SUKH DEO Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) At the instance of the assessee the Judge (Revisions) has referred to this Court a statement of the case giving rise to the following question of law :- Whether the preparation of medicines on prescriptions of the applicant amounted to a manufacture of 'medicines and pharmaceutical preparations' within the meaning of notification No. ST-3504/X dated 10th May, 1956, and whether the applicant was assessable to tax on the turnover of the medicines so dispensed.

(2.) The assessee is a practising doctor and dispensing chemist. His patients get medicines according to the prescriptions issued by him and dispensed by him ; he thus sells medicines required by patients according to their prescriptions. He has been assessed to sales tax on the turnover of these sales. He claimed that he was exempted from the liability to pay sales tax because he could not be said to be a manufacturer of medicines. His contention was rejected by the Sales Tax Officer and the Judge (Appeals and Revisions).

(3.) Under Section 3 of the Sales Tax Act every dealer is liable to pay in each assessment year a tax at a certain rate on the turnover (in this case) of the assessment year. Section 3-A is to the effect that "notwithstanding anything contained in Section 3 the State Government may...declare that the turnover in respect of any goods...shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify." under Section 4 no tax is to be payable on the sale of any goods which the State Government may exempt. The State Government issued a notification under Section 4 exempting medicines and pharmaceutical preparations from payment of the sales tax, but subsequently they revoked the exemption and issued notification No. ST-3504/X, dated 10th May, 1956, under Section 3-A laying down that with effect from 8th May, 1956, medicines and pharmaceutical preparations manufactured in Uttar Pradesh shall not be liable to be taxed except when sold by the manufacturer. The result of this notification was twofold : one was to remove the exemption and thereby make the turnover of medicines assessable under Section 3 and the other was that in respect of medicines manufactured in Uttar Pradesh the turnover in the hands of the manufacturer alone was liable to tax. This was the state of law in 1957-58 but it was not correctly understood, not only by the assessee but also by the Sales Tax Officer, the Judge (Appeals) Sales Tax, the Judge (Revisions) Sales Tax and even the Commissioner, Sales Tax. They all laboured under the impression that turnover on the sale of medicines was not assessable at all except in the case of sale by the manufacturer and consequently, concentrated all their attention in the instant case on the question whether the assessee was a manufacturer of the medicines sold by him to his patients. The Sales Tax Officer etc. held that he was a manufacturer and consequently liable to pay sales tax. They held him liable under the notification and did not consider his liability under Section 3 itself. They knew about the notification exempting turnover on sale of medicines from the liability but presumably did not learn about the notification cancelling the exemption and thereby restoring the liability under Section 3.