TaxTMI 
TaxTMI 
2026 (9) TMI 1417
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....he order impugned herein, has preferred the present appeal. The principal contention of the Appellant is that the FAA, while passing each of the impugned orders, had erred in allowing the appeal by classifying the supply of food to the extent to in-patients of MGM Hospital by the Respondent as composite supply of healthcare service and dropping the demand of taxes, interest and penalty to the extent of food supplied to inpatient of MGM Hospital by the Respondent. The Appellants prays that the order impugned be set aside and uphold the order passed by the Adjudicating Authority (AA). 3. The short matter that is to be decided in the instant proceedings is whether the supplies made by the Respondent herein, more particularly with regard to food supplied to in-patients by the MGM Hospitals, would be liable to a levy of GST or not? 4. The Appellants in their grounds of appeal has contended that the Central Board of Indirect Taxes and Customs (the Board) vide its Circular No. 32/06/2018-GST dated 12.02.2018 clarified under the context of Healthcare Services provided by a Clinical Establishment, an authorised medical practitioner, which is not applicable to the instant case as the R....
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....empts to reopen settled factual narratives which lacks legal basis and sustainability. It is their submission that the clarification provided by the Board vide the said circular is clear and unambiguous and that it explicitly states that food supplied to in-patients based on the advice of the doctor's or nutritionist forms part of composite supply of healthcare services and is therefore not taxable separately. It is further contented that since the food is supplied within the precincts of the Hospital, the same cannot be categories as restaurant service. The cross objection draws reference to sl.no.74 of Notification No. 12/2017-CT(R) dated 28.06.2017 read with Section 8(a) of the Act, healthcare services constitute a composite supply. It is their submission that it is legally not correct to isolate food supply from this conglomeration of services and tax is separately as 'supply of other food'. The Respondent places reliance on the Principal Accountant General's (PAG) letter (C.No. PAG (Audit)/TS/GSS-7/2018-19/AE No.29 dated 07-2018) addressed to Osmania General Hospital which clarified that the food supplied within this medical framework is not taxable; that similar letter has al....
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....would constitute a composite supply or not. a. There must exists two or more supplies; b. Both the supplies must be taxable supplies; c. Both the supplies must be naturally bundled; d. Both supplies must be supplied in conjunction with each other in the ordinary course of business; and e. One must be a principal supply 9.1 Apply the above to the case on hand, it would be clear that in the hands of the Respondent there is only one supply viz., supply of food. This supply is being undertaken by the Respondent to MGM Hospital under an agreement. The one and only supply undertaken by the Respondent, under the agreement, is supply of food to in-patients, outpatients, staffs and doctors, at the rates agreed upon. While the supplies to other persons are not in dispute, the food provided to in-patients have been subject to dispute with effect from January 2018 to November 2021. It is understood that the agreement between MGM Hospitals and the Respondents have been terminated during November 2021 and hence issue is confined only to the said period. It is undisputed that between July 2017 to December 2017, the Respondent was paying appropriate ....
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....ly would be applicable to the food supplied by MGM Hospital to its in-patients. It would be categorically clear that the healthcare services and the food supply are both supplied in conjunction with each other. In other words, for the treatment of an ailment, the MGM Hospitals have not only to provide necessary and effective treatment but also advice the proper food that has to be administered to the in-patient. Therefore, both the supplies are inseparable and would be regarded as a 'composite supply'. 10.1 Now, applying the above to the case on hand, it would be apparently clear that the Respondent is providing only food to the in-patients and that too under a contracted agreement with MGM Hospitals. Apart from supply of food, there is no other supply in the hands of the Respondent and as such the provisions of Section 2(30) of the Act cannot be applied to the instant case. Similarly, the Board in the circular discussed above has only clarified the levy of a separate tax, for food supply, in the hands of the healthcare supplier viz., MGM Hospital in the instant case, and such a clarification would have no bearing on the Respondent, whatsoever. We are also of the considered opin....
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....rification extended by the Board. In order to invoke the provisions of Section 74 of the Act, there must be ingredients embedded in it, and that the same has to be established in clear terms. In the instant case, even though the department has sought to invoke the provisions of Section 74 of the Act, nothing concrete has been established necessitating invoking the said section. Further, even the proposal of penalties under Section 122 of the Act has been dropped by the AA, which only further fortifies that the Respondent has not deliberately opted against payment of tax for supply of food for in-patients. Except for the gross error in understanding the law and the clarification provided by the Board, we don't find any reason for invoking the provisions of Section 74 of the Act. We are unable to comprehend that the Respondent's act was with any mala-fide intention. Though the demand of tax was within the normal period, we are of the considered opinion that a relook into invoking Section 74 of the Act is very much essential especially with regard to the penal actions proposed. 12.2 At this juncture, we feel it appropriate to consider invoking the provisions of Section 75(2) of the....
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.... of supply is inclusive of integrated tax or, as the case may be, central tax, State tax, Union territory tax, the tax amount shall be determined in the following manner, namely,- Tax amount = (Value inclusive of taxes x tax rate in % of IGST or, as the case may be, CGST, SGST or UTGST) / (100 + sum of tax rates, as applicable, in %)" 13.2 The present case falls within the scope of Rule 35. Since the appellants had not collected tax separately from the recipients, and the Department has not alleged that they had, in fact, collected any tax over and above the invoice value, the value declared in the invoices must be treated as inclusive of tax. 13.3 The tax component must consequently be worked out in accordance with the formula prescribed under Rule 35. Tax cannot be calculated on an amount which already includes the tax component. The benefit of cum-tax valuation is, therefore, required to be extended while determining the differential tax liability. 14. It may be observed that the appellants did not specifically claim the benefit of Rule 35 either before this Bench or before the authorities below. In our view, this omission cannot disentitle them from receiving ....