2024 (5) TMI 888 - AT - Service Tax

Levy of service tax - net nursing home receipts and consultation receipts covered under the taxable category of business support services - Pathology Laboratory Arrangement - Renting of Immovable Property Services - miscellaneous income. - Joint venture (JV) Agreement with sharing revenue Net nursing home receipts and consultation receipts covered under the taxable category of business support services - HELD THAT - The Tribunal set aside the demand on net nursing home and consultation receipts - In view of the decision of the Tribunal in M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI 2020 (11) TMI 536 - CESTAT NEW DELHI , it has to be held that the Principal Commissioner committed an error in confirming the demand of service tax on net nursing home receipts and consultation receipts under business auxiliary service - demand set aside. Pathology Laboratory Arrangement - HELD THAT - The relationship between the hospital and the pathology laboratory is in the nature of a joint venture and, therefore, the appellant did not provide any service to such pathology laboratory agencies. The fact that the arrangement between the appellant and the agencies was a joint venture is clear from the arrangement entered into between the parties - The agreements laid down conditions by which the testing laboratories and the hospital will contribute their respective shares in the activities, and also the rules for conducting the business. This is not a case of the appellant providing only infrastructural facilities and receiving a income - it is clearly a case of joint venture in which neither any party renders any service to the other. In this connection, reliance can be placed to the decision of the Tribunal in MORMUGAO PORT TRUST VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, GOA- (VICE-VERSA) 2016 (11) TMI 520 - CESTAT MUMBAI , where it was held that ' The money flow to the Assessee from SWPL, under the nomenclature of Royalty, is not a consideration for rendition of any services but infact represents the Appellant s share of revenue arising out of the Joint Venture being carried on by the Assessee and SWPL' - demand withheld. Renting of Immovable Property Services - HELD THAT - The appellant did not contest the demand confirmed under this category. Miscellaneous income - HELD THAT - It has been pointed out by learned counsel for the appellant that the show cause notice does not even indicate the category under which the service tax was proposed. Since the show cause notice covered the period prior to July 2012, the confirmation of demand cannot be sustained as the show cause notice did not indicate the category of service under which the demand was proposed. The order dated July 01, 2015 passed by the Principal Commissioner insofar as it confirms the demand under net nursing home receipts and consultation receipts and miscellaneous income , therefore, deserves to be set aside and is set aside - Appeal allowed.

Summary

Issues:
1. Quashing of order confirming demand with interest and penalty
2. Tax liability on nursing home receipts, consultation receipts, renting of property, and miscellaneous income

Analysis:

The case involved M/s Aashlok Nursing Home Pvt. Ltd. challenging the order confirming a demand passed by the Principal Commissioner of Central Excise and Service Tax. The appellant, a multi-specialty hospital, engaged in providing health care services through arrangements with pathology laboratories and specialized doctors. The show cause notice proposed service tax on various receipts, including nursing home receipts, consultation receipts, renting of property, and miscellaneous income. The appellant denied the allegations but the Principal Commissioner confirmed a demand of Rs. 97,58,904 invoking the extended period of limitation.

Regarding the tax liability on nursing home and consultation receipts, the appellant argued that the arrangement with doctors did not fall under 'business auxiliary service' and cited precedents supporting their position. The Tribunal referred to previous decisions and held that under the negative list regime, health care services were exempt from service tax. The revenue model between hospitals and doctors for shared obligations and benefits did not constitute business support services.

On the issue of tax liability concerning the relationship with pathology laboratories, the appellant contended it was a joint venture where no services were provided to each other. The Tribunal agreed, emphasizing the collaborative nature of the arrangement where responsibilities were shared, and infrastructural needs were met by both parties. The Tribunal cited the decision in Mormugao Port Trust to support the finding of a joint venture without service provision.

Regarding the demand under 'renting of immovable property services,' the appellant did not contest the confirmation. However, for the miscellaneous income, the show cause notice lacked clarity on the proposed service category, leading to the demand confirmation being unsustainable. Consequently, the Tribunal set aside the order confirming the demand on nursing home and consultation receipts, as well as miscellaneous income, allowing the appeal partially.

In conclusion, the Tribunal held that the Principal Commissioner erred in confirming the demand under specific categories, based on the nature of arrangements and precedents cited. The judgment highlighted the exemption of health care services from service tax and the collaborative, non-service-based nature of the appellant's relationships with doctors and pathology laboratories. The appeal was allowed in part, with the demand under certain categories being set aside.