Revenue-sharing arrangements in business support services deemed principal-to-principal and not taxable, appeal allowed with relief

Revenuesharing arrangements between the appellant and digital service providers were held not to attract service tax when characterised as principaltoprincipal business support and infrastructural services, with healthcare support services treated as exempt. The Tribunal relied on prior departmental appellate decisions and an earlier identical Tribunal ruling to find the issue no longer res integra; absent departmental appeals those prior orders attained finality and preclude the department from adopting a contrary position. Consequential relief to the appellant was granted by setting aside the impugned order.

---

---

Issues: Whether revenue-sharing arrangements between the hospital and diagnostic service providers (DSPs) amount to taxable "support services of business or commerce" attracting service tax under the Business Support Service (BSS) category, or whether such arrangements are principal-to-principal revenue-sharing (and/or healthcare services) not exigible to service tax for the relevant period.

Analysis: The Tribunal examined the contractual terms evidencing revenue-sharing between the parties, which show collection of receipts by the hospital and periodic sharing with DSPs in agreed proportions, with no stipulation for payment of service charges by DSPs. The contracts permit DSPs to install and operate their equipment and provide diagnostic expertise; billing is effected by the hospital and revenue is accounted in the hospital's books before sharing. Circular No. 109/03/2009-ST recognizing that principal-to-principal revenue-sharing arrangements do not constitute service was applied. The Tribunal also considered the definitions of "support services of business or commerce" and "infrastructural support services" under Sections 65(104c) and 65(105)(zzzq) of the Finance Act, 1994, and distinguished mere provision of basic amenities or infrastructure from provision of a taxable support service. Prior decisions of the Tribunal and departmental Appellate Authority for earlier and subsequent periods in the appellant's and related units' cases were relied upon; those orders were final as the department had not appealed, precluding a contrary departmental stand. The Tribunal also addressed limitation, noting no suppression with intent and that revenues were recorded in public documents, precluding invocation of the extended period.

Conclusion: The revenue-sharing arrangements are principal-to-principal commercial arrangements (not a taxable service) and, in any event, the services involved qualify as healthcare services exempt from service tax; accordingly the impugned demand under BSS is set aside and the appellant's appeal is allowed.

---