TMI Blog2014 (2) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. - Writ Tax No. - 68 of 2014 - - - Dated:- 6-2-2014 - Dr. Dhananjaya Yeshwant Chandrachud,CJ And Hon'ble Dilip Gupta,JJ. For the Petitioner : Rahul Agarwal,Bharat Ji Agrawal,Rashi Misra For the Respondent : C. S. C. ORDER In these proceedings under Article 226 of the Constitution, the petitioner has sought to question the legality of an order of the Deputy Commissioner, Commercial Tax dated 27 September 2013 insofar as it brings to tax, under the provisions of the U.P. Value Added Tax Act, 2008 (hereinafter referred to as the Act), stents and valves used by the petitioner as an intrinsic and integral element in the performance of a heart procedure at a super-speciality hospital. The petitioner has set up a super-speciality integrated hospital at Noida. Patients who are required to undergo treatment are admitted to the hospital and are treated as indoor patients. According to the petitioner, whenever a stent or a valve is required to be implanted in a patient, neither the hospital nor its pharmacy sells the implants directly to the patient. In other words, the implants are used during the course of a surgical procedure and there is no 'sale' when such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Bharat Sanchar Nigam Ltd. (supra) and on the judgment of the Jharkhand High Court in Tata Main Hospital (supra) against which a special leave petition has been dismissed by the Supreme Court. Entry 54 of the State List to the Seventh Schedule of the Constitution provides for a tax on the sale and purchase of goods. For the purpose of these proceedings, it would not be necessary to advert in detail to the legislative history leading to the introduction of Article 366 (29-A) in the Constitution by the 46th Amendment since that has been the subject matter of a considerable amount of judicial pronouncement. In State of Madras v. Gannon Dankerley Co. (Madras) Ltd.3 and in the decisions which followed it, the expression 'sale' was given a restricted meaning as contained in the Sale of Goods Act. The 46th Amendment to the Constitution was brought into force so as to provide a deeming definition of what will constitute tax on the sale and purchase of goods. Article 366 (29-A) provides as follows:- "366. (29-A) 'tax on the sale or purchase of goods' includes - (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surgical procedure under medical supervision. Admittedly, neither of the six clauses of Article 366 (29-A) of the Constitution are attracted to the rendering of such a service and hence, the deeming definition under which a contract is regarded as a contract for the sale of goods is not attracted. According to the hospital, where a patient comes to get admitted for a surgical procedure like an angioplasty, the contract is indivisible, in the course of which medical service is rendered to the patient. The issue as to whether a service of this nature would fall within the ambit of the expression 'sale' has to be determined with reference to the definition of that expression in Section 2 (ac) of the Act. Section 2 (ac) defines the expression 'sale' as follows: "2. (ac) "sale" with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) by one person to another, for cash or for deferred payment or for any other valuable consideration and includes,-- (i) a transfer, otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the State Legislature to bring to tax the sale element in the execution of such contracts. Specifically in the context of hospital services, the Supreme Court dealt with the issue in the course of the judgment as follows:- "44. Of all the different kinds of composite transactions the drafters of the Forty-sixth Amendment chose three specific situations, a works contract, a hire-purchase contract and a catering contract to bring them within the fiction of a deemed sale. Of these three, the first and third involve a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been constitutionally permitted in sub-clauses (b) and (f) of clause (29-A) of Article 366, there is no other service which has been permitted to be so split. For example, the sub-clauses of Article 366 (29-A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the Sales Tax Authorities tax the transaction as a sale? Doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes out and hands over a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanted but even if that is so, that would not dilute the essential nature of the transaction, which is the performance of a medical procedure. After the Forty-sixth amendment to the Constitution, the issue whether a contract which falls within the description of one of the sub-clauses of Article 366 (29A) involves a dominant intention to transfer property in goods has ceased to be material. That is because as a result of the introduction of clause 29A into Article 366, a deeming fiction has been introduced by which contracts comprised in sub-clause (a) to (f) become separable and divisible into a contract for materials and a contract for services. For instance, a works contract within the meaning of sub-clause (b) of clause 29A has been rendered divisible consequent upon the constitutional amendment. In the leading judgment of the Supreme Court in Larsen and Toubro Limited Anr. VS. State of Karnataka4, a Bench of three learned Judges has held that the dominant nature test has no application to contracts of the nature contemplated in Article 366(29A). Speaking for the Bench, Hon'ble Mr. Justice R.M. Lodha held thus: "The dominant nature test has no application and the traditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bihar Finance Act, 1981 is pari materia to Section 2 (ac) of the Act. After adverting to the judgment of the Supreme Court in Bharat Sanchar Nigam Ltd. (supra), the Division Bench held as follows:- 26. The transaction of supply of Medicines, vaccines, surgical items, x-ray films and plates etc. to the indoor patients in course of treatment in TMH does not come with the purview of the definition of sale as envisaged under Section 2 (t) of the Bihar Finance Act for the following reasons:- (i) Supply of those articles are part and parcel of the treatment and they are essentially required for the treatment of the patients. (ii) Supply of those articles are incidental to the Medical service being rendered by the TMH to the patients. (iii) Those articles are not being sold to the patients but the cost price of the same being adjusted against the head pharmacy and are not being separately charged item wise. (iv) Charge under the head pharmacy is part of composite charge realized by the TMH towards the treatment of those indoor patients." A petition for Special Leave to Appeal (Civil) No.3652 of 2008 was dismissed by the Supreme Court against this judgment on 10 March 2008. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that this is not a case where the petitioner is contending that the sale of medicines at the pharmacy in the hospital is not assessable to tax. The only issue is as to whether the definition of the expression 'sale' in Section 2 (ac) of the Act is attracted where a stent or valve is implanted in a patient in the course of a surgical procedure. Plainly, in our opinion, there is no element of sale. The fact that in the bill which is raised on the patient, the hospital recovers, apart from the cost of the surgery, charges towards drugs and other consumables would not render the transaction of the implantation of a stent or valve a 'sale' within the meaning of Section 2 (ac) of the Act. We clarify that we have dealt with only the aforesaid factual situation and our judgment as aforesaid does not deal with any other factual situation which is not before the Court. Before concluding, we may reiterate that since the basic facts before the Court were not disputed and the only issue that fell for consideration was as noted above, we do not consider it appropriate and proper to relegate the petitioner to pursue the alternative remedy under the Act. The existence of an alternative remedy ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
