Stem Cell Banking Services Qualify As "Healthcare Services" In Service Tax Exemption Notification : Supreme Court

The Supreme Court held that stem cell banking services, including enrolment, collection, processing, and storage of umbilical cord blood stem cells, constitute “Healthcare Services” which were exempted from service tax as per the notifications issued by the Ministry of Finance in 2012 and 2014 under the Finance Act, 1994.

Holding so, a bench comprising Justice JB Pardiwala and Justice R Mahadevan set aside the assessment orders issued against M/s Stemcyte India Therapeutics Ltd for over Rs 2 crores as service tax for the period from 01.07.2012 to 16.02.2014.

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.

The Supreme Court held that the activities carried out by the appellant were covered under these notifications.

Clause 2(t) of the 2012 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.”

Based on this definition clause, the Court observed that 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.

Reference was made to the judgment of the Andhra Pradesh High Court in M. Satyanarayana Raju Charitable Trust v. UOI, which interpreted “Healthcare Services” to include preventive services.

Further, the appellant was 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) reinforced their status as a legitimate healthcare provider, the Court noted.

The Department contended that the appellant's services were exempted only from 17.02.2014 under Entry 2A of Notification No. 4/2014-ST. However, the Court said that 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 Court held the appellant's services are well within the ambit of “Healthcare Services”

The Court also noted that 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.

"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," observed the judgment authored by Justice Mahadevan.

Case : M/S. STEMCYTE INDIA THERAPEUTICS PVT. LTD vs COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, AHMEDABAD - III 

Citation : 2025 LiveLaw (SC) 707

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