K.S. Tiwana, J.
1. The petitioner, M/s. Troks Pharmaceuticals Private Ltd., Bahadurgarh (for short the company), has filed these two Civil Writ Petitions No. 4500 of 1981, Troks Pharmaceuticals Private Ltd., Bahadurgarh v. Excise and Taxation Officer, Bahadurgarh, and Others and No. 1986 of 1982, Troks Pharmaceuticals Private Ltd., Bahadurgarh v. Excise and Taxation Officer, Bahadurgarh, and Others. As a matter of fact, the same question of law is involved in both these petitions. The facts are exactly similar. The respondents are common. The annexures are also common. For these reasons, both these petitions shall be decided by one judgment recorded in C. W. P. 1986 of 1982.
2. The company is engaged in the business of manufacturing and selling drugs/ medicines, etc. The petitioner-company made sales to various Health Departments of different State Governments which they had ordered for the supply to various hospitals established under the Employees State Insurance Scheme. The sales to the State Governments are chargeable at four per cent of taxation under Section 8(1) of the Central Sales Tax Act, 1956 (Act No. 74 of 1956) (briefly the Act). Prior to the amendment effected in the year 1975, the rate of tax on such sales was three per cent. For the sales of medicines to various State Governments in the country by the company, it was assessed to sales tax at three per cent in the year 1974-75 by the Assessing Authority, Faridabad, by order, copy of which is annexure P-5(A). For the assessment year 1975-76. the same authority assessed similar sales by the company at the rate of four per cent, vide orders dated 17th March, 1978, copy of which is annexure P-5(B). For the assessment year 1976-77, the company was again assessed by the same authority for similar sales at the rate of four per cent, vide orders dated 9th May, 1978, copy of which is exhibit P-5(C). The Deputy Excise and Taxation Commissioner (Appeals), Rohtak (Haryana), suo motu took action to revise the rate of tax on the sales for the assessment years 1974-75, 1975-76 and 1976-77. He was of the view that these sales were not to any Government department, but to the Employees State Insurance Corporation (briefly the Corporation) and were thus chargeable at the rate of ten per cent of tax. He issued notice to the Company, copy of which is annexure P-6 to the petition. The petitioner-company submitted the reply. The company produced various certificates issued by the medical authorities of the Corporations of various States to the effect that the purchases were made by the Corporation as a department of the State Government. The Excise and Taxation Commissioner made enquiries and came to the conclusion that the Corporation was not a department of the Government. Vide order dated 1st August, 1980, copy of which is annexure P-8, the Deputy Excise and Taxation Commissioner, after enquiry, notice and hearing the company, came to the conclusion that the sales were not made by it in favour of the department of the Government, but to the Corporation and hence, was liable to sales tax at the rate of ten per cent and not at four per cent under Section 8(1) of the Act, as found by the assessing authority. The assessing authority was directed to realise the tax and issue demand notices on the additional demands created as a result of the revisional proceedings.
3. Vide annexure P-13(A) dated 7th July, 1981 (in C.W.P. No. 4500 of 1981), the Assessing Authority, Bahadurgarh, assessed the company at the rate of ten per cent of these sales during the assessment year 1977-78 and issued demand notice, copy of which is exhibit P-13(B) on 17th July, 1981. Notice of recovery, copy of which is annexure P-l to this petition, dated 10th September, 1981, for the recovery of Rs. 89,300 as sales tax for the year 1977-78 was issued. Notice of assessment and demand dated 21st September, 1981, copy of which is annexure P-2 was also issued.
4. For the assessment year 1978-79 the company was assessed at the rate of ten per cent on such sales, vide copy of order annexure P-2 (in C.W.P. No. 1986 of 1982). In this assessment order, the Assessing Authority relying on the orders of the Sales Tax Tribunal, Haryana, in Sales Tax Appeal No. 61 of 71-72, Laxmi Medicine Traders, Ambala Cantt. v. The State, negatived the contention of the company to have the tax assessed at the rate of four per cent by virtue of Section 8(1) of the Act.
5. The petitioner-company has filed these two Civil Writ Petitions, No. 4500 of 1981 and No. 1986 of 1982 under Articles 226/227 of the Constitution of India, seeking the quashing of the orders, copies of which are annexures P-l, P-2, P13, P-13(A) (in C.W.P. No. 4500 of 1981) and copy of order annexure P-2 (in C.W.P. No. 1986 of 1982). The grounds urged by the company are that it had sold the medicines to the State Governments through their officers. The orders were placed by these officers of the State Governments. The privity of contract was with the State Governments and not with the Corporation. The payment for the goods purchased was made by the State Governments from the Consolidated Fund. Right of rejection was with the State Governments and at no stage, there was any direct dealing with the Corporation. Form D was issued by the State Government which brings the sales of medicines by the company within the purview of Section 8(1) of the Act. To support its case, the company furnished certificates issued by the medical authorities of the States of Karnataka, Tamil Nadu, Rajasthan, Gujarat, Madhya Pradesh, Punjab and the Union Territory of Pondicherry to the effect that the sales were made to the State Governments and that the payments were made from the consolidated fund of the Government. The company had filed appeals before the Sales Tax Commissioner. Since the Tribunal had expressed itself in favour of ten per cent of the tax assessment, it could not wait for the result of those appeals.
6. The Excise and Taxation Officer, Bahadurgarh, respondent No. 1, in his return took a preliminary objection that the company had filed appeals before the Sales Tax Tribunal which are pending and it could not, without waiting for the result thereof, come to this Court and file these writ petitions. It was further averred that in case the company lost the appeals, it could ask the Sales Tax Tribunal to make a reference to the High Court. Since the company had not exhausted the alternative remedy, it could not approach the Court on the writ side.
7. Respondent No. 1 in the written statement filed in this Court defended the order and reiterated the position that the sales by the company, as a matter of fact, were in favour of the Corporation which is not a department of the Government and that Section 8(1) of the Act is not attracted for application. The charging of ten per cent of the sales tax was defended.
8. The State of Rajasthan, in the return filed in both the petitions, supported the claim of the petitioner-company. It averred that the medical benefit is administered by the State Governments and each State has an Administrative Medical Officer to look after the medical arrangements. The various State Governments, while purchasing the goods from the company, made purchases in their own right and did not act as the agents of the Corporation. The goods purchased by the State Governments are used and distributed to various hospitals run by them. It was averred that there was privity of contract between the company and the respective purchasing State Governments. The very fact that the State Governments reimburse the Corporation towards the expenses in certain ratio, would show that the purchases made by the State Governments in fact and in law were made by the State Governments.
9. The State of Madhya Pradesh in the return filed on its behalf did not object to the contentions made in the petition. It was averred : 'That Clause C of the grounds of appeal is not objected, further more in respondent-State, the position of E.S.I. is different. It is under regular establishment of Government, and governed by Labour Ministry. The position is, officer is like officer, as Class II, Class I and Super Class I Officers, there is separate Directorate of it and the pay and expenditure are charged to Government and it is in no way controlled by E.S.I. Corporation. There is separate budget drawn on the expenditure of Government for purchase of medicines for 'E.S.I. Hospitals and Dispensaries. There is no deputation of officer and the officers are on regular establishment of Government in Labour Department, while Public Health Department is governed by Health Ministry.'
10. The State of Punjab filed its return in C.W.P. No. 4500 of 1981. It took the position that under the scheme, it provides full medical care to the insured employees and the members of their families. As the provision of medical benefit is a State subject, it is obligatory to make payment in respect of the expenditure incurred on medical care. The State Government bears 4 per cent sales tax on medicines, etc., purchased from approved sources, including the company, at concessional rates as is purchased for other Government Hospitals/ Dispensaries. The Government of Punjab, Ministry of Health and Family Welfare has already clarified to the Commissioner, Sales Tax (Central), New Delhi, that the medicines purchased for use in the E.S.I. Hospitals/Institutions is on behalf of the Punjab Government and not on behalf of the Corporation. The necessary budget provisions for the purchase of medicines in respect of the E.S.I. Hospitals/ Dispensaries in the State are being made in the State Budget and the same are voted by the State Assembly. Apart from the above expenditure involved, it is debited to the relevant heads of the State Government, form D issued by the direct demanding officers of the E.S.I. Hospitals/Institutions have heretofore been accepted by the concerned authority for availing benefit of concessional rate of sales tax.
11. The petitioner-company in its replication reiterated the position taken in the petition. Regarding the preliminary objection, it was averred that it was not an efficacious remedy.
12. Since the States which were- impleaded as respondents took the stand against respondent No. 1, the Assessing Authority of Bahadurgarh, it was agreed at the motion stage between the parties that the case be heard on merits. The preliminary objection was not pressed and this case was, on the request of the learned counsel for the parties, admitted for hearing before a Division Bench.
13. In the course of arguments before us, Shri B. S. Gupta, learned counsel for respondent No. 1, again, raised the preliminary objection that the company should pursue the alternate remedy to which it had taken recourse. In case the result of the appeal goes against it, the company can take the opportunity of asking the Tribunal to make reference to this Court. It is the lone voice of the Assessing Authority, respondent No. 1, in support of the impugned orders. The rest of the States arrayed as respondents before us, have taken the position diametrically opposite to that of respondent No. 1, to urge that Section 8(1) of the Act is applicable to the purchases of medicines made by the Governments for use in the E.S.I. Hospitals/Dispensaries. In view of this and the fact that the preliminary objection was not pressed at the motion stage, we do not feel inclined to dismiss the petition on the objection of pursuit of alternate remedy. In given cases, where interests of justice demand, in spite of such an objection, a petition can be entertained for decision on merits. There cannot be a better case than the one in hand in which the interests of justice require the decision of the petition on merits, because a number of the State Governments in India are opposing the stand taken by respondent No. 1. We, therefore, proceed to hear the arguments to decide the case on merits, so that the controversy created by the taxation authorities in Haryana is set at rest.
14. The question arising for determination in the case, is whether the purchases of the goods were made by the Government or by the Corporation.
15. It is appropriate to note the relevant provisions of the Act* Section 8(1) of the Act is as under :
8. Rates of tax on sales in the course of inter-State trade or commerce,- (1) Every dealer, who in the course of inter-State trade or commerce-
(a) sells to the Government any goods; or
(b) sells to a registered dealer other than the Government goods of the description referred to in Sub-section (3);
shall be liable to pay tax under this Act, which shall be four per cent of his turnover...
16. Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 (for short the Rules), in accordance with which form D is issued by the State Government in its capacity as a purchaser, is also reproduced below :
12. (1) The declaration and the certificate referred to in Sub-section (4) of Section 8 shall be in forms C and D respectively :
Provided that form C in force before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1974, or before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1976, may also be used up to the 31st December, 1980, with suitable modifications:.
Form D which is issued by the purchaser to the seller is as under :
The Central Sales Tax (Registration and Turnover) Rules, 1957
Form of certificate for making Government purchases
[See Rule 12(1)]
(To be used when making purchases by Government not being
a registered dealer)
Central Government/Name of the State Government...Name of issuing Ministry/Department...Name and address of Office of issue....To................................................(Seller)................................................Certified that the goods ordered for in our purchase order No..................... dated...........................purchased from you as per bill/cash memo stated below supplied under your chalan No..................dated..................are purchased by or on behalf of the Government of.....................
Date...................... Signature..................Designation of the authorised officer of the Government..........SEAL OF THE DULY AUTHORISED OFFICER OF THE GOVERNMENT Particulars of Bill/Cash memo. Date.............No.............Amount.............Name and address of the seller with name of the State. Strike out whichever is not applicable.(Note :-To be furnished to the prescribed authority in accordance with the rules framed under Section 13(3) by the appropriate State Government).
17. Section 8(1) provides the reduced percentage of tax in case the purchaser happens to be a State Government. This benefit of lesser tax can be availed of only if the State Government has a responsibility to provide the medical treatment to the industrial workers.
18. The Employees' State Insurance Act, 1948, was brought on the statute book in the year 1948. Section 56 of the Act provides that an insured person or (where such medical benefit is extended to his family) a member of his family, whose condition requires medical treatment and attendence, shall be entitled to receive medical benefit and such medical benefit may be given either in the form of out-patient treatment and attendance in a hospital or dispensary, clinic or other institution or by visits to the home of the insured person or treatment as in-patient in a hospital or other institution. Sub-section (1) of Section 57 states that an insured person and (where such medical benefit is extended to his family) his family shall be entitled to receive medical benefit only of such kind and on such scale as may be provided by the State Government or by the Corporation. The Objects and Reasons of the Act with regard to the providing of medical care and treatment are as under :
Medical care and treatment to insured workman will be provided by Provincial Governments at such hospitals, dispensaries and other institutions as may be prescribed for the purpose. The cost of medical benefit will be shared between the Provincial Government and the Corporation in such proportions as may be agreed upon between them. In case the average incidence of sickness cash benefit in any Province is in excess of the all-India average, Provincial Government will also bear such share of the cost of the excess incidence as may be agreed upon between it and the Corporation.
19. Sections 56 and 57 of the Act made the insured workers entitled to the medical treatment. The legislature, as is apparent from the Objects and Reasons, intended to make it the primary responsibility of the State Government to provide medical care and treatment to the workmen. This intention was given a practical shape in the form of Sections 58 and 59 of this Act. Sub-section (1) of Section 58 states that the State Government shall provide for insured persons and (where such benefit is extended to their families) their families in the State, reasonable medical, surgical and obstetric treatment. There is a proviso to this subsection which says that the State Government may with the approval of the Corporation, arrange for medical treatment at clinics of medical practitioners on such scale and subject to such terms and conditions as may be agreed upon. Section 58, therefore, imposes a liability on the State Government to provide medical care and treatment to the insured persons and their families. Sub-section (1) of Section 59 states that the Corporation may, with the approval of the State Government establish and maintain in a State such hospitals, dispensaries and other medical and surgical services as it may think fit for the benefit of the insured persons and (where such benefit is extended to their families) their families. The word used in Section 59 is 'may' while that used in Sub-section (1) of Section 58 is 'shall'. It is, therefore, clear that the primary responsibility for providing medical benefits to insured persons and their families is imposed by the legislature on the State Government, The proviso to Sub-section (1) of Section 58 empowers the State Government to make alternative arrangement by arranging for medical treatment at the clinics of medical practitioners. These arrangements cannot be made except with the approval of the Corporation, but if the Corporation agrees, the responsibility for making appropriate arrangements will be that of the State Government and not of the Corporation. The scheme of the Act very clearly provides that the help to the care of the insured workmen under the Employees' State Insurance Act, is the primary responsibility of the State Government, In the circumstances given in Section 68 of this Act, the State Government shares the medical expenditure rateably with the Corporation. The State Governments are taking the medical care as their primary responsibility. The State of Punjab, under the Employees State Insurance Scheme, is providing full medical care to the insured persons and the members of their families. The State of Punjab considers it obligatory on its part to incur the expenses on the medical care of the insured persons. A provision for these expenses is made in the State Budget and is voted by the State Assembly. The expenditure involved is debited to the relevant heads of the State Government. The State Government bears four per cent tax on the medicines, etc. The Governor of Punjab, vide order dated 28th March, 1978 [annexure P-4(D) to C.W.P. No. 1986 of 1982] exercising the powers under note 5 of Rule 19.1 of the Punjab Financial Rules, Volume 1, redelegated the powers to make purchases on the (i) Director, Family Welfare, Punjab; (ii) Director, Research and Medical Education, Punjab, and (iii) All Civil Surgeons in the State, Medical Superintendents of the Hospitals, including E. S. I. Hospitals up to Rs. 50,000. In this very letter, vide Clause (v), they were directed not to effect any purchase from the rate contracting firms without the prior approval of the State Government. This applies to the Medical Superintendents of the E.S.I. Hospitals also.
20. The State of Rajasthan in its return averred that the view, expressed by the Deputy Excise and Taxation Commissioner, Haryana, in his order dated 1st August, 1980 (copy annexure P-8 in C.W.P. No. 1986 of 1982), that the Government Officers who purchased the goods and issued certificates in form D were on deputation under the ESI Scheme and were given duty to look after hospitals were employees covered by the ESI Scheme was incorrect, and untenable. It is firm in its stand that the various State Governments were purchasing the goods from the company in their own right and did not act as agents of the Corporation. The goods are purchased by the State Government and distributed to various hospitals by it. In the return filed on behalf of the State Government of Madhya Pradesh, it was categorically stated that the Corporation was being treated as a department of the Government and was administered by the Ministry of Labour of the State.
21. The learned Advocate-General of Rajasthan, and the learned counsel appearing for the States of Karnataka, Punjab, Kerala and Tamil Nadu stated before us that the State Governments make the purchases of the medicines for the Corporation in the discharge of their obligation placed on them by the statute for providing medical aid to the insured workmen. They refuted the contention of the learned counsel for respondent No. 1 that the sales were being made by the State Governments, as agents of the Corporation, but maintained that the purchases of medicines were made by the Governments in their own right. It was further stated that the same were distributed to the E. S. I. Hospitals/Dispensaries run under the management of the Corporation.
22. Certificates, copies of which are annexures P-11 (A to M) (with C.W.P. No. 1986 of 1982) are issued by the Director of Medical Services, E.S.I. Scheme, Medical Superintendents of the E.S.I. Hospitals, Administrative Medical Officers of the State Governments, etc., of Andhra Pradesh, Gujarat, Rajasthan, Punjab, Union Territory of Pondicherry are to the effect that the purchases of medicines by them from the company were in their capacity of a department of the Government. The purchasing officers are authorised to issue form D to the company that the sales have been made to the State Governments. The payment for the medicines purchased is made by the State Governments from the Consolidated Fund of the State. This is evident from the certificates, copies of which are annexures P-3 (A to C) (with C.W P. No. 1986 of 1982) issued by the Director E. S. I. Scheme (M) Service, Bangalore (Karnataka) and Jaipur (Rajasthan) and Hyderabad (Andhra Pradesh). These certificates are to the effect:
This is to certify that all the payments towards the supply of drugs and chemicals by M/s Troks Pharmaceuticals Private Ltd., Bahadurgarh, Haryana to the ESI Scheme, are being made by the Director, ESI Schemes (Medical) Service, Government of Karnataka, from the Consolidated Fund of the State.
23. It has already been noticed that the State of Punjab makes the payment for the purchase of such medicines, from the Company, from the State budget voted by the Legislative Assembly and the State of Madhya Pradesh draws separate budget on the expenditure of the Government for the purchase of medicines for the ESI Hospital and Dispensaries. As per certificate reproduced, the payment is made from the Consolidated Fund of the State. There cannot be any doubt that the payment of the medicines purchased for the E.S.I. Hospitals/Dispensaries and other institutions is made by the State Government from its Consolidated Fund, because the duty to provide medical care is placed on the State by the statute.
24. The State Governments made purchases of medicines in the discharge of their own statutory obligations, to implement the E.S.I. Scheme, as stated on behalf of the States of Punjab, Rajasthan, Gujarat, Madhya Pradesh and Andhra Pradesh. It is a State subject. The State Governments do not do this act as agents of the Corporation. The Corporation can enter into an agreement with the State in regard to the nature and scale of medical care and treatment to be provided to the insured workers and their families. The State Government has to share the expenditure with the Corporation in case the incidence of sickness is found to exceed the all-India average. The Corporation may establish hospitals with the approval of the State Government. These are not the attributes of agency.
25. The things which emerge clearly and which are also agreed to between the learned counsel for the parties before us are that the State Governments are responsible for the medical care and treatment of the insured workmen; arrange for such treatment at the institutions, hospitals and dispensaries, etc., which are managed by the Corporations; the officers of the State Governments, as also of the Corporation, order the purchase of medicines; the price thereof is paid by the State Governments from their Consolidated Funds; the expenditure is made from the budget voted by the State Assemblies; the reduced rate of tax is paid by the State Governments; the property in the goods passes to the State Government and the right of rejection or acceptance of the goods remains with the State Governments; in case of dispute with the State Governments regarding the fulfilment of the contract, the sellers can sue the State Government and not the Corporation; in case of breach of contract, the State Government has a remedy against the seller; the State Government issues form D, as is claimed by the State Governments which are respondents in these cases. The Punjab Government has conferred powers on the Medical Superintendents of E.S.I. Hospitals in the State to make purchases of medicines through approved sources up to a limit of Rs. 60,000. Even the Medical Superintendents of E.S.I. Hospital are debarred from making purchases from rate contracting firms without approval of the State Government. These factors, when considered together, go to show that, as a matter of fact, the State Government is the purchaser of the medicines and not the Corporation. In the light of this, even the medicines purchased by the officers of the Government on deputation with the Corporation are to be taken to be purchases by the Government. In these circumstances, it is erroneous to hold that the purchases of medicines in these cases from the company were not made by the State Governments. The conclusion of the Deputy Excise and Taxation Commissioner, as also of the Taxation Authorities in this regard cannot be sustained. The assessments of sales tax made at the rate of ten per cent are, thus, liable to be struck down.
26. On behalf of the company, it was contended that the Deputy Excise and Taxation Commissioner overstepped the limits of his enquiry. He could (not) examine the ultimate use of the goods after the issue of form D by the purchaser. The Deputy Excise and Taxation Commissioner, Haryana came to conclusion that the purchaser was the Corporation and not the State Government. One of the grounds on which he based his conclusion was that the medicines purchased ultimately found their way to the E.S.I. Hospitals/Dispensaries run by the Corporation. By this the Taxation Authorities were led to hold that the Corporation was the purchaser of the goods. The medicines purchased by the State Government have to reach the E. S. I. Hospitals/Dispensaries as it is the duty of the State Government to provide medical aid to the insured workmen. The seller cannot be fixed with the responsibility to conduct an enquiry into the intention of the purchaser for the ultimate use of the goods. A similar question came up before a Division Bench of this Court in Dalmia Dadri Cement Ltd. v. State of Haryana,  35 STC 320. In that case, cement was sold against the certificates issued by the Executive Engineer that it was required for use in generation and use of electrical energy. The cement was, however, used in the construction of the quarters for the staff. The assessing authority after enquiry disallowed the deduction. Following State of Madras v. Radio and Electricals Ltd.  18 STC 222(SC), it was held in this case :
When the purchasing dealer furnishes a certificate in form C without striking out any of the four alternatives, it is a representation that the goods purchased are intended to be used for all or any of the purposes, and the certificate complies with the requirements of the Act and the Rules. The sales tax authority is competent to scrutinise the certificate to find out whether the certificate is genuine. He may also, in appropriate cases, when he has reasonable grounds to believe that the goods purchased are not covered by the registration certificate of the purchasing dealer, make an enquiry about the contents of the certificate of registration of the purchasing dealer. But it is not for the Tax Officer to hold an enquiry whether the goods specified in the certificate of registration of the purchaser can be used by him for any of the purposes mentioned by him in form C, or that the goods purchased have in fact not been used for the purpose declared in the certificate. It was further pointed out that the seller can have, in the transactions of sale and purchase in the course of inter-State trade and commerce, no control over the purchaser. He has only to rely upon the representation made to him. He must satisfy himself that the purchaser is a registered dealer, and the goods purchased are specified in his certificate; but his duty extends no further. If he is satisfied on these two matters, on a representation made to him in the manner prescribed by the Rules and the representation is recorded in the certificate in form C, the selling dealer is under no further obligation to see to the application of the goods for the purpose for which it was represented that the goods were intended to be used. Whether the goods specified in the registration certificate in form B can be used for the purpose is not for the selling dealer to determine. These observations can be applied mutatis mutandis to the case before us. Once the responsible officers of the Punjab State Electricity Board issued the necessary certificates, the petitioner-company, as seller of cement, was under no obligation to see that the cement purchased from it was actually used in the generation and distribution of electrical energy.
27. Dalmia Dadri Cement Ltd.'s case  35 STC 320 is a complete answer to the argument regarding the scope of enquiry by the Assessing Authority in such matters. The company was under no obligation to question the purchaser about the end user of the goods supplied by it, after it had obtained form D. The Assessing Authority can enquire into the genuineness of the said form, but cannot extend its enquiry up to the ultimate use of the goods. The Deputy Excise and Taxation Commissioner overstepped the limits of the enquiry.
28. On the facts placed before us in these petitions, we find that the sales, as referred to the cases in hand, were to the State Governments and were covered by Section 8(1) of the Act, rendering the sales liable to taxation at four per cent. Holding, as we do, the writ petitions (No. 4500 of 1981 and 1986 of 1982) are accepted with costs and annexures P-1, P-2, P-13 and P-13(A) (in C.W.P. No. 4500 of 1981) and P-2 (in C.W.P. No. 1986 of 1982) are quashed.
S.D. Sandhawalia, J.
29. I agree.