Medical oxygen and nitrous oxide classification as drugs and medicines turns on treatment use and common parlance tests.

Liquid medical oxygen IP, medical grade oxygen and nitrous oxide IP are treated as drugs and medicines for classification under the A.P. VAT Act because they are included in the Indian Pharmacopoeia, manufactured under drug licences, used in hospitals for treatment and anaesthesia, and understood in trade as surgical aids. The common parlance, user and functional tests support classification within Entry 88 of Schedule IV. Exclusion from another schedule entry does not, by itself, remove the goods from Entry 88 unless the statute expressly so provides. Accordingly, the goods are taxable as medicinal goods and not as unclassified goods under Schedule V.

---

---

Issues: Whether liquid medical oxygen IP, medical grade oxygen and nitrous oxide IP are taxable as drugs and medicines under Entry 88 of Schedule IV to the A.P. Value Added Tax Act, 2005 or as unclassified goods under Schedule V.

Analysis: Entry 88 covers drugs and medicines as defined in Section 3(b)(i) of the Drugs and Cosmetics Act, 1940, and also extends to similar articles used in medical treatment. The goods in question are included in the Indian Pharmacopoeia, are manufactured under drugs licences, are used in hospitals for treatment and anaesthesia, and are understood in trade and common parlance as surgical aids. The exclusion of medical grade oxygen from Entry 100(36) of Schedule IV does not take it out of Entry 88, because exclusion from one entry does not imply exclusion from another unless the statute so provides. The common parlance, user and functional tests all support classification as medicinal goods.

Conclusion: The goods fall within Entry 88 of Schedule IV and are taxable only at 4%/5%, not as unclassified goods under Schedule V.

Ratio Decidendi: Where a substance is used in treatment, mitigation or prevention of disease or disorder and is commercially understood as a medical/surgical aid, it falls within the statutory definition of drug and medicine for classification purposes, notwithstanding exclusion from a different schedule entry.

---