1983 (2) TMI 262 - HC - VAT and Sales Tax

Classification of Distilled Water as Essential Component of Medicines under Sales Tax Act

The High Court of Andhra Pradesh held that distilled water sold in vials by a medicine dealer is classified under entry 37 of the Sales Tax Act as it is ... Classification under First Schedule entry 37 - Drugs and medicines as defined in section 3 of the Drugs and Cosmetics Act, 1940 - integral component of injected medicine - manufactured to Indian Pharmacopoeia Standards - second sale not exigible to taxClassification under First Schedule entry 37 - integral component of injected medicine - manufactured to Indian Pharmacopoeia Standards - second sale not exigible to tax - Distilled water sold in vials for use with injectable medicines falls within entry 37 of the First Schedule and is not taxable as a first sale. - HELD THAT: - The Court held that distilled water is chemically pure and made free of infection producing pathogens and other impurities so that it can be mixed with injectable drugs; it is therefore an integral component of injected medicine. Viewed commercially and functionally, distilled water sold in vials for mixing with medicines before injection falls within the description of 'drugs and medicines' in entry 37. The Court relied on the analogy of earlier decisions where components manufactured to pharmacopoeial standards and intended for medicinal use were held to fall within comparable schedule entries. Noting that distilled water undergoes a manufacturing process and is produced to Indian Pharmacopoeia Standards, the Court agreed with the Tribunal that the turnover arising from such sales constituted a second sale in the hands of the dealer and hence was not exigible to sales tax as a separate taxable commodity.Tax revision dismissed; distilled water in vials treated as drugs/medicines under entry 37 and not taxable as a first sale.Final Conclusion: The High Court upheld the Tribunal's finding that distilled water sold in vials for use with injectable medicines falls within entry 37 as part of drugs and medicines and accordingly the tax revision was dismissed. The High Court of Andhra Pradesh ruled that distilled water sold in vials by a dealer in medicines falls under entry 37 of the Sales Tax Act as it is an integral component of medicines. The decision was based on the nature of distilled water and its use in medicines. The Court cited similar rulings from the Calcutta and Madras High Courts to support their decision. The tax revision case was dismissed, and no costs were awarded.