Hospital supplies in patient treatment remain part of an indivisible medical service, not taxable deemed sales under Article 366(29A).

Medicines, implants, consumables and surgical tools supplied exclusively in the treatment of in-patients were held to form part of an indivisible medical service, not a separate sale of goods liable to sales tax. The deeming fiction in Article 366(29A) was confined to the specific categories expressly enumerated there and could not be extended by analogy to hospital treatment. The dominant nature test was applied to the composite hospital transaction, whose essential character remained medical care, so the sale and service elements could not be bifurcated for taxation. The argument that drugs are essential commodities did not bring such supplies within Article 366(29A)(a).

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Issues: (i) Whether medicines, implants, consumables and surgical tools used exclusively in the treatment of in-patients in a hospital constitute a sale of goods under Article 366(29A)(f) of the Constitution of India and are taxable as such under the sales tax law. (ii) Whether the sale element in such hospital transactions can be severed from the medical service by applying the deeming fiction in Article 366(29A) or the dominant nature test. (iii) Whether the argument that drugs are essential commodities brings the transaction within Article 366(29A)(a).

Issue (i): Whether medicines, implants, consumables and surgical tools used exclusively in the treatment of in-patients in a hospital constitute a sale of goods under Article 366(29A)(f) of the Constitution of India and are taxable as such under the sales tax law.

Analysis: The supply and administration of drugs, implants and consumables in the course of hospital treatment was held to be part of the therapeutic service rendered to the patient. The patient has no independent choice over the particular items administered in treatment, and the items are used only pursuant to medical advice as part of the overall care. Article 366(29A)(f) was held to be confined to the specific supply of food and drink in catering-type situations and could not be extended to hospital services. The fiction created by Article 366(29A) does not travel beyond the clauses in which it is expressly contained.

Conclusion: The supply of medicines, implants and consumables to in-patients in the course of treatment is not a separate sale of goods and is not exigible to sales tax as such.

Issue (ii): Whether the sale element in such hospital transactions can be severed from the medical service by applying the deeming fiction in Article 366(29A) or the dominant nature test.

Analysis: The reasoning in earlier decisions treating hospital supplies as taxable sales was rejected. The dominant nature test continues to apply to composite transactions not covered by Article 366(29A), and hospital treatment was held to be an indivisible composite service whose dominant character is medical care. The deemed-sale fiction applies only to the specific categories enumerated in Article 366(29A) and cannot be extended by analogy to hospital treatment. The levy cannot be sustained merely because property in goods passes during treatment or because the hospital may operate for profit.

Conclusion: The sale and service elements in hospital treatment cannot be bifurcated for the purpose of levying sales tax on the value of the items used in treatment.

Issue (iii): Whether the argument that drugs are essential commodities brings the transaction within Article 366(29A)(a).

Analysis: The contention was rejected because the transaction was not one involving a controlled commodity or a statutory compulsion that supplies consensus. The real reason the tax could not be levied was not absence of contract, but the indivisible character of the medical service in which the goods were used. Essential commodities, by themselves, do not attract Article 366(29A)(a) unless the legal conditions for that clause are satisfied.

Conclusion: The essential-commodities argument does not bring hospital supply of medicines and consumables within Article 366(29A)(a).

Final Conclusion: Hospital supplies of medicines, implants and consumables used in the treatment of in-patients are part of an indivisible medical service and cannot be isolated as taxable sales under the deemed-sale provisions of Article 366(29A).

Ratio Decidendi: The deeming fiction in Article 366(29A) is confined to the specific categories expressly enumerated there, and in composite transactions outside those categories the sale element cannot be severed from an indivisible service by applying the dominant nature test to impose sales tax.

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