SC: Stem Cell Banks Covered Under Healthcare, Orders Rs. 40L Tax Refund
The Supreme Court observed that the activity of enrolment, collection, processing, and storage of umbilical cord blood stem cells fell within the scope of exempted “Healthcare Services” and therefore, was not liable to service tax. The Appellant is a joint venture company of M/s. Stemcyte Inc., USA, M/s. Apollo Hospital Enterprises Ltd., and M/s. Cadila Pharmaceuticals Ltd. and is engaged in the collection, processing, testing, and storage of umbilical cord blood units and their therapeutic application.
A Bench of Justice J.B. Pardiwala and Justice R. Mahadevan observed, “The records reveal that the appellant was under a bona fide belief that the activity of enrolment, collection, processing, and storage of umbilical cord blood stem cells fell within the scope of exempted “Healthcare Services” and therefore, was not liable to service tax. There is nothing on record to suggest that the appellant suppressed any material facts. On the contrary, they responded promptly to departmental communications and even deposited a sum of Rs. 40,00,000/- during the investigation. There was no allegation or evidence of fraud, collusion, wilful misstatement, or contravention of statutory provisions with intent to evade tax.”
Case Brief
It was the case of the Appellant that being engaged in the collection, processing, testing, and storage of umbilical cord blood units and their therapeutic application it is exempted from service tax as “Healthcare Services” are exempted.
However, the Deputy Commissioner of Central Excise issued summons and letters to the Appellant demanding service tax for the period from July 1, 2012 to February 16, 2014. Accordingly, the Appellant submitted replies along with the necessary documents and deposited a sum of Rs. 40,00,000/-, stating that the payment was made under protest.
Later, Customs, Excise and Service Tax Appellate Tribunal (CESTAT) also dismissed the plea of the Appellant. The Appellant submitted that “Healthcare Services” have always been exempt under the Finance Act, 1994.
Court’s Analysis
With regard to the question whether the Appellant’s service fell within the ambit of “Healthcare Services” and are therefore, eligible for exemption from payment of service tax, the Court opined that the records reveal that the Appellant was under a bona fide belief that the activity of enrolment, collection, processing, and storage of umbilical cord blood stem cells fell within the scope of exempted “Healthcare Services” and therefore, was not liable to service tax. There was nothing on record to suggest that the Appellant suppressed any material facts.
“Therefore, in the absence of fraud, collusion, wilful misstatement, or suppression of facts with an intent to evade payment of service tax, the invocation of the extended period of limitation under Section 73 of the Finance Act, 1994 is wholly unwarranted. Mere non-payment of service tax, by itself, does not justify the invocation of the extended limitation period. Accordingly the show cause notice issued by the department is clearly time-barred. On this ground alone, the impugned order deserves to be set aside”, the Bench said.
