TMI Blog1999 (12) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it has been clarified that exemption in sales tax would only be available to those life saving drugs which are being sold with the same very names which find mention in the notification dated March 31, 1992 and not to those drugs which are being sold in their own "brand name", is under challenge in these writ petitions. 2.. The petitioners who are manufacturers of life saving drugs in their factories situate at different parts of the country and are carrying on their business within territorial jurisdiction of the State of U.P. have put their claims for exemption of sales tax placing reliance upon the notification issued by the State Government. The Notification No. S.T.-2-1217 dated March 31, 1992 has been issued by the State Government in exercise of powers under clause (a) of section 4 of the U.P. Sales Tax Act, 1948 by the Governor granting exemption from sales tax on the life saving drugs. This exemption was allowed for a limited period for specified assessment years only. The Schedule mentioned in the notification at item No. 4 gives the heading life saving drugs followed by the words, "that is to say" and thereafter the names of 33 life saving drugs have been ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empted from sales tax. In support of their contention, the learned counsel for the petitioners have, for example, drawn our attention to the brand names of various drugs indicating that these drugs contain only that component which is exempted under the notification from sales tax. It has been stated that tetracycline hydrochloride is exempted from the trade tax when sold in the same name. The petitioners, namely, M/s. Mercury Laboratories Pvt. Ltd., manufacture the same drug have given it, the brand name of Linemett-500 and Linemett-333. Likewise M/s. Dey s Medical Store manufacture tetracycline hydrochloride. It is one of the drug exempted from the notification but market name is Subamycin Caplets-500. Ampicillin which again is an exempted drug under the notification is being manufactured by different companies but the same is being sold and marketed with their respective brand names. These drugs have not been given exemption by the sales tax authorities. 7.. A comparative chart was handed over to us by the learned counsel for the parties indicating the components of the drugs which is found in the drugs sold in the brand name and the name of the drugs which is exempted und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or ampicillin trihydrate with one or more suitable colouring, flavouring, sweetening, buffering and suspending agents, preservatives. When reconstituted as directed, it contains not less than 90 per cent and not more than 120.00 per cent of the stated amount of ampicillin, C16H19N3O4S. 12.. The learned counsel has also drawn our attention towards ampicillin injection and ampicillin products emphasising that all these products are ampicillin in one form or the other with varying strength so as to make a life saving drug as effective as need would be. According to the learned counsel for the petitioner such ampicillin which contains the same very ingredients found in the ampicillin itself and there is no change in therapeutic value of ampicillin and if such a drug is made consumable by the patient it cannot be treated as a separate drug, not covered by the notification or exemption. In furtherance of this argument the learned counsel for the petitioner further argued that ampicillin oral suspension is meant for children who are not in a position to take crude ampicillin because of its taste and size. For children, the same is made sweet and as in the tablet form it cannot be swal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument is that there is a complete embargo for realising sales tax on sale and purchase of any goods by giving it a different name or colour. Thus if the same very drugs are manufactured and are being sold by petitioners, no sales tax can be realised from the customers in such a sale simply because they are coloured and sweetened or different name has been given. Thus if the same very life saving drug which are notified in the notification are being manufactured or sold in the respective brand names by the companies and simply some colouring and sweetening is done for the purposes of making it consumable by the patient, they would not fall outside the scope of exemption on this very ground alone. 16. The learned counsel for the petitioners also urged that the name of the drug or the medicines which is known in common parlance has to be taken into consideration while considering the question of exemption. Further contention is that even a chemical when sold as a medicine would qualify for a lower tax. 17. The term "life saving drugs" has not been defined anywhere in the Act or in the notification. 18.. In support of his contention, the learned counsel for the petitioners ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to raise revenue and for which purpose they classify diverse products, articles and substances, resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them. If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted.......... Having regard to the aforesaid well-settled test the question is whether clinical syringes could be regarded as "glassware" falling within entry 39 of the First Schedule to the Act? It is true that the dictionary meaning of the expression "glassware" is "articles made of glass" (see Webster's New World Dictionary). However, in commercial sense glassware would never comprise articles like clinical syringes, thermometers, lactometers and the like which have specialised significance and utility. In popular or commercial parlance a general merchant dealing in "glassware" does not ordinarily deal in articles like clinical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n science and technology and inventions of new methods, materials and techniques, but none the less they would all be textiles...... The character of a fabric or material as textile does not depend upon the use to which it may be put. The uses of textiles in a fast developing economy are manifold and it is quite common now to find 'textiles' being used even for industrial purposes." 23.. In the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v. Pio Food Packers [1980] 46 STC 63, the honourable Supreme Court held as follows: "Section 5A(1)(a) of the Kerala General Sales Tax Act envisages the consumption of a commodity in the manufacture of another commodity. The goods purchased should be consumed, the consumption should be in the process of manufacture, and the result must be the manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the word. In Shorter Oxford English Dictionary, Vol. 1, the word chemical means "relating or belonging to chemistry; obtained by chemistry. A substance obtained or used in chemical operations". In Webster's Third New International Dictionary, the meaning given is "relating to applications of chemistry; as acting or operated by chemical means or synthesized from chemicals: suitable for use in or used for operations in chemistry: having reference to or relating to the science of chemistry." 25.. The learned counsel for the petitioners further argued that the list of drugs which has been notified cannot be limited to the specified drugs which are to be sold in the same name but would embrace such life saving drugs also which are being sold in the brand name containing the same ingredients. In all such cases the assessing authority has to decide as to whether the life saving drugs which are being sold in the brand name are a mixture or combination of some more drugs or some more ingredients, which change the therapeutic value of the drug or that all the ingredients, do not fall in the exemption notification, or the life saving drugs contains, that drug also, which is not exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of judicial review of the competent authority under the Act. The judicial discretion and judicial wisdom of the assessing authority has been totally taken away and they have been directed not to give exemption without even considering the case of the assessee on merits. 30.. In support of its contention the learned counsel relied upon a case reported in [1978] 41 STC 147 (All.); 1977 UPTC 81 (Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh). In this case it has been held that the Commissioner cannot issue such a direction or administrative orders which have the effect of overriding the notification. 31.. The learned counsel for the State laid emphasis on the fact that only life saving drugs which have been notified are entitled for exemption as the head life saving drugs is followed by words "that is to say". The emphasis is that by using the words "that is to say" the benefit has been limited to specified drugs and the petitioners who also sell the life saving drugs, are not entitled to exemption as their names do not find place in the notified drugs. However, it has not been disputed by the learned counsel for the State and rather it has been admitted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the same drug as ampicillin, and therefore, the contention of the petitioners that "ampicillin" trihydrate contains ampicillin only more hydrate compound that is water would not entitle it for exemption. Likewise he argued with respect to other preparation of ampicillin in the form of ampicillin oral suspension, capsules, injection, etc. 35.. In [1987] 61 Comp Cas 663 (SC); (1987) 1 SCC 424 (Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd.), it has been held that: "33. Interpretation must depend on the text and the context. They are the bases of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute-maker, provided by such context, its scheme, the sections, clauses, phrases and words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 6-B of the Bengal Finance (Sales Tax) Act the High Court on admission granted interim relief by injuncting West Bengal Government from collecting such tax on the turnover but ultimately dismissed the writ petitions. Against this order the appeals were filed. The apex Court dismissed all the appeals after considering the view taken by the West Bengal Taxation Tribunal. The learned counsel for the State relied on paragraphs 10 to 15 of the said judgment wherein the Supreme Court explained the ratio of constitution Bench in J.K. Synthetics Ltd. v. Commercial Tax Officer [1994] 94 STC 422; (1994) 4 SCC 276 and held that the provision in the taxing statute providing for levy of interest on failure of the dealer to pay tax due under the particular Act should not be strictly construed but should be so construed so as to effectuate and not defeat the object and purpose of the Act. 39.. Their Lordships also held that the State is empowered by the Legislature to raise revenue through the mode prescribed in the Act so the State should not be sufferer on account of the delay caused by the tax payer in payment of the tax due. The provision for charging interest would have been intr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Commissioner, Sales Tax would have courage to go beyond the wishes of Commissioner, Sales Tax, because that may not only make him liable for adverse remarks or some punitive action but would also make him open for submitting explanation as to why he has caused loss to the State revenue by granting such exemption when the things were made clear in this regard, therefore, the contention of the learned State Counsel that the aforesaid guide-lines were not binding on subordinate authorities and was only a view expressed by the Commissioner, Sales Tax, in the magazine does not stand to reason. 44.. Besides this in the case of Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh reported in [1977] 41 STC 147 (All.); 1977 UPTC 81, it has clearly been held that the Commissioner cannot issue such direction or instructions or guidelines which have an overriding effect on the notification. 45.. The matter was to be considered by the assessing authority and it on the strength of the evidence which may be brought by the assessee before the assessing authority, it is established that life saving drug so being sold under the brand name is entitled for exemption, under the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher profit which is being earned by the companies by selling these very life saving drugs at higher rates and therefore, they are not entitled for exemption is taken to be correct, the effect of the same would be that instead of taking any action against such companies who are earning such profits the burden would be on the shoulders of the consumers and they would be punished by paying the sales tax which would be included as an additional cost of the same very drug having no fault of their own. It is common knowledge that whatever medicines or drugs are prescribed by a doctor or physician under whose treatment the patient is continuing, the whole endeavour of the person is always to have that very medicine, may be in the brand name or otherwise. The poor patient and the consumer thus would be adversely affected if such a faulty approach is taken by the Government and the purpose of granting exemption to life saving drugs would be defeated. 51.. The contention of the learned counsel for the petitioners is that they are selling the very same drugs, i.e., "lifesaving drugs" which find mention in the Pharmacopoeia of India with the same ingredients which have been exempted under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court, a reference to which has been made in the preceding paragraphs of the judgment. It is clear that while interpreting even the taxing statute the principle and the object of the Act has to be kept in mind and that it has to be seen in the light of the scheme of the Act and the context thereof. 55.. Section 4(a) of the Act is a provision which gives exemption from trade tax to certain items articles or goods. The said provision gives power to the State to grant exemption by means of notification with respect to any other goods which are otherwise not entitled for exemption under section 4-A or section 4(a). The sale or purchase of water, milk (salt excluding processed and branded salt), newspapers have already been exempted under the said provision and thereafter the State Government has been vested with the power to grant exemption by issuing a notification with respect to any other goods. 56.. From the scheme of the Act and various amendments which have taken place in section 4(a) it is clear that, salt excludes processed or branded salt. This exclusion was introduced by means of amendment carried through U.P. Act No. 11 of 1997 by virtue of which the word "s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4(a) are not dependent upon the words which preceded these words. 61.. Thus we are of the view that the contention of the learned counsel for the State that since the processed and branded salt has been excluded from exemption notification, the drugs which are sold in the brand name automatically stand excluded from exemption notification cannot be accepted. The crux of the matter is that in case the life saving drugs are the same which have been specified in the exemption notification they cannot be excluded from the exemption notification simply because they are being sold in their own brand name by the respective manufacturers. 62.. The arguments of the learned counsel for the petitioners also finds support in the light of the provisions of section 8-A of the Act as it specifically prohibits that no dealer registered under this Act shall, in respect of any sale or purchase made by or through him, realise from any person any amount by way of (trade tax on sale or purchase of goods) or any amount in lieu of (trade tax on sale or purchase of goods) by giving it different name and colour and no dealer under this Act shall in respect of any sale or purchase made by him or throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority its judicial discretion compelling the assessing authorities or subordinate authorities to the Commissioner to follow the suggestion made by him. This would amount to judicial interference in the matter of assessment which is to be done by the competent authority by applying his own judicial mind. 67. Besides this, the issuance of such a guide-lines, message, or instructions by whatever names it may be called was not at all proper as the Commissioner was not dealing with any such matter either in appeal or otherwise and was also having no material before him so as to arrive on such a conclusion and give his interpretation regarding notification of exemption. In this regard it is also clear that once such a message or directions has been communicated by the Commissioner to the assessing authority, there is no possibility of the assessing authority to take a different view. 68.. It has been brought to our notice that in this bunch of writ petitions, many writ petitions have been filed against issuance of notice and in some cases the assessment have been made and appeals are pending. We find that the notices which have been issued to the assessee clearly indicates that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt decision as to whether the exemption which is being claimed by such assessees could be granted to them, by finding out on the basis of such evidence which may be required for the purpose as to whether the drug which is being sold in a particular brand name consists of those very ingredients or drugs which have been granted exemption under notification dated March 31, 1992. After considering as to whether such drug which has been sold in the brand name is entitled for exemption or not the authority shall pass orders in that regard. The assessing authority shall permit the assessee reasonable time, afresh for submitting the reply to the notices and thereafter proceed in the light of the observations made in this judgment. Since the matters are quite old, therefore we provide that the assessees shall submit their reply to the show cause notice within a period of six weeks from today. In case the petitioner fails to submit reply within the aforesaid period it would be open to the assessing authority to proceed with the case in accordance with law. 72.. Since fresh opportunity is being given to the assessee for filing a reply the assessments orders made, the assessment orders passe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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