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Apollo Hospitals V/S CCE, Raipur

Company & Directors' Information:- S V S HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TG2007PTC052534

Company & Directors' Information:- D D HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN2009PTC073765

Company & Directors' Information:- A AND E HOSPITALS PRIVATE LIMITED [Active] CIN = U85110KL2003PTC016562

Company & Directors' Information:- R R HOSPITALS PRIVATE LIMITED [Active] CIN = U85100HR2011PTC042705

Company & Directors' Information:- K P S HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TZ1994PTC004918

Company & Directors' Information:- B R S HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN1988PTC016237

Company & Directors' Information:- V H M HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN2009PTC073497

Company & Directors' Information:- D B R HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TG2003PTC041648

Company & Directors' Information:- S M R HOSPITALS PVT LTD [Strike Off] CIN = U85110DL2005PTC143152

Company & Directors' Information:- M S R HOSPITALS PRIVATE LIMITED [Active] CIN = U85110AP1994PTC017731

Company & Directors' Information:- M M HOSPITALS PRIVATE LIMITED [Under Process of Striking Off] CIN = U85110UP1993PTC015371

Company & Directors' Information:- APOLLO INDIA PRIVATE LIMITED [Active] CIN = U24290DL2012PTC237964

Company & Directors' Information:- K C HOSPITALS PRIVATE LIMITED [Strike Off] CIN = U85110PB2012PTC035880

Company & Directors' Information:- B M HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN2005PTC058062

Company & Directors' Information:- S A HOSPITALS LIMITED [Strike Off] CIN = U85110MH2002PLC136697

Company & Directors' Information:- M. B. HOSPITALS PRIVATE LIMITED [Active] CIN = U85100HR2010PTC041489

Company & Directors' Information:- M G M I HOSPITALS (INDIA) PRIVATE LIMITED [Active] CIN = U85195KA2010PTC052058

Company & Directors' Information:- M AND D HOSPITALS PRIVATE LIMITED [Active] CIN = U85110DL2002PTC117618

Company & Directors' Information:- RAIPUR HOSPITALS PRIVATE LIMITED [Strike Off] CIN = U85110CT1996PTC010746

Company & Directors' Information:- M. R. HOSPITALS PRIVATE LIMITED [Strike Off] CIN = U85110UP1995PTC018165

Company & Directors' Information:- S P HOSPITALS PVT LTD [Strike Off] CIN = U85110HP1992PTC012651

Company & Directors' Information:- V K R HOSPITALS PRIVATE LIMITED [Strike Off] CIN = U85110TG2011PTC075009

Company & Directors' Information:- C P E C APOLLO PRIVATE LIMITED [Active] CIN = U74999DL2015PTC283774

Company & Directors' Information:- V P HOSPITALS PRIVATE LIMITED [Active] CIN = U85110DL2011PTC220548

Company & Directors' Information:- G S HOSPITALS PRIVATE LIMITED [Active] CIN = U85100AP2014PTC094902

    Appeal No. ST/51175/2015-DB (Arising out of Order-in-Original No. Commissioner/BIL/ST/06/2014 dated 23.12.2014 passed by the Commissioner of Central Excise, Raipur) and Final Order No. 52179/2018

    Decided On, 31 May 2018

    At, Customs Excise Service Tax Appellate Tribunal New Delhi

    By, MEMBER

    For Petitioner: Radhika Chandrasekhar, Advocate And For Respondents: Sanjay Jain, D.R.

Judgment Text

1. The appellant - M/s. Apollo Hospitals, Bilaspur are engaged in providing the health care facility. To provide the medical services to the patients visiting the hospital of the appellant, the appellant have engaged professional and doctors on contractual basis. These doctors are provided space in the hospital with the required facilities to attend to the patients coming to the hospitals run by the appellant. These doctors engaged on contract basis, are paid professional fee in terms of the contract. The fee paid to the doctors is computed, based on a pre-determined ratio on the amount received by the appellant from the patients. It appeared to Revenue that the portion of the fee collected by the appellant and retained by them is by way of collection charges/facilitation fee and is liable to service tax under the category of Business Support Service for the period July, 2012 to July, 2013. As the appellant had not paid any service tax under the category of Business Support Service, it appeared to Revenue that the appellant is liable to pay service tax under the Business Support Service and they have violated the provisions of the Act read with the Rule. Accordingly, Show Cause Notice dated 19th Sept. 2013 was issued demanding service tax of Rs. 51,03,718/- including cess along with interest with further proposal to impose penalty under Section 77 and 78 of the Act.

2. The Show Cause Notice was adjudicated vide order-in-original dated 23rd Sept. 2014 on contest, and the propose demand was confirmed, with interest. Further, penalty of equal amount was imposed under Section 78 and further penalty of Rs. 10,000/- was imposed under Section 77 of the Finance Act read with Rule 6 of Service Tax Rules, 1994.

3. Being aggrieved, the appellant is before this Tribunal.

4. The ld. Counsel for the appellant - Ms. Radhika Chandershekhar urges that the issue is no longer res integra. The Division Bench of this Tribunal in batch of appeals wherein the appellant was one of the appellant vide Final Order No. 58226-58232/2017 dated 6.12.2017 have held as follows:

"4. We have heard both the sides and perused the appeal records. We have also perused specifically the terms of some of the agreements on record. The dispute in the present appeals is with reference to the tax liability of the appellant hospitals under the category of business support services. The statutory provision for the said tax entry is as below:

"Section 65(104c) 'support services of business or commerce' means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.

Explanation. - For the purposes of this clause, the expression 'infrastructural support services' includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security."

5. The claim of the Revenue is that the appellants have provided infrastructural support service to various doctors. As a consideration for such support, they have retained a part of the amount collected from visiting patients. We have perused some of the agreements/appointment arrangements entered into between the appellants hospitals and the individual doctors. Typically, the arrangement contains details like duration of time for consultation, the obligations on the part of the doctors, fee to be paid, procedure for termination of agreement, etc. The agreements generally talk about appointment of consultants to provide services to the patients who will visit or admitted in the appellants hospital. The doctors will receive a percentage of share of the collection from the patients in case of consultation, procedures and surgeries done by them. In some cases, there is a provision for treating patients from low economic background without any financial benefits. On careful consideration of various terms and conditions and the scope of arrangement, we are of the considered view that such arrangement are for joint benefit of both the parties with shared obligations, responsibilities and benefits. The agreements do not specify the specific nature or list of facilities which can be categorized as infrastructural support to the doctors. The revenue model, as agreed upon between the contracting parties also, did not refer to any consideration attributable to such infrastructural support service.

6. The proceedings by the Revenue, initiated against the appellant hospitals, are mainly on the inference drawn to the effect that the retained amount by the hospitals out of total charges collected from the patients should be considered as an amount for providing the infrastructure like room and certain other secretarial facilities to the doctors to attend to their work in the appellants hospitals. We find this is only an inference and not coming out manifestly from the terms of the agreement. Here, it is very relevant to note that the appellant hospitals are engaged in providing health care services. This can be done by appointing the required professionals directly as employees. The same can also be done by having contractual arrangements like the present ones. In such arrangement, the doctors of required qualification are engaged/contractually appointed to provide health care services. It is a mutually beneficial arrangement. There is a revenue sharing model. The doctor is attending to the patient for treatment using his professional skill and knowledge. The appellants hospitals are managing the patients from the time they enter the hospital till they leave the premises. ID cards are provided, records are maintained, all the supporting assistance are also provided when the patients are in the appellant hospital premises. The appellant hospital also manages the follow-up procedures and provide for further health service in the manner as required by the patients. As can be seen that the appellants hospitals are actually availing the professional services of the doctors for providing health care service. For this, they are paying the doctors. The retained money out of the amount charged from the patients is necessarily also for such health care services. The patient paid the full amount to the appellant hospitals and received health care services. For providing such services, the appellants entered into an agreement, as discussed above, with various consulting doctors. We do not find any business support services in such arrangement.

7. The inference made by the Revenue that the retained amount by the hospital is to compensate the infrastructural support provided to the doctors can be examined in another angle also. Reading the statutory provisions for BSS, we note that the services mentioned therein are "provided in relation to business or commerce." As such, to bring in a tax liability on the appellant hospital, it should be held that they are providing infrastructural support services in relation to business or commerce. That means, the doctors are in business or commerce and are provided with infrastructural support. This apparently is the view of the Revenue. We are not in agreement with such proposition. Doctors are engaged in medical profession. As examined by Hon'ble Gujarat High Court in Dr. K.K. Shah (supra), though in an income-tax case, we note that there is a discernable difference between "business" and "profession". The Gujarat High Court referred to decision of Hon'ble Supreme Court in Dr. Devender Surtis : AIR 1962 SC 63. The Supreme Court observed as below:

"There is a fundamental distinction between a professional activity and an activity of a commercial character" : "...a "profession"... involves the idea of an occupation requiring either purely intellectual skill, or of manual skill controlled, as in painting and sculpture, of surgery, by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production or sale or arrangements for the production or sale of commodities" "...a professional activity must be an activity carried on by an individual by his personal skill and intelligence...... and unless the profession carried on by (a person) also partakes of the character of a commercial nature" the professional activity cannot be said to be an activity of a commercial character."

8. Applying the above ratio and examining the scope of the tax entry for BSS, we are of the considered view that there is no taxable activity identifiable in the present arrangement for tax liability of the appellant hospitals.

9. Under negative list regime w.e.f. 01.07.2012, the health care services are exempt from service tax. Earlier the health care services were only taxed for specified category of hospitals and for specified patients during the period 01.07.2010 to 01.05.2011. With effect from 01.05.2011, health care services were exempt from service tax under Notification No. 30/2011 ST. After introduction of negative list tax regime, Notification No. 25/2011-ST exempted levy of service tax on health care services rendered by clinical establishments. We have examined the scope of the terms 'clinical establishments' and 'health care services'. The notification defines these terms. The term 'clinical establishments' is defined as below":

"Clinical establishment" means hospital, nursing home, clinic, sanatorium or any other institution by whatever name called, that offers services or facilities requiring diagnosis or treatment of care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases."

10. The terms 'health care services' is defined as below:

"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 their transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of both affected due to congenital defects, developmental abnormalities, injury or trauma."

11. These two provisions available in Notification No. 25/2012 will show that a clinical establishment providing health care services are exempted from service tax. The view of the Revenue that in spite of such exemption available to health care services, a part of the consideration received for such health care services from the patients shall be taxed as business support service/taxable service is not tenable. In effect this will defeat the exemption provided to the health care services by clinical establishments. Admittedly, the health care services are provided by the clinical establishments by engaging consultant doctors in terms of the arrangement as discussed above. For such services, amount is collected from the patients. The same is shared by the clinical establishment with the doctors. There is no legal justification to tax the share of clinical establishment on the ground that they have supported the commerce or business of doctors by providing infrastructure. We find that such assertion is neither factually nor legally sustainable.

12. The Revenue has filed an appeal against order dated 01.02.2016 of Commissioner of Service Tax, Delhi-I. In similar set of facts, as discussed above, the Commissioner, after detailed examination, held that the respondent (hospital) is not providing any services to the consultants/doctors. The service provided by

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the respondent hospital would merit classification under Health Care Services extended to the patients. Accordingly, the demand proceedings against the respondent hospital was dropped. Revenue filed appeal against the said order. In view of our detailed analysis on the same dispute while dealing with appeals by the appellant hospitals, as above, we find no merit in the present appeal by the Revenue. We are in agreement with the ratio and decision of the Commissioner in the impugned order. Accordingly, the appeal by the Revenue is dismissed. 13. In view of above discussion and analysis, we hold that the impugned orders against which appellant hospitals filed appeal are devoid of merit, the same are set-aside. Upholding the order dated 01.02.2016 of Commissioner, Service Tax, New Delhi, we dismiss the appeal by the Revenue. All the 7 appeals are disposed-of in these terms." 5. The ld. AR for Revenue have relied upon the impugned order. 6. Having considered the rival contentions, we are satisfied that the issue herein have been decided in favour of the appellant for the previous period vide aforementioned Final Order No. 58226-58232/2017 dated 6.12.2017. Accordingly, we allow this appeal and set aside the impugned order. 7. The appellant shall be entitled to consequential benefits in accordance with law.