One-point sales tax and drug price control: reimbursement of first-point tax could be recovered from consumers, and the ban was invalid.

Under the Assam one-point sales tax system, tax was levied and collected only at the first sale, so amounts later recovered by retailers or intermediary dealers from consumers represented reimbursement of tax already borne at the first point and formed part of the sale price. The price control orders allowed local taxes to be included in the retail price structure for scheduled formulations, while non-scheduled formulations were required to have a maximum retail price inclusive of all taxes. Because the tax had already been realised from the first seller, there was no legal basis to prohibit recovery of that reimbursed component or to treat it as a further tax liability on later sellers. The notification and circular were therefore invalid to that extent.

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Issues: Whether retailers and intermediary dealers in medicines and drugs could recover the amount of sales tax already paid at the first point of sale by including it in the price charged to consumers, and whether the impugned notification and circular prohibiting such recovery were valid in light of the Drugs (Price Control) Orders and the sales tax regime.

Analysis: The price control orders permitted the inclusion of local taxes in the retail price structure for scheduled formulations, while non-scheduled formulations were required to bear a maximum retail price inclusive of all taxes. The Court accepted that, under the Assam one-point sales tax system, tax was levied and collected at the first sale and not on subsequent sales. Amounts recovered by later sellers represented reimbursement of tax already borne at the first point and formed part of the sale price rather than a fresh tax levy. Since the sales tax authorities had already realised the tax due from the first seller, there was no legal basis to prohibit recovery of the reimbursed amount from consumers or to treat it as a further tax liability on intermediary dealers or retailers.

Conclusion: The impugned notification and circular were invalid to the extent they prevented recovery of the reimbursed tax component, and the petitioners were entitled to relief.

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