Medicinal use determines tax classification: medicated oxygen for hospital treatment was not taxable as an industrial gas.

Medicated oxygen manufactured under the Medicated Oxygen and Drugs Rules, 1945 and used exclusively for treating human patients in hospitals was treated as a medicine or drug, not as industrial oxygen gas. Because it had no industrial or commercial use apart from life-saving treatment, the higher tax rate applicable to industrial oxygen was held inapplicable. The additional tax demand was therefore unsustainable, and the lower rate on medicated oxygen was upheld.

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Issues: Whether medicated oxygen used exclusively for treating human patients in hospitals was liable to tax at the higher rate applicable to oxygen and industrial gases under the relevant notification, or whether it was correctly treated as medicine or drug and taxed at the lower rate.

Analysis: Medicated oxygen was found to be manufactured under the Medicated Oxygen and Drugs Rules, 1945 and to have no industrial or commercial use apart from saving human life in hospitals. The higher rate under the notification was held applicable to industrial oxygen gas, not to medicated oxygen used only for treatment. The finding that the commodity was medicine or a drug, and not an industrial gas, was supported by the exclusive life-saving use of the product. The Court also emphasized that, where a commodity is used only for saving human life, unnecessary tax burden should not be imposed in light of the State's welfare obligation.

Conclusion: The additional demand based on the higher tax rate was not sustainable, and the lower tax rate treating medicated oxygen as medicine or drug was upheld.

Final Conclusion: The revision petition failed, and the assessment position sustaining tax at the lower rate on medicated oxygen remained undisturbed.

Ratio Decidendi: Where a commodity is manufactured and used exclusively for life-saving treatment and has no industrial or commercial use, it is to be classified according to that exclusive medical use rather than as an industrial product for higher tax liability.

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