Summary of the Judgment M/s. Stemcyte India Therapeutics Pvt. Ltd. vs. Commissioner of Central Excise and Service Tax, Ahmedabad-III, 2025 INSC 841

Citation: M/s. Stemcyte India Therapeutics Pvt. Ltd. vs. Commissioner of Central Excise and Service Tax, Ahmedabad-III, 2025 INSC 841
Related Law: Service Tax under the Finance Act, 1994; Exemption under Notification No. 25/2012-ST and 4/2014-ST; Interpretation of "Healthcare Services."

1. Introduction

The Supreme Court of India addressed a dispute involving the classification of stem cell banking services under "Healthcare Services" for exemption from service tax. The appellant, Stemcyte India Therapeutics Pvt. Ltd., challenged the CESTAT's order confirming service tax liability for the period 01.07.2012 to 16.02.2014.

2. Factual Background

• Appellant's Business: Engaged in collection, processing, testing, and storage of umbilical cord blood stem cells for therapeutic use.

• Regulatory Framework:
  2011: Ministry of Health mandated registration for cord blood banks under Drugs and Cosmetics Rules.
  2012: Notification No. 25/2012-ST exempted "Healthcare Services" from service tax.
  2014: Notification No. 4/2014-ST explicitly exempted stem cell banking services (Entry 2A).

• Dispute: Whether stem cell banking services during 2012–2014 qualified as "Healthcare Services" under the 2012 exemption.

3. Key Issues

1. Limitation: Whether the show-cause notice (2017) for tax demand (2012–2014) was time-barred.

2. Exemption Eligibility: Whether stem cell banking services constituted "Healthcare Services" under Notification No. 25/2012-ST.

3. Penalties: Whether penalties under Sections 77 and 78 of the Finance Act, 1994, were justified.

4. Supreme Court’s Analysis

A. Time-Barred Demand

• Ordinary Limitation: 1 year (Section 73(1), Finance Act).

• Extended Limitation (5 years): Applicable only for fraud/suppression of facts.

• Court's Findings:
  The department was aware of the appellant’s activities since 2013 but delayed the notice until 2017.
  No evidence of fraud or intent to evade tax. The appellant acted under a bona fide belief of exemption.
  Precedents Cited: Padmini Products (1989), Chemphar Drugs (1989) – Extended limitation requires deliberate wrongdoing.

• Conclusion: The demand was time-barred.

B. Exemption Under "Healthcare Services"

• Definition (Clause 2(t), Notification No. 25/2012-ST):
  Covers diagnosis, treatment, or care for illnesses/injuries in any recognised medical system.

• Appellant’s Services:
  Preventive & Curative: Stem cell storage enables future treatment of life-threatening diseases (e.g., leukemia).
  Regulated: Complied with Drugs and Cosmetics Act; recognized by the Ministry of Health (OM dated 22.05.2013).

• Clarificatory Nature of 2014 Notification:
  Entry 2A (2014) explicitly included stem cell banking but did not exclude such services from the 2012 exemption.
  Court's View: The 2014 notification was clarificatory, affirming the 2012 exemption’s scope.

• Precedents: Parle Exports (1989) – Exemptions must be liberally interpreted.

C. Penalties

• No Wilful Evasion: Appellant disclosed all details and deposited ₹40 lakhs during investigation.

• Bona Fide Conduct: Engaged with authorities for clarifications; no suppression of facts.

• Conclusion: Penalties under Sections 77 and 78 were quashed.

5. Conclusion & Directions

1. Appeal Allowed: CESTAT’s order set aside.

2. Refund Ordered: ₹40 lakhs deposited by the appellant to be refunded within 4 weeks.

3. Key Takeaways:
   Extended Limitation: Requires positive evidence of fraud.
   Exemption Scope: "Healthcare Services" includes preventive and future therapeutic services like stem cell banking.
   Penalties: Not imposed for bona fide disputes.