Page 73 - GSTL_26th March 2020_Vol 34_Part 4

2020 ] ABBOTT HEALTHCARE P. LTD. v. COMMR. OF COMMERCIAL TAX, THRISSUR 583
by the petitioner has to be seen as a composite supply, with the in-
strument being the principal supply, and the reagents constituting
the incidental supply. The rate of tax applicable to the instrument
had therefore to be applied to the supply of reagents/calibra-
tors/disposables.
6. I have considered the pleadings in this case as also the rival submis-
sions. To appreciate the challenge in the writ petition, to the orders of the AAR
and the Appellate Authority, one has to first notice the query that was raised by
the petitioner before the AAR under Section 99 of the GST Act. The said query
reads as follows :
“Whether in the facts of the present case, the provision of specified med-
ical instruments by the Applicant to unrelated parties like hospital(s),
Lab(s), for uses without any consideration, constitutes a “supply” or
whether it constitutes “movement of goods otherwise than by way of
supply” as per provisions of the CGST/SGST Act, 2017?”
The AAR examined the query in the backdrop of the agreement entered into be-
tween the petitioner and the hospitals/laboratories concerned, and opined that
the petitioner was effecting two supplies, namely, of medical instruments and of
reagents/calibrators/disposables to be used along with the instrument. Since the
instrument supplied had no utility to the customer unless he also bought the re-
agents/calibrators/disposables, the supply of the instrument and the reagents
etc. had to be seen as naturally bundled to form a composite supply. The AAR
went on to observe that the supply of the instrument was to be treated as the
principal supply, in the said composite supply, and accordingly, that the rea-
gents, calibrators and disposables had to be taxed at the higher rate applicable to
the instrument supplied. The arrangement of supplies by the petitioner through
the agreement was seen as a scheme to avoid payment of tax at higher rate. As
regards valuation of the said supply, the AAR found that in terms of the agree-
ment, the petitioner had, in fact, supplied the medical instrument for deferred
consideration since, according to it, the minimum purchase obligation in respect
of reagents etc., under the agreement, ensured that the overall price realised from
the customer subsumed within it, the rent for the instrument as well. This was
more so because, the agreement between the parties clearly stipulated that if the
required quantity of consumables was not purchased by the customer hospital, it
was obliged to pay the petitioner the deficit amount. The aforesaid findings of
the AAR were upheld by the Appellate Authority as well.
7. On a consideration of the facts and circumstances of the case and the
reasonings of the AAR and the Appellate Authority, it is my view that while it
may have been open to the AAR to enquire, based on the terms of the agreement,
whether the supply of the medical instruments to the customer, although styled
as a free supply, was in fact one for valid consideration, its findings as regards a
composite supply are wholly without jurisdiction. It is apparent that the AAR
went beyond the terms of reference in embarking upon an enquiry as to whether
the supplies effected under the agreement between the petitioner and the cus-
tomer hospitals/laboratories, constituted a composite supply. As a consequence,
the AAR did not go into the real issue of whether the supply of instruments per se
constituted a taxable supply under the CGST Act. While these facts would have
sufficed for this Court to remit the matter to the AAR for a fresh consideration of
the issue, the Learned Senior Counsel would urge me to give a definite view on
the correctness of the finding of the AAR regarding the transaction being a com-
GST LAW TIMES  26th March 2020  169