1985 (11) TMI 209 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of catguts-sutures for tax purposes.
2. Determination of the applicable tax rate for catguts-sutures.
3. Validity of the assessment orders under section 21 of the U.P. Sales Tax Act.
4. Acceptance of the disclosed turnover by the assessee for the assessment year 1975-76.

Issue-wise Detailed Analysis:

1. Classification of Catguts-Sutures for Tax Purposes:
The primary issue was whether catguts-sutures should be classified as "medicine and pharmaceutical preparations" or as "surgical goods" taxable as unclassified items. The court noted that catguts-sutures are used in surgical operations for stitching wounds, which aids in the healing process by joining disintegrated tissues. The court referenced the Indian Drugs and Cosmetics Act, 1940, which includes "sterilized surgical ligature and sterilized surgical suture" under the definition of "drug." The court also cited various dictionaries and medical texts to support that surgery is a branch of medicine and that substances used in surgical treatment, like catguts-sutures, fall under the category of "medicine."

2. Determination of the Applicable Tax Rate for Catguts-Sutures:
The court examined whether the tax rate applied to catguts-sutures should be 3.5% as "medicine and pharmaceutical preparations" or 7% as unclassified items. The court held that catguts-sutures fall under "medicine and pharmaceutical preparations" and thus should be taxed at the lower rate of 3.5%. The court rejected the argument that these items should be taxed as unclassified surgical goods, emphasizing that the modern scientific understanding of medicine includes surgical treatments.

3. Validity of the Assessment Orders under Section 21 of the U.P. Sales Tax Act:
The court reviewed the assessment orders passed under section 21 of the Act for the years 1973-74, 1974-75, and 1975-76, which had reclassified catguts-sutures as surgical goods taxable at higher rates. The court annulled these orders, stating that the reclassification was incorrect and that the items should remain classified under "medicine and pharmaceutical preparations." The court noted that the appellate and revisional authorities had correctly treated catguts-sutures as medicines, and there was no error of law in their decisions.

4. Acceptance of the Disclosed Turnover by the Assessee for the Assessment Year 1975-76:
The court addressed the department's challenge to the acceptance of the assessee's disclosed turnover for the year 1975-76. The appellate authority had accepted the turnover disclosed by the assessee and reduced the tax assessed at the enhanced turnover. The court upheld this decision, finding no error in the acceptance of the disclosed turnover and the subsequent reduction of the assessed tax.

Conclusion:
The court dismissed the revisions, affirming that catguts-sutures should be classified as "medicine and pharmaceutical preparations" and taxed at the lower rate of 3.5%. The court found no error in the appellate and revisional authorities' decisions and upheld the acceptance of the disclosed turnover for the assessment year 1975-76. The petitions were dismissed with no order as to costs.