By TIOL News Service

CHENNAI, APR 07, 2015: WITH negative list regime coming into effect from 01.07.2012, all the activities other than those specified in the negative list and those covered under the exemption notification No 25/2012 ST became taxable. Vide Sl No 2 of the Notification No 25/2012 ST, "Health care services by a clinical establishment, an authorised medical practitioner or para-medics" are exempted. Since a doubt arose as to whether the services of Stem Cell banks, which store the umbilical cord blood will attract service tax, the service providers represented to the Ministry of Health for a clarification and based on the recommendation by the Ministry of Health, instead of clarifying the issue, the good Board has issued a fresh exemption by way of inserting Sl 2A in Notification No 25/2012 ST vide Notification No 4/2014 ST dated 17.02.2014. Since there was no exemption from 01.07.2012, the officers demanded tax for the period from 01.07.2012 to 16.02.2014. Against the action of the department, the Petitioner filed a Writ Petition seeking directions to prohibit the revenue from collecting service tax from 01.07.2012.

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. 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.

After hearing both sides, the High Court held:

Amendatory statutes, like original statutes, will not be given retroactive construction, unless the language clearly makes such construction necessary. In other words, the amendment will usually take effect only from the date of its enactment and will have no application to prior transactions, in the absence of an expressed intent or an intent clearly implied to the contrary' and that where a statutory provision is in its nature clarificatory, it will be presumed to be retrospective unless the contrary intention is clearly indicated by the Legislature, the reason being that its underlying purpose of explaining or clarifying the existing law will be effectively served only by giving it such a retrospective construction.

Therefore, the intention of the legislature is clear that bringing the services provided by cord blood banks by way of preservation of stem cells under the exemption Notification in order to give exemption of service tax, however, it has not been specifically mentioned that the said amendment should be with effect from the date of exemption Notification. i.e. 20.6.2012, wherein, originally, Entry No.2 has been inserted, giving exemption towards healthcare services by clinical establishment, an authorised medical practitioner or para-medics. Therefore, by virtue of such amendment, it should be construed that the establishments which provides the above said services will get exemption of service tax with effect from the date of amendment, i.e. 17.2.2014 only and they cannot claim it with retrospective effect.

From the language used in the so-called amendment, it is clear that the exemption is given towards the services provided by cord blood banks by way of preservation of stem cells and it cannot be construed that such exemption shall have retrospective effect.

The so-called amendment cannot be viewed as a clarificatory one and therefore, the Court is unable to countenance the argument advanced by the Petitioner that the so-called amendment is only a clarificatory nature.

Accordingly, the High Court dismissed the Writ Petition.

(See 2015-TIOL-844-HC-MAD-ST)