TaxTMI 
TaxTMI 
TaxTMI 
2014 (10) TMI 1020
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....ns, it would suffice if the facts in W.P. No. 13418 of 2014 are noted. 3. The petitioner, in W.P. No. 13418 of 2014, is a public limited company engaged in the manufacture and sale of various gasses including Medical Oxygen IP, and Nitrous Oxide IP. They are dealers on the rolls of the Commercial Tax Officer, Gajuwaka Circle, Visakhapatnam. By assessment order, in Form VAT 305 dated 07.04.2014, the petitioner was assessed to VAT for Rs. 1,73,01,306/- classifying Medical Oxygen IP, and Nitrous Oxide IP, sold by them as unclassified goods under Schedule V to the Act; and tax at the higher rate of 12.5%/14.5%, instead of 4%/5% under Entry 88 of Schedule IV to the Act, was levied thereon. 4. It is the petitioners case that they manufacture the aforesaid products under a licence granted to them under the Drugs and Cosmetics Rules, 1945; the subject goods are used only in the treatment of patients in hospitals; the petitioner had classified these goods as drugs and medicines under Entry 88 of the IV Schedule, and had paid VAT at 4%/5% as applicable during the relevant period; they submitted an application to the Authority for Clarification and Advance Ruling on 02.05.2005 seeking clari....
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....tion 67(3) of the Act; the assessment order is a vague and non-speaking order; it has not dealt with the submissions put forth on behalf of the petitioner; the demand is barred by limitation for the period from April, 2009 to February, 2010; and Liquid Medical Oxygen IP and Nitrous Oxide IP should be classified as drugs and medicines under Entry 88 of the IV Schedule to the Act. 7. Sri Shaik Jeelani Basha, Learned Counsel for the petitioner in W.P. No. 16782 of 2014, would submit that the Government had, by G.O. Ms. No. 1615 dated 31.08.2005, prescribed HSN Codes in respect of 70 items in Schedule-IV, whereunder Oxygen-medicinal grade was referred to in sub-entry 14 of Entry 88; the government had, by G.O. Ms. No. 140 dated 19.03.2013, rescinded the earlier notification issued in G.O. Ms. No. 1615 dated 31.08.2005; later the Government had, by G.O. Ms. No. 76 dated 14.02.2014, validated the orders passed, advance rulings and clarifications issued by the authorities of the Commercial Taxes Department following the classification of goods in G.O. Ms. No. 1615 dated 31.08.2005 till it was rescinded by G.O. Ms. No. 140 dated 19.03.2013; as the assessment order relates to the period, f....
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.... 9. Sri P. Balaji Varma, Learned Special Standing Counsel for Commercial Taxes, would submit that the clarification given by the Advance Ruling Authority is binding; Entry 100(36) of Schedule IV specifically excludes medical grade oxygen; as medical grade oxygen has been specifically excluded from Entry 100 of Schedule IV, and has not been specifically included in Entry 88 thereof, they must be held to be unclassified goods taxable under Schedule V to the Act; and, if the Legislature intended to bring them within the ambit of Entry 88, a specific entry would have been made therein, more so, as they have been excluded from Entry 100 of Schedule IV to the Act. 10. By G.O. Ms. No. 1615, dated 31.08.2005, HSN Codes were prescribed for various goods in the Schedules to the Act. The said G.O. was issued in the exercise of the powers conferred on the government under Section 76(2) of the Act. The HSN Code, prescribed for oxygen medical grade in G.O. Ms. No. 1615 dated 31.08.2005, was 2804.40.10; and oxygen medical grade was shown therein to fall under Entry 88 of Schedule IV to the Act. In MGRM Medicare Limited v. Commercial Tax Officer, a Division Bench of this Court held: While the s....
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....der of assessment, and remand the matter back to the first respondent assessing authority who shall, after giving the petitioner an opportunity of being heard, pas a fresh order of assessment in accordance with law without reference to the HSN Codes mentioned in G.O. Ms. No. 1615 dated August, 31, 2005 as relatable to entry 2 of the first Schedule to the VAT Act (emphasis supplied) 12. As G.O. Ms. No. 1615 dated 31.08.2005, issued in exercise of the powers conferred under Section 76(2) of the Act, was neither a legislative exercise nor was it issued under Section 79 of the Act, this Court held that no reliance could be placed on these HSN Codes to restrict the scope of the Entries in the Schedules to the Act and, in view thereof, the assessing authority could not have relied upon G.O. Ms. No. 1615, dated 31.08.2005. The law declared by the Court is presumed to be the law at all times. The decision of a Court, enunciating a principle of law, is applicable to all cases irrespective of its stage of pendency because it is assumed that what is enunciated by the Court is, in fact, the law from the inception. (M.A. Murthy v. State of Karnataka). A judicial decision acts retrospectively. ....
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....ovisions of Section 13. Schedule IV is the list of goods taxable at 4% prior to 14.09.2011, and at 5% thereafter. Entry 88 thereof reads as under: 88. Drugs and medicines whether patent or proprietary as defined in clauses (i), (ii) and (iii) of Section 3(b) of Drugs and Cosmetics Act, 1940 (Central Act 23 of 1940), and hypodermic syringes, hypodermic needles, perfusion sets, urine bags, catguts, sutures, surgical cotton, dressing, plasters, catheters, cannulae, bandages and similar articles, but not including:- (a) Medicated goods; (b) Products capable of being used as cosmetics and toilet preparations including Tooth Pastes, Tooth powders, cosmetics, Toilet articles and soaps; [c] Mosquito Repellants in any form. 15. Entry 100 of the IV Schedule relates to goods when sold as industrial inputs. Sub-entry (36), thereunder, reads thus:- Hydrogen, rare gases other non-metals excluding medicinal grade oxygen. 16. Under Schedule V to the Act all goods, other than those specified in Schedules I, III, IV and VI, are taxable at the standard rate of 12.5% prior to 15.01.2010, and at 14.5% thereafter. If Medical Oxygen IP and Nitrous Oxygen IP fall under Entry 88 of Schedule IV,....
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....icines, and substances which are not medicines strictly so-called. The expression "substances", therefore, must be something other than medicines but which are used for treatment. The appropriate meaning of the expression "substances" in the Section is "things". The Legislature designedly extended the definition of "'drug" so as to take in substances which are necessary aids for treating surgical or other cases. The main object of the Drugs Act, which is to prevent usage of substandard drugs for maintaining high standards of medical treatment, would be defeated if the necessary concomitants of medical or surgical treatment were allowed to be diluted and consequently the very same evil, which the Drugs Act intends to eradicate, would continue to subsist. (Chimanlal Jagjivan Das Sheth). 20. The words used for or in, in Section 3(b)(i) of the Drugs Act, are significant. The definition of a drug therein would take within its fold (1) all substances used for the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings; and (2) all substances used in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings. Thus a....
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.... Order, 2013, (2013 order for short), which came into force, on its publication in the Official Gazette, on 15.05.2013. Para 2(d) thereunder defined ceiling price to mean a price fixed by the Government for Scheduled formulations in accordance with the provisions of the Order. Para 2(t) defines National List of Essential Medicines to mean National List of Essential Medicines, 2011 published by the Ministry of Health and Family Welfare as updated or revised from time to time, and included in the first schedule of the Order. Para 2(zb) defines scheduled formulation to mean any formulation, included in the First Schedule, whether referred to by generic versions or brand name. Para 2(2) stipulates that all other words and expressions used therein and not defined, but defined in the Drugs and Cosmetics Act, 1940, shall have the meanings respectively assigned to them in the said Act. As such, for the purpose of the Drugs (Prices Control) Order, 2013, the definition of a drug under Section 3(b) of the Drugs Act would apply. Section 1 of Schedule I to the 2013 order relates to anesthesia, and Clause 1.1 thereunder relates to general anesthetics and oxygen. Among the medicines categorized t....
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....ence, ought to be understood in that sense. Such a special meaning i.e. the technical meaning shall be assigned as distinguished from the more common meaning that the word may have. (National Mineral Development Corpn. Ltd. v. State of M.P.,). 24. Martindale-the Complete Drug Reference, (Thirty Sixth Edition, edited by Sean C. Sweetman), defines Oxygen as a colourless, odourless gas, soluble one in about 32 of water by volume at 20 and a pressure of 101 KPa. It stipulates that Oxygen should be kept in approved metal cylinders, the shoulders of which are painted white, and the remainder black; the cylinder should carry a label stating Oxygen; and, in addition, Oxygen or symbol O2 should be stenciled in paint on the shoulder of the cylinder. With regards its uses in administration, it is stated that Oxygen is given by inhalation to correct hypoxaemia in conditions causing respiratory failure, and in conditions where the oxygen content of the air breathed is inadequate such as high altitude disorders; oxygen is of value in the treatment of poisoning with a number of substances, including carbon monoxide, cyanides, and dichloromethane; it provides enhanced oxygenation in inhalation in....
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.... the functional test, it is evident that "medical oxygen" and "nitrous oxide" are served as medicines.. In a case where an item falls under two entries in the Schedule in order to decide the taxable entry the question is as to which of the two is the special entry, for the special entry will exclude the general entry. [Importex International (P) Ltd. v. State of Kerala [1991] 81 STC 351 (Ker) and Deputy Commissioner of Sales Tax v. Food Specialities Ltd. [1991] 82 STC 298 (Ker)]. The Karnataka High Court in Indian Oxygen Ltd.'s case [1990] 79 STC 351, took the view that "medical oxygen" is distinct from "industrial oxygen". Entry No. 85 deals with all kinds of gases. If as a matter of fact a particular category of gas, in the instant case, "medical oxygen", has got the exclusive user as a medicine and if there is an entry relating to medicine, the item so carved out from the general entry relating to "gases" will have to be brought under the entry medicine and it has to be assessed under that entry. Here, as we have already noted, entry No. 85 deals with all kinds of gases, "medical oxygen" is one of the items of gases dealt with in entry No. 85. However, "medical oxygen" bei....
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....icine and a pharmaceutical preparation since the use of abbreviation 'IP' against the word 'oxygen' means that it is included in the Indian Pharmacopoeia (emphasis supplied). 29. As is evident, from the aforesaid judgments, "Medical oxygen" has 99.9% purity of purified oxygen and its use is only for treatment of patients and to mitigate contrary intensity of any disease or disorders in human beings. At times of emergency, the application of "medical oxygen" to a patient is resorted to in order to prevent any sudden collapse of a patient, which process is a part of the treatment given to a patient to recoup from a deterioration in his health condition. (Ram Oxygen (P) Ltd.). The principal use of nitrous oxide (laughing gas) is as an anaesthetic in surgical operation procedures of short duration. (Southern Gas Ltd.). Nitrous oxide is sold mainly to hospitals and nursing homes, for being used as an anaesthetic. It is treated as a surgical aid in trade circles and common parlance. Medicinal oxygen is used to enrich gaseous anaesthetics, during general anaesthesia. "Nitrous oxide" is used as an anaesthetic. Both "nitrous oxide" and "medical oxygen" are clearly identifi....