1946 (6) TMI 8 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability for registration under Section 7 of the Bengal Finance (Sales Tax) Act, 1941.
2. Definition of "manufacturer" under sub-section 5(a) of Section 4 of the Act.
3. Whether dispensing chemists can be considered manufacturers while serving out prescriptions.

Issue-Wise Detailed Analysis:

1. Liability for Registration under Section 7 of the Bengal Finance (Sales Tax) Act, 1941:
The primary issue is whether the applicants, North Bengal Stores, Ltd., are liable for registration under Section 7 of the Bengal Finance (Sales Tax) Act, 1941. Section 7(1) mandates that no dealer shall carry on business unless registered and possessing a registration certificate. The term "dealer" is defined in Section 2(c) as any person, firm, or Hindu joint family engaged in the business of selling or supplying goods in Bengal. The applicants' gross turnover exceeded Rs. 10,000 during the year preceding the commencement of the Act, which brings them under the purview of Section 4(5)(a) if they are considered manufacturers.

2. Definition of "Manufacturer" under Sub-section 5(a) of Section 4 of the Act:
The core issue is whether the applicants qualify as manufacturers under sub-section 5(a) of Section 4 of the Act. The Act does not define "manufacture" or "produce," so these terms must be construed in their ordinary natural meaning. According to the judgment, "to manufacture" means "to bring goods into being," and "to manufacture or produce goods for sale" means to produce something in a form capable of being sold or supplied in the course of business. The judgment elaborates that the essence of manufacturing is that something is produced or brought into existence, which is different from its raw materials and is a commercial commodity capable of being sold.

3. Whether Dispensing Chemists Can Be Considered Manufacturers While Serving Out Prescriptions:
The applicants argued that dispensing a doctor's prescription for one patient is not manufacture but merely preparing a drug for personal use. However, the court opined that the process of mixing different medicinal ingredients into an ultimate mixture suitable for use by particular classes of patient consumers constitutes the manufacture of medicines. The court drew a parallel with other trades, such as goldsmiths and tailors, who are considered manufacturers even when producing items to order. The judgment emphasized that the resultant mixtures from dispensing prescriptions are the goods sold by the chemist, and the process of dispensing is necessary to produce those goods for sale. Therefore, the chemist who dispenses prescriptions produces goods for sale within the meaning of Section 4, sub-section (5), clause (a) of the Act.

Conclusion:
The court concluded that the applicants are liable for registration under Section 7 of the Bengal Finance (Sales Tax) Act, 1941, as they are considered manufacturers. The answers to the three questions referred to the court were all in the affirmative. The court held that the process of dispensing prescriptions constitutes manufacturing or producing goods for sale, making the applicants liable for tax under the Act. Consequently, the decisions of the Commissioner and the Board of Revenue were upheld, and the reference was answered in the affirmative.