The Madras High Court has ruled that Chennai-based LifeCell International, touted as India’s first umbilical cord blood stem cell bank, cannot claim service tax exemption retrospectively even as the court refrained from rendering any finding on whether the company’s activities would fall within the ambit of health care service.
Disposing of a writ petition by LifeCell, which had sought service tax exemption with retrospective effect as per the Centre’s amendment to include stem cell companies under health care services —which is exempt from service tax — Justice S Vaidyanathan ruled that the amendment was only remedial in nature and it can have a 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 June 20, 2012. Since the amendment having been brought into force from a particular date, from February 17, 2014, no retrospective operation thereof can be contemplated prior thereto,” he said.
The judge has emphasised that the court has not rendered any finding regarding whether the activities of the petitioner would fall within the ambit of health care service and, thereby, the so-called amendment would apply in order to claim exemption of service tax. “The authorities are at liberty to determine this aspect in accordance with law,” he further said.
LifeCell had approached the high court praying that since the Centre had amended the provisions to include stem cell companies under the ambit of heath care services, the court should issue orders to the authorities concerned refraining them to levy service tax from 2012 to 2014. According to the plea, the amendment was made by way of an entry into the exemption notification of June 20, 2012 , by a notification dated February 17, 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 maybe included in the healthcare services bracket.
On the retrospective effect issue, Vaidyanathan said that in order to make a provision applicable with retrospective effect, it has to be expressed in the provision. “We do not find such an expression in the said provision. Nothing stopped the government before amending the rule to word it specifically, making it retrospective. That wasn’t done and we are not prepared to hold the rule is retrospective. Second, we can’t cou-ntenance the argument that the rule has a clarificatory nature. The rule, for the first time, creates a quota and thus crystallises the rights of direct appointees and promoters which wasn’t there earlier, ” he said.