1963 (4) TMI 44 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the preparation of medicines on prescriptions constitutes manufacturing of medicines and pharmaceutical preparations for tax assessment purposes?
2. Whether the applicant is assessable to tax on the turnover of the dispensed medicines?

Analysis:

Issue 1:
The court deliberated on whether the preparation of medicines based on prescriptions qualifies as manufacturing under a specific notification. The Chief Justice emphasized that the term "manufacture" should not encompass the mere preparation of mixtures tailored to individual prescriptions. The notification under section 3-A aims to regulate articles sold multiple times, shifting the tax burden to the end consumer. As medicines prepared on prescriptions are intended for specific patients and sold directly to them, the notification's scope does not extend to such scenarios. The court concluded that the resulting mixtures were not commercially distinct articles, as each prescription led to a unique mixture without altering the nature of the ingredients. Therefore, the court determined that the applicant cannot be deemed a manufacturer under the notification.

Issue 2:
Regarding the assessability of tax on the turnover of dispensed medicines, the court discussed the applicability of section 3 for tax liability. The judge's referral of the second aspect of the question, despite focusing on manufacturing in the initial argument, was deemed relevant. The court highlighted that the applicant had not challenged his assessability under section 3 during prior proceedings. As the applicant sold medicines in the course of business, he was considered a dealer liable for tax under section 3. The court rejected the argument that the applicant was exempt from tax liability due to a notification under section 3-A, clarifying that the notification only applied to manufacturers of medicines. Since the applicant was not a manufacturer, the notification did not absolve him from tax obligations under section 3. Therefore, the court concluded that the turnover of dispensed medicines was subject to tax under section 3, affirming the applicant's liability.

In conclusion, the court determined that the applicant's preparation of medicines based on prescriptions did not constitute manufacturing under the notification. Additionally, the court affirmed the applicant's liability to pay tax on the turnover of dispensed medicines under section 3, dismissing arguments of exemption based on the notification under section 3-A. The judgment was jointly delivered by Chief Justice Desai and Justice Asthana, with Justice Asthana concurring with the decision.