2025 (6) TMI 8 - AT - Service Tax

Liability of payment of service tax - bariatric surgery - taxable as cosmetic surgery or not - cum-tax benefit service - HELD THAT - Having heard both the parties and perusal of entire records including the decisions as have already been passed in favour of the appellant on the identical issue by this Tribunal. We find that it is evident from the Circular No. 334/13/2009-TRUm dated 06.07.2009 the minutes of the Postgraduate Medical Education Committee held on 25th July 2014 at 10.30 AM in the Council Office Sector-VIII Pocket-14 Dwarka New Delhi and clarification by Indian Medical Association Indore Branch 2013-14 it is clear that bariatric surgery is distinct from the plastic or cosmetic surgery. Bariatric surgery is a procedure through which the intake capacity of the patient is restricted thereby resulting in weight loss which is necessary for control of obesity related diseases while plastic or cosmetic surgery is intended to improve the outer shape and appearance of the body. Bariatric surgery is undertaken only on those patients who are diagnosed with morbid obesity which itself is a disease with other co-morbidities and on such patients who have a BMI of over 32.5. The President of the Indian Medical Association in a letter dated May 6 2014 also wrote that cosmetic surgery is done to improve the looks of a person but bariatric surgery is done to correct the metabolic and hormonal state of the diseased body along with weight loss. After referring to the Circular dated July 6 2009 the exemption Notification dated June 30, 2012 the literature provided by the appellant therein relating to bariatrics the letter of the Medical Council of India the Additional Commissioner in another case of identical demand against M/s Asian Bariatric vide order dated 22.02.2014 has held as a fact that bariatric surgery cannot be considered as cosmetic surgery and therefore not taxable under Section 65(105)(zzzzk) of the Finance Act. Thus we find no reason to differ from the said earlier decisions. The order under challenge has failed to follow the outcome and to observe judicial discipline. Resultantly we hereby set-aside the impugned order and consequent thereto the appeal is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

• Whether bariatric surgery performed by the appellant hospital constitutes cosmetic or plastic surgery attracting service tax liability under the Finance Act, or whether it is a medically necessary procedure exempt from service tax.
• Whether the earlier decisions of the Tribunal and relevant statutory and regulatory clarifications support the appellant's claim that bariatric surgery is not taxable as cosmetic surgery.
• Whether the impugned order correctly applied legal principles and followed judicial discipline in light of prior rulings on identical issues.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Bariatric Surgery as Cosmetic Surgery for Service Tax Purposes

Relevant legal framework and precedents: The service tax liability arises under Section 65(105)(zzzzk) of the Finance Act, which includes cosmetic or plastic surgery services. The Central Board of Excise and Customs (CBEC) Circular No. 334/13/2009-TRUm dated 06.07.2009 and exemption notifications such as the one dated 30.06.2012 provide guidance on the scope of taxable cosmetic surgery. The Medical Council of India and Indian Medical Association have issued clarifications distinguishing bariatric surgery from cosmetic surgery.

Court's interpretation and reasoning: The Tribunal analyzed the nature and purpose of bariatric surgery, noting that it is a gastrointestinal surgical procedure aimed at treating morbid obesity and associated co-morbidities such as hypertension, Type-II diabetes, arthritis, lipid disorders, and obstructive sleep apnea. Bariatric surgery is performed only on patients with a Body Mass Index (BMI) above 32.5 with co-morbid conditions, following internationally recognized surgical guidelines endorsed by the Asia Pacific International Federation of Surgical Obesity and the Obesity Surgical Society of India.

The Tribunal emphasized that bariatric surgery's objective is therapeutic-to reduce weight and control obesity-related diseases-rather than cosmetic enhancement. This distinction was supported by the Circular dated 06.07.2009, minutes of the Postgraduate Medical Education Committee meeting held on 25.07.2014, and a letter from the Indian Medical Association, Indore Branch (2013-14), all clarifying that bariatric surgery is not plastic or cosmetic surgery.

Key evidence and findings: The appellant provided medical literature on bariatrics, official clarifications from the Medical Council of India, and prior orders of the Additional Commissioner and Tribunal holding bariatric surgery distinct from cosmetic surgery. The Additional Commissioner's order dated 22.02.2014 in a similar case (M/s Asian Bariatric) was particularly relied upon, which held bariatric surgery as non-taxable under the relevant service tax provisions.

Application of law to facts: Applying the statutory definition and the clarifications from medical authorities, the Tribunal concluded that bariatric surgery is a medically necessary treatment for a disease condition (morbid obesity) and not a cosmetic procedure aimed at enhancing physical appearance.

Treatment of competing arguments: The Department argued for the applicability of service tax on bariatric surgery by treating it as cosmetic surgery. However, the Department's Authorized Representative conceded the earlier Tribunal decisions favoring the appellant. The Tribunal found that the impugned order failed to follow binding precedents and did not adequately consider the medical and regulatory clarifications distinguishing bariatric surgery from cosmetic surgery.

Conclusions: Bariatric surgery is not taxable as cosmetic surgery under the Finance Act. The service tax demand on the appellant for bariatric surgery services is unsustainable.

Issue 2: Adherence to Judicial Discipline and Precedents in the Impugned Order

Relevant legal framework and precedents: The Tribunal referred to its own prior decisions in the appellant's cases reported as 2021 (45) GSTL 149 (Tr.-Del) and 2023 (6) TMI 898-CESTAT NEW DELHI, which had ruled in favor of the appellant on identical issues. The Supreme Court decision in Damodar J Malpani v. Collector of Central Excise was cited to emphasize the principle that once an order has attained finality, the Department cannot take a contradictory stand in subsequent proceedings.

Court's interpretation and reasoning: The Tribunal observed that the impugned order under challenge failed to follow the earlier decisions of the Tribunal and the principle of judicial discipline. The Department had allowed earlier demands to be set aside by the Tribunal, and the same issue was being re-agitated without justification.

Key evidence and findings: The Tribunal noted that show cause notices for earlier periods had been decided in favor of the appellant and that the Department's own Circulars and clarifications supported the appellant's stance. The appellant's reliance on these prior decisions and clarifications was well-founded.

Application of law to facts: The Tribunal applied the principle of consistency and finality in judicial decisions, holding that the Department cannot reopen settled issues arbitrarily. The impugned order's failure to follow binding precedents rendered it unsustainable.

Treatment of competing arguments: The Department's plea to dismiss the appeal was rejected due to its concession of earlier Tribunal rulings and failure to distinguish the present case from those rulings.

Conclusions: The impugned order is set aside for non-adherence to judicial discipline and failure to follow binding precedents.

3. SIGNIFICANT HOLDINGS

The Tribunal held as follows:

"Bariatric surgery is a procedure through which the intake capacity of the patient is restricted, thereby resulting in weight loss which is necessary for control of obesity related diseases, while plastic or cosmetic surgery is intended to improve the outer shape and appearance of the body."

"The Central Board of Excise and Customs has also clarified that the service proposed to be taxed were cosmetic surgery and such plastic surgery which is undertaken to preserve or enhance physical appearance or beauty. The aim and object of bariatric surgery is to cure the state of morbid obesity and related disease."

"In coming to this conclusion, reliance can be placed on the decision of the Tribunal in Shri Niraj Prasad vs. Commissioner of Central Excise and Service Tax, Kanpur (2019-TIOL-3237-CESTAT-ALL 2020 (38) GST 78 (Tr All.). A similar issue had arisen for consideration. In one matter, the demand of service tax under "business auxiliary service by a similarly situated assessee had been set aside by the Commissioner and that order had attained finality. The Division Bench of the Tribunal held that when the Department had permitted that order to attain finality, it cannot be permitted to urge in the case of the appellant that the appellant should pay service tax under "business auxiliary service", In coming to this conclusion, reliance was placed by the Division Bench on the decision of the Supreme Court in Damodar J Malpani v. Collector of Central Excise [2002 (146) ELT. 483 (S.C.)."

The Tribunal concluded that the impugned order was contrary to established legal principles and prior findings and therefore set aside the order, allowing the appeal.