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.

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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.

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