By TIOL News Service

CHENNAI, NOV 23, 2016: THE petitioner is a Hospital specialized in Orthopaedic and Trauma care. The Government of Tamil Nadu framed a Scheme "Kalaignar Kaapittu Thittam" (KKT), with a view to afford good medical treatment for the people in the lower income group, who were suffering from serious ailments, by providing treatment in Government as well as in private notified Hospitals. The Scheme was to be managed by M/s Star Health and Allied Insurance Company Limited, (STAR), who were selected by the Government, as their bid was for the lowest amount of premium. As per the Scheme evolved by the Government of Tamil Nadu, the entire premium has to be paid by the Government of Tamil Nadu to the STAR and the beneficiary family will be entitled to avail free medical treatment upto Rs.1 lakh in a block period of four years.

The Additional Commissioner issued a show cause notice alleging that the petitioner has contravened the provisions of the Finance Act, 1994, and the Rules framed therein and called upon the petitioner to show cause as to why the proviso to section 73(1) of the Finance Act should not be invoked to demand service tax beyond the normal period and as to why service tax amount cannot be demanded from the petitioner payable for the service rendered under "Health Check up and Treatment Services" for the period from 01.07.2010 to 30.04.2011, apart from proposing to demand interests and levy penalty. The same has been confirmed by the Adjudicating Authority.

After hearing both sides, the High Court held:

+ Under normal circumstances, the Writ Petition will not be maintainable because the Order-in-Original was passed by the first respondent, and as against the same, the petitioner has an effective alternate remedy of filing an Appeal before the Commissioner (Appeals), under the provisions of the Finance Act, 1994. However, in the light of the pure question of law, which is raised by the petitioner, this Court is inclined to entertain the Writ Petition.

+ One fundamental error which has crept in the impugned proceedings is that the authority while adjudicating the show cause notice did not examine the scope of the transaction between the petitioner and the Government/STAR. In fact that should have been the first endeavour of the adjudicating authority, since the petitioner raised a preliminary objection by stating that KKT is a Welfare Scheme and not an Insurance policy, no approval was obtained from IRDA and therefore, they will not fall within the definition of "Health Check up and Treatment Services". Thus, the primordial question would be whether while implementing the Welfare Scheme propounded by the State Government, if the work is entrusted to STAR would that by itself make it an Insurance Policy. The second aspect which has to be seen as to who is the insured, the specific case of the petitioner is that the recipient is the public, who are below the poverty line and there is no policy drawn between the beneficiary and STAR or the petitioner. Therefore, unless and until the Scheme has been examined in full, the respondent cannot come to a conclusion that the nature of transaction done by the petitioner would fall within the definition of section 65(105)(zzzzo) of the Finance Act. Therefore, this Court is of the view that such an exercise is required to be done before coming to the conclusion as to what is the nature of service rendered and whether it is an Insurance Policy or it is a Welfare Scheme. Thus, without examining the Government orders, the Scheme propounded by the Government arrangement with STAR, the petitioner and the Government, conclusion could not have been arrived at and the case laws referred to could not have been made applicable without going into the facts and the terms of the subject schemes which may be distinct and different from those considered in the decision relied on by the respondent.

+ In the light of the above, the Court is of the view that the matter should be reconsidered by the respondent as indicated in the preceding paragraphs and such exercise should be done. Impugned order is set aside and the matter is remanded.

(See 2016-TIOL-2838-HC-MAD-ST)