# COMMISSIONER OF SALES TAX, U.P v. DR. SUKH DEO 1fu1:u.11 I 9, 1968

- **Citation:** [1969] 1 S.C.R. 710
- **Court:** Supreme Court of India
- **Decided:** 1969
- **Case number:** CIVIL APPELLATE Jt:IUSDICTIO'.'t: Civil Appeal No. 2458 of 1966
- **Bench:** J. C. SJ!AH .INO v. RA:vtASWAMl
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-sales-tax-u-p-v-dr-sukh-deo-1fu1-u-11-i-9-1968-4472
- **Pages:** 4

## Headnote

U.P.
Sale.r Tax Act
1948-Norification
No. S.T. 3504/ X,
dated
1\1G}' 10, 1956 issued undr.r powrr given by s. 3A of the Act-Sin1:le
point tax pa,vable on sale by ntanufacture of medicines and pharmaceuticals-.\f edicines dispensed by 1nedical oractition. .. ~r to his patients--Such
dispensing lvhe1lzcr 'n1a11ufacturc' ll'ithin meaning of 11otificatio11-Whl'ther
A
B
taxable.
C
'[be respondent was a n1cdic;1J practitioner in Utrar Pradesh and maintained a dispensary front "'hich medicines were issued
to
his
patients
according to his prcscdptions. According to notific;ition No. s:r. ~504/X,
dated May 10, 1956 issued under. s. 3A of the U.P. Sales Tax Act, 1948,
tax in re;pect of sale of medicines and pharmaceuticals manufactured in
the State \\·as pJyable at single point on the sale effected hy the manufacturer. The Sales Tax Officer held that dispensin~ of medicines wa'i 'manuD
facture' \l."ithin the m<~aning of the aforesaid notification and ac;.se;sed the
r"'Jl<>ndcnt to sales tax for the year 1956-57 on the turnover of medicines
dispeased.
The order was confirmed hy
the
appellate and
re\.isional
authorities, but the High Court decided in favour of the rcspondcnL The
State appealed.
1-iELD : \Vhcn 3.\ pre~cribed b}' a medical pracunoner, a mixture of
different drugs is prepared by the medical practitioner or·by his employees
· specially for the use of a patient in the treatment of an ailment or discon1fort diagnosed by the medical practitioner by his professional skill,
and \\'hich mixture is normally incap~1ble of being passed from hand to
hand as a commercial cornn1odity, the medical practitioner supplying the
medicines cannot be .said to be a manufacturer of the mixture and the
mixture cannot be said to he manufactured
\\'ithin the meaning of the
notification. [712 G-H]
In the absence of clearer phrascolo!,T)' the Court would not in a taxing
provi.-.ion be "'illing to give an inteTprctation whereby a rriedical practitioner supplying to hi_., paticntc; medicines and pharmaceutical prcpal'3tions
separately is not liable to tax, hut \vhcn under bis direction they arc mixed
hy hi<.; employees for the special use of a patient under his treatment and
to achieve a specific purpose, the turnover from the resultant mixture is
taxable. [713 DJ
CIVIL APPELLATE Jt:IUSDICTIO'.'t: Civil Appeal No. 2458 of
1966.
Appeal by special leave from the judgment and decree dated
April I, 1963 of the Allahabad High Coun in Sales-tax Reference
No. 391 of 1959.
C. B. Agarwala and 0. P. Rana, for the appellant.
J. P. Goyal and Sobhag Mal Jain, for the respondent.
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SALE. TAX COMMR. V. SVKH DEO (Shah, J.)
711
A

## Text

710
COMMISSIONER OF SALES TAX, U.P.
v.
DR. SUKH DEO
1fu1:u.11 I 9, 1968
[J. C. SJ!AH .INO v. RA:vtASWAMl, JJ.]
U.P.
Sale.r Tax Act
1948-Norification
No. S.T. 3504/ X,
dated
1\1G}' 10, 1956 issued undr.r powrr given by s. 3A of the Act-Sin1:le
point tax pa,vable on sale by ntanufacture of medicines and pharmaceuticals-.\f edicines dispensed by 1nedical oractition. .. ~r to his patients--Such
dispensing lvhe1lzcr 'n1a11ufacturc' ll'ithin meaning of 11otificatio11-Whl'ther
A
B
taxable.
C
'[be respondent was a n1cdic;1J practitioner in Utrar Pradesh and maintained a dispensary front "'hich medicines were issued
to
his
patients
according to his prcscdptions. According to notific;ition No. s:r. ~504/X,
dated May 10, 1956 issued under. s. 3A of the U.P. Sales Tax Act, 1948,
tax in re;pect of sale of medicines and pharmaceuticals manufactured in
the State \\·as pJyable at single point on the sale effected hy the manufacturer. The Sales Tax Officer held that dispensin~ of medicines wa'i 'manuD
facture' \l."ithin the m<~aning of the aforesaid notification and ac;.se;sed the
r"'Jl<>ndcnt to sales tax for the year 1956-57 on the turnover of medicines
dispeased.
The order was confirmed hy
the
appellate and
re\.isional
authorities, but the High Court decided in favour of the rcspondcnL The
State appealed.
1-iELD : \Vhcn 3.\ pre~cribed b}' a medical pracunoner, a mixture of
different drugs is prepared by the medical practitioner or·by his employees
· specially for the use of a patient in the treatment of an ailment or discon1fort diagnosed by the medical practitioner by his professional skill,
and \\'hich mixture is normally incap~1ble of being passed from hand to
hand as a commercial cornn1odity, the medical practitioner supplying the
medicines cannot be .said to be a manufacturer of the mixture and the
mixture cannot be said to he manufactured
\\'ithin the meaning of the
notification. [712 G-H]
In the absence of clearer phrascolo!,T)' the Court would not in a taxing
provi.-.ion be "'illing to give an inteTprctation whereby a rriedical practitioner supplying to hi_., paticntc; medicines and pharmaceutical prcpal'3tions
separately is not liable to tax, hut \vhcn under bis direction they arc mixed
hy hi<.; employees for the special use of a patient under his treatment and
to achieve a specific purpose, the turnover from the resultant mixture is
taxable. [713 DJ
CIVIL APPELLATE Jt:IUSDICTIO'.'t: Civil Appeal No. 2458 of
1966.
Appeal by special leave from the judgment and decree dated
April I, 1963 of the Allahabad High Coun in Sales-tax Reference
No. 391 of 1959.
C. B. Agarwala and 0. P. Rana, for the appellant.
J. P. Goyal and Sobhag Mal Jain, for the respondent.
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SALE. TAX COMMR. V. SVKH DEO (Shah, J.)
711
A
The Judgment of the Court was delivered by
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Shah, J.
The Judge (Revisions) Sales Tax, U.P., Lucknow,
referred the following question to the High Court of Allahabad
[or opinion :
'
"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. S.T. 3504/X dated 10th
May, 1956, and whether the applicant was assessable to
tax on the turnover of the medicines so dispensed ?"
The High Court held that the respondent was not a manufacturer of medicines and pharmaceutical preparations within the
meaning of the notification. Against the answer recorded by the
High Court, the Commissioner of Sales Tax, U.P., has appealed
to this Court with special leave.
The respondent is a medical practitioner and in the performance of his professional duties he examines patients, advises
them and prescribes medicines which are issued ~rom his dispensary.
The Sales Tax Officer being of the view that the! dispensing
of medicines, according to the prescriptions issued by the respondent, amounted to manufacture of medicines within the meaning
of the notification No. S.T. 3504/X dated May 10, 1956, assessed the respondent to pay tax on a turnover of Rs. 12,943 for
the year 19 5 6-5 7.
The order was confirmed in appeal by the
Judge (Appeals) and was further confirmed by the Judge (Revisions) Sales Tax.
The sole question which falls to be determined in this appeal
is whether by virtue of the notification, the respondent is exempt
from liability to pay tax.
Section 3 of the1 U.P. Sales Tax Act, 1948, makes every
dealer liable to pay in each assessment year a tax at a certain rate
on the turnover.
Section 3A provides :
"Notwithstanding anything contained in section '.'.\
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 sale.~ by
successive dealers
as the State Government may
specify."
On May 10, 1965, the Governor of Uttar Pradesh issued a
notification No. S.T. 3504/X that-
"'ln exercise of the powers conferred by section 3A
of the U.P. Sales Tax Act, 1948, as amended from time
•
to time, and in supersession of all the previous notifica-
•
712
SCPRn!l: COCRT REPORTS
[1969] I SCR
lions on the subject, the Governor of Uttar Pradesh is
A
hereby pleased to declare that with effect from May 8,
1956, the turnover m respect of medicines and pharmaceutical preparations shall not
be
liable
to
tax
except-
( a) in the case of medicines and pharmaceutical
preparations
imponed
from
outside
Uttar
Pradesh, at the point of sale by the importer.
and
(b) in the case of medicines and phannaceutical
prepar~tions manufactured, in Uttar Pradesh, at
the pomt of sale by the manufacturer;
And the Governor is further pleased to declare that such
turnover shall with effect from the said date be taxed
at the rate of .... "
The respondent is not an m1portcr of medicines and pharmaceutical preparations from outside Uttar Pradesh.
That ls common
ground.
The Revenue auihoritics, however, held that when in
his dispensary medicines and
pharmaceutical
preparations
as
prescribed by him were mixed, the process of mixing resulted in
"manufacture" of medicines by him as a "manufacturer". The
expression "manufacture" has in ordinary
acceptation a wide
cormotation : it means making of articles, or material commercially different from the basic components, by physical labour or
mechanical process; and a manufacturer is a person by whom or
under whose direction and control the articles or materials
arc
made.
The notification in the first instance exempts from tax
sales of medicines and pharmaceutical preparations. It then proceeds to withdraw the exemption in respect of two classes of sales
of medicines and phannaceutical preparations, (i) sale by an
importer of medicines etc., imported from outside the State and
(ii) sale by a manufacturer of medicines etc., manufactured in the
State.
The tax levied in respect of the excepted categories is a
single point tax : it may be levied when medicines and pharmaceutical preparations manufactured in the State of Uttar Pradesh
are sold by the manufacturer.
In our judgment when, as prescribed by a
medical pra_ctitioner, a mixture of different drugs is prepared by the medical
practitioner or by his employees specially for the use of a patient
in the treatment of an ailment or discomfort diagnosed by the
medical practitioner by his professional skill, and which mixture
is normally incapable of being passed from hand to hand as a
commercial commodity, the medical practioner supp)ying the
medicines cannot be said to be a manufacturer ol the nnxture and
the mixture cannot be said to be manufactured within the meanB
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SALES TAX COMMR. V. SUKH DEO (Shah. J.)
713
ing of the notification~ Exemption granted by the notification
ceases to apply under cl. (a) if the importer of 'medicines and
pharmaceutical preparations manufactured outside the State sells
them, and under cl. (b) if the manufacturer of medicines and
pharmaceutical preparations manufactured in Uttar Pradesh sells
them.
The scheme therefore is to levy sales-tax at one point
only, viz., at the point of sale by the importer in respect of medicines imported by him into the State, and at the point of sale by
the manufacturer of medicines manufactured by him .within the
State. If preparation of a mixture of drugs as prescribed by a
medical practitioner in his own dispensary is not manufacture of
medicines or pharmaceutical preparation, the exception clause of
the notification will have no application.
Acceptance of the contention by the Revenue would imply
that a medical practitioner supplying to his patients medicines
and pharmaceutical preparations separately is not liable to tax :
when under his direction they are mixed by his employees for the
special use of a patient under his treatment and to achieve a
specific purpose, the turnover from the resultant mixture is taxable. In the absence of clearer phraseology, the Court would
not in a taxing provision be willing to give that interpretation.
The appeal therefore fails and is dismissed.
The delay in
filing the respondent's statement of the case is condoned. There
will be no order as to costs in this appeal.
G.C.
Appeal dismissed .
•