SC: Medical Oxygen IP; Nitrous Oxide IP is ‘Drugs’ under section 3(b)(i) Of Drugs & Cosmetics Act 1940

State of Andhra Pradesh v. Linde India Ltd., Civil Appeal No 2230 of 2020, decided on 13.04.2020

The (), while supporting the decision of the Andhra Pradesh , has held that ‘’ and ‘’ falls within the ambit of ‘’ under Section 3(b)(i) of the  and therefore covered under Entry 88 of Schedule IV of Andhra Pradesh Value Added Tax (VAT) Act,

According to the State, these gaseous substances were taxable as ‘unclassified goods’ under Schedule V[1], which attracts a higher percentage of duty as compared to Schedule IV. 

The HC opined that in Section 3(b)(i) of the Drugs and Cosmetics Act 1940[2], the expression ‘drug’ includes ‘any substance which is used for or in the treatment, prevention and mitigation of a disease or a disorder’. It observed that:

  • Medical Oxygen IP is used for the treatment of patients and to reduce the intensity of diseases and disorders; and 
  • Nitrous Oxide IP is used as an anesthetic in surgical operations and procedures of a short duration

As both the gaseous substance serve as medicines, HC held that these substances are taxable as ‘drugs’ under Schedule IV[3]and therefore liable to tax only at 4%/5%. The SC bench, comprising Justices D Y Chandrachud and Ajay Rastogi heard appeal filed by the State of Andhra Pradesh against the judgment of the HC. The broader question before the SC was whether ‘Medical Oxygen IP’ and ‘Nitrous Oxide IP’ are used in or for any of the purposes specified in section 3(b) of Drugs and Cosmetics Act, 1940. 

The term ‘medicine’ is not defined in the 1940 Act. Therefore, going according to the plain, literal and grammatical meaning of the word, the Court said that the term medicine is characterized by its curative properties in general and specifically, its use for or in diagnosis, treatment, mitigation or prevention of any disease or disorder. 

Highlighting various judgments and publications, the Court observed that ‘Nitrous Oxide is used as an anesthetic agent. Medical oxygen with 99.9% purity is predominantly used in hospitals. Medical Oxygen is also used for the treatment of patients and to mitigate the intensity of disease or disorder in human beings. It is utilized to prevent a sudden collapse of patients and to aid in the recovery of health. As stated in the Counter Affidavit filed by the respondents, in order to carry out critical surgical procedures, supplemental oxygen is administered to patients. Medical Oxygen is also administered in resuscitation, major trauma, anaphylaxis, major hemorrhage, shock, and active convulsions, amongst other conditions’

The SC concluded that ‘there is no doubt that both the substances are medicines used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings, therefore, falling within the ambit of Section 3(b)(i) of the 1940 Act are thus covered under Entry 88 of the 2005 Act’

Read Judgment HERE.


[1]Andhra Pradesh Value Added Tax (VAT) Act, 2005, Schedule V-  “Goods taxable at the standard rate (RNR) of [14.5%] All goods other than those specified in Schedules I, III, IV, VI.”
[2]Section 3(b) “drug” includes— (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on the human body for the purpose of repelling insects like mosquitoes;……………. (iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board.”
[3]Andhra Pradesh Value Added Tax (VAT) Act, 2005, Entry 88 of Schedule IV reads as follows: “Drugs & Medicines whether patent or proprietary, as defined in clauses (i), (ii) and (iii) of Section 3(b) of Drugs and Cosmetics Act, 1940 (Central Act 23 of 1940), including hypodermic syringes, hypodermic needles, catguts, sutures, surgical cotton, dressing, plasters, catheters, cannulae, bandages, and similar articles but not including (a) Medicated goods; (b) Products capable of being used as cosmetics and toilet preparations including Toothpaste, Tooth powders, cosmetics, Toilet articles, and soaps; and (c) Mosquito repellents   in any form.”

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