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TMI Blog2024 (8) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... ATE GENERAL OF CENTRAL EXCISE INTELLIGENCE, THE COMMISSIONER OF SERVICE TAX [ 2015 (4) TMI 290 - MADRAS HIGH COURT] and hold that the retrospective application was never intended through legislative amendment. Even on limitation, the finding of the adjudicating authority correctly upholds the extended period as applicable to the facts and circumstances of the case. Circular No. 334/03/2014-TIU dated 17 February, 2014 cannot therefore, be stated to be supporting retrospective effect and as has been laid down by the Hon ble High Court of Madras and cannot be stated to be clarificatory in the absence of any provision in the notification stating the same to be so. In view of the aforesaid legal position, specifically relating to retrospective application of any amendments, it cannot be held that any serious legal issue of interpretation was involved, which needed fresh ice to be broken. The inaction to take registration despite department s insistence and contents of the Board Circular No. 334/03/2014-TRU dated 17.0.2024. The circular does not indicate in any case, its applicability to the past. Extended limitation therefore has been correctly applied. The legislative mandate or absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler of M/s. StemCyte was recorded on 04.02.2014, under Section 14 of the Central Excise Act, 1944 made applicable to service tax matters vide Section 83 of the Finance Act, 1994 wherein he inter alia deposed that M/s. StemCyte had collected total amount of Rs. 14,67,52,309/ during the period from 01.07.2012 to 31.12.2013 from their customers for enrolment, collection, processing and storage of Umbilical Cord Blood (UCB) Stem Cell. 3. A statement of Shri Deepak Chhabra, Chief Operating Officer of M/ StemCyte was recorded on 13.02.2014, wherein he inter alia stated that the services provided by their Company fall under the category of Health care services by a clinical establishment; that the activity of enrolment, collection, processing and storage of Umbilical Cord Blood Stem Cells carried out by their Company was definitely a service which was not covered under the Negative List of Services and the same is chargeable to Service Tax with effect from 01.07.2012; that they made representation on 24.07.2012, through their Association, to the Ministry of Finance, representing that the Exemption List included Health Care Services, but the apparent definition of the Health Care Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive List as given in the Section 66D of the Finance Act, 1994, as amended from time to time. 3.3 This service is also not exempted under mega exemption notification No. 25/2012-S.T. dated 20-06-2012, as amended from time to time. The Health Care Service has been defined under Definition Clause 2(t) of Mega Exemption Notification No. 25/2012-S.T. dated 20.06.2012 as: Health care services means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma; 3.4 In order to examine whether the services provided by M/s. StemCyte are the services falling in the ambit of definition of Health Care Services, the definition of Health Care Services, as stated above, is exhaustive in the nature as it specifically caters to: Any service by way of Diagnosis For illness, injur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services. In the said notification, the opening paragraph after entry 2, the following entry has been inserted: 2A. Services provided by Cord blood banks by way of preservation of stem cells or any other service in relation to such preservation From the said Notification No. 04/2014-S/Tax dated 17.02.2014, it is clear that, with effect from 17.02.2014, the Stem Cell/ Umbilical Cord Blood Banking Services provided by cord blood banks by way of preservation of stem cells has been given exemption from levy of Service Tax and it is prospective in nature. 5. As per ledger submitted by M/s. StemCyte, it has been noticed that M/s. StemCyte has shown the amount received for the activity of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cells and claimed exemption from service tax as under: In view of the above, it appeared that the activity of enrollment. collection, processing and storage of Umbilical Cord Blood Stem Cell preformed by M/s StemCyte is a taxable service and accordingly service tax of Rs.2,07,29,576/-, as mentioned in above table, on the taxable amount of Re 16,77,15,014/- received during the period from 01.07 2012 to 16.02 2014, such activity is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the governing statutory provisions create an absolute liability when any provision is contravened or there is a breach of trust placed on the service provider appeared that the Service provider have contravened the provisions of Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994 in as much as they failed to obtain Service Tax Registration within the stipulated time frame as prescribed therein for rendering the above mentioned taxable service; that they have also contravened the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 in as much as they failed to pay the service tax on said taxable service for the period from 01.07.2012 to 16.02.2014 which neither fall under the Negative List of Services as provided under Section 66D of the Finance Act, 1994 nor exempted under the Mega exemption Notification No. 25/2012-S.T. dated 20.06.2012 till 16.02.2014 i.e. till amendment of the said Notification by Notification No. 04/2014-S.T. dated 17.02.2014; that they have also contravened the provisions of Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994 in as much as they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Chief Operating Officer of M/s StemCyte in para 4 above that they were aware about the taxable nature of services rendered and the liability to pay service tax. However, they have wilfully evaded payment of service tax and have not complied with the provisions of Finance Act, 1994 and hence extended period under Section 73(1) of the Finance Act, 1994 is available for demand and they are also liable for penalty under Section 78 of the Finance Act, 1994. 10. In view of above, it appeared that the service provider had contravened the provisions of:- (a) Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994 in as much as they failed to obtain service tax registration within the stipulated time frame as prescribed therein for rendering the above taxable services; (b) Section 68 of the Finance Act 1994 read with Rule 6 of the Service tax Rules 1994 in as much as they have failed to pay service tax, as detailed above, within the prescribed manner and time to the credit of the Government of India; (c) Section 70 of the Finance Act 1994 in as much as they have failed to assess the service tax due on the services provided by them; and they have also failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded period of five years and Service tax amounting to Rs.40,00,000/- (Forty lakhs rupees only) deposited by them should not be appropriated towards the tax liability payable by them against the said demand; ii. Interest at appropriate rate should not be recovered from them under Section 75 of Finance Act, 1994, as amended from time to time; iii. Penalty should not be imposed upon them under Section 77(1)(a) of Finance Act, 1994 for failure to obtain service tax registration for the sand service within the stipulated time frame; iv. Penalty should not be imposed upon them under Section 77(1) (d) of the Finance Act, 1994 failure to pay service tax through internet banking: v. Penalty should not be imposed upon them in terms of the provisions of Section 77(2) of the Finance Act, 1994 for failure to assess their service tax liability failure to file prescribed returns in form ST-3 within stipulated time frame for the said service under Section 70 of Finance Act, 1994; vi. Penalty should not be imposed upon them under Section 78 of Finance Act, 1994 for non-payment of service tax on account of mis- statement/suppressing of facts and contravention of provisions of Finance Act, 1994 and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, transportation, battery of pathological tests and storage of the cord blood is born by them; that they are the only company in India who has facilitated 44 cord blood transplants with cords from Stemcyte USA/ Taiwan / India till date with huge discounts to save a life terminally ill patient, that they have appointed Transplant coordinate for this purpose and they are in contact with Hematologists all over, that they have also provided training to doctors for these transplants. These transplants have happened in various hospitals across India viz. AIIMS Delhi BL Kapur Hospital, Delhi Gangaram Hospital, Delhi Deenanath Manageshkar Hospital, Pune Sterling Hospital. Ahmedabad Apollo Hospitals, Chennai GCRI, Ahmedabad Ruby Medical Hall, Pune Apollo Hospital, Ahmedabad 14.7 They do private banking to support the public banking. In public banking there is no income but cost is incurred for collections, testing. processing and storage of Umbilical cord blood for indefinite period (at present upto 26 years) All such costs are borne by them. Under private banking they enter into an agreement with expectant mother for storage of cord blood for 21/26 years, as the case may be, subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption. Therefore, the Association of StemCell Bank of India under letter dated 21-09-12 made a representation to issue necessary clarification in this regard. They have enclosed copy of the letter as Annexure. 14.11 It would not be out of place to mention here that the Ministry of Health and Family Welfare, Government of India, considered their services to be a part of health care service and, therefore, should be exempted from service tax. The official memorandum issued by Under Secretary to Government of India dated 22-05-2013 addressed to Secretary, Department of Revenue, and Government of India. 14.12 Their view was also supported by legal opinion obtained from two different Advocates mainly engaged in taxation practice. 14.13 They have pleaded that when the demand is made by the department invoking extended period, the burden is casted on the department to show how the ingredients for invoking extended period were present in the facts of the case. However, the show cause notice does not bring any such facts or evidences on record. The absence of such evidences or basis would have the effect rendering the notice barred by limitation. 14.14 They have always been holding a belief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be included in negative list services while insertion through Notification No. 04/2014-ST dated 17.02.2014 only not any date prior to that, therefore, he sought to placed reliance on the aforesaid decision to uphold. It was pointed out that emphasized through AR, rejection of retrospect instruction has been properly done by the Hon ble Madras High Court and therefore, statutory provision is classificatory. The same has to come through the language of the statute and his not construable as such. 17. The department on the other hand seeks to rely upon the discussion and finding has given in Order-In-Original to deny the benefit of Exemption Notification No. 25/2012-ST dated 20.06.2012 and holding the services provided was not particularly for Diagnosis treatment care. 18 Aggrieved by the order. Appellants during hearing have emphasised the statutory provisions as well as the by the CBIC Cirucular that amendment in Notification No. 25/2012-ST was clarificatory and is therefore retrospective in nature. It has also emphasised that the decision as reported in 2015 (40) STR 77 (Mad.) in the matter of LIFE CELL INTERNATION (P) LTD vs. Union of India was sub silentio on this aspect and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Notification No. 25/2012-8.T. is remedial in nature hence it has only prospective effect unless specifically expressed in the Notification itself. There is distinction between retrospective and retroactive statute. While the provisions of the legislation may be retroactive ie. to cover the transactions which have taken place before the enactment it cannot have a retrospective effect i.e. it cannot be deemed to have come into force from a back date. 21.10.2 The above view is fortified by the decision of the Honble Supreme Court, reported in K. S. Paripoornan versus State of Kerala-1995 AIR 1012. 1994 SCC (5) 593, wherein, it has been observed that usually an amendment will take effect only from the date of its enactment and will have no retrospective effect in the absence of an express intent or an intent clearly implied to the contrary. Indeed there is a presumption that an amendment usually operates prospectively. The apex court has also observed that a statute dealing with substantive rights differs from a statute which relates to procedures or evidence or is declaratory in nature inasmuch as while a statute dealing with substantive rights is prima facie prospective unless i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of preservation of stem cells has been given exemption from levy of Service Tax and it is prospective in nature. Thus, the activity of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cell provided by M/s StemCyte is a taxable service from 01.07.2012 to 16.02.2014 as the same is not covered under the Negative List of Services as given in the Section 66D of the Finance Act, 1994, as amended from time to time. This service is also not exempted till 16.02.2014 under mega exemption notification No. 25/2012-S.T. dated 20-06-2012, as amended from time to time. Shri Rajesh N. Shah, Finance Controller and Shri Deepak Chhabra, Chief Operating Officer of M/s. Stemcyte in their statements recorded on 20.02.2014, have interalia stated that M/s. Stemcyte is exempted from Service Tax vide Notification No. 04/2014-ST dated 17.02.2014 and they accepted that they are liable to pay Service Tax for the period prior to issuance of said Notification i.e. for the period 01.07.2012 to 16.02.2014 21.10.6 In view of the above, I find that the activity of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cell preformed by M/s StemCyte is a taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of clause (h) of Section 2 of the Clinical Establishment Act,2010, the following systems of medicine are recognized systems of medicines: (a) Allopathy (b) Yoga (c) Naturopathy (d) Ayurveda (e) Homoeopathy (1) Siddha (g) Unani (h) Any other system of medicine that may be recognized by Central Government. Thus, the diagnosis, treatment or care provided in these systems of medicines in India are excluded from the purview of taxability. In India there are lots of other alternate methods of treatment of diseases viz acupressure, acupuncture, Reki, Colour Therapy, etc. However, these methods of treatments are not recognized by Central Government and there treatment provided by these systems will not be covered under this entry 21.11.4 The Notification No. 25/2012-ST does not define Cord Blood Bank. But Rule 122EA (fa) of Drugs and Cosmetic Rules, 1945 defines Cord Blood 21.11.4 Bank as follows:- (fa) or unit for carrying out and responsible for operations of collection, processing, testing, banking, selection and release of cord blood units. Thus, the Cord Blood Bank is :- (a) place or organization or unit. It can be any independent place or organization or unit. It may be attached to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition of Service which was neither covered under negative list nor was exempted under Mega Exemption Noti. No 25/2012-ST as amended. The said fact has also been accepted by Shri Rajesh N. Shah, Finance Controller and Shri Deepak Chhabra, Chief Operating Officer of M/s. Stemcyte in their statements recorded during investigation and also reproduced in the SCN. 22.1 I find that provisions of Section 75 of the Finance Act, 1994 read as- Interest on delayed payment of service tax. 75. Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, for the period by which such crediting of the tax or any part thereof is delayed. 22.2 I find that as per the provisions of Section 68 of the Finance Act, 1994 read with Rule 6(1)(i) or (ii) of the Service Tax Rules, 1994, the service tax shali be paid to the credit of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s its tax liability, what were the elements on which service tax was leviable and was required to follow the provisions of the law scrupulously. In the era of assessee friendly governance, the noticee is required to self-assess its service tax liabilities and make compliance thereof. Thus, when the department explores such hidden facts, it is empowered to invoke larger period. M/s Stemcyte had not declared, the gross amount received by them towards services provided by them, during the corresponding period and not discharged their service tax liability, as discussed in the foregoing paras. They had also not obtained Service Tax registration as required under Section 69 of the Finance Act, 1994 (which they obtained as late as on 24.10.2013). From the evidences, I find that the said service provider had not taken into account all these incomes received by them for providing taxable services for the purpose of self assessment and payment of applicable service tax and thereby not complied their tax liabilities. Thus the deliberate efforts to mis-declare the value of taxable service by non filing of ST- 3 Returns (till obtaining Registration) / failure to assess/declare the correct axab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that M/s. Stemcyte are liable to penalty under the provisions of Section 78(1) of the Act, as it existed during the relevant period. 23.2 I find that the M/s Stemcyte has not produced any reasonable cause for the failure to pay Service Tax. I have already discussed the issue of suppression on the part of the M/s Stemcyte. If M/s Stemcyte had any doubt with regard to taxability, then they should have approached Service Tax Authorities for clarification of doubt to ascertain the taxability of the service provided by them and payment of Service Tax thereon. 23.3 The Government has from the very beginning placed full trust on the service provider so far as the payment of service tax is concerned and accordingly measures like self-assessinents etc., based on mutual trust confidence are in place. Further, a taxable service provider is not required 20 maintain any statutory or separate records under the provisions of Service Tax Rules as considerable amount of trust is placed on the service provider and private records maintained by him for normal business purposes are accepted, practically for all the purpose of Service tax. All these operate on the basis of honesty of the service pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the amount of such service tax Provided that in respect of the cases where the details relating to such transactions are recorded in the specified records for the period beginning with the 8th April of the into the date on which the Finance Bill, 2015 eves the assent of the President (both days inclusive), the penalty shall be fifty per cent of the service tax so determined. In the instant case, I find that the taxable value of the services provided by M/s Stemcyte has been reflected by them in their Balance Sheets Ledgers and Profit loss account but was not declared by them to the Department (They had not filed their ST-3 returns since they were not registered with the Department) and hence the instant SCN has been issued demanding the amount of Service Tax liability, not discharged by M/s Stemcyte on the suppressed taxable value of the services provided by them to their clients The details relating to such transactions are recorded in the specified records for the entire period of the SCN. Since the details relating to such transactions are recorded in the specified records for the period beginning with the July, 12 till 16.02.2014 (prior to the date on which the Finance Bill, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as while a statute dealing with substantive rights is prima facie prospective unless it is expressly or by necessary implication made to have retrospective effect, a statute that concerns mainly matters of procedure or evidence or which is declaratory in nature has to be construed as retrospective unless there is a clear indication that such was not the intention of the Legislature. It has been held by the Hon ble Apex Court as under in paras 64 to 66 : 64. A statute dealing with substantive rights differs from a statute which relates to procedure or evidence or is declaratory in nature inasmuch as while a statute dealing with substantive rights is prima facie prospective unless it is expressly or by necessary implication made to have retrospective effect, a statute concerned mainly with matters of procedure or evidence or which is declaratory in nature has to be construed as retrospective unless there is a clear indication that such was not the intention of the legislature. A statute is regarded as retrospective if it operates on cases or facts coming into existence before its commencement in the sense that it affects, even if for the future only, the character or consequences of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rating prospectively if it creates new rights and duties arising out of past transactions. The question whether a particular .statute operates prospectively only or has retrospective operation also will have to be determined on the basis of the effect it has on existing rights and obligations, whether it creates new obligations or imposes new duties or levies new liabilities in relation to past transactions. For that purpose it is necessary to ascertain the intention of the legislature as indicated in the statute itself. 22 . From the above decision, it is clear that amendatory statutes, like original statutes, will not be given retroactive construction, unless the language clearly makes such construction necessary. In other words, the amendment will usually take effect only from the date of its enactment and will have no application to prior transactions, in the absence of an expressed intent or an intent clearly implied to the contrary and that where a statutory provision is in its nature clarificatory, it will be presumed to be retrospective unless the contrary intention is clearly indicated by the Legislature, the reason being that its underlying purpose of explaining or clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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