The main legal principle established is that the act of compounding prescriptions by a dispensing chemist constitutes the manufacture or production of goods for sale under the Bengal Finance (Sales Tax) Act, 1941.

GENTLE, J. - This is a reference by the Board of Revenue, Bengal, under section 21, sub-section (1), of the Bengal Finance (Sales Tax) Act, 1941. The applicants are the North Bengal Stores, Ltd., who are dealers in patent medicines and medical sundries; they are also dispensing chemists and as such they make up and dispense prescriptions, written by medical practitioners for their patients.

By sub-section (1) of Section 4 of the Act, every dealer whose gross turnover during the year immediately preceding the commencement of the Act exceeded the taxable quantum, specified in sub-section (5) of the same section, shall be liable to pay tax on all sales effected after the notified date. By sub-section (5), taxable, quantum, so far as material for the present reference, means :-

Clause (a) in relation to any dealer who himself manufactures or produces any goods for sale, 10,000 rupees;

Clause (c) in relation to any other dealer, 50,000 rupees.

It is common ground that, during the year preceding the commencement of the Act, the applicants' turnover was less than Rs. 50,000 and they are not liable to taxation under clause (c). The Commercial Tax Officer, however, assessed the applicants on the grounds that dispensing chemists are manufacturers and, since the applicants' turnover during the year before the commencement of the Act exceeded Rs. 10,000, they are liable to assessment pursuant to clause (a).

The Commissioner of Commercial Taxes, Bengal, and the Board of Revenue, to whom respectively an appeal and a petition for revision were preferred by the applicants, upheld the assessment. The Commissioner expressed the opinion that mixing different medicinal ingredients into an ultimate mixture suitable for use by particular classes of patient consumers according to the manner prescribed by medical men is the manufacture of medicines. The view stated by the Board was that the applicants' business of compounding preparations for use by individual customers is manufacture or production of any entity, different essentially from its ingredients.

Three questions are referred by the Board to this Court; they are as follows :-

(i) Whether, on the facts proved, the petitioners' business is liable for registration under Section 7 of the Bengal Finance (Sales Tax) Act, 1941 ?

(ii) Whether the petitioners are manufacturers within the meaning of sub-section (5)(a) of Section 4 of the Act ?

(iii) Whether the petitioners, while serving out prescriptions for individual cases, can be said to be manufacturers ?

The answers to questions (i) and (ii) will depend upon the answer to question (iii) and the opinion with respect to the meaning and effect of clause (a) of sub-section (5) of Section 4 of the Act.

Mr. Sinha, for the applicants, conceded that a manufacturing chemist, who makes up specific medicines in considerable quantities for sale to members of the public at large, is a manufacturer, but, he contended that the dispensing of a doctor's prescription for one patient is not manufacturer, but is preparing for one person a drug or combining two or more drugs into a convenient form to be taken or used by a person according to a doctor's direction.

On behalf of the Board, the Advocate-General argued that the preparation of a doctor's prescription by a chemist is the manufacture of a medicine. He referred to the observations of Abbott, C.J., in The King v. Wheeler, (1819) 2 B. & Ald. 345, 349; 106 E.R. 392, where he said that -

"the word 'manufacture' has been generally understood to denote either a thing made, which is useful for its own sake, and vendible as such, as a medicine, a stove, a telescope, and many others."

He referred, also to Section 41, sub-section (1), of the English Finance (No. 2) Act, 1940, (3 & 4 Geo. VI c. 48) wherein "manufacturer" is defined as -

"a person who carries on in the United Kingdom a business of making goods or of applying any process in the course of making of goods, so however that for the purposes of this