Stem Cell Banks Within The Scope Of ‘healthcare Services’; Supreme Court Directs Refund Of Rs. 40 Lacs Tax Deposited
The Supreme Court considered the question whether the services relating to enrolment, collection, processing, and storage of umbilical cord blood stem cells fall within the definition of "Healthcare Services", so as to qualify for exemption from service tax.
Justice J.B. Pardiwala, Justice R. Mahadevan, Supreme Court
The Supreme Court observed that the activity of enrolment, collection, processing, and storage of umbilical cord blood stem cells fell within the scope of exempted “Healthcare Services” and therefore, was not liable to service tax.
The Appellant is a joint venture company of M/s. Stemcyte Inc., USA, M/s. Apollo Hospital Enterprises Ltd., and M/s. Cadila Pharmaceuticals Ltd. and is engaged in the collection, processing, testing, and storage of umbilical cord blood units and their therapeutic application.
A Bench of Justice J.B. Pardiwala and Justice R. Mahadevan observed, “The records reveal that the appellant was under a bona fide belief that the activity of enrolment, collection, processing, and storage of umbilical cord blood stem cells fell within the scope of exempted “Healthcare Services” and therefore, was not liable to service tax. There is nothing on record to suggest that the appellant suppressed any material facts. On the contrary, they responded promptly to departmental communications and even deposited a sum of Rs. 40,00,000/- during the investigation. There was no allegation or evidence of fraud, collusion, wilful misstatement, or contravention of statutory provisions with intent to evade tax.”
Case Brief
It was the case of the Appellant that being engaged in the collection, processing, testing, and storage of umbilical cord blood units and their therapeutic application it is exempted from service tax as “Healthcare Services” are exempted.
However, the Deputy Commissioner of Central Excise issued summons and letters to the Appellant demanding service tax for the period from July 1, 2012 to February 16, 2014. Accordingly, the Appellant submitted replies along with the necessary documents and deposited a sum of Rs. 40,00,000/-, stating that the payment was made under protest.
Later, Customs, Excise and Service Tax Appellate Tribunal (CESTAT) also dismissed the plea of the Appellant. The Appellant submitted that “Healthcare Services” have always been exempt under the Finance Act, 1994.
Court’s Analysis
With regard to the question whether the Appellant’s service fell within the ambit of “Healthcare Services” and are therefore, eligible for exemption from payment of service tax, the Court opined that the records reveal that the Appellant was under a bona fide belief that the activity of enrolment, collection, processing, and storage of umbilical cord blood stem cells fell within the scope of exempted “Healthcare Services” and therefore, was not liable to service tax. There was nothing on record to suggest that the Appellant suppressed any material facts.
“Therefore, in the absence of fraud, collusion, wilful misstatement, or suppression of facts with an intent to evade payment of service tax, the invocation of the extended period of limitation under Section 73 of the Finance Act, 1994 is wholly unwarranted. Mere non-payment of service tax, by itself, does not justify the invocation of the extended limitation period. Accordingly the show cause notice issued by the department is clearly time-barred. On this ground alone, the impugned order deserves to be set aside”, the Bench said.
The Court also emphasised that unless a notification or circular explicitly provides for retrospective operation, it must be construed as prospective.
Further, the Court noted that the Appellant is actively involved in post-transplant monitoring, clinical trials, and collaborations with international medical experts. Their services also support research on conditions like autism and cerebral palsy.
“The Department contends that the appellant’s services were exempted…The absence of express inclusion of cord blood services in earlier notifications does not alter their essential healthcare nature. Therefore, the appellant’s services are well within the ambit of Healthcare Services”, the Court added.
Furthermore, the Court highlighted that the Ministry of Health and Family Welfare clarified in consultation with the National AIDS control Organization that stem cell banking is a part of “health care services” and qualifies for exemption.
Thus, the Court observed that the appellant’s services fall within the ambit of “Healthcare Services as defined under the exemption notification.
“The deposit of Rs. 40,00,000/- made by the Appellant shall be refunded to them within a period of four weeks from the date of receipt of this judgment”, the Court ordered.
Accordingly, the Appeal was allowed.
Cause Title: M/S. Stemcyte India Therapeutics Pvt. Ltd V. Commissioner Of Central Excise And Service Tax, Ahmedabad - III (Neutral Citation: 2025 INSC 841)
