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2014 (9) TMI 300 - HC - VAT and Sales TaxLiability of Hospital for registration as dealer for selling medicines to patients - Constitutional validity of Section 6 of Kerala Value Added Tax Act, 2003 - whether hospital is a "dealer" within the definition of the term as contained in the KGST Act - The petitioners mainly relied on para 44 of the judgment in the case of Bharat Sanchar Nigam Ltd. judgment [2006 (3) TMI 1 - Supreme court] where the apex court held that hospital service is still outside article 366 (29A) and explained it with an example that if during the treatment of a patient in a hospital, he or she is given a pill, sales tax authorities cannot tax the same as a sale. According to the petitioners, what they render is hospital service and that therefore, the medicine or other consumable sold during treatment is not a sale under the Act to attract levy of tax. On this basis, they contended that since section 6 of the Act authorises levy of tax on such medicines and other consumables, the section is unconstitutional. Held that:- First of all, Bharat Sanchar Nigam Ltd. judgment [2006 (3) TMI 1 - Supreme court] was not rendered in the context of the provisions of the KVAT Act and the issue raised and decided in that case is also not in the context of a comparable controversy. In so far as the finding regarding hospital services or example that is given by the apex court are concerned, the court has only laid down a principle and said that if in the process of treatment a pill is given to a patient, such a transaction cannot be treated as a sale. That example given by the apex court cannot be taken to mean that it was laying down a principle that in all circumstances, every transaction that takes place in a hospital, is a service and is outside the taxation law. This is all the more so in today's context where hospitals are being established by public limited companies which are incorporated with profit-motive. Therefore, if in a hospital, medicines and other consumables are sold to a patient and bills are raised, such transaction cannot be outside the KVAT Act and taking refuge under the example given by the apex court to explain the meaning and content of article 366(29A) of the Constitution, such hospitals cannot avoid statutory liabilities. On the other hand, if in an individual case, a particular transaction is not a sale, it is for the concerned hospital to contest the matter in accordance with law and that does not mean that the whole hospital industry in the State can remain outside the discipline of the KVAT Act. Decision in the case of Malankara Orthodox Syrian Church v. Sales Tax Officer in [2002 (12) TMI 587 - KERALA HIGH COURT] fully answers the contentions raised by the petitioners in these cases regarding their liability to be registered under the Act and to pay tax thereunder. - Decided against assessee.
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