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M/s. Life Cell International (P) Ltd. Versus Union of India, Directorate General of Central Excise Intelligence, The Commissioner of Service Tax

2015 (4) TMI 290 - MADRAS HIGH COURT

Effect of amendment of Notification - Retrospective or prospective - Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation - Notification No. 25/2012 dated 20.6.2012 as amended by 4/2014-ST dated 17.2.2014 - Exemption in the nature of clarificatory or not - Held that:- services provided by the petitioner, viz., collection of umbilical blood and tissue and preserving in cold storage, has not been included in the "Negative .....

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No.2A which read "Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation" and thereby the services of the petitioner are recognized as fallen within the ambit of "health care services" and exempted from the whole of the service tax leviable under Section 66 B of the Finance Act.

If the amendment introduced by Notification No.4/2014-ST, dated 17.2.2014, is declaratory or clarificatory in nature, it is no doubt, .....

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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.

So-called amendment, admittedly, has been inserted by way of Entry 2A into the exemption Notific .....

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id 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 canno .....

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ereto.

Supreme Court in WPIL Ltd [2005 (2) TMI 137 - SUPREME COURT OF INDIA], having considered the fact that already, the Government issued Notification dated 1.3.1994, giving exemption from imposing excise duty on parts of power driven pumps used in the factory premises for manufacture of power driven pumps and to clarify the position, the subsequent notification dated 25.4.1994 was issued giving exemption towards the goods that are used within the factory of production in the manuf .....

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mption for the first time towards the services provided by cord blood banks by way of preservation of stem cells and hence, it cannot be considered as clarificatory in order to give retrospective effect. - Decided against Petitioner. - Writ Petition No. 672 of 2015 - Dated:- 27-3-2015 - S. Vaidyanathan,J. For the Petitioner : Mr Aravind P Datar, SC & Mr N Viswanathan For the Respondent : Mr V Sundareswaran ORDER This Writ Petition has been filed, praying for the issuance of a writ of Prohibi .....

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pany, it has been promoted for engaging itself in establishing stem cell bank, having sales and marketing centres at various locations in India, for collection, processing, cryo-preservation and release of stored samples for transplantation of umbilical cord blood and tissue stem cells, which are required in treating over 80 adverse medical conditions such as leukemia, lymphoma, myeloma, sickle-cell anemia, thalassemia, etc. The above activity of the petitioner/company involves application of pr .....

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arrying out appropriate process on the said umbilical cord blood by placing them in pilot bags (5 ml) and main bag (20 ml) sealed and stored in cold storage maintained at a particular concentration to make it available in case of necessity to the person for transplantation. For carrying out their above activities, the petitioner established public awareness programmes and collection facilities at different parts of country. The petitioner company will charge a fee either a onetime payment or on .....

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activities are governed by the provisions contained in the Drugs & Cosmetics Act, 1940 and the Rules made thereunder and they have been granted licence in Form 28F to operate as a blood bank under the category "blood bank and blood transfusion services" which is covered under Schedule F of Part XII B. In this regard, the Ministry of Health had issued Notification No. G.S.R. 304(E) dated 09.04.2010 in respect to the process guidelines for collection and preservation of cord blood a .....

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provided by a cold storage and since the cold storage services provided by them stood excluded from the levy of service tax in terms of the above definition under Section 65(102) of the Act they were not being subjected to the levy of service tax, for the cold storage activities involved in the above activities undertaken by them. 5. According to the petitioner company, even though the Finance Act, 2011 provided for the levy of service tax for the health care services, the Government of India, i .....

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2012 was issued providing for exemption from the payment of service tax on certain taxable services. Even though substantial changes were made to the provisions contained in the Finance Act, 1994 through the above amendments even then the amended provisions in general continued the earlier provisions specifically excluding certain service activities or granting the exemption from the payment of service by specifying it either under the negative list or under the mega exemption notification. The .....

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d storage services either under the negative list of services under the newly introduced Sec. 66D of the Act or by notifying it as an exempted services under the mega exemption Notification No. 25/2012 ST dated 20.06.12. The petitioner claims that the investigating authorities of the respondents conducted various search operations and enquiries under summons to collect various documents and details from them and others apart from forcing them to give posted cheques towards payment of the tax as .....

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services rendered by the stem cell banks are part of health care services and hence they may be considered for service tax exemption. Pursuant to the same, the Ministry of Finance, instead of clarifying that the health care services notified under notification no. 25/2012 ST covers the stem cell banks also as per the clear recommendations of the Ministry of Health, made an amendment to the said notification by inserting a new entry 2A below to serial no. 2 "Services provided by cord blood B .....

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ficatory 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. In other words, 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. Hence, the writ petition, seeking to prohibit the respondents 3 and 4 from collecting service tax from the petitioner company from 01.7.2012 to 16.2.2014. 8. Resisting the claim of the petitione .....

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e of duty, fall within the exclusive domain of Hon'ble Apex Court, hence, the writ petition under Article 226 of the Constitution is not maintainable. It is also stated that considering the representation made by the Association of Stem Cell Banks of India to the first respondent, the said mega exemption notification dated 20.6.2012 was amended by inserting Entry No.2A which read "Services provided by cord blood banks by way of preservation of stem cells or any other service in relation .....

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Clause 2(t), a case of tax evasion was registered by the 3rd respondent for the period in question. During the course of investigation, the Managing Director of the petitioner, in his voluntary statement tendered on 9.1.2014 under Section 14 of the Central Excise Act, 1944 made applicable to service tax under Section 83 of the Finance Act, 1994, admitted service tax liability for the services provided by them by way of preservation of stem cells with effect from 1.7.2012. Pursuant to his underta .....

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notice will be issued to the petitioner quantifying the proposed liability to tax and on such event, the petitioner will be at liberty to contest the tax liability by letting in evidence and it is for the adjudicating authority to come to the conclusion whether the activities of the petitioner fall within the purview of "health care services" or not by analyzing the evidence on record. With these averments, the respondents sought for dismissal of the writ petition. 9. Heard the learned .....

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2-ST dated 20.06.2012, however, pursuant to the efforts taken by the petitioner and the Association of Stem Cell Banks of India with the Ministry of Health & Family Welfare, which issued a memorandum dated 22.5.2013 to the first respondent recommending that the services rendered by the stem cell banks are part of health care services, the said mega exemption notification dated 20.6.2012 was subsequently amended by inserting Entry No.2A which read "Services provided by cord blood banks b .....

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ion, dated 20.6.2012, it has to be treated that such amendment is only a clarificatory in nature and though the amendment is with effect from 17.2.2014, it has to be given with retrospective effect and thereby, exemption for paying service tax for the period from 1.7.2012 to 16.2.2014 has to be extended by the respondents and therefore, the learned senior counsel prayed that that the 3rd and 4th respondents should be restrained by way of writ of prohibition. He would vehemently contend that the .....

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, viz., "WPIL Ltd., Ghaziabad versus Commissioner of Central Excise, Meerut, U.P., reported in (2005) 3 SCC 73; "Collector of Central Excise, Shillong versus Wood Craft Products Ltd." reported in (1995) 3 SCC 454; "Maharaja Book Depot. Versus State of Gujarat" reported in AIR 1979 SC 180; and "Commissioner of Income Tax I versus Gold Coin Health Food Private Limited" reported in (2008) 9 SCC 622. 11. On the other hand, Mr.V.Sundareswaran, learned standing couns .....

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e decision of the Hon'ble Apex Court reported in "Navin Chemicals Manufacturing and Trading Co.Ltd. versus Collector of Customs, reported in 1993 (68) ELT 3 (SC); and also the orders of this Court in W.P.No.1276 of 2010, dated 17.11.2014 and CMA No.2424 of 2007. 12. As regards the relief sought for by the petitioner for issuance of writ of prohibition to prohibit the respondents 3 and 4 from collecting service tax from 01.07.2012 onwards by giving retrospective effect to the so-called a .....

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ther the activities of the petitioner would fall within the meaning "health care services" on scrutiny of documents and thorough investigation, therefore, the self-claim sought for by the petitioner that as if the amendment of Entry 2A is squarely applicable to their services and has to be given effect retrospectively cannot be sustained. He would also contend that even assuming that the amendment would apply to the services provided by the petitioner, it is settled law that any amendm .....

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have been brought under the purview of "health care services" and by amendment of entry No.2A, payment of service tax has been exempted and it has been claimed that such exemption should be retrospective and no issue regarding rate of duty in terms of Section 35(G)(1) of the Act is involved in this writ petition for determination. Hence, the learned senior counsel would contend that if the statutory authority acts beyond the jurisdiction, it is settled law that writ under Article 226 i .....

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ain the respondents 3 and 4 from collecting the service tax by giving retrospective effect of the amendment with effect from 01.7.2012 onwards. Therefore, the question of the determination of rate of duty in terms of Section 35G(1) of the Central Excise Act, 1944 read with Section 83 of the Finance Act does not arise in this writ petition and hence, the writ petition is maintainable. In support of his contentions, the learned senior counsel placed reliance on "Bengal Immunity Co. versus Sta .....

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and the respective arguments advanced on behalf of either parties, it appears that the issue involved in this writ petition is "whether the so-called amendment i.e. Entry No.2A brought into the exemption Notification, dated 20.6.2012 by Notification No.4/2014-ST dated 17.2.2014 to the effect that "Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation" is only a clarificatory nature and whether it should be .....

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with retrospective effect and thereby, the respondents 3 and 4 should be prohibited from collecting service tax from 01.7.2012 onwards by way of writ of prohibition. Therefore, since this Court is inclined to delve upon the issue involved in this Writ Petition, "whether the so-called amendment i.e. Entry No.2A brought into the exemption Notification, dated 20.6.2012 by Notification No.4/2014-ST dated 17.2.2014 to the effect that "Services provided by cord blood banks by way of preserva .....

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t would apply to the petitioner organization in order to claim exemption of service tax" is going to be rendered by this Court in this writ petition. In view of the submission made by the learned counsel for the respondents that the assessment proceedings are yet to be finalized and the applicability of the amendment of exemption towards the services provided by the petitioner is also yet to be determined, this Court is of the view that it is for the authorities to determine whether the act .....

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e Finance Act, 2011 (8 of 2011) substituting the provision of Section 65(105) (zzzzo) to cover services provided or to be provided to any person, (i) by a clinical establishment; or (ii) by a doctor, not being an employee of a clinical establishment, who provides service from such premises for diagnosis, treatment or care for illness, disease, injury, deformity, abnormality or pregnancy in any system of medicine. While levying the tax for the above said health care services, the Government of In .....

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xcise and Customs (CBEC) has further issued "Mega Exemption Notification" vide Notification No. 25/2012-Service Tax dated 20th June, 2012, enlisting the services which shall be exempted from the payment of service tax with effect from 1st July, 2012. With the enforcement of Finance Act 2012, Section 65 relating to the "definitions" of the various terms relating to the service tax has been omitted. However, two important sections which have been introduced defining the new ser .....

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e petitioner, pursuant to the efforts taken by the petitioner and the Association of Stem Cell Banks of India, the Ministry of Health & Family Welfare, issued a memorandum dated 22.5.2013 to the first respondent recommending that the services rendered by the stem cell banks are part of health care services and based on which, the said mega exemption notification dated 20.6.2012 was subsequently amended by inserting Entry No.2A which read "Services provided by cord blood banks by way of .....

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effect that "Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation" is only a clarificatory nature and whether it should be given with retrospective effect?, this Court is of the view that if the amendment introduced by Notification No.4/2014-ST, dated 17.2.2014, is declaratory or clarificatory in nature, it is no doubt, it will have retrospective effect and if the amendment is remedial in nature it can have on .....

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ate. 21. In this regard, it is appropriate to refer the decision of the Hon'ble Supreme Court, reported in "K.S.Paripoornan versus State of Kerala", wherein, it has been observed that usually an amendment will take effect only from the date of its enactment and will have no retrospective effect in the absence of an express intent or an intent clearly implied to the contrary. Indeed there is a presumption that an amendment usually operates prospectively. The apex court has also obse .....

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not the intention of the Legislature. It has been held by the Hon'ble Apex Court as under in para 64 to 66: "64. A statute dealing with substantive rights differs from a statute which relates to procedure or evidence or is declaratory in nature inasmuch as while a statute dealing with substantive rights is prima facie prospective unless it is expressly or by necessary implication made to have retrospective effect, a statute concerned mainly with matters of procedure or evidence or which .....

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ing with substantive rights transactions are neither invalidated by reason of their failure to comply with formal requirements subsequently imposed, nor open to attack under powers of avoidance subsequently conferred. They are also not rendered valid by subsequent relaxations of the law, whether relating to form or to substance. Similarly, provisions in which a contrary intention does not appear neither impose new liabilities in respect of events taking place before their commencement, nor relie .....

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l statutes, they 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. Indeed there is a presumption that an amendment shall operate prospectively." (See Crawford's Statutory Construction, pp. 622-23) "66. .....

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oses a new duty or attaches a new disability in respect to transactions or considerations already past, will not be treated as retrospective. In Alexander v. Mercouris19 Goff, L.J., after referring to the said observations of Lord Denman, C.J., has observed that a statute would not be operating prospectively if it creates new rights and duties arising out of past transactions. The question whether a particular statute operates prospectively only or has retrospective operation also will have to b .....

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ruction 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 clarifyi .....

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plicable with retrospective effect, it has to be specifically expressed in the provision. We do not find such an expression in the said proviso. Nothing had stopped the Government before amending the Rule to word it specifically, making it retrospective. That was not done and we are not prepared to hold that the Rule is retrospective. Secondly, we cannot countenance the argument that the Rule has a clarificatory nature. The Rule, for the first time, creates a quota and thus crystallises the righ .....

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a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only - "nova co .....

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s a whole (ibid., p. 440). "14. The presumption against retrospective operation is not applicable to declaratory statutes. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well sett .....

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is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answ .....

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nal Agricultural Coop. Marketing Federation of India Ltd. v. Union of India" reported in (2003) 5 SCC 23, wherein, it has been held as under 16 and 17: "16. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. "Sometimes this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction .....

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ntly, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise apparent. 24. Reverting to the case on hand, the so-called amendment, admittedly, has been inserted by way of Entry 2A into the exemption Notification, dated 20.6.2012 by Notification No.4/2014-ST dated 17.2.2014 to the effect that "Services provided by cord blood banks by way of preservation of stem cells or any other service in re .....

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ces 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. The uncontroverted position is that before the amendment came into force, for the services provided by the cord blood banks were leviable and in f .....

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have prospective effect only. If at all the legislature thought it fit to extend exemption with retrospective effect, it would have certainly expressed by mentioning specifically to the effect that the amendment would be with effect from 20.6.2012. Since the amendment having been brought into force from a particular date, i.e. 17.2.2014, no retrospective operation thereof can be contemplated prior thereto. 25. As regards the decisions (cited supra) relied upon by the learned senior counsel for .....

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issued giving exemption towards the goods that are used within the factory of production in the manufacture, held that the subsequent notification was not a new one granting exemption for the first time in respect of parts of power driven pumps to be used in the factory and therefore, the subsequent notification is clarificatory nature and it has to be given with retrospective effect. But in the present case, it is not in dispute that the so-called amendment Notification issued by the Government .....

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the strength of its earlier judgments in "CIT v. Harprasad and Co. (P) Ltd. [(1975) 3 SCC 868 : 1975 SCC (Tax) 158 : (1975) 99 ITR 118] and followed in "Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139 : 1980 SCC (Tax) 67 : (1979) 120 ITR 921] . After an elaborate and detailed discussion, the Apex Court held with reference to the charging provisions of the statute that the expression "income" should be understood to include losses. The expression "profits and g .....

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