2023 (8) TMI 615 - AT - Service Tax

Exemption from Service Tax - Interpretation of statute - N/N. 25/2012 ST dated 20.06.2012 - cosmetic or plastic surgery is excluded from the purview of the Notification or not - Autologous Micrograft Treatment - Radio Frequency Treatment - scope of Healthcare services - extended period of limitation - HELD THAT - A conjoint reading of the notification reveals that the exemption is for healthcare services provided by a clinical establishment and authorised medical practitioner or paramedics. Healthcare services is a service whereby the diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and include services by way of transportation of the patient to and from a clinical establishment. But it specifically excludes hair transplant or cosmetic or plastic surgery except when the same is undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma. It is pertinent to take cognizance of the clarification issued by TRU when the service tax was initially levied on cosmetic and plastic surgery. It is noted that the term surgery has been defined in medical technology as consisting of physical intervention on tissues. As a general rule it has defined surgery to involve cutting of patient s tissues or closure of previously sustained wound. It also includes non-invasive surgery.Non-invasive surgery procedures leave the skin intact or unbroken, meaning it does not require an incision or cutting of the skin. Rather it is usually performed by laser or using syringes. Autologous micrograph treatment is used to treat male and female pattern baldness. This treatment involves the extraction of unspecialised cell from one s body that maintain and repair tissues. Skin micrographs are taken from behind the year with the help of a biopsy punch and a stem cell - like rich solution is made out of it and it is injected into the hair thinned areas of the scalp. It is noted that this therapy is a single session treatment and the process requires to be administered under local anaesthesia - Illness such as hypothyroidism has also been associated with thinning hair, and certain dietary deficiency that may include zinc, iron, and biotin could also have same results. Autoimmune conditions such as alopecia areata (AA) have also been shown to lead to hair loss. What is clear is that the said treatment is not used to prevent or address any disease per se, rather it is to address the consequences of disease which can be drogenetic Alopecia and/or Telogen effluvium. In this context we find that the Supreme Court in the case of PUMA AYURVEDIC HERBAL (P) LTD. VERSUS COMMISSIONER OF C. EX., NAGPUR 2006 (3) TMI 141 - SUPREME COURT has held that By use of the product if a person is able to grow hair on his head, his ailment of baldness is cured and the persons appearance may improve product used for the purpose cannot be termed as cosmetic simply because it has ultimately led to the improvement in appearance of the person. The primary role of the product was grow hair on his head and cure his baldness. It is apparent that the Autologous Micrograph Treatment undertaken by the appellant is to treat Androgenetic Alopecia and/or Telogen effluvium i.e. baldness which has been recognised to be an illness. Once Androgenetic Alopecia/Telogen Effluvium is recognised as illness, we hold that the same is covered by the definition of healthcare services given in 2(t) of the notification. Any improvement in appearance is not a consequence of such a treatment, as has been categorically held by the Supreme Court in Puma Ayurvedic Herbal - There is only injection of a stem cell -like rich solution into the thinning areas of the head. This does not involve any surgery or surgical procedure which involves cutting of a patient s tissues or closure of a previously sustained wound. Accordingly, the Autologous Micrograph Treatment is eligible for exemption under Notification 25/2012. Whether Radio Frequency Treatment is a cosmetic surgery or not? - HELD THAT - The Radio Frequency process is a non-surgical chemical cautery or with electro cautery, which is used to eliminate Warts, Moles and Freckles with no side effects or scarring. It is painless and the number of sittings depends upon the size of lesion. Warts, known in medical terminology as papillomas, may emerge anywhere on the body, depending on the specific strain of the virus (known as Human papillomavirus or HPV) that causes them to develop in the body. Viral warts are infectious to the patient and others. Moles are a common type of skin growth, and often appear as small, dark brown spots and are caused by clusters of pigment-forming cells (melanocytes). Freckles are small spots on the skin that range in colour from red to brown, and are commonly seen on sun-exposed areas, such as face, neck, etc. All these common skin conditions are not usually life threatening, and any procedure to remove such warts/moles or freckles is undertaken to enhance physical appearance or beauty. Therefore, their removal would clearly fall under the category of a cosmetic surgery. Time Limitation - HELD THAT - It is clear that the two treatments were not in the knowledge of the Department. It is evident from the fact that the Commissioner has dropped the demand of Rs. 2,39,00438/- on other services viz., Alopecia Injection, Hairloss therapy, Mesotherapy, Platelet Rich Plasma etc on the ground that these were recognised by the department in the Internal Audit Report (IAR) No. 260/2016-17 dated 10.08.2016, as these were undertaken by the appellant during the period of the last Audit. Hence, the invocation of the extended period under Section 73 of the Finance Act, 1994 relating to Radio Frequency Treatment is justified and is upheld. The demand relating to Autologous Micrograph Treatment set aside and the demand confirmed in respect of Radio Frequency Treatment upheld - the penalty amount is accordingly modified - appeal allowed in part.

Summary

Issues Involved:

1. Whether Autologous Micrograft Treatment is eligible for exemption under Notification No. 25/2012-ST.
2. Whether Radio Frequency Treatment is eligible for exemption under Notification No. 25/2012-ST.
3. Whether the extended period of limitation can be invoked for the demand of service tax on these two treatments.

Summary of the Judgment:

Issue 1: Autologous Micrograft Treatment Eligibility for Exemption

The appellant argued that Autologous Micrograft Treatment, used to treat Androgenetic Alopecia and Telogen Effluvium, is not cosmetic in nature but a healthcare service. The Tribunal noted that this treatment involves extracting unspecialised cells and injecting them into hair-thinned areas, which does not involve cutting tissues or closing wounds. Citing the Supreme Court's decision in Puma Ayurvedic Herbal (P) Ltd. vs. CCE, it was held that the treatment addresses a medical condition (baldness) and is not primarily for enhancing physical appearance. Therefore, the Tribunal concluded that Autologous Micrograft Treatment qualifies for exemption under Notification No. 25/2012-ST.

Issue 2: Radio Frequency Treatment Eligibility for Exemption

The appellant contended that Radio Frequency Treatment, used to remove warts, moles, and freckles, is a healthcare service. However, the Tribunal found that these conditions are generally not life-threatening and their removal is primarily for enhancing physical appearance. Thus, Radio Frequency Treatment falls under the category of cosmetic surgery and is excluded from the exemption under Notification No. 25/2012-ST.

Issue 3: Extended Period of Limitation

The Tribunal observed that the Commissioner had dropped the demand for other services due to the Department's knowledge from previous audits. However, Autologous Micrograft Treatment and Radio Frequency Treatment were not provided during the earlier audit period and were not disclosed to the Department. Hence, the extended period of limitation was invoked correctly for Radio Frequency Treatment but not justified for Autologous Micrograft Treatment.

Conclusion:

The Tribunal set aside the demand for Autologous Micrograft Treatment, confirming its eligibility for exemption. The demand for Radio Frequency Treatment was upheld, and the penalty was modified accordingly. The appeal was partially allowed, modifying the order in original to that extent.