1. The petitioner is an assessee under the Karnataka Sales Tax Act, 1957 (for short ' the'). For the assessment period 1999-200, the petitioner declared the gross and taxable turnover at Rs.3,38,49,121/- and Rs.1,84,03,986/- respectively. The taxable turnover include first sale of NITROUS OXIDE to Hospital and Nursing Homes for anesthetic purposes to an extent of Rs.14,48,084-25. The petitioner had classified the sale of Nitrous Oxide as a 'chemical' falling under Entry No.10-A (Part-C) of II Schedule, which related to 'Chemicals of all kinds including copper sulphate, caustic soda, dyes and sulphur'. The rate of tax for substances falling under Entry 10A was 4% from 1-4-1996 to 31-12-1999 and 8% from 1-1-2000 to 31-03-2000.
2. The Assessing Authority by order dated 30-07-2001, rejected the classification of Nitrous Oxide as a 'chemical' falling under Entry No.10-A (Part-C) of II Schedule. He treated it is an unclassified goods falling under Section 5(1) of the Act, for which the rate of tax was 10%.
3. In an appeal filed by the petitioner, the Appellate Authority held that the Nitrous Oxide was an 'industrial gas' falling under Entry-3 (of Part-II) Schedule. The said entry related to 'Industrial gas such as oxygen, acetylene, nitrogen and the like', for which the tax was 10% from 01-04-1998 to 31-12-1999 and 12% from 01-01-2000 to 31-03-2000.
4. In a second appeal filed by the petitioner, the Karnataka Appellate Tribunal held that Nitrous Oxide fell under EntryNo.21 (Parts-S) of II Schedule. The said entry related to 'surgical and dental instruments, tools and aids' for which the rate of tax was 10% during the relevant year.
5. Feeling aggrieved, the petitioner has filed this revision petition under Section 23(1) of the. The petitioner relies on a Test Certified dated 12-09-2000 issued by the Bangalore Test House which reads thus:
'Nitrous Oxide is also called by the Chemical Name Dinitrogen Mono oxide or hyponitrous acid anhydride with molecular formula of N O and Molecular weight of 44.02. It contains 63.65% Nitrogen (N) and 36.35% of Oxygen (O). It is prepared by thermal decomposition of Ammonium Nitrate.
Nitrous Oxide is colourless gas, slightly sweetish odour & taste m.p - 90.81 ; b.p - 88.46 freely soluble in Sulphuric acid, soluble in alcohol, ether, oils.
Use: Anesthetic by inhalation & analgesic.
Ref: Merck Index. Page No. 1051.
Remarks: From the above facts, it is concluded that Nitrous Oxide is a Chemical.'
The petition raises the question whether Nitrous Oxide is to be treated as a 'chemical' falling under entry No.10-A of PART-C of II Schedule or as a 'surgical aid' falling under Entry No.21 of Part-S of II Schedule.
6. 'Chemical' in a broad sense refers to all substances produced by any Chemical process. The principal use of Nitrous Oxide (laughing gas) is as an anesthetic in surgical operations procedures of short duration. The fact that Nitrous Oxide is produced by a chemical process and therefore would fall under the general definition of 'chemical' is not dispute by the State. What is contended by the State is that the 'Nitrous Oxide' falls under a specific separate entry enacted by the State dealing with surgical aids (Entry No.21 of Part-S of Second Schedule) and therefore, it gets excluded from the general entry relating to chemicals (Entry No.10-A of Part-C of II Schedule). It is also submitted that the items enumerated as being inclusive in the definition of 'chemicals' in indicative of the fact that only solid substances and not gases are intended to be included under the said entry.
7. In DEPUTY COMMISSIONER OF SALES TAX vs G.S.PAI and Co., 1980 (45) STC 58 (AIR 1980 SC 611) [LQ/SC/1979/411] , the Supreme Court observed:
'Now there is one cardinal rule of interpretation which has always to be borne in mind while interpreting entries in sales tax legislation and it is that the words used in the entries must be construed not in any technical sense nor from the scientific point of view but as understood in common parlance. We must give the Words used by the legislature their popular sense meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it.'
7.1) In UNITED OFFSET PROCESS PRIVATE LTD., vs ASST COLLECTOR OF CUSTOMS (1989 (74) STC 81 [LQ/SC/1988/537] -AIR 1989 SC 622 [LQ/SC/1988/537] ) the Supreme Court held:
'In incorporating items in the statutes like excise, customs or sales tax whose primary object is to raise revenue and for which to classify diverse products, articles and substances, resort should be had not to the scientific and technical meaning of substances but to their popular meaning viz., the meaning attached to these expressions by those dealing in them'
7.2) We may also refer to a decision of the division bench of this Court in INDIAN OXYGEN LIMITED vs STATE OF KARANTAKA reported in 79 (1990) STC 351, which considered the question whether 'medical oxygen' and 'nitrous oxide' used as anesthetics in hospitals could be treated as 'industrial gas' falling under (old) Entry 121 of Second schedule or should be taxed under Section 5(1) as a product not specifically provided for. The Division Bench held that 'oxygen' in the entry 'industrial gas such as oxygen, acetylene, nitrogen and the like' can only refer to oxygen which is accepted in trade as an industrial gas. It held that 'medical oxygen' is different from 'industrial oxygen' and that if a product is not an 'industrial gas' as understood in common parlance by those who deal in the product, even if medical oxygen (which is a purified form of industrial oxygen) can be used as 'industrial oxygen', it cannot be treated as an 'industrial gas'.
7.3) When the decision in INDIAN OXYGEN was rendered, there was no entry in existence similar to Entry 21 of Part S of Second Schedule. Entry 21 of Part S of Second Schedule, introduced with effect from 1-4-1988 earlier read 'Surgical/dental instruments and tools and Syringes and its needles'. The entry was substituted thus effect from 1-4-1993.
'Surgical and dental instruments, tools and aids including electrical and electronics equipments and appliances; syringes and needles; operation theatre equipments, shadow bulbs and tubes, specially made operation and examination tables and cots and suction apparatus; stands, stretchers, trolleys, dental chairs, laboratory equipments and glassware; stethoscopes, thermo-meters, lactometers, B.P.instruments, surgical cotton wool; enema cana, bed pans, kidneys trays and such other hospitalware; surgical gloves, aprons, operation suits, rubber sheets, catheters; I.V.sets and the like; cervical collars, abdominal belts (telonet paraffin gauze dressing, ultrasound jelly, pinchers (steel), medicinal oxygen, medical kits, medical disposable intravenous administration set, thermometer, mechanical nasal filters, instrument sterliser, injection needles, hospitalwares, gypeona plaster of paris bandage, fixed partial dentures, enameled iron trays, and basins (used in the hospitals, ECG recording chart, ECG jelly, drip set, disposable hypodermic needles, cotton buds, bed elevators absorbent cotton rolls] and the like.'
Entry 21 (part S) as it presently stands encompass every substance or produce considered as a surgical/dental instrument or tool, or surgical/dental aid. The legislative intent is to rope in all items relating to or associated with or useful in surgery and dentistry under Entry 21 (Part S). The term 'surgical' contextually refers to the branch of medicine dealing with the practice of treating injuries or disease by any manual, mechanical or operative procedures or measures (as contrasted from treatment by mere prescription or administration of drugs). Neither a 'surgical aid' falling under entry 21 (part S) nor a 'medicinal or pharmaceutical preparations' falling under Entry 5 (part M) can be treated as a 'chemical' falling under Entry 10A (part C), though they may be 'chemical' in compensation.
8. The petitioner admitted before the Assessing Authority and before us, that Nitrous Oxide is to sold mainly to Hospitals and Nursing Homes, for being used as an anesthetic. This makes it clear that Nitrous oxide is treated as a surgical aid in trade circles and common parlance. The items illustratively enumerated in Entry 21 (Part S) of second schedule under 'surgical and dental instruments, tools and aids' include 'Medicinal Oxygen' and the like. Medicinal Oxygen is used to enrich gaseous anesthetics, during general anesthesia. 'Nitrous Oxide' is used as an anesthetic. Though both 'Nitrous Oxide' and 'Medical Oxygen' may answer the general and wider definition of 'chemicals' they are clearly identifiable and used as surgical aids. 'Nitrous Oxide' would therefore definitely fall under 'surgical and dental aids including 'medicinal oxygen' and the like.' It is well settled that where a product or substance falls under a specific entry in the schedule, the product will have to be considered under the specific entry even though it may also fall under an entry containing general description. Where substance or product falls under a specific entry and also under a general entry, the specific entry will exclude the general entry. Therefore, the Tribunal was right in classifying nitrous oxide as falling under entry No.21 of Part-S of II Schedule and rejecting the request of the petitioner to treat it as a 'chemical' falling under Entry No.10-A of Part-C of II Schedule.
The petition has no merits. It is accordingly rejected.'
