The main legal principle established in the judgment is the application of the dominant nature test to determine the taxability of transactions involving the supply of goods as part of composite services. The judgment emphasizes that the transaction must represent two distinct and separate contracts to impose tax on the sale of goods.

Amareshwar Sahay, J.

1. In the present writ petition the petitioner has prayed for, for the following reliefs:

(i) For declaration that the supply of medicines, surgical items, vaccines, X-ray items etc which are supplied by the petitioner to its indoor patients during the course of their treatment is not a transaction which comes within the meaning of "Sale" as defined under Section 2(t) of the Bihar Finance Act, 1981 and, therefore, is not taxable under the said Act.

(ii) For declaration that the petitioner does not come within the definition of "Dealer" as defined under the provisions of Bihar Finance Act, 1981 and, therefore, is not required to be registered as "Dealer" under the said Act.

(iii) To quash the notice dated 31/3/2005 contained in Annexure- 3 to the writ application issued by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur, asking the petitioner to explain as to why an action be not taken against it for not registering itself as registered "Dealer".

(iv) To quash Annexure-5, i.e. the letter No. 261 dated 05/05/2005 issued by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur, whereby the petitioner was held liable to pay sales tax.

(v) To quash the order contained in Annexure-13 to the writ application dated 18/03/2006 relating to the financial years 2001-02 to 2004-05 whereby the Assistant Commissioner, Commercial Taxes, Urban Circle, Jamshedpur passed an order for assessment of the sales tax against the petitioner under Section 17 (5) of the Bihar Finance Act, 1981 for the last four financial years.

(vi) To quash the demand notices dated 20th March 2006, contained in Annexure-14 series, issued by the Assistant Commissioner, Commercial Taxes, Urban Circle, Jamshedpur, under Section 17 (5) of the Bihar Finance Act, 1981.

2. The facts, which are relevant for the purpose of decision of the present case, are stated herein below:

The petitioner Tata Main Hospital, hereinafter referred as TMH, situated at Jamshedpur was established by Tata Steel Limited and is a division of Tata Steel Limited. TMH is providing treatment and medical facilities to the indoor patients, who either employees or ex-employees or their family members of the Tata Steel Limited as well as the non-employee indoor patients also. In course of treatment whatever medicines, surgical items, vaccines, x-ray items are supplied to such indoor patients, who are either employees, ex-employees or their family members are supplied free of cost and for that TMH does not charge anything from them. TMH also provides treatment and medical facilities to other indoor non-employee patients, i.e. the patients, who are other than the employees of the Tata Steel Limited but those non-employees indoor patients are to pay charges to TMH for their treatment by making payment towards Registration, Blood Bank, Pathology, O.T., Pharmacy, Accommodation and Doctors fees etc.

3. An inspection of the TMH was made on 02/09/2005 by a team of Commercial Tuxes Authorities. Annexure-9 to the writ petition is their inspection report. It was reported by them in course of enquiry that one Mr. Singhal who was Financial Analyst disclosed that no separate Account is maintained in the TMH. The TMH only issues bills which are forwarded to the general office of Tata Steel Limited therefore detailed description and whatever data is required by the department can be had from the general office of Tata Steel Limited. He also disclosed that the medical store department of the TMH purchases medicines mostly from the local market except those medicines which are not available in the local market are purchased from outside the State also but such purchases is very less.

The enquiry report further reveals that one Bill dated 23/03/2005 being Bill No. BN/05/005687 dated 23/03/2005, issued to one Mr. Somesh Mahanti, was examined from which it appeared that the TMH has charged the following amount under different heads:

(i) Registration - Rs. 100.00 (ii) Blood Bank