Oxygen classified as a chemical, but medicinal sales qualified for the lower tax rate with turnover apportionment.

Oxygen was treated as a chemical within the taxable entry for chemicals because the term was given its broad dictionary meaning in the absence of contrary commercial usage evidence. The same commodity could also qualify as a medicine when sold for medicinal purposes, so the applicable tax rate depended on the character of the sale. Oxygen sold for industrial use attracted the higher rate, while oxygen sold for medicinal use was taxable at the reduced rate for medicines or medicinal preparations. The turnover therefore had to be apportioned between industrial and medicinal sales according to actual use.

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Issues: (i) whether oxygen was a chemical liable to tax under the entry for chemicals; and (ii) whether oxygen sold for medicinal purposes could be taxed at the lower rate applicable to medicines or medicinal preparations.

Issue (i): whether oxygen was a chemical liable to tax under the entry for chemicals.

Analysis: The expression "chemicals of all kinds" in the notification was construed broadly. In the absence of evidence of the meaning attributed to the word by commercial men, the Court adopted the dictionary meaning. Oxygen answered that meaning because it was a substance obtained by chemical process, used in chemical operations, and capable of producing chemical changes in other substances.

Conclusion: Oxygen was a chemical and fell within the taxable entry for chemicals.

Issue (ii): whether oxygen sold for medicinal purposes could be taxed at the lower rate applicable to medicines or medicinal preparations.

Analysis: A chemical may also be a medicine. Where the same commodity is sold for different uses, the applicable rate depends on the character of the sale. Oxygen sold for industrial use attracted the higher rate, while oxygen sold for medicinal use qualified for the reduced rate applicable to medicines. The turnover therefore required apportionment according to use.

Conclusion: Oxygen sold for medicinal purposes was taxable at the reduced rate, and the turnover had to be apportioned between industrial and medicinal sales.

Final Conclusion: The reference was answered by holding that oxygen is a chemical, but the applicable rate depends on whether it is sold for industrial or medicinal use, with apportionment required between the two categories.

Ratio Decidendi: Where a commodity answers the commercial or dictionary description of a taxable category, it is taxable as such, but if the same commodity is sold for a distinct use carrying a different statutory rate, the sale must be classified according to its actual use and turnover apportioned accordingly.

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