M/S. Stemcyte India Therapeutics Pvt Ltd vs. C.C.E. And St, Ahmedabad - Iii

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REPORTABLE
2025 INSC 841
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 3816-3817 OF 2025
M/S. STEMCYTE INDIA THERAPEUTICS
PVT. LTD. ... APPELLANT
VERSUS
COMMISSIONER OF CENTRAL EXCISE AND
SERVICE TAX, AHMEDABAD - III ... RESPONDENT
J U D G M E N T
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
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Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad , 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
Signature Not Verified
Digitally signed by
CHANDRESH
Date: 2025.07.14
18:38:51 IST
Reason:
16.02.2014, do not fall within the scope of “Healthcare Services”.
1
For short, “CESTAT”

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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, Ministry
the of Health and Family
Welfare, Government of India, issued notification No.
rd
GSR 899(E) notifying the Drugs and Cosmetics (3
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
derived
cord blood- 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 No. 12/2012–Service Tax dated 17.03.2012.

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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.

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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”.
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

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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

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No.X.11035/41/2012-DFQC (Pt.) dated 22.05.2013 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

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2
precedents including K.P. Mohammed Salim v. Commissioner of Income-tax ,
3
and Lucknow Development Authority v. M.K. Gupta , 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.
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.
2
2008 (11) SCC 573
3
(1994) 1 SCC 243

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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 under the Service Tax Rules. However,
the appellant breached this trust and contravened Section 68 of the Finance Act,

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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.

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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 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

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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
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.

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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 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.

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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:
4
(i) Padmini Products v. CCE
“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
4
(1989) 4 SCC 275

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established that the duty of excise had not been levied or paid or short-levied or
short-paid, or erroneously refunded by reasons 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 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

15
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 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.”

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5
(ii) CCE v. Chemphar Drugs and Liniments
“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 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
5
(1989) 2 SCC 127

17
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 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.”
6
(iii) Pushpam Pharmaceuticals Co. v. CCE  
“4. Section 11-A empowers the Department to reopen proceedings if the levy
has been short-levied or not 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
6
1995 Supp (3) SCC 462

18
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.”
7
(iv) CCE v. Punjab Laminates (P) Ltd.
“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.
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
7
(2006) 7 SCC 431

19
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. 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,

20
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 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

21
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
8
Court in Life Cell International (P) Ltd. v. Union of India and others , 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 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
8
(2016) 6 VST-OL 50

22
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 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 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

23
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 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.

24
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.”
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

25
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.

26
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 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
9
Trust v. UOI , 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.”
9
2017 SCC OnLine Hyd 168

27
10
11.7. In CCE, Bombay-I & Anr. vs. Parle Exports Pvt. Ltd. , this Court held
that an exemption notification has statutory force 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, 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
10
(1989) 1 SCC 345

28
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.
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,

29
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 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

30
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.
…………………………… J.
[J.B. Pardiwala ]
…………………………… J.
[R. Mahadevan ]
New Delhi;
July 14, 2025