Abbott Healthcare Private … vs The Commissioner Of State Tax

Abbott Healthcare Private … vs The Commissioner Of State Tax … on 7 January 2020

Petitioner: ABBOTT HEALTHCARE PRIVATE LIMITED

The petitioner is engaged in the sale of pharmaceutical products, diagnostic kits, etc. It places its diagnostic instruments at the premises of unrelated hospitals, laboratories, etc. for their use for a specified period without any consideration.

An agreement has also been entered between the petitioner and its customers (unrelated hospitals/labs) for the supply of medical instruments for their use without consideration for specified period AND supply of specified quantities of reagents, calibrators, disposables, etc. at the prices specified in the agreement, through its distributors on payment of applicable GST. Distributors purchase goods from petitioners on Principal to Principal basis and sell them to hospitals/labs as an independent supply for a price charged separately with GST.

There is no direct supply by petitioner to hospitals/labs w.r.t. supply of reagents, calibrators, and disposables. Supply of instruments composed of 20% of the turnover of reagents, calibrators, and disposables.

The agreement entered into between the parties also contains a clause which provides that if the hospital fails to purchase specified minimum quantum of reagents, calibrators, etc., then the petitioner is entitled to recover from the hospital an amount equal to the deficit in the actual purchases, vis-a-vis, the minimum purchase stipulated under the contract.

The consignment of instruments which were being transported to a laboratory without any consideration was seized by the Assistant State Tax Officer.

Petitioner applied AAR to know whether the supply of medical instruments constitutes a “supply” or whether it constitutes “movement of goods otherwise than by way of supply”.

AAR:

It looked into the backdrop of the contractual terms under which the supply was affected and observed that instruments supplied by the petitioner cannot work without the supply of reagents, calibrators, and disposables, thereby constituting a COMPOSITE SUPPLY. Where the principal supply instruments attracting a higher rate of 18% as compared to the lower rate of 5% on reagents, calibrators, and disposables.

Petitioner’s representative argued that this was not the matter for which advance ruling has been applied for.

Held:

AAR needs not to go into the backdrop of contractual terms. These are two different supplies because both the supplies are taking place by two different persons. One has to satisfy the definition of composite supply. Composite supply must take into account supplies as effected at a given point in time on “as is where is” basis. Moreover, the supply of instruments by the petitioner is for a short term period. Writ petition allowed by quashing department orders and the matter have been remit back to AAR for a fresh decision on the query raised before it by the petitioner company.

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