Important points
" The exemption even without the Explanation, was held to be of a limited nature and applicable only to such dispensaries wherein no medical or surgical care is provided by way of in-patient treatment and a Doctor carries on only consultation-It was found that supply of medicine is an integral part of the treatment or medical services rendered and it is significant in terms of the cost to the patient and was charged separately.
" Relying on Explanation (3C) to the definition of "sale" as found in Section 2(xxi), it was held that the legislative intent is to enlarge the scope of the operation of the Act to cover sales effected in the course of rendering services also; i.e.: all types of services-
" The sale of drugs, implants and consumables by a hospital to its inpatients, in the course of medical treatment administered, cannot be separated from the composite indivisible service of providing medical care and treatment and it cannot be said to be a sale of goods. Nor would the deeming provision under Article 366 (29A) of the Constitution take in such services to differentiate the distinct elements, comprised in one, inseparable, indivisible transaction.

23-01-2019

The last but one sentence of paragraph 23 of the order dated 18.01.2019 is as under:

“We, hence, find that the decisions of this Court, as cited herein before, finding the sale of drugs, implants and consumables by a hospital to its inpatients, in the course of medical treatment administered, cannot be separated from the composite indivisible service of providing medical care and treatment and it cannot be said to be a sale of goods”.

An inadvertent mistake occurred and the same would stand corrected as follows :

“We, hence, contrary to the decisions of this Court as cited herein before, find that the sale of drugs, implants and consumables by a hospital to its inpatients, in the course of medical treatment administered, cannot be separated from the composite Indivisible service of providing medical care and treatment and it cannot be said to be a sale of goods”.

Ordered accordingly.

ORDER :

Vinod Chandran, J.

The above cases - Writ Appeals, Revisions and Writ Petitions have been placed before us by virtue of a reference order dated 13.04.2018 passed by a Division Bench of this Court. The question referred for consideration is as to whether the medicines supplied, implants carried out, the consumables used and surgical tools exclusively used in a particular procedure, as part of treatment of patients in a hospital, the price of which is recovered by way of bills from the patients are 'sale of goods' as contemplated by the legislation levying such tax; herein the Kerala Value Added Tax Act, 2003 [for brevity “KVAT Act”]. The Division Bench was of the opinion that though under the VAT Act the hospitals may require registration as a dealer since they have Pharmacies through which medicines and other components required for the treatment are sold; not only to in-patients but also to out-patients, such transactions would not be exigible to tax under the sales tax enactment as it forms part of services rendered by the hospital. The Division Bench, which made the reference, relied on Bharat Sanchar Nigam Ltd. & Another v. Union of India & Others [(2006) 3 SCC 1] to take a different view from that held by this Court; by Benches of varying strength of quorum. The difference of opinion, so arising in the mind of the Division Bench being in conflict with a number of decisions of this Court on the very same aspect, the last of which also noticed Bharat Sanchar Nigam Ltd.; but found the dictum therein to have no relevance to the particular transactions as carried out by the hospitals, a reference was necessitated.

2. Some of the petitioners are also concerned with the tax leviable on the consumables including medicines as supplied by the Pharmacies to out-patients who are not admitted to the hospital for a definite medical treatment or surgical procedure. There being no view expressed on that aspect nor a reference made by the Division Bench, we would not look into that aspect. This would have to be necessarily considered by a Division Bench; whether the answer we give in the reference, is in favour of the assessee or against on the other aspect.

3. We need not refer to the individual facts to answer the reference and what we broadly stated as to the legal issue arising, would encompass the essential bare facts. We need only notice the various decisions of this Court, the Hon'ble Supreme Court and the various other High Courts to answer the question, which is purely on law; whether the drugs, implants and other consumables used in the treatment of in-patients in a hospital could be deemed to be sale of goods under Article 366 (29A) (f) of the Constitution of India.

4. We have heard learned Senior Counsel Sri. Bechu Kurian Thomas, learned Counsel Sri.A.Kumar, Sri.P.N.Damodaran Namboodiri, Sri.K.P.Abdul Azees for the petitioners and appellants and Senior Government Pleader Sri.C.K.Govindan for the State.

5. The first decision on the point, which has been referred to and extensively relied on in all the later decisions, is Malankara