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2022 (9) TMI 60
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..... 67/2019 D.B. Sales Tax Revision / Reference No. 68/2019 D.B. Sales Tax Revision / Reference No. 69/2019 D.B. Sales Tax Revision / Reference No. 117/2019 D.B. Sales Tax Revision / Reference No. 132/2019 D.B. Sales Tax Revision / Reference No. 137/2019 D.B. Sales Tax Revision / Reference No. 138/2019 D.B. Sales Tax Revision / Reference No. 140/2019 D.B. Sales Tax Revision / Reference No. 146/2019 D.B. Sales Tax Revision / Reference No. 147/2019 D.B. Sales Tax Revision / Reference No. 148/2019 D.B. Sales Tax Revision / Reference No. 149/2019 D.B. Sales Tax Revision / Reference No. 150/2019 D.B. Sales Tax Revision / Reference No. 185/2019 D.B. Sales Tax Revision / Reference No. 187/2019 D.B. Sales Tax Revision / Reference No. 271/2019 D.B. Sales Tax Revision / Reference No. 293/2019 D.B. Sales Tax Revision / Reference No. 23/2021 D.B. Sales Tax Revision / Reference No. 25/2021 D.B. Sales Tax Revision / Reference No. 26/2021 D.B. Sales Tax Revision / Reference No. 32/2021 D.B. Sales Tax Revision / Reference No. 37/2021 D.B. Sales Tax Revision / Reference No. 40/2021 D.B. Sales Tax Revision / Reference No. 45/2021 D.B. Sales Tax Revision / Reference No. 46/2021 D.B. Sales Tax Revision ....
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.... No.F.12 (23) FD/Tax/ 2015-198 dated 09.03.2015. 2. Substituted by notification No. F.12 (11) FD / Tax /2016-187 dated 08.03.2016, for expression, Medical equipment/ devices and implants other than Pseudophakic Intra Ocular Lens" 5. While relying upon the said Entry 86, it is contended that the medical equipment/devices including dental implants but excluding Pseudophakie Intra Ocular Lens attracts tax at the rate of 5.5% on the sale price. It was further contended that the respondents, who are clinical establishments, nursing homes, hospitals providing health care services to the in-house patients, while selling medical equipment/devices, implants during the course of treatment, surgery, have not discharged sales tax/VAT on the said transactions even though it has been admitted that implants, consumables, drugs, pharma etc. have been sold during the course of treatment. 6. It was further contended that the learned Adjudicating Authority, while relying upon the provisions of Section 2(11) of the RVAT Act, 2003, which defines 'Dealer' and Section 2(35) which defines 'Sale' which includes any supply or transfer of property in goods during rendering serv....
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....ndered in K. Damodarasamy Naidu & Bros. and others Vs. State of T.N. and others: (2000) 1 SCC 521 wherein it was held that on supply of food and drinks in restaurants, there is a liability of sales tax even though service element is involved, in terms of Article 366(29A) and in terms of Entry 54 of List II of the Seventh Schedule of the Constitution of India on the commodities of goods, even though the same was part of services. 11. Per-contra, learned counsels appearing for the respondents submitted that the question of law formulated is duly answered by the learned Tax Board. Neither the respondents qualifies to be a dealers nor the transaction in question qualifies the test of sale. The transaction in hand is predominantly a service wherein implant of lenses, stents, surgical items and sale of drug is an incidental event. It was further submitted that in the light of the judgment of the Hon'ble Apex Court rendered in Bharat Sanchar Nigam Limited and Another Vs. Union of India and others: (2006) 145 STC 91 aspect theory needs to be applied. Predominantly, the transaction in question is a service and the same will fall under the Union List. The State has no competence to le....
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....c; Secondly, the same was part of composite charges realized by the hospital towards treatment of indoor patients. The aforesaid judgment of Jharkhand High Court was upheld by the Apex Court and while dismissing the SLP, it was held by Hon'ble Apex Court that what one has to analyze before levy of sales tax is the substance of contract and the dominant nature test to decide whether the contract falls into sale or service to test the legislative competence as to whether the subject in question is of "Union List" or the "State List". Merely by relying upon Article 366 (29A) of the Constitution of India and analyzing that the case in hand is of composite contract, it will not automatically fall under legal fiction of a deeming sale. Relying upon the aforesaid judgment, learned counsels for the respondents submitted for upholding the version of the learned Tax Board and for dismissal of the instant revision petitions filed by the petitioner-Revenue. 14. We have heard the respective counsels representing the petitioner-Revenue and the respondents-assessees. We have also perused records of the revision petitions and considered the various judgments cited at bar by the respective s....
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....transactions. 19. In the case in hand, before we advert to the issue, one has to analyze the nature of transaction whether it qualifies to be a "sale" or a "service" to decide the legislative competence. If the transaction in question is a service, then by no stretch of imagination, the petitioner-Revenue will have power to collect sales tax/VAT on the same. If the transaction in question amounts to sale, the power will be wholly exercised by the petitioner-Revenue as the same will be under their domain. 20. It is also important to analyze the relevant definitions and provisions of the Rajasthan Value Added Tax Act, 2003. It will be important to consider the preamble, Sections 2(11), 2(15), 2(35), 2(36) and 2(44) of the RVAT Act, 2003 which provide as under:- 2(11) "dealer" means any person, who carries on business in any capacity, of buying, selling, supplying or distributing goods directly or otherwise, or making purchases or sales as defined in clause (35) for himself or others, whether for cash or deferred payment, or for commission, remuneration or other valuable consideration and shall include- (i) a factor, broker, commission agent, del credere agent ....
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....other valuable consideration and includes- (i) a transfer, otherwise than in pursuance of a contract, of property in goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) any delivery of goods on hire-purchase or other system of payment by instalments; (iv) a transfer of the right to use goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) a supply of goods by an unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; and (vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply shall be deemed to be a sale and the word "purchase" or "buy" shall be construed accordingly; Explanation.- Notw....
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....ainst each of such goods in the said Schedules." 22. The case of the petitioner-Revenue is that the respondents clinical establishments/hospitals/nursing homes purchases the medical implants like stents, eye-lenses, pharmacy and surgical items after payment of tax/VAT from dealers and utilizes the same during the course of medical treatment of patients in-house and as the same constitutes transfer of goods in terms of Section 2(35) of the RVAT Act, 2003. The same also amounts to sale in terms of Section 2(11) of the RVAT Act, 2003 and as they are selling the same for consideration, they qualify to be a dealer and alternatively, by virtue of Section 2(44) of the RVAT Act, 2003, as they carry out work of installation, the same amounts to "works contract". 23. In the case in hand, the respondents are running health care services wherein the patients are categorized primarily in two categories; out patients and "in-patients" for administrative convenience. The out patients are those who visit a hospital for routine check ups or clinical visits. In-patients are those who are admitted in the hospital for the required treatment. Normally, there is a central pharmacy from where the p....
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....ind of service and sale at the same time. Apart from these two cases where splitting of the service and supply has been Constitutionally permitted in clauses (b) and (g) of Clause 29A of Art. 366, there is no other service which has been permitted to be so split. For example the clauses of Art. 366(29A) do not cover hospital services. Therefore, if during the treatment of a patient in a hospital, he or she is given a pill, can the sales tax authorities tax the transaction as a sale? Doctors, lawyers and other professionals render service in the course of which can it be said that there is a sale of goods when a doctor writes out and hands over a prescription or a lawyer drafts a document and delivers it to his/her client? Strictly speaking with the payment of fees, consideration does pass from the patient or client to the doctor or lawyer for the documents in both cases. 46. The reason why these services do not involve a sale for the purposes of Entry 54 of List II is, as we see it, for reasons ultimately attributable to the principles enunciated in Gannon Dunkerley's case, namely, if there is an instrument of contract which may be composite in form in any case other t....
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....ot to have finally determined the issue. In any event, the High Court erred in including the cost of the service in the value of the SIM card by relying on the aspects doctrine. That doctrine merely deals with legislative competence. As has been succinctly stated in Federation of Hotel & Restaurant Association of India Vs. Union of India (1989) 3 SCC 634- "subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. They might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects". No one denies the legislative competence of States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. 88. This does not however allow State to entrench upon the Union list and tax services by including the cost of such service in the value of the goods. Even in those composite contra....
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.... service in the case of indoor patients, Entry 86 will not come in play. The significance of Entry 86 is attracted in the case of outdoor patients when the transaction in question is an isolated transaction of sale of goods in the form of medical equipment/devices and implants. There is no predominance of medical treatment in the said transaction, unlike in the case of indoor patients. Therefore, the provisions of Schedule-IV and Entry 86 are not attracted and applicable in the case of medical treatment given to indoor patients even though, while rendering medical treatment, certain services like supply of medical equipment, devices, installation of implants/lenses is involved. 30. The above said contentions find support from the relied upon judgment rendered by Hon'ble Jharkhand High Court in Tata Main Hospital (Supra) wherein in Paras 25 and 26, it was held as under:- "25. Considering the facts of the present case, the argument advanced on behalf of the respective parties and the law in the subject noticed above it is to be held that in the present case, the medicines, which are supplied to the indoor patients are administered in course of treatment to those patie....
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....t the medical services during the course of treatment rendered to the indoor patients do not qualify as sale and the hospitals can't be termed as dealer. The said judgment was upheld by the Apex Court. 32. The reliance placed by the respondents upon division bench judgment of Hon'ble Allahabad High Court in International Hospital Pvt. Ltd. (supra), is also worth consideration wherein relying upon judgment of BSNL (supra) and provisions of Article 366 and Article 29A of the Constitution of India, it was held that the supply of medicines, surgical items, vaccines, x-ray items, etc., which were supplied to the indoor patients admitted in the hospital for treatment and for which the hospital realizes charges, does not qualify to be considered as 'sale', but predominantly is a transaction of service. 33. Respectfully following the judgments of both the High Courts, i.e. Jharkhand High Court and Allahabad High Court, which have attained finality upon dismissal of SLP of the Revenue preferred before the Hon'ble Supreme Court and the ratio of judgment being squarely applicable in the present case, this Court is of the view that the transaction in question and the ....
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....tant sale under Section 366(29-A) of the Constitution of India to the supply of food and drink in hospitals. The matter was entirely different and not pertaining to medical treatment services. The said case was duly considered in Bharat Sanchar Nigam Limited (supra) along with other judgments of the Apex Court and only thereafter giving the concept of Aspect Theory and Predominant Test, the classification of service and sale was made out. The facts of above case are distinguishable and therefore, not applicable in the present case. 38. In the light of the fact that the case in hand pertains to rendering of health care/medical services and not supply of goods, this Court is of the view that the value recovered by the hospitals towards the cost of medicines, implants, stents, lenses and various other charges towards room rent, supply of food cannot be classifiable as sale or supply of goods but the transaction will be of service on account of Predominant Test/ Aspect Doctrine as reasoned above. 39. In the light of above, the substantial question of law formulated and arising out of the order impugned passed by the learned Tax Board is decided in favour of the respondents-assess....
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