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2025 (3) TMI 737 - HC - VAT / Sales Tax


1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

  • Whether the supply of medicine by the hospital to patients constitutes a business activity under the Madhya Pradesh Commercial Tax Act, 1994, thereby rendering the petitioner liable to pay tax.
  • Whether the operation of a canteen by the hospital for attendants of patients constitutes a business activity under the Act.
  • Whether the activities of the petitioner, being a charitable trust, exempt it from being classified as a dealer under the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework revolves around the definitions provided in the Madhya Pradesh Commercial Tax Act, 1994. Section 2(c) defines "business" to include any trade, commerce, or manufacture, irrespective of profit motive or regularity. Section 2(h) defines "dealer" as any person engaged in the business of buying, selling, or distributing goods. The Court also considered precedents from the Supreme Court and High Courts, notably the Kerala High Court's decision in Aswini Hospital Private Limited and others, and the Gujarat High Court's ruling in Bhailal Amin General Hospital.

Court's interpretation and reasoning:

The Court interpreted the definitions under the Act, emphasizing that the term "business" includes activities conducted without a profit motive. However, the Court distinguished the definitions under the Madhya Pradesh Act from those under the Kerala General Sales Tax Act, noting the absence of the phrase "whether in the course of business or not" in the former. This distinction was pivotal in determining that the mere supply of medicine in the course of running a hospital does not constitute a business activity.

Key evidence and findings:

The Court examined the nature of the hospital's operations, including the supply of emergency medicines and the running of a canteen. It was established that the hospital's primary objective was providing medical care, and any supply of medicine was incidental to this main activity. The hospital operated on a no-profit, no-loss basis, further supporting the argument that it was not engaged in a business activity.

Application of law to facts:

The Court applied the definitions of "business" and "dealer" under the Act to the facts, concluding that the hospital's activities did not meet the criteria for being classified as a business. The supply of medicine was deemed an integral part of the medical services provided, rather than a separate business transaction.

Treatment of competing arguments:

The respondents argued that the hospital's activities constituted a business due to the regularity and volume of medicine supplied. However, the Court rejected this argument, citing the lack of profit motive and the incidental nature of the medicine supply to the hospital's primary charitable activities. The Court also distinguished the case from the Cochin Port Trust decision, noting differences in statutory definitions.

Conclusions:

The Court concluded that the petitioners, being charitable institutions, were not engaged in business activities as defined under the Act. Consequently, they were not liable to pay tax on the supply of medicine or the operation of the canteen.

3. SIGNIFICANT HOLDINGS

Core principles established:

The Court affirmed that the supply of medicine as part of medical treatment in a charitable hospital does not constitute a business activity subject to taxation under the Act. It emphasized the importance of the primary purpose of the activity, which in this case was providing medical care, not engaging in commerce.

Final determinations on each issue:

The petitions were allowed, and the impugned orders imposing tax on the hospital's activities were quashed. The Court held that the petitioners were exempt from tax under the Act for both the supply of medicine and the operation of the canteen as part of their charitable activities.

 

 

 

 

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