1999 (12) TMI 829 - HC - VAT and Sales Tax

EXEMPTIONS LIFE SAVING DRUGS DRUGS ENUMERATED IN NOTIFICATION THAT IS TO SAY, MEANING OF SAME DRUGS SOLD UNDER BRAND NAMES - INTERPRETATION OF TAXING STATUTES OBJECT OF ENACTMENT TO BE CONSIDERED.

Summary

Issues Involved:
1. Whether life-saving drugs sold under brand names are excluded from the exemption notification.
2. Whether the object of the exemption to make life-saving drugs available at cheaper rates is defeated by excluding branded drugs.
3. Competence of the Commissioner, Sales Tax, to issue instructions limiting the exemption to non-branded drugs.

Issue-wise Detailed Analysis:

1. Exclusion of Life-Saving Drugs Sold Under Brand Names:
The court examined whether life-saving drugs sold under brand names are excluded from the exemption notification dated March 31, 1992. The petitioners argued that the exemption should apply to drugs with the same ingredients, regardless of brand names. They provided examples such as tetracycline hydrochloride, sold under different brand names but containing the same exempted component. The court noted that the controversy arose from the Commissioner, Sales Tax's instruction that only drugs sold under the exact names listed in the notification were exempt. The court found that the same drugs sold under different brand names should not be excluded from the exemption if they contain the same ingredients and therapeutic value.

2. Object of Exemption to Make Life-Saving Drugs Available at Cheaper Rates:
The petitioners contended that excluding branded drugs from the exemption would defeat the purpose of making life-saving drugs available at cheaper rates. The court agreed, stating that the burden of sales tax would increase the price of branded drugs, adversely affecting consumers. The court emphasized that the purpose of the exemption is to provide life-saving drugs at lower prices and that consumers should not be penalized for purchasing drugs under brand names prescribed by their doctors.

3. Competence of the Commissioner, Sales Tax, to Issue Instructions:
The court addressed whether the Commissioner, Sales Tax, had the authority to issue instructions limiting the exemption to non-branded drugs. The court held that the Commissioner had no such authority and that the instructions interfered with the judicial discretion of the assessing authorities. The court cited previous judgments, including Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh, which held that the Commissioner could not issue directions overriding the notification. The court concluded that the assessing authorities should independently determine whether branded drugs qualify for the exemption based on their ingredients and therapeutic value.

Conclusion:
The court quashed the notices and assessment orders issued based on the Commissioner's instructions and directed the assessing authorities to reconsider the cases of the petitioners. The court emphasized that the exemption should apply to life-saving drugs with the same ingredients and therapeutic value, regardless of whether they are sold under brand names. The court also highlighted the importance of maintaining judicial discretion and the proper interpretation of exemption notifications in line with legislative intent.