2024 (5) TMI 370 - AT - Service Tax

Eligibility for deduction of cost of medicines incurred for providing health services - N/N. 12/2003-ST dated 20.06.2003 - HELD THAT - The decision of larger bench relied upon by the Commissioner (Appeals) in the case of M/s Aggarwal Colour Advance Photo System has been set aside by the Hon ble Madhya Pradesh High Court vide its order dated 13.03.2020 2020 (4) TMI 799 - MADHYA PRADESH HIGH COURT where it was held that ' in goods, the tax on such sale or purchase of goods is leviable. In this view of the matter, after the 46th Amendment, there is no question of dominant nature test applying in photography service and the works contract, which is covered by Clause (29A) of Article 366 of the Constitution where the element of goods can be separated, such contracts can be subjected to sales tax by the States under Entry 54 of List II of Schedule II. Once that is so, value of photographic paper and consumables cannot be included in the value of photography service for the purposes of imposition of service tax.' From the decision of Hon ble High Court it is quite evident that the benefit of exemption under Notification No 12/2003-ST cannot be denied just for the reason that the value of goods consumed in providing the taxable services is not separately indicated in the invoice, or no separate invoice for the sale of such goods have been made. The appellant hospital admittedly consuming the medicines and other consumables for providing the health services to its client. The only reason recorded in the impugned order for denying the said benefit is non production of sale bills showing sale of the medicines which were actually consumed in providing the health services. Commissioner (Appeal) has based his order on decision of larger bench of tribunal referred above. However as this decision has been set aside by the Hon ble High Court reliance placed on the said decision cannot be upheld. The he impugned order is set aside, Order-in-Original passed by Deputy Commissioner has been restored - appeal allowed.

Summary

Issues Involved:
1. Eligibility for deduction of cost of medicines u/s Notification No. 12/2003-ST.
2. Interpretation of "sale" in the context of Notification No. 12/2003-ST.
3. Applicability of larger bench decision in M/s Aggarwal Colour Advance Photo System case.
4. Determination of service tax liability.

Summary:

1. Eligibility for Deduction of Cost of Medicines u/s Notification No. 12/2003-ST:
The Commissioner (Appeals) denied the deduction of the cost of medicines from the taxable value, citing the absence of documentary proof of sale and referencing the larger bench decision in M/s Aggarwal Colour Advance Photo System. It was held that the medicines consumed in providing health services do not qualify for the deduction as they were not sold separately.

2. Interpretation of "Sale" in the Context of Notification No. 12/2003-ST:
The Tribunal referred to the Madhya Pradesh High Court's decision, which clarified that the benefit of the exemption under Notification No. 12/2003-ST cannot be denied solely because the value of goods consumed in providing taxable services is not separately indicated in the invoice. The term "sold" in the Notification should include "deemed sale" as per Article 366(29A)(b) of the Constitution.

3. Applicability of Larger Bench Decision in M/s Aggarwal Colour Advance Photo System Case:
The Tribunal noted that the larger bench decision relied upon by the Commissioner (Appeals) had been set aside by the Madhya Pradesh High Court. Therefore, the reliance on this decision for denying the exemption was not upheld.

4. Determination of Service Tax Liability:
The Adjudicating Authority had allowed the deduction of the cost of medicines from the gross taxable receipt, considering the medicines as excludible from the total amount received for providing health services. The Tribunal restored the Order-in-Original passed by the Deputy Commissioner, which allowed the deduction of the cost of medicines and recalculated the taxable receipt accordingly.

Conclusion:
The Tribunal set aside the impugned order and restored the Order-in-Original, allowing the deduction of the cost of medicines from the taxable value and reducing the service tax liability. The appeal was allowed.