2023 (5) TMI 388 - AT - Service Tax

Classification of services - Business Support service or not - privity of contract - doctors appointed on contractual basis, - collection of consultation fees/charges from the patients (out of the income so generated from that account, certain amount is retained by the appellants) - period from 01.10.2006 to 31.03.2014 - HELD THAT - The arrangements made are for joint benefit of both the parties with shared obligations, responsibilities etc. The agreements between the parties do not specify the nature or list of facilities, which can be categorized as provision of infrastructural support imparted by the appellants to the contractual doctors. Further, the revenue model, as agreed upon between the contracting parties also, did not refer to any consideration attributable to such infrastructural support service as alleged by the department. Further, there is no privity of contract between the doctors and the patients and that the later is contractually obliged to settle the bills raised by the appellants hospital towards provision of the medical services - the service tax demand cannot be fastened on the appellants. On looking at another angle, it cannot be said that the appellants hospital is the recipient of service provided by the doctors inasmuch as the appellants actually availed the professional services of the doctors, for which they pay certain amount from the payment received from the patients. Hence, as a recipient of service, the liability to pay service tax cannot be fastened on the appellant. Furthermore, it is not the case of Revenue that the patients treated in the appellants hospital are having contractual relationship with the doctors and that the doctors raised the professional bills on them - the appellants are providing business support service to the doctors. There are no merits in the impugned orders, insofar as the activities of the appellants were treated as taxable service and consequently, the adjudged demands were confirmed. Further, there was no scope or occasion on the part of the adjudicating authority to rely upon or interpret the ratio of the judgments relied upon by the appellants in this case inasmuch as the impugned order was passed in the month of June 2016 - appeal allowed.

Summary

Issues involved:
Interpretation of taxable service for healthcare providers under service tax law.

Analysis:
The case involves healthcare service providers who were providing medical services through qualified doctors and medical staff, both on their panel of consultants and on a contractual basis. The service tax department initiated show cause proceedings against the appellants, alleging that the amount retained by the healthcare providers from patient charges was earned for providing infrastructure support to the doctors and should be classified as "Business Support service." The department sought confirmation of service tax demand amounting to Rs. 2,56,46,932 for the period from 01.10.2006 to 31.03.2014. The appellants challenged this before the Tribunal.

The appellants argued that the demands could not be confirmed based on previous judgments, including cases involving National Health and Education Society, Sir Ganga Ram Hospital, Apollo Hospitals, and Holy Family Hospital. The Revenue, however, reiterated the findings in the impugned order.

Upon examination, the Tribunal found that the arrangements between the healthcare providers and consulting doctors were mutually beneficial, with shared obligations and responsibilities. The agreements did not specify infrastructural support provided by the appellants to the doctors, and the revenue model did not attribute any consideration to such support. Additionally, there was no privity of contract between doctors and patients, as patients settled bills raised by the hospital for medical services. The Tribunal concluded that the service tax demand could not be imposed on the appellants as they were recipients of professional services from the doctors, not providers of business support services.

The Tribunal referenced the judgment in the case of Sir Ganga Ram Hospital, where it was observed that the retained amount by hospitals from patient charges was for healthcare services provided by the doctors, not for infrastructural support. The Tribunal further highlighted that under the negative list regime, health care services were exempt from service tax, and taxing a portion of patient charges as business support service would defeat this exemption.

Ultimately, the Tribunal set aside the impugned order, noting that the demands on the appellants were not justified. The Tribunal also highlighted that subsequent proceedings for the subsequent periods were dropped by the Revenue, relying on similar judgments. The appeals were allowed in favor of the appellants, emphasizing the settled position of law in such cases.