TMI Blog2007 (9) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be sale under the law as there is no element of sale at all in the said transaction. Accordingly, this writ application is allowed and the order dated 18.3.2006 as contained in Annexure-13 and the demand notices dated 20th March, 2006, contained in Annexure-14 series are hereby quashed. - Writ Petition (T) No. 2422 of 2006 - - - Dated:- 7-9-2007 - M.Karpage Vinayagam and Amareshwar Sahay, JJ. For the Petitioner : Dr Debi Prased Pal, Sri Advocate, Sh. M.S. Mittal, A.R. Choudhary For the Respondents : Mr. K.K. Jhunjhunwals, GP-III JUDGMENT In the present writ petition the petitioner has prayed for, for the following reliefs:- (i) For declaration that the supply of medicines, surgical items, vaccines, X-ray items etc. which were are supplied by the petitioner to its indoor patients during the course of their treatment is not a transaction which comes within the meaning of sale as defined under Section 2(t) of the Bihar Finance Act. 1981 and, therefore is not taxable under the said act. (ii) For declaration that the petitioner does not come within the definition of Dealer as defined under the provisions of Bihar Finance Act, 1981 and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was Financial Analyst disclosed that no separate account is maintained in the TMH. The TMH only issues bills which are forwarded to the general officer of Tata Steel Limited therefore detailed description and whatever date is required by the department can be had from the general officer of Tata Steel Limited. He also disclosed that the medical store department of the TMH purchases medicines mostly from the local market except those medicines which are not available in the local market are purchased from outside the State also but such purchases is very less. The enquiry report further reveals that one Bill dated 23.3.2005 being Bill No. BN/05/005687 dated 23.03.2005, issued to one Mr. Somesh Mahanti, was examined from which it appeared that the TMH has charged the following amount under different heads:- (i) Registration ₹ 100.00 (ii) Blood Bank ₹ 1275.00 (iii) Pathology ₹ 1980.00 (iv) O.T. Package ₹ 1200.00 (v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Years 2001-2002 to 2004-05. Pursuant to the said order as contained in Annexure-13 to the writ application, demand notices were issued as contained in Annexure-14 series, which are also under challenge in this writ application. 7. There is no dispute of this fact that TMH supplies medicines, surgical items, vaccines, x-ray items etc. to the employee indoor patients and the aforesaid items, which are supplied in course of the treatment of employee indoor patients, ex-employee and their family members, TMH does not charge a single paisa from them and they are given treatment totally free of cost and therefore, imposition of sales tax on those items does not and cannot arise. Learned G.P.III also conceded in this regard. 8. The question to be considered and decided in the present case, is as to whether the supply of the medicines, surgical items, vaccines and xray item etc. to the non-employee indoor patients admitted in TMH for treatment for which TMH realizes charges, comes within the purview of sale as defined under Section 2(t) of the Bihar Finance Act, 1981 so as to make TMH liable to get themselves registered as Dealer under the Bihar Finance Act and whether they are l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not admitted in TMH for any treatment. 12. Dr. Debi Pal, learned senior Counsel further submitted that the petitioner is supplying those articles, i.e. Medicines, surgical items, vaccines, x-ray items etc. to the patients as a part of composite services, which are rendered by TMH to the indoor patients. Such supply of Medicines etc. which are administered to the indoor patients are part of its Hospital services and this cannot cover under the definition of business of selling goods and the petitioner cannot be said to be a Dealer as defined under Section 2(e) of the Bihar Finance Act, 1981. He further submitted that under Section 2(e) of the Bihar Finance Act a Dealer must be a person who carries on business of buying, selling or supplying goods for consideration, whereas in the present case the supply of medicines etc. by TMH to its indoor patients, who are given treatment in TMH, are part and parcel of service rendered by TMH to those patients therefore, it does not constitute sale of goods. As a matter of fact those non employee indoor patients, who are admitted in TMH for treatment pay a composite charge or a package charge, which includes various items like registration B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the purview of Dealer as defined under the Bihar Finance Act, 1981. Therefore the petitioner has rightly been assessed and held liable for payment of sales tax by the taxing authority as contained in Annexure-13 to the writ application. In support of his submissions, Mr. Jhunjhunwala has relied on the decision in the case of East India Hotels Limited vs. Union of India and others reported in 121 STC 46 and a Division Bench s decision of Patna High Court in the case of Charu Pharmacy Clinic vs. State of Bihar Others, reported in 32 STC 265 (P) = 1974 BLJR 207 . 15. Sale has been defined under Section 2(t) of the Bihar Finance Act, 1981, which reads as under. 2(t) Sale means any transfer of property in goods for cash or deferred payment or other valuable consideration but does not include a mortgage or hypothecation of or a charge or pledge on goods and includes. (i) transfer of property in any goods, otherwise than in pursuance of a contract; (iii)delivery of goods on hire purchase or any system of payment by installments; (iv) transfer of the right to use any goods for any purpose (whether or not for a specified period); (v)supply of goods made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndivided family or other association or persons which carries on such business; (ii) a factor, broker, commission agent, Declared agent or any other mercantile agent by whatsoever name called and whether or not, who carries on the business of buying, selling, supplying or distributing, goods belonging to any principal whether disclosed or not; and (iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal. Explanation-I. Every person who acts as an agent, in the State of Bihar or a dealer residing outside the State of Bihar and buys, sells, supplies or distributes, in the State or acts on behalf or such dealer as- (i) a mercantile agent as defined in the sale of Goods Act, 1930 (3 of 1930); or (ii) an agent for handling of goods or documents of tile relating to goods; or (iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment. And every local branch or office in the State of Bihar of a firm registered out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods shall be deemed to be sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. 18. In the light of 46th amendment the definition of sale within the meaning of Section 2(t) of Bihar Finance Act, was amended. 19. Now, let us examine the decisions cited by the parties. The first decision cited on behalf of the petitioner is the case of State of Madras vs. Gannom Dunkerley Company madras Ltd., reported in 9 STC 353 (SC), wherein it has been held that the expression sale of goods in Entry 48 in List II Schedule VII of the Government of India Act, 1935, cannot be construed in its popular sense but must be interpreted in its legal sense and should be given the same meaning which it has in the Sale of Goods Act, 1930. It was also held that in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods, which presupposes capacity to contract, it must be supported by money consideration and that as a result of the transaction property must actually pass in the goods. Unless all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 366 (29-A) continues to be; Did the parties have in mind or intend separate rights arising out of the sale of goods? If there was no such intention there is not sale even of falls into one category or other is to as what is the substance of the contract . We will, for the want of a better phrase, call this the dominant nature test . 21. In the above quoted para 46 of this very judgment while interpreting the principle laid down in Gannon Dunkerley s case, it has been held that if there is an instrument of contract which may be composite in form in any case other than the exceptions in Article 366(29-A) unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service and impose tax on the sale. 22. Thus, in view of the decision of the Supreme Court in the case of Bharat Sanchar Nigam Limited (supra) the test of deciding whether the contract falls into one category or the other is as to what is the substance of contract . According to the Supreme Court, it has to be seen as to what is the dominant nature test of the contract. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges for service and medicines was rejected. This case is also of no held to the Counsel for the State because in the present case the supply of Medicines, surgical items, vaccines, x-ray films plates to the non employee indoor patients by the TMH was part and parcel and incidental to the Medical services rendered to those indoor patients. 25. Considering the facts of the present case, the argument advanced on behalf of the respective parties and the law in the subject noticed above it is to be held that in the present case, the Medicines, which are supplied to the indoor patients are administered in course of treatment to those patients in the TMH. Therefore, it appears that the dominate nature rest of contract to provide Medical services and in providing such Medical services the medicines are administered, surgical items, x-ray plates and a part of the medical services rendered by the TMH to the patients and for the TMH is realizing charges against the head pharmacy without giving particulars and break up as to what is the charge being realized for Medicines what is the charge being realized for surgical items and for xray films and plates etc. used in course of treatment t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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