Hospital supplies during medical treatment are integral to service and not separately taxable as sales under VAT law.

Medicines, drugs, stents, valves, implants and other consumables supplied by a private hospital during treatment are not separately taxable sales under Punjab and Haryana VAT law. The article explains that Entry 54 of List II permits tax only on sales of goods, while Article 366(29-A) extends the field only to specified deemed sales. A hospital treatment arrangement is characterised as a service contract, and items supplied in the course of treatment remain integral to that service. The dominant nature test applies outside Article 366(29-A), and the State cannot sever the supply from the medical service by legal fiction when no independent sale exists.

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Issues: Whether medicines, drugs, stents, valves, implants and other consumables supplied during a medical procedure by a private hospital constitute a sale exigible to value added tax under the Punjab and Haryana VAT laws.

Analysis: The power to levy tax under Entry 54 of List II of Schedule VII of the Constitution of India is confined to sales of goods, and Article 366(29-A) of the Constitution of India extends the field only to the specified deemed sales. A hospital treatment contract is a service contract whose substance is medical treatment, and the supply of medicines, stents, implants and similar items is integral to that service. Such hospital services do not fall within the constitutional categories of deemed sale, and the State cannot, by a legal fiction, sever the medical service from the supply of articles so as to create a taxable sale where the element of sale is absent. The dominant nature test continues to apply to transactions outside Article 366(29-A) of the Constitution of India, and the supply made during treatment is not independently severable as a sale.

Conclusion: The supply of medicines, drugs, stents, valves, implants and other consumables during medical treatment is not a sale and is not exigible to value added tax under the Punjab and Haryana VAT laws.

Ratio Decidendi: A hospital's supply of articles that are integral to medical treatment cannot be separated from the service contract and taxed as a sale unless the transaction independently satisfies the legal ingredients of sale or falls within Article 366(29-A) of the Constitution of India.

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