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M/s. Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central Excise and Service Tax, Ahmedabad-III

Civil Appeal · 2025 INSC 841Decided 14 Jul 2025
C.A. No.-003816-003817 - 2025
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

The appellant, a joint venture of Stemcyte Inc. (USA), Apollo Hospitals, and Cadila Pharmaceuticals, ran a cord blood bank collecting, processing and storing umbilical cord blood stem cells. It believed its services qualified as exempt "Healthcare Services" under a 2012 service tax notification, a view apparently supported by a 2013 Health Ministry office memorandum, and it kept writing to the government seeking clarification. Even so, tax authorities in Ahmedabad demanded service tax of over Rs. 2 crore for the period July 2012 to February 2014 (before a later 2014 notification expressly exempted cord blood banks), and the appellant paid Rs. 40 lakh under protest while contesting the demand. The CESTAT (tax tribunal) rejected the appellant's appeals and upheld the tax demand along with interest and penalties, reasoning that stem cell storage did not amount to "healthcare services" since it wasn't treatment of regular illnesses, prompting the appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that the appellant's services were indeed "Healthcare Services" within the exemption notification, since they were preventive and curative in nature and involved diagnosis, treatment and care: the exemption does not distinguish based on how common or rare the illness treated is. Separately and independently, the Court held that the demand was time-barred: the extended period of limitation under Section 73(1) of the Finance Act, 1994 can only be invoked where there is fraud, collusion, wilful misstatement, or suppression of facts with intent to evade tax, and here the appellant had been in constant, transparent correspondence with the government seeking clarity, never concealed anything, and acted in good faith, so there was no basis to invoke the extended limitation period or impose penalties. The Court set aside the CESTAT order in its entirety, allowed the appeals, and directed that the Rs. 40 lakh deposited by the appellant be refunded within four weeks.

Lesson Learnt

Tax authorities cannot use the extended limitation period to raise stale demands against a taxpayer who has acted transparently and in good faith: actively seeking clarification from the government rather than concealing facts is strong evidence against any claim of wilful suppression or intent to evade tax.

Official source (sci.gov.in)View Judgment (PDF)

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