TaxTMI 
TaxTMI 
2020 (11) TMI 152
X X X X Extracts X X X X
X X X X Extracts X X X X
....II diabetes and hypertension. According to the appellant, bariatric surgery is a gastro intestinal surgery carried out on the stomach in different manners like, by folding & stitching, by removing fat and cutting down, by insertion of outer bodies or by bonding the stomach. The appellant also claims that bariatric surgery is performed on morbidly obese individuals suffering from hypertension, Type-II diabetes, arthritis, lipid disorder or obstructed sleep apnea. The person selected for this surgery should also have a Body Mass Index[BMI] of above 32.5 with co-morbidities. The surgery is said to be performed as per the Asia Pacific International Federation of Surgical Obesity Guidelines endorsed by Obesity Surgical Society of India. The appellant, therefore, claims that since bariatric surgery is performed to treat obesity and other associated medical ailments, it will not be a cosmetic surgery or plastic surgery. It is for this reason that the appellant claims that it did not pay service tax. 3. However, a show cause notice dated October 4, 2013 was issued to the appellant requiring the appellant to explain why it did not pay service tax on the service provided through surgeries....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in this statement dt. 25/09/2013 wherein with response to a specific question, he had categorically stated that "as a MS General surgeon and with special training in bariatric surgery and advance minimal access surgery I am entitled to perform bariatric surgery. Also the surgical review corporation of USA has endorsed myself as a bariatric surgeon of excellence and the centre as a centre of excellence in bariatric surgery". It is worthwhile to mention here that the statement is never retracted by the directors of the Noticee firm. These facts further leaves no doubt that the surgery performed is neither for cure of type II diabetes, hypertension, hypothyroidism, arthritis etc. as while carrying out the said surgery the specialized doctors treat diabetic patients, hypertension patients or ortho-paedicians doctors specialized to treat arthritis have no role to play. Not only this, the basic requirement to carry out the surgery is BMI(Body Mass Index) and not the aforementioned diseases the person is afflicted with. The BMI is nothing but only a scale to decide the degree of a person obesity. All these facts clearly establish that bariatric surgery is related to "weight reduction" b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Plastic Surgery Services." (emphasis supplied) 7. The Commissioner then analyzed the contents of the changes and clarification on service tax issued by the Government of India on the 2009-10 budget relating to cosmetic and plastic surgery service and the observations are reproduced below: "This Noticee while arguing their case has tried to seek the help from MOF Letter no. DOF NO. 334/13/2009-TRU dt. 06.07.09 specially from para 2.4.3 which reads as under 2.4.3_"However, any reconstructive surgery undertaken to restore one's appearance, anatomy or bodily functions affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma would be outside the scope of this service. These processes could be undertaken to correct impairment caused by burns, fractures or congenital abnormalities like cleft lip etc.----------Unquote". However, the Noticee while arguing their case on the strength or para 2.4.3 has made a mistake of not giving any credence to 2.4.2 of the same leter which reads as under:- 2.4.2 Some of the commonly known aesthetic/cosmetic surgeries are abdomenoplasty, (tummy tuck); blepharoplasty (eyelid surgery0; mammoplasty; b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....09.2014 05.07.2016 Period of Dispute 01.11.2011 to 07.03.2013 08.03.2013 to 31.03.2014 01.04.2014 to 31.03.2015 Duty Demanded Rs. 81,92,416/- Rs. 1,35,67,694/- Rs. 1,53,35,526/- Penalty imposed under the Finance Act Section 77 - Rs. 10,000/- Section 78 - Rs. 40,96,208/- Section 76 - Rs. 13,56,796/- Section 78 - Rs. 10,000/- Section 70 - late fee of Rs. 20,000/- Section 76 - Rs. 15,33,552/- Section 78 - Rs. 10,000/- Section 70 - late fee of Rs. 20,000/- 9. Shri B.L Narasimhan, learned Counsel for the appellant assisted by Shri N. Singhvi, made the following submissions: (i) The activities carried out by the appellant for the period from November 1, 2011 to June 30, 2012 are not taxable under section 66 of the Finance Act. The adjudicating authority has confirmed the demand of service tax by classifying the activities of the appellant under section 65(105)(zzzzk) of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....types of bariatric surgeries are plastic and cosmetic in nature; (ii) The activity undertaken by the appellant does not fall in the exclusion clause of surgeries contemplated under section 65(105)(zzzzk) of the Finance Act; (iii) The appellant is not justified in contending that the activity was undertaken to restore "developmental abnormalities"; and (iv) The discharge summary of five obese patients undergoing bariatric surgery does not indicate any condition caused by congenital defects, developmental abnormalities, degenerated diseases, injury or trauma. 11. The submissions advanced by learned counsel for the appellant and the learned Authorized Representative of the Department have been considered. 12. The appellant claims that it performs bariatric surgery on patients suffering from morbid obesity. Morbid has been defined in Oxford English Reference Dictionary (Indian Edition) as "of the nature of or indicative of disease". It has been defined in Webster's Third New International Dictionary as "relating to, or characteristic or disease." Obesity has been defined in the Webster's Third New International Dictionary to mean "a bodily condition mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma. 17. The reasons given by the Commissioner for confirming the demand of service tax are briefly summarized as under: (i) Bariatric surgery is carried out to control obesity, whether associated with any disease like arthritis, hypertension, Type-II diabetes or not, and is not carried out to treat any type of disease. (ii) Bariatric surgery is carried out by surgeons specializing in bariatric surgery only and not by surgeons specializing in cure of Type-II diabetes, hypertension or arthritis. The basic requirement to carry out the surgery is BMI and not the aforementioned diseases. (iii) As per the brochures published by Ethicon Endo-surgery, Johnson & Johnson Medical, it is clear that bariatric surgery is singularly for weight loss, irrespective of its association with any disease. (iv) Obesity cannot be termed as developmental abnormalities, as developmental abnormalities are manifest at the natal stage of human being. (v) Liposuction has been termed as cosmetic sur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "Conclusion: The evidence is now overwhelming that obesity, defined as excessive storage of energy in the form of fat, has adverse effects on health and longevity. Obesity is clearly associated with hypertension, hypercholesterolemia, NIDDM, and excess of certain cancers and other medical problems. Height and weight tables based on mortality data or the body mass index are helpful measures to determine the presence of obesity and the need for treatment. Thirty-four million adult Americans have a body mass index greater than 27.8 (men) or 27.3 (women). At this level of obesity, which is very close to a weight increase of 20 percent above desirable, treatment is strongly advised. When diabetes, hypertension, or a family history for these diseases is present, treatment will lead to benefits even when lesser degrees obesity are present. Obesity research efforts should be directed toward elucidation of biologic markers, factors regulating the regional distribution of fat, studies or energy regulation, and studies utilizing the techniques of anthropology, psychiatry, and the social sciences." (emphasis supplied) 24. It has also been submitted that bariatric surgery,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry sources: S. No. Relevant Resource Definition of Bariatrics Definition of Plastic Surgery Definition of Cosmetic Surgery 1. Dorland's Medical Dictionary A field of medicine encompassing the study of overweight, its cause, prevention, and treatment Surgery concerned with the restoration, reconstruction, correction, or improvement in the shape and appearance of body structures that are defective, damaged, or misshapen by injury, disease, or growth and development. That department of plastic surgery which deals with procedures designed to improve the patient's appearance by plastics restoration, correction, removal of blemishes etc. 2. Encyclopaedia and Dictionary of Medicine A field of medicine encompassing the study of overweight, its cause, prevention, and treatment. Surgery concerned with the restoration, reconstruction, correction, or improvement in the shape and appearance of body structure that are defective, damaged, or misshapened by injury, disease, or anomalous growth and development. 3. Butterworth's Dictionary (1978) That branch of surg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not undertaken for enhancement of physical appearance or beauty but only as a cure for a serious disease associated with severe complications and as a lifesaving surgery. (iii) It is important to also understand the anatomy of a human body and the degenerative deformities resulting in obesity and comorbidities. In the normal digestive process, as food moves along the digestive tract, digestive juices and enzymes digest and absorb calories and nutrients. After chewing and swallowing, the food moves down the esophagus to the stomach, where a strong acid continues the digestive process. The stomach can hold about 3 pints of food at one time. When the stomach contents move to the duodenum (the first part of the small intestine), bile and pancreatic juice speed up digestion. Most of the iron and calcium in the food is absorbed there. The other two parts of the nearly 20 feet small intestine absorb nearly all of the remaining calories and nutrients. The food particles that cannot be digested in the small intestine reside in the large intestine until eliminated. The body needs a certain amount of energy (calories) from food to keep up basic life functions. Body weight tends to remain t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vironment with anesthesia and antiseptic conditions using surgical instruments. It also includes 'non-invasive' surgery. 2.4.2. Some of the commonly known aesthetic/cosmetic surgeries are abdominoplasty (tummy tuck); blepharoplasty (eyelid surgery); mammoplasty, buttock augmentation and lift; rhinoplasty (reshaping of nose); otoplasty (ear surgery); Rhytidectomy (fact lift); liposuction (removal of fat from body); brow lift; cheek augmentation; facial implants; lip augmentation; forehead lift; cosmetic dental surgery; orthodontics; aesthetic dentistry; laser skin surfacing etc. 2.4.3. However, any reconstructive surgery undertaken to restore one's appearance, anatomy or bodily functions affected due to congenital defects, developmental abnormalities, degenerative disease, injury or trauma would be outside the scope of this service. These processes could be undertaken to correct impairment caused by burns, fractures or congenital abnormalities like cleft lip etc. (emphasis supplied) 31. A bare perusal of the aforesaid Circular shows that the services proposed to be taxed in the 2009-10 budget are cosmetic surgery and plastic surgery undertaken to preserve or enhance phys....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate that as per World health organization International Code of Diseases 10 version 2010 (ICD 10) IV -Endocrine, Nutritional & metabolic diseases Obesity is included At "E66-Obesity & E66.8- Morbid Obesity". The American Medical Association has also passed the resolution pushed by American Association of Clinical Endocrinologists, the American College of Cardiology & others. The resolution argued that Obesity was a "multimetabolic & hormonal disease state" that leads to unfavorable outcomes like Type 2 Diabetes and Cardiovascular diseases. "The Suggestion that Obesity is not a diseases but rather a consequence of a Chosen lifestyle exemplified by overeating and / or inactivity is equivalent to suggesting that Lung Cancer is not a disease because it was brought about by individual choice to smoke cigarettes", the resolution said. The cosmetic surgery is done to improve the looks of a person, but bariatric surgery is done to correct the metabolic and hormonal state of the diseased body along with weight loss. May 6,2014 President-IMA, Indore, Br. Dr. Surendra Bapat M.B.M.S. FAIS, FIAGES, MAMASI, MACRSI MBA (HA), LLB (HONOURS), MA (SOCIOLOGY) B.J.D.Y.E. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....It is also not possible, for the reasons stated above, to accept the submission of learned Authorized Representative for the Department that all types of bariatric surgeries are plastic or cosmetic surgery. 38. It is also not necessary to examine the contention of the learned Authorized Representative of the Department that the activity undertaken by the appellant does not fall in the exclusion clause of surgeries contemplated under section 65(105)(zzzzk) of the Finance Act, since the appellant is not performing plastic surgery or cosmetic surgery and, therefore, the surgery would not fall in the 'main part' of the definition of taxable service under section 65(105)(zzzzk) of the Finance Act. 39. The factual position pointed out by the appellant has also been noted with approval by the Additional Commissioner in an order dated February 22, 2016 by which the proceedings initiated by the show cause notice dated August 11, 2015 issued to M/s. Asian Bariatrics, Rajkot were dropped. The show cause notice proposed to tax the bariatric surgery performed by M/s. Asian Bariatric under section 65 (105)(zzzzk) of the Finance Act. The Additional Commissioner noticed that the issue that w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd it is better known as metabolic surgery; that it is performed with intent to resolution of any metabolic syndrome which is the combination of obesity and type 2 diabetes mellitus and/or hypertension and/or dyslipidaemia; it is performed to reduce persons desire to eat and it cannot be compared with the Cosmetic or Plastic Surgery; that Bariatric Surgery is covered under 'health care services' provided by a clinical establishment an authorized medical practitioner or para-medics and hence the same are exempted under Notification No. 25/2012-ST dated 30-06-2012. I find that the definition of 'health care service', as prescribed under para 2(t) of the Notification No. 25/2012-ST dated 30-06-2012 reads as under: "health care services" means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, deve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin the meaning of clause (105) (zzzzk) of Section 65 of the Finance Act, 1994 and consequently the Noticee is not liable to pay Service Tax on the said service. 4.9 I find that since Bariatric Surgery is not a Cosmetic or Plastic Surgery it does not fall under Section 65(105)(zzzzk) ibid and therefore, it is not a taxable service. I find that the Noticee, vide their letter dated 21-05-2015, addressed to the Range Superintendent of Service Tax, Rajkot and also vide letter dated 12-02-2016, have provided details of the surgeries performed by them, which include date of surgery, name of the patient type of surgery and amount received by them. On scrutiny of this information I find that the Noticee has performed Bariatric Surgery during the period from March-2014 to March-2015. Since the Noticee has performed Bariatric Surgery and since Bariatric Surgery does not cover under the definition of Cosmetic or Plastic Surgery, as defined under Section 65(105)(zzzzk), as discussed in length in preceding paras, I hold that the Noticee is not liable to pay Service Tax amounting to Rs. 21,72,888/- demanded from them vide Show Cause Notice No. V.ST/AR-1-RJT/43/ADC(BKS)/2015 dated 11-08-2015, ....