CRESCENT DISTRIBUTORS VS CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL, KARACHI, 2009 PTD-KARACHI-HIGH-COURT-SINDH 148 (2008)

Sales Tax Act (VII of 1990)---

----Sched. VI, Items Nos.12 & 13---S.R.O. 357(I)/84, dated 28-4-1984---Drugs Act (XXXI of 1976), Ss.7, 8 & 3(g)(i)---Barium Sulphate is a drug within the Drugs Act, 1976 and hence exempt from sales tax---Principles.

Barium Sulphate is included in the list of prescription chemical of Pakistan National Formulary and because of this reason, its specific registration as a drug under section 8 of the Drugs Act, 1976 is not required, if the same is imported as a prescription chemical and if it is clear from the perusal of the bill of entry that it had been imported as a prescription chemical under S.R.O. 357(I)/84 and, therefore, for all practical purposes it falls within the definition of drugs specially also because it is used as a diagnostic reagent for the diagnosis of the diseases and such substance which is used for the above purpose is included in the definition of drugs under the Drugs Act, 1976. It also falls within the definition of medicament and is more closer to such definition than many of the items or substances which have been specifically excluded from the ambit of Items Nos.12 and 13 of VI-Schedule of the Sales Tax Act, 1990 and therefore if legislature was of the view that such exemption should not apply to Barium Sulphate (X-Ray quality) then they would have specifically excluded it from the ambit of Items Nos.12 and 13, hence its non-exclusion makes the intention of the Legislature clear that it falls within the definition of Drugs Act and medicament for the purposes of exemption in these two items of VI Schedule. The adjudicating authority, the Collector Appeals and the Tribunal fell in error when they held that since this is not a registered drug and is not used for alleviation of the diseases and wounds, it cannot be included in the definition of the term medicament and since it is not registered as a drug it cannot be treated as a drug, and is, therefore, not entitled to exemption under Items Nos. 12 and 13 of VI Schedule.

Glaxo Laboratories Pakistan Ltd. v. Federation of Pakistan PLD 1992 SC 455 and Central Insurance Company v. Central Board of Revenue 1993 SCMR 1232 = 1993 PTD 766 ref.

Abid S. Zubairy for Appellant.

Jawaid Farooqui for Respondents.

Date of hearing: 31st October, 2008.

JUDGMENT

MUHAMMAD ATHAR SAEED, J.---These Special Sales Tax Appeals have been filed against the common order of the Customs, Excise and Sales Tax Tribunal, Karachi, dated 14-9-2000 in Customs Appeal Nos. K-378, K-379, K-380 and K-135 of 2000 in which following common question has been proposed for the opinion of this Court:

"Whether Barium Sulphate is a drug within the Drugs Act and hence exempt from Sales Tax."

2. These Sales Tax Appeals were admitted for regular hearing on 16-1-2001 on the basis of the contention of the learned counsel that appellate tribunal failed to appreciate that the chemical imported by the appellant having been treated as part of the Pakistan National Formulary in terms of the Notification, dated 28-4-1984 therefore, there was no requirement for separate registration as Drugs under section 7(a) of the Drugs Act for the purpose of claiming exemption from Sales Tax.

3. We have heard Mr. Abid S. Zuberi, learned counsel for the appellant and Mr. Jawaid Farooqui, learned counsel for the respondent.

4. The learned counsel first drew our attention to the order of the tribunal to point out that the tribunal had dismissed the appeal of the appellant because they were of the view that Barium Sulphate (X-ray) is a prescription medical convert in Pakistan National Formulary, which cannot be termed to be substance for alleviation of disease or wounds, and as such it cannot be included in the definition of term `medicament' and the second reason which had been given by the adjudicating officer for the rejection of such exemption was that it was not registered under the Drugs Act. Learned counsel then drew our attention to S.R.O. 357(I)/84, dated 28th April 1984 vide which the Federal Government had modified the Pakistan National Formulary, list of prescription chemical and in the revised list Barium Sulphate (X-Ray Quality) was mentioned as Item No. 4. He then referred to the letter of the Assistant Collector Drugs, issued by him on behalf of the Director General Health, dated 18-1-1996 on the subject of Import of Prescription Chemicals, in which it has been mentioned that the items which have been specified as prescription chemical vide the above referred S.R.O. and have been included in the Pakistan National Formulary, did not require specific registration if imported as a prescription chemical. The learned counsel then drew our attention to section 3(g)(i) and pointed out that definition of drug includes. any substance or mixture or substances for internal or external use in the diagnosis of diseases. He then took us to the order in original to point out that the adjudicating officer has admitted that Barium Sulphate (X-Ray quality) i.e. item in dispute is a diagnostic reagent. Learned counsel then read out Items Nos. 12 and 13 of the VI-schedule to the Sales Tax Act, 1990 and pointed out that under Item 12 medicaments excluding some items and substances and under item No.13 drugs registered under Drugs Act excluding almost the same items which have been excluded from the provision of Item No.12, fall within the exemption provided. He argued that Barium Sulphate is not included in the exclusion from Items Nos. 12 and 13 of VI Schedule.

5. He then referred to the exclusion from Items Nos. 12 and 13 and pointed out that items like scrub (washing preparation), soft soap medicated shampoos and even absorbent cotton wool have been specifically excluded from the ambit of Items Nos. 12 and 13, which means that if the legislature was of the view that if these items are not specifically excluded they may be treated as medicament and drugs which are exempted vide Items Nos. 12 and 13. He argued that Barium Sulphate (X-Ray quality) is more closer to the definition of medicament and drugs than these items which have been specifically excluded and therefore it is clear that this chemical falls within the ambit of the prescribed exemption, as it is used for the purpose of diagnosis of diseases and therefore falls within the definition of drug as defined under section 3(g)(i) of the Drugs Act, 1976. Learned counsel argued that though medicament is not defined in the Act but the Hon'ble Supreme Court in its judgment in the case of Glaxo Laboratories Pakistan Ltd. v. Federation of Pakistan reported in PLD 1992 SC 455 has observed that since the definition of word "medicament" has not been given therefore ordinary dictionary meaning shall be taken into consideration which means `medicine and drugs' and if Diabranol Lozenges has been accepted as drug by the Ministry of Health, therefore, the Hon'ble Supreme Court treated it as a medicament. Learned counsel further argued that although the .tribunal - has accepted that Central Board of Revenue has clarified the position vide its letter, dated 25-8-1999, in which they have clarified that Barium Sulphate is neither covered under the definition of medicament nor has been registered as drug under the Drugs Act, 1976 as such it is not entitled to exemption of sales tax in accordance with the entries at serial Nos. 12 and 13 of VI-Schedule of the Sales Tax Act, however the tribunal rejected the arguments that adjudicating officer was influenced by this clarification, as according to the tribunal the original order was passed much before the notification by C.B.R. The learned counsel submitted that this finding of the Tribunal is fallacious and once again drew our attention to the order in original to bring to our notice that C.B.R. clarification, dated 25-8-1999 is mentioned in the order in original and it is one of the reasons for which the adjudicating authority has held that import of Barium Sulphate is not entitled to exemption of sales tax.

6. Learned counsel has also referred to a judgment of the Hon'ble Supreme Court passed in the case of Central Insurance Company v. Central Board of Revenue reported in 1993 SCMR 1232 = 1993 PTD 766 in which it has been held that C.B.R. does not figure in the hierarchy of the forums, who have not been assigned the task of interpretation of statute and their interpretation is of no binding effect specially on the Quasi Judicial Authorities.

7. On the basis of above arguments, the learned counsel prayed that proposed question may be answered in his favour.

8. Learned counsel for the respondent supported the order of the Tribunal and argued that Barium Sulphate does not fall within the ambit of drugs as defined under section 3(g)(i) as it cannot be termed as a substance which can be used' for the alleviation of the diseases and wounds. It cannot also be included in the definition of medicament since it is not registered as drug under section 8 of the Drugs Act, 1976, it does not fall within Item No.13 also. He, therefore, prayed that the proposed question may be answered in favour of the respondents.

9. We have examined the case in the light of the arguments of the learned counsel and have perused the record of the case including the impugned order very carefully and have also carefully considered the effect of Items Nos.12 and 13 of VI-Schedule, the provisions of the Drugs Act and the notifications issued by the Ministry of Health from time to time, available on record in the file of the Court at pages 53 and 73. We are of the considered opinion that Barium Sulphate is included in the list of prescription chemical of Pakistan National Formulary and because of this reason, its specific registration as a drug under section 8 of the Drugs Act is not required, if the same is imported as a prescription chemical and it is clear from the perusal of the bill of entry that it ?lad been imported as a prescription chemical under S.R.O. 357(1)/84 and therefore for all practical purposes it falls within the definition of drugs specially also because it is used as a diagnostic reagent for the diagnosis of the diseases and such substance which is used for the above purpose is included in the definition of drugs under the Drugs Act, 1976. We are also of the opinion that it also falls within the definition of medicament and is more closer to such definition than many of the items or substances which have been specifically excluded from the ambit of Items Nos.12 and 13 of VI-Schedule and therefore if legislature was of the view that such exemption should not apply to Barium Sulphate (X-Ray quality) then they would have specifically excluded it from the ambit of Items Nos.12 and 13, hence its non-exclusion makes the intention of the legislature clear that it falls within the definition of Drugs Act and medicament for the purposes of exemption in these two items of VI Schedule. We are, therefore, of the considered opinion that the adjudicating authority, the Collector Appeals and the Tribunal fell in error when they held that since this is not a registered drug and is not used for alleviation of the diseases and wounds, it cannot be included in the definition of the term medicament and since it is not registered as a drug it cannot be treated as a drug, and is, therefore, not entitled to exemption under Items Nos.12 and 13 of VI Schedule.

The above are the reasons for which after hearing the learned counsel, in Court today, we had by a short order answered the proposed question in affirmative in favour of the applicant and against the defendant.

A copy of this order under the signature of the Registrar and seal of this Court may be sent to the Registrar Customs and Sales Tax Appellate Tribunal, Karachi, for passing orders in -conformity with this order.

M.B.A./C-18/KOrder accordingly.