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Legal Case Shots

Court judgements broken down into the case type, how the decision played out, and the lesson worth remembering, with the full judgement available as a PDF.

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Tax & Customs LawSupreme Court of India

The State of Andhra Pradesh v. M/s Linde India Ltd. (Formerly BOC India Ltd)

Civil Appeal · 2020 INSC 334Decided 13 Apr 2020
Civil Appeal No. 2230 of 2020
Dr. Justice D.Y. Chandrachud · Justice Ajay Rastogi

Background

A company manufacturing and selling industrial and medical gases was assessed by Andhra Pradesh tax authorities on the basis that "Medical Oxygen IP" and "Nitrous Oxide IP" were "unclassified goods" taxable at a high rate (12.5%/14.5%), rather than as "drugs and medicines" taxable at a much lower rate (4%/5%) under Entry 88 of the state VAT Act. The Sales Tax Appellate Tribunal and the High Court both ruled in the company's favour, holding these gases were medicines, so the State appealed to the Supreme Court.

Decision Breakdown

The Supreme Court examined the definition of "drug" under the Drugs and Cosmetics Act, 1940, which covers substances used for or in the diagnosis, treatment, mitigation or prevention of disease. It found that Medical Oxygen IP is listed in the Indian Pharmacopoeia, is used in emergencies, surgery, resuscitation and trauma care, and Nitrous Oxide IP is a recognised anesthetic used in surgery and dentistry, both appearing in the National List of Essential Medicines under "Anesthesia." Surveying consistent rulings of several High Courts reaching the same conclusion, the Court held both products squarely qualify as "drugs/medicines" and fall under the lower-tax Entry 88, not the residual unclassified-goods category. The State's appeals were dismissed, with no order as to costs.

Lesson Learnt

For tax classification purposes, courts look at a product's real-world medical use and recognised pharmacopoeial status (not just its everyday label as an "industrial gas") to decide whether it qualifies as a "medicine": a principle relevant to any business whose products straddle an industrial/medical use divide.

The State of Andhra Pradesh v. M/s Linde India Ltd. (Formerly BOC India Ltd) – Legal Case Shots | LegalAware