Hospitech Management Consultants Pvt Ltd Vs Principal Commissioner of Central Goods and Services Tax (Delhi High Court)
Summary: The Delhi High Court allowed the service tax appeal filed by Hospitech Management Consultants Pvt Ltd and set aside the penalty of Rs. 4,50,000/- imposed under Section 78 of the Finance Act, 1994. The Court confined the appeal to the penalty issue because the Appellant had expressly not pressed its challenge against the service tax demand for the normal period of limitation, which consequently attained finality.
The dispute originated from a CERA Audit Memo dated 18.01.2006 concerning the taxability of services rendered by the Appellant in relation to government hospitals, medical colleges and educational institutions. The Appellant had maintained that its services were non-commercial because they were provided to institutions established for educational, charitable and health purposes and not for profit. Significantly, the Department itself had initially taken a similar view. Communications dated 11.09.2006 and 20.11.2007 from the Assistant Commissioner and Deputy Commissioner of Service Tax respectively stated that the services rendered to the concerned institutions were non-commercial and, relying upon CBEC Circular No. 80/10/2004-ST dated 17.09.2004, were not liable to service tax.
A subsequent internal audit for the period 2005-06 to 2009-10 resulted in a Show Cause Notice dated 22.10.2010 proposing service tax, interest, denial of CENVAT credit and penalties. The Commissioner of Service Tax (Adjudication), by Order-in-Original dated 31.03.2014, confirmed service tax of Rs. 65,75,890/- together with interest, CENVAT credit demand of Rs. 12,360/- with interest and total penalties of Rs. 65,93,250/-. The Appellant did not press its challenge to the CENVAT credit demand and the Rs. 5,000/- penalty under Section 77 before CESTAT.
