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

Facts

The petitioner, M/s. Holy Cross Hospital Pvt. Ltd., filed several revision petitions before the High Court of Kerala against orders of the Value Added Tax Appellate Tribunal. The core issue revolved around the denial of input tax credit (ITC) due to an inadvertent error by the supplier in issuing invoices in Form-8B. The petitioner argued that the goods purchased under these invoices had suffered output tax and its remittance was not disputed. The Tribunal had reversed the order of the first appellate authority, finding the claimed ITC unsustainable. Another issue concerned the exigibility of tax on X-ray films, which the petitioner contended were part of diagnostic services and not a sale. The Assessing Officer and statutory authorities had previously considered these matters.

Held

The Court held that input tax credit is not sustainable when invoices are issued in Form-8B, as this form signifies a sale to the ultimate consumer, precluding ITC. The Tribunal's decision to deny ITC on this ground was found to be without infirmity. The Court answered this issue against the assessee and in favour of the Revenue. Regarding the exigibility of tax on X-ray films, the Court held that taking X-rays is an integral part of the composite service offered by a hospital for patient diagnosis. The transfer of X-ray films in this context cannot be separated as a sale from the overall para-medical service. Therefore, X-ray films are not exigible to tax as a sale. The Court partly allowed revision petitions concerning X-ray films in favour of the assessee and rejected others pertaining to ITC denial.

Key Issues

1. Whether input tax credit (ITC) is admissible when the supplier inadvertently issued invoices in Form-8B, despite the goods having suffered output tax and its remittance not being disputed? This question turns on the interpretation of the implications of Form-8B regarding ITC. The petitioner argued that the error was by the supplier and the goods had indeed suffered output tax. The Revenue contended that Form-8B explicitly prohibits ITC on purchases made under such invoices, as they are deemed to be sales to the final consumer. 2. Whether X-ray films are exigible to tax as a sale, or if their transfer as part of diagnostic services in a hospital is a composite supply not separable from the service? The petitioner argued that taking X-rays is a para-medical service for diagnosis, not a sale. The Revenue's stance, as implied by the court's discussion, was that X-ray films could be considered a sale. The court referred to a Full Bench decision on the use of consumables in hospitals.