First-stage sales tax on medicines applied to the earliest taxable dealer where the manufacturer's sale was exempt.

Section 18 of the Haryana General Sales Tax Act, 1973 allowed tax on notified goods at the first stage of sale, subject to notification-based conditions. For medicines and pharmaceutical preparations, the 5 May 1973 notification provided that where a manufacturer's first sale in the State was not taxable because the manufacturer was exempt from tax, the earliest successive dealer liable to tax became the taxable stage. On that basis, the earliest liable dealer's subsequent sale was within the notified taxable stage and was not exempt from tax.

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Issues: Whether the subsequent sale of medicines was exempt from tax where the first sale was by a manufacturer exempted from payment of tax under the Haryana General Sales Tax Act, 1973.

Analysis: Section 18 of the Haryana General Sales Tax Act, 1973 permits tax on notified goods to be levied at the first stage of sale, subject to conditions and restrictions specified by notification. The notification dated 5th May, 1973 covering medicines and pharmaceutical preparations provided that where the manufacturer sells such goods for the first time in the State and is not liable to pay tax, the sale by the earliest of the successive dealers liable to tax becomes the taxable stage. The manufacturer in question was exempt under section 13(1) and was therefore not liable to pay tax on the first sale. In that situation, the assessee, being the earliest successive dealer liable to tax, fell within the taxable stage contemplated by the notification.

Conclusion: The subsequent sale was not exempt from tax. The question was answered in the negative and against the assessee.

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