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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • P.K.Sinha
  • N.N.Roy
  • Lakshman Saran Sinha
  • Guru Sharan Sharma
  • B.C.Ghosh
Judges
  • N.L Untwalia, C.J
  • S.K Jha, J.
Acts
  • Section 25(1) of the Bihar Sales Tax Act, 1947, hereinafter called the Act,
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • P.K.Sinha
  • N.N.Roy
  • Lakshman Saran Sinha
  • Guru Sharan Sharma
  • B.C.Ghosh
Judges
  • N.L Untwalia, C.J
  • S.K Jha, J.
Acts
  • Section 25(1) of the Bihar Sales Tax Act, 1947, hereinafter called the Act,
See more information ...
Smart Summary

Structured Summary of the Opinion (Untwalia, C.J.)

Factual and Procedural Background

The Commercial Taxes Tribunal, Bihar, referred two questions of law to the High Court under Section 25(1) of the Bihar Sales Tax Act, 1947 concerning whether a physician who supplies medicines to patients from his clinic is (1) a dealer within the meaning of the Act and (2) whether those supplies amounted to a "sale".

The factual matrix recorded in the statement and revisional order is: the assessee is a physician who runs a clinic and a pharmacy; he examines patients, prescribes medicines and supplies medicines from the pharmacy to patients on payment; prescriptions were not handed to patients but transcribed in a register in which charges were recorded; and the assessee did not sell medicines to outsiders.

Procedural history (as stated in the opinion): a surprise inspection by the Sales Tax Intelligence Branch on 28.9.1958 led to seizure of books and assessment proceedings for several periods (1954–55 through 31.7.58). The 1954–55 assessment was confirmed on appeal; other assessments were remanded and then fresh assessments were made (Annexures A–A/4). Appeals to the Deputy Commissioner were dismissed (order dated 6.3.63, Annexure C); revisions before the Commissioner of Commercial Taxes were dismissed; second revisions were transferred to the Tribunal, which dismissed them by order dated 22.1.66 (Annexure G). The Tribunal then stated the two questions to the High Court.

Legal Issues Presented

  1. Whether, on the facts and circumstances of the case, the applicant (a physician who supplies medicines to his patients from his clinic in course of their treatment) is a "dealer" within the meaning of the Bihar Sales Tax Act, 1947?
  2. Whether, on the facts and circumstances of the case, the supplies of medicines by the applicant to the patients who visited his clinic for treatment amounted to "sale" within the meaning of the Bihar Sales Tax Act, 1947?

Arguments of the Parties

Assessee's Arguments (as presented in the opinion)

  • During Tribunal argument an admission (concession) was made by the assessee's Advocate that a patient could decline to purchase medicines from the clinic and could take away the prescription by paying the consultation fee.
  • Learned counsel for the assessee, Mr. B.C. Ghose, later submitted that that concession was made under a misconception and was without basis; he said in fact no patient was allowed to take back the prescription and purchase medicines from other shops.
  • Mr. Ghose contended that the assessee charged a consolidated amount for treatment which included both professional fees and the cost of medicines, with no separate determinable price for medicines; on that basis the assessee was not making "sales" of medicines and therefore was not a "dealer" under the Act.
  • The assessee relied upon the Supreme Court decision in Commissioner of Sales Tax, U.P. v. Dr Sukh Deo (23 S.T.C. 385) in support of his position.

Department / Assessing Authority Position (as reflected in the record)

  • The assessing authorities, the Deputy Commissioner and the Tribunal recorded findings that the amounts charged and entered in the assessee's register represented the price of medicines supplied to patients.
  • The authorities found that the assessee did not charge any separate consultation fee; instead he made his return from profits on medicines sold in the clinic pharmacy. The register showed differing amounts in accordance with the value of medicines supplied.
  • On that basis the assessing authorities treated the transactions as sales and included the relevant receipts in the assessee's gross turnover for sales tax assessment.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Commissioner Of Sales Tax, U.P. v. Dr Sukh Deo (23 S.T.C. 385) The opinion records that this decision was relied upon by the assessee; in that case the question concerned the point at which sales tax could be charged under a Governor's notification and whether a physician who mixed medicines was a "manufacturer" under the notification. The Court held that the Dr Sukh Deo decision was not apposite to the present issue (which is whether supplies amounted to sale), and therefore it did not aid the assessee's contention here.
State of Madras v. Gannon Dunkerley & Co., (Madras) Ltd (9 S.T.C. 353) The opinion records that an attempt was made before the Tribunal to bring the assessee’s case within the principle of law laid down in this decision (the specific principle is not detailed in the provided opinion). The Tribunal (and the High Court in reviewing the record) distinguished this case and did not apply its principle to find for the assessee.
Sundaram Motors (Private) Ltd. v. The State of Madras (9 S.T.C. 687) The opinion records that the assessee sought to rely on the principle laid down in this Madras High Court decision (the specific principle is not detailed in the provided opinion). The Tribunal distinguished this decision and did not apply it in favour of the assessee; the High Court agreed with that distinction.

Court's Reasoning and Analysis

The Court first recorded that it would leave out of consideration the concession made by the assessee's Advocate before the Tribunal, and proceeded on the assumption (for the assessee's benefit) that no patient was in fact allowed to take away the prescription to purchase medicines elsewhere.

The Court then examined the assessment order, the appellate order of the Deputy Commissioner, and the case presented by the assessee across stages of the proceedings. From those documents the Court identified the operative factual findings: the assessee sat in the clinic, examined patients, prescribed medicines, and the amounts recorded in the register were taken by the assessing authorities to be the price of medicines supplied.

The Court noted that the assessee claimed he charged a consolidated amount (including professional fee and value of medicines) but the Department did not accept that claim. The record contained no entries or items that substantiated a consolidated-charge practice or showed an appreciable portion charged as professional fee; instead, the register suggested differing amounts correlating to the value of medicines supplied.

On that basis the Court concluded that the assessee was not, in substance, charging a consultation fee; rather, he was conducting the business of selling medicines to his patients and relying on profit from the pharmacy. The patients purchasing medicines from the clinic were customers who paid prices for the medicines.

The Court therefore treated those transactions as contracts of sale between seller (assessee) and buyers (patients). Relying on the findings of the assessing authorities (and reading the Tribunal's findings in the light of observations in the revisional order), the Court held that the assessee fell within the definition of "dealer" (Section (c) of the Act) and that the transactions amounted to "sales" (Section 2(g) of the Act), making the assessee chargeable to sales tax.

The Court briefly addressed the precedents relied upon by the assessee (notably Dr Sukh Deo and the Madras cases). It explained that Dr Sukh Deo was focused on whether a physician was a "manufacturer" for purposes of a point-of-taxation notification and did not consider the present question whether supplies were sales; the Madras cases were raised before the Tribunal but were distinguished and not applied to support the assessee.

Holding and Implications

Holding: Both questions referred to the Court were answered in the affirmative — the Court held that the assessee was a dealer within the meaning of the Bihar Sales Tax Act and that the supplies of medicines to his patients amounted to "sale" within the meaning of the Act. The reference was therefore answered against the assessee and in favour of the Department.

Implications (direct consequences): The immediate legal consequence is that the assessee is chargeable to sales tax on the transactions in question and the assessments as made were upheld in substance. The Department was awarded its costs; a consolidated hearing fee of Rs. 64/- was ordered.

The opinion does not articulate any broader or novel legal principle beyond application of the Act to the facts; it distinguishes certain precedents but does not purport to set a new precedent applicable beyond the factual context described.

Disposition: Application dismissed. (S.K. Jha, J. concurred.)

Show full summary ...

    Messrs Charu Pharmacy & Clinic v. State Of Bihar Opp. Party.

    Untwalia, C.J:— The Commercial Taxes Tribunal Bihar, has made this reference to this Court under Section 25(1) of the Bihar Sales Tax Act, 1947, hereinafter called the Act, on the following two questions of law—

    “(1) Whether in the facts and circumstances of the case the applicant, a physician who supplies medicines to his patients from his clinic in course of their treatment, is a dealer within the meaning of the B.S.T Act, 1947?

    (2) Whether in the facts and circumstances of the case the supplies of medicines by the applicant to the patients who visited his clinic for treatment amounted to sale within the meaning of the B.S.T Act, 1947?”

    2. The facts of the case as stated in the statement are these. The assessee is a physician who runs a pharmacy and clinic for examination and treatment of patients who go to him. As a result of a surprise inspection by the Intelligence Branch of the Sales Tax Department on 28.9.58 proceedings for assessment of Sales Tax were commenced by the Assessing Officer on the basis of the result of the examination of books of account seized during the inspection. Assessment were made for the period 1954-1955, 1955-1956, 1956-1957, 1957-1958 and 1.4.58 to 31.7.58 On appeal the assessment of the year 1954-1955 was confirmed, but for the remaining four periods the assessment orders were set aside and the proceedings were remanded for fresh assessment due to certain technical irregularities. Fresh assessment orders for the four periods 1955-1956, 1956-1957, 1957-1958 and 1.4.58 to 31.7.58 were made. They are Annexures A to A/4 to the statement of the case. Against these assessment orders the assessee filed appeals before the Deputy Commissioner of Commercial Taxes, Ranchi who by his order dated 6.3.63 (Annexure C) dismissed the appeals. The assessee then filed revision applications before the Commissioner of Commercial Taxes, but the revisions were dismissed. Then he preferred second revisions before the Board of Revenue which were eventually trans ferred to the Tribunal for disposal. The Tribunal dismissed these revision applications by order dated 22.1.66 (Annexure G). On being asked to state a case the Tribunal has done so on the two questions of law stated above.

    3. In the revisional order of the Tribunal the facts recorded are these … (1) that the assessee is a physician, runs a pharmacy and clinic and examines the patients who go to him for treatment, (2) that a prescription is drawn up and medicines are supplied from the pharmacy to the patients on payment of its price, (3) that the prescriptions are not handed over to the patients and they are transcribed in a register in which the charges realised are also noted, and (4) that the assessee is not engaged in selling medicines to any outsider.

    4. During the course of argument the learned Advocate for the assessee admitted that it was open to a patient not to purchase the medicines from the clinic and to take away the prescription drawn up by the physician by paying the consultation fee. Then, finally, rejecting the argument advanced on behalf of the assessee applicant the Tribunal has recorded the following findings—

    “The transfer of property in the shape of medicine was thus subject to the agreement of both the parties and an implied contract for the sale thus existed. The accepted fact of the case being that the applicant did not use to charge any fee from such of the patients who chose to purchase medicines from him and the assessing authority having treated only such of the amounts as taxable turnover as were received from the patients purchasing the medicines from the clinic, we hold that the turnover of the applicant has been rightly determined and Sales Tax imposed thereon”.

    5. Mr. B.C Ghose, learned counsel for the assessee, submitted that the concession made by the assessee's Advocate before the Tribunal was under a misconception and misapprehension. There was no basis for making that concession. No patient was allowed to take back the prescription written by the Doctor, the assessee, and purchase medicines from other shops. Learned counsel further submitted that the case of the assessee was that he used to charge a consolidated amount for the treatment of the patient and did not charge any separate amount as the price of the medicines supplied. In that view of the matter, the assessee was not a dealer within the meaning of the Act as he was not making any sale of the medicines to his patients. It was a part of a consolidated contract for the treatment of patients and the consolidated charge included the price of the medicines also which could not be determined and has not been determined separately. Learned counsel also placed reliance upon a decision of the Supreme Court in (1) Commissioner Of Sales, Tax, U.P v. Dr Sukh Deo (23 S.T.C 385).

    6. I shall leave out of consider action the concession made by the learned counsel for the assessee before the Tribunal. I shall assume in favour of the assessee that no case was detected where the patient was allowed to purchase the medicines from another shop after charging merely consultation fee. But that does not solve the difficulty of the assessee in this case. Reading the assessement order, the appellate order of the Deputy Commissioner and the case made out by the assessee at various stages, the facts which emerge are these. The assessee used to sit in the clinic, examine patients and prescribe medicines. The charges which were paid by the patients were the charges for the supply of the medicines, namely the price. The whole of the amount mentioned in the register maintained by the assessee has been taken to be his gross turnover. It is a case where the assessee, as it appears, was not charging any fee from the patients but he used to run the business of selling medicines to his patients without charging any fee from them and resting content with the profit which he used to make from the shop. The assessee's case in his petition of appeal and the petition of revision was that he used to charge a consolidated amount from his patients which included the value of the medicines used in course of treatment and the fee for his professional skill. But this case was not accepted by the Department. The finding recorded by the Assessing Officer, the Deputy Commissioner and the Tribunal are that whole of the amount charged was the price of the medicines supplied. The register maintained by the assessee must have disclosed that he was charging different amounts from his patients in accordance with the value of the medicines supplied to them. No item could be brought to the notice of the department to show that the charges were consolidated ones and not only the price of the medicines but some appreciable amount was charged by way of fees for examination and treatment. Nor was it a case where the assessee could claim to be treating the patients on a contract basis charging a consolidated amount by way of his remuneration and the value of the medicines supplied. It was not a case where the assessee used to treat his patients and charge consolidated amounts, major or an appreciable portion of which was his fee. It was a clear case as is a well-known practice in the State of Bihar where a doctor was sitting in his shop prescribing medicines to his patients, not charging any consultation fee and was charging price of the medicines supplied to them. There is no doubt in my mind that the assessee was selling medicines to his patients who when purchasing medicines from ibis clinic were his customers. They used to pay prices and thus there was a contract of sale between the seller, namely, the assessee and the customers, namely, the patients. Reading the finding recorded by the Tribunal in the light of what has been said by the Commissioner of Commercial Taxes in this revisional order dated 14.3.64 it is clear that the assessee was a dealer within the meaning of Section (c) of the Act and was effecting sales within the meaning of Section 2(g) of the Act. He was thus chargeable to sales tax and has rightly been charged.

    7. The Supreme Court decision relied upon by the assessee, referred to above, is not quite apposite. There the question under consideration was not as whether the medicines supplied by the physician amounted to sale or not. The question of charging sales tax treating it as sale did not arise in that case. The point under consideration there was whether the sales tax could be charged in accordance with the notification dated May 10, 1956 issued by the Governor of Uttar Pradesh. There the sales tax could be charged only at one point of time in the case of medicines and pharmaceutical preparations imported from outside Uttar Pradesh, at the point of gale by the importer, and in the case of medicines and pharmaceutical preparations manufactured in Uttar Pradesh, at the point of sale by the manufacturer. The question before the Supreme Court was whether the physician who was supplying medicines after mixing a few other ones was a manufacturer within the meaning of the Uttar Pradesh notification. The answer given by the High Court as also by the Supreme Court was that it was not so. Here, in this case, such a question does not arise. Before the Tribunal attempt was made to bricg the assessee's case within the principle of law laid down by the Supreme Court in (2) The State Of Madras v. Gannon Dunkerley & Co., (Madras) Ltd (9 S.T.C 353) and a decision of the Madras High Court in (3) Sundaram Motors (Private) Ltd. v. The State of Madras (9 S.T.C 687). The two cases were rightly distinguished by the Tribunal.

    8. Both the questions referred to this Court have got to be answered in the affirmative and it has got to be held that the assessee was supplying medicines to his patients as a dealer within the meaning of the Act and on the facts and circumstances of this case supply of medicines by him to his patients who visited his clinic for treatment amounted to sale. The reference is, therefore, answered against the assessee and in favour of the Department. The latter must have its costs. Hearing fee one consolidated sum of Rs. 64/- only.

    9. S.K Jha, J.:—I agree.

    Application dismissed.

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    Comments

    Messrs Charu Pharmacy & Clinic v. State Of Bihar Opp. Party.
    (Jul 3, 1973)