Page 47 - GSTL_7th May 2020_Vol 36_Part 1

2020 ] STATE OF ANDHRA PRADESH v. LINDE INDIA LTD. 5
classified goods’ under Schedule V. The classification of the two products deter-
mines the rate of tax to be levied on them - 4%/5% [5% substituted for the figure
4% by Act 11 of 2012, dated 20 April, 2012] under Entry 88 or 12.5%/14% [14.5%
substituted for the figure 12.5% by Act 9 of 2010, dated 20 April, 2010] under
Schedule V.
3. The facts in the appeals before this Court being similar, we proceed
to elucidate the factual context of the lead appeal.
4. The respondent - Linde India Ltd., is a registered company under the
2005 Act and is an assessee on the rolls of the Commercial Tax Officer, Gajuwaka
and Dwarakanagar Circle. The respondent is engaged in the manufacturing and
trading of industrial gases as well as Medical Oxygen IP and Nitrous Oxide IP.
On 12 December, 2005, the Commercial Tax Officer communicated to the re-
spondent that an outstanding tax liability of Rs. 5,11,062 was due and payable for
the period between 1 August, 2005 and 31 August, 2005.
5. Aggrieved, the respondent filed an appeal before the Appellate
Deputy Commissioner who, by his order dated 26 June, 2006, affirmed the as-
sessment of the Commercial Tax Officer. By an order dated 25 November, 2014,
the Sales Tax Appellate Tribunal, relying on a judgment of the Andhra Pradesh
High Court in Inox Air Products Ltd. v. The Assistant Commissioner (CT), Hyderabad
[2014 VIL 339 AP], allowed the appeal filed by the respondent. The appellant’s
appeal before the High Court for the State of Telangana and the State of Andhra
Pradesh was dismissed. Aggrieved, the appellant is in appeal before this Court.
6. The High Court was of the view that in Section 3(b)(i) of the Drugs
and Cosmetics Act, 1940 [1940 Act] the expression ‘drug’ covers within its ambit
any substance which is used for or in the treatment, prevention and mitigation of
a disease or a disorder. The High Court held that (i) Medical Oxygen IP is used
for the treatment of patients and to mitigate the intensity of diseases and disor-
ders; and (ii) Nitrous Oxide IP is used as an anesthetic in surgical operations and
procedures of a short duration. The High Court held :
“...Both “nitrous oxide” and “medical oxygen” are clearly identifiable, and
are used as surgical aids (Indian Oxygen Ltd. State of Karnataka; Southern
Gas Ltd.). Going by the user test and the functional test, it is evident that
“medical oxygen” and “nitrous oxide” serve as medicines. As ‘medical ox-
ygen IP’ and ‘Nitrous Oxide IP’ are used in the treatment and mitigation of
disorders in human beings, and as they are generally understood in the
trade to be surgical aids, both these substances would fall under the defini-
tion of ‘drug’ under Section 3(b)(i) of the Drugs Act, and consequently, fall
under Entry 88 of Schedule IV of the Act liable to tax only at 4%/5%”
7. Assailing the judgment of the High Court, Learned Counsel for the
appellant urged :
(i) The decision of the Andhra Pradesh High Court in Inox Air, insofar
as it held that Medical Oxygen IP and Nitrous Oxide IP are covered
by the expression “similar articles” in Entry 88, is erroneous. Apply-
ing the principle of ejusdem generis, it cannot be said that gases are
‘similar articles’ to the other products specified in the entry;
(ii) The term ‘used for or in’ employed in Section 3(b)(i) qualifies only
‘substances’ and not ‘medicines’. Consequently, it cannot be used to
broaden the scope of Entry 88;

GST LAW TIMES  7th May 2020  47