2010 (2) TMI 1091 - HC - VAT and Sales Tax

Whether the goods diagnostic film and medical X-ray film fall under item 31 of Schedule B and therefore are taxable at four per cent? Held that - The goods diagnostic films and medical X-ray films would not fall under items at serial No. 31 of Schedule B of the PVAT Act, 2005 and, hence, would not be taxable at four per cent but the same would be taxable at the rate of 12.5 per cent.

Summary

Issues:
Interpretation of Schedule B of the PVAT Act, 2005 regarding the tax rate applicable to diagnostic films and medical X-ray films.

Analysis:
The appellant challenged an order by the VAT Tribunal, Punjab, regarding the tax rate applicable to diagnostic films and medical X-ray films under the PVAT Act, 2005. The appellant argued that these items should be taxed at four percent under item No. 31 of Schedule B, considering them as medical equipment/devices. The Excise and Taxation Commissioner, Punjab, however, held that these items are taxable at 12.5 percent, not four percent. The appellant's appeal before the VAT Tribunal was dismissed, leading to the current appeal.

The primary legal question before the court was whether diagnostic films and medical X-ray films fall under item No. 31 of Schedule B and are taxable at four percent. The appellant contended that these items qualify as "devices" under item 31, referencing the Oxford Dictionary definition of "device" and arguing that these items are invented and constructed for special purposes, thus falling under the category of medical equipment/devices.

On the other hand, the State's counsel argued that diagnostic films and X-ray films do not fit under item 31 of Schedule B. Reference was made to Schedule C of the Bengal VAT Act, where X-ray films and diagnostic films are taxed at four percent under a separate entry from medical equipment, devices, and implants. The presence of distinct entries for these items in the Bengal VAT Act indicated a deliberate separation by the State, reinforcing the argument that diagnostic films and X-ray films are not covered under item 31 of Schedule B.

Upon thorough consideration, the court analyzed the provisions of Schedule C of the Bengal VAT Act, highlighting the separate taxation of X-ray films and diagnostic films from medical equipment, devices, and implants. The court concluded that diagnostic films and medical X-ray films do not fall under item 31 of Schedule B of the PVAT Act, 2005. Consequently, the court upheld the tax rate of 12.5 percent for these items, dismissing the appellant's appeal against the Punjab VAT Tribunal's decision.

In summary, the court's judgment clarified the tax treatment of diagnostic films and medical X-ray films, emphasizing the specific categorization of these items under the PVAT Act, 2005. The court's decision was based on a meticulous analysis of relevant statutes and definitions, ultimately affirming the tax rate of 12.5 percent for these items, in line with the provisions of the Bengal VAT Act.