The Kerala High Court in the case of Abbott Healthcare Pvt Ltd v CST remitted back the matter to Kerala AAR where the Authority did not rule on the issue referred to it for the purpose of seeking a ruling.
The petitioner company is engaged in the sale of pharmaceutical products, diagnostic kits, etc. It places its diagnostic instruments at the premises of unrelated hospitals/laboratories for their use for a specified period without any consideration. The petitioner also enters into Agreements with various hospitals, laboratories, etc., whereunder the arrangement between parties is for supply of medical instruments to the hospital/laboratory concerned, for their use, without any consideration for a specified period and for the supply of specified quantities at prices specified in agreement, through its distributors on payment of applicable GST.
The petitioner had sought a ruling before the respondents Kerala AAR and AAAR on the issue of – whether in the facts of the present case, the provision of specified medical instruments by the Applicant to unrelated parties like hospital(s), Lab (s), for uses without any consideration, constitutes a “supply” or whether it constitutes “movement of goods otherwise than by way of supply” as per provisions of the CGST/SGST Act, 2017?”
The AAR irrespective of answering on the above lines opined that the petitioner was effecting two supplies, namely, of medical instruments and of reagents/calibrators/disposables to be used along with the instrument. Since the instrument supplied had no utility to the customer unless he also bought the reagents/calibrators/disposables, the supply of the instrument and the reagents, etc. had to be seen as naturally bundled to form a composite supply.
A single-judge bench of Justice A.K. Jayasankaran Nambiar held that the findings as regards a composite supply are whole without jurisdiction. The matter is hence remitted back to AAR for fresh consideration.
It was observed that it is only open to AAR to enquire based on terms of the agreement. In the present case, the AAR went beyond the terms of reference in embarking upon an enquiry as to whether supplies under agreement constituted a composite supply.
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