Assistant Commissioner, ... vs M/S Suvi Eye Hospital And Research ...
2022 Latest Caselaw 5841 Raj/2

        HIGH COURT OF JUDICATURE FOR RAJASTHAN
                    BENCH AT JAIPUR

       D.B. Sales Tax Revision / Reference No. 139/2019

Assistant Commissioner, Anti Evasion, Kota
                                                                 ----Petitioner
                                  Versus
Kota Eye Hospital And Research Foundation, 88, Shakti Nagar,
Kota
                                                               ----Respondent

Connected With D.B. Sales Tax Revision / Reference No. 66/2019 Assistant Commissioner, Anti Evasion, Zone-Ii, Jaipur

----Petitioner Versus Dr. Virendra Laser Fecosurgery Centre, Behind Ford Showroom, Gandhi Nagar, Tonk Rod, Jaipur

----Respondent D.B. Sales Tax Revision / Reference No. 67/2019 Assistant Commissioner, Anti Evasion, Zone-Ii, Jaipur

----Petitioner Versus Dr. Virendra Laser Fecosurgery Centre, Behind Ford Showroom, Gandhi Nagar, Tonk Rod, Jaipur

----Respondent D.B. Sales Tax Revision / Reference No. 68/2019 Assistant Commissioner, Anti Evasion, Zone-Ii, Jaipur

----Petitioner Versus Dr. Virendra Laser Fecosurgery Centre, Behind Ford Showroom, Gandhi Nagar, Tonk Rod, Jaipur

----Respondent D.B. Sales Tax Revision / Reference No. 69/2019 Assistant Commissioner, Anti Evasion, Zone-Ii, Jaipur

----Petitioner Versus

(2 of 29) [STR-139/2019]

Dr. Virendra Laser Fecosurgery Centre, Behind Ford Showroom, Gandhi Nagar, Tonk Rod, Jaipur

----Respondent D.B. Sales Tax Revision / Reference No. 117/2019 Commercial Taxes Officer, Special Circle-Vii, Jaipur

----Petitioner Versus M/s Santokba Durlabhji Memorial Cum Medical Research Institute, Bhawani Singh Marg, Jaipur

----Respondent D.B. Sales Tax Revision / Reference No. 132/2019 Assistant Commissioner, Anti Evasion Kota,

----Petitioner Versus Dr. R.n. Modi Hospital, Swami Vivekanand Nagar, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 137/2019 Assistant Commissioner, Anti Evasion, Kota

----Petitioner Versus Dr. R.n. Modi Hospital, Swami Vivekanand Nagar, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 138/2019 Assistant Commissioner, Anti Evasion, Kota

----Petitioner Versus M/s Sudha Hospital And Medical Research Centre, 11-A, Talwandi Kota

----Respondent D.B. Sales Tax Revision / Reference No. 140/2019 Assistant Commissioner, Anti Evasion, Kota

----Petitioner Versus Kota Eye Hospital And Research Foundation, 88, Shakti Nagar, Kota

(3 of 29) [STR-139/2019]

----Respondent D.B. Sales Tax Revision / Reference No. 146/2019 Assistant Commissioner, Commercial Tax Department, Circle Anti Evasion, Kota

----Petitioner Versus M/s Kota Heart Institute And Research Centre, A-11, Talwandi, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 147/2019 Assistant Commissioner, Commercial Tax Department, Circle Anti Evasion, Kota

----Petitioner Versus M/s Kota Heart Institute And Research Centre, A-11, Talwandi, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 148/2019 Assistant Commissioner, Commercial Tax Department, Circle Anti Evasion, Kota

----Petitioner Versus M/s Kota Heart Institute And Research Centre, A-11, Talwandi, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 149/2019 Assistant Commissioner, Commercial Tax Department, Circle Anti Evasion, Kota

----Petitioner Versus M/s Kota Heart Institute And Research Centre, A-11, Talwandi, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 150/2019 Assistant Commissioner, Anti Evasion, Kota

----Petitioner

(4 of 29) [STR-139/2019]

Versus M/s Sudha Hospital And Medical Research Centre Pvt. Ltd., 11-A, Talwandi Kota

----Respondent D.B. Sales Tax Revision / Reference No. 185/2019 Commercial Taxes Officer, Special Circle-Vii, Jaipur

----Petitioner Versus M/s Santokba Durlabhji Memorial Cum Medical Research Institute, Bhawani Singh Marg, Jaipur

----Respondent D.B. Sales Tax Revision / Reference No. 187/2019 Commercial Taxes Officer, Special Circle-Vii, Jaipur

----Petitioner Versus M/s Santokba Durlabhji Memorial Cum Medical Research Institute, Bhawani Singh Marg, Jaipur

----Respondent D.B. Sales Tax Revision / Reference No. 271/2019 Assistant Commissioner, Anti Evasion Kota

----Petitioner Versus Dr. R.n. Modi Hospital, Swami Vivakanand Nagar, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 293/2019 Assistant Commissioner, Circle Anti Evasion, Kota

----Petitioner Versus M/s Kota Eye Hospital And Research Foundation, 88, Shakti Nagar, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 23/2021 Assistant Commissioner Anti Evasion, Kota

----Petitioner Versus

(5 of 29) [STR-139/2019]

M/s Kota Eye Hospital And Research Foundation, 88, Shakti Nagar, Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 25/2021 Assistant Commissioner, Anti-Evasion, Circle, Kota.

----Petitioner Versus M/s Suvi Eye Hospital And Research Center Pvt.ltd., C-13, Talwandi, Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 26/2021 Assistant Commissioner, Anti-Evasion, Circle, Kota.

----Petitioner Versus M/s Dr. R.n. Modi Hospital, (A Unit Of Ramniwas Modi Charitable Society), Swami Vivekanand Nagar, Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 32/2021 Assistant Commissioner, Anti Evasion Circle, Kota.

----Petitioner Versus M/s D.d. Eye Institute, B-631, C.a.d. Circle, Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 37/2021 Assistant Commissioner Anti Evasion, Kota

----Petitioner Versus M/s Dr. R.n. Modi Hospital, Kota

----Respondent D.B. Sales Tax Revision / Reference No. 40/2021 Assistant Commissioner, Anti - Evasion, Circle, Kota.

----Petitioner Versus M/s Suvi Eye Hospital And Research Center Pvt. Ltd., C-13, Talwandi, Kota.

                                          (6 of 29)                [STR-139/2019]


                                                               ----Respondent

D.B. Sales Tax Revision / Reference No. 45/2021 Assistant Commissioner, Anti-Evasion, Circle, Kota.

----Petitioner Versus M/s Kota Eye Hospital And Research Foundation, M/s Kota Eye Hospital And Research Foundation, 88, Shakti Nagar, Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 46/2021 Assistant Commissioner, Anti Evasion Circle, Kota

----Petitioner Versus M/s Suvi Eye Hospital And Research Center Pvt. Ltd., C-13, Talwandi Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 47/2021 Assistant Commissioner, Anti-Evasion Circle, Circle, Kota.

----Petitioner Versus M/s Suvi Eye Hospital And Research Center Pvt.ltd., C-13, Talwandi , Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 48/2021 Assistant Commissioner, Anti - Evasion Circle, Kota

----Petitioner Versus M/s Suvi Eye Hospital And Research Center Pvt. Ltd., C-13, Talwandi, Kota.

----Respondent D.B. Sales Tax Revision / Reference No. 49/2021 Assistant Commissioner, Anti-Evasion, Circle, Kota.

----Petitioner Versus M/s Suvi Eye Hospital And Research Center Pvt. Ltd., C-13, Talwandi, Kota.

                                              (7 of 29)                [STR-139/2019]


                                                                   ----Respondent

D.B. Sales Tax Revision / Reference No. 50/2021 Assistant Commissioner, Anti-Evasion Circle, Kota.

----Petitioner Versus M/s Suvi Eye Hospital And Research Center Pvt. Ltd., C-13, Talwandi, Kota.

----Respondent

For Petitioner(s) : Mr. Punit Singhvi, Adv. With Mr. Ayush Singh, Adv., Mr. Akshat Dewan, Adv., Mr. Swapnil S. Sharma, Adv.

Mr. Sheetanshu Sharma, Adv. With Mr. Parnav Bhansali, Adv.

For Respondent(s) : Mr. Alkesh Sharma, Adv.

Mr. Amit Jindal, Adv.

Mr. Dinesh Kumar, Adv.

HON'BLE MR. JUSTICE PANKAJ BHANDARI HON'BLE MR. JUSTICE SAMEER JAIN

Judgment / Order

REPORTABLE Per: Hon'ble Sameer Jain, J.

Reserved On: 01/08/2022 Pronounced On: 25 /08/2022

1. Instant Sales Tax Revision Petitions under Section 84 of the

Rajasthan Value Added Tax Act, 2003 (for short, 'RVAT Act, 2003')

read with Section 86 of the Rajasthan Sales Tax Act, 1994 have

been filed by the petitioner-Revenue assailing the order impugned

passed by the learned Tax Board, Ajmer.

2. All Revision Petitions in the bunch of cases are involving

identical questions of law and based on the same set of facts.

Therefore, with the consent of learned counsels, the matter is

taken up for final disposal. SB Sales Tax Revision Petition

(8 of 29) [STR-139/2019]

No.139/2019 is taken up as a lead case for deciding the questions

of law which will apply mutatis-mutandis to all the connected

Revisions.

3. The matter was heard on the following questions of law:-

"Whether in the facts and circumstances of the case, the learned Tax Board was right in law in deleting the tax and consequential interest as well as penalty on implants, surgical items and medicines sold by the respondents even though the same was falling within the ambit of definition of "sale" as defined under Section 2(35) of the RVAT Act, 2003 ?"

4. Learned counsels appearing for the petitioners-Revenue

submitted that under Section 4 of the RVAT Act, 2003, the "levy of

tax and its rates" is defined which is to be imposed on the event of

sale as defined under Section 2(35) of the RVAT Act, 2003. The

particular rate on the given "sale price" as defined under Section

2(36) has to be discharged by the "dealer" as defined under

Section 2(11) of the RVAT Act, 2003 on the goods.

It is further submitted that as per Schedule-IV issued under

Section 4 of the RVAT Act, 2003 more particularly Entry 86

provides as under:-

"86. Medical equipment/devices and implants including dental implants but excluding Pseudophakic Intra Ocular lens _____________

1. Substituted by clause (iii) of Notification 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

(9 of 29) [STR-139/2019]

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 services or in execution of works contract

to be a deemed sale and therefore, held respondent liable for

payment of VAT. It was further submitted that owing to

transparent, broad and inclusive definition of 'sale', which was

broadened by Article 366(29A) of the Constitution of India, it was

obligatory on the part of the respondents to discharge VAT and

therefore, they were liable as per Entry 86 under Schedule-IV at

the rate of 5.5% or as per applicable rate.

7. Learned counsel for the petitioner-Revenue drew attention of

this Court towards the findings arrived at by the learned Appellate

Authority which provide as under:-

^^mDr fcUnq ij xgu euu fd;k x;kA O;ogkjh dk ;g dFku lgh gS fd gkWfLiVy us= lEcU/kh chekfj;ksa esa fof'k"V lsok iznku dj jgk gS] fdUrq ;gkW ;g rF; mYys[kuh; gS fd pwafd mDr laLFkku dkQh la[;k esa fpfdRld] uflZaxdehZ] rduhdh fo'ks"kK] fpfdRlh; vR;k/kqfud e'khuksa ls lqlfTtr gS ,oa vius Hkkxhnkjksa ds ykHkkFkZ dk;Zjr gSA ;g rF; bls lkekU; ,dy fpfdRld ls i`Fkd djrk gSA ;g dFku tkap

(10 of 29) [STR-139/2019]

esa xyr lkfcr gqvk gS fd gkWfLiVy }kjk iznku dh tk jgh lsokvksa ,oa lIykbZ dh tkus okyh oLrqvksa ds isVs dalksfyMsVsM Qzh pktZ dh tk jgh gSA vf/kdka'k fcyksa esa vkbZ ysUl ,oa dUT;wescYl vkfn dh i`Fkd ls jkf'k pktZ ik;h x;hA O;ogkjh dk ;g dFku fd vkbZ ysUl] nokbZ;kW vkfn dh lIykbZ jksxh ds bykt ds nkSjku vkuq"kafxd gS] Hkh tkap esa xyr lkfcr gqvk gSA mnkgj.kkFkZ ^vkbZ ysUl* ds izdj.k esa jksxh dks yxk, tkus okys ^vkbZ ysUl* dh la[;k vkfn dk fu.kZ; djus gsrq tkap fd;k tkuk vfuok;Z gSA tkap ds i'pkr lEcfU/kr O;fDr dbZ izdj.ksa esa fdlh vU; vLirky esa ^vkbZ ysUl* yxok;s tkus dk fodYi pqurk gS] dfri; izdj.kksa esa lEcfU/kr O;fDr tkap ds dkQh le; i'pkr vkbZ ysUl yxok;s tkus dk fodYi pqurk gSA ;gkW rd dh dfri; izdj.kksa esa lEcfU/kr O;fDr fpfdRld }kjk lykg fn;s tkus ds fo:) ^vkbZ ysUl* ugha yxokus dk fodYi pqurk gSA blds vfrfjDr 'Sale' dh ifjHkk"kk esa 'any other article for human consumption or any drink' dks 'kkfey fd;k tkuk nokbZ;ksa dh lIykbZ dks Hkh foØ; izekf.kr djrk gSA gkWfLiVy }kjk mDr laO;ogkj yxkrkj lrr~ :i ls Hkkjh ek=k esa Lo;a ds ykHkkFkZ fd;s tk jgs gSa tks gkWfLiVy jktLFkku ewY; ifjof/kZr dj vf/kfu;e] 2003 ds rgr ^Mhyj* ,oa mlds dk;Z dks ^fctusl* izekf.kr djrs gSaA**

8. While replying upon the said findings of the Appellate

Authority, learned counsel for the petitioner-Revenue submitted

that in the invoices, there is a separate charge reflected towards

the sale of eye lenses, consumables and other pharmaceutical

items. He further submitted that the eye lenses sold to the

patients are at value added price and therefore, by fiction of law

and extended definition of sale in the light of Article 366(29A) of

the Constitution of India and in terms of Section 2(35) of the RVAT

Act, 2003, the sale of medicine/pharmaceutical items, installation

of implants will qualify to be sale and therefore, liable for payment

of tax and the hospitals in question will constitute as dealer and

the transaction will amount to business.

(11 of 29) [STR-139/2019]

9. In support of his submissions, learned counsels for the

petitioner-Revenue relied upon the judgment of Madras High Court

rendered in MIOT Hospitals Ltd. Vs. The State of Tamil Nadu

& Ors.(W.P. Nos.2982 to 2987 of 2012 & other connected

petitions) decided on 28/05/2020; Sanjose Parish Hospital

Vs. Commercial Tax Officer: 2019 SCC OneLine Ker. 355;

Fortis Health Care Limited Vs. State of Punjab: 2015 SCC

Online P&H 2018. Relying upon the aforesaid judgments,

learned counsel for the petitioners-Revenue submitted that the

respondents have rendered works contract services which falls

within the extended meaning of definition of sale and by fiction of

law, when medical services provided by respondents involve

composite contracts and when element of service is also involved,

it will be counted as sale and the same will be taxable on entire

transaction and consideration.

10. Learned counsel for the petitioners-Revenue also placed

reliance upon Larger Bench judgment of the Apex Court rendered

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

(12 of 29) [STR-139/2019]

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 levy any tax on the same. Learned counsel for the respondents

further submitted that for the purpose of illustration, there is a

very thick distinction between the transaction of sale and

transaction of service. If a Doctor or a nursing hospital, through

its pharmacy or drug store, sell prescription drugs/medicines to

outdoor patients or outsiders, same will be pure transaction of

sale and VAT will be attracted. Whereas, when the indoor patient

comes for treatment or for diagnosis, health care services are

provided by the hospital which are bundled services and the

predominancy is qua the treatment only. Other services including,

but not limited to, room facility, installation of implants,

consumption of drugs/medicine by the patient supplied via

pharmacy are merely incidental and they will not pass litmus test

to qualify for definition of sale u/s 2(35) of the Act, nor the clinical

establishment/hospital will qualifies to fall under definition of

"dealer."

12. In support of their contentions, learned counsels for the

respondents has laid emphasis upon the Apex Court judgment

rendered in the case of Bharat Sanchar Nigam Limited and

another (supra). He has further placed reliance upon judgments

rendered in Tata Main Hospital Vs. State of Jharkhand &

Ors.: (2008) 10 VAT Reporter 1 (Jharkhand); State of

(13 of 29) [STR-139/2019]

Jharkhand & Ors. Vs. Tata Main Hospital: (2008) 10 VAT

Reporter 11 (SC); International Hospital Pvt. Ltd. Vs. State

of U.P. & Ors.: (2014) 71 VST 139 (All); Aswini Hospital

Pvt. Ltd. & Ors. Vs. Intelligence Officer, Squad No.1,

Thrissur & Ors.: [2019] 61 GSTR 492 (Ker.) [FB], M/s.

Crosslay Remedies Ltd. Vs. State of UP & Ors.: (2017) UP

TC 536 and in M/s. Fortis Health Care Limited and another

Vs. State of Punjab and others (Civil Writ Petition No.1922

to 1924 of 2012), decided on 23/01/2015 by the Punjab &

Haryana High Court.

13. Learned counsel for the respondents, placing reliance on the

aforesaid judgment of Tata Main Hospital (supra) submitted that

while considering the pari-materia provisions of "sale" and

"dealer", the Hon'ble Jharkhand High Court has held that services

rendered in the course of treatment of indoor patients fall outside

the scope of term of sale. Further, a hospital/clinical establishment

is not a dealer because firstly, as it was not engaged in the

business of sale of medicines, vaccines, surgical items, x-ray films

and plates etc; 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

(14 of 29) [STR-139/2019]

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 sides.

15. Before we analyze the case, it is essential to consider various

provisions of the Constitution of India, RVAT Act, 2003 and the

rules framed therein.

16. As per Article 246 of the Constitution of India, which is

enshrined in Part XI, power of making laws is conferred upon the

Parliament and Legislatures of the States. The respective subject

matter on which law can be made by Union and State are

enumerated in Schedule VII wherein List I pertains to subject

matters on which Parliament can legislate i.e. Union List. List II

pertains to State List, as to matters on which State Legislature has

power to legislate. Lastly, List III is Concurrent List which deals

with those subject matters that can be legislated by both

Parliament and State Legislatures.

As per List I i.e. Union List of Schedule VII, Entry 92-C

prescribes tax on service and Entry 97 prescribes residuary entry

i.e. levy of tax on residuary matters not prescribed in any of the

Lists.

17. Similarly, List II pertains to State list and Entry 54 specifies

taxes on the sale or purchase of goods. The respective Entries

namely; 92-C, 97 of List I and Entry 54 of List II are reproduced

as under:-

                                           (15 of 29)            [STR-139/2019]



      "List I
      92-C Taxes on services.

97. Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.

List II

54. Taxes on the sale of petroleum crude high speed diesel. motor spirit (commonly known as petrol) natural gas, aviation turbine fuel and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods."

18. As per the powers given under Entry 92-C read with Entry

97, Finance Act, 1994 was enacted with a view to impose tax on

services. As per the powers enshrined under Entry 54, the

Rajasthan Value Added Tax Act, 2003 alongwith rules was framed.

Prior to the year 2017 i.e. before the advent of Goods & Service

Tax, there was separate levy on the services by virtue of Union

List and there was a separate levy by the State on intra-State sale

of goods under the powers given under Entry 54 by virtue of VAT

Act, 2003. To simply submit, prior to the year 2017, the Union had

power to levy service tax on the services and State had power to

levy sales tax on sale and purchase on intra-State 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.

(16 of 29) [STR-139/2019]

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 or any other mercantile agent, by whatever name called, and whether of the same description as hereinbefore mentioned or not, who carries on the business of buying, selling, supplying or distributing any goods belonging to any principal whether disclosed or not;

(ii) an auctioneer, who sells or auctions goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal;

(iii) a manager or an agent, of a non-resident dealer who buys, sells, supplies or distributes goods in the State belonging to such dealer;

(iv) any society, club, trust or other association, whether incorporated or not, which buys goods from or sells goods to its members;

(v) a casual trader;

(vi) the Central or any State Government or any of their Departments or offices which, whether or not in the course of business, buy, sell, supply or distribute goods directly or otherwise, whether for cash or deferred payment or for commission, remuneration or other valuable consideration; and

(17 of 29) [STR-139/2019]

(vii) any trading, commercial or financial establishment including a bank, an insurance company, a transport company and the like which, whether or not in the course of its business, buys, sells, supplies or distributes goods, directly or otherwise, whether for cash or deferred payment, commission, remuneration or other valuable consideration; Explanation - A person, who sells agricultural or horticultural produce, grown by himself or grown on any land in which he has an interest as owner or tenant as defined in the Rajasthan Tenancy Act, 1955 (Act No. 3 of 1955), shall not be deemed to be a dealer in respect of such sales within the meaning of this clause;

2(15) "goods" means all kinds of movable property, whether tangible or intangible, other than newspapers, money, actionable claims, stocks, shares and securities, and includes materials, articles and commodities used in any form in the execution of works contract, livestock and all other things attached to or forming part of the land which is agreed to be severed before sale or under the contract of sale;

2(35) "sale" with all its grammatical variations and cognate expressions means every transfer of property in goods by one person to another for cash, deferred payment or 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

(18 of 29) [STR-139/2019]

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.- Notwithstanding anything contained in this Act, where any goods are sold in packing, the packing material in such case shall be deemed to have been sold with the goods;

2(36) "sale price" means the amount paid or payable to a dealer as consideration for the sale of any goods less any sum allowed by way of any kind of discount or rebate according to the practice normally prevailing in the trade, but inclusive of any statutory levy or any sum charged for anything done by the dealer in respect of the goods or services rendered at the time of or before the delivery thereof, except the tax imposed under this Act;

Explanation I. - In the case of a sale by hire purchase agreement, the prevailing market price of the goods on the date on which such goods are delivered to the buyer under such agreement, shall be deemed to be the sale price of such goods;

Explanation II. - Cash or trade discount at the time of sale as evident from the invoice shall be excluded from the sale price but any ex post facto grant of discounts or incentives or rebates or rewards and the like shall not be excluded;

Explanation III. - Where according to the terms of a contract, the cost of freight and other expenses in respect of the transportation of goods are incurred by the dealer for or on behalf of the buyer, such cost of freight and other expenses shall not be included in the sale price, if charged separately in the invoice;

                                           (19 of 29)            [STR-139/2019]


      2(44)      "works contract" means a contract for

carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property;"

21. It is also apposite to reproduce Section 4(1) of the RVAT Act,

2003 which pertains to levy of tax and its rate alongwith Schedule

IV, Entry 86 (supra) for the relevant purpose in hand which

provides as under:-

"4. Levy of tax and its rate. - (1) Subject to the other provisions of this Act and the provisions of the Central Sales Tax Act, 1956 (Central Act No. 74 of 1956), the tax payable by a dealer under this Act, shall be at such point or points, as may be prescribed, in the series of sales by successive dealers and shall be levied on the taxable turnover of sale of goods specified in Schedule III to Schedule VI at the rate mentioned against 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

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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 procured stock of

medicines, implants, consumables etc. are supplied to its outlets

such as; in-patient pharmacy, operation theater pharmacy and

out-patient pharmacy. The in-patient pharmacy and operation

theaters pharmacy supplies medicines and consumables only to

in-patients. The hospital is expected to provide not only primary

services of medical treatment but also to provide lodging, nursing

care, supply of medicines, food and operational/ procedural

treatment under the supervision of Doctor until discharge. There

are bundle of services embodied to the primary services of

medical treatment. The primary service without any doubt is of

medical treatment but there are ancillary and incidental services

of lodging, care, medicine, supply of food, implant of surgical

items, installation of lenses, stents etc. Hence, the medicines,

implants, room provided on rent used in the course of providing

health care services/medical treatment to the patients admitted

for diagnosis for treatment in the hospital or clinical establishment

are undoubtedly naturally bundled in the main services of medical

treatment and it is a composite supply to facilitate health care

services.

24. Whereas the out-patient pharmacy attached to the hospital

provided drugs/medicines etc., upon valid prescription to out-

patients and outside customers and receives consideration. No

service of medical treatment is rendered and the dominant nature

of the said transaction is sale of medicine. As far as out-patients

are concerned, there is no control over its continuous treatment.

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The patient has absolute freedom to follow or not follow the

prescription or to purchase the medicine from the hospitals' drug

store or from outside. The services in such cases are advisory in

nature. If the drug store/ hospital sells the medicine, it is an

isolated transaction and not a composite supply of health care

service and is therefore, not covered under the ambit of health

care services.

25. In the celebrated judgment of Bharat Sanchar Nigam

Limited and another (supra), the Apex Court has observed and

held as under:-

"45. Of all the different kinds of composite transactions the drafters of the 46th Amendment chose three specific situations, a works contract, a hire purchase contract and a catering contract to bring within the fiction of a deemed sale. Of these three, the first and third involve a kind 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

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instrument of contract which may be composite in form in any case other than the exceptions in Article 366(29-A), unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service, and impose tax on the sale. The test therefore for composite contracts other than those mentioned in Article 366 (29A) continues to be - did the parties have in mind or intend separate rights arising out of the sale of goods. If there was no such intention there is no sale even if the contract could be disintegrated. The test for deciding whether a contract falls into one category or the other is to as what is 'the substance of the contract . We will, for the want of a better phrase, call this the dominant nature test.

51. What are the "goods" in a sales transaction, therefore, remains primarily a matter of contract and intention. The seller and such purchaser would have to be ad idem as to the subject matter of sale or purchase. The Court would have to arrive at the conclusion as to what the parties had intended when they entered into a particular transaction of sale, as being the subject matter of sale or purchase. In arriving at a conclusion the Court would have to approach the matter from the point of view of a reasonable person of average intelligence.

87. It is not possible for this Court to opine finally on the issue. What a SIM card represents is ultimately a question of fact as has been correctly submitted by the States. In determining the issue, however the Assessing Authorities will have to keep in mind the following principles: If the SIM Card is not sold by the assessee to the subscribers but is merely part of the services rendered by the service providers, then a SIM card cannot be charged separately to sales tax. It would depend ultimately upon the intention of the parties. If the parties intended that the SIM card would be a separate object of sale, it would be open to the Sales Tax Authorities to levy sales tax thereon. There is insufficient material on the basis of which we can reach a decision. However we emphasise that if the sale of a SIM card is merely incidental to the service being provided and only facilitates the identification of the subscribers, their credit and other details, it would not be assessable to sales tax. In our

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opinion the High Court ought not 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 contracts which are by legal fiction deemed to be divisible under Art 366(29A), the value of the goods involved in the execution of the whole transaction cannot be assessed to Sales Tax. As was said in Larsen & Toubro Vs. Union of India(supra):-

"The cost of establishment of the contractor which is relatable to supply of labour and services cannot be included in the value of the goods involved in the execution of a contract and the cost of establishment which is relatable to supply of materials involved in the execution of the works contract only can be included in the value of the goods".

26. Applying the ratio of the judgment of Bharat Sanchar

Nigam Limited and another (supra), this Court has to analyze

and apply the "Aspect Doctrine" or "Predominant Criteria Test" in

order to determine whether the transaction in question constitutes

supply of goods i.e. "sale" or rendering of medical

treatment/health care services constituting "service".

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27. Analyzing the case in hand and considering that lenses,

stents, implants and sale of medicines are made to the indoor

patients while carrying out medical treatment services, it is

beyond doubt that predominantly, the same constitutes medical

treatment/ health service and it is a case of composite supply

whereas the predominancy is of a service and other incidental

sales/services are bundled into it. Therefore, the classification and

categorization of the said transaction will be of service and not of

a sale keeping in mind the dictum of the Hon'ble Apex Court in

Bharat Sanchar Nigam Limited and another (supra).

28. Considering the "Predominance Test" and the "Aspects

Doctrine", the transaction in question is of service and therefore,

the State authorities/petitioner-Revenue has no power, jurisdiction

or competence to levy sales tax upon the same and therefore, the

question formulated above needs to be decided against the

petitioner-Revenue and the judgment of the Tax Board deserves

to be upheld.

29. The arguments advanced by learned counsel for the

petitioner-Revenue that as per Schedule-IV, it is specifically

enlisted that the medical equipment/devices and implants are to

be charged at the rate of 5.5%, has to be interpreted broadly.

Only if a transaction qualifies to be a sale, will it be charged at the

applicable rate of sales tax/VAT. In the case in hand, as the

transaction in question amounts to 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,

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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 patients in the TMH. Therefore, it appears that the dominant nature test of contract is to provide medical services and in providing such medical services the medicines are administered, surgical items, x-ray plates and films are used, which are incidental to and a part of the medical services rendered by the TMH to the patients and for that the TMH is realizing charges against the head Pharmacy without giving particulars and break-up as to what is the charge being realized for medicines, what is the charge being realized for surgical items and for x-ray films and plates etc. used in course of treatment to those indoor patients and, therefore, it cannot be said that the medicines, surgical items, x-ray films and plates etc, were sold by the TMH to the indoor patients. In fact the supply of those articles were made by the TMH as a part of service rendered by the TMH during the treatment of the indoor patients and, therefore the transaction cannot be said to be 'sale' within the meaning of Section 2 (t) of the Bihar Finance Act.

26. The transaction of supply of medicines, vaccines, surgical items, x-ray films and plates etc. to the indoor patients in course of treatment in TMH does not come within the purview of the definition of 'sale' as

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envisaged under Section 2 (t) of the Bihar Finance Act for the following reasons:

(i) Supply of those articles are part and parcel of the treatment and they are essentially required for the treatment of the patients.

(ii) Supply of those articles are incidental to the medical service being rendered by the TMH to the patients.

(iii) Those articles are not being sold to the patients but the cost price of the same being adjusted against the head 'pharmacy' and are not being separately charged item wise.

(iv) Charge under the head "pharmacy" is part of the composite charge realized by the TMH towards the treatment of those indoor patients."

31. The Hon'ble Jharkhand High Court in Tata Main Hospital

(supra), has held that during the course of indoor services,

predominantly, the services provided are of medical treatment and

the same cannot be given a colour of transaction in nature of sale

wherein pari-materia Section 2(t) of Bihar Finance Act, 1981 was

under consideration. The definition of the dealer is also similar and

after considering both it was held that 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,

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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 question of law framed

above has to be decided against the Revenue.

34. There is one other ground which is worth consideration. The

theory of Goods and Service Tax has been introduced w.e.f. 2017

and an integrated tax is imposed but at different rates qua the

service and qua the goods under the same set of legislation. In a

case of Advanced Ruling under GST Act, 2017, it was held in

KIMS Health Care Management Ltd. Kerala: [2018] 99

taxmann.com 37 (AAR-Kerala) that supply of medicines,

consumables and implants used in the course of providing medical

health care services to the in-house patients for diagnosis or

treatment by the hospital are naturally bundled services and are

provided in conjunction with each other as a composite supply and

will fall under exemption under the category of health care

services and not individually as a goods and will not qualify as

supply.

35. It is also noteworthy to mention that the transaction in

question was clarified to be a service and exempted under the

erstwhile law of service tax wherein vide notification No.25/2012,

the health and care services rendered by clinical establishments

were exempted and were declared as service and not sale/supply.

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36. Learned counsel for the petitioner-Revenue has relied upon

judgment in MIOT Hospitals Ltd. (supra) wherein while relying

upon Tamil-Nadu VAT Act, 2006, the learned Single Bench of

Madras High Court has finally held that the respondents shall

exclude the value of medicine from the taxable value but has

directed for exclusion of x-ray, C.T. Scan, PET Scan charges. The

learned Court has held that the judgment of BSNL Vs. UOI:

(2006) 3 SCC 1 cannot be construed as a binding ratio. This

Court is entirely in disagreement with the said analogy for the

reason that the Hon'ble Apex Court judgments are binding in

nature and cannot be commented upon. The judgment of the

learned Single Judge is also of contradictory nature where on one

hand, the value of medicines are excluded and on the other hand,

x-ray and CT Scan charges are included. For the reasons given in

the Division Bench orders rendered by Allahabad High Court and

Jharkhand High Court, the judgment rendered in MIOT Hospitals

Ltd. (supra) is distinguishable.

37. The judgment rendered in K. Damodarasamy Naidu &

Bros. and others (supra) relied upon by learned counsel for the

petitioner-Revenue was pertaining to mutant 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.

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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-

assessees and against the petitioner-Revenue.

40. Consequently, all these Sales Tax Revision Petitions are

dismissed. All pending applications stand disposed of in above

terms. Cost made easy.

                                   (SAMEER JAIN),J                                             (PANKAJ BHANDARI),J

                                   Raghu/









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