2018 (8) TMI 249 - AT - Service Tax

Renting of Immovable Property Services or business support service - sharing of the infrastructure of the hospital - Held that - It is apparent from record and is an admitted fact also that with three of the diagnostic centres the appellant has entered into separate agreements. The relevant extract has been mentioned in the show cause notice. The perusal thereof shows that the diagnostic centres are allowed by the appellant to install and operate their equipments in the space provided by the appellant within the Hospital premises with the condition and they shall be creating necessary infrastructure at their own cost as is required specifically for their equipment - there is no element of rent is involved in the transaction between the appellant and diagnostic centre. Business Support Service - Held that - The appellant is providing the facilitation of customer relationship to the diagnostic centres by employing their own staff to collect the amount from the patients against the diagnostic services to be received by them but to be provided by the diagnostic centres in the appellants premises. Though the appellant herein has relied upon the fact that the health services are exempted from the Tax Net and diagnosis is included as the part of the health services, but the fact remains is that in the given arrangements/agreements with the diagnostic centres the appellant is not providing any health service. It is merely collecting money on behalf of the diagnostic centres for providing them the number of patients. Hence, the share of revenue so collected in the hands of the appellant cannot be categorized as a consideration for rendering the health service to the patients - considerations received undoubtedly is for such activities as are enumerated in the definition of the BSS. The Notification dated 20.06.2012 is also not applicable at least to the amount of consideration @ 25% of the total revenue collected by the appellant from the patients to receive diagnostic health services from the diagnostic centres using appellant s infrastructural. Management Maintenance Repair Services to the food courts (FC) in the appellant s premises - Held that - The agreement of the appellant with the FCs is to provide basic amenities as water, electricity, air-conditioning, power back-up etc. It is also apparent that appellant while allowing the FCs to operate in its premises, it charges a fixed amount and also receives a fixed percentage from the sale of these FCs. The activity is opined to not to fall under definition of MMR in Section 65 (64) of the Act. It is rather an admitted fact that w.e.f. 01.06.2007, the appellant is discharging his liability as Renting of Immovable Property Services qua the consideration received from these FC s - demand set aside. The remaining findings qua imposition of interest and the penalties are held to have no infirmity as the appellant is a big health service provider and cannot be presumed to be ignorant of law nor is so permitted. Appeal allowed in part.

Summary

Issues Involved:
1. Classification of services provided to diagnostic centers under Business Support Service (BSS).
2. Classification of services provided to food courts under Management, Maintenance, and Repair Service (MMR).
3. Imposition of interest and penalties for non-payment of service tax.

Issue-wise Detailed Analysis:

1. Classification of Services Provided to Diagnostic Centers under Business Support Service (BSS):

The appellant, a hospital, had agreements with three diagnostic centers allowing them to install and operate their equipment within the hospital premises. The diagnostic centers were responsible for creating necessary infrastructure and reimbursing the hospital for electricity and water expenses. The hospital employed its staff for billing and receiving payments from patients, retaining 25% of the revenue collected.

The Tribunal examined whether these arrangements could be classified as Business Support Service (BSS) under Section 65 (105) (r) of the Finance Act, 1994. BSS includes services provided in relation to business or commerce, such as operational assistance for marketing, formulation for customer service, and infrastructural support services. The Tribunal concluded that the hospital was providing infrastructural support to the diagnostic centers, including customer relationship management by collecting payments on their behalf. Therefore, the revenue share retained by the hospital was considered consideration for providing BSS, not exempt health services.

2. Classification of Services Provided to Food Courts under Management, Maintenance, and Repair Service (MMR):

The appellant had agreements with food courts within its premises to provide basic amenities like water, electricity, air-conditioning, and power backup. The hospital charged a fixed amount and received a percentage of the food courts' sales. The Tribunal assessed whether these services fell under MMR as defined in Section 65 (64) of the Finance Act, 1994. It was observed that the hospital was already discharging its liability as Renting of Immovable Property Services for these arrangements. The Tribunal referred to the case law Aravali Construction Company Pvt. Ltd. vs. CCE, Jaipur, and concluded that the services provided to food courts did not fall under MMR. Consequently, the demand for service tax amounting to ?1,84,913/- for MMR services was set aside.

3. Imposition of Interest and Penalties:

The Tribunal upheld the imposition of interest and penalties for non-payment of service tax on the grounds that the appellant, being a significant health service provider, could not be presumed ignorant of the law. The non-deposition of tax based on an incorrect reliance on the exemption for health services was considered a deliberate act to evade tax. Therefore, the interest and penalties related to the confirmed demand for BSS were upheld.

Conclusion:

The Tribunal upheld the demand for service tax under Business Support Service, along with the respective interest and penalties. However, it set aside the demand for Management, Maintenance, and Repair Services for ?1,84,913/- and the related interest and penalties. The appeal was partly allowed, providing consequential benefits to the appellant.