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2014 (10) TMI 1020 - HC - VAT and Sales TaxClassification of goods - Liquid Medical Oxygen IP - Medical Grade Oxygen - Nitrous Oxide IP - whether fall under Entry 88 of the IV Schedule to the A.P. VAT Act, 2005 or are they liable to tax as unclassified goods under Schedule-V to the Act? - HELD THAT:- Section 4(3) of the Act requires every VAT dealer to pay tax on every sale of goods taxable under the Act on the sale price at the rates specified in Schedules III, IV and V subject to the provisions of Section 13. Schedule IV is the list of goods taxable at 4% prior to 14.09.2011, and at 5% thereafter - Under Schedule V to the Act all goods, other than those specified in Schedules I, III, IV and VI, are taxable at the standard rate of 12.5% prior to 15.01.2010, and at 14.5% thereafter. If Medical Oxygen IP and Nitrous Oxygen IP fall under Entry 88 of Schedule IV, they are then liable to be taxed at 4% or 5%. If not, they are taxable, as unclassified goods, at 12.5% or 14.5% under Schedule V to the Act. Going by the user test and the functional test, it is evident that medical oxygen and nitrous oxide serve as medicines. As medical oxygen IP and Nitrous Oxide IP are used in the treatment and mitigation of disorders in human beings, and as they are generally understood in the trade to be surgical aids, both these substances would fall under the definition of drug under Section 3(b)(i) of the Drugs Act and, consequently, fall under Entry 88 of Schedule IV to the Act liable to tax only at 4%/5%. Entry 100 of the IV Schedule to the Act relate to goods when sold as industrial inputs. Under sub-entry (36) thereof, Hydrogen, rare gases and other non-metals, when sold as industrial inputs, fall within Entry 100 of Schedule IV and are liable to be taxed at 4%/5%. However, in view of its specific exclusion, medical grade oxygen, when it is sold as an industrial input, would not fall within the purview of Entry 100 of Schedule IV to the Act. Exclusion of medical oxygen from the ambit of Entry 100(36) does not mean that it is, automatically, excluded from all other Entries in Schedule IV for, if the Legislature had so intended, medical oxygen would then have been excluded from Entry 88 of Schedule IV also. Entry 88 specifically excludes (a) medicated goods; (b) products capable of being used as cosmetics and toilet preparations including Tooth Pastes, Tooth powders, cosmetics, Toilet articles and soaps; and (c) mosquito repellants in any form - Entry 88 not only includes drugs and medicines as defined in Section 3(b)(i), (ii), and (iii) of the Drugs Act, but also includes hypodermic syringes, hypodermic needles, perfusion sets, urine bags, catguts, sutures, surgical cotton, dressings, plasters, catheters, cannulae, bandages and similar articles. All articles, similar to the goods aforementioned, would also fall within the ambit of Entry 88. There is no reason why medical oxygen IP and Nitrous Oxide IP, which are admittedly surgical aids used for or in the treatment and mitigation of disorders in human beings, would not fall under similar articles in Entry 88 of Schedule IV to the Act. Both medical oxygen IP and Nitrous Oxide IP fall under Entry 88 of Schedule IV, and are liable to tax only at 4%/5%, and not at 12.5%/14.5% - Petition allowed.
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