2006 (10) TMI 413 - HC - VAT and Sales Tax

Levy of Service tax - Kerala General Sales Tax Act, 1963 (KGST Act) - Supply of intra ocular lens - cataract operation involves replacement of natural lens with an artificial lens - HELD THAT - Even though an implanted lens also is a lens and is used for the purpose of gaining or improving vision, the same, in our opinion is not covered by entry 136 which provides for spectacles, glasses, goggles, lenses, etc., which are externally used. In other words, whatever is implanted in the body irrespective of its purpose, is a medical implant specifically covered by entry 145 of the First Schedule to the Act. This certainly takes in lens used in cataract surgery. Same is the position in regard to metal rods implanted to substitute or strengthen bones, stent implanted in blood vessels, etc. In other words, all materials implanted in human body come within the description of medical implants . Therefore, we are of the view that the lenses sold by the petitioner through surgical implants in cataract surgery attract tax under entry 145 of the First Schedule to the KGST Act as medical implant, and not under entry 136 of the First Schedule covering spectacles, goggles, lenses, etc. It is seen that petitioner was well aware of petitioner's liability under the KGST Act and, therefore, took registration and paid tax on turnover which they considered taxable. Therefore, this issue does not merit consideration by us. Apart from this, we do not think in revisional proceedings, this court enjoys the power to grant relief of the nature prayed for by the petitioner. The sales tax revision cases are disposed of as above.

Summary

Issues: Whether the supply of intraocular lens by a hospital to patients during cataract surgery attracts sales tax under the Kerala General Sales Tax Act, 1963.

Analysis:
The judgment addressed the question of whether a hospital's supply of intraocular lenses to patients during cataract surgery is subject to sales tax. The court noted that cataract affects the natural lens, necessitating its replacement with an artificial lens during surgery. The assessing officer had added fifty percent to the purchase turnover of artificial lenses replaced during cataract surgeries for tax assessment. The court referred to a previous ruling regarding hospitals selling medicines during medical treatment being liable for tax. Drawing parallels, the court likened the replacement of natural lenses with artificial ones to the sale of medicines. It highlighted that the cost of materials supplied by hospitals, such as lenses, is a significant component of charges and varies based on quality. The court also mentioned the common tax rate of eight percent on medical implants under the Sales Tax Act.

Regarding the specific tax entry, the court discussed the classification of the lenses under two entries: entry 136 for spectacles and entry 145 for medical implants. While both entries had the same tax rate, the court emphasized that implanted lenses, despite improving vision, fall under the category of medical implants. The judgment clarified that any material implanted in the human body, including lenses for cataract surgery, qualifies as a medical implant and should be taxed accordingly under entry 145.

Additionally, the court addressed the issue of liability for past years. It differentiated this case from previous instances where liability was restricted due to pending legal matters. In this case, where the hospital was aware of its tax liability, registered, and paid taxes on taxable turnover, the court deemed the issue of liability for specific years not relevant for consideration. The judgment concluded by dismissing the sales tax revision cases, affirming the tax liability of hospitals for supplying intraocular lenses during cataract surgeries under the appropriate tax entry for medical implants.