No Sales Tax Payable on Medical Equipment’s Imported by Hospital for ‘Own Use’

M/s. Eye Foundation Ltd. Vs. Joint Commissioner (Commercial Taxes) (Madras High Court)

In this case the reason for issuing a detention notice in respect of the imported equipment is owing to a suspicion, which had arisen in the minds of the second respondent stating that the imported goods are meant for sale within the State of Tamil Nadu. Therefore, the second respondent opined that the petitioner should have a valid registration as a dealer under the TNVAT Act and CST Act and in the absence of such registration proposed to treat the import transaction as a sale within the State and imposed tax at 14.5% and levied compounding fee at the rate of two times the one time tax.

The second respondent, in their written submissions filed by him on 19.09.2017, accepts that the fact the petitioner is a hospital having various branches and also obtained import and export code during 2012. The second respondent would contend that the concept of “own use” is of no relevance under the sales tax statue and exemption from tax net and concessional levy in the rate of tax is only available with the registered dealers under the provisions of the TNVAT Act and CST Act and such concession cannot be extended to unregistered dealer like the petitioner. It is further stated that the burden of proof that a sale was effected outside the State is on the petitioner and if no proof is placed, then the sale can be treated as local sale. The import effected by the petitioner has not been disputed by the second respondent, rather admitted as the petitioner has a valid import license. In such circumstances, the only fact that has to be ascertained is whether the suspicion in the minds of the second respondent that the goods are meant for sale within the State of TamilNadu is correct or not. For this purpose, this Court directed the Joint Commissioner (CT), Enforcement, Coimbatore, to submit a report. Upon due verification, a report has been submitted, which clearly states that the imported equipment is used by the petitioner in their hospital. This goes to show that the import has been effected by the petitioner using the import license granted in their favour and the goods are put to use in their hospital. Thus, there is no grounds to treat the transaction as a sale within the State of Tamil Nadu.