TMI Blog2004 (5) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... ody", and in holding the said product to be not a medicine under the said Schedule, entry on the basis of such interpretation? (iii) Whether, on the facts and in the circumstances of the case and on true and correct interpretation of Schedule, entry C-II-106 appended to the Bombay Sales Tax Act, the Tribunal was legally justified in holding that the diagnostic kit sold by the appellant by his invoice dated August 27, 1996 is a scientific and laboratory instrument/equipment covered by the said Schedule, entry C-II-106, merely because it is used exclusively in pathological laboratories for carrying diagnostic tests? 2.. The dispute in the present reference relates to the classification of diagnostic kits sold by the applicant (hereinafter referred to as "the assessee"), vide sale invoice dated August 27, 1996. The larger Bench of the Tribunal has held that the diagnostic kits sold by the assessee are not classifiable as "drugs " under Schedule, entry C-II-37, but the same are classifiable as scientific and laboratory instrument/equipment under Schedule, entry C-II-106, of the Bombay Sales Tax Act, 1959 ("the BST Act", for short). 3.. The assessee is a public limited company eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AIDS and the only way to avoid contracting AIDS is by preventing the entry of virus, namely, HIV's which are responsible for AIDS. Therefore, detection of the said virus in the human beings play a major role in the human life. Thus, the diagnostic kits which are medicinal formulations are liable to be treated as "drugs" and accordingly it was contended that the diagnostic kits are squarely covered under Schedule, entry C-II-37, of the BST Act as amended on June 29, 1996 with retrospective effect from October 1, 1995. 7.. The Commissioner of Sales Tax by his order dated January 7, 1998 held that any medicinal formulations or preparations for being qualified as "drugs and medicines" in the new Schedule, entry C-II-37, have not only to be useful for diagnosis, treatment, mitigation or prevention of disease or disorders, but it has also to be capable of internal or external application on the body. Since the diagnostic kits sold by the assessee were admittedly not applied on the human body either internally or externally, but were used in pathological laboratories for carrying out certain tests, the Commissioner held that in spite of the word "diagnosis" in the Schedule, entry C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or prevention of any diseases or disorder in human beings, animals and birds which is manufactured, imported into India, stocked, distributed or sold under licence granted under the Drugs and Cosmetics Act, 1940, but excluding mosquito repellants in any form'. C-II-106: Professional, scientific and laboratory instruments, implements, tools including syringes and needles of all kinds intended for the use of medical profession, other than those specified elsewhere and components, parts and accessories thereof. (emphasis supplied)." 11.. Mr. Patkar, learned advocate appearing on behalf of the assessee, submitted that the Revenue had contended before the lower authorities that the diagnostic kits cannot be classified under entry C-II-37 mainly on two grounds, namely: (i) Diagnostic kits are not medicinal formulations and (ii) it is used neither inside nor upon the human body and hence cannot fall under entry C-II-37. He submitted that larger Bench of the Tribunal has rejected the first contention of the assessee and has held that the diagnostic kits are Here italicised. medicinal formulations. The revenue has accepted the decision of the Tribunal. Therefore, the only issue that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection, Mr. Patkar submitted as follows: (a) The words "internally or externally" are not defined under the BST Act. In the medical science the words "internally/externally" are referred by the words "in vivo" and "in vitro". As per the Websters Encyclopaedic Unabridged Dictionary of the English Language, the words "in vitro" and "in vivo" means: "In vitro: (in vetro), Biol. within an artificial environment, as a test tube: the cultivation of tissues in vitro Cf. in vivo [ L: lit., in glass.]." "In vivo: (in vevo), Biol. within a living organism: the cultivation of tissues in vivo Cf. in vitro [ L: in something alive]." (b) As per Stedman's Medical Dictionary the term "in vitro" and "in vivo" means: "in vitro-in the test tube: referring to chemi reactions fermentations, etc., occurring therein, usually in cell-f extracts." "invivo-in the living body: referring vital chemical processes, etc., as distinguished from those occurring in the test tube (in vitro)." (c) If the entry C-II-37 was intended to cover only those drugs which are applied inside or on the human body then it would have been specifically so stated in the entry C-II-37. He referred to the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1969, to refer to the definition of "drug" under the Drugs and Cosmetics Act, 1940. (e) Medicinal formulations intended to be used, whether internally or externally for diagnosis of the diseases in human beings have been on the statute book since 1964 and the same have been interpreted by the Tribunal in the case of Bharat Laboratories v. State of Maharashtra (S.A. No. 488 of 1975 decided on November 21, 1975) as early as 24 years back and there are no compelling reasons to take a contrary view. In this connection, reliance was placed on the decision of the apex Court in the case of State of Tamil Nadu v. Srinivasa Timber Depot [1991] 80 STC 393. (f) Use of the words "human beings" in entry C-II-37 cannot be read as "human body". There is a distinction between the word "human being" and "human body". Referring to the decisions of the apex Court in the case of the Assessing Authority-cum-Excise and Taxation Officer v. East India Cotton Mfg. Co. Ltd. [1981] 48 STC 239 and State of Bombay v. Automobile and Agricultural Industries Corporation [1961] 12 STC 122, it was submitted that when the Legislature has designedly abstained from using an expression which has restrictive mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Words in Marathi transliterated in English. the entry No. 106 which is applicable only for instruments, implements, etc. 17.. From the entry in the Schedule to the Sales Tax Act, it can be seen that some articles are listed separately and some articles together. When they are grouped together, each word in the entry draws colour from the other words therein. The word "instrument" mentioned in entry C-II-106 draws colour from the words "implements" and "tools". Even the words "syringes and needles" mentioned in that entry are syringes and needles simpliciter and the entire entry has nothing to do with "drugs". In this connection, reliance was placed on the decision of the apex Court in Pardeep Aggarbatti v. State of Punjab [1997] 107 STC 561. 18.. It was further submitted that the Revenue has not offered any reasons except stating that the entry C-II-37 should be given a restricted meaning. The onus or the burden to show that the product falls within a particular entry is always on the Revenue. Since the Revenue has failed to discharge the onus, the classification suggested by the Revenue cannot be accepted. In this connection, reliance was placed on the decision of the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Legislature. The scope of the entry is not to be determined on the basis of the goods but are to be determined on the basis of language used by the Legislature. Referring to the Oxford Advanced Learner's Dictionary of Current English by A.S. Hornby, Sixth Edition, it was submitted that the word "externally" has been used in disjunction with the word "internally". It is not necessary for the goods to be useful internally as well as externally for satisfying the requirement to get covered under the said entry. The diagnostic reagents (genus) (during the period when the word for diagnosis is present), which are useful "externally" or "internally " are intended to be covered under the said entry. Even if there exists no diagnostic reagents for external use, it only means that the diagnostic reagents which are used internally (species) are intended to be covered by the said entry. By assigning such meaning to the word "externally" it has the effect in narrowing down the scope of the entry, which is the exclusive prerogative of the Legislature. The wisdom of the Legislature cannot be called in question. If by assigning some meaning to the words, all the diagnostic reagents are out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. When the people in the trade themselves avoid using the word "external" in relation to the products of the appellant, there is no reason to presume that in trade parlance the appellant's products are for external use. As against the use of the words "for external use" used in relation to the goods traded by them, the words "in vitro" are used in relation to the products of the applicant. Admittedly the in vitro products are not "medicinal", meaning thereby capable of being used on the human body. Only in vivo diagnostic reagents can be used on the human body. Thus in common parlance the word "externally" means "upon the body and not beyond the body". 23.. It was submitted that the Tribunal held that the diagnostic kits are medicinal formulations and further held that these medicinal formulations do not qualify under entry C-II-37 because they are not applied on the human body and, therefore, would qualify under entry C-II-106. It was submitted that the Tribunal on the one hand held that the diagnostic kits are medicinal formulations and on the other hand has held that these medicinal formulations are instruments falling under entry C-II-106. Such a finding is mutually contradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations. 25.. The words "internally or externally for or in the diagnosis" have been used by the Legislature in the entry relating to drugs/ medicines, since 1965. In the case of Bharat Laboratories v. State of Maharashtra (Second Appeal No. 488 of 1975 decided on November 21, 1975), the issue before the Tribunal was that whether the "blood sera" used to determine the blood group before transfusing the blood into human being could be classified as "medicines". The Tribunal in that case held that the "blood sera" used for testing the blood to find out the blood group would be "for or in the diagnosis" and fall within the scope of the then entry relating to "medicines". Although, the scope of the words "externally" was not specifically considered by the Tribunal, the issue therein specifically pertained to the classification of the diagnostic reagents used outside the body for diagnosing the ailment in human beings. 26.. Following the decision of the Tribunal in the case of Bharat Laboratories (Second Appeal No. 488 of 1975 decided on November 21, 1975) the Commissioner of Sales Tax in the case of Associated Laboratories Pvt. Ltd. (Order No. DDQ-1175/261/B-1, Bombay, dated January ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo decades it is judicially interpreted and accepted by the revenue that the medicinal formulations/preparations which are used outside the body for diagnosing the ailment in human beings are covered under the entry relating to medicines/drugs. 28.. It is pertinent to note that during the period from July 1, 1981 to June 28, 1996, the medicinal formulations/preparations used for diagnosis were excluded from the entry relating to medicines/ drugs. However, on 29th June, 1996 the medicinal formulations/ preparation were once again brought within the purview of the entry relating to drugs. Thus, except for the period from July 1, 1981 to June 28, 1996, the entry relating to medicines/drugs had always covered the medicinal formulations used internally or externally for or in the diagnosis of disease in human beings. The judicial interpretation given by the highest authority in the State, namely, the Maharashtra Sales Tax Tribunal, which has been accepted and prevailing for more than two decades is that the words "internally or externally for diagnosis" in the entry relating to medicines/drugs cannot be restricted only to diagnosis reagents or formulation which are used on the body, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period 1983-84 to 1987-88. During that period the entry relating to medicines did not include medicinal formulations used for diagnosis. Moreover, the said decision was rendered ignoring the decision of the Tribunal in the case of Bharat Laboratories (Second Appeal No. 488 of 1975 decided on November 21, 1975). 30.. In the present case, the larger Bench of the Tribunal had held that in the case of Bharat Laboratories (Second Appeal No. 488 of 1975 decided on November 21, 1975) the Tribunal had really no occasion to specifically examine the question as to whether the word "externally" in the entry relating to medicines would imply only the application on the external surface of the body or not. The larger Bench of the Tribunal held that the Marathi version of entry was not flawless. The Tribunal noticed that for the words "internally" the words used in Marathi are *"Pottal Ghanyakareeta" which means that only such medicines which are to be consumed orally. If the Marathi version is accepted then it would imply that the medicines which are to be put in ears, eyes or nose which are certainly for internal use, would not get so covered by virtue of the Marathi version. It is held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the field for more than two decades, it will not be proper to reverse that view, unless it is shown that the earlier view is patently erroneous or there are compelling reasons for taking a contrary view. In the present case, the revenue has not adduced any material to show as to why it is necessary to take a contrary view in the matter. It is well-established in law that the interpretation holding the field for a considerable period of time cannot be disturbed unless there are compelling reasons to do so. In the present case, the Tribunal, has not found that the earlier decision taken in the matter was patently erroneous and contrary to law. Such an interpretation which seeks to unsettle the long-standing interpretation is unwarranted [See Hindustan Ferodo Ltd. v. Collector of Central Excise, Bombay [1997] 106 STC 214 (SC); [1997] 89 ELT 16 (SC)]. 32.. In this view of the matter, we are of the opinion that the Tribunal was not justified in holding that the entry C-II-37 has to be interpreted restrictively so as to include only those medicinal formulations which are used inside or upon the human body. In view of the long-standing judicial interpretation which has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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