Supreme Court of India
M/S STEMCYTE INDIA THERAPEUTICS PVT. LTD.versusCOMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, AHMEDABAD -III
- Citation
- 2025 INSC 841
- Decided
- 14 July 2025
- Disposal
- Appeal(s) allowed
- Bench
- B PARDIWALA
Holding
The appellant’s stem‑cell banking activities are "Healthcare Services" eligible for exemption, the 2014 notification is clarificatory and benefits the appellant, and the show‑cause notice is time‑barred, so the impugned order is set aside.
Summary
M/s Stemcyte India Therapeutics, a joint‑venture stem‑cell bank, was assessed service tax for its enrolment, collection, processing and storage of umbilical cord blood stem cells for the period 1 July 2012 to 16 February 2014. The appellant claimed exemption as a "Healthcare Service" under Notification No.25/2012‑ST and argued that the later Notification No.4/2014‑ST merely clarified the exemption and should apply retrospectively. The department issued a show‑cause notice in 2017 invoking the extended limitation under s.73 of the Finance Act, demanding tax, interest and penalties. The Supreme Court held that the appellant’s activities are preventive and curative services falling within the ambit of "Healthcare Services", that the 2014 notification is clarificatory and can be read to benefit pending disputes, and that the department could not invoke the extended limitation absent fraud or wilful misstatement. Consequently, the show‑cause notice was held time‑barred, the penalties were unwarranted, and the appellant’s deposit was ordered to be refunded. The appeals were allowed.
Issues considered
- The question whether the services of enrolment, collection, processing and storage of umbilical cord blood stem cells constitute "Healthcare Services" exempt from service tax under Notification No.25/2012‑ST.
- Whether Notification No.4/2014‑ST, which introduced Entry 2A for cord‑blood banks, is merely clarificatory and can be given retrospective effect to cover the disputed period.
- Whether the department could validly invoke the extended limitation period under s.73(1) of the Finance Act, 1994, to issue a show‑cause notice after more than three years without proof of fraud, collusion or wilful misstatement.
Legislation cited
- Central Excise Act, 1944s. 11B
- Drugs and Cosmetics (3rd Amendment) Rules, 2011
- Drugs and Cosmetics Act
- Drugs and Cosmetics (Amendment) Rules, 2018
- Finance Act, 1994s. 68, s. 70, s. 73, s. 75, s. 77, s. 78, s. 80
- Service Tax Rules, 1994
Headnote
Issue for Consideration Whether the services of enrolment, collection, processing, and storage of umbilical cord blood stem cells, provided by the appellant fell within the scope of “Healthcare Services” during the disputed period and for exemption from payment of service tax during the said period. Headnotes† Finance Act, 1994 – Exemption notification – “Healthcare Services” – Exemption from payment of service tax – Entitlement to – Services of enrolment, collection,
Subjects
Stem cell bankingUmbilical cord bloodHealthcare ServicesService tax exemptionNotification No.25/2012‑STNotification No.4/2014‑STExtended limitation periodSection 73 Finance ActPenalty under Section 77Retrospective effect of notificationDrugs and Cosmetics Act
Judgment
[2025] 8 S.C.R. 70 : 2025 INSC 841
M/s Stemcyte India Therapeutics Pvt. Ltd.
v.
Commissioner of Central Excise and Service Tax,
Ahmedabad - III
(Civil Appeal No(s). 3816-3817 of 2025)
14 July 2025
[J.B. Pardiwala and R. Mahadevan,* JJ.]
Issue for Consideration
Whether the services of enrolment, collection, processing, and
storage of umbilical cord blood stem cells, provided by the appellant
fell within the scope of “Healthcare Services” during the disputed
period and thus, whether eligible for exemption from payment of
service tax during the said period.
Headnotes†
Finance Act, 1994 – Exemption notification – “Healthcare
Services” – Exemption from payment of service tax –
Entitlement to – Services of enrolment, collection, processing,
and storage of umbilical cord blood stem cells, provided by
the appellant, if fell within the scope of “Healthcare Services”
during the disputed period and thus, whether exempted from
the levy of service tax as per the 2012 and 2014 Notifications
dtd.20.06.2012 and 17.02.2014 issued by the Ministry of
Finance – Show cause notice was issued to the appellant
stating that its services during the period from 01.07.2012
to 16.02.2014 were a taxable service – CESTAT held that the
services provided by the appellants during the disputed period,
did not fall within the scope of “Healthcare Services” and thus,
the appellant was held liable to pay service tax on the said
services along with interest and penalties – Interference with:
Held: Appellant’s services are well within the ambit of “Healthcare
Services” – As per Entry 2 of the 2012 Notification, services provided
by clinical establishments in the nature of healthcare were exempt
from service tax – Appellant qualifies as a clinical establishment
u/clause 2(j) of the said Notification which fact is not disputed by
the Department – Appellant’s core activities i.e. collection and
* Author
[2025] 8 S.C.R. 71
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
preservation of umbilical cord blood stem cells are preventive
in nature, with potential curative applications for life-threatening
diseases – The processing, testing, cryopreservation, and
eventual release for transplantation constitute integral components
of healthcare aimed at future diagnosis, treatment and care –
Further, the appellant is also actively involved in post-transplant
monitoring, clinical trials (including those for spinal cord injuries),
and collaborations with international medical experts – Their services
also support research on conditions like autism and cerebral palsy –
Recognition under the Drugs and Cosmetics Act (post-amendment
dated 17.12.2012) reinforces their status as a legitimate healthcare
provider – The Department contends that the appellant’s services
were exempted only from 17.02.2014 under Entry 2A of the 2014
Notification – However, the insertion of Entry 2A does not curtail
the scope of Serial No.2 under the 2012 Notification – The absence
of express inclusion of cord blood services in earlier notifications
does not alter their essential healthcare nature – Also, the Ministry
of Health and Family Welfare, through a 2013 Office Memorandum
clarified that stem cell banking is a part of “health care services”
and qualifies for exemption – Appellant’s services fall within the
ambit of “Healthcare Services” as defined under the exemption
notification – These services are preventive and curative in nature
and encompass diagnosis, treatment, and care – Further, show
cause notice issued by the Department is time-barred therefore, the
imposition of penalties is not warranted – Moreover, during the course
of investigation, the appellant deposited Rs.40,00,000/- – However,
on facts, imposition of penalties and interest are unsustainable
in law – Impugned order set aside, deposit of Rs.40,00,000/-
made by the appellant to be refunded – Service Tax Rules, 1994.
[Paras 6, 11.2, 11.4, 11.5, 11.8, 12, 13, 13.2, 14]
Finance Act, 1994 – s.73 – Invocation of extended period
of limitation, when not justified – The disputed period is
from 01.07.2012 to 16.02.2014 however, show cause notice
was issued after more than three years only on 28.07.2017,
demanding a sum of over Rs.2 crores towards service tax,
by invoking the extended period of limitation:
Held: U/s.73(1), a show cause notice must ordinarily be issued
within one year from the relevant date – Proviso to s.73(1)
allows an extended period of up to five years only where the
non-payment or short payment of service tax is due to fraud,
collusion, wilful misstatement, suppression of facts, or contravention
72 [2025] 8 S.C.R.
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of the provisions of the Act or Rules, with an intent to evade
payment of service tax – Thus, for the department to invoke the
extended period of limitation, there must be an active and deliberate
act on the part of the assessee to evade payment of tax – Mere
non-payment of tax, without any element of intent or suppression,
is not sufficient to attract the extended limitation period – Services
rendered by the appellant were not exempt from service tax until
the 2012 Notification was issued – Appellant was under a bona
fide belief that the activity of enrolment, collection, processing,
and storage of umbilical cord blood stem cells fell within the scope
of exempted “Healthcare Services” and therefore, was not liable
to service tax – Nothing on record to suggest that the appellant
suppressed any material facts – On the contrary, they responded
promptly to departmental communications and even deposited a
sum of Rs.40,00,000/- during the investigation – In the absence
of fraud, collusion, wilful misstatement, or suppression of facts
with an intent to evade payment of service tax, the invocation of
the extended period of limitation u/s.73 was wholly unwarranted –
Mere non-payment of service tax, by itself, does not justify the
invocation of the extended limitation period – Thus, show cause
notice issued by the department is time-barred. [Paras 9, 9.2-9.4]
Notification/Circular – Notification No. 4/2014-ST dtd.17.02.2014
issued by the Ministry of Finance – Clarificatory in nature –
Operation of notification, prospective – Finance Act, 1994.
[Paras 10.1, 10.2]
Case Law Cited
K.P. Mohammed Salim v. Commissioner of Income-tax [2008] 6
SCR 949 : (2008) 11 SCC 573; Lucknow Development Authority v.
M.K. Gupta [1993] Supp. 3 SCR 615 : (1994) 1 SCC 243; Padmini
Products v. CCE [1989] 3 SCR 873 : (1989) 4 SCC 275; CCE v.
Chemphar Drugs and Liniments [1989] 1 SCR 711 : (1989) 2 SCC
127; Pushpam Pharmaceuticals Co. v. CCE (1995) Supp. 3 SCC
462; CCE v. Punjab Laminates (P) Ltd. [2006] Supp. 5 SCR 264 :
(2006) 7 SCC 431; CCE, Bombay-I & Anr. v. Parle Exports Pvt.
Ltd. [1988] Supp. 3 SCR 933 : (1989) 1 SCC 345 – referred to.
Life Cell International (P) Ltd. v. Union of India and Others (2016)
6 VST-OL 50 – partly overruled.
M. Satyanarayana Raju Charitable Trust v. UOI, 2017 SCC OnLine
Hyd 168 – approved.
[2025] 8 S.C.R. 73
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
Books and Periodicals Cited
Oxford and Black’s Law Dictionaries.
List of Acts
Finance Act, 1994; Service Tax Rules, 1994; Drugs and Cosmetics
Act; Drugs and Cosmetics (3rd Amendment) Rules, 2011; Drugs
and Cosmetics (Amendment) Rules, 2018,
List of Keywords
Services of enrolment, collection, processing, and storage of
umbilical cord blood stem cells; “Healthcare Services”; Stem cell
banking; Stem Cell Banks; Diagnosis, treatment and care; Legitimate
healthcare provider; Essential healthcare nature; Cord blood banks;
Levy of service tax; Exemption from payment of service tax; Disputed
period; Exemption notification; Ministry of Finance; Ministry of Health
and Family Welfare; Interest and penalties; Penalties; Interest;
Imposition of penalties and interest unsustainable; Show cause
notice; Clinical establishments; Services preventive and curative
in nature; Show cause notice time-barred; Deposit to be refunded;
Extended period of limitation; Non-payment or short payment of
service tax; Fraud; Collusion; Wilful misstatement; Suppression
of facts; Intent to evade payment of service tax; Element of intent
or suppression; Notification Clarificatory; Notification prospective;
Clarificatory Office Memorandum; Bona fide belief/conduct; No
material facts suppressed nor concealed; Constant communications
with the Department; CESTAT.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 3816-3817
of 2025
From the Judgment and Order dated 02.08.2024 of the Custom
Excise Service Tax Appellate Tribunal, West Zonal Bench at
Ahmedabad in STA No. 12168 of 2018 & STA No. 11738 of 2016
Appearances for Parties
Advs. for the Appellant:
Tarun Gulati, Sr. Adv., Krishnamohan K., Ms. Dania Nayyar, Pramod
Kandpal, Ms. Meetika Baghel.
Adv. for the Respondent:
N. Venkataraman, ASG.
74 [2025] 8 S.C.R.
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Judgment / Order of the Supreme Court
Judgment
R. Mahadevan, J.
1. These appeals have been preferred by the appellant / assessee
challenging the common Final Order dated 02.08.2024 passed by
the Customs, Excise and Service Tax Appellate Tribunal, West Zonal
Bench at Ahmedabad1, in Service Tax Appeal Nos. 12168/2018
and 11738/2016. By the impugned order, the CESTAT rejected the
appeals filed by the appellant and upheld the orders passed by the
lower authorities. In doing so, it held that the services of enrolment,
collection, processing, and storage of umbilical cord blood stem
cells, provided by the appellant during the period from 01.07.2012
to 16.02.2014, do not fall within the scope of “Healthcare Services”.
Consequently, the appellant was held liable to pay service tax on
the said services along with interest and penalties.
2. The basic facts of the case, as projected by the appellant, are as follows:
2.1. The appellant is a joint venture company of M/s. Stemcyte Inc.,
USA, M/s. Apollo Hospital Enterprises Ltd., and M/s. Cadila
Pharmaceuticals Ltd., established in 2008. It is engaged in the
collection, processing, testing, and storage of umbilical cord
blood units and their therapeutic application. The appellant is
a member of the Association of Stem Cell Banks of India.
2.2. On 27.12.2011, the Ministry of Health and Family Welfare,
Government of India, issued notification No. GSR 899(E)
notifying the Drugs and Cosmetics (3rd Amendment) Rules,
2011. Under these rules, cord blood banks were required to
obtain registration. Part XII-D of the Rules set out detailed
requirements relating to the collection, processing, testing, and
release of umbilical cord blood-derived stem cells.
2.3. Subsequently, the Ministry of Finance, Government of India, issued
Notification No.25/2012–Service Tax dated 20.06.2012, which
provided a consolidated list of services exempt from service tax.
Under Serial No.2 of the said notification, “Healthcare Services”
were exempted. This notification superseded the earlier Notification
1 For short, “CESTAT”
[2025] 8 S.C.R. 75
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
No. 12/2012–Service Tax dated 17.03.2012. Accordingly, with
effect from 01.07.2012, the negative list regime of service tax
was introduced, rendering all services taxable unless specifically
included in the in the negative list or expressly exempted otherwise.
2.4. On 21.09.2012, the Association of Stem Cell Banks of India
submitted a representation to the Ministry of Health and Family
Welfare, Government of India, seeking clarification on whether
the services rendered by stem cell banks qualified as “Healthcare
Services”. In response, the Ministry, after consultation with
the National AIDS Control Organization, issued an Office
Memorandum dated 22.05.2013, clarifying that the services
rendered by stem cell banks are part of “Healthcare Services”
and may be considered for exemption from service tax.
2.5. On 24.10.2013, the appellant obtained Service Tax Registration
No. AALCS7174BSD001 under the category “healthcare
services by clinical establishment, health check-up / diagnosis,
etc.” from the Central Board of Excise and Customs.
2.6. Subsequently, the Deputy Commissioner of Central Excise,
Ahmedabad-III, issued a letter dated 02.12.2013 to the appellant
requiring them to submit documents relating to the services
provided by it. The appellant submitted the requested documents
on 30.12.2013.
2.7. Thereafter, a search was conducted at the appellant’s premises
on 06.01.2014, during which, statements were recorded and a
panchnama was drawn.
2.8. In the meanwhile, the Ministry of Finance issued Notification
No. 4/2014-ST dated 17.02.2014, inserting Entry 2A, which
exempted from service tax the services provided by cord blood
banks by way of preservation of stem cells or any other services
in relation to such preservation.
2.9. Subsequently, the Commissioner issued summons and letters
to the appellant demanding service tax for the period from
01.07.2012 to 16.02.2014. In response, the appellant submitted
replies along with the necessary documents and deposited a
sum of Rs. 40,00,000/-, stating that the payment was made
under protest, as the services provided by it, were exempt
under Notification No.25/2012-ST dated 20.06.2012 under the
heading “Healthcare Services”.
76 [2025] 8 S.C.R.
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2.10. On 26.03.2015, the appellant filed an application seeking
refund of the deposited amount of Rs.40,00,000/-. However, by
communication dated 27.03.2015, the Superintendent of Central
Excise, Ahmedabad-III, refused to refund the said amount.
2.11. Thereafter, the Commissioner issued a show cause notice
dated 08.04.2015 calling upon the appellant to show cause why
their refund claim should not be rejected under Section 11B
of the Central Excise Act, 1944. The appellant filed a written
reply, but the Commissioner passed Order-in-Original No. 108/
Ref/ST/DC/2015-16 dated 31.08.2015, rejecting the refund
claim on the ground that the investigation was still pending.
The Commissioner (Appeals) also dismissed the appellant’s
appeal by Order-in-Appeal dated 28.07.2016. Aggrieved, the
appellant preferred a further appeal before the CESTAT under
Section 86(1) of the Finance Act, 1994.
2.12. During the pendency of the aforesaid appeal, the Commissioner,
CGST & Central Excise, Gandhinagar issued a show cause
notice dated 28.07.2017 demanding service tax of Rs.
2,07,29,576/- along with interest for services rendered between
01.07.2012 and 16.02.2014, and also proposed imposition of
penalties under sections 77(1)(a), 77(1)(d), 77(2) and 78 of
the Finance Act, 1994. The appellant filed a detailed reply.
2.13. Meanwhile, the Ministry of Health and Family Welfare issued
Notification No. GSR 334(E), notifying the Drugs and Cosmetics
(Amendment) Rules, 2018, wherein, stem cell and cell-based
products were classified as ‘Drugs’. The appellant submitted
an additional reply to the show cause notice, on 04.05.2018.
Thereafter, the Commissioner passed Order-in-Original dated
18.05.2018, confirming the demand and penalties. Aggrieved,
the appellant filed a statutory appeal before the CESTAT.
2.14. By a common order dated 02.08.2024, the CESTAT dismissed
both the appeals filed by the appellant and upheld the
Orders-in-Original. The appellant is therefore before this Court
by way of the present appeal.
3. The learned senior counsel for the appellant submitted that the
CESTAT failed to properly consider the various documents, expert
opinions, and submissions placed on record. These included the Office
Memorandum No.X.11035/41/2012-DFQC (Pt.) dated 22.05.2013
[2025] 8 S.C.R. 77
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
issued by the Ministry of Health and Family Welfare, Government of
India, clarifying that the services rendered by the appellant – relating
to enrolment, collection, processing, and storage of umbilical cord
blood stem cells – fall within the ambit of “Healthcare Services”, and
are thus exempt under Serial No.2 of Notification No. 25/2012-ST
dated 20.06.2012. It was further contended that the subsequent
insertion of Entry 2A by Notification No.4/2014-ST dated 17.02.2014
was merely clarificatory in nature and did not imply that the services
were not covered earlier under Entry 2.
3.1. It was submitted that the exemption under Entry 2 is broad and
does not distinguish between types of illnesses based on their
frequency or severity. The CESTAT erred in narrowly interpreting
the term “Healthcare Services” holding that although stem cells
stored and supplied by the appellant are used for treatment of
grave illnesses, these would not qualify as health care services
as they are not used for treatment of regular illnesses.
3.2. It was argued that “Healthcare Services” have always been
exempt under the Finance Act, 1994 and that such exemption
continued under the negative list regime from 01.07.2012.
Referring to Clause 2(t) of Notification No.25/2012-ST, the
learned senior counsel submitted that the expression “any
service” used therein must be interpreted liberally, covering
services for diagnosis, treatment, or care of illness, injury,
deformity, abnormality, or pregnancy. Judicial precedents
including K.P. Mohammed Salim v. Commissioner of Income-
tax2, and Lucknow Development Authority v. M.K. Gupta3, were
relied upon to demonstrate that the word “any” has wide import
and must be read expansively.
3.3. It was further submitted that the CESTAT failed to appreciate
the beneficial nature of the exemption under Notification No.
25/2012-ST. Such exemptions, being in furtherance of public
health, must be interpreted liberally in favour of the assessee.
The later insertion of Entry 2A could not curtail the scope of
Entry 2, as both pertain to the same class of services.
2 (2008) 11 SCC 573
3 (1994) 1 SCC 243
78 [2025] 8 S.C.R.
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3.4. The learned senior counsel further argued that the CESTAT’s
finding – that the appellant’s services are not part of any
recognized system of medicine – is perverse and unsupported
by evidence. This finding merely reiterated the reasoning of
the Order-in-Original dated 18.05.2018 without independently
evaluating the appellant’s submissions.
3.5. It was pointed out that the appellant’s services are regulated
under the Drugs and Cosmetics Act and the 2011 Third
Amendment Rules. Part XII D of these Rules prescribes
conditions for registration and regulation of stem cell banks.
Furthermore, Notification No. 213 dated 04.04.2018 classifies
stem cell-based products as “drugs”, thereby placing the services
within a recognized statutory framework. The appellant, having
obtained all necessary registrations and certifications, acted
under a bona fide belief that their services were exempt.
3.6. The learned senior counsel further contended that the
extended period of limitation invoked by the department was
impermissible. The demand raised after more than three years
from the conclusion of the investigation is barred by limitation.
In the absence of suppression, misstatement, or intent to
evade, the invocation of the extended limitation period was
unjustified.
3.7. It was also submitted that the penalties imposed under Section
78 were unwarranted. Given the appellant’s reasonable and
bona fide belief regarding exemption, their conduct falls within
the protective ambit of section 80 of the Finance Act, 1994.
3.8. In support of the submissions, the learned senior counsel placed
reliance on a compilation of judgments of this Court.
3.9. Accordingly, it was submitted that the appellant is not liable to
pay service tax, interest, or penalties for the disputed period
and hence, the impugned order is liable to be set aside.
4. On the contrary, the learned Additional Solicitor General appearing
for the respondent submitted that there existed an element of mutual
trust and confidence between the department and the appellant
regarding compliance with service tax provisions. Based on such
mutual trust, the appellant was required to maintain statutory records
[2025] 8 S.C.R. 79
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
under the Service Tax Rules. However, the appellant breached this
trust and contravened Section 68 of the Finance Act, 1994, read with
Rule 6 of the Service Tax Rules, 1994, by failing to pay service tax
for the relevant period.
4.1. It was further argued that the services provided by the appellant
cannot be classified as falling within the ambit of “Healthcare
Services by clinical establishments”. Therefore, as per clause
2(t) of Notification No. 25/2012-ST, the activities of enrolment,
collection, processing, and storage of umbilical cord blood stem
cells are not covered under the said notification for exemption.
4.2. It was also submitted that the exemption for the appellant’s
services was specifically introduced only by Notification No.
4/2014-ST dated 17.02.2014 through insertion of Entry 2A.
Hence, during the period from 01.07.2012 to 16.02.2014, the
appellant’s services were neither covered under the Negative
List nor exempted by Notification No. 25/2012-ST and they are
chargeable to service tax.
4.3. The learned counsel further submitted that the appellant had
failed to obtain proper service tax registration for the said
services and also failed to declare and assess the correct value
of taxable services. Consequently, the appellant was rightly held
liable to pay penalties under Sections 77(1)(a), 77(1)(d), 77(2)
and 78 of the Finance Act, 1994.
4.4. Accordingly, the learned counsel submitted that the impugned
order calls for no interference and that the present appeal
deserves to be dismissed.
5. We have considered the rival submissions and carefully perused the
materials placed on record.
6. Admittedly, the appellant is engaged in the business of stem cell
banking services, and has been issued a registration certificate under
the category of “Healthcare Services by clinical establishments”
as per the provisions of the Finance Act, 1994. As per Entry 2 of
Notification No.25/2012-ST dated 20.06.2012, services provided by
clinical establishments in the nature of health care were exempt
from service tax. Subsequently, Notification No.4/2014-ST dated
17.02.2014 introduced Entry 2A, specifically exempting services
provided by cord blood banks for the preservation of stem cells or
80 [2025] 8 S.C.R.
Supreme Court Reports
related services. During investigation, the appellant deposited a
sum of Rs.40,00,000/- with the department under protest. Observing
that the activity of enrolment, collection, processing and storage
of umbilical cord blood stem cells performed by the appellant is a
taxable service during the period from 01.07.2012 to 16.02.2014, show
cause notice dated 28.07.2017 came to be issued to the appellant,
and the same culminated in Order-in-Original dated 18.05.2018, the
operative portion of which reads as follows:
“(i) I confirm the demand of Service Tax amounting
to Rs.2,07,29,576/- (Rupees Two crore seven lakhs
Twenty-nine thousand five hundred and seventy-Six only)
not paid by them, during the period from 01.07.2012 to
16.02.2014 on activity of enrollment, collection, processing
and storage of Umbilical Cord Blood Stem Cells …
(ii) as of Section 73(2) of the Finance Act, 1994 by invoking
the extended, and order it to be recovered from them.
Since an amount of Rs.40,00,000/- (Rupees Forty Lakhs
only) has already been deposited by them, I order it to
be appropriated towards the above Service Tax liability
payable by them against the said demand;
(iii) I order to recover interest at appropriate rate, on the
Service Tax amounting to Rs.2,07,29,576/- (Rupees Two
crore seven lakhs twenty-nine thousand five hundred
and seventy-six only) from them under Section 75 of the
Finance Act, 1994, as amended from time to time.
(iv) I impose penalty of Rs.10,000/- (Rupees Ten thousand
only) upon them under Section 77(1)(a) of the Finance Act,
1994 for their failure to obtain service tax registration for
the said service within the stipulated time frame;
(v) I impose penalty of Rs.10,000/- (Rupees Ten thousand
only) upon them under Section 77(l)(d) of the Finance Act,
1994 for their failure to pay service tax through internet
banking;
(vi) I impose penalty of Rs.10,000/- (Rupees Ten Thousand
Only) upon them under Section 77(2) of the Finance Act,
1994 for their failure to assess their service tax liability
& failure to file prescribed returns in Form ST-3 within
[2025] 8 S.C.R. 81
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
stipulated time frame for the said service under Section
70 of the Finance Act, 1994;
(vii) I impose penalty of Rs.1,03,64,788/- (Rupees One
Crore Three Lakhs Sixty Four Thousand Seven Hundred
and Eighty Eight Only) (Fifty percent of the service tax
demanded) upon them under Section 78 of the Finance
Act, 1994 for non-payment of service tax on account of
misstatement / suppression of facts and contravention
of provisions of the Finance Act, 1994 and Service Tax
Rules, 1994 with intent to evade payment of Service Tax.”
The CESTAT confirmed the demand of service tax, interest and
penalties imposed, and the rejection of refund claim made by the
appellant, by the order impugned herein.
7. Now, the primary dispute involved herein, relates to the period between
01.07.2012 and 16.02.2014 and whether the appellant’s services
during this period fell within the ambit of “Healthcare Services” and
are therefore, eligible for exemption from payment of service tax.
8. The contentions raised by the appellant can be summarised under
two broad grounds: first, that the show cause notice is barred by
limitation; and second, that the services rendered by it fall within the
ambit of “Healthcare Services”.
9. In the present case, the disputed period is from 01.07.2012 to
16.02.2014. However, the show cause notice was issued only on
28.07.2017, demanding a sum of Rs.2,07,29,576/- towards service
tax, by invoking the extended period of limitation. Under section 73(1)
of the Finance Act, 1994, a show cause notice must ordinarily be
issued within one year from the relevant date. The proviso to section
73(1) allows an extended period of up to five years only where the
non-payment or short payment of service tax is due to fraud, collusion,
wilful misstatement, suppression of facts, or contravention of the
provisions of the Act or Rules, with an intent to evade payment of
service tax.
9.1. It is evident from the communication dated 02.12.2013 issued
by the Deputy Commissioner of Central Excise, Ahmedabad-III,
directing the appellant to furnish the documents relating to their
activities, that the department was already aware of the nature
of the appellant’s operations as early as in 2013. Despite such
82 [2025] 8 S.C.R.
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awareness, the department issued the show cause notice after
an inordinate delay, well beyond the ordinary period of limitation,
and sought to justify it by invoking the extended period.
9.2. There is no dispute that the services rendered by the appellant
were not exempt from service tax until Notification No. 25/2012-
ST dated 20.06.2012 was issued. The records reveal that
the appellant was under a bona fide belief that the activity of
enrolment, collection, processing, and storage of umbilical cord
blood stem cells fell within the scope of exempted “Healthcare
Services” and therefore, was not liable to service tax. There
is nothing on record to suggest that the appellant suppressed
any material facts. On the contrary, they responded promptly to
departmental communications and even deposited a sum of Rs.
40,00,000/- during the investigation. There was no allegation or
evidence of fraud, collusion, wilful misstatement, or contravention
of statutory provisions with intent to evade tax.
9.3. It is a settled principle of law that, for the department to invoke
the extended period of limitation, there must be an active and
deliberate act on the part of the assessee to evade payment of
tax. Mere non-payment of tax, without any element of intent or
suppression, is not sufficient to attract the extended limitation
period. In this regard, reference may be made to the following
judgments:
(i) Padmini Products v. CCE4
“12. Shri V. Lakshmi Kumaran, learned counsel for
the appellant drew our attention to the observations of
this Court in CCE v. Chemphar Drugs and Liniments,
Hyderabad [(1989) 2 SCC 127 : 1989 SCC (Tax) 245]
where at p. 131 of the report, this Court observed that
in order to sustain an order of the Tribunal beyond a
period of six months and up to a period of five years
in view of the proviso to sub-section (1) of Section
11-A of the Act, it had to be established that the duty
of excise had not been levied or paid or short-levied
or short-paid, or erroneously refunded by reasons
4 (1989) 4 SCC 275
[2025] 8 S.C.R. 83
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
of either fraud or collusion or wilful misstatement
or suppression of facts or contravention of any
provision of the Act or Rules made thereunder, with
intent to evade payment of duty. It was observed by
this Court that something positive other than mere
inaction or failure on the part of the manufacturer or
producer of conscious or deliberate withholding of
information when the manufacturer knew otherwise,
is required to be established before it is saddled with
any liability beyond the period of six months. Whether
in a particular set of facts and circumstances there
was any fraud or collusion or wilful misstatement or
suppression or contravention of any provision of any
Act, is a question of fact depending upon the facts
and circumstances of a particular case. The Tribunal,
however, had held contrary to the contention of the
appellant. The Tribunal noted that dhoop sticks are
different products from agarbatis even though they
belonged to the same category and the Tribunal was
of the view that these were to be treated differently.
Therefore, the clarification given in the context of the
agarbatis could not be applicable to dhoop sticks etc.
and the Tribunal came to the conclusion that inasmuch
as the appellant had manufactured the goods without
informing the central excise authorities and had
been removing these without payment of duty, these
would have to be taken to attract the mischief of
the provisions of Rule 9(2) and the longer period of
limitation was available. But the Tribunal reduced the
penalty. Counsel for the appellant contended before
us that in view of the trade notices which were referred
to by the Tribunal, there is scope for believing that
agarbatis were entitled to exemption and if that is so,
then there is enough scope for believing that there
was no need of taking out a licence under Rule 174
of the said Rules and also that there was no need of
paying duty at the time of removal of dhoop sticks,
etc. Counsel further submitted that in any event apart
from the fact that no licence had been taken and for
which no licence was required because the whole
84 [2025] 8 S.C.R.
Supreme Court Reports
duty was exempt in view of Notification No.111 of
1978, referred to hereinbefore, and in view of the fact
that there was scope for believing that it was exempt
under Schedule annexed to the first notification i.e.
No.55 of 1975, being handicrafts, the appellant could
not be held to be guilty of the fact that excise duty
had not been paid or short-levied or short-paid or
erroneously refunded because of either any fraud
or collusion or wilful misstatement or suppression of
facts or contravention of any provision of the Act or
Rules made thereunder. These ingredients postulate a
positive act. Failure to pay duty or take out a licence
is not necessarily due to fraud or collusion or wilful
misstatement or suppression of facts or contravention
of any provision of the Act. Suppression of facts is not
failure to disclose the legal consequences of a certain
provision. Shri Ganguly, appearing for the Revenue,
contended before us that the appellant should have
taken out a licence under Rule 174 of the said Rules
because all the goods were not handicrafts and as
such were not exempted under Notification No. 55
of 1975 and therefore, the appellant were obliged to
take out a licence. The failure to take out the licence
and thereafter to take the goods out of the factory
gate without payment of duty was itself sufficient,
according to Shri Ganguly, to infer that the appellant
came within the mischief of Section 11-A of the Act.
We are unable to accept this position canvassed on
behalf of the Revenue. As mentioned hereinbefore,
mere failure or negligence on the part of the producer
or manufacturer either not to take out a licence in
case where there was scope for doubt as to whether
licence was required to be taken out or where there
was scope for doubt whether goods were dutiable
or not, would not attract Section 11-A of the Act. In
the facts and circumstances of this case, there were
materials, as indicated to suggest that there was
scope for confusion and the appellant believing that
the goods came within the purview of the concept of
handicrafts and as such were exempt. If there was
[2025] 8 S.C.R. 85
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
scope for such a belief or opinion, then failure either
to take out a licence or to pay duty on that behalf,
when there was no contrary evidence that the producer
or the manufacturer knew these were excisable or
required to be licensed, would not attract the penal
provisions of Section 11-A of the Act. If the facts are
otherwise, then the position would be different. It is
true that the Tribunal has come to a conclusion that
there was failure in terms of Section 11-A of the Act.
Section 35-L of the Act, inter alia, provides that an
appeal shall lie to this Court from any order passed
by the appellate tribunal relating, among other things,
to the determination of any question having a relation
to the rate of duty of excise or to the value of goods
for purpose of assessment. Therefore, in this appeal,
we have to examine the correctness of the decision
of the Tribunal. For the reasons indicated above, the
Tribunal was in error in applying the provisions of
Section 11-A of the Act. There were no materials from
which it could be inferred or established that the duty
of excise had not been levied or paid or short-levied or
short-paid or erroneously refunded by reason of fraud,
collusion or any wilful misstatement or suppression of
facts, or contravention of any of the provisions of the
Act or of the Rules made thereunder. The Tribunal
in the appellate order has, however, reduced the
penalty to Rs 5000 and had also upheld the order of
the confiscation of the goods. In view of the fact that
the claim of the Revenue is not sustainable beyond a
period of six months on the ground that these dhoop
sticks, etc. were not handicrafts entitled to exemption,
we set aside the order of the Tribunal and remand
the matter to the Tribunal to modify the demand by
confining it to the period of six months prior to issue of
show-cause notice and pass consequential orders in
the appeal on the question of penalty and confiscation.
The appeal is allowed to the extent indicated above
and the matter is, therefore, remanded to the Tribunal
with the aforesaid directions. This appeal is disposed
of accordingly.”
86 [2025] 8 S.C.R.
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(ii) CCE v. Chemphar Drugs and Liniments5
“7. The respondent filed an appeal before the Tribunal.
The Tribunal considered the matter and noted that
the appellant’s case was that the demand for duty
for the period beyond six months was time-barred;
and the respondent’s case was that the demand
for the period beyond 6 months from the receipt of
show-cause notice, was time-barred inasmuch as
there was no suppression or misstatement of facts
by the appellant with a view to evade payment of
duty. In support of its claim the respondent produced
classification list approved by the authorities during
the period 1978-79, and also produced extracts from
the survey register showing that the officers had
been visiting its factory from time to time and also
taking note of the previous goods manufactured by
the respondent. The plea of the Revenue was that
there was suppression and/or mis-declaration and/or
wrong information furnished in the declaration itself.
The Tribunal noted the facts as follows:
“We observe it is not denied by the Revenue that the
appellants had been submitting their classification
lists from time to time showing the various products
manufactured by them including those falling under
T.I. 14-E and 68 also these containing alcohol. The
officers who visited the factory as seen from the survey
register at the factory also took note of the various
products being manufactured by the appellants. It
cannot be said that the appellants had held back any
information in regard to the range and the nature of
the goods manufactured by them. The appellants
have maintained that the value of the exempted goods
under T.I. 68 and also value of medicines containing
alcohol, according to their interpretation, were not
required to be included for the purpose of reckoning
of the total excisable goods cleared by them. There
5 (1989) 2 SCC 127
[2025] 8 S.C.R. 87
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
is nothing on record to show that the appellants non-
bona fidely held back information about the total value
of the goods cleared by them with a view to evade
payment of duty. Their explanation that it was only
on the basis of their interpretation that the value of
the exempted goods were not required to be included
that they did not include the value of the exempted
goods which they manufactured at the relevant time
and falling under T.I. 68 is acceptable in the facts of
that case. The departmental authorities were in full
knowledge of the facts about manufacture of all the
goods manufactured by them when the declaration
was filed by the appellants. That they did not include
the value of the product other than those falling under
T.I. 14-E manufactured by the appellants has to be
taken to be within the knowledge of the authorities.
They could have taken corrective action in time. We
therefore find there was no warrant in invoking longer
time-limit beyond six months available for raising the
demand. So far as the demand for the period within
six months reckoned from the date of receipt of the
show-cause notice is concerned, we observe that the
appellants’ case is that value of the goods under T.I.
68 was not required to be included but the Revenue’s
plea is that only value of the specified goods under
Notifications Nos. 71/78 and 80/80 was not required
to be excluded.”
8. On the aforesaid view the Tribunal came to the
conclusion that the demand raised on this for a period
beyond 6 months was not maintainable.
9. Aggrieved thereby, the Revenue has come up in
appeal to this Court. In our opinion, the order of the
Tribunal must be sustained. In order to make the
demand for duty sustainable beyond a period of six
months and up to a period of 5 years in view of the
proviso to sub-section (1) of Section 11-A of the Act,
it has to be established that the duty of excise has
not been levied or paid or short-levied or short-paid,
or erroneously refunded by reasons of either fraud
88 [2025] 8 S.C.R.
Supreme Court Reports
or collusion or wilful misstatement or suppression
of facts or contravention of any provision of the
Act or Rules made thereunder, with intent to evade
payment of duty. Something positive other than mere
inaction or failure on the part of the manufacturer or
producer or conscious or deliberate withholding of
information when the manufacturer knew otherwise, is
required before it is saddled with any liability, before
(sic beyond) the period of six months. Whether in
a particular set of facts and circumstances there
was any fraud or collusion or wilful misstatement or
suppression or contravention of any provision of any
Act, is a question of fact depending upon the facts
and circumstances of a particular case. The Tribunal
came to the conclusion that the facts referred to
hereinbefore do not warrant any inference of fraud.
The assessee declared the goods on the basis of
their belief of the interpretation of the provisions of
the law that the exempted goods were not required
to be included and these did not include the value
of the exempted goods which they manufactured at
the relevant time. The Tribunal found that explanation
was plausible, and also noted that the department
had full knowledge of the facts about manufacture of
all the goods manufactured by the respondent when
the declaration was filed by the respondent. The
respondent did not include the value of the product
other than those falling under T.I. 14-E manufactured
by the respondent and this was in the knowledge,
according to the Tribunal, of the authorities. These
findings of the Tribunal have not been challenged
before us or before the Tribunal itself as being based
on no evidence.”
(iii) Pushpam Pharmaceuticals Co. v. CCE6
“4. Section 11-A empowers the Department to reopen
proceedings if the levy has been short-levied or not
6 (1995) Supp. 3 SCC 462
[2025] 8 S.C.R. 89
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
levied within six months from the relevant date. But
the proviso carves out an exception and permits the
authority to exercise this power within five years from
the relevant date in the circumstances mentioned in
the proviso, one of it being suppression of facts. The
meaning of the word both in law and even otherwise
is well known. In normal understanding it is not
different that what is explained in various dictionaries
unless of course the context in which it has been
used indicates otherwise. A perusal of the proviso
indicates that it has been used in company of such
strong words as fraud, collusion or wilful default. Infact
it is the mildest expression used in the proviso. Yet
the surroundings in which it has been used it has to
be construed strictly. It does not mean any omission.
The act must be deliberate. In taxation, it can have
only one meaning that the correct information was
not disclosed deliberately to escape from payment
of duty. Where facts are known to both the parties
the omission by one to do what he might have done
and not that he must have done, does not render it
suppression.”
(iv) CCE v. Punjab Laminates (P) Ltd.7
“12. At no point of time, the Revenue doubted the
correctness or otherwise of the manufacturing process
or the ingredients disclosed by the respondent. The
stand of the respondent that the industry as such
had adopted the same manufacturing process and
had been extended the benefit of the exemption
notification of 1989 has not been called in question.
If the stand of the manufacturer is correct, there was
no reason as to why it should be singled out.
13. This Court decided Bakelite Hylam Ltd. [(1997)
10 SCC 350] on 10-3-1997. The impugned notice
was issued only on 9-12-1997 evidently relying on
or on the basis thereof.
7 (2006) 7 SCC 431
90 [2025] 8 S.C.R.
Supreme Court Reports
14. It is not a case where the respondents had not
disclosed the activities of manufacturing products
carried out by them by declaration or otherwise. They
responded to each and every query of the appellant,
as and when called upon to do so. The authorities of
the appellant must have verified the said disclosures.
At least they are expected to do so. The disclosure
made by the respondent was acceptable to them.
Their bona fides were never questioned.
15. The applicability of the extended period of
limitation is, therefore, required to be considered in
the aforementioned context. The proviso, it is trite,
provides for an exception. It is not the rule. A case,
therefore, has to be made out for attracting the same.
16. In Primella Sanitary Products (P) Ltd. v. CCE
[(2005) 10 SCC 644 : (2005) 184 ELT 117] a three-
Judge Bench of this Court was dealing with a
case where a concession was made by a counsel
appearing on behalf of the Revenue. The Court
opined that although the item was put under the right
classification list but they had not been permitted to
take a different stand stating: (SCC p. 648, para 13)
“As the matter of classification has proceeded on a
matter of concession of facts we do not allow the
appellants to withdraw from that concession. They
are now not permitted to argue on the question of
classification.”
17. In Pahwa Chemicals (P) Ltd. v. CCE [(2005) 189
ELT 257] this Court held:
“The appellants have all along claimed that merely
because they were affixing the label of a foreign party,
they did not lose the benefit of Notification No. 175/86-
CE as amended by Notification No. 1/93-CE The view
taken by the appellants had, in some cases, been
approved by the Tribunal which had held that mere
use of the name of a foreign party did not disentitle a
party from getting benefit of the notifications. It is only
after larger Bench held in Namtech Systems Ltd. v.
[2025] 8 S.C.R. 91
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
CCE [(2000) 115 ELT 238 (cegat)] that the position
has become clear. It is settled law that mere failure
to declare does not amount to wilful misdeclaration
or wilful suppression. There must be some positive
act on the part of the party to establish either wilful
misdeclaration or wilful suppression. When all facts
are before the Department and a party in the belief
that affixing of a label makes no difference does
not make a declaration, then there would be no
wilful misdeclaration or wilful suppression. If the
Department felt that the party was not entitled to the
benefit of the notification, it was for the Department
to immediately take up the contention that the benefit
of the notification was lost.”
18. Keeping in view the peculiar facts and
circumstances of this case, we are of the opinion that
it is not a fit case where this Court should interfere.
The appeal is, therefore, dismissed. The parties shall,
however, pay and bear their own costs.”
9.4. Therefore, in the absence of fraud, collusion, wilful misstatement,
or suppression of facts with an intent to evade payment of
service tax, the invocation of the extended period of limitation
under Section 73 of the Finance Act, 1994 is wholly unwarranted.
Mere non-payment of service tax, by itself, does not justify
the invocation of the extended limitation period. Accordingly,
the show cause notice issued by the department is clearly
time-barred. On this ground alone, the impugned order deserves
to be set aside.
10. We next come to the question of the period between 01.07.2012 to
17.02.2014, for the purpose of exemption from the levy of service
tax. Undoubtedly, the services provided by cord blood banks,
including preservation of stem cells or any other services related
to such preservation, are exempt from service tax, under Entry 2A
of Notification No. 4/2014-ST dated 17.02.2014. According to the
appellant, the said notification is clarificatory in nature and therefore,
ought to be applied retrospectively with effect from 01.07.2012.
10.1. In the present case, since we have rendered a finding that stem
cell banking services constitute a healthcare service, which was
92 [2025] 8 S.C.R.
Supreme Court Reports
specifically so stated by the notification dated 17.02.2014, the
said notification must necessarily be held to be illustrative and
clarificatory to that extent. This clarification/specific exemption,
coupled with our finding that stem cell banking services fall
within the ambit of “Healthcare Services”, must necessarily
inure to the benefit of the appellant. This is not to say that the
notification dated 17.02.2014 is retrospective in operation. In
other words, the said notification cannot be applied to cases
where assessments have already been made and service tax
has been paid without demur. However, in respect of pending
claims, ongoing assessments, and existing disputes that are
sub judice, it can be said that the notification dated 17.02.2014
is in the nature of a clarification to the earlier notification dated
01.07.2012. At this juncture, it is pertinent to mention that we
have also noted and perused the judgment of the Madras
High Court in Life Cell International (P) Ltd. v. Union of India
and others8, wherein the nature of the 2014 notification was
considered and it was held that the amendment introduced by
Notification No. 4/2014-ST cannot be construed as clarificatory
and hence, does not have retrospective effect. However,
the Court explicitly stated that it did not render any finding
on whether the activities of the petitioner therein, fell within
the ambit of “Healthcare Services” so as to qualify for the
exemption. For better appreciation, the relevant paragraphs
of the said decision are extracted below:
“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 relation to such preservation”.
Therefore, the intention of the legislature is clear
that bringing the services provided by cord blood
banks by way of preservation of stem cells under
the exemption Notification in order to give exemption
of service tax, however, it has not been specifically
8 (2016) 6 VST-OL 50
[2025] 8 S.C.R. 93
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
mentioned that the said 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 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 fact, the
petitioner has also paid Rs. 1 Crores each towards
service tax with effect from 01.07.2012. Therefore,
from 17.2.2014 onwards, by virtue of amendment,
the said services were exempted from levy of service
tax, which by itself explicit that the said amendment
is extending remedial effect to the cord blood banks
from being levied with service tax. Therefore, having
regard to the same, this Court is of the considered
view that the so-called amendment is only a remedial
nature and it can 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 the petitioner are
concerned, I am of the view that those decisions will no
way helpful to the case of the petitioner. In “WPIL Ltd.,
case (cited supra), the Hon’ble Supreme Court, 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
94 [2025] 8 S.C.R.
Supreme Court Reports
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 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, giving exemption 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.
26. In “Golden Coin case (cited supra), the expression
“income” in the statute appearing in Section 2(24)
of the Act has been clarified to mean that it is an
inclusive definition and includes losses, that is,
negative profit. This has been held so by the Apex
Court on 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 gains” refers to positive income whereas
“losses” represents negative profit or in other words
minus income. Considering this aspect of the matter
in greater detail, the Apex Court overruled the view
expressed by the two learned Judges in “Virtual Soft
Systems [(2007) 9 SCC 665: (2007) 289 ITR 83].
The Apex Court adopted the proposition of law that
though retrospectivity is not to be presumed and
[2025] 8 S.C.R. 95
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
rather there is presumption against retrospectivity,
it 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 and 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 and in the absence of a retrospective
operation having been expressly given, the courts
may be called upon to construe the provisions and
answer the question whether the legislature had
sufficiently expressed that intention giving the statute
retrospectivity. When this ratio is applied to the case
on hand, I am of the view that the language used in
the so-called amendment is clear that the exemption
is given towards the services provided by cord blood
banks by way of preservation of stem cells and it
cannot be construed that such exemption shall have
retrospective effect.
27. For the foregoing discussion, I am of the
considered opinion that the so-called amendment
cannot be viewed as a clarificatory one and therefore,
this Court is unable to countenance the argument
advanced by the learned senior counsel that the
so-called amendment is only a clarificatory nature.
28. Accordingly, the Writ Petition fails and it is
dismissed. No costs. Consequently, connected MPs
are closed. However, it is once again made clear that
this 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.”
10.2. It is a well-settled principle of law that unless a notification or
circular explicitly provides for retrospective operation, it must
be construed as prospective. Admittedly, the said notification
96 [2025] 8 S.C.R.
Supreme Court Reports
does not contain any express provision indicating retrospective
effect. Therefore, it can only be applied prospectively. However,
for the reasons stated in the preceding paragraphs, while
we concur with the decision of the Madras High Court to the
extent that Notification No. 4/2014-ST cannot be considered
to be retrospective, we are of the considered opinion that
the said amendment is indeed clarificatory. To this limited
extent, the judgment in Life Cell International (P) Ltd. (supra)
stands overruled in principle. Accordingly, the impugned order
overlooks the comprehensive scope of the exemption and is
therefore, liable to be set aside.
11. The next aspect to be considered herein is, whether the services
rendered by the appellant – relating to enrolment, collection,
processing, and storage of umbilical cord blood stem cells – fall
within the definition of “Healthcare Services”, so as to qualify for
exemption from service tax during the disputed period.
11.1. Notification No.25/2012-ST dated 20.06.2012 issued by the
Ministry of Finance, provided a consolidated list of services
exempt from service tax. Under Serial No.2, “Healthcare
Services” are exempt and the same reads as under:
“2. Healthcare services by a clinical establishment,
an authorized medical practitioner or para-medics”.
Clause 2(t) of the said Notification defines “health care
services” broadly covering diagnosis, treatment, or care for
illness, injury, deformity, abnormality, or pregnancy in any
recognised system of medicines in India. The said clause
reads as under:
““health care services” means any service by way
of diagnosis or treatment or care for illness, injury,
deformity, abnormality or pregnancy in any recognised
system of medicines in India and includes services
by way of transportation of the patient to and from
a clinical establishment, but does not include hair
transplant or cosmetic or plastic surgery, except when
undertaken to restore or to reconstruct anatomy or
functions of body affected due to congenital defects,
developmental abnormalities, injury or trauma.”
[2025] 8 S.C.R. 97
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
It is clear that the use of the phrase “any service” gives an
expansive scope to the term. Though the terms “diagnosis”,
“treatment”, and “care” are not specifically defined under the
Finance Act, 1994, their ordinary meanings (as per Oxford and
Black’s Law Dictionaries) include acts like identifying illness
causes, curing diseases or injuries, and ensuring well-being
or preventive healthcare.
11.2. The appellant qualifies as a clinical establishment under
clause 2(j) of the Notification No.25/2012-ST, which fact
is not disputed by the Department. The appellant’s core
activities – collection and preservation of umbilical cord blood
(UCB) stem cells – are preventive in nature, with potential
curative applications for life-threatening diseases. The
processing, testing, cryopreservation, and eventual release for
transplantation constitute integral components of healthcare
aimed at future diagnosis, treatment, and care.
11.3. The appellant has submitted various materials – brochures,
laboratory processes, transplant coordination protocols, clinical
trials, and scientific articles – demonstrating that their services
include not only storage but also vital diagnostic and therapeutic
support. Stem cell transplantation depends on extensive
matching and testing conducted by the appellant. Doctors,
who have utilised their services have certified the critical role
played by the appellant in treating blood-related disorders.
11.4. Further, the appellant is actively involved in post-transplant
monitoring, clinical trials (including those for spinal cord
injuries), and collaborations with international medical experts.
Their services also support research on conditions like autism
and cerebral palsy. Recognition under the Drugs and Cosmetics
Act (post-amendment dated 17.12.2012) reinforces their status
as a legitimate healthcare provider.
11.5. The Department contends that the appellant’s services were
exempted only from 17.02.2014 under Entry 2A of Notification
No. 4/2014-ST. However, the insertion of Entry 2A does not
curtail the scope of Serial No.2 under Notification No. 25/2012-
ST. The absence of express inclusion of cord blood services
in earlier notifications does not alter their essential healthcare
98 [2025] 8 S.C.R.
Supreme Court Reports
nature. Therefore, the appellant’s services are well within the
ambit of “Healthcare Services”.
11.6. The Andhra Pradesh High Court in M. Satyanarayana Raju
Charitable Trust v. UOI9, interpreted “Healthcare Services” to
include preventive services. Being a beneficial exemption, the
provision must be liberally construed. The following paragraphs
of the said judgment is pertinent:
“18. Where the second respondent appears to have
gone wrong is that the second respondent has
taken the services provided by the petitioner for the
wellbeing of an individual, as something out of the
purview of the diagnosis or treatment. The second
respondent has fallen into an error in thinking so,
due to a fundamental misconception that is normally
prevalent in society. While allopathic system of
medicine is only for diagnosis and treatment of illness,
many of the indigenous system of medicines, seek
to prevent rather than prescribe.
…
20. Therefore, an exemption notification, which is
understood by the respondents to confer a benefit
upon the clinical establishments, cannot be made
inapplicable to a holistic health care institution such as
the petitioner herein, as the same would tantamount
to killing our indigenous system of health and well
being. A system of medicine which focused mainly on
healthy living and not merely a prolonged existence
cannot be denied the benefit of the exemption
notification on the basis of a misconception that a
clinical establishment is one that would treat people
after they fall ill and not one which will prevent people
from falling ill.”
11.7. In CCE, Bombay-I & Anr. vs. Parle Exports Pvt. Ltd.10, this
Court held that an exemption notification has statutory force
9 2017 SCC OnLine Hyd 168
10 (1989) 1 SCC 345
[2025] 8 S.C.R. 99
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
equivalent to that of the Act. The relevant paragraphs are
extracted as under:
“17. ……………. The expressions in the Schedule
and in the notification for exemption should be
understood by the language employed therein
bearing in mind the context in which the expressions
occur. The words used in the provision, imposing
taxes or granting exemption should be understood
in the same way in which these are understood in
ordinary parlance in the area in which the law is
in force or by the people who ordinarily deal with
them. It is, however, necessary to bear in mind
certain principles. The notification in this case was
issued under Rule 8 of the Central Excise Rules and
should be read along with the Act. The notification
must be read as a whole in the context of the other
relevant provisions. When a notification is issued
in accordance with power conferred by the statute,
it has statutory force and validity and, therefore,
the exemption under the notification is as if it were
contained in the Act itself.
……………….
While interpreting an exemption clause, liberal
interpretation should be imparted to the language
thereof, provided no violence is done to the language
employed. It must, however, be borne in mind that
absurd results of construction should be avoided.
18. In Hindustan Aluminium Corpn. Ltd. v. State of
U.P. [(1981) 3 SCC 578 : 1981 SCC (Tax) 280 :
(1982) 1 SCR 129] this Court emphasised that
the notification should not only be confined to its
grammatical or ordinary parlance but it should also
be construed in the light of the context. This Court
reiterated that the expression should be construed
in a manner in which similar expression have been
employed by those who framed relevant notification.
The court emphasised the need to derive the intent
from a contextual scheme. In this case, therefore,
100 [2025] 8 S.C.R.
Supreme Court Reports
it is necessary to endeavour to find out the true
intent of the expressions “food products and food
preparations” having regard to the object and the
purpose for which the exemption is granted bearing
in mind the context and also taking note of the literal
or common parlance meaning by those who deal
with those goods, of course bearing in mind, that in
case of doubt only it should be resolved in favour
of the assessee or the dealer avoiding, however, an
absurd meaning. Bearing the aforesaid principles in
mind, in our opinion, the revenue is right that the non-
alcoholic beverage bases in India cannot be treated
or understood as new “nutritive material absorbed
or taken into the body of an organism which serves
for the purpose of growth, work or repair and for the
maintenance of the vital process” and an average
Indian will not treat non-alcoholic beverage bases
as food products or food preparations in that light.”
Additionally, in Advance Ruling No. KAR ADRG 24/2020, the
Karnataka Authority for Advance Ruling held that stem cell
donor - related services are exempt as healthcare services.
11.8. Notably, the Ministry of Health and Family Welfare, through an
Office Memorandum dated 22.05.2013 clarified in consultation
with the National AIDS control Organization that stem cell
banking is a part of “health care services” and qualifies for
exemption. The said O.M. is reproduced below, for the sake
of reference:
X-11035/41/2012-DFQC (Pt)
Government of India
Ministry of Health & Family Welfare
Department of Health and Family Welfare
(DFQC Section)
Nirman Bhawan, New Delhi
Dated the 22 May, 2013
OFFICE MEMORANDUM
Subject: Service Tax Exemption to Stem Cell
Banks – Regarding.
[2025] 8 S.C.R. 101
M/s Stemcyte India Therapeutics Pvt. Ltd. v. Commissioner of Central
Excise and Service Tax, Ahmedabad - III
The undersigned is directed to refer to representations
dated 24.07.2012, 21.09.2012, 27.02.2013,
08.03.2013 and 20.03.2013 of Association of Stem
Cell Banks of India on the subject cited above and to
say that this Department has examined the matter in
consultation with National Aids Control Organization,
Department of Aids Control, Ministry of Health and
Family Welfare. In this connection, this Department
recommends that the services rendered by the Stem
Cell Banks are part of healthcare services and hence
they may be considered for service tax exemption.
2. This issues with the approval of the Secretary
(Health and Family Welfare).
(Sudhir Kumar)
Under Secretary to the
Government of India
Telefax: 23062419
The Secretary,
Department of Revenue,
Ministry of Finance,
North Block, New Delhi.
12. Thus, it is evident that the appellant’s services fall within the ambit
of “Healthcare Services” as defined under the exemption notification.
These services are preventive and curative in nature and encompass
diagnosis, treatment, and care.
13. As regards the imposition of penalties, it is evident that the appellant
neither suppressed nor concealed any material facts from the
Department. On the contrary, they were in constant communications
with the Department, seeking clarifications on whether their services
were exempt from the levy of service tax. As already held by us,
the show cause notice issued by the Department is time-barred.
Therefore, the imposition of penalties is not warranted.
13.1. Further, there is nothing on record to indicate any intent on
the part of the appellant to evade payment of service tax.
All relevant information and documents were duly disclosed
and furnished to the Department. The appellant acted under
102 [2025] 8 S.C.R.
Supreme Court Reports
a bona fide belief that their activities were covered under
Entry 2 of the Exemption Notification dated 20.06.2012.
The records substantiate that the appellant had addressed
multiple representations – dated 24.07.2012, 21.09.2012,
27.02.2013, 08.03.2013 and 20.03.2013 to the Ministry,
seeking clarifications on the applicability of the exemption. Their
consistent engagement with the authorities further reinforces
their bona fide conduct.
13.2. Moreover, during the course of investigation, the appellant
deposited a sum of Rs. 40,00,000/- on 30.03.2014. It is a well
settled legal position that penal provisions are meant to deter
deliberate contravention of statutory provisions and are not
intended to penalize bona fide taxpayers. In this context, the
imposition of penalties and interest appears arbitrary, unjust,
and unsustainable in law.
14. For the foregoing reasons, the impugned order is set aside in its
entirety. Accordingly, these appeals stand allowed. The deposit of Rs.
40,00,000/- made by the appellant shall be refunded to them within
a period of four weeks from the date of receipt of this judgment. No
costs. Connected miscellaneous application(s), if any, shall stand
closed.
Result of the case: Appeals allowed.
†
Headnotes prepared by: Divya Pandey
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