Facts of the Case

This is a pre-GST Service Tax matter under the Finance Act, 1994. The petitioners — Ayursundra Hospitals (Guwahati) Pvt. Ltd. (formerly Ayursundra Health Care Pvt. Ltd.), a clinical establishment providing healthcare and diagnostic services, and its Director — challenged an Order-in-Original dated 13.12.2022 passed by the Principal Commissioner, GST and Central Excise Commissionerate, Guwahati, confirming a demand of Service Tax including cess of Rs. 3,57,30,422/- for financial year 2016-17, along with interest and an equal-amount penalty (with a 25% reduced-penalty option on timely payment).

The petitioners' case was that healthcare and diagnostic services provided by clinical establishments were exempt from service tax under Notification No. 25/2012-S.T. (later No. 30/2011-S.T. and 25/2011-S.T.), and that since exempted persons need not file ST-3 returns per a 2007 CBEC circular, the exempted revenue of Rs. 23,82,02,812/- for FY 2016-17 was not separately reported in the service tax return.

A show cause notice dated 26.10.2021 had proposed to recover service tax on this amount, invoking the extended period of limitation on the ground of suppression of facts and non-filing of returns. The petitioners replied on 02.11.2021 relying on the exemption notifications and submitted their audited financial statements, but the department rejected their contentions in the impugned order.

Issues Involved

  1. Whether the petitioners' healthcare/diagnostic services were exempt from service tax, and whether the impugned order had properly addressed this exemption claim.
  2. Whether the writ petition should be entertained given the availability of an alternate statutory remedy before CESTAT.

Petitioner's Arguments

  • The show cause notice did not give clear notice of the department's intention, and the impugned order was passed on considerations not disclosed in the notice.
  • The exemption from service tax for healthcare services rendered by clinical establishments, and the petitioners' consequent non-liability for FY 2016-17, was not properly or lawfully addressed in the impugned order.

Respondent's Arguments

  • All contentions raised by the petitioners had in fact been addressed in the impugned order, which extensively referred to the statutory provisions and decided the case on facts.
  • The writ petition was not maintainable, and the petitioners should be relegated to the alternate and efficacious statutory remedy before CESTAT, East Regional Bench, Kolkata.

Court Order / Findings

  • Applying the settled principles on alternate remedy from Whirlpool Corporation v. Registrar of Trademarks and Radha Krishan Industries v. State of Himachal Pradesh, the Court found none of the recognised exceptions (violation of fundamental rights, breach of natural justice, want of jurisdiction, or vires challenge) applicable here.
  • On perusal of the impugned order, the Court found that the points urged by the petitioners had in fact been considered — the order dealt with limitation, the effect of non-disclosure of the correct taxable value, and gave reasons why the exemption notifications relied upon did not save the petitioners from liability, while also noting the petitioners had not responded to pre-notice communications.
  • The Court held the impugned order may or may not be correct on merits, but it was not passed wholly without jurisdiction, and personal hearing had in fact been afforded — so the case did not fall within any exception to the alternate-remedy rule.
  • The writ petition was dismissed at the motion stage without issuing notice to the respondents, though the Court directed that the period the petition was pending before it (16.05.2023 to 22.05.2023) be treated as time spent bona fide pursuing a remedy, for limitation purposes in any subsequent appeal. No costs were awarded.

Important Clarification

The Court did not independently decide whether the petitioners' healthcare services were, in fact, exempt from service tax for FY 2016-17 — it only found that the department's order had considered (even if arguably erroneously) the exemption arguments, which meant the writ court's very limited grounds for bypassing an alternate remedy were not made out. The correctness of the exemption denial remains open for the appellate tribunal to examine. This is a pre-GST Service Tax case and does not decide any GST question.

Sections Involved

  • Section 73(1) and (2) of the Finance Act, 1994 (extended limitation and confirmation of Service Tax demand)
  • Section 75 of the Finance Act, 1994 (interest)
  • Section 77(1) and Section 78 of the Finance Act, 1994 (penalties)

Decision – In Favour of

Disposed of without a decision on merits — the writ petition was dismissed on alternate-remedy grounds, with the petitioners relegated to their statutory appeal before CESTAT, and the exemption question left open.

Case Details

Court: Gauhati High Court (High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh)
Case No.: WP(C)/2747/2023
CNR: GAHC010101742023
Coram: Hon'ble Mr. Justice Kalyan Rai Surana
Date of Order: 22.05.2023

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