Case Law Details
Jaipur Golden Hospital Vs Commissioner, Service Tax (CESTAT Delhi)
CESTAT Delhi held that the health care services are provided by the clinical establishments by engaging consultant doctors is exempted from service tax and cannot be taxed as business support service.
Facts- The appellant is running a hospital. It claims to have a facility of beds and doctors with specialization in different fields. According to the appellant, it engages professional/doctors/consultants on contractual basis. These doctors are given designated space in the hospital premises in the form of chambers having an examination table for the patients coming to the appellant.
A show cause notice was, however, issued to the appellant on the premise that the appellant was providing “business support service” to doctors by providing facilities and administrative support to them.
Conclusion- In Ganga Ram Hospital it is held that a clinical establishment providing health care services are exempted from service tax. The view of the Revenue that in spite of such exemption available to health care services, a part of the consideration received for such health care services from the patients shall be taxed as business support service/taxable service is not tenable. In effect this will defeat the exemption provided to the health care services by clinical establishments. Admittedly, the health care services are provided by the clinical establishments by engaging consultant doctors. For such services, amount is collected from the patients. The same is shared by the clinical establishment with the doctors. There is no legal justification to tax the share of clinical establishment on the ground that they have supported the commerce or business of doctors by providing infrastructure.
It has to be held that the Commissioner was not justified in confirming the demand of service tax under the head “business support services”.
FULL TEXT OF THE CESTAT DELHI ORDER
This appeal assails the order dated March 20, 2017 passed by the Commissioner whereby the show cause notice dated October 20, 2014 issued for the period of April 2009 to March 2013 has been adjudicated upon. The Commissioner has confirmed the demand of service tax under “business auxiliary service” with penalty and interest.
2. The appellant is running a hospital. It claims to have a facility of beds and doctors with specialization in different fields. According to the appellant, it engages professional/doctors/consultants on contractual basis. These doctors are given designated space in the hospital premises in the form of chambers having an examination table for the patients coming to the appellant.
3. A show cause notice was, however, issued to the appellant on the premise that the appellant was providing “business support service” to doctors by providing facilities and administrative support to them.
4. Shri Shantanu Kumar and Shri Shashwat Arya, learned counsel appearing for the appellant placed reliance upon the decision of this Tribunal in Sir Ganga Ram Hospital and Ors. CCE, Delhi-I and Ors.1 as also a subsequent decision of the Tribunal in M/s. Sir Ganga Ram Hospital vs. Commissioner of Service Tax, New Delhi2 to contend that demand of service tax could not have been confirmed under the head of “business support service”.
5. Shri Harsh Vardhan, learned authorized representative appearing for the department supported the impugned order.
6. The submission advanced by the learned counsel for the appellant and the learned authorized representative appearing for the Department has been considered.
7. In order to appreciate the contentions, it would be appropriate at this stage to refer to the agreement that was entered into between the hospital and the doctors, which agreement is contained at page 140 of the Appeal Memo. It is as follows:-
” TERMS AND CONDITIONS OF CONTRACT FOR HONY. CONSULTANTS ”
1. You will be part of the Unit and will attend to all emergencies including emergency calls earmarked for you unit.
2. Junior Consultant in the unit will be first on call for all In the absence of Jr. Consultant, Associate/Senior consultant will provide cover for emergency calls when required. Associate/Senior Consultant will be 2nd /3rd on call. If there is no Junior Consultant in the Unit, Associate Consultant will be first on call for all emergencies.
3. You will attend the General OPD and General Ward patients free of charge.
4. You will attend General OPD regularly and ensure that all the patients who have been issue G.OPD cards are seen by the unit consultants.
5. You will not admit any patient outside your speciality and you will practice in your own speciality.
6. No Hospital Case will be converted to Clinic Case.
7. You will ensure that at least one round is taken daily jointly by the Senior, Associate and Junior Consultants.
8. You will ensure timely discharge of patients.
9. It will be the responsibility of the Senior Consultant to ensure that patient files are documents daily.
10. In surgical discipline, the cold surgery should be planned ensuring that patient files are documented daily.
11. You will charge fees as per schedule laid down by the hospital from time to time. You will enter your charges in case sheet as per the procedure. No dues will be collected by you directly from the patient or his relatives/friends.
12. You will take night round of the hospital once in a month as per the roster issue by the hospital administration.
13. It will be mandatory to put on white coat while on duty in the
14. Junior Consultants preferably will have residence within a radius of 5 kms from Jaipur Golden Hospital.
15. You will be paid Professional fee in accordance with the existing policy of the hospital.
16. You will ensure that the equipment of the hospital entrusted to you for use are handled properly.
17. You will ensure that the investigative facilities available in the hospital are utilized to the maximum for your hospital as well as private cases.
18. You will be entitled to 30 days leave in a year.
19. In case you plan to go on leave/vacation or are unable to attend the OPD, due to whatsoever reasons, you will inform the Medical Director and the Deptt. Chairman/Coordinator in writing at least one week in advance, except in dire emergency, when you must inform the Medical Superintendent on phone.
20. You will not own or be a partner in any hospital, nursing home ordiagnostic centre.
21. Junior consultants will not be allowed attachment outside Jaipur Golden Hospital.
22. You will strictly comply with the guidelines which may be required for quality accreditations like NABH etc.
23. Consultants of General Specialities excluding Junior Consultants are allowed on one attachment outside JGH at a place beyond 12 kms from the hospital. Super speciality consultants will have only one additional attachment. However Attachment with RGCI will be allowed additionally. Few of the general speciality as defined by the hospital will be separate attachment policy from time to
24. It will be expected to have Private OPD chamber in the hospital and you shall be available during the allotted time of your Private OPD slot.
25. You will be required to involve yourself in academic/training programme including training of medical/para-medical staff as required from time to time.
26. You will ensure regular attendance in Clinical Meetings/Seminars/CME organized by the hospital and also Journal Club/ Departmental meetings.
27. You will be required to participate actively in the research activities of the hospital.
28. You should public a paper in an Indexed Journal and read a paper in the National Conference at least once in 2 years. The details of each paper published/ read should be intimated to the hospital in writing along with the copy of the publication.
29. To recover operational cost, hospital will retain 20% of your collection charges (as per the existing policy) representing Consultancy, Surgery and Professional fees, subject to revision as per hospital policy. However, during the first year, for Junior consultants/ Clinical Assistants, no collection charges will be levied.
30. It will be mandatory for you to have medical Indemnity Insurance for minimum of Rs. 20 lacs. The hospital authorities will get the insurance renewal as and when due and deduct the premium amount from the Consultant’s income.
31. It will be mandatory for you to have valid registration with Delhi Medical Council.
32. You will ordinarily retire on attaining the age of 60 years. Further renewal of your term will be based on assessment of your overall Consultants who are attached only to Jaipur Golden Hospital will be granted extra weightage at the time of renewal of their contract.
33. This contract may be terminated on one month’s notice on either side. However, in case of gross unethical conduct, negligence in performance of duties or acts affecting the reputation of the hospital, the appointment is liable to be terminated without notice.”
8. This precise issue had come up for consideration before two Benches of the Tribunal in Ganga Ram Hospital. The first decision rendered on December 06, 2017 was considered in the subsequent decision rendered on September 02, 2020.
9. Paragraphs 5,6,9 and 11 of the first decision rendered by the Tribunal on December 06, 2017 relate to the period before and after July 01,2012. The Tribunal, after a consideration of the conditions prescribed in the agreement held that the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits and, therefore, no service was provided by the hospital to the doctors. The relevant portion of the decision is reproduced below:
“5. The claim of the Revenue is that the appellants have provided infrastructural support service to various doctors. As a consideration for such support, they have retained a part of the amount collected from visiting patients. We have perused some of the agreements/appointment arrangements entered into between the appellants hospitals and the individual doctors. Typically, the arrangement contains details like duration of time for consultation, the obligations on the part of the doctors, fee to be paid, procedure for termination of agreement, etc. The agreements generally talk about appointment of consultants to provide services to the patients who will visit or admitted in the appellants hospital. The doctors will receive a percentage of share of the collection from the patients in case of consultation, procedures and surgeries done by them. In some cases, there is a provision for treating patients from low economic background without any financial benefits. On careful consideration of various terms and conditions and the scope of arrangement, we are of the considered view that such arrangement are for joint benefit of both the parties with shared obligations, responsibilities and benefits. The agreements do not specify the specific nature or list of facilities which can be categorized as infrastructural support to the doctors. The revenue model, as agreed upon between the contracting parties also, did not refer to any consideration attributable to such infrastructural support service.
6. The proceedings by the Revenue, initiated against the appellant hospitals, are mainly on the inference drawn to the effect that the retained amount by the hospitals out of total charges collected from the patients should be considered as an amount for providing the infrastructure like room and certain other secretarial facilities to the doctors to attend to their work in the appellants hospitals. We find this is only an inference and not coming out manifestly from the terms of the agreement. Here, it is very relevant to note that the appellant hospitals are engaged in providing health care services. This can be done by appointing the required professionals directly as employees. The same can also be done by having contractual arrangements like the present ones. In such arrangement, the doctors of required qualification are engaged/contractually appointed to provide health care services. It is a mutually beneficial arrangement. There is a revenue sharing model. The doctor is attending to the patient for treatment using his professional skill and knowledge. The appellants hospitals are managing the patients from the time they enter the hospital till they leave the premises. ID cards are provided, records are maintained, all the supporting assistance are also provided when the patients are in the appellant hospital premises. The appellant hospital also manages the follow-up procedures and provide for further health service in the manner as required by the patients. As can be seen that the appellants hospitals are actually availing the professional services of the doctors for providing health care service. For this, they are paying the doctors. The retained money out of the amount charged from the patients is necessarily also for such health care services. The patient paid the full amount to the appellant hospitals and received health care services. For providing such services, the appellants entered into an agreement, as discussed above, with various consulting doctors. We do not find any business support services in such arrangement.
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9. Under negative list regime w.e.f. 01.07.2012, the health care services are exempt from service tax. Earlier the health care services were only taxed for specified category of hospitals and for specified patients during the period 01.07.2010 to 01.05.2011. With effect from 01.05.2011, health care services were exempt from service tax under Notification No. 30/2011 ST :MANU/DSTX/0055/2011 After introduction of negative list tax regime. Notification No. 25/2011-ST: MANU/DSTX/0065/2012 exempted levy of service tax on health care services rendered by clinical establishments. We have examined the scope of the terms ‘clinical establishments’ and ‘health care services’. The notification defines these terms. The term ‘clinical establishments’ is defined as below:
“Clinical establishment” means hospital, nursing home, clinic, sanatorium or any other institution by whatever name called, that offers services or facilities requiring diagnosis or treatment of care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.”
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11. These two provisions available in Notification No. 25/2012: MANU/DST/0065/2012 will show that a clinical establishment providing health care services are exempted from service tax. The view of the Revenue that in spite of such exemption available to health care services, a part of the consideration received for such health care services from the patients shall be taxed as business support service/taxable service is not tenable. In effect this will defeat the exemption provided to the health care services by clinical establishments. Admittedly, the health care services are provided by the clinical establishments by engaging consultant doctors in terms of the arrangement as discussed above. For such services, amount is collected from the patients. The same is shared by the clinical establishment with the doctors. There is no legal justification to tax the share of clinical establishment on the ground that they have supported the commerce or business of doctors by providing infrastructure. We find that such assertion is neither factually nor legally sustainable.”
(emphasis supplied)
10. The aforesaid decision of the Tribunal was accepted by the The subsequent decision of the Tribunal rendered on September 02, 2020 followed the earlier decision.
11. It also needs to be noted that the same view has been taken by the Tribunal in the following cases:
(i) M/s. Gujarmal Modi Hospital & Research Centre for Medical Science Versus CST, Delhi-II3
(ii) M/s. Fortis Healthcare (India) Limited versus CCE & STChandigarh-I4
(iii) M/s. Ivy Health & Life Science Pvt. Ltd. Versus CCE, Chandigarh-II/Lud hiana5
(iv) CCE & ST, Panchkula, Delhi-IV versus Alchemist Hospital Limited, Artemis Medicare Services Limited6
12. Thus, in view of the aforesaid decisions of the Tribunal, it has to be held that the Commissioner was not justified in confirming the demand of service tax under the head “business support services”.
13. The order dated March 20, 2017, passed by the Commissioner, therefore, cannot be sustained and is set aside. The appeal is, accordingly, allowed.
(Order dictated in the Open Court)
Notes :
1. [2018 (11) G.S.T.L. 427]
2. [2020(11) TMI 536-CESTAT NEW DELHI]
3. 2019(1) TMI 378-CESTAT NEW DELHI.
4 2019 (9) TMI 462-CESTAT CHANDIGARH.
5 2019 (4) TMI 178- CESTAT CHANDIGARH.
6 2019 (3) TMI 1331-CESTAT CHANDIGARH.
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