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PETITIONER: COMMISSIONER OF SALES TAX, U.P.

       Vs.

RESPONDENT: DR. SUKH DEO

DATE OF JUDGMENT: 19/08/1968

BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V.

CITATION:  1969 AIR  499            1969 SCR  (1) 710  CITATOR INFO :  F          1980 SC  86  (5)

ACT: U.P.   Sales Tax Act   1948-Notification  No.  S.T.  3504/X, dated May 10, 1956 issued under power given by s. 3A of  the Act-Single  point  tax  payable on sale  by  manufacture  of medicines and pharmaceuticals-Medicines dispensed by medical practitioner   to  his  patients-Such   dispensing   whether ’manufacture’   within   meaning   of   notification-Whether taxable.

HEADNOTE: The  respondent was a medical practitioner in Uttar  Pradesh and maintained a dispensary from which medicines were issued to  his  patients according to his prescriptions.  According to  notification No. S.T. 3504/X, dated May 10, 1956  issued under s. 3A of the U.P. Sales Tax Act, 1948, tax in  respect of sale of medicines and pharmaceuticals manufactured in the State  was payable at single point on the sale  effected  by the manufacture. The Sales Tax Officer held that  dispensing of  medicines  was manufacture’ within the  meaning  of  the aforesaid notification and assessed the respondent to  sales tax  for  the  year 1956-57 on  the  turnover  of  medicines dispensed.  The order was confirmed by  the  appellate   and revisional authorities, but the High Court decided in favour of the respondent.  The State appealed. HELD:  When  as  prescribed by  a  medical  practitioner,  a mixture  of  different  drugs is  prepared  by  the  medical practitioner or by his employees specially for the use of  a patient  in  the  treatment  of  an  ailment  or  discomfort diagnosed  by the medical practitioner by  his  professional skill,  and  which mixture is normally  incapable  of  being passed  ’from  hand to hand as a commercial  commodity,  the medical practitioner supplying the medicines cannot be  said to  be a manufacturer of the mixture and the mixture  cannot be  said  to  be manufactured  within  the  meaning  of  the notification. [712 G-H] In the absence of clearer phraseology the Court would not in a  taxing  provision be willing to  give  an  interpretation whereby  a  medical practitioner supplying to  his  patients medicines and pharmaceutical preparations separately is  not liable  to tax, but when under his direction they are  mixed

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by his employees for the special use of a patient under  his treatment  and to achieve a specific purpose,  the  turnover from the resultant mixture is taxable. [713 D]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2458 of 1966. Appeal  by special leave from the judgment and decree  dated April  1,  1963  of the Allahabad High  Court  in  Sales-tax Reference No. 391 of 1959. C.B.Agarwala and O.P. Rana, for the appellant. J.P. Goyal and Sobhag Mal Jain, for the respondent. 711 The Judgment of the Court was delivered by Shah,  J.  The Judge [Revisions] Sales Tax,  U.P.,  Lucknow, referred  the  following  question  to  the  High  Court  of Allahabad for opinion:               "Whether  the  preparation  of  medicines   on               prescriptions  of the applicant amounted to  a               manufacture  of "medicines and  pharmaceutical               preparations"    within   the    meaning    of               notification  No. S.T. 3504/X dated 10th  May,               1956, and whether the applicant was assessable               to  tax  on the turnover of the  medicines  so               dispensed ?" The   High  Court  held  that  the  respondent  was  not   a manufacturer  of medicines and  pharmaceutical  preparations within the meaning of the notification.  Against the  answer recorded  by the High Court, the Commissioner of Sales  Tax, U.P., has appealed to this Court with special leave. The  respondent  is  a  medical  practitioner  and  in   the performance of his professional duties he examines patients, advises them and prescribes medicines which are issued  from his  dispensary.   The Sales Tax Officer being of  the  view that   the  dispensing  of  medicines,  according   to   the prescriptions   issued  by  the  respondent,   amounted   to manufacture   of  medicines  within  the  meaning   of   the notification  No. S.T. 3504/X dated May 10,  1956,  assessed the  respondent to pay tax on a turnover of Rs.  12,943  for the year 1956-57.  The order was confirmed in appeal by  the Judge  (Appeals)  and  was further confirmed  by  the  Judge (Revisions) Sales Tax. The  sole  question which falls to be  deterrained  in  this appeal  is  whether  by  virtue  of  the  notification,  the respondent is exempt from liability to pay tax. Section  3  of  the U.P. Sales Tax Act,  1948,  makes  every dealer  liable  to pay in each assessment year a  tax  at  a certain rate on the turnover.  Section 3A provides:               "Notwithstanding anything contained in section               3   the  State Government may   ....   declare               that   the   turnover  in   respect   of   any               goods   ....shall not be liable to tax  except               at such single point in the series of sales by               successive dealers  as  the  State  Government               may specify." On  May  10, 1965, the Governor of Uttar  Pradesh  issued  a notification No. S.T. 3504/X that--               "In  exercise  of  the  powers  conferred   by               section 3A of the U.P. Sales Tax Act, 1948, as               amended from time to time, and in supersession               of all the previous notifica- 712               tions  on the subject, the Governor  of  Uttar               Pradesh is hereby pleased to declare that with

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             effect  from  May  8,  1956,  the  turnover  m               respect   of  medicines   and   pharmaceutical               preparations  shall not  be  liable   to   tax               except-               (a)    in   the   case   of   medicines    and               pharmaceutical  preparations   imported   from               outside   Uttar Pradesh, at the point of  sale               by the importer. and               (b)    in   the   case   of   medicines    and               pharmaceutical  preparations manufactured,  in               Uttar  Pradesh,  at the point of sale  by  the               manufacturer;               And the Governor is further pleased to declare               that such turnover shall with effect from  the               said date be taxed at the rate of  ....  " The   respondent  is  not  an  importer  of  medicines   and pharmaceutical  preparations  from  outside  Uttar  Pradesh. That  Is common ground.  The Revenue  authorities,  however, held   that   when   in   his   dispensary   medicines   and pharmaceutical   preparations   as prescribed  by  him  were mixed,  the process of mixing resulted in  "manufacture"  of medicines,  by  him  as a  "manufacturer".   The  expression "manufacture"   has  in   ordinary   acceptation   a    wide connotation:  it  means  making  of  articles,  or  material commercially   different  from  the  basic  components,   by physical labour or mechanical process; and a manufacturer is a  person by whom or under whose direction and  control  the articles  or materials  are made.  The notification  in  the first  instance  exempts  from tax sales  of  medicines  and pharmaceutical  preparations.  It then proceeds to  withdraw the  exemption  in  respect  of  two  classes  of  sales  of medicines  and pharmaceutical preparations, (i) sale  by  an importer of medicines etc., imported from outside the  State and   (ii)  sale  by  a  manufacturer  of  medicines   etc., manufactured in the State.  The tax levied in respect of the excepted categories is a single point tax: it may be  levied when medicines and pharmaceutical preparations  manufactured in the State of Uttar Pradesh are sold by the manufacturer. In   our  judgment  when,  as  prescribed  by   a    medical practitioner,  a mixture of different drugs is  prepared  by the  medical practitioner or by his employees specially  for the  use  of  a patient in the treatment of  an  ailment  or discomfort  diagnosed  by the medical  practitioner  by  his professional skill, and which mixture is normally  incapable of being passed from hand to hand as a commercial commodity, the medical  practioner  supplying  the medicines cannot  be said  to  be a manufacturer of the mixture and  the  mixture cannot be said to be manufactured within the mean- 713 ing   of  the  notification.   Exemption  granted   by   the notification  ceases to apply under cl. (a) if the  importer of  medicines and pharmaceutical  preparations  manufactured outside  the  State  sells them, and under cl.  (b)  if  the manufacturer  of medicines and  pharmaceutical  preparations manufactured  in  Uttar  Pradesh  sells  them.   The  scheme therefore  is to levy sales-tax at one point only, viz.,  at the  point of sale by the importer in respect  of  medicines imported by him into the State,. and at the point of sale by the manufacturer of medicines manufactured by him within the State.   If preparation of a mixture of drugs as  prescribed by  a  medical  practitioner in his own  dispensary  is  not manufacture of medicines or pharmaceutical preparation,  the exception   clause   of  the  notification  will   have   no application. Acceptance of the contention by the Revenue would imply that

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a medical practitioner supplying to his  patients  medicines and pharmaceutical preparations separately is not liable  to tax:  when  under  his  direction  they  are  mixed  by  his employees  for  the  special  use of  a  patient  under  his treatment  and to achieve a specific purpose,  the  turnover from  the resultant mixture is taxable.  In the  absence  of clearer  phraseology,  the  Court  would  not  in  a  taxing provision be willing to give that interpretation. The  appeal therefore fails and is dismissed.  The delay  in filing  the respondent’s statement of the case is  condoned. There will be no order as to costs in this appeal. G.C.                                     Appeal dismissed. 714