Commissioner of Sales Tax, U.P. versus Dr. Sukh Deo

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710

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COMMISSIONER OF SALES TAX, U.P. A

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v.

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DR. SUKH DEO

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1fu1:u.11 I 9, 1968

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[J. C. SJ!AH .INO v. RA:vtASWAMl, JJ.]

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U.P. Sale.r Tax Act 1948-Norification No. S.T. 3504/ X, dated 1\1G}' 10, 1956 issued undr.r powrr given by s. 3A of the Act-Sin1:le point tax pa,vable on sale by ntanufacture of medicines and pharmaceuticals-.\f edicines dispensed by 1nedical oractition. .. ~r to his patients--Such dispensing lvhe1lzcr 'n1a11ufacturc' ll'ithin meaning of 11otificatio11-Whl'ther taxable. '[be respondent was a n1cdic;1J practitioner in Utrar Pradesh and maintained a dispensary front "'hich medicines were issued to his patients according to his prcscdptions. According to notific;ition No. s:r. 504/X, dated May 10, 1956 issued under. s. 3A of the U.P. Sales Tax Act, 1948, tax in re;pect of sale of medicines and pharmaceuticals manufactured in the State \·as pJyable at single point on the sale effected hy the manufacturer. The Sales Tax Officer held that dispensin of medicines wa'i 'manufacture' \l."ithin the m<~aning of the aforesaid notification and ac;.se;sed the r"'Jl<>ndcnt to sales tax for the year 1956-57 on the turnover of medicines dispeased. The order was confirmed hy the appellate and re.isional authorities, but the High Court decided in favour of the rcspondcnL The State appealed.

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1-iELD : \Vhcn 3.\ precribed b}' a medical pracunoner, a mixture of different drugs is prepared by the medical practitioner or·by his employees · specially for the use of a patient in the treatment of an ailment or discon1fort diagnosed by the medical practitioner by his professional skill, and \'hich mixture is normally incap1ble of being passed from hand to hand as a commercial cornn1odity, the medical practitioner supplying the medicines cannot be .said to be a manufacturer of the mixture and the mixture cannot be said to he manufactured \'ithin the meaning of the notification. [712 G-H]

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In the absence of clearer phrascolo!,T)' the Court would not in a taxing provi.-.ion be "'illing to give an inteTprctation whereby a rriedical practitioner supplying to hi_., paticntc; medicines and pharmaceutical prcpal'3tions separately is not liable to tax, hut \vhcn under bis direction they arc mixed hy hi<.; employees for the special use of a patient under his treatment and to achieve a specific purpose, the turnover from the resultant mixture is taxable. [713 DJ

B

C

D

E

F

G

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CIVIL APPELLATE Jt:IUSDICTIO'.'t: Civil Appeal No. 2458 of 1966.

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Appeal by special leave from the judgment and decree dated April I, 1963 of the Allahabad High Coun in Sales-tax Reference No. 391 of 1959.

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H

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C. B. Agarwala and 0. P. Rana, for the appellant. • J. P. Goyal and Sobhag Mal Jain, for the respondent.

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••

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SALE. TAX COMMR. V. SVKH DEO (Shah, J.)

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711

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A The Judgment of the Court was delivered by

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Shah, J. The Judge (Revisions) Sales Tax, U.P., Lucknow, referred the following question to the High Court of Allahabad [or opinion : '

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"Whether the preparation of medicines on prescrip- B tions of the applicant amounted to a manufacture of "medicines and pharmaceutical preparations" within the meaning of notification No. S.T. 3504/X dated 10th May, 1956, and whether the applicant was assessable to tax on the turnover of the medicines so dispensed ?"

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The High Court held that the respondent was not a manufacc turer of medicines and pharmaceutical preparations within the meaning of the notification. Against the answer recorded by the High Court, the Commissioner of Sales Tax, U.P., has appealed to this Court with special leave.

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The respondent is a medical practitioner and in the performance of his professional duties he examines patients, advises D them and prescribes medicines which are issued ~rom his dispensary. The Sales Tax Officer being of the view that the! dispensing of medicines, according to the prescriptions issued by the respondent, amounted to manufacture of medicines within the meaning of the notification No. S.T. 3504/X dated May 10, 1956, assessed the respondent to pay tax on a turnover of Rs. 12,943 for E the year 19 5 6-5 7. The order was confirmed in appeal by the Judge (Appeals) and was further confirmed by the Judge (Revisions) Sales Tax.

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F

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The sole question which falls to be determined in this appeal is whether by virtue of the notification, the respondent is exempt from liability to pay tax.

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Section 3 of the1 U.P. Sales Tax Act, 1948, makes every dealer liable to pay in each assessment year a tax at a certain rate on the turnover. Section 3A provides :

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"Notwithstanding anything contained in section '.'.\ the State Government may .... declare that the turnG over in respect of any goods .... shall not be liable to tax except at such single point in the series of sale.~ by successive dealers as the State Government may specify."

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On May 10, 1965, the Governor of Uttar Pradesh issued a notification No. S.T. 3504/X that-

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H

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"'ln exercise of the powers conferred by section 3A

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of the U.P. Sales Tax Act, 1948, as amended from time

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• to time, and in supersession of all the previous notifica-

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[1969] I SCR

712

SCPRn!l: COCRT REPORTS

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<

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lions on the subject, the Governor of Uttar Pradesh is hereby pleased to declare that with effect from May 8, 1956, the turnover m respect of medicines and pharmaceutical preparations shall not be liable to tax except-

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( a) in the case of medicines and pharmaceutical preparations imponed from outside Uttar Pradesh, at the point of sale by the importer. and (b) in the case of medicines and phannaceutical prepar~tions manufactured, in Uttar Pradesh, at the pomt of sale by the manufacturer; And the Governor is further pleased to declare that such turnover shall with effect from the said date be taxed at the rate of .... "

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The respondent is not an m1portcr of medicines and pharmaceutical preparations from outside Uttar Pradesh. That ls common ground. The Revenue auihoritics, however, held that when in his dispensary medicines and pharmaceutical preparations as prescribed by him were mixed, the process of mixing resulted in "manufacture" of medicines by him as a "manufacturer". The expression "manufacture" has in ordinary acceptation a wide cormotation : it means making of articles, or material commercially different from the basic components, by physical labour or mechanical process; and a manufacturer is a person by whom or under whose direction and control the articles or materials arc made. The notification in the first instance exempts from tax sales of medicines and pharmaceutical preparations. It then proceeds to withdraw the exemption in respect of two classes of sales of medicines and phannaceutical preparations, (i) sale by an importer of medicines etc., imported from outside the State and (ii) sale by a manufacturer of medicines etc., manufactured in the State. The tax levied in respect of the excepted categories is a single point tax : it may be levied when medicines and pharmaceutical preparations manufactured in the State of Uttar Pradesh are sold by the manufacturer.

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In our judgment when, as prescribed by a medical pra_ctitioner, a mixture of different drugs is prepared by the medical practitioner or by his employees specially for the use of a patient in the treatment of an ailment or discomfort diagnosed by the medical practitioner by his professional skill, and which mixture is normally incapable of being passed from hand to hand as a commercial commodity, the medical practioner supp)ying the medicines cannot be said to be a manufacturer ol the nnxture and the mixture cannot be said to be manufactured within the mean-

A

B

c

D

E

F

G

H

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SALES TAX COMMR. V. SUKH DEO (Shah. J.)

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713

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A ing of the notification~ Exemption granted by the notification ceases to apply under cl. (a) if the importer of 'medicines and pharmaceutical preparations manufactured outside the State sells them, and under cl. (b) if the manufacturer of medicines and pharmaceutical preparations manufactured in Uttar Pradesh sells them. The scheme therefore is to levy sales-tax at one point

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B only, viz., at the point of sale by the importer in respect of medicines imported by him into the State, and at the point of sale by the manufacturer of medicines manufactured by him .within the State. If preparation of a mixture of drugs as prescribed by a medical practitioner in his own dispensary is not manufacture of medicines or pharmaceutical preparation, the exception clause of the notification will have no application.

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c

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Acceptance of the contention by the Revenue would imply that a medical practitioner supplying to his patients medicines and pharmaceutical preparations separately is not liable to tax : when under his direction they are mixed by his employees for the special use of a patient under his treatment and to achieve a D specific purpose, the turnover from the resultant mixture is taxable. In the absence of clearer phraseology, the Court would not in a taxing provision be willing to give that interpretation.

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The appeal therefore fails and is dismissed. The delay in filing the respondent's statement of the case is condoned. There will be no order as to costs in this appeal.

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G.C. Appeal dismissed .

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Commissioner of Sales Tax, U.P. v. Dr. Sukh Deo

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Commissioner of Sales Tax, U.P. v. Dr. Sukh Deo

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