Dr. Adi Mohan Rao vs. Union Of INDIA And 3 Others

Facts

The petitioner, Dr. Adi Mohan Rao, a medical practitioner, challenged an order dated 25.02.2022 passed by the Additional Commissioner, Service Tax (4th respondent). This order demanded Rs. 67,22,162/- as service tax and imposed penalties under Sections 78, 77, and 70 of the Finance Act, 1994, for the entire period covered by a notice dated 28.12.2020. The petitioner contended that his services as a medical practitioner fall under "Health Care Services" and are exempt from service tax under Notification No. 25/2012 dated 20.06.2012. The petitioner argued the demand was arbitrary and violated principles of natural justice. The department did not dispute the exemption for medical practitioners but argued the petitioner failed to apprise the authorities of his profession and claim the exemption, and that the petitioner did not respond to notices.

Held

The Court acknowledged that the petitioner is a medical practitioner and that Health Care Services are exempted under Notification No. 25/2012 dated 20.06.2012. The Court noted that the core issue was to verify if the petitioner is indeed a medical practitioner and if the assessed income was derived from this profession. Given the petitioner's assertion and the existence of an interim order, the Court permitted the petitioner to appear before the 4th respondent on 23.08.2023 without issuing fresh notice. The Court clarified that its order serves as notice and the concerned authority should make an appropriate decision after verifying the facts, particularly in light of the aforementioned notification. The impugned order dated 25.02.2022 was directed not to be acted upon. The Court held that the writ petition was allowed in part.

Key Issues

1. Whether the demand of service tax and penalty raised by the 4th respondent against the petitioner, a medical practitioner, is valid despite the exemption available for Health Care Services under Notification No. 25/2012 dated 20.06.2012, considering the petitioner's alleged failure to claim the exemption before the authority? (Question of law and fact, turning on Notification No. 25/2012 and principles of natural justice). Petitioner's arguments: The petitioner argued that his services as a medical practitioner are exempt under Notification No. 25/2012 dated 20.06.2012, making the demand illegal and arbitrary, and a violation of natural justice. He asserted that the income derived was exclusively from his medical profession. Respondents' arguments: The respondents conceded that medical practitioner services are generally exempted but contended that the petitioner failed to inform the concerned authorities about his profession and claim the exemption. They also argued that the petitioner was given ample opportunity and issued notices to which he did not respond, and therefore, the authority cannot be faulted for issuing the impugned order.