1982 (4) TMI 267 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "water for injection" for tax purposes.
2. Applicability of the U.P. Sales Tax Act and relevant notifications.
3. Interpretation of "medicine" and "pharmaceutical preparations" under the U.P. Sales Tax Act.

Summary:

1. Classification of "water for injection" for tax purposes:
The applicant, M/s. Rashtra Deep Laboratory, challenged the Sales Tax Tribunal's decision that "water for injection" was taxable at 7% as an unclassified item rather than at 3% as a medicine or pharmaceutical preparation. The Assistant Commissioner (Judicial) Sales Tax had previously ruled it taxable at the lower rate, differing from the assessing authority's view.

2. Applicability of the U.P. Sales Tax Act and relevant notifications:
The Tribunal noted that "water for injection" is sterilized distilled water without pharmaceutical or medicinal properties. The applicant did not claim exemption u/s 4 of the Act, which excludes distilled water from the definition of "water." The Tribunal relied on previous decisions, including H.T. Chemical Laboratories v. State of U.P. and Chandausi Chemicals v. Commissioner of Sales Tax, which held distilled water and water for injection as not being medicines or pharmaceutical preparations.

3. Interpretation of "medicine" and "pharmaceutical preparations" under the U.P. Sales Tax Act:
The applicant argued that the issue was whether "water for injection" fell under "medicines and pharmaceutical preparations" as per the notification dated 15th November 1971. The Drugs and Cosmetics Act, 1940, and its rules, which regulate the sale of drugs, include "water for injection" as a drug. The Tribunal's observation that "water for injection" is not commonly called a drug or medicine was not based on a thorough examination.

The Court emphasized that the concept of medicine is dynamic and evolving. It referred to the Supreme Court's approach in Porritts & Spencer (Asia) Limited v. State of Haryana, which considered the broader context and cognate statutes for interpreting terms in taxing statutes. The Court concluded that "water for injection" should be taxed at the lower rate as it falls within "medicines and pharmaceutical preparations."

Conclusion:
The revision was allowed, setting aside the Tribunal's order. It was held that "water for injection" is taxable at the lower rate as a medicine within the entry "medicines and pharmaceutical preparations." Parties were ordered to bear their own costs.