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TMI Blog2004 (4) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal is justified in discarding all the evidence placed on record by the applicant? 4.. It was the contention of the applicant before the adjudicating authority that the diagnostic reagents manufactured and sold by them during the financial years 1983-1984, 1984-1985 and 1985-1986 were covered under the entry 24 of Schedule C, Part I appended to the BST Act relating to medicines and sales tax payable thereon was at four per cent. However, as a precautionary measure, the applicant had collected ten per cent sales tax from the customers on the footing that the goods are classifiable under the residuary entry (C-II-102) and paid the same into the Government treasury from time to time along with the periodical returns. After the scrutiny of the record, the assessing sales tax officer by assessment orders dated July 4, 1986, August 24, 1987 and August 30, 1988 respectively held that the product manufactured by the applicant were medicines falling under entry C-I-24 and taxed the same at four per cent. As a result, the applicant became entitled to the refund of tax paid in excess of four per cent amounting to Rs. 1,42,964, Rs. 1,81,013 and Rs. 2,64,544 respectively. The applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly, for treatment or mitigation or prevention of diseases in human beings or animals. 7.. Mr. P.C. Joshi, learned counsel appearing on behalf of the applicant broadly submitted as follows: (a) Diagnosis is a part of the treatment. Therefore, the diagnostic reagents which are medicinal preparations/formulations for use in the treatment of human beings are covered under entry C-I-24 of the BST Act and accordingly, the tax payable thereon is at four per cent. (b) The fact that during the relevant years the entry C-I-24 did not contain the words "for diagnosis" does not in any way affect the case of the applicant, because, the diagnostic reagents are medicinal formulations/preparations for use in the treatment of human being and thus squarely fall under entry C-I-24. (c) The Tribunal was in error in ignoring the expert opinion given by the persons in the trade such as doctors, reputed pathological laboratories, patients, etc., to the effect that diagnostic reagents manufactured by the applicant are used for the treatment of the ailment in human beings. (d) Having made the applicant to refund to the customers the amount of sales tax collected in excess of 4 per cent, during the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemical processes, etc., as distinguished from those occurring in the test tube (in vitro)." (e) In the New Encyclopaedia Britannica-Macropaedia-Vol. 5, it is stated as follows: "Diagnosis is ordinarily the forerunner of treatment, and treatment must be based on an understanding of diagnosis and of prognosis;………………Treatment is then undertaken, with or without modification of the original diagnosis." (f) As per the "guidance for F.D.A. Staff-issued by the U.S. Department of Health and Human Services, F.D.A. for Regulating In Vitro Diagnostic Device (IVD) studies, the term 'in vitro' ro diagnostic" is defined as follows: "In Vitro diagnostics: IVD's are reagents, instruments, and systems intended for use in the diagnosis of disease or other conditions, including a determination of the state of health, in order to cure, mitigate, treat or prevent disease or its sequelae." (g) As per Dorland's illustrated "Medical Dictionary" (26th Edition), the word "medicine" means (1) any drug or remedy (2) the art and science of the diagnosis and treatment of disease and the maintenance of health. (h) According to Oxford and IBH new medical dictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing description: Patent or proprietary or pharma-copoeia medicinal formulations or preparations made up ready for use, internally or externally for the diagnosis, treatment, mitigation or prevention, of disease in human being or animal. Mr. Joshi submitted that from the aforesaid entries in the Schedule, it can be clearly seen that the medicinal formulations for diagnosis and treatment have always been considered together by the Legislature. In other words, according to Mr. Joshi, even the Legislature has always considered the diagnosis as part and parcel of the treatment. Even while the treatment is on, the diagnostic tests are required to be carried out to ascertain as to whether the treatment should be continued, suspended or modified. The entire procedure, right from the moment the ailing person visits the doctor till the person is completely cured are so integrated that without carrying out relevant diagnostic tests, the treatment cannot be commenced nor could it be continued. 10. Mr. Joshi further submitted that the entries in the Schedule C to the BST Act related to the products dealt with by the medical science and, therefore, the phraseology used therein have to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue. Relying upon the decision of the apex Court in the case of BPL Pharmaceuticals [1997] 104 STC 164, Mr. Joshi submitted that opinion of the persons involved in the trade and the persons who have been using the product such as doctors, reputed pathological laboratories and patients have evidentiary value. It was submitted that without adducing any material contrary to the material produced by the applicant, the Tribunal could not have disregarded the certificates produced by the applicant and brushed aside the same as of no evidentiary value. In this connection, Mr. Joshi referred to the judgment of the apex Court in the case of G.S. Auto International Ltd. v. Collector of Central Excise, Chandigarh [2003] 152 ELT 3, wherein it is held that the goods are to be classified on the basis as to how they are referred to in the market by those who deal with them. The following decisions were also cited by Mr. Joshi in support of his above submission: (1) Commissioner of Central Excise v. Pandit D.P. Sharma (2003) 4 JT 353 (SC). (2) Porritts & Spencer (Asia) Ltd. v. State of Haryana [1978] 49 STC 433 (SC). (3) State of Goa v. Leukoplast (India) Ltd. [1997] 105 STC 318 (SC). (4) Depu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontend that the diagnostic reagents are not medicinal formulations. 16.. It was further submitted on behalf of respondents that to fall under entry C-I-24, the medicinal formulations must be (i) ready to be used in the human body or animal, either externally or internally and (ii) ready for use without any pressing or material change and is capable of being administered directly to the human body for the purpose of treatment, mitigation or prevention of disease. It was submitted that diagnostic reagents do not satisfy any of the aforesaid conditions and, therefore, it cannot be said that the diagnostic reagents are covered under entry C-I-24. 17.. It was submitted that "diagnosis" can be said to be an act or process of identifying the disease; whereas "treatment" is for relieving the body of the disease. It was submitted that "treatment" has a direct impact on the disease; whereas "diagnosis" is done before the commencement of the treatment. The process of "diagnosis" is to ascertain the actual ailment in the human beings and the "treatment " connotes the medicine actually administered for eradication of the disease. Accordingly, it was submitted that the substances which are use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is the exclusive prerogative of the Legislature to either expand or narrow down the scope of any entry. The wisdom of the Legislature in that respect cannot be the subject-matter of challenge. To give effect to the legislative amendment, the goods which are used for diagnosis stand excluded from the purview of the entry, lest it may amount to ignoring the legislative exercise of amendment. It was submitted that the diagnosis is not synonymous to treatment and even if during the treatment, diagnostic tests are required to be carried out, the goods used for diagnosis cannot be said to be goods, used for treatment. Accordingly, it was submitted that the pathological diagnostic reagents used for diagnosis or not for treatment, mitigation or prevention of any disease and, therefore, cannot be said to be covered by entry No. C-I-24. 23.. Reliance was placed by the respondents on the decision of the apex Court in the case of the Commissioner of Wealth-tax, Andhra Pradesh v. Officer-in-Charge (Court of Wards) Paigah [1976] 105 ITR 133; AIR 1977 SC 113. In that case, it was held by the apex Court that it is not correct to give as wide a meaning as possible to the terms used in a statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he treatment of human beings in entry C-I-24, cannot be accepted, because, although diagnosis and treatment go hand in hand and without the diagnosis the treatment to a patient cannot be started, it cannot be said that the word "treatment" means "diagnosis". Neither in the text books relating to medicines nor in the medical dictionary referred to by the applicant, the word "treatment" is understood to be synonymous to "diagnosis". A medical diagnostic laboratory may be the backbone of a treating person, but still, diagnosing the disease of a human being itself cannot be said to be a treatment for the disease. In the New Encyclopaedia Britannica, the word diagnosis is aptly held to be a fore runner for treatment. In Dorland's Illustrated Medical Dictionary (26th Edition), "medicine" means the art and science of the diagnosis and treatment of disease and the maintenance of health. Thus, the diagnosis and the treatment no doubt go hand in hand, but still, the treatment commences after the diagnosis of the disease. In other words, on completion of diagnosis, the treatment to an ailing patient begins. It may be that in certain cases even during the treatment, diagnostic tests may be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for treatment of the ailing human beings and not the medicinal formulations which are used for diagnosing the ailment in human beings. 28.. The contention of the applicant that the words "for diagnosis" were excluded from the entry relating to medicines because the same was implicitly covered under the word "treatment" is without any merit. If the word "diagnosis" was covered under the word "treatment" then during the period when the entry expressly used the words "for diagnosis" would be rendered surplus and such a construction which renders the express words used in the entry surplus or superfluous is not permissible in law. Moreover, the reintroduction of the words "for diagnosis" in the entry relating to medicine from the year 1996 completely demolishes the case sought to be put forth by the applicant. If the word "diagnosis" was covered under the word "treatment", then the word diagnosis would not have been introduced again in the year 1996. To overcome this difficulty, it was contended that to set at rest any controversy, the word "diagnosis" was reintroduced in the entry in the year 1996. In our opinion, there is no merit in this contention. It is well-established in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the doctors, pathological laboratories and patients produced by the applicant to the effect that the diagnosis is integral part of the treatment have no bearing on the issue raised herein. As stated hereinabove, the diagnosis and treatment to an ailing patient may go hand in hand and they may be interconnected like two sides of a coin. Even then, it is open to the Legislature to tax the two separately. Since 1960, the relevant entries relating to "medicine" specifically and distinctly covered two types of medicinal formulations which are used for diagnosis as well as for "treatment". When the entry on July 1, 1981 specifically included only one type of medicinal formulations, the other must be held to be excluded from the entry. In other words, during the relevant years since the entry C-I-24 specifically included only for the medicinal formulations for treatment of diseases in human beings, it will have to be held that the medicinal formulations for use in the diagnosis of the diseases in human beings were excluded from the purview of entry C-I-24. It is not in dispute that the diagnostic reagents manufactured by the applicant if not classifiable under entry C-I-24 will fall under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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