2016 (11) TMI 238 - HC - Service Tax

Classification of taxable services - activity of treatment under KKT scheme - Health Checkup and Treatment Services - appellant contended that the KKT is a Welfare Scheme introduced by the Government of Tamil Nadu for the benefit of those who cannot afford costly medical treatment and that will not construed as an Insurance Scheme, but a Welfare Scheme - Held that - one fundamental error which has crept in the impugned proceedings is that the authority while adjudicating the show cause notice did not examine the scope of the transaction between the petitioner and the Government/STAR. In fact that should have been the first endeavour of the adjudicating authority, since the petitioner raised a preliminary objection by stating that KKT is a Welfare Scheme and not an Insurance policy, no approval was obtained from IRDA and therefore, they will not fall within the definition of Health Check up and Treatment Services Unless and until the Scheme has been examined in full, the respondent cannot come to a conclusion that the nature of transaction done by the petitioner would fall within the definition of section 65(105)(zzzzo) of the Finance Act - the Scheme propounded by the Government arrangement with STAR, the petitioner and the Government, conclusion could not have been arrived at and the case laws referred to could not have been made applicable without going into the facts and the terms of the subject schemes which may be distinct and different from those considered in the decision relied on by the respondent - Petition allowed by way of remand.

Summary

Issues:
Challenge to Order-in-Original confirming Service Tax demand for Health Checkup and Treatment Services under Finance Act, 1994.

Analysis:
1. The petitioner, a specialized Hospital, challenged an Order-in-Original confirming Service Tax demand for Health Checkup and Treatment Services under the Finance Act, 1994. The petitioner contended that the scheme they were part of, Kalaignar Kaapittu Thittam (KKT), was a Welfare Scheme, not an Insurance Scheme, and therefore should not be taxed under section 65(105)(zzzzo) of the Finance Act. They argued that the scheme was managed by M/s Star Health and Allied Insurance Company Limited on behalf of the Government, and there was no insurance policy or policyholder involved in the transactions.

2. The first respondent issued a show cause notice alleging contravention of the Finance Act, 1994, and called for payment of Service Tax for services rendered under the KKT scheme. The petitioner objected, stating that the gross receipts included materials and consumables that should be excluded from the taxable value. They argued that the levy of Service Tax was unwarranted, and the allegations of suppression and penalty imposition were not sustainable.

3. The first respondent, in the impugned order, concluded that the petitioner was liable to pay Service Tax on the gross amount received from the Insurance Company. The respondent justified the demand for Service Tax, interest, and penalty, citing legal provisions and previous court decisions. However, a fundamental error was noted in the proceedings as the authority did not examine the nature of the transaction between the petitioner, the Government/STAR, and the beneficiaries of the scheme.

4. The High Court held that the matter needed to be reconsidered by the respondent, emphasizing the need to examine the Government orders, the scheme details, and the roles of all parties involved before determining the nature of the services provided. The Court set aside the impugned order, remanding the matter to the respondents for a fresh consideration. The respondents were directed to conduct a thorough examination, consider all relevant documents, and provide the petitioner with an opportunity for a personal hearing before passing fresh orders within three months.

This detailed analysis of the judgment highlights the key legal arguments, findings, and directions provided by the High Court in response to the challenges raised by the petitioner regarding the Service Tax demand under the Finance Act, 1994.