Service Tax, Delhi², by which the demand of service tax proposed in the show cause notice has been confirmed with interest and penalty.

2. The appellant provides various categories of health care services to its patients and for this purpose appointed professionals/doctors/consultants on contractual basis. The doctors were given designated space in the hospital premises in the form of chambers with an examination table for examining the patients coming to the hospital. The doctors appointed by the appellant were paid a professional fee, which was computed in the following manner. A= Amount received by the patient for medical facilities such as operation/surgery/consultancy provided by the doctors B= Amount retained by the Appellant as 'collection charges'/ 'facilitation fee'

C= (A-B), which is the amount paid to the

doctors/consultants/professionals

3. Thus, the amount retained by the appellant as against the amount paid to the doctors is predetermined in the contract executed between the appellant and the doctors.

4. The appellant received a show cause notices dated April

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taxable under the category of "business support services" as defined under section 65 (104c) of the Finance Act 1994³and taxable under section 65 (105)(zzzq) of the Finance Act up to June 30, 2012 and under section 66B with effect from July 1, 2012. The reply filed by the appellant to the show cause notice did not find favour of the Commissioner, who by the impugned order confirmed the demand of service tax proposed in the show cause notices.

5. It was contended on behalf of the appellant that the arrangement between the hospital and the doctors was in the nature of "revenue sharing" and neither party could be said to be rendering any service of the other. It was also contended that no consideration flowed from the doctors to the appellants and even otherwise, the services provided were specifically exempted from payment of service tax under entry no. 2 of the Notification dated June 20, 2012.

6. These contentions of the appellant were not accepted by the Commissioner and the relevant portions of the order passed by the Commissioner are reproduced below.

"The Noticee has not disputed the deduction of collection charges from the doctors on account of provision of consultation room or examination room and other infrastructural facilities available in the hospital which include maintenance of proper cleanliness and hygiene of the premises, provision of furniture, electricity, security, testing facilities, common reception and lounge etc. All these activities also require trained manpower who are employed by the hospital but whose services are also used by these doctors. These 'collection charges' have also been reflected by the notice in their books of accounts towards income. I also find that the notice provides online appointment facility or

3. The Finance Act

3

appointment through telephone for the doctors providing consultation in the hospital O.P.D. Obviously for such online appointment or telephonic appointment facility, the hospital has made adequate arrangement by appointing personnel for the purpose of booking of appointment slots. This suggests that the notice is not only providing consultation/Examination rooms to the doctors but is also providing other infrastructural support. Visiting doctors do not undertake regular maintenance, provision of electricity, power back-up, air-conditioning, security, reception, tasting facilities, reception, billing and any other requirement for the up-keeping of the rooms and facilities they utilize. All such activities of maintenance, provision of electricity, power back-up etc. are taken care of by the noticee, which is nothing but outsourcing of these activities by the doctors which otherwise would have to be done by them individually. *****

4.6.5 From the conjoint reading of exemption under Notification and the definitions cited above, it is seen that the exemption from payment of service tax is available to an establishment with regard to rendering services for diagnosis, treatment or care for illness, disease, injury, deformity, abnormality or pregnancy. In other words, only the health care services provided by a hospital or a medical practitioner are exempt under the notification. Any services, other than healthcare services, provided by a hospital would not be covered by the said notification. Thus the claim that the assesse is undisputably a hospital and hence exemption to a clinical establishment would be admissible in terms of the notification is ill-founded.

4.6.6 As held above, the amount retained by the notice being 'Collection Charges' was on account of rendering infrastructural support to the doctors for use of the hospital infrastructure, where exemption under the Notification is not available to the noticee and as such I hold that the noticee were liable to pay service tax on the amount retained by them."

7. Shri B.L. Narasimhan learned counsel for the appellant has made the following submission:-

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(i) The Tribunal, in the matter of the appellant relating to the same issue for the previous years, held that no service tax could be levied. This decision is reported in 2017 (12) TMI 509 (M/s. Sir Ganga Ram Hospital and others vs. M/s Indraprastha Medical Corporation Ltd.);

(ii) The agreement between the doctors and the appellant is on a revenue sharing basis. The 'collection charges' are an integral part of the health care services provided jointly by the appellant and the doctors;

(iii) Without prejudice to the above submissions, 'service', if any, is provided by the doctors to the appellant and not by the appellant to the doctors; and

(iv) Healthcare service are exempt from service tax for the post negative list period.

8. Shri R.K. Majhi learned Authorized Representative of the Department has, however, supported the impugned order and has submitted that it does not call for interference in this appeal.

9. The submissions advanced by the learned counsel for the appellant and the learned Authorized Representative of the Department have been considered.

10. The issue that the arises for consideration in this appeal is whether service tax is payable by the appellant for having allowed usage of the infrastructure provided by it to the contracted doctors.

11. This precise issue was considered by the Tribunal in connection with the earlier show cause notice to the appellant which involved the period both before and after July 1, 2012. The Tribunal

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held, after a careful consideration of the conditions prescribed in the agreement, that the arrangement was for joint benefit of both the parties with shared obligations, responsibilities and benefits. 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 appellant 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 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 appellant 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 service. The patient paid the full amount to the appellant hospitals and received health care services. For providing such services, the appellants entered into

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an agreement, as discussed above, with various consulting doctors. We do not find any business support services in such arrangements. *******

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. After introduction of negative list tax regime, Notification No. 25/2011-ST 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'.

******

11. These two provisions available in Notification No. 25/2012 will show that a clinical establishment providing health care services are exempted from services tax. The view of the Revenue that is 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."

12. The aforesaid decision of the Tribunal has been accepted by the Department as is clear from the communication dated

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(i) M/s. Gujarmal Modi Hospital & Research Centre For Medical Sciences Versus CST, Delhi-II⁴.

(ii) Ms. Fortis Healthcare (India) Limited versus CCE & ST- Chandigarh-I⁵.

(iii) M/S. Ivy Health & Life Sciences Pvt. Ltd. Versus CCE, Chandigarh-II/Ludhiana⁶.

(iv) CCE & ST, Panchkula, Delhi-IV versus Alchemist Hospital Limited, Artemis Medicare Services Limited (Vice-Varsa)⁷.

14. 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 "business support service".

15. The impugned order dated December 28, 2016, therefore, is liable to be set aside and is set aside. The appeal is consequently allowed.

(JUSTICE DILIP GUPTA)

(PRESIDENT)

(C. L. MAHAR)

MEMBER (TECHNICAL)

Jb

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