The Business of “Hospitals”
Hospital being a public health care facility
has always been a borderline case with regard to the question of being an
industry. The Management of Safdur Jung
Hospital v Kuldip Singh Sethi AIR
1970 SC1407 and The State of Bombay v
Hospital Mazdoor Sabha AIR 1960 SC 610 are the cases which justify the contrary
point of views. When Safdur Jung denies the status of industry to hospitals, Hospital
Mazdoor Sabha guarantees the commercial activity of hospital. However the need
to settle the primary function of a hospital has become a necessity in the scenario
of Sales Tax since sale of medicine in hospitals has gone way up. Liability to
pay Sales tax arise only if the person is “in the business of” buying, selling
etc of goods. The term business is defined as carrying on a trade or commerce.
Consequently unless it is proved that primary function itself is a business,
there can be no liability under sales tax. Supreme Court has resorted to the
test of volume, frequency, continuity & regularity of the activity to
consider whether sales tax can be imposed [State
of TN v Board of Trustees of the Port of Madras 114 STC 520]. Hence the
sale of medicines in hospitals can be brought under sales tax purview only if
it is shown that hospital are doing “business” and sale of medicines is an
incidental/ancillary function to the main activity. Kerala High Court has, in
its decisions 55 VST 208 (Ker), 135 STC 224, held that hospitals though a
health care facility where individual doctors serve patients has grown into a
commercial activity and taken up the character of business. Hence hospitals can
be considered as dealers who are liable under Sales tax. However they have not
answered as to the character of those hospitals which are state/ central funded
or non-profit motive. The Supreme Court decision The Management of Safdur Jung Hospital v Kuldip Singh Sethi AIR 1970 SC1407 still stands ground
since they analyse the character of hospitals in wide manner.
(Disclaimer:- The opinion mentioned here is of the author and author alone and in no case, should it be linked to any another advocate, be it the law firm where the author is currently working or any other who may or may not know the author. The opinion has to be understood in the context in which it is expressed and in that context only. Author will not be liable for any misinterpretation of the idea mentioned in this article.)
