M/S.Holy Cross Hospital PVT. LTD. vs. State Of Kerala

Facts

The petitioner, M/s. Holy Cross Hospital Pvt. Ltd., filed two tax revisions before the High Court of Kerala challenging an order of the Kerala Value Added Tax Additional Appellate Tribunal. The revisions stemmed from a common order where both the Revenue and the assessee had filed appeals. The core dispute involved the taxability of X-ray films and consumables used in the hospital, the eligibility for input tax credit on certain purchases, and the tax treatment of capital goods. The Tribunal had passed an order that was contested by the petitioner.

Held

The Court decided the first issue in favour of the assessee and against the Revenue, relying on the Full Bench declaration in Sanjose Parish Hospital v. Commercial Tax Officer [2019 (1) KLT 336 (FB)]. The second issue was decided against the assessee and in favour of the Revenue, holding that Form-8B is an invoice issued on the last sale and explicitly states that no input tax credit can be claimed on such purchases. For the third issue concerning capital goods, the Court noted that while the Tribunal had considered the issue and found no evidence produced, certain invoices have now been produced. Specifically, an invoice from Sabari Enterprises for Rs. 14,49,636 (plus tax) for capital goods was identified. The Court found that at least for this invoice, the purchases were of capital goods, spares, and equipment used in the hospital. Therefore, the Court directed the Assessing Officer to re-consider the issue upon production of bills and written submissions by the assessee within one month. The Assessing Officer is to afford a hearing and consider the invoices, and purchases of capital goods are to be excluded from sales estimation. The Court expressly left undecided the extent of capital goods purchases beyond the one invoice discussed.

Key Issues

1. Whether tax can be imposed on X-ray films purchased and used in diagnostic services, and on consumables purchased for hospital upkeep, and if such items constitute a sale exigible to tax, as per the facts and circumstances and in law. 2. Whether input tax credit can be denied solely due to an inadvertent error by the supplier in issuing an invoice in Form 8B, when the returns and books confirm the goods suffered output tax and its remittance is not disputed, and if the Tribunal's order reversing the first appellate authority's decision was passed mechanically. 3. Whether the Tribunal ought to have provided an opportunity to explain and establish the nature of capital goods from the books if doubted, and whether the matter should have been remanded to the first appellate authority for consideration, as the first appellate authority had not addressed this issue. Petitioner's Contentions: The petitioner argued that X-ray films and consumables are not sales and thus not exigible to tax. They also contended that input tax credit should not be denied for a supplier's clerical error if the tax has been paid. Regarding capital goods, they argued for an opportunity to prove their nature and for a remand if the issue was not properly considered. Revenue's Contentions: The Revenue argued that Form 8B explicitly prohibits input tax credit claims on such purchases. They also pointed out that invoices for capital goods were not produced before any authority.