MIOT Hospitals Ltd Vs State of Tamil Nadu (Madras High Court)
Conclusion: Works contract for fitting out or implanting of prosthetics into the physiology or the body of the patient for alleviation of pain or for improvement of the life of the patient in the course of medical/surgical procedure could be construed as ‘works contract’ liable for VAT under the provisions of the Tamil Nadu Value Added Tax Act, 2006.
Held: The issue arose for consideration was whether in the course of provision the medical service, assessee who were private hospitals were liable to pay Value Added Tax (VAT) under the provisions of the Tamil Nadu Value Added Tax Act, 2006 on the stents, valves, medicines, x-ray and other goods used while treating their in house patients? Assessee-hospital claimed that they did not charge any amount separately towards the cost of these items and charge a consolidated amount from the patients towards cost of medical treatments and it was inclusive of all the expenditure incurred by it and therefore State was not entitled to issue the impugned notices. State asked assessee to pay Value Added Tax (VAT) on the purported deemed sale of stents, valves, hip replacement and knee replacement etc. in the course of provision of medical services by assessee-hospital as “works contract” within the meaning of Section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 chargeable to tax under Sections 5/6 of the said Act. It was held that the definition of “works contract” can include hospital/health/Medical services involving composite contracts where there is not only a provision of service but also supply of goods along with such service. The definition takes within its fold such services also. State was therefore justified in proposing a demand to tax assessee goods along with such service. There was not only transfer of possession of prosthetics into the physiology of the patient but also the ownership of such prosthetics to the patient for consideration in the course of the provision of medical/health service. Similarly, in the course of taking x-ray, scan, MRI/CT Scan for such in-patient, cost of which get included into the package were taxable as such activity could be termed as the processing of movable property. Therefore, fitting out or implanting of prosthetics into the physiology or the body of the patient for alleviation of pain or for improvement of the life of the patient in the course of medical/surgical procedure could be construed as “works contract” liable for VAT under the provisions of the Tamil Nadu Value Added Tax Act, 2006.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
By this common order, all the above-mentioned Writ Petitions are being disposed. In these writ petitions, an interesting and an important question of law arises for consideration as to whether in the course of provision the medical service, petitioners who are private hospitals were liable to pay Value Added Tax (VAT) under the provisions of the Tamil Nadu Value Added Tax Act, 2006 ( also referred to as Act for the sake brevity in this Order) on the stents, valves, medicines, x-ray and other goods used while treating their in house patients?
2. The petitioners claim that they do not charge any amount separately towards the cost of these items and charge a consolidated amount from the patients towards cost of medical treatments and it is inclusive of all the expenditure incurred by it and therefore the respondent is not entitled to issue the impugned notices.
3. By the impugned notices, the respondent has called upon the petitioners to pay Value Added Tax (VAT) on the purported deemed sale of stents, valves, hip replacement and knee replacement etc. in the course of provision of medical services by the petitioners as “works contract” within the meaning of Section 2(43) of the Tamil Nadu Value Added Tax Act, 2006 chargeable to tax under Sections 5/6 of the said Act.
4. In all these Writ Petitions, the respective petitioners have challenged the impugned notices issued under Section 27 of the TNVAT Act, 2006 to reopen the completed assessment made under Section 22(2) of the TNVAT Act, 2006 on the ground that the petitioners have rendered “works contract” within the extended meaning of definition of “sale” under Section 2(33) of the TNVAT Act, 2006, chargeable to tax under Section 5/6 of the said Act.
5. The petitioners are corporate bodies and persons running hospitals and are providing expensive Medical/Health services to their inpatients. In the course of provision of such services, they have implanted implants such as Ortho Implants, Plates, Stents, Valves, Pace Makers, intra-aortic balloon pump etc, (collectively referred to as Prosthetics) in the body of the patients for treatment by surgery and provided such other ancillary services such as MRI Scan Films, X-Ray Films and others. This has been proposed to be taxed as “works contract” by the respondent within a meaning of Section 2(43) of the TNVAT Act, 2006 to propose tax from the petitioner.
6. The petitioner in W.P.(MD) Nos.2982 to 2987 of 2012 viz., MIOT Hospitals Ltd., represented by its Managing Director P.V.A.Mohandas has challenged the following pre assessment notices:-
