1995 (1) TMI 381 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of benzene hexachloride 50% W.D.P. as a medicine or insecticide.
2. Applicability of Rule 24 of the M.P. General Sales Tax Rules, 1959 for tax exemption.
3. Interpretation of the term "medicine" under various statutes.

Issue-wise Detailed Analysis:

1. Classification of Benzene Hexachloride 50% W.D.P. as Medicine or Insecticide:
The primary issue was whether benzene hexachloride 50% W.D.P. should be classified as a medicine or an insecticide. The assessing officer treated it as an insecticide, while the Tribunal later classified it as a medicine, thus making it eligible for tax exemption. The High Court examined the usage of benzene hexachloride, noting that it is used in the eradication of malaria by spraying in marshy and waterlogged places to control or destroy malaria-carrying flies. The Court emphasized that it is not consumed internally or applied externally on humans or animals for medicinal purposes.

2. Applicability of Rule 24 of the M.P. General Sales Tax Rules, 1959 for Tax Exemption:
Rule 24 allows for deductions from turnover for sales of medicines, medical, surgical, veterinary instruments, or equipment to specified government officers or organizations, provided they are certified for bona fide use in hospitals or for free distribution in disease prevention schemes. The Joint Director, Health Services certified that benzene hexachloride was purchased for bona fide use in eradicating malaria under the National Malaria Eradication Programme, thus exempting it from sales tax. However, the Court found that the certificate did not classify benzene hexachloride as a medicine but merely indicated its use in a government scheme.

3. Interpretation of the Term "Medicine" Under Various Statutes:
The Court explored definitions from several statutes, including the Drugs and Cosmetics Act, 1940, and the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. The term "medicine" was not defined in the M.P. General Sales Tax Act or the Rules. The Court referred to the Drugs and Cosmetics Act, which defines "drug" but not "medicine," and noted that benzene hexachloride was not listed as a drug by the Central Government. The Court also considered common parlance and commercial understanding, concluding that "medicine" generally refers to substances taken internally or applied externally to treat or prevent diseases. Benzene hexachloride, being an insecticide used to kill malaria germs and not consumed by humans or animals, does not fit within this definition.

Conclusion:
The High Court concluded that benzene hexachloride 50% W.D.P. is an insecticide and not a medicine. Therefore, it does not qualify for tax exemption under Rule 24 of the M.P. General Sales Tax Rules, 1959. The Board of Revenue's reliance on the certificate from the Joint Director, Health Services, was misplaced as it did not substantiate that benzene hexachloride is a medicine. The reference was answered in the negative, favoring the Revenue and against the assessee, with no direction as to costs.

Final Judgment:
The reference is answered in the negative, indicating that benzene hexachloride 50% W.D.P. is not a medicine and thus not eligible for tax exemption under Rule 24. A copy of the judgment is to be forwarded to the appellate authority.