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TMI Blog2007 (9) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure-3 to the writ application issued by the Deputy Commissioner, commercial taxes, Urban Circle, Jamshedpur be taken against it for not registering itself as registered "Dealer". (iv) To quash Annexure-5, i.e. the letter No. 261 dated 5.5.2005 issued by the Deputy Commissioner, Commercial Taxes Urban Circle, Jamshedpur, whereby the petitioner was held liable to pay sales tax. (v) To quash the order contained in Annexure-13 to the writ application dated 18.03.2006 relating to the financial years 2001-2002 to 2004- 2005 whereby the Assistant Commissioner, Commercial Taxes, Urban Circle Jamshedpur passed an order for assessment of the sales tax against the petitioner under Section 17(5) of the Bihar Finance Act, 1981 for the last four financial years. (vi) To quash the demand notices dated 20th March, 2008, contained in Annexure-14 series, issued by the Assistant commissioner, Commercial Taxes, Urban Circle, Jamshedpur, under Section 17(5) of the Bihar Finance Act 1981. 2. The facts, which are relevant for the purpose of decision of the present case, are stated herein below:- The petitioner Tata Main Hospital, hereinafter referred as TMH situated at Jamshedpur was establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgical operation. The amount charged under the head "Accommodation + Doctor" was the charge for Bed and Doctors fee as well as the diet supplied to the patient whereas the amount charged under the head pharmacy was the charge against supply of medicines to the patient, which is charged from the nonemployee patients. 4. According to the inspecting team, the amount which was charged against the head Pharmacy relates to sale of medicine Since the said amount was charged for sale of medicines and, therefore, under Section 3 of the Bihar Finance Act the same is exigible, because of the fact that no detail regarding sale and purchase of medicines were supplied to the term and, therefore under the provision of Section 33(i) of the Act, the petitioner TMH was directed to attend the office of the Deputy Commissioner, Commercial Taxes, Town Circle, Jamshedpur with relevant documents relating to purchase and sale of medicines for hearing. 5. Ultimately, after hearing the parties, the order of assessment as contained in Annexure-13, was passed by the Assistant Commissioner, Commercial Taxes, Jamshedpur, on 18.03.2006 under Section 17(5) of the Bihar Finance Act, 1981 for the years 2001-2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Authority that there is no intention of profit and that actually no profit is being made from the transaction. The said notification has been annexed as Annexure-8 to the writ application. 10. Now, let us examine as to whether the transaction of supply of medicines, surgical items, vaccines, x-ray items etc. to those indoor patients is course of their treatment for which TMH realizes charge from those patients can be said to be sale and whether these articles, which are being supplied to those patients are covered within the meaning to definition of goods and whether the supplier of those articles comes within the definition of Dealer as defined under the Bihar Finance Act, 1981 or not? 11. Dr. Debi Prasad Pal, learned senior Counsel appearing for the petitioner submitted that the charges, which are being realized from the non-employee indoor patients by TMH are composite charge or package charge for rendering medical service to such non employee indoor patient and such composite package charges are indivisible service contract. In rendering such services the supply of medicines to the non employee indoor patients at the cost price is incidental to and part of the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ras) Ltd., reported in 9 STC 353 (SC)" and the case of Bharat Sanchar Nigam Limited vs. Union of India & Ors. reported in 145 STC 91 = (2006) 3 SCC 1". 13. Challenging the impugned order of assessment, contained in Annexure-13 to the writ application, it is submitted on behalf of the petitioner that the Assessing Officer wrongly assessed the tax against the petitioner by only dealing with the question that the petitioner was a Dealer carrying on business of selling goods. It is contended that the Assessing Officer has taken the purchase amount of entire medicines, which the petitioner has purchased from the market as the same price for such medicines and imposed sales tax thereon. In fact so to 80 percent of such Medicines was purchased from the market are administered to the employees, ex employees or their dependants from whom no charge for supply of Medicines etc. is realized, therefore imposition of Sales Tax on these Medicines, which are supplied free of cost to the employee or ex employee or their family members are absolutely wrong. 14. Mr. Jhunjhunwala, learned G.P. III submitted that the supply of medicines, surgical items, x-ray films etc. by TMH to its non-employee ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the person to whom such transfer, delivery or supply is made. Explanation-I. A transfer or acquisition of goods on hire purchase or under any other system in which payment or valuable consideration is made by installments, shall, notwithstanding the fact that the seller retains that title in the goods as a security for the payment of the valuable consideration or for any other reasons, be deemed to be a sale or purchase. Explanation-II. Notwithstanding anything contained in any law for the time being in force, two independent purchases or sales shall for the purpose or this part, be deemed to have taken place- (a) When the goods are transferred from principal to his selling agent and from the selling agent to the purchaser; or (b) When the goods are transferred from the seller to a buying agent to his principal, it the agent is found (i) to have sold the goods at one rate and to have passed on the sale price to his principal at another rate or (ii) to have purchased the goods at one rate and to have passed on to his principal at another rate; or (iii) not to have accounted to his principal for the collections or deduction made by him in the sales or purchases effected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of goods other than newspapers. Entry 92A of the List-I empowers the Central Government to impose tax on sale or purchase of goods other than newspapers, where such sale or purchase taken place in the course of interstate trade or commerce. Prior to 46th amendment of the Constitution, composite contracts like work contracts, hire purchase contracts and catering contracts were not assessable as contracts for sale of goods. By 46th amendment of the Constitution, Article 366 (29-A) of the Constitution was amended by inserting a definition of tax on the sale or purchase of goods. After amendment the definition reads as follows: "366(29-A) "tax" on the sale or purchase of goods includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, or property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by installments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent kinds of composite transactions the drafters of the Forty Sixth Amendment chose three specific situations, a works contract, a hire purchase contract and catering contract to bring them within the fiction of a deemed sale. Of these three, the first and third involved a kind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been constitutionally permitted in sub-clauses (b) and (f) of Clause (29-A) of Article 366 (29-A) do not cover hospital service. Therefore, it during the treatment of a patient in a Hospital, he or she is given a pill, can the sales tax Authorities tax the transaction as a sale? Doctors, lawyers and other professionals render service in the course of which and it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/ her client? Strictly speaking, with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases. 46. The reason why these services do not involve a sale for the purpose of Entry 54 of List II is, as we see it, for reasons ultima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by him it amounts to be a sale. The above case before the Supreme Court was not a case of service contract or a case of composite charges. Whereas in the present case the fact are clearly distinguishable because undisputedly in the present case the TMH is not selling any medicines or surgical items to any out door persons or patients, who are not admitted in the TMH for treatment rather the medicines , surgical items, x-ray films and plates etc., are supplied to those indoor patients, which were essentially required for the treatment of these indoor patients. 24. The Counsel for the State also relied on a decision of Patna High Court in the case of Charu Pharmacy & Clinic vs. State of Bihar & Others, reported in 32 STC 265(P) (equivalent to 1974 BLJR, 207). In this case the fact was that the Doctor was running the pharmacy and the clinic and he used to examine patients, who went to him for treatment. He used to draw prescription and supplied medicines to them from the pharmacy on payment of price of Medicines. The charges, which were paid by the patients, were the charges for the supply of Medicines. The plea of the assessee (the Doctor) is that he used to charge consolidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(t) of the Bihar Finance Act for the following reasons:- (i) Supply of those articles are part and parcel of the treatment and they are essentially required for the treatment of the patients. (ii) Supply of those articles are incidental to the Medical service being rendered by the TMH to the patients. (iii) Those articles are not being sold to the patients but the coast price of the same being adjusted against the head pharmacy and are not being separately charged item wise. (iv) Charge under the head pharmacy is part of composite charge realized by the TMH towards the treatment of those indoor patients. 27. On the facts noticed in the forgoing paragraphs, we find that the TMH is not doing business of sale of the aforesaid articles, i.e. Medicines, vaccines, surgical items, x-ray films & plates etc. and therefore, cannot be said that the Hospital is a dealer within the meaning of Dealer Under the Bihar Finance Act. 28. The transaction aforesaid, cannot be said to be sale under the law as there is no element of sale at all in the said transaction. It is to be held that the transaction of supply of Medicines, surgical items, x-ray films and plats etc. for the treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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