Patna High Court
Charu Pharmacy And Clinic vs State Of Bihar on 3 July, 1973
Equivalent citations: [1973]32STC265(PAT)
Author: N.L. Untwalia
Bench: N.L. Untwalia
JUDGMENT N.L. Untwalia, C.J.
1. 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 Bihar Sales Tax 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 Bihar Sales Tax 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 28th September, 1958, 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. Assessments were made for the periods 1954-55, 1955-56, 1956-57, 1957-58 and 1-4-58 to 31-7-58. On appeal the assessment for the year 1954-55 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 1955-56, 1956-57, 1957-58 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 6th March, 1963, (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 transferred to the Tribunal for disposal. The Tribunal dismissed these revision applications by order dated 22nd January, 1966 (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, reject ing the argument advanced on behalf of the assessee-applicant, the Tribunal has recorded the following finding :
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 fees 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 Commissioner of Sales Tax, U. P. v. Dr. Sukh Deo [1969] 23 S.T.C. 385 (S.C.).
6. I shall leave out of consideration 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 assessment 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 the 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 his 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 his revisional order dated 14th March, 1964, it is clear that the assessee was a dealer within the meaning of Section 2(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 to 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 10th May, 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 sale 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 bring the assessee's case within the principle of law laid down by the Supreme Court in The State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 S.T.C. 353 (S.C.). and a decision of the of the Madras high Court in Sundaram Motors (Private) Ltd. v. The Sate of Madras [1958] 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.
S.K. Jha, J.
9. I agree.