Medical Oxygen IP & Nitrous Oxide IP Are 'Drugs' Under Section 3(b)(i) Of Drugs & Cosmetics Act 1940 : SC [Read Judgment]

The Supreme Court has held that 'Medical Oxygen IP' and 'Nitrous Oxide IP' are 'drug' within the meaning of Section 3(b)(i) of the Drugs and Cosmetics Act 1940.

On this ground, a bench comprising Justices D Y Chandrachud and Ajay Rastogi held that these gaseous substances are to be taxed as 'drugs'under Entry 88 of Schedule V of the Andhra Pradesh Value Added Tax Act 2005.

The bench was considering an appeal filed by the State of Andhra Pradesh against the judgment of the High Court which held that these substances are taxable as drugs under Schedule IV.

According to the State, they were taxable as 'unclassified goods' under Schedule V, which attracts a higher percentage of duty when compared to Schedule IV.

The High Court was of the view that in Section 3(b)(i) of the Drugs and Cosmetics Act 1940, the expression "drug‟ covers within its ambit any substance which is used for or in the treatment, prevention and mitigation of a disease or a disorder. The High Court held that (i) Medical Oxygen IP is used for the treatment of patients and to mitigate the intensity of diseases and disorders; and (ii) Nitrous Oxide IP is used as an anesthetic in surgical operations and procedures of a short duration. 

Challenging the said decision of the High Court, the State of Andhra Pradesh submitted, inter-alia, that every 'substance' cannot be said to fall within the ambit of Entry 88 merely because it is used for medicinal purposes. For a substance to fall within the ambit of Entry 88, it must accord with the definition stipulated in Section 3(1)(b) of the 1940 Act, the state submitted.

The Court noted that Entry 88 of Schedule IV included in its ambit 'drugs and medicines' as defined under Section 3 of the Drugs and Cosmetics Act 1940.

Hence, the issue was whether 'Medical Oxygen' and 'Nitrous Oxide' would be drugs as per the Act.

 Section 3(b)(i) includes both medicines or substances used for the diagnosis, treatment, mitigation or prevention of any disease or disorder or in the diagnosis, treatment, mitigation or prevention of any disease or disorder.

The term "medicine‟ is not defined in the 1940 Act.  Therefore, the Court followed the ordinary meaning of the word.

The ordinary or popular understanding of the term medicine is characterized by its curative properties in general and specifically, its use for or in diagnosis, treatment, mitigation or prevention of any disease or disorder, the Court said.

The Court noted that Nitrous Oxide is used as anesthetic agent. Medical oxygen with 99.9% purity is predominantly used in hospitals. Medical Oxygen is also used for the treatment of patients and to mitigate the intensity of disease or disorder in human beings. It is utilised to prevent a sudden collapse of patients and to aid in the recovery of health.Medical Oxygen is also administered in resuscitation, major trauma, anaphylaxis, major hemorrhage, shock and active convulsions, amongst other conditions. 

Several medical publications and judgments were referred by the Court for the above conclusions.

"There is no doubt that Medical Oxygen IP and Nitrous Oxide IP are medicines used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings falling within the ambit of Section 3(b)(i) of the 1940 Act. We hold that Medical Oxygen IP and Nitrous Oxide IP fall within the ambit of Section 3(b)(i) of the 1940 Act and are consequently covered in Entry 88 of the 2005 Act", the Court concluded.

Case Details
Title : State of Andhra Pradesh vs M/s Linde India Ltd
Case No : Civil Appeal 2230 of 2020
Coram : Justices D Y Chandrachud and Ajay Rastogi

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