TaxTMI 
TaxTMI 
2024 (8) TMI 397
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.... List nor under the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012, a search was conducted at the premises of M/s StemCyte on 06.01.2014 under regular Panchnama dated 06.01.2014. During the course of search, Shri Rajesh N. Shah, Finance Controller of M/s. StemCyte informed that it is a joint venture company between StemCyte Ine. USA, Apollo Hospital Enterprises Ltd. and Cadila Pharmaceuticals Ltd. The Company is engaged in collection, processing and storage of Umbilical Cord Blood (UCB) Stem Cells and its therapeutic application and have hybrid model of UCB stem cell banking operating both as a Private and a Public Bank. Publie Banking is where the child's stem cell are donated to the Company to be processed and storage for the future therapeutic use by patients in need who are unrelated and Private Banking is when a child's umbilical cord blood stem cells are collector processed and stored for family's future medical needs for the purpose making the cells readily available for the family for treatment including malignancies, blood disorders and immune deficiency disease. 2. A statement of Shri Rajesh N. Shah, Finance Controller of M/s. StemCyte was reco....
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....ct, 1994 as amended from time to time Any execution of act or operation carried out or provision of a facility will also be included. A single activity is also covered in its ambit and it is not necessary that such activity should be carried on a regular basis. Even a passive activity or forbearance to act or to refrain from an act or to tolerate an act or a situation, would be regarded as service. b. Carried out by a person for another- For a transaction of service, there must be two parties, one, the service provider and the other, service receiver. By implication, self service is outside the ambit of taxable service. However, certain exceptions are provided which are explained later. c. For a consideration- Under the Indian Contract Act, 1872, the definition of "consideration" is, "When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing. something, such act or abstinence or promise is called a consideration for the promise. 3.2 The nature of activity carried out by M/s StemCyte is covered under the definition of service and is not covered....
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....ated with the Health Care, but the services provided by them cannot be identified to fall in the ambit of definition of Health Care Services by a Clinical Establishment. Therefore, M/s StemCyte had wrongly claimed exemption from payment of service tax by stating that as per Notification No. 25/2012 S.T. dated 20.06.2012, their activity of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cells is an exempted service with effect from 01.07.2012 as the same fall under the category of Health Care Service by a Clinical Establishment. However, as per the definition Clause 2(t) of Mega Exemption notification No. 25/2012-S.T., as mentioned above, the activity of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cells is not covered under the mega exemption of Service by Notification No. 25/2012-8.T. dated 20.06.2012 and hence, the sald service is chargeable to Service Tax with effect from 01.07 2012. However, it is observed that vide Notification No. 04/2014-Service Tax dated 17.02.2014 an amendment was made in Notification No. 25/2012-ST dated 20.06.2012 wherein service provided by Cord Blood Bank by way of preservation of stem cells or....
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....14 5,00,000/- TOTAL 40,00,000/- 7. In view of facts discussed in foregoing paras, it appeared to the department that the activity of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cell provided by M/s StemCyte is a taxable service from 01.07.2012 to 16.02.2014 as the same is not covered under the Negative List of Services as given in the Section 66D of the Finance Act, 1994, as amended from time to time. This service is also not exempted till 16.02.2014 under mega exemption notification No. 25/2012-S.T. dated 2006-2012, as amended from time to time. However, they have failed to pay service tax leviable on the value of Rs. 16,77,15,014/-, received during the period from 01.07.2012 to 16.02.2014 for providing the said service. 8. Department was of the view that the Government has from the very beginning placed full trust on the service provider so far service tax is concerned and accordingly measures like self-assessments, etc., based on mutual trust and confidence are in place Further a taxable service provider is not required to maintain any statutory or separate records under the provisions of service Tax Rules ....
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....ion to evade payment of service tax and, therefore, the said service tax not paid is required to be demanded and recovered from them under the proviso to Sec. 73(1) of the Finance Act, 1994 as amended with interest at applicable rate, by invoking extended period of five years. 9. From the above, it appeared to the department that M/s StemCyte has not disclosed their taxable activity to the Department i.e. they carried out the activities of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cells which is a taxable service from 01.07.2012 to 16.02.2014 as the same was neither falling under the Negative List of Services nor exempted under the Mega exemption Notification. They also failed to obtain service tax registration for providing said service, also failed to assess/declare the correct taxable value in ST-3 Returns for that service and have also failed tax liability at appropriate time. Such outright act of defiance of law appear to have rendered them liable for stringent penal action as per the provisions of Section 78 of the Finance Act, 1994 for suppression or concealment of taxable service with intent to evade payment of service tax. Therefo....
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....entioned service within the stipulated time frame and as such they have rendered themselves liable to penalty in terms of the provisions of Section 77(1)(a) of the Finance Act, 1994. 12.2 M/s. StemCyte have also rendered themselves liable to penalty in terms of the provisions of Section 77(1) (d) of Finance Act, 1994 in as much as they failed to pay the service tax dues through internet banking 12.3 M/s. StemCyte have also rendered themselves liable to penalty in terms of the provisions of Section 77(2) of the Finance Act, 1994 in as much as they failed to properly assess their service tax dues and also failed to file prescribed returns in form ST-3 within stipulated time frame for the said service in terms of the provisions of Section 70 ibid. 13. In view of the above, M/s. Stemcyte India Therapeutic Pvt. Ltd., Apollo Hospitals Complex, Bhat, Ahmedabad were issued Show Cause Notice dated 28.07.2017 bearing No. V.ST/15- 37/DEM/OA/15-16 whereby they were called upon to show cause before the Commissioner of CGST & Central Excise, Gandhinagar having his office at Customs House, Navrangpura, Ahmedabad as to why: i. Service tax for the period from 01.07.2012 to 16-02-2....
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.... Health care services by a clinical establishment, and authorized medical practitioner or para-medics: that their services / activities are covered under the said exemption. 14.3 They are engaged in collection, processing and storage of umbilical cord blood and its therapeutic applications; that they are a joint venture between Stemcyte Inc USA, Apollo Hospitals and Cadila Pharmaceuticals. 14.4 The umbilical cord and placenta, after a child's birth (discarded as biomedical waste) contain blood, which is a rich source of stem-cells and hence banking of cord blood allows families to save this valuable resource for potential medical use. The present therapeutic uses are mainly for terminally ill blood related 84 diseases e.g. blood cancer, thalassemia, aplastic anemia etc. The research is going on spinal cord injury (clinical trials going), diabetes and heart related diseases. 14.5 The main advantage of UCB banking is to provide an alternate cure to the terminally ill patient who would die because of non availability of bone marrow match. The concept is new in India and industry it at nascent stage. However, the world over this is a recognized way of treati....
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....n, testing & processing) (ii) Storage charges for 21/26 years (deferred storage charges) 14.8 The Drugs & Cosmetics Act and Rules were amended by notification dated 27-12-2011 whereby the cord blood bank require registration. Further. detailed requirements for collection, processing, testing, storage, banking and release of umbilical cord blood derived Stem cells in part XII D are provided. They have enclosed Copy of the amendment as Annexure- 1. The requirement of drugs law and the nature of services clearly show that the same are health care services. 14.9 The health care services under notification 25/12 was subject matter of examination before Hon'ble Andhra Pradesh High Court in the case of Manthena Satyanarana Raju Charitable Trust 2017 (5) TMI 672; that after keeping note of the definition, the Hon'ble High Court in para 18 observed that even the prevention would be included therein; that therefore, the services such as steam bath, sauna/infrared bath, foot and arm bath, whirlpool bath, circular jet, full emersion bath, spinal spray, spinal bath, hip bath, hydro deluxe bath, Jacuzzi, mud bath, neem paste bath, plant leaf bath, sand bath, massage, mud p....
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....r intention to evade service tax is absent. The demand is, therefore, barred by limitation. When the demand is not tenable on merit as well as on limitation, the question of interest or penalty does not arise. They therefore prayed for discharging the notice. Same however was heard and adjudicated to their pre juice. Being aggrieved the present appeal or various grounds has been filed before us. 15. Party in particular, sought to rely on Circular No. 334/03/2014-TRU dated 17.02.2014, to emphasize that services provided by cord blood banks by inserting Entry Sl. No. 2A in Exemption Notification No. 25/2012-ST dated 20.06.2012 which reads as follows:- "1.4 Services provided by cord blood banks: Health Ministry had recommended that services provided by the cord blood banks should be treated as health care services and should be exempted. By inserting entry sl. no. 2A in the exemption notification No. 25/2012-S.T., which reads as "2A. Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation", an exemption has been extended. This would cover services provided by cord blood banks, such as coll....
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.... 77 (Madras). The following observations after Commissioner made in his order are relevant in para 21.08 to 25. "21.8 The Association of StemCell Bank of India made a representation to issue necessary clarification in this regard, to the Ministry of Finance, representing that the Exemption List included Health Care Services, but the apparent definition of the Health Care Services did not specify the Blood Bank services, which were critical care services by nature and requested to provide clarification on the said entry in the Notification No. 12/2012-S.T. dated 17.03.2012 or in the mega exemption list vide Notification No.25/2012-S.T. dated 20.06.2012; that they specifically sought explicit classification of services rendered by Blood Banks and cryopreservation procedures under the definition "Health Care Services"; that the Ministry of Health & Welfare also recommended their services as a part of Health Care Service and forwarded their representation to the Ministry of Finance for consideration. 21.9. Subsequently, vide Notification No. 04/2014-Service Tax, dated 17.02.2014 an amendment was made in Notification No. 25/2012-ST dated 20. 06.2012 wherein service pro....
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....t of Judicature at Madras | reported at 2015 (40) S.T.R. 77 (Mad.J| Versus Union of India and others praying for the issuance of a writ of Prohibition, to prohibit the 3rd and 4th respondents from collecting the service tax from the petitioner company for the period from 1-7-2012 to 16- 22014 as the insertion of entry to Sl. No. 2A to Notification No. 25/2012-S.T.. dated 20-6-2012 vide amending Notification No. 4/2014-ST, dated 17-2-2014 was only clarificatory in nature and the activities of the petitioner company had always been exempted as health care service. While deciding the said Writ Petition, Hon'ble High Court opined that the so-called amendment cannot be viewed as a clarificatory one and therefore, the court is unable to countenance the argument advanced by the learned senior counsel that the so-called amendment is only a clarificatory nature. 21.10.4 Thus from the above decisions, it is clear that amendatory statutes, like original statutes, will not be given retroactive construction, unless the language clearly makes such construction necessary. In other words, the amendment will usually take effect only from the date of its enactment and will have no appli....
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....m the c-receipt for service tax vide various Challans. 21.11.1 M/s Stemcyte have relied upon the citation of Manthena Satyanarana Raju Charitable Trust 2017 (5) TMI 672 of Hon'ble Andhra Pradesh High Court in support of their contention that the services provided by them were Health Care Services, that Health Care Services covered order notification No. 25/12 was subject matter of examination before Hon ble Andhra Pradesh High Court in the aforesaid case; that after keeping note of the definition, the Hon'ble High Court in para 18 observed that even the prevention would be included therein, that therefore, the services such as steam bath, sauna/infrared bath, foot and arm bath, whirlpool bath, circular jet, full emersion bath, spinal spray, spinal bath, hip bath, hydro deluxe bath, Jacuzzi, mud bath, neem paste bath, plant leaf bath, sand bath, massage, mud packs, vibrio massages, physiotherapy, exercises, yoga, medication, colon therapy, etc. are covered as health care services'. However, I find that the services provided by them are not indigenous system of health and well being, as was the locus in the said citation. The same is explained as under: ....
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....ocessing, storing and release of cord blood when required for treatment by person. Standard No. CE/STL-036 has been notified for Stem Cell Processing and Storage Facility. The Stem Cells can be derived from the below sources:- (i) Umbilical Cord Blood; (ii) Bone Marrow and mobilized peripheral blood; (iii) Others including Adipose tissue, etc. 21.11.5 M/s Stemcyte is providing Umbilical Cord Blood Banking Services. The cord blood is collected just after birth and stored for future use. Cord Blood is collected because it has stem cells, which is useful for treatment of hematopoietic and genetic disorders. Umbilical Cord Blood Banking Services provided by M/s Stemcyte are services which can't be considered as diagnosis, treatment or care in India. The Stem Cells of Cord Blood is not anyway useful for regular illness, injury, deformity, abnormality or pregnancy. However, these are useful for treatment of hematopoietic and genetic disorders. Umbilical Cord Blood Banking Services provided by any Cord Blood Bank is not a recognized systems of medicines by Central Government. Thus, the Umbilical Cord Blood Banking Services provided by M/s S....
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....th, in any other case, immediately following the calendar month in which the service is deemed to be provided as per the rules framed in this regard. In the instant cases I find that the service tax had not been paid by the said assessee to the credit of the Central Government within the period specified under Rule 6 of the Service Tax Rules, 1994, therefore, simple interest at the applicable rate is also required to be paid by the said assesses. 22.3 in this regard, I also rely upon the judgment of the Hon'ble Bombay High Court in the case of CCE & C, Aurangabad Vs. Padmashri V.V. Patil S.SK Ltd. in support of the demand and recovery of interest from M/s Stemcyte on the amount of Service opined that 'Language of Tax. Hon'ble High Court in the said judgment bag Section 11AB is unambiguous, that the person, whb liable to pay duty short levied/short paid/not levied/unpaid, etc., is liable to pay interest at the rate as may be determined by the Central Government from ome to time that this is evident from the opening part of sub Section (1) of Section 11; interest chargeable u/s 11AB is sort of cint liability of the assessee. who has retained the cereunt of public....
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....aw and breach of trust deposed on them is certainly not in tune with Governments efforts in the direction to create a voluntary tax compliance regime. Thus the said noticee had not declared the correct taxable value (suppressed taxable value) of the services provided by them for the period under reference, in their ST-3 returns filled by them, from time to time. Thus, I find that the said noticee has evaded payment of Service Tax by not discharging their actual Service Tax liability, an discussed herein above. I find that there has been a deliberate withholding of essential and critical information from the department about amounts received by them for providing services. As discussed above, they were aware about the raxability of the Services Provided by them, however they have deliberately. consciously and purposefully concealed material information from the department. The above said short payment is unearthed after conducting search by the Officers of Preventive of Central Excise Commissionerate, Ahmedabad-III and therefore I find that had the said short payment not been detected during preventive action, it would have remained unnoticed Therefore, this is a case of improper as....
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....travened or there is a breach of trust placed on the service provider. 23.4 As regards imposition of penalty under section 78 of the sald Act, 1 find that there is clear cut of suppression of facts established on the part of the sand M/s Stemcyte as discussed in the foregoing paragraphs and the said M/s Stemcyte is therefore liable for penalty under the said section. The penalty under Section 78 is mandatorily imposable as has been held by the Apex court in the case of Dharmendra Textile Mills Ltd. 2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving Mills Ltd-2009 (238) ELT 3 (SC). I observe that so far as 'suppression of facts' is concerned, the phrase implies that withholding of information is suppression of facts. P. Ramanatha Aiyar's Concise Law Dictionary (1997 Edition Reprint 2003 page 822 defines the phrase lucidly and accurately as Where there is an obligation to speak, a failure to speak will constitute the "suppression of fact" but where there is no obligation to speak, silence cannot be termed "suppression". It is manifestly clear from this that intention to evade payment of duty is implied in the suppression of facts. Since the said M/s Stemcyte ....
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....benefit of reduced penalty to the tune of 50% of the service tax determined in terms of the proviso to Section 78 ibid would be applicable for the period from July, 12 to 16.02.2014. 25. From the foregoing discussions, I find that M/s Stemcyte had failed to obtain the service tax registration within stipulated time period (obtained Service Tax Registration as late as on 24.10.2013) and thereby contravened the provisions of 69 of the Finance Act, 1994, hence liable to pay penalty for such contravention under Section 77(1)(a) of the Finance Act, 1994. They have also failed to pay Service Tax thro' internet banking and hence liable to pay penalty for such contravention, under Section 77(1)(d) of the Finance Act, 1994. They have also failed to assess their service tax liability & failed to file prescribed returns in form ST-3 within stipulated time frame for the said service under Section 70 of Finance Act, 1994 to the Superintendent of Central Excise and thereby contravened the provisions of Section 70(1) Finance Act, 1994 read with Rule 7 of Service Tax Rules 1994, hence liable for penalty under Section 77 (2) of the Finance Act, 1994." 20. The Commissioner has correc....
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....transactions previously entered into or of other past conduct. By virtue of the presumption against retrospective applicability of laws dealing with substantive rights transactions are neither invalidated by reason of their failure to comply with formal requirements subsequently imposed, nor open to attack under powers of avoidance subsequently conferred. They are also not rendered valid by subsequent relaxations of the law, whether relating to form or to substance. Similarly, provisions in which a contrary intention does not appear neither impose new liabilities in respect of events taking place before their commencement, nor relieve persons from liabilities then existing, and the view that existing obligations were not intended to be affected has been taken in varying degrees even of provisions expressly prohibiting proceedings. (See Halsbury's Laws of England, 4th Edn., Vol. 44, paras 921, 922, 925 and 926.). "65. These principles are equally applicable to amendatory statutes. According to Crawford : "Amendatory statutes are subject to the general principles... relative to retroactive operation. Like original statutes, they will not be given retroactive constru....
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....at its underlying purpose of explaining or clarifying the existing law will be effectively served only by giving it such a retrospective construction." 20.1 In view of the foregoing and in the absence of any expression in amending notification supporting retrospective application, it is clear that as per trite law, same cannot be given retrospective application. This Court is, therefore, inclined to follow the principles as laid down in the decision of LIFE CELL INTERNATION (P) LTD and hold that the retrospective application was never intended through legislative amendment. Even on limitation, the finding of the adjudicating authority correctly upholds the extended period as applicable to the facts and circumstances of the case. Circular No. 334/03/2014-TIU dated 17 February, 2014 cannot therefore, be stated to be supporting retrospective effect and as has been laid down by the Hon'ble High Court of Madras and cannot be stated to be clarificatory in the absence of any provision in the notification stating the same to be so. In view of the aforesaid legal position, specifically relating to retrospective application of any amendments, it cannot be held that....