Star Health Sciences INDIA LTD vs. Commissioner Of Indirect Taxes

Facts

Star Health Sciences India Ltd. (the petitioner) is a company engaged in providing healthcare services in Ayurveda and Homeopathy. The Commissioner of Central Tax, Ranga Reddy CGST Commissionerate (respondent No. 2) issued a show cause notice dated October 18, 2021, to the petitioner. This notice alleged that income declared in income tax returns for 2016-2017 and income determined for 2017-2018 (up to June 2017) should be treated as consideration for taxable services under the Finance Act, 1994, demanding Rs. 3,60,71,804.00. The petitioner replied on November 16, 2021, arguing that its services were non-taxable under Exemption Notification No. 25/2012-Service Tax dated June 20, 2012. Subsequently, jurisdiction was transferred to the Commissioner of Indirect Taxes and Customs, Hyderabad Audit-I (respondent No. 1), who passed an Order in Original on March 27, 2023, confirming the demand, interest, and penalty.

Held

The High Court held that it would meet the ends of justice to grant the petitioner another opportunity to substantiate its claim of being covered by Exemption Notification No. 25/2012-Service Tax dated June 20, 2012. The Court noted that the petitioner's contention was that its services are rendered under indigenous systems of medicine, i.e., Homeopathy and Ayurveda. However, the impugned Order in Original indicated that the petitioner had failed to produce categorical evidence to prove the non-taxability of its services. Therefore, the Court set aside the impugned Order in Original dated March 27, 2023, and remanded the matter back to respondent No. 1 for a fresh decision in accordance with the law, after giving the petitioner a due opportunity of hearing and to adduce evidence. All contentions were kept open. The ratio decidendi is that a party claiming exemption under a notification should be given a fair opportunity to present evidence to support their claim, especially when the initial assessment found a lack of categorical evidence.

Key Issues

1. Whether the services rendered by the petitioner, which are in the indigenous systems of medicine (Homeopathy and Ayurveda), are exempted from service tax under Exemption Notification No. 25/2012-Service Tax dated June 20, 2012, issued under Section 93(1) of the Finance Act, 1994? (Question of law) Petitioner's contentions: The petitioner argued that the services provided by its clinical establishment fall under the definition of 'clinical establishment' and are therefore exempt from service tax as per Notification No. 25/2012. They contended that the treatment provided is under recognized Indian systems of medicine. Revenue's contentions: The revenue, through respondent No. 1's Order in Original, contended that the petitioner failed to produce categorical evidence, apart from annual reports, to prove the non-taxability of the services rendered. Consequently, they took the view that the show cause notice was in order and the petitioner was liable to pay the demanded tax.