Taken - Non-reversal of CENVAT Credit attributable to exempted services - HELD THAT:- The facts of the case show that the Modvat credit taken on the inputs was reversed by the petitioner. Since the reversal of Modvat credit has been done by the petitioner hence in our opinion it has to be treated that no credit was taken by the petitioner on the inputs, namely PVC granules used in the manufacture of PVC/PP bottles as contemplated under the Notification No. 15/94-C.E., dated 1-3-1994. There is no dispute that the appellant has reversed the entire credit of Rs.25,02,361/-‐ taken on exempted output services along with interest of Rs.6,71,531 in September 2013, after the Show Cause Notice was issued. These details have been certified by the Chartered Accountant and they are not being disputed by the Revenue - the confirmed demand of Rs. Rs.1,00,76,186/-, is legally not sustainable. Demand of Rs.42,94,470/- under ‘business support service’ - Classification and taxability of services under 'Business Support Service' and 'Business Auxiliary Service' - HELD THAT:- It is not found that the appellant, apart from making available the above ‘space’ has provided any other infrastructure facilities to the client. In fact, it is clear from the Agreement that all such infrastructure facilities will have to be created by the client with their own cost. It is more akin to letting out the space on rent to the client for which the consideration is arrived @ 18% of the sale proceeds of the medicines. Therefore, on factual matrix there are no justification to classify the service as “Business Support Service”, the classification under which the present demand has been made and confirmed - the demand of Rs.42,94,470/- made under ‘business support service’ set aside. Demand of Rs.8,87,242/- under ‘business auxiliary service’ - HELD THAT:- The collection of blood samples prima facie does not fall under any of the above seven categories. Further, in the show cause notice, the department has nowhere specified under which clause of the definition of “Business Auxiliary Service” the liability shall be fastened on the Appellant. It is well settled that to bring any activity under the definition of “Business Auxiliary Service” for levy of tax, it is to be clearly mentioned in the show cause notice under which clause of the definition shall apply to fasten that service under the classification of “Business Auxiliary Service” - demand set aside. Demand of Rs.19,69,383/- under ‘health care service’ as pure agent - HELD THAT:- On going through the copy of the ST 3 enclosed, it is found that indeed it is an inadvertent error on their part because of which they have shown an amount of Rs.1,91,20,228/- under Sl.3F(l)(iii) instead of at S.No. 3F(l)(ii), wherein it should have been shown, since this amount was received on account of diagnostic and treatment provided to admitted inpatients which is an exempted service - the demand of Rs.19,69,383 set aside. Demand of Rs.1,95,934/- under ‘renting of immovable property service’ - HELD THAT:- On going through the challans and calculation sheet provided by the appellant at page Nos.367 to 389 and find the appellant’s claims to be correct. Since, the Revenue has not adduced any evidence to the effect that the appellants have charged and recovered the Service Tax from their tenants, it is held that they are entitled for cum-tax benefit in terms of Section 67(2) of the Finance Act 1994 - the demand is required to be re-quantified as Rs.1,67,181 and not at Rs.1,95,934/- as calculated by the Revenue. Demand of Rs.4,73,252/- under ‘health care service’ in respect of sundry debtors - HELD THAT:- The appellant shows by way of documentary evidence, along with the Chartered Accountant’s Certification, that as and when the amounts were realized from the debtors, the same have been properly accounted for and Service Tax has been paid. The Appellant submits that during the material period, service tax was payable on collection basis and not on the invoice basis - the confirmed demand of Rs.4,73,252/- on the unrealised sundry debtors set aside. Demand of Rs.3,28,957/- under ‘health care service’ in respect of amount received from corporates for treatment of their employees - HELD THAT:- If the payment is made towards health checkup and preventive care, then such service would become taxable under the category “health service’. In the present case, it is found that the amount being paid by the corporates is not account of such services, but is on account of in-patient hospitalization charges, which is being paid by the corporates to the appellant - demand set aside. Demand of Rs.1,03,133/- under Section 66A of the Act - HELD THAT:- The SCN proposed to levy service tax under Section 66A without mentioning any specific classification whatsoever. However, on production of the documentary evidences along with the reply to the SCN, the Adjudcating authority dropped a portion of the demand and confirmed the demand on Rs.7,27,129/- and Rs.1,38,583/- as expenditure incurred in foreign currency for the years 2008-09 and 2010-11. On such payments, he has confirmed the demand of Rs.1,03,133/- under three taxable classifications namely ‘Business Support Service’, Commercial Coaching Centre and Tutorial Service’ and ‘Scientific or Technical Consultancy Service’ knowing fully that the demand proposed in the impugned show cause notice without mentioning any taxable service under which the demand was proposed - Since the appellant was not put to notice about the sub-classification of the import of service in the Show Cause Notice, the confirmed demand of Rs.1,03,133/- set aside. Time limitation - HELD THAT:- In this case, the appellant has reversed the cenvat taken along with interest and the decision are in their favour. Further all the cenvat credit taken whether for the exempted services or for the taxable services, have been recorded by them in their books of account. All these make it clear that the Dept has not brought in any evidence to the effect that the appellant was indulging in suppression with an intent to evade Service Tax payment. Similarly in case of import of service, even if the same payable, which is not in the present case, the same would be available as Cenvat Credit to the appellant. Hence, there would not be any motive to suppress. The entry of Rs.19 lacs is on account of their clerical mistake while filing the ST3 Returns. In respect of Renting of immovable property services, due to the confusion prevailing at that time, they have neither collected the Service Tax nor paid the same. Subsequently on getting clarification, they have paid the Service Tax along with interest. Thus if all the facts are considered together, we find that the Revenue has not made out any case of suppression, and the non-payment / short payment, if any has been purely on account of interpretational difficulties. The appellant has also shown their bonafides by making the payment of Service Tax, wherever payable, along with interest. Therefore, the confirmed demand for the extended period is legally not sustainable. Conclusion - All the demands are set aside. The Appeal succeeds on merits and on account of time-bar. Appeal allowed. The judgment from the Appellate Tribunal CESTAT Kolkata involved several issues concerning the Service Tax liabilities of the appellant, a healthcare service provider. The Tribunal addressed each issue, providing detailed reasoning and decisions based on legal precedents and the facts presented. Here's a detailed analysis of the judgment:Issues Presented and Considered:The core legal questions considered were:Whether the appellant was liable for the demand of CENVAT Credit under Rule 14 of CCR, 2004 due to non-reversal of CENVAT Credit attributable to exempted services.The classification and taxability of services under 'Business Support Service' and 'Business Auxiliary Service.'The demand under 'Health Care Service' as a 'Pure Agent' and related clerical errors in tax returns.The applicability of Service Tax on 'Renting of Immovable Property' and under 'Health Care Service' for amounts received from corporates.The demand under 'Import of Service' without specific classification in the Show Cause Notice (SCN).Whether the Show Cause Notice was barred by limitation due to the invocation of the extended period under Section 73(1) of the Act.Issue-Wise Detailed Analysis:A. Demand of CENVAT Credit:Legal Framework: The demand was based on Rule 14 of the CENVAT Credit Rules, 2004, which requires reversal of CENVAT Credit attributable to exempted services.Court's Interpretation: The Tribunal noted that the appellant reversed the credit along with applicable interest after the SCN was issued, which was corroborated by a Chartered Accountant's certification.Precedents: The Tribunal referenced several cases, including Hello Minerals Water (P) Ltd. and Tiara Advertising, which established that reversal of CENVAT Credit is equivalent to non-availment.Conclusion: The Tribunal held that the demand of 6% of the value of exempted services was not sustainable and set aside the demand.B. Demand under 'Business Support Service':Legal Framework: The demand was based on the classification of services provided as 'Business Support Service.'Court's Interpretation: The Tribunal found that the appellant merely rented space without providing additional infrastructure, which does not fall under 'Business Support Service.'Precedents: The Tribunal cited Royal Western India Turf Club Ltd., which held that mere renting of space does not constitute 'Business Support Service.'Conclusion: The demand was set aside as the service was more akin to renting of immovable property.C. Demand under 'Business Auxiliary Service':Legal Framework: The demand was based on the classification of services as 'Business Auxiliary Service.'Court's Interpretation: The Tribunal noted the SCN failed to specify which clause of 'Business Auxiliary Service' applied, rendering the demand vague.Precedents: The Tribunal referenced Balaji Enterprises, which emphasized the need for specificity in SCNs.Conclusion: The demand was set aside due to lack of specificity in the SCN.D. Demand under 'Health Care Service' as Pure Agent:Legal Framework: The demand was based on an alleged clerical error in tax returns.Court's Interpretation: The Tribunal found that the error was inadvertent and the appellant did not act as a 'pure agent.'Conclusion: The demand was set aside as it was a clerical mistake.E. Demand under 'Renting of Immovable Property':Legal Framework: The demand was based on the retrospective applicability of Service Tax on renting.Court's Interpretation: The Tribunal acknowledged the appellant's payment of tax on a cum-tax basis and granted the benefit of cum-tax.Conclusion: The demand was re-quantified to reflect the cum-tax payment, and the excess demand was set aside.F. Demand under 'Health Care Service' for Sundry Debtors:Legal Framework: The demand was based on outstanding balances as of March 31, 2011.Court's Interpretation: The Tribunal noted that service tax was payable on a receipt basis during the relevant period.Conclusion: The demand was set aside as the tax was not applicable on unrealized invoices.G. Demand under 'Health Care Service' for Corporate Payments:Legal Framework: The demand was based on payments received from corporates for employee treatment.Court's Interpretation: The Tribunal clarified that such payments were not taxable as they were not for health check-ups or preventive care.Conclusion: The demand was set aside as the services did not fall under the taxable category.H. Demand under 'Import of Service':Legal Framework: The demand was based on expenses incurred in foreign currency without specific classification in the SCN.Court's Interpretation: The Tribunal found that the adjudicating authority went beyond the SCN by classifying services not specified in the notice.Conclusion: The demand was set aside as it exceeded the scope of the SCN.Significant Holdings:The Tribunal established the principle that reversal of CENVAT Credit with interest is equivalent to non-availment, setting a precedent for similar cases. It emphasized the importance of specificity in SCNs and held that demands based on vague or incorrect classifications are unsustainable. The Tribunal also reinforced the interpretation that service tax on renting of immovable property should consider cum-tax benefits if not collected separately.Final Determinations:The demand of CENVAT Credit amounting to Rs.1,00,76,186 was set aside.The demand under 'Business Support Service' of Rs.42,94,470 was set aside.The demand under 'Business Auxiliary Service' of Rs.8,87,242 was set aside.The demand under 'Health Care Service' as Pure Agent of Rs.19,69,383 was set aside.The demand under 'Renting of Immovable Property' was re-quantified to Rs.1,67,181, and the excess was set aside.The demand under 'Health Care Service' for sundry debtors of Rs.4,73,252 was set aside.The demand under 'Health Care Service' for corporate payments of Rs.3,28,957 was set aside.The demand under 'Import of Service' of Rs.1,03,133 was set aside.The entire demand for the extended period was set aside on account of time-bar.The Tribunal allowed the appeal, granting consequential relief to the appellant as per law.