Writ Petition No. 672 of 2015. Case: Life Cell International (P.) Ltd. Vs Union of India and Ors.. High Court of Madras (India)
| Case Number | Writ Petition No. 672 of 2015 |
| Counsel | For Appellant: Aravind P. Datar, S.C. for N. Viswanathan, Adv. and For Respondents: V. Sundareswaran, Adv. |
| Judges | S. Vaidyanathan, J. |
| Issue | Central Excise Act, 1944 - Sections 14, 35G(1); Constitution of India - Article 226; Finance Act, 1994 - Sections 2(24), 65, 65(102), 65(105)(zzzzo), 65(44), 65B, 66B, 66D, 67, 73(3), 73(4), 83 |
| Judgement Date | March 27, 2015 |
| Court | High Court of Madras (India) |
Order:
S. Vaidyanathan, J.
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This Writ Petition has been filed, praying for the issuance of a writ of Prohibition, to prohibit the 3rd and 4th respondents from collecting the service tax from the petitioner company for the period from 1.7.2012 to 16.2.2014 as the insertion of entry to Sl. No. 2A to Notification No. 25/2012-ST: dated 20.6.2012 vide amending Notification No. 4/2014-ST: dated 17.2.2014 was only clarificatory in nature and the activities of the petitioner company had always been exempted as health care service and as has been clarified by the second respondent.
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According to the petitioner company, it has been promoted for engaging itself in establishing stem cell bank, having sales and marketing centres at various locations in India, for collection, processing, cryo-preservation and release of stored samples for transplantation of umbilical cord blood and tissue stem cells, which are required in treating over 80 adverse medical conditions such as leukemia, lymphoma, myeloma, sickle-cell anemia, thalassemia, etc. The above activity of the petitioner/company involves application of proper technology for the preservation of stem cells for over number of years for use of the baby as well as its near and dear siblings in appropriate clinical treatment. The petitioner claims that the above activities undertaken by it can be termed as "Health Care Services". The services rendered by the petitioner/company among other things involved the collection of the umbilical blood and tissue in a special kit provided by them by sending their paramedics to the concerned hospital, carrying out appropriate process on the said umbilical cord blood by placing them in pilot bags (5 ml) and main bag (20 ml) sealed and stored in cold storage maintained at a particular concentration to make it available in case of necessity to the person for transplantation. For carrying out their above activities, the petitioner established public awareness programmes and collection facilities at different parts of country. The petitioner company will charge a fee either a onetime payment or on yearly basis for the above facility provided by them from their clients/customers which includes enrollment umbilical cord blood processing fee, umbilical cord tissue processing fee and cryo preservation charges. In order to provide the above facility, the petitioner used to engage various doctors and para medical technicians in the field. The petitioner company claims that the activities undertaken by them is similar to the one provided by a blood bank.
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According to the petitioner, the above activities are governed by the provisions contained in the Drugs & Cosmetics Act, 1940 and the Rules made thereunder and they have been granted licence in Form 28F to operate as a blood bank under the category "blood bank and blood transfusion services" which is covered under Schedule F of Part XII B. In this regard, the Ministry of Health had issued Notification No. G.S.R. 304(E): dated 09.04.2010 in respect to the process guidelines for collection and preservation of cord blood and upto the stage of release of stem cells for application. The petitioner and others who are engaged in the stem cell banking business are required to comply with the above guidelines.
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The petitioner company claims that the term storage and warehousing was however defined under section 65(102) of the Finance Act, 1994 to include Storage and Warehousing Services for goods including liquid and gases, but does not include any services provided for storage of agriculture produce or any services provided by a cold storage and since the cold storage services provided by them stood excluded from the levy of service tax in terms of the above definition under Section 65(102) of the Act they were not being subjected to the levy of service tax, for the cold storage activities involved in the above activities undertaken by them.
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According to the petitioner company, even though the Finance Act, 2011 provided for the levy of service tax for the health care services, the Government of India, in public interest issued an exemption notification bearing No. 30/2011 ST dated 25.04.2011 exempting the above taxable services provided or to be provided unconditionally. The newly introduced provisions among other things defined the term services for the first time under Sec. 65(44) of the Act, while also notifying certain services under Sec. 66D as Negative List of services on which no service tax was leviable. In addition to the above, a mega exemption Notification No. 25/2012-ST: dated 20.06.2012 was issued providing for exemption from the payment of service tax on certain taxable services. Even though substantial changes were made to the provisions contained in the Finance Act, 1994 through the above amendments even then the amended provisions in general continued the earlier provisions specifically excluding certain service activities or granting the exemption from the payment of service by specifying it either under the negative list or under the mega exemption notification. The petitioner admits accordingly the health related services which were hitherto enjoying the exemption under Notification No. 30/2011 ST: was notified against Sl. No. 2 of Notification No. 25/2012 ST: dated 20.05.12 whereby the exemption was continued to be extended to the health care services.
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The grievance of the petitioner is that while their activities were kept out of the levy of the service tax, however, in the Finance Act, 2012 brought into force from 01.07.12 it was not declared that the cold storage services either under the negative list of services under the newly introduced Sec. 66D of the Act or by notifying it as an exempted services under the mega exemption Notification No. 25/2012 ST: dated 20.06.12. The petitioner claims that the investigating authorities of the respondents conducted various search operations and enquiries under summons to collect various documents and details from them and others apart from forcing them to give posted cheques towards payment of the tax as calculated by them which the petitioner has no other option but to oblige and accordingly, the petitioner made payment of Rs. 3 Crores.
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It is stated that pursuant to the efforts taken by the petitioner by making number of representations to the second respondent, the Ministry of Health issued a memorandum dated 22.5.2013 to the effect that their department has examined the matter in consultation with the National Aids control Organization, Department of Aids Control to recommend that the services rendered by the stem cell banks are part of health care services and hence they may be considered for service tax exemption. Pursuant to the same, the Ministry of Finance, instead of clarifying that the health care services notified under notification No. 25/2012 ST: covers the stem cell banks also as per the clear recommendations of the Ministry of Health, made an amendment to the said notification by inserting a new entry 2A below to serial No. 2 "Services provided by cord blood Banks by way of preservation of stem cells or any other service in relation to such services" vide amending Notification No. 04/2014: dated 17.02.2014 even when the explanation of the terms "clinical establishment" and "Health care services" appended to the said notification fully covered their services requiring the grant of the exemption from the payment of service tax. Therefore, according to the petitioner, the amending notification has to be considered as only a clarificatory in nature effective and valid from 01.07.2012 in terms of serial No. 2 of the notification No. 25/2012 ST: dated 20.6.2012. In other words, though the amendment came into force on and from 17.2.2014, since it is only a clarificatory in nature, the petitioner claims exemption on and from 01.7.2012. Hence, the writ petition, seeking to prohibit the respondents 3 and 4 from collecting service tax from the petitioner company from 01.7.2012 to 16.2.2014.
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Resisting the claim of the petitioner, the respondents 1, 3 and 4 have filed a common counter affidavit, stating that the issue involved in this writ petition is applicability of exemption notification which relates to rate of duty and in terms of Section 35(G)(1) of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, the jurisdiction of the High Court is barred even for statutory appeal arising out of CESTAT orders, relating, among other things, to the determination of any question having a relation to rate of duty, fall within the exclusive domain of Hon'ble Apex Court, hence, the writ petition under Article 226 of the Constitution is not maintainable. It is also stated that considering the representation made by the Association of Stem Cell Banks of India to the first respondent, the said mega...
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