CESTAT upholds Rs. 2 Cr Service Tax Demand on Stem Cell/Umbilical Cord Blood Bank, says No Retrospective Exemption [Read Order]

The Ahmedabad Bench of the Customs, Excises and Service Tax Appellate Tribunal ( CESTAT ) recently held that Activities rendered by Stem Cell/Umbilical Cord Blood Banks are not retrospectively exempt from Service Tax while upholding a Rs.2 Cr Service Tax Demand imposed by the Revenue Department on the Appellant.

The Service Tax Appeal was lodged by Stemcyte India Therapeutics Pvt. Ltd. against the Order of the Commissioner of Central Excise-Ahmedabad-III. Stemcyte was registered with the Service Tax Department as a concern performing 'Health care services by a clinical establishment, Health check-up / Diagnosis, etc.’ under Section 65(105) of the Finance Act, 1994.

Essential Training for Tax Professionals: Know Your Sections!

A search operation was conducted at the premises of Stemcyte India on the basis of incriminating information that the Company was engaged in the activity of collection, processing and storage of Umbilical Cord Blood (UCB) Stem Cells and its therapeutic application, in contrast to the scope of activities under Section 65(105) of the Finance Act, 1994.

The present assertions relabel the Company under Section 66B of the Finance Act, 1994, as a UCB Stem Cell Bank operating as both, a private and public Bank facilitating the storage of umbilical cord stem cells of newborns that can be repurposed for future medical needs.

The Tribunal noted that Deepak Chhabra, Chief Operating Officer of Stemcyte had previously submitted that the Services rendered by Stemcyte India were definitely chargeable to Service Tax and not covered under the Negative List of Services or under the Mega Exemption Notification No.25/2012-ST dated 20.06.2012.

Pursuantly, the Counsel for the Appellant, Jigar Shah & Shri Amber Kumarawat sought that the Blood Bank and Cryopreservation Services provided by the Appellant be explicitly classified under ‘Health Care Services’ and made representation to the Ministry of Finance requesting the same.

Upon evaluation of the Appellant’s ledger, CESTAT noted that the Appellant had received an Income of Rs.16,77,15,014/- between 01.07.2012 and 16.02.2014.

CESTAT observed that “Services of enrollment, collection, processing and storage of Umbilical Cord Blood Stem Cell” performed by Stemcyte is a taxable service and accordingly, service tax of Rs.2,07,29,576/- was correctly levied on the Income of the Appellant between 01.07.2012 and 16.02.2014, out of which the Appellant had paid Rs.40,00,000/-.

Essential Training for Tax Professionals: Know Your Sections!

In light of the latest amendments made to the Mega Exemption Notification No.25/2012-ST vide Notification No. 04/2014-Service Tax dated 17.02.2014 and Circular No. 334/03/2014-TIU dated 17.02.2014, it was contended by the Appellant Counsel that the functions undertaken by Stemcyte India were exempted from Service Tax through Entry Sl. No.2A in the Mega Exemption Notification.

In light of the findings, the West Zonal Bench of CESTAT, Ahmedabad Coram comprising Somesh Arora, Judicial Member and C.L. Mahar, Technical Member referred to the Decision of the Madras High Court in Life Cell Internation (P) Ltd. vs. Union of India (2015) and maintained that the Amendment to the Mega Exemption Notification cannot be attributed retrospective application to permit the Appellant to avail Service Tax Exemption.

In conclusion, the Tribunal while dismissing the Appeal, adjudged that the Appellant Company is very much liable to pay Service Tax on the aforementioned period. The Tribunal further condemned the Appellant’s wilful default in payment of Service Tax, subjecting them to a violation of the limitation for non-filing of their returns.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates