Mohak Hi Tech Speciality Hospital Vs Commissioner Of Central Excise (CESTAT Delhi)
The issue under consideration is whether service tax can be imposed on bariatric surgery even if it is a life-saving procedure?
CESTAT states that from the explanation given by the Noticee in their written submission regarding Bariatric Surgery and perusal of the above mentioned documentary evidence submitted by the Noticee along with the clarification issued by the CBEC vide letter dated 06-09-2009, CESTAT am of a considered view that Bariatric Surgery cannot be considered as a Cosmetic or Plastic Surgery, and hence the same is not a taxable service within the meaning of clause (105) (zzzzk) of Section 65 of the Finance Act, 1994 and consequently the Noticee is not liable to pay Service Tax on the said service. Thus, when the Department itself accepted the findings of the Additional Commissioner in the aforesaid order dated February 22, 2016 that bariatric surgery is not cosmetic surgery or plastic surgery, it is not open to the Department to now contend that bariatric surgery is cosmetic surgery or plastic surgery. The confirmation of demand in the impugned order for this reason cannot be sustained.
FULL TEXT OF THE CESTAT JUDGEMENT
These three service tax appeals can be decided by this common order, as the issue involved in all the appeals is whether bariatric surgery which the appellant performs would be cosmetic surgery or plastic surgery so as to be taxable under section 65(105)(zzzzk) of the Finance Act, 19941.
2. The appellant is a part of Bhandari Hospital & Research Centre and claims to be engaged in performing bariatric surgery on patients suffering from morbid obesity coupled with life-taking diseases like Type-II diabetes and hypertension. According to the appellant, bariatric surgery is a gastro intestinal surgery carried out on the stomach in different manners like, by folding & stitching, by removing fat and cutting down, by insertion of outer bodies or by bonding the stomach. The appellant also claims that bariatric surgery is performed on morbidly obese individuals the Finance Act suffering from hypertension, Type-II diabetes, arthritis, lipid disorder or obstructed sleep apnea. The person selected for this surgery should also have a Body Mass Index2 of above 32.5 with co-morbidities. The surgery is said to be performed as per the Asia Pacific International Federation of Surgical Obesity Guidelines endorsed by Obesity Surgical Society of India. The appellant, therefore, claims that since bariatric surgery is performed to treat obesity and other associated medical ailments, it will not be a cosmetic surgery or plastic surgery. It is for this reason that the appellant claims that it did not pay service tax.
3. However, a show cause notice dated October 4, 2013 was issued to the appellant requiring the appellant to explain why it did not pay service tax on the service provided through surgeries performed to cure obesity, which would be classifiable under cosmetic surgery or plastic surgery as defined in section 65(105)(zzzzk) of the Finance Act. It was alleged that surgeries were performed with the sole motive of weight reduction and had no relation with reconstruction or restoring anatomy or function of body affected due to congenital defects, development abnormalities, degenerative diseases, injury or trauma. Thereafter, two periodical show cause notices dated September 11, 2014 and July 5, 2016 were also issued to the appellant proposing demand of service tax with interest and penalty. The appellant filed detailed replies to the aforementioned show cause notices.
4. The Commissioner/Principal Commissioner, however, confirmed the demands proposed in the three show cause notices with interest and penalties under section 65 (105)(zzzzk) of the Finance Act. This section is reproduced below :
“Section 65 (105) (zzzzk): “taxable service” means any service provided or to be provided to any person, by any other person, in relation to cosmetic surgery or plastic surgery, but does not include any surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, development abnormalities, degenerative disease, injury or trauma;”
5. The Commissioner analyzed the provisions of section 65 (105)(zzzzk) of the Finance Act in the following manner:
“The definition leaves no doubt to understand that the said service is taxable when it is provided in relation to cosmetic or plastic surgery exclusive of surgery performed to treat specified biological orders.
It is also a fact that the surgery is specifically and specially made to control obesity whether associated with any disease like arthritis, hypertension, type-II diabetes etc. or otherwise and bariatric surgery is not carried out to treat any type of disease but to curb only obesity or reduction of weight. It is also a fact that a person suffering from high obesity takes prior appointments with doctors. They are examined by the doctor, records are maintained, numerous test are conducted and then only it is decided to carry out the surgery keeping in mind the pre and post surgery complications. The fact cannot be denied that surgery is carried out not only by general surgeons but a bariatric surgeon which is a fact accepted by the Director of the Noticee in this statement dt. 25/09/2013 wherein with response to a specific question, he had categorically stated that “as a MS General surgeon and with special training in bariatric surgery and advance minimal access surgery I am entitled to perform bariatric surgery. Also the surgical review corporation of USA has endorsed myself as a bariatric surgeon of excellence and the centre as a centre of excellence in bariatric surgery”. It is worthwhile to mention here that the statement is never retracted by the directors of the Noticee firm. These facts further leaves no doubt that the surgery performed is neither for cure of type II diabetes, hypertension, hypothyroidism, arthritis etc. as while carrying out the said surgery the specialized doctors treat diabetic patients, hypertension patients or ortho-paedicians doctors specialized to treat arthritis have no role to play. Not only this, the basic requirement to carry out the surgery is BMI(Body Mass Index) and not the aforementioned diseases the person is afflicted with. The BMI is nothing but only a scale to decide the degree of a person obesity. All these facts clearly establish that bariatric surgery is related to “weight reduction” by making a surgery and not a treatment of degenerative disease like diabetes, cancer, heart disease, arthritis etc.”
(emphasis supplied)
6. Thereafter, the Commissioner analyzed the meaning of the terms congenital defects, developmental abnormalities, degenerative diseases, injury or trauma. This was for the reason that surgeries undertaken to restore or reconstruct anatomy or functions of body affected due to these are not taxable under section 65(105)(zzzzk) of the Finance Act. The relevant observations are as follows :
“The Government while bringing the “Cosmetic or Plastic Surgery Services” under Service Tax net has taken utmost precautions and therefore while defining the taxable service has kept taxation on surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative disease, injury or trauma out of purview of taxation. At this juncture before getting on any further with the matter it is paramount to have a clear under standing of the terms Congenital Defects, Developmental Abnormalities, Degenerative Diseases, Injury or Trauma.
The word congenital defect denotes a defect that is present by birth like absence eyelids, absence of pigmentation in eyes, hair or skin, sex organs having both male and female characteristics. Similarly, the word degenerative disease defines the disease in which the function or structure of affected tissue or organ progressively deteriorate over time. The best examples are cancer, Parkinson disease, diabetes, arthritis etc. The word “injury” means damage caused to body by an outside force like bruise, wounds, joint dislocation, fractures, burns, etc. The word “trauma” is defined as a body wound or shock due to accident or sudden physical injury mostly treated in specialized care centers termed as “trauma centers”. From these definition it is also clear that it will be far fetched to ascribe any connection to Bariatric Surgery has got to Developmental abnormalities, injury or trauma and thus the bariatric surgery cannot be included in any surgery undertaken to restore or reconstruct anatomy or functions of body affected due to “developmental abnormalities” the Noticee has forwarded the argument that obesity as a medical condition is a result of “Developmental abnormality” and hence to be kept outside the scope of “Cosmetic and Plastic Surgery Services.”
(emphasis supplied)
7. The Commissioner then analyzed the contents of the changes and clarification on service tax issued by the Government of India on the 2009-10 budget relating to cosmetic and plastic surgery service and the observations are reproduced below:
“This Noticee while arguing their case has tried to seek the help from MOF Letter no. DOF NO. 334/13/2009-TRU dt. 06.07.09 specially from para 2.4.3 which reads as under 2.4.3_”However, any reconstructive surgery undertaken to restore one’s appearance, anatomy or bodily functions affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma would be outside the scope of this service. These processes could be undertaken to correct impairment caused by burns, fractures or congenital abnormalities like cleft lip etc. Unquote”. However, the Noticee while arguing their case on the strength or para 2.4.3 has made a mistake of not giving any credence to 2.4.2 of the same leter which reads as under:-
2.4.2 Some of the commonly known aesthetic/cosmetic surgeries are abdomenoplasty, (tummy tuck); blepharoplasty (eyelid surgery0; mammoplasty; buttock augmentation and lift; rhinoplasty (reshaping of nose); otoplasty (ear surgery); Rhytidectomy (facelift); liposuction (removal of fat from the body) brow lift; cheek augmentation; facial implants; lip augmentation; forehead lift; cosmetic dental surgery; orthodontics; aesthetic dentistry; laser skin surfacing etc.
This para of the same circular specifically mentions “liposuction” as a cosmetic surgery. The “liposuction” is nothing but a surgery with the sole purpose of removal of fat from body or in other words resulting in weight loss or reductions of morbid obesity. The same is the case with that of bariatric surgery here in carried out by the Noticee in their premises which is also with a sole purpose of weight loss or reduction of morbid obesity. Thus, when the sole purpose of both the surgeries is nothing but weight loss or reduction of morbid obesity and one i.e. namely liposuction has already got a place under “Cosmetic & Plastic Surgery Services” how the other one surgery named differently in medical terms as bariatric surgery but with the same purpose i.e. weight loss or reduction of morbid obesity can be termed as other than “Plastic & Cosmetic Surgery Services” and definitely the answer is nothing but to treat the bariatric surgery only and only as “plastic & cosmetic surgery services” liable to service tax and brought to service tax net with effect from 01/09/2009 vide the Finance Act, 2009.
Here, one should never forget that any rule/circular/letter cannot be read in parts or a part beneficial to assessee or revenue, should be taken in account as it always leads to absurd results, entering into a controversy giving rise to frivolous litigation whereas the complete reading of same will lead to the result for which the same is meant without any controversy. Therefore, when both parts are read together as a whole it is found that the objection raised by Noticee does not sustain.”
(emphasis supplied)
8. The dates of the impugned orders and the show cause notices, the period of dispute, the duty demanded and the amount of penalty imposed in the three appeals are contained in the table below:
