Tata Mains Jharkhand HC

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2007 SCC OnLine Jhar 260 : (2008) 1 AIR Jhar R 795
Jharkhand High Court

(BEFORE M. KARPAGA VINAYAGAM, C.J. AND AMARESHWAR SAHAY, J.)
Tata Main Hospital

Versus
State of Jharkhand & Ors.
W.P. 2422 of 2006
Decided on September 7, 2007
The Judgment of the Court was delivered by
AMARESHWAR SAHAY, J.:— In the present writ petition the petitioner has prayed for,
for the following reliefs:—
(i) For declaration that the supply of medicines, surgical items, vaccines, x-ray
items etc. which are supplied by the petitioner to its indoor patients during the
course of their treatment is not a transaction which comes within the meaning of
“sale” as defined under Section 2(t) of the Bihar Finance Act, 1981 and,
therefore, is not taxable under the said Act.
(ii) For declaration that the petitioner does not come within the definition of
“Dealer” as defined under the provisions of Bihar Finance Act, 1981 and,
therefore, is not required to be registered as “Dealer” under the said Act.
(iii) To quash the notice dated 31-3-2005 contained in Annexure-3 to the writ
application issued by the Deputy Commissioner, Commercial Taxes, Urban Circle,
Jamshedpur, asking the petitioner to explain as to why an action be not taken
against it for not registering itself as registered “Dealer”.
Page: 796
(iv) To quash Annexure-5, i.e. the letter No. 261 dated 5-5-2005 issued by the
Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur, whereby
the petitioner was held liable to pay sales tax.
(v) To quash the order contained in Annexure-13 to the writ application dated 18-3-
2006 relating to the financial years 2001–02 to 2004–05 whereby the Assistant
Commissioner, Commercial Taxes, Urban Circle, Jamshedpur passed an order for
assessment of the sales tax against the petitioner under Section 17(5) of the
Bihar Finance Act, 1981 for the last four financial years.
(vi) To quash the demand notices dated 20th March 2006, contained in Annexure-
14 series, issued by the Assistant Commissioner, Commercial Taxes, Urban
Circle, Jamshedpur, under Section 17(5) of the Bihar Finance Act, 1981.
2. The facts, which are relevant for the pur pose of decision of the present case, are
stated herein below:—
The petitioner Tata Main Hospital, hereinafter referred as TMH, situated at
Jamshedpur was established by Tata Steel Limited and is a division of Tata Steel
Limited. TMS is providing treatment and medical facilities to the indoor patients,
who either employees or ex-employees or their family members of the Tata Steel
Limited as well as the non-employee indoor patients also. In course of treatment
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whatever medicines, surgical items, vaccines, x-ray items are supplied to such
indoor patients, who are either employees, ex-employees or their family members
are supplied free of cost and for that TMH does not charge anything from them. TMH
also provides treatment and medical facilities to other indoor non-employee
patients, i.e. the patients, who are other than the employees of the Tata Steel
Limited but those non-employees indoor patients are to pay charges to TMH for
their treatment by making payment towards Registration, Blood Bank, Pathology,
O.T., Pharmacy, Accommodation and Doctors fees etc.
3. An inspection of the TMH was made on 2-9-2005 by a team of Commercial Taxes
Authorities. Annexure-9 to the writ petition is their inspection report. It was reported
by them in course of enquiry that one Mr. Singhal who was Financial Analyst disclosed
that no separate Account is maintained in the TMH. The TMH only issued bills which
are forwarded to the general office of Tata Steel Limited therefore detailed description
and whatever data is required by the department can be had from the general office of
Tata Steel Limited. He also disclosed that the medical store department of the TMH
purchases medicines mostly from the local market except those medicines which are
not available in the local market are purchased from outside the State also but such
purchases is very less. The enquiry report further reveals that one Bill dated 23-3-
2005 being Bill No. BN/05/005687 dated 23-3-2005, issued to one Mr. Somesh
Mahanti, was examined from which it appeared that the TMH has charged the following
amount under different heads:—
(i) Registration - Rs. 100.00
(ii) Blood Bank - Rs. 1275.00
(iii) Pathology - Rs. 1980.00
(iv) O.T. Package - Rs. 1200.00
(v) Pharmacy - Rs. 1287.00
(vi) Accommodation + Doctor Fees Rs. 4250.00
Total - Rs. 10,592.00
4. The enquiry team found that the charges under the heads ‘Registration’, ‘Blood
bank’, ‘Pathology’, ‘O.T.’ were made in shape of consultancy and others. Amount
charged against ‘Blood Bank’ was not taxable. That amount charged under heads
“Pathology” and “O.T.” are the charges for consultancy and surgical operation. The
amount charged under the head “Accommodation + Doctor” was the charge for “Bed”
and Doctors fee as well as the diet supplied to the patient whereas the amount
charged under the head “Pharmacy” was the charge against supply of medicines to the
patient, which is charged from the non-employee patients.
5. According to the inspecting team, the amount which was charged against the
head “Pharmacy” relates to sale of medicine. Since the said amount was charged for
sale of medicines and, therefore, under Section 3 of the Bihar Finance Act the same is
exigible, because
Page: 797
of the fact that no detail regarding sale and purchase of medicines were supplied to
the team and, therefore, under the provision of Section 33(i) of the Act, the petitioner
TMH was directed to attend the office of the Deputy Commissioner, Commercial Taxes,
Town Circle, Jamshedpur with relevant documents relating to purchase and sale of
medicines for hearing.
6. Ultimately, after hearing the parties, the order of assessment as contained in

Annexure-13, was passed by the Assistant Commissioner, Commercial Taxes,
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Jamshedpur, on 18-3-2006 under Section 17(5) of the Bihar Finance Act, 1981 for the
years 2001–02 to 2004–05, which is under challenge in the present writ application.
7. From perusal of Annexure-13 to the writ petition it appears that the assessing
officer in his order has held that Tata Steel Limited is a “Dealer” and it turns TMH as its
ancillary activities and, therefore, they are liable to pay tax, but they have got
themselves registered as “Dealer” nor did they file any such application for such
registration and, therefore, under Section 17(5) of the Bihar Finance Act they are
liable to pay tax for the last four financial years and, accordingly, the sales tax was
assessed for the financial years 2001–02 to 2004–05.
8. Pursuant to the said order as contained in Annexure-13 to the writ application,
demand notices were issued as contained in Annexure-14 series, which are also under
challenge in this writ application.
9. There is no dispute of this fact that TMH supplies medicines, surgical items,
vaccines, x-ray items etc. to the employee indoor patients and the aforesaid items,
which are supplied in course of the treatment of employee indoor patients, ex-
employee and their family members, TMH does not charge a single paisa from them
and they are given treatment free of cost and, therefore, imposition of sales tax on
those items does not and cannot arise. Learned G P.-III also conceded in this regard.
10. The question to be considered and decided in the present case, is as to whether
the supply of the medicines, surgical items, vaccines and x-ray items etc. to the non-
employee indoor patients admitted in TMH for treatment for which TMH realizes
charges, comes within the purview of “Sale” as defined under Section 2(t) of the Bihar
Finance Act, 1981, so as to make TMH liable to get themselves registered as “Dealer”
under the Bihar Finance Act and whether they are liable to pay sales tax on such
supply of medicines, surgical items, vaccines and x-ray items etc., to the indoor
patients, which are used in course of their treatment in TMH.
11. It is also important to note that vide notification No. Bikrikar/San-1005/76-
14199 F.T. dated 15-12-1976 effective from 1-1-1977 issued under Section 7(3) of
the Bihar Finance Act, 1981, it has been notified that all the medical institutions are
exempted from ambit of sales tax provided that any such medical institution proves to
the satisfaction of the assessing authority that there is no intention of profit and that
actually no profit is being made from the transaction. The said notification has been
annexed as Annexure-8 to the writ application.
12. Now, let us to whether the transaction of supply of medicines, surgical items,
vaccines, x-ray items etc. to those indoor patients in course of their treatment for
which TMH realizes charge from those patients can be said to be “Sale” and whether
these articles, which are being supplied to those patients are covered within the
meaning of definition of goods and whether the supplier of those articles comes within
the definition of “Dealer” as defined under the Bihar Finance Act, 1981 or not?
13. Dr. Debi Prasad Pal, learned senior counsel appearing for the petitioner
submitted that the charges, which are being realized from the non-employee indoor
patients by TMH are composite charge or package charge for rendering medical
services to such non-employee indoor patients and such composite package charges
are indivisible service contract. In rendering such services, the supply of medicines to
the non-employee indoor patients at the cost price is incidental to and part of the
services, which is rendered by TMH. According to Dr. Debi Pal, the contract being a
service contract and since it is
Page: 798
indivisible. The medicines are actually not sold to those patients but are supplied by
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TMH and used in treatment of those patients and for which cost price is realized from
them therefore such transaction is not exigible.
14. Elaborating his argument, Dr. Pal further submitted that when the medicine is
being administered to a patient or a syringe is used in injection in the body of the
patient, in course of his treatment there is no sale of good. He further submitted that
the TMH does not provide or sale medicines to any out side patient, who is not
admitted in TMH for any treatment.
15. Dr. Debi Pal, learned senior counsel further submitted that the petitioner is
supplying those articles, i.e. medicines, surgical items, vaccines, x-ray items etc. to
the patients as a part of composite services, which are rendered by TMH to the indoor
patients. Such supply of medicines etc. which are administered to the indoor patients
are part of its Hospital services and this cannot cover under the definition of business
of selling goods and the petitioner cannot be said to be a “Dealer” as defined under
Section 2(e) of the Bihar Finance Act, 1981. He further submitted that under Section 2
(e) of the Bihar Finance Act a “Dealer” must be a person who carries on business of
buying, selling or supplying goods for consideration, whereas in the present case the
supply of medicines etc. by TMH to its indoor patients, who are given treatment in
TMS, are part and parcel of service rendered by TMH to those patients therefore, it
does not constitute sale of goods. As a matter of fact those non-employee indoor
patients, who are admitted in TMH for treatment, pay a composite charge or a package
charge, which includes various items like registration, blood bank, pathology,
accommodation plus doctor fees etc. and these charges, which are realized, are
composite charges and it cannot be broken or segregated. The supply of medicines,
surgical items, vaccines, x-ray films & plates etc. by TMH for the treatment of the
patients within the TMH cannot be considered to be ‘Sale’ since the TMH is not
carrying on business in selling such medicined to the indoor patients.
16. In support of his submissions, Dr. Pal relied on the decision in the case of
“State of Madras v. Gannom Dunkerley & Company (Madras) Ltd., reported in 9 STC
353 : AIR 1958 SC 560 (SC)” and the case of “Bharat Sanchar Nigam Limited v. Union
of India reported in 145 STC 91 : (2006) 3 SCC 1 : AIR 2006 SC 1383”.
17. Challenging the impugned order of assessment; contained in Annexure-13 to
the writ application, it is submitted on behalf of the petitioner that the Assessing
Officer wrongly assessed the tax against the petitioner by only dealing with the
question that the petitioner was a “Dealer” carrying on business of selling goods. It is
contended that the Assessing Officer has taken the purchase amount of entire
medicines, which the petitioner has purchased from the market as the same price for
such medicines and imposed sales tax thereon. In fact 70 to 80 percent of such
medicines was purchased from the market are administered to the employees, ex-
employees or their dependents from whom no charge for supply of medicines etc. is
realized, therefore, imposition of Sales Tax on those medicines, which are supplied free
of cost to the employee or ex-employee or their family members are absolutely wrong.
18. Mr. Jhunjhunwala, learned G.P.-III submitted that the supply of medicines,
surgical items, x-ray films etc. by TMH to its non-employee indoor patients for which
TMH is realizing charge comes within the definition of “Sale” because there is
consideration of money and there is actual passing of goods to the buyers hence the
supply of such items are covered under the definition of “Sale” under Section 2(t) of
the Bihar Finance Act, 1981. According to Mr. Jhunjhunwala, the petitioner is in fact
selling those medicines and other items which are supplied to the non-employee
indoor patients in course of their treatment because the patients are paying for those
items to TMH therefore, the said transaction comes within the definition of “sale of
goods” and, accordingly, the petitioner comes within the purview of “Dealer” as
defined under the Bihar Finance Act, 1981. Therefore the petitioner has rightly been
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assessed and held liable for payment of sales tax by the taxing
Page: 799
authority as contained in Annexure-13 to the writ application.
19. In support of his submissions, Mr. Jhunjhunwala has relied on the decision in
the case of “East India Hotels Limited v. Union of India reported in 121 STC, 46 and a
Division Bench's decision of Patna High Court in the :case of “Charu Pharmacy & Clinic
v. State of Bihar, reported in 32 STC 265 (P) : 1974 BUR 207”.
20. “Sale” has been defined under Section 2(t) of the Bihar Finance Act, 1981,
which reads as under:
2(t) ‘Sale’ means any transfer of property in goods for cash or deferred payment
or other valuable consideration but does not include a mortgage or hypothecation of
or charge or pledge on goods, and includes.-
(i) transfer of property in any goods, otherwise than in pursuance of a contract;
(ii) transfer of property in goods (whether as goods or in some other form)
involved in the execution of a works contract;
(iii) delivery of goods on hire purchase or any system of payment by
instalments;
(iv) transfer of the right to use any goods for any purpose (whether or not for a
specified period);
(v) supply of goods made by a society, trust, club or association, whether
incorporated or not, to its members or otherwise;
(vi) supply by way of or as part of any service or in any other manner,
whatsoever, of goods being food or any drink whether or not intoxicating;
And such transfer, delivery or supply of any goods shall be deemed to be a sale
of those goods by the person making the transfer, delivery or supply, and all
grammatical variations and cognate expression shall be construed accordingly;
And “purchase” means such acquisition of property in goods or purchase of those
goods by the person to whom such transfer, delivery or supply is made.
Explanation-I.- A transfer or acquisition of goods on hire purchase or under any
other system in which payment of valuable consideration is made by instalments,
shall, notwithstanding the fact that the seller retains that title in the goods as a
security for the payment of the valuable consideration or for any other reasons, be
deemed to be a sale of purchase.
Explanation-II - Notwithstanding anything contained in any law for the time
being in force, two independent purchases or sales shall, for the purpose of this
part, be deemed to have taken place-
(a) when the goods are transferred from principal of his selling agent and from
the selling agent to the purchaser; or
(b) when the goods are transferred from the seller to a buying agent to his
principal, if the agent is found-
(i) to have sold the goods at one rate and to have passed on the sale price to
his principal at another rate; or
(ii) to have purchased the goods at one rate and to have passed on to his
principal at an-other rate; or
(iii) not to have accounted to his principal for the collections or deductions
made by him in the sales or purchases effected by him or on behalf of his
principal; or
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(iv) to have acted for a fictitious or nonexistent principal;

21. Whereas the “Dealer” has been defined under Section 2(e) of the Bihar Finance
Act, 1981, which reads as under:—
“2(e) “Dealer” means any person who carries on (whether regularly or otherwise)
the business of buying, selling, supplying or distributing goods, directly or
indirectly, for cash, or for deferred payment, or for commission, remuneration or
valuable consideration and includes-
(i) a local authority, a body corporate, a company, any co-operative society or
other society, club firm, Hindu undivided family or other association of persons
which carries on such business;
(ii) a factor, broker, commission agent, declared agent, or any other mercantile
agent, by whatsoever name called, and whether of the same description as
hereinbefore mentioned or not, who carries on the business of buying, selling,
supplying or distributing, goods belonging to any principal whether disclosed
Page: 800
or not; and
(iii) an auctioneer who carries on the business of selling or auctioning 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.
Explanation I - Every person who acts as an agent, in the State of Bihar or a
dealer residing outside the State of Bihar and buys, sells, supplies or distributes, in
the State or acts on behalf of such dealer as-
(i) a mercantile agent as defined in the Sale of Goods Act, 1930 (3 of 1930); or
(ii) an agent for handling of goods or documents of title relating to goods; or
(iii) an agent for the collection or the payment of the sale price of goods or as a
guarantee for such collection or payment,
And every local branch or office in the State of Bihar of a firm registered out-side
the State of Bihar or a company or other body corporate, the Principal office, or
headquarters whereof is outside the State of Bihar shall be deemed to be a dealer
for the purposes of this Act.
Explanation II - A Government which whether or not in the course of business,
buys, sells or distributes goods, directly or otherwise, for cash or for deferred
payment or for commission, remuneration or other valuable consideration, shall be
deemed to be a dealer for the purposes of this Act.”
22. Entry-54 of List II of the Constitution of India empowers the State Government
to impose tax on sale or purchase of goods other than newspapers. Entry 92A of the
List-I empowers the Central Government to impose tax on sale or purchase of goods
other than newspapers, where such sale or purchase takes place in the course of
interstate trade or commerce. Prior to 46th amendment of the Constitution, composite
contracts like work contracts, hire purchase contracts and catering contracts were not
assessable as contracts for sale of goods. By 46th amendment of the Constitution,
Article 336 (29-A) of the Constitution was amended by inserting a definition of “tax on
the sale or purchase of goods”. After amendment the definition reads as follows:—
“336 (29-A) ‘tax on the sale or purchase of goods’ includes-
(a) a tax on the transfer, otherwise than in pursuance of a contract, or property in
any goods for cash, deferred payment or other valuable consideration;
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(b) a tax on the transfer of property in goods (whether as goods or in some other
form) involved in the execution of a works contract;
(c) a tax on the delivery of goods on hire-purchase or any system of payment by
installments;
(d) a tax on the transfer of the right to use any goods for any purpose (whether or
not for a specified period) for cash, deferred payment or other valuable
consideration;
(e) a tax on the supply of goods by any unincorporated association or body of
persons to a member thereof for cash, deferred payment or other valuable
consideration;
(f) a tax on the 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), whether such supply or service, is for
cash, deferred payment or other valuable consideration,
and such transfer, delivery or supply of any goods shall be deemed to be sale
of those goods by the person making the transfer, delivery or supply and a
purchase of those goods by the person to whom such transfer, delivery or supply
is made;”
23. In the light of 46th Amendment the definition of sale within the meaning of
Section 2(t) of Bihar Finance Act, was amended.
24. Now, let us examine the decisions cited by the parties.
25. The first decision cited on behalf of the petitioner is the case of “State of Madras
v. Gannom Dunkerley & Company Madras) Ltd., reported in 9 STC 353 : AIR 1958 SC
560 (SC)”, wherein it has been held that the expression “sale of goods” in Entry 48 in
List II Schedule VII of the Government of India Act, 1935, cannot be construed in its
popular sense but must be interpreted in its legal sense and should be given the same
meaning which it has in the Sale of Goods Act, 1930. It was
Page: 801
also held that in order to constitute a sale it is necessary that there should be an
agreement between the parties for the purpose of transferring title to goods, which pre
-supposes capacity to contract, it must be supported by money consideration, and that
as a result of the transaction property must actually pass in the goods. Unless all these
elements are present, there can be no sale. Thus, if merely title to the goods passes
but not as a result of any contract between the parties, express or implied, there is no
sale. So also if the consideration for the transfer is not money but other valuable
consideration, then be exchanged or barter but not a sale.
26. The other case cited by the petitioner is the case of “Bharat Sanchar Nigam
Limited v. Union of India, reported in 145 STC 91 : (2006) 3 SCC 1 : AIR 2006 SC
1383. The observation of the Supreme Court in paragraphs 45 and 46 are very
relevant in this regard, which are being reproduced as under:—
“45. Of all the different kinds of composite transactions the drafters of the Forty-
sixth Amendment chose three specific situations, a works contract, a hire-purchase
contract and a catering contract to bring them 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 sub-clauses (b) and (f) of Clause (29-A) of Article 366,
there is no other service, which has been permitted to be so spilt. For example, the
sub-clause of Article 366 (29-A) do not cover hospital services. Therefore, if during
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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 Case, (1958) 9 STC 353 : AIR 1958 SC 560 SC,
namely, if there is an instrument of contract which may be composite in form in any
case other than the exceptions in Articles 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 (29-A) 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 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.”
27. In the above quoted para-46 of this very judgment while interpreting the
principle laid down in Gannon Dunkerley's case, it has been held that if there is an
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, men 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.
28. Thus, in view of the decision of the Supreme Court in the case of “Bharat
Sanchar Nigam Limited” (supra) the test of deciding whether me contract falls into
one category or the other is as to what is the “substance of contract”. According to the
Supreme Court, it has to be seen as to what is the dominant nature test of the
contract.
29. The decision in the case of “East India Hotels Limited v. Union of India reported
in 121 STC, 46 : (2001) 1 SCC 284 : AIR 2001 SC 231” which has been relied by the
counsel for the State, the Supreme Court has held that when a customer goes to a
restaurant and orders
Page: 802
food and in respect of which he pays the price indicated therein and the said food
items are supplied to him it would clearly be a case of transfer of property in goods to
the customer. Whether the customer eats the entire or part of the dish or chooses not
to eat at all would make no difference if he pays for the dishes supplied. The moment
the dish is supplied to the customer and the sale is paid by him it amounts to be a
sale.
30. The above case before the Supreme Court was not a case of service contract or
a case of composite charges. Whereas in the present case the facts are clearly
distinguishable because undisputedly in the present case the TMH is not selling any
medicines or surgical items to any out door persons or patients, who are not admitted
in the TMH for treatment rather the medicines, surgical items, X-ray films and plates
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etc., are supplied to those indoor patients, which were essentially required for the
treatment of those indoor patients.
31. The counsel for the State also relied on a decision of Patna High Court in the
case of “Charu Pharmacy & Clinic v. State of Bihar, reported in 32 STC 265 (P)
(equivalent to 1974 BLJR, 207”). In this case the fact was that the doctor was running
the pharmacy and the clinic and he used to examine patients, who went to him for
treatment. He used to draw prescription and supplied medicines to them from the
pharmacy on payment of price of medicines. The charges, which were paid by the
patients, were the charges for the supply of medicines. The plea of the assessee (the
doctor) is that he used to charge consolidated amount from his patient which included
the value of the medicines used in course of treatment and the fee for this professional
skill, was not accepted by the High Court than it was not a case the assessee used to
treat the patients and charge the consolidated amount rather it was a clear case where
the doctor was charging price to the supply of medicines and in those circumstances it
was held that the assessee (doctor) was held to be dealer engaged in the business of
selling medicines for price and the plea of rendering consolidated charges for service
and medicines was rejected.
32. This case is also of help to the counsel; for the State because in the present
case the supply of medicines, surgical items, vaccines, x-ray films & plates to the non-
employee in-door patients by the TMH was part and parcel and incidental to the
medical services rendered to those indoor patients.
33. Considering the facts of the present, case, the argument advanced on behalf of
the respective parties and the law in the subject notices 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. There fore, 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 medicine, 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, there fore the transaction cannot be said to be
‘sale’ within the meaning of Section 2(t) of the Bihar j Finance Act.
34. 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 envisaged under Section 2(t) of the Bihar
Finance Act for the following reasons:—
(i) Supply of those articles are part and parcel of me 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.
Page: 803
(iii) Those articles are not being sold to the patients but the cost price of the same
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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.
35. On the facts noticed in the foregoing paragraphs, we find that the TMH is not
doing business of sale of the aforesaid articles, i.e. medicines, vaccines, surgical items,
x-ray films & plates etc. and, therefore, cannot be said that the hospital is a ‘dealer’
within the meaning of “dealer” under the Bihar Finance Act.
36. The transaction aforesaid, cannot be said to be ‘sale’ under the law as there is
no element of sale at all in the said transaction.
37. It is to be held that the transaction of supply of medicines, surgical items, x-ray
films and plates etc. for the treatment of the indoor patients does not come under the
purview of ‘sale’ in terms of the Bihar Finance Act because the TMH is not selling those
items to the indoor patients but in fact they are being consumed, utilized,
administered to those indoor patients, which are essentially required for their
treatment. Accordingly, it is to be held that supply of the aforesaid articles by the TMH
are not liable to be taxed.
38. In view of the findings and discussion above, the order dated 18-3-2006 as
contained in Annexure-13 to the writ application whereby the Assistant Commissioner,
Commercial Taxes, Urban Circle Jamshedpur, passed an order for assessment of the
sales tax against the petitioner under Section 17(5) of the Bihar Finance Act, 1981 for
the last four financial years and the demand of tax as contained in Annexure-14 series
to the writ application cannot be sustained.
39. Accordingly, this writ application is allowed and the order dated 18-3-2006 as
contained in Annexure-13 and the demand notices dated 20th March 2006, contained
in Annexure-14 series are hereby quashed.
40. In the facts and circumstances of the case, there shall be no order as to cost.
M. KARPAGA VINVAYAGAM, C.J.:—
41. I agree.
42. Application allowed.
———
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Tata Mains Jharkhand HC

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SCC Online Web Edition, © 2022 EBC Publishing Pvt. Ltd.

Page 1 Saturday, July 30, 2022

2007 SCC OnLine Jhar 260 : (2008) 1 AIR Jhar R 795

Jharkhand High Court

Tata Main Hospital

6. Ultimately, after hearing the parties, the order of assessment as contained in

authority as contained in Annexure-13 to the writ application.

(iv) to have acted for a fictitious or nonexistent principal;

(iii) an auctioneer who carries on the business of selling or auctioning goods

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