2020 (11) TMI 536 - AT - Service Tax

Levy of Service Tax - Healthcare services/Business Support Services - revenue sharing - whether service tax is payable by the appellant for having allowed usage of the infrastructure provided by it to the contracted doctors? - HELD THAT -This precise issue was considered by the Tribunal in connection with the earlier show cause notice to the appellant which involved the period both before and after July 1, 2012. The Tribunal held, after a careful consideration of the conditions prescribed in the agreement, that the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits. The Commissioner was not justified in confirming the demand of service tax under business support service - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether service tax is payable by the appellant for providing infrastructural support to contracted doctors.

Analysis:
The appellant, a hospital, appointed doctors on a contractual basis and retained a portion of the fees paid by patients to the doctors as 'collection charges'. The Department alleged that these charges should be subjected to service tax as the hospital was providing infrastructural support services to the doctors, falling under the category of 'business support services'. The Commissioner confirmed the demand of service tax, stating that the hospital was providing infrastructural support beyond healthcare services, which were exempt from service tax.

The appellant contended that the arrangement with doctors was based on revenue sharing and no services were rendered by one party to the other. They argued that healthcare services were exempt from service tax under a specific notification. However, the Commissioner rejected these contentions, emphasizing that the hospital provided infrastructural support beyond healthcare services, making them liable for service tax on the retained amount.

The Tribunal considered a previous case involving the same issue and held that the arrangement between the hospital and doctors was mutually beneficial with shared obligations, responsibilities, and benefits. The Tribunal found no evidence of specific infrastructural support services being provided by the hospital to the doctors, concluding that the retained amount was for healthcare services. The Tribunal also highlighted that healthcare services were exempt from service tax under the negative list regime.

The Tribunal's decision was accepted by the Department, and subsequent cases followed the same reasoning, leading to the conclusion that the Commissioner was not justified in confirming the demand of service tax under 'business support services'. Therefore, the impugned order confirming the service tax demand was set aside, and the appeal was allowed in favor of the appellant.