Holding

Medical Oxygen IP and Nitrous Oxide IP are medicines within the meaning of Section 3(b)(i) of the Drugs and Cosmetics Act, 1940 and therefore fall within Entry 88 of Schedule IV of the Andhra Pradesh Value Added Tax Act, 2005, attracting the 4%/5% tax rate.

Summary

The State of Andhra Pradesh assessed tax on M/s Linde India Ltd for its sale of Medical Oxygen IP and Nitrous Oxide IP, treating them as unclassified goods under Schedule V of the Andhra Pradesh Value Added Tax Act, 2005, which would attract a 12.5%/14.5% rate. Linde argued that the products are drugs/medicines covered by Entry 88 of Schedule IV, liable to a 4%/5% rate. The Supreme Court examined the definition of “drug” in the Drugs and Cosmetics Act, 1940, the inclusion of the gases in the Indian Pharmacopoeia and the National List of Essential Medicines, and applied principles of statutory interpretation. It held that both Medical Oxygen IP and Nitrous Oxide IP are medicines within the meaning of Section 3(b)(i) of the 1940 Act and therefore fall within Entry 88 of Schedule IV. Accordingly, the lower tax rate of 4%/5% applies. The Court dismissed the appeals.

Issues considered

Whether Medical Oxygen IP and Nitrous Oxide IP fall within Entry 88 of Schedule IV of the Andhra Pradesh Value Added Tax Act, 2005 as drugs/medicines
Whether the applicable tax rate should be the lower 4%/5% under Schedule IV or the higher 12.5%/14.5% under Schedule V

Legislation cited

Andhra Pradesh Value Added Tax Act, 2005s. Entry 88 (Schedule IV), s. Schedule V
Drug (Prices Control) Order, 2013s. Para 2(2), s. Para 2(t)
Drugs and Cosmetics Act, 1940s. Section 16, s. Section 3(b)(i), s. Section 3(b)(iv)
Essential Commodities Act, 1955s. Section 3

Subjects

Value Added TaxTax classificationMedical oxygenNitrous oxideDrugs and Cosmetics ActStatutory interpretationEssential commoditiesTax rateMedicinesSchedule IVSchedule V

Judgment

838 [2020]REPORTS
SUPREME COURT 5 S.C.R. 838 [2020] 5 S.C.R.

A THE STATE OF ANDHRA PRADESH
v
M/S LINDE INDIA LTD. (FORMERLY BOC INDIA LTD)
(Civil Appeal No. 2230 of 2020)
B APRIL 13, 2020
[DR. DHANANJAYA Y CHANDRACHUD AND
AJAY RASTOGI, JJ.]
Andhra Pradesh Value Added Tax Act, 2005 – Entry 88,
C Schedule IV; Schedule V – Respondent-Company registered under
the 2005 Act is engaged in manufacturing, trading of industrial
gases and also Medical Oxygen IP and Nitrous Oxide IP – Issue as
to whether Medical Oxygen IP and Nitrous Oxide IP are taxable u/
Entry 88, Schedule IV or as ‘unclassified goods’ u/Schedule V and
the resultant rate of tax to be levied on them – Held: Schedule IV
D prescribes a uniform tax rate of 4%/5% for listed goods – Entry 88
includes drugs and medicines, as defined in clauses (i), (ii) & (iii)
of s.3(b), 1940 Act – Any drug or medicine that falls within the
ambit of clauses (i), (ii) & (iii) of s.3(b) falls within the ambit of
Schedule IV – Schedule V stipulates that all goods that do not fall
E within the ambit of Schedules I, III, IV & VI shall be taxed @ 14.5%
– s.16, 1940 Act r/w the Second Schedule and the specification of
Medical Oxygen in the Indian Pharmacopoeia (an autonomous
institution of Ministry of Health and Family Welfare, Govt. of India,
through its publication titled “Indian Pharmacopoeia” prescribes
standards for identity, purity and strength of the drugs specified
F therein) lends support to respondent’s contention that Medical
Oxygen IP is a drug as defined in s.3(b)(i), 1940 Act – Further,
2013 Prices Control Order contains the National List of Essential
Medicines 2011 – Inclusion of Oxygen and Nitrous Oxide as
Anesthesia therein lends support to its use in the diagnosis and
treatment of a disorder or disease as specified in s.3(b)(1), 1940
G
Act – 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
s.3(b)(i), 1940 Act and are consequently covered in Entry 88, 2005
Act – Drugs and Cosmetics Act, 1940 – s.3(b)(i)-(iv); s.16 –
H
838
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 839
INDIA LTD.)

Interpretation of Statutes – Essential Commodities Act, 1955 – s.3 – A
Drug (Prices Control) Order 2013.
Dismissing the appeals, the Court
HELD: 1.1 Schedule IV of the 2005 Act prescribes a uniform
tax rate of 4%/5% for listed goods. Entry 88 includes drugs and
B
medicines, whether patent or proprietary as defined in clauses
(i), (ii) and (iii) of Section 3(b) of the 1940 Act. Any drug or
medicine that falls within the ambit of clauses (i), (ii) and (iii) of
Section 3(b) falls within the ambit of Schedule IV. Entry 88 also
stipulates that hypodermic syringes, hypodermic needles, catguts,
sutures, surgical cotton, dressing, plasters, catherters, cannulae, C
bandages and ‘similar articles’ are also included, save and except
for the three specified exclusions. Schedule V stipulates that all
goods that do not fall within the ambit of Schedules I, III, IV, and
VI shall be taxed at a rate of 14.5%. Clause (i) of Section 3(b)
defines a drug as all medicines for internal or external use of
D
human beings or animals and all substances “intended to be used
for or in the diagnosis, treatment, mitigation or prevention of any
disease or disorder in human being, or animals”, including
specified preparations. Clause (iv) of Section 3(b) includes all
devices ‘intended’ for internal or external use in the diagnosis,
treatment, mitigation or prevention of disease or disorder in E
human beings or animals. [Paras 10-12][846-B, E-G; 847-D]
Chimanlal Jagjivandas Sheth v. State of Maharashtra
AIR 1963 SC 665 : [1963] Suppl. SCR 344; Ishwar
Singh Bindra v. The State of UP [1969] 1 SCR 219 –
referred to. F
1.2 The term “medicine” is not defined in the 1940 Act.
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. [Paras 16, 18][849-G; 852-B] G
State of HP v. Pawan Kumar (2005) 4 SCC 550; State
of Goa v. Leukoplast (India) Ltd. (1997) 4 SCC 82 :
[1997] 2 SCR 516 – relied on.

H
840 SUPREME COURT REPORTS [2020] 5 S.C.R.

A State of Himachal Pradesh v Pawan Kumar 2005
Cr.L.J. (SC) 2008; State of Haryana v Suresh (2007)
15 SCC 186 : [2007] 7 SCR 961; State of Rajasthan v
Babu Ram (2007) 6 SCC 55 : [2007] 7 SCR 939;
Commissioner of Customs (Import), Mumbai v Dilip
Kumar and Company (2018) 9 SCC 1 : [2018] 7 SCR
B
1191 – referred to.
Black’s Law Dictionary; Collins Dictionary; Cambridge
Dictionary – referred to.
1.3 The Indian Pharmacopoeia Commission is an
C autonomous institution of the Ministry of Health and Family
Welfare, Government of India. The IPC, through its publication
titled ‘Indian Pharmacopoeia’ prescribes standards for the identity,
purity and strength of the drugs specified therein. Medical oxygen
(at 99.9% purity) is included as a drug termed as ‘Oxygen IP’.
Section 16, read with the Second Schedule and the specification
D of Medical Oxygen in the Indian Pharmacopoeia lends support
to the contention urged by the respondents that Medical Oxygen
IP is a drug as defined in Section 3(b)(i) of the 1940 Act.
Furthermore, in exercise of the powers conferred by Section 3 of
the Essential Commodities Act 1955, the Central Government
E issued the Drug (Prices Control) Order 2013. Para 2(t) stipulates
that the ‘National List of Essential Medicines’ means the National
List of Essential Medicines 2011 published by the Ministry of
Health and Family Welfare as updated and revised from time to
time. It also specifies that the National List of Essential Medicines
2011 is included in the First Schedule to the order. Para 2(2)
F stipulates that all other words and expressions used therein and
not defined, but defined in the 1940 Act shall have meanings
respectively assigned in the 1940 Act. The first Schedule contains
the National List of Essential Medicines 2011. Section 1.1
includes both Nitrous Oxide and Oxygen as medicines within
G the ambit of ‘Anesthesia’. The inclusion of Oxygen and Nitrous
Oxide as Anesthesia lends support to its use in the diagnosis
and treatment of a disorder or disease as specified in Section
3(b)(1) of the 1940 Act. [Paras 20-23][853-F-H; 854-A-B, G-H]
Southern Gas Ltd. v. State of Kerala (2005) 3 KLT 78;
H Indian Oxygen Ltd. v. State of Karnataka (1989) SCC
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 841
INDIA LTD.)

Online Kar 459; State of Tamil Nadu v. Ram Oxygen A
(Pvt.) Ltd. 2010 (35) VST 478; Panki Oxygen v. State
of Uttar Pradesh (2014) SCC Online All 2144 –
referred to.
1.4 Medical Oxygen IP and Nitrous Oxide IP are medicines
used for or in the diagnosis, treatment, mitigation or prevention B
of any disease or disorder in human beings falling within the ambit
of Section 3(b)(i) of the 1940 Act. 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
impugned judgment of the High Court, to the extent it held that
Medical Oxygen IP and Nitrous Oxide IP fall within Entry 88 of C
the 2005 Act is upheld. [Paras 31, 32][859-B-C]
Inox Air Products Ltd v The Assistant Commissioner
(CT), Hyderabad 2014 VIL 339 AP; Southern Gas v
State of Kerala 2005 (139) STC 504 (Ker); State of
Tamil Nadu v Ram Oxygen [2011] 5 GST 87 (Mad HC); D
Chimanlal v State of Maharashtra 2004 (137) STC 68;
Indian Oxygen v State of Karnataka 1990 (79) STC
351; State of Kerala v Indian Oxygen 2003 (129) STC
471; ACTO, Special Circle Jodhpur v M/s Jodhpur
Gases (2009) SCC Online 2459 – referred to. E
Principles of Statutory Interpretation by Justice G P
Singh; Craies on Statute Law; KD Tripathi, Essentials
of Medical Pharmacology, VIIth Ed., at p. 378 –
referred to.
V Lew, E McKay, M Maze, Past, present, and future of F
nitrous oxide, British Medical Bulletin, Volume 125,
Issue 1, March 2018, Pages 103–119; WHO Model
Prescribing Information: Drugs Used in Anaesthesia
(1989) – referred to.
Case Law Reference G
[1963] Suppl. SCR 344 referred to Para 13
[1969] 1 SCR 219 referred to Para 14
(2005) 4 SCC 550 relied on Para 17
H
842 SUPREME COURT REPORTS [2020] 5 S.C.R.

A 2005 Cr.L.J. (SC) 2008 referred to Para 17
[2007] 7 SCR 961 referred to Para 17
[2007] 7 SCR 939 referred to Para 17
[2018] 7 SCR 1191 referred to Para 17
B [1997] 2 SCR 516 relied on Para 19
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2230
of 2020.
From the Judgment and Order dated 25.01.2016 of the High Court
of Judicature at Hyderabad for the States of Telangana and Andhra
C
Pradesh in Tax Revision Case No. 53 of 2015.
With
Civil Appeal Nos. 2233-34, 2231 and 2232 of 2020
Sanjib Sen, Sr. Adv., Guntur Prabhakar, Hemal Kiritkumar Sheth,
D T. Vijaya Bhaskar Reddy, Digvijay Harichandan, G. N. Reddy,
Shabyashechi Patra, Sanjeev Kumar, M/s. Khaitan & Co, Annam D. N.
Rao, Annam Venkatesh, Rahul Mishra, Ananya Kandelwal, Avni Sharma,
and Ms. Sangeetha M., Advs. for the appearing parties.
The Judgment of the Court was delivered by
E
DR. DHANANJAYA Y CHANDRACHUD, J.
1. Leave granted.
2. The short point of law that arises in the present appeals is
whether ‘Medical Oxygen IP’ and ‘Nitrous Oxide IP’ are taxable under
F Entry 88 of Schedule IV of the Andhra Pradesh Value Added Tax Act
20051 or as ‘unclassified goods’ under Schedule V. The classification of
the two products determines the rate of tax to be levied on them – 4%/
5%2 under Entry 88 or 12.5%/14%3 under Schedule V.
3. The facts in the appeals before this Court being similar, we
G proceed to elucidate the factual context of the lead appeal.
4. The respondent – Linde India Ltd, is a registered company
under the 2005 Act and is an assessee on the rolls of the Commercial
1
2005 Act.
2
5% substituted for the figure 4% by Act 11 of 2012 dated 20 April 2012.
3
H 14.5% substituted for the figure 12.5% by Act 9 of 2010 dated 20 April 2010.
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 843
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

Tax Officer, Gajuwaka and Dwarakanagar Circle. The respondent is A
engaged in the manufacturing and trading of industrial gases as well as
Medical Oxygen IP and Nitrous Oxide IP. On 12 December 2005, the
Commercial Tax Officer communicated to the respondent that an
outstanding tax liability of Rs. 5,11,062 was due and payable for the
period between 1 August 2005 and 31 August 2005.
B
5. Aggrieved, the respondent filled an appeal before the Appellate
Deputy Commissioner who, by his order dated 26 June 2006, affirmed
the assessment of the Commercial Tax Officer. By an order dated 25
November 2014, the Sales Tax Appellate Tribunal, relying on a judgment
of the Andhra Pradesh High Court in Inox Air Products Ltd v The
Assistant Commissioner (CT), Hyderabad4, allowed the appeal filed C
by the respondent. The appellants appeal before the High Court for the
State of Telangana and the State of Andhra Pradesh was dismissed.
Aggrieved, the appellant is in appeal before this Court.
6. The High Court was of the view that in Section 3(b)(i) of the
Drugs and Cosmetics Act 19405 the expression ‘drug’ covers within its D
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. E
The High Court held:
“…Both “nitrous oxide” and “medical oxygen” are clearly
identifiable, and are used as surgical aids (Indian Oxygen Ltd.
State of Karnataka; Southern Gas Ltd). Going by the user test
and the functional test, it is evident that “medical oxygen” and F
“nitrous oxide” serve as medicines. As ‘medical oxygen IP’ and
‘Nitrous Oxide IP’ are used in the treatment and mitigation of
disorders in human beings, and as they are generally understood
in the trade to be surgical aids, both these substances would fall
under the definition of ‘drug’ under Section 3(b)(i) of the Drugs
Act, and consequently, fall under Entry 88 of Schedule IV of the G
Act liable to tax only at 4%/5%”

4
2014 VIL 339 AP
5
1940 Act H
844 SUPREME COURT REPORTS [2020] 5 S.C.R.

A 7. Assailing the judgment of the High Court, learned counsel for
the appellant urged:
(i) The decision of the Andhra Pradesh High Court in Inox
Air, in so far as it held that Medical Oxygen IP and Nitrous
Oxide IP are covered by the expression “similar articles”
B in Entry 88, is erroneous. Applying the principle of ejusdem
generis, it cannot be said that gases are ‘similar articles’ to
the other products specified in theentry;
(ii) The term, ‘used for or in’ employed in Section 3(b)(i)
qualifies only ‘substances’ and not ‘medicines’.
C Consequently, it cannot be used to broaden the scope of
Entry 88;
(iii) Though Section 3(b)(i) of the 1940 Act includes substances
that are necessary aids for treating surgical or other cases,
Entry 88 also contains an exclusion clause. Entry 100(36)
D of Schedule IV specifically excludes “medical grade
oxygen”. Absent a specific inclusion of Medical Oxygen
IP and Nitrous Oxide IP in Entry 88, they fall within the
ambit of unclassified goods in Schedule V; and
(iv) Every ‘substance’ cannot be said to fall within the ambit of
E 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.
8. Opposing the above submissions, learned counsel for the
F respondents urged:
(i) Section 3(b)(i) of the 1940 Act defines a ‘drug’ broadly as
a medicine or substance used for or in the diagnosis,
treatment, mitigation or prevention of any disease or disorder.
Medical Oxygen IP and Nitrous Oxide IP are widely known
for their curative properties and as medicines in the diagnosis,
G
treatment, mitigation and prevention of diseases
anddisorders;
(ii) Medical Oxygen and Nitrous Oxide are included in the
Indian Pharmacopoeia which prescribes standards for
drugs. The Indian Pharmacopoeia has legal status under
H
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 845
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

Section 16 of the 1940 Act. Consequently, Medical Oxygen A
and Nitrous Oxide are drugs within the ambit of Section
3(1)(b) of the 1940 Act. As Medical Oxygen IP and Nitrous
Oxide IP are ‘medicines’ within the ambit of Section 3(1)(b)
of the 1940 Act, they are expressly included in Entry 88 of
the 2005 Act;
B
(iii) Goods must be classified according to their popular meaning
or as they are understood in their commercial sense. Oxygen
is used widely as an emergency medicine as well as for the
delivery of medical services. Nitrous Oxide is used in surgery
and dentistry for anesthetic purposes. Applying the common
parlance test, there is no doubt that the products in question C
are used in the mitigation of diseases and disorders and fall
within the ambit of Entry 88 as drugs defined in Section
3(b)(i) of the 1940 Act;
(iv) Several High Courts in the country have uniformly held that
Medical Oxygen IP and Nitrous Oxide IP are medicines D
within the meaning of their respective state enactments.
These include Southern Gas v State of Kerala6, State of
Tamil Nadu v Ram Oxygen7, Panki Oxygen v State of
Uttar Pradesh8, Chimanlal v State of Maharashtra9,
Indian Oxygen v State of Karnataka10, State of Kerala E
v Indian Oxygen11 and ACTO, Special Circle Jodhpur
v M/s Jodhpur Gases12;
(v) The National List of Essential Medicines 2011 which
constitutes Schedule I of the Drug Price (Control) Order
2013, includes ‘Oxygen’ and ‘Nitrous Oxide’ as ‘anesthesia’ F
under Section 1; and
(vi) The decision of the High Court from which the present
appeal arises was rightly based on the judgment of that

6
G
2005 (139) STC 504 (Ker)
7
[2011] 5 GST 87 (Mad HC)
8
2014 SCC Online All 2144
9
2004 (137) STC 68
10
1990(79) STC 351
11
2003 (129) STC 471
12
2009 SCC Online 2459 H
846 SUPREME COURT REPORTS [2020] 5 S.C.R.

A High Court in Inox Air, both of which must be upheld by
this Court.
9. The rival submissions fall for consideration.
10. We must begin with the statutory framework. Schedule IV of
the 2005 Act prescribes a uniform tax rate of 4%/5% for listed goods.
B Entry 88 of Schedule IV reads asfollows:
“Drugs & Medicines whether patent or proprietary, as defined in
clauses (i), (ii) and (iii) of Section 3(b) of Drugs and Cosmetics
Act, 1940 (Central Act 23 of 1940), including hypodermic syringes,
hypodermic needles, catguts, sutures, surgical cotton, dressing,
C plasters, catherters, cannulae, bandages and similar articles but
not including:
(a) Medicated goods;
(b) Products capable of being used as cosmetics and toilet
D preparations including Toothpastes, Tooth powders, cosmetics,
Toilet articles and soaps; and
(c) Mosquito repellents in anyform.”
Entry 88 includes drugs and medicines, whether patent or
proprietary as defined in clauses (i), (ii) and (iii) of Section 3(b) of the
E 1940 Act. Any drug or medicine that falls within the ambit of clauses (i),
(ii) and (iii) of Section 3(b) falls within the ambit of Schedule IV. Entry
88 also stipulates that hypodermic syringes, hypodermic needles, catguts,
sutures, surgical cotton, dressing, plasters, catherters, cannulae, bandages
and ‘similar articles’ are also included, save and except for the three
specified exclusions.
F
11. Schedule V of the 2005 Act readsthus:
“Goods taxable at standard rate (RNR) of [14.5%]
All goods other than those specified in Schedules I, III, IV, VI.”
Schedule V stipulates that all goods that do not fall within the
G ambit of Schedules I, III, IV, and VI shall be taxed at a rate of 14.5%.
12. Section 3(b) of the 1940 Act defines a “drug” in the following
terms:
“(i) All medicines for internal or external use of human beings or
animals and all substances intended to be used for or in the
H
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 847
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

diagnosis, treatment, mitigation or prevention of any disease or A
disorder in human beings, or animals, including preparations applied
on human body for the purpose of repelling insects like mosquitoes;

…
B

(iv) such devices intended for internal or external use in the
diagnosis, treatment, mitigation or prevention of disease or disorder
in human beings or animals, as may be specified from time to time
by the Central Government by notification in the Official Gazette, C
after consultation with the Board.”
Clause (i) of Section 3(b) defines a drug as all medicines for internal
or external use of human beings or animals and all substances “intended
to be used for or in the diagnosis, treatment, mitigation or prevention of
any disease or disorder in human being, or animals”, including specified D
preparations. Clause (iv) of Section 3(b) includes all ‘devices’ intended
for internal or external use in the diagnosis,treatment, mitigation or
prevention of disease or disorder in human beings oranimals.
13. In the early decision of this Court in Chimanlal Jagjivandas
Sheth v State of Maharashtra,13 the question before a four judge Bench E
was whether absorbent cotton wool, roller bandages, and gauzes would
fall within the ambit of Section 3(b) of the Act of 1940. The Court held:
“3. The said definition of “drugs” is comprehensive enough to
take in not only medicines but also substances intended to be used
for or in the treatment of diseases of human beings or animals.
F
This artificial definition introduces a distinction between medicines
and substances which are not medicines strictly so-called. The
expression “substances”, therefore, must be something
other than medicines but which are used for treatment. The
part of the definition which is material for the present case is
“substances intended to be used for or in the treatment”. The G
appropriate meaning of the expression “substances” in the section
is “things”’. It cannot be disputed, and indeed it is not disputed,
that absorbent cotton wool, roller bandages and gauze are

13
AIR 1963 SC 665
H
848 SUPREME COURT REPORTS [2020] 5 S.C.R.

A “substances” within the meaning of the said expression. If so, the
next question is whether they are used for or in”treatment”.
…
It is not necessary for the purpose of this appeal to define
exhaustively “the substances” falling within the definition of
B “drugs”; and we consider that whether or not surgical instruments
are “drugs”, the articles concerned in this caseare.”
(Emphasis supplied)
This Court held that the comprehensive nature of the definition
C includes both medicines and something other than medicines, but which
are used for treatment. In that case, the question concerned whether
absorbent cotton wool, roller bandages and gauze are ‘substances’ within
the ambit of Section 3(b). It is in that context that this Court held that
substances are ‘things’. The Court clarified that it was not necessary to
exhaustively define ‘the substances’ which fall within the ambit of drugs
D as defined in Section 3(b). A substance may be a product, which though
not specifically used as a medicine is used for diagnosis, treatment,
mitigation or prevention of diseases.14 Where a product other than a
medicine is intended to be used for or in the diagnosis, treatment, mitigation
or prevention of any disease or disorder, the same would be a ‘substance’
E falling within the ambit of Section3(b)(i).
14. The learned counsel for the appellants urged that the phrase
“intended to be used for or in the diagnosis, treatment, mitigation or
prevention of any disease or disorder” in Section 3(b)(i) is only applicable
to ‘substances’ and not ‘medicines’. In Ishwar Singh Bindra v The
F State of UP,15 the central question before a three judge Bench of this
Court was the interpretation of Section 3(b)(i) of the 1940 Act. This
Court held:
“11. Now if the expression “substances” is to be taken to mean
something other than “medicine” as has been held in our previous
decision it becomes difficult to understand how the word “and”
G
as used in the definition of drug in Section 3(b)(i) between
“medicines” and “substances” could have been intended to have

14
Barium, for example, is a substance used as an element in the diagnostic process in X-
rays.
15
H (1969) 1 SCR 219
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 849
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

been used conjunctively. It would be much more appropriate in A
the context to read it disjunctively. In Stroud’s Judicial Dictionary,
3rd Edn. it is stated at p. 135 that “and” has generally a cumulative
sense, requiring the fulfilment of all the conditions that it joins
together, and herein it is the antithesis of or. Sometimes, however,
even in such a connection, it is, by force of a contexts, read as
B
“or”. Similarly, in Maxwell on Interpretation of Statutes, 11th Edn.,
it has been accepted that “to carry out the intention of the
legislature it is occasionally found necessary to read the
conjunctions ‘or’ and ‘and’ one for the other”.
This Court held that as the word ‘substances’ in the clause is
used to mean something other than ‘medicine’, it was not the intention C
of the legislature that the word “and” was meant to be read conjunctively.
Accordingly, this Court held that the two parts of the definitional clause
must be read disjunctively.
15. In the above view, Section 3(b)(i) stipulates that medicines or
substances used for or in the diagnosis, treatment, mitigation or prevention D
of any disease or disorder in human beings, or animals shall be included
within the ambit of the definition. It is significant to note the use of the
phrase ‘for’ or ‘in’ in the definitional clause. 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, E
mitigation or prevention of any disease or disorder. Where the former
highlights the direct use of the product in question in diagnosing, treating,
mitigating or preventing a disease or disorder, the latter highlights its
instrumental use as a facilitative agent in the diagnosis, treatment,
mitigation or prevention of any disease or disorder. The relevant enquiry
for this Court is whether Medical Oxygen IP and Nitrous Oxide IP are F
used in or for any of the purposes specified therein.
16. The term, medicine is not defined in the 1940 Act. It is a trite
principle of interpretation that the words of a statute must be construed
according to the plain, literal and grammatical meaning of the words.
Justice G P Singh in his seminal work Principles of Statutory G
Interpretation states:
“The words of a statute are first understood in their natural, ordinary
or popular sense and phrases and sentences are construed
according to their grammatical meaning, unless that leads to some
H
850 SUPREME COURT REPORTS [2020] 5 S.C.R.

A absurdity or unless there is something in the context or in the
object of the statute to suggest the contrary…in the statement of
the rule, the epithets ‘natural’, ‘ordinary’, ‘literal’, grammatical
and ‘popular’ are employed almost interchangeably.
…
B It is often said that a word, apart from having a natural, ordinary
or popular meaning (including other synonyms i.e. literal,
grammatical and primary), may have a secondary meaning which
is less common e.g technical or scientific meaning. But once it is
accepted that natural, ordinary or popular meaning of the word is
C derived from its context, the distinction drawn between different
meanings loses much of its relevance.”
Similarly, Craies on Statute Law states:
“One of the basic principles of interpretation of Statutes is to
construe them according to plain, literal and grammatical meaning
D of the words. If that is contrary to, or inconsistent with, any express
intention or declared purpose of the Statute, or if it would involve
any absurdity, repugnancy or inconsistency, the grammatical sense
must then be modified, extended or abridged, so far as to avoid
such an inconvenience, but no further. The onus of showing that
E the words do not mean what they say lies heavily on the party
who alleges it. He must advance something which clearly shows
that the grammatical construction would be repugnant to the
intention of the Act or lead to some manifest absurdity.”
The words of a statute should be first understood in their natural,
F ordinary or popular sense and phrases and sentences should be construed
according to their grammatical meaning, unless that leads to some
absurdity or unless there is something in the context, or in the object of
the statute to suggest the contrary. Where a word has a secondary
meaning, the assessment is whether the natural, ordinary or popular
meaning flows from the context in which the word has been employed.
G In such cases, the distinction disappears and courts must adopt the
meaning which flows as a matter of plain interpretation and the context
in which the word appears.
17. In State of HP v Pawan Kumar,16 it was contended that the
safeguards provided in Section 50 of the Narcotics Drugs and
H
16
(2005) 4 SCC 550
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 851
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

Psychotropic Substances Act 1985 regarding search of any person would A
also apply to any bag, briefcase or any such article or container, which is
being carried by the person. The word ‘person’ was not defined in the
Act. A three judge Bench of this Court, having regard to the scheme of
the Act and the context in which the word — ‘person’ has been used,
rejected the contention and held thus:
B
“8. One of the basic principles of interpretation of statutes is to
construe them according to plain, literal and grammatical meaning
of the words. If that is contrary to, or inconsistent with, any express
intention or declared purpose of the statute, or if it would involve
any absurdity, repugnancy or inconsistency, the grammatical sense
must then be modified, extended or abridged, so far as to avoid C
such an inconvenience, but no further. The onus of showing that
the words do not mean what they say lies heavily on the party
who alleges it. He must advance something which clearly shows
that the grammatical construction would be repugnant to the
intention of the Act or lead to some manifest absurdity.” D
The above canon of statutory interpretation has been consistently
followed by this Court in State of Himachal Pradesh v Pawan
Kumar17, State of Haryana v Suresh18, State of Rajasthan v Babu
Ram19 and Commissioner of Customs (Import), Mumbai v Dilip
Kumar and Company20. E
18. The word ‘medicine’ is defined in Black’s Law Dictionary
thus:
“Medicine – the science and art dealing with the prevention, cure
and alleviation of diseases; in a narrower sense that part of science
and art of restoring and preserving health which is the province of F
the physician as distinguished from the surgeon and obstetrician.”
Collins Dictionary for Advanced Learners defines ‘medicine’
thus:
“Medicine is the treatment of illness and injuries by doctors and
G
nurses; is a substance that you drink or swallow to cure an illness”

17
2005 Cr.L.J. (SC) 2008
18
(2007) 15 SCC 186
19
(2007) 6 SCC 55
20
(2018) 9 SCC 1
H
852 SUPREME COURT REPORTS [2020] 5 S.C.R.

A Cambridge Dictionary defines ‘medicine’ as:
“A drug that is used to treat illness or injury; the science dealing
with the preserving of health and with preventing and treating disease or
injury.”
The ordinary or popular understanding of the term medicine is
B characterized by its curative properties in general and specifically, its
use for or in diagnosis, treatment, mitigation or prevention of any disease
or disorder.
19. In State of Goa v Leukoplast (India) Ltd,21 the question
before this Court concerned whether Zinc Oxide Adhesive Plaster BPC
C (Leukoplast), Surgical Wound Dressing (Handyplast), Belladona Plaster
BPC, Capsicum Plaster BPC and Cotton Crape Bandages BPC
(Leukocrapes) are ‘drugs’ or ‘medicine’ under the 1940 Act. A two
judge Bench of this Court laid down the test to determine whether a
product is a medicine in the following terms:
D “15. In our view, whether the products manufactured by the
assessee can be treated as “drugs or medicines” cannot be
answered straightaway. The medicinal content of the products, if
any, has to be ascertained. Its curative function has to be found
out. Can the product be called a medicament at all? Is it used to
E cure or alleviate or to prevent disease or to restore health or to
preserve health?...”
This Court held that the relevant enquiry is whether the product is
understood to be a medicine and is used to cure, alleviate or prevent
disease or to restore health or preserve health. The question in the present
F case does not concern all variants of oxygen and nitrogen, but only
Medical Oxygen IP and Nitrous Oxide IP.
20. Chapter IV of the 1940 Act is titled ‘Manufacture, Sale and
Distribution of Drugs and Cosmetics’. Section 16 stipulates:
“16. Standards of quality.- (1) For the purposes of this Chapter,
G the expression “standard quality” means –
(a) In relation to a drug, that the drug complies with the standard
set out in the Second Schedule, and

H 21
(1997) 4 SCC 82
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 853
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

(b) In relation to a cosmetic, that the cosmetic complies with such A
standards as may be prescribed.”
Section 16(1)(a) stipulates that drugs that comply with the
standards set out in the Second Schedule shall be certified to be of
‘standard quality’ under the 1940 Act. The Second Schedule is titled
‘Standards to be complied with by Imported Drugs and by Drugs B
manufactured for Sale, Stocked, or Exhibited for Sale or Distributed.’
Entry 5 of the Second Schedule reads:
“5. Other drugs –
Drugs included in the Indian Pharmacopeia.
C
Standards of identity, purity and strength specified in the
edition of the India Pharmacopoeia for the first time being in force
and such other standards as may be prescribed.
In case the standards of identity, purity and strength of the
drugs are not specified in the edition of the Indian Pharmacopoeia D
for the time being in force but are specified in the edition of the
Indian Pharmacopoeia immediately preceding the standards of
identity, purity and strength shall be those occurring in such
immediately preceding edition of the Indian Pharmacopoeia and
such other standards as may be prescribed.”
E
21. Drugs specified in the Second Schedule are required under
the 1940 Act to comply with specified standards. Entry 5 prescribes that
‘other drugs’ means drugs included in the Indian Pharmacopeia, for which
standards are specified therein. The Indian Pharmacopoeia Commission22
is an autonomous institution of the Ministry of Health and Family Welfare,
Government of India. The IPC, through its publication titled ‘Indian F
Pharmacopoeia’ prescribes standards for the identity, purity and strength
of the drugs specified therein. Medical oxygen (at 99.9% purity) is
included as a drug termed as ‘Oxygen IP’. Section 16, read with the
Second Schedule and the specification of Medical Oxygen in the Indian
Pharmacopoeia lends support to the contention urged by the respondents
G
that Medical Oxygen IP is a drug as defined in Section 3(b)(i) of the
1940 Act.

22
IPC H
854 SUPREME COURT REPORTS [2020] 5 S.C.R.

A 22. Furthermore, in exercise of the powers conferred by Section
3 of the Essential Commodities Act 1955, the Central Government issued
the Drug (Prices Control) Order 2013 which came into force on the
date of its publication in the Official Gazette (15 May 2013). Para 2(t)
stipulates that the ‘National List of Essential Medicines’ means the
National List of Essential Medicines 2011 published by the Ministry of
B
Health and Family Welfare as updated and revised from time to time. It
also specifies that the National List of Essential Medicines 2011 is included
in the First Schedule to the order. Para 2(2) stipulates that all other
words and expressions used therein and not defined, but defined in the
1940 Act shall have meanings respectively assigned in the 1940 Act.
C 23. The First Schedule contains the National List of Essential
Medicines 2011.
The relevant portion is extracted below:
“Schedule – I
D (See paragraphs – 2(t), 2(zb))
Symbols P, S and T appearing in NLEM 2011 denote essentially
at Primary, Secondary and Tertiary levels respectively.
NATIONAL LIST OF ESSENTIAL MEDICINES 2011
Section: 1 – Anesthesia
E 1.1 General Anesthetics and Oxygen
Medicines Category Route of Strengths
Administration
… … … …
F Nitrous Oxide P, S, T Inhalation
Oxygen P, S, T Inhalation

Section 1.1 includes both Nitrous Oxide and Oxygen as medicines
within the ambit of ‘Anesthesia’. In the exercise of the power conferred
G under the 2013 Order, the Government of India, by its order dated 20
December 2013 prescribed the selling price for both “Nitrous Oxide
Inhalation” and “Oxygen Inhalation”. This was evidently done keeping
in mind the regulation of the selling prices of essential medicines in the
market. The inclusion of Oxygen and Nitrous Oxide as Anesthesia lends
support to its use in the diagnosis and treatment of a disorder or disease
H as specified in Section 3(b)(1) of the 1940 Act.
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 855
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

24. Learned counsel for the respondents relied on the judgments A
of various High Courts which have emphasized the medicinal properties
of Medical Oxygen IP and Nitrous Oxide IP. In Southern Gas Ltd. v
State of Kerala,23 the question before the High Court of Kerala was
whether Medical Oxygen and Nitrous Oxide were ‘medicines’ for the
purpose of tax assessment under the Kerala General Sales Tax Act
B
1963. Answering this in the affirmative, the Kerala High Court held:
“In the instant case, as already noted, the assessee, who is the
manufacturer of “medical oxygen” and “nitrous oxide”, has clearly
stated that these two items are manufactured only for use in
hospitals and that the dominant use of these two items are only as
medicines…There is no dispute that “medical oxygen” is used for C
administering it on patients. Similarly, the function of “nitrous oxide”
is to act as an anesthetic agent. Thus, going by the user test and
the functional test, it is evident that “medical oxygen” and “nitrous
oxide” are served as medicines.”
Applying the user test and functional test, the Kerala High Court D
noted that Medical Oxygen is administered to patients and Nitrous Oxide
is used as an anesthetic agent and concluded that both are medicines.
25. In Indian Oxygen Ltd v State of Karnataka,24 the question
before the High Court of Karnataka concerned whether Medical Oxygen
fell within the ambit of Entry 121 of the Karnataka Sales Tax Act 1957 E
which stipulated a tax rate for industrial gases. The High Court answered
this in the negative and drew a distinction between industrial oxygen and
medical oxygen in the followingterms:
“The object of Entry 121 is clearly to attract an “industrial gas”,
which cannot, on the face of it include, a gas which is not F
considered as an “industrial gas” by those who deal in it. It is
clear that a person requiring “medical oxygen” will not be satisfied
if he is supplied with the “industrial oxygen” and similarly an honest
trader would not sell “medical oxygen” as “industrial oxygen”.
26. In State of Tamil Nadu v Ram Oxygen (Pvt.) Ltd25, the G
High Court of Madras held that medical oxygen is a ‘drug’ within the
ambit of the 1940 Act:
23
(2005) 3 KLT 78
24
1989 SCC Online Kar 459
25
(2010) 35 VST 478 H
856 SUPREME COURT REPORTS [2020] 5 S.C.R.

A “…It is also not in dispute that medical oxygen has 99.9% purity
of purified oxygen and that its use is only for treatment of patients
and to mitigate contrary intensity of any disease or disorders in
human beings. It is common knowledge at times of emergency,
the application of ‘medical oxygen’ is resorted to in order to prevent
any sudden collapse of a patient, which process is nothing but
B
part of a treatment meted out to a patient to recoup the
deterioration of health conditions…”
The Madras High Court noted that at times of emergency, the
administration of medical oxygen is resorted to prevent the sudden
collapse of patients, which forms a part of the treatment meted out to
C them.
27. In Panki Oxygen v State of Uttar Pradesh,26 the question
before the High Court of Allahabad was whether tax on Oxygen IP
under the Uttar Pradesh Trade Tax Act was to be levied under the Entry
“Medicine and Pharmaceutical Preparation” or under the Entry “Oxygen
D and other gases”. Justice Ashok Bhushan (sitting as a judge of that High
Court) relied on the above decisions of various High Courts and held
thus:
“In view of the above, we are of the view that oxygen (IP) is fully
covered by Entry 26 of the notification dated 15.1.2000
E
i.e. “medicines and pharmaceutical preparation” and shall not be
covered by Entry 47 of the notification dated 29.1.2001 which
relates to “oxygen and other gases”. The oxygen (IP) i.e. medicinal
oxygen being a drug fully covered by Entry 26 of the notification
dated 15.1.2000 cannot be included in the general entry i.e. Entry
F 47 of the notification dated 29.1.2001.”
28. In Inox Air, the question before the High Court of Andhra
Pradesh was whether Liquid Medical Oxygen IP, Medical Grade Oxygen
and Nitrous Oxide IP are liable to be taxed under Entry 88 of the 2005
Act. The High Court held:
G
“As medical oxygen LP and nitrous oxide LP are used in the
treatment and mitigation of disorders in human beings, and as
they are generally understood in the trade to be surgical aids, both
these substances would fall under the definition of drug under
26
2014 SCC Online All 2144
H
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 857
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

Section 3(b)(1) of the Drugs Act, and consequently, fall under A
Entry 88 of Schedule IV of the Act. Viewed from any angle, both
medical oxygen IP and Nitrous Oxide IP fall under Entry 88 of
Schedule IV and are liable to tax only at 4%/5% and not at12.5%
or 14.5%.”
The High Court held that medical oxygen is used in the treatment B
and mitigation of disorders in human beings, and are generally understood
in trade to be surgical aids.
29. The above judgments highlight the curative and instrumental
use of Medical Oxygen IP and Nitrous Oxide IP in the mitigation and
prevention of disease or disorder. Nitrous Oxide is used as anesthetic C
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. As stated in the Counter Affidavit filed by the respondents, in
order to carry out critical surgical procedures, supplemental oxygen is D
administered to patients. Medical Oxygen is also administered in
resuscitation, major trauma, anaphylaxis, major hemorrhage, shock and
active convulsions, amongst other conditions.
30. Nitrous Oxide is used in surgery and dentistry for its anesthetic
and analgesic effects. An article published in the British Medical Bulletin E
titled ‘Past, Present and Future of Nitrous Oxide’27 highlights the medical
use of Nitrous Oxide in thefollowing terms:
“As an anaesthetic gas, N2O has many unique properties that
have historically been used to great benefit in the operating room.
These include a high FA/FI ratio allowing for rapid onset and F
offset, anxiolytic as well as analgesic and amnestic properties,
lack of an odour and lack of irritation to the tracheobronchial tree.
These same properties have made it increasingly popular in areas
outside of the OR including paediatric procedural sedation, the
emergency room, obstetrics, and potentially psychiatry, for G
attenuation of treatment-resistant depression.”

27
V Lew, E McKay, M Maze, Past, present, and future of nitrous oxide, British
Medical Bulletin, Volume 125, Issue 1, March 2018, Pages 103–119. H
858 SUPREME COURT REPORTS [2020] 5 S.C.R.

A The World Health Organisation in its publication titled ‘Model
Prescribing Information: Drugs Used in Anesthesia’28 states that Nitrous
Oxide has the following uses:
“Maintenance of surgical anaesthesia in combination with other
anaesthetic agents (halothane, ether, thiopental or ketamine) and
B muscle relaxants.

In sub anaesthetic doses, to provide analgesia for obstetric practice,
for emergency management of injuries, during postoperative
physiotherapy and for refractory pain in terminal illness.”
C
K D Tripathi in Essentials of Medical Pharmacology29 states:
“INHALATIONAL ANAESTHETICS 1. Nitrous oxide (N2O)
It is a colourless, odourless, heavier than air, non inflammable gas
supplied under pressure in steel cylinders. It is non irritating, but
D low potency anaesthetic; unconsciousness cannot be produced in
all individuals without concomitant hypoxia; MAC is 105% implying
that even pure N2O cannot produce adequate anaesthesia at 1
atmosphere pressure. Patients maintained on 70% N2O + 30%
O2 along with muscle relaxants often recall the events during
anaesthesia, but some lose awareness completely. Nitrous oxide
E is a good analgesic; even 20% produces analgesia equivalent to
that produced by conventional doses of morphine.

…
F
3. Nitrous oxide The patient is made to breathe 100% oxygen
through a nose piece or hood and N2O is added in 10% increments
(to a maximum of 50%, rarely 70%) till the desired level of sedation
assessed by constant verbal contact is obtained. This is maintained
G till the procedure is performed. Thereafter, N2O is switched off,
but 100% O2 is continued for next 5 min. The patient is generally
roadworthy in 30–60 min.”

28
WHO Model Prescribing Information: Drugs Used in Anaesthesia (1989).
29
H KD Tripathi, Essentials of Medical Pharmacology, VIIth Ed., at p. 378.
STATE OF A.P. v M/S LINDE INDIA LTD. (FORMERLY BOC 859
INDIA LTD.) [DR. DHANANJAYA Y CHANDRACHUD, J.]

The above extracts demonstrate the medical use of Nitrous Oxide A
as a general anesthetic as well as in operation rooms for its analgesic
and anxiolytic properties.
31. In the proceedings before this Court, it was not seriously
disputed that Medical Oxygen IP and Nitrous Oxide IP sub-serve a
medicinal purpose. There is no doubt that Medical Oxygen IP and Nitrous B
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.
C
32. The impugned judgment of the High Court, to the extent it
held that Medical Oxygen IP and Nitrous Oxide IP fall within Entry 88
of the 2005 Act is upheld.
33. The appeals are dismissed, although for the reasons highlighted
above. There shall be no order as to costs. D
34. Pending application(s), if any, shall stand disposed of.

Divya Pandey Appeals dismissed.

E

F

G

H