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CIVIL APPEAL NO.1335 OF 2010
M/s Reckitt Benckiser (India) Ltd. ..Appellant
Taxes & Ors. ..Respondents
JUDGMENT
Civil Appeal No.1335 of 2010
1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 17.12.2008 passed by the High Court of Kerala at Ernakulam in OT Appeal No.6 of 2006 by which the High Court has dismissed the said appeal and has upheld the order passed by the Commissioner with respect to the classification of the goods in question, the assessee has preferred the present appeal.
2. At the outset, it is required to be noted that the issue pertains to the classification of the appellant’s products namely (i) Mosquito Mats, Coils and Vaporizers; and (ii) Mortein Insect Killers; (iii) Harpic Toilet Cleaner and Lizol Floor Cleaners; and (iv) Dettol Antiseptic Liquid for the purposes of Kerala VAT Act, 2003 (hereinafter referred to as “KVAT Act”). It was the case on behalf of the appellant that the products at (i) to
(iii) were classifiable under Entry No. 44(5) of the
III Schedule to the Kerala VAT Act as being 'pesticides, insecticides' corresponding to HSN Code 3808 and therefore subject to VAT at the rate of 4%. With respect to the product at (iv) hereinabove, it was the case on behalf of the appellant that 'Dettol Antiseptic Liquid' is correctly classifiable under Entry 36(8) (h) (vi) being medicaments corresponding to HSN Code 3004.90 of the III Schedule, and thus also subject to tax at the rate of 4%. 2.[1] However, the Commissioner of Commercial Taxes, rejected the contention of the appellant holding that the products (i) Mortein Mosquito Coil, Mat and Liquid Vaporizer is classifiable under Entry 66 of Notification SRO 82/06 dated 21.01.2006 issued under Section 6(1)(d) of the Kerala VAT Act which covers "Mosquito Repellants, electric or electronic mosquito repellants, gadgets and insect repellants, devices and parts and accessories thereof” corresponding to HSN Code 8516 79 20; (ii) Mortein Insect Killer is subject to tax at the rate of 12.5% under the residuary entry i.e. under
┌───────────────────────────────────────────────────────────┐ │ Sl. No. Description HSN Code │ ├───────────────────────────────────────────────────────────┤ │ 44 Fertilizers, pesticides, │ │ weedicides, insecticides, │ │ fungicides, herbicides, │ │ rodenticides, anti │ │ sprouting products and │ │ plant growth regulators, │ │ biofertilizers, │ │ micronutrients and │ │ similar products │ │ 5 Pesticides, weedicides, 3808 │ │ insecticides, 3808 │ │ fungicides, herbicides, │ │ rodenticides, anti │ │ sprouting products and │ │ plant growth regulators, │ │ and similar products │ │ other than micro products │ │ Civil Appeal No.1335 of 2010 Page 5 of 32 │ │ (d) Entry 36(8)(h)(vi) of the Third Schedule reads │ │ as under: │ │ 36 Drugs, Medicines and │ │ Bulk Drugs including │ │ Ayurvedic, Unani, and │ │ Homoeopathic │ │ medicine but │ │ excluding mosquito │ │ repellants and those │ │ specifically mentioned │ │ in First Schedule and │ │ those notified under │ │ clause (d) of sub │ │ section (1) of section │ │ 6. │ │ 8 Medicaments │ │ (excluding goods of │ │ HSN heading nos. │ │ 3002, 3005, or 3006) │ │ consisting of mixed or │ │ unmixed products for │ │ therapeutic or │ │ prophylactic uses, put │ │ up in measured doses │ │ (including those in the │ │ Civil Appeal No.1335 of 2010 Page 6 of 32 │ │ form of transdermal │ │ administration │ │ systems) or in forms │ │ or packings for retail │ │ sale │ │ h Other │ │ (vi) Medicaments other 3004.90 │ │ than those given in │ │ subentries (i) to (v) │ │ Entry 66 of Notification No. SRO No. 82/2006, │ │ G.O.(P) No. 4/2006/TD Dated 21st January 2006. │ │ LIST OF GOODS │ │ (1) (2) (3) │ │ 66 Mosquito repellents, 8516.79.20 │ │ electric or electronic │ │ mosquito repellents, │ │ gadgets and insect │ │ repellents, devices │ │ and parts and │ │ accessories thereof │ │ Civil Appeal No.1335 of 2010 Page 7 of 32 │ └───────────────────────────────────────────────────────────┘
7. Making above submissions it is prayed to dismiss the present appeal.
8. We have heard the learned counsel appearing on behalf of the respective parties at length.
9. So far as the product Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers are concerned, it is the case on behalf of the appellant that the said products would fall in Entry 44(5) of III Schedule of KVAT Act and would fall under HSN Code 3808. Therefore, it is the case on behalf of the appellant that the aforesaid products shall be classifiable as insecticides under Entry 44(5) and therefore chargeable to tax at 4%. It is the case on behalf of the appellant that as the aforesaid products are manufactured under the licence granted under the Insecticides Act and therefore the said products can be said to be insecticides classifiable under Entry 44(5). The aforesaid has no substance. It is required to be noted that HSN Code 3808 has been deleted from Entry 44(5) w.e.f. 01.07.2006 and from 21.01.2006 the aforesaid products would fall under Sl. No.66 namely ‘Mosquito repellant’, which is the specific entry and subject to VAT at 12.5%. The insecticides under Entry 44(5) therefore can be said to be a general entry. Once there is a specific entry the ‘Mosquito Repellant’, thereafter one is not required to go to the definition under another Act namely Insecticides Act. Sl.No.66 of Notification SRO 82/06 dated 21.01.2006 issued under Section 6(1)(d) of the Kerala VAT Act which covers "Mosquito Repellants”. 9.[1] Even otherwise it is required to be noted that Entry 44(5) which includes insecticides relates to products which are used in agricultural operations. All the products in the Entry are used in the agricultural field in relation to growing of agricultural products and controlling of pets, insecticides etc. which are attacking the plants. Therefore, in view of the specific Entry 66 of Notification SRO 82/06 dated 21.01.2006 the aforesaid products namely Mosquito Repellants, electric or electronic mosquito repellants, gadgets and insect repellants, devices and parts and accessories thereof are rightly classified as Mosquito repellants. Now so far as the reliance placed upon the decision of this Court in the case of Bombay Chemicals Pvt. Ltd. (supra) is concerned, the said decision shall not be applicable to the facts of the case on hand while dealing with the specific entries under KVAT Act. It was a case under the Central Excise Act and the Entry corresponding to the Excise Act. In the present case under the KVAT Act there is a specific Entry Mosquito repellant so far as the product electric or electronic mosquito repellents, gadgets and insect repellents, devices and parts and accessories thereof are concerned and therefore the said specific entry shall be applicable in any case, the same cannot be said to be insecticides. We are in complete agreement with the view taken by the High Court that Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers products shall not be classifiable under Entry 44(5) as insecticides. 9.[2] Now so far as the products Harpic and Lizol is appellant that the same is classifiable under Entry 44(5) of III Schedule of KVAT Act HSN Code 3808 and the said products are also classifiable as insecticides. 9.[3] However, it is required to be noted that after introduction of SRO 82/06 w.e.f. 22.01.2006 the Harpic and Lizol would fall under Sl. No. 27(4) of SRO 82/06. Sl. No.27(4) thus is a specific entry. 9.[4] Even the High Court has also considered the use of the aforesaid two products. The aforesaid two products are used for cleaning the floor and toilet. As noted by the High Court and even from the product description and the nature of use stated in the products, the said two items are essentially used as stain removers and deodorants. Merely because they kill germs as well, the same cannot be said to be insecticides classifiable under Entry 44(5). What is required to be considered is the dominant use which is cleaning and removal of stains of floor and the toilet. Thereafter, the same shall not fall under Entry 44(5) – HSN Code No.3808 as insecticides or disinfectant. Entry 27(4) of SRO No. 82 of 2006 is with respect to stain busters, stain removers, abir, blue and all kinds of cleaning powder and liquids including floor and toilet cleaning. In that view of the matter Entry 27(4) being a specific entry the same shall be applicable and the aforesaid two products namely Harpic and Lizol shall not be classifiable under general Entry 44(5) and in any case the same cannot be classifiable under Entry 44(5) as insecticides. We are in complete agreement with the view taken by the High Court that the product Harpic and Lizol shall not be classifiable under Entry 44(5) and shall be classifiable under Entry 27(4) of SRO 82/2006 chargeable to tax at 12.5%. 9.[5] However, so far as the product Dettol is appellant that Dettol is an Antiseptic Liquid and therefore is classifiable as a drug/medicine under Entry 36(8)(h)(vi). The active ingredients of Dettol are Chloroxylenol IP, Terpineol BP, Alcohol Absolute IP (denatured) and it is an antiseptic having germicidal properties and it kills germs, bacteria and it prevents infection therefore it is applied on wounds, cuts, grazes, bites and stings. It is also used in hospitals for surgical use and medical use. 9.[6] Thus the Dettol is used as an antiseptic liquid and is used in hospitals for surgical use, medical use and midwifery, due to therapeutic & prophylactic properties. Therefore, the same can be said to be an item of medicament to be treated as a drug and medicine. Here also the dominant use is a relevant consideration. 9.[7] In the case of Ponds India Ltd. (supra) this Court has held that while deciding the issue whether any particular item would be covered under relevant entry or classification, different tests viz. the dictionary meaning, technical meaning, user’s point of view, popular meaning etc. are to be applied. In paragraphs 35 & 38 it is observed and held as under: “35…..while interpreting an entry in a taxing statute, the court’s role would be to consider the effect thereof upon considering the same from different angles. Different tests are laid down for interpretation of an entry in a taxing statute, namely, dictionary meaning, technical meaning, user’s point of view, popular meaning, etc.”
XXX XXX XXX “38. Whether a product would be a drug or a cosmetic sometimes poses a difficult question and, thus, answer thereto may not be easy. For the said purpose, the court may not only be required to consider the contents thereof, but also the history of the entry, the purpose for which the product is used, the manner in which it has been dealt with under the relevant statute as also the interpretation thereof by the implementing authorities.” 9.[8] Thus, as per the settled position of law while considering a particular entry the principles of classification which are fundamental to any matter relating to classification under the taxing statute are: (a) plain meaning to be given to the taxing provision; (b) burden to prove classification in a particular entry is always on the Revenue;
(c) any ambiguity has to be resolved in favour of the assessee and in case of a reasonable doubt, the construction most beneficial to the assessee must be adopted;
(d) specific entry would override a residuary entry; and
(e) resort to residuary entry is to be taken as a last measure, only when by liberal construction the specific entry cannot cover the goods in question. 9.[9] At this stage it is required to be noted that the Guwahati High Court and the Rajasthan High Court have held the Dettol to be a drug under the respective entries of Assam VAT Act and Rajasthan VAT Act and have rejected the submission of the Revenue that the Dettol falls under the residuary entry. It is to be noted against the decision of the Rajasthan High Court, the Revenue had preferred the SLPs before this Court which are dismissed by this Court.
9.10 In view of the above and considering the dominant use of Dettol and the active ingredients of Dettol referred to hereinabove and that the Dettol is used as an antiseptic and is used in hospitals for surgical use, medical use and midwifery due to therapeutic & prophylactic properties the same would fall under Entry 36(8) (h) (vi) as claimed by the appellant and would not fall under the residuary entry as claimed by the Revenue. To that extent the impugned judgment and order passed by the High Court deserves to be quashed and set aside.
10. In view of the above and for the reason stated above, present appeal succeeds in part. The impugned judgment and order passed by the High Court in so far as the products Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers; Harpic Toilet Cleaner and Lizol Floor Cleaners is hereby confirmed. So far as the impugned judgment and order passed by the High Court with respect to Dettol Antiseptic Liquid is concerned, the impugned judgment and order passed by the High Court is set aside and it is held that the product Dettol would fall under Entry 36(8) (h)(vi) of Schedule III of the KVAT Act and shall be liable to be taxed at 4%. Present appeal is accordingly partly allowed to the aforesaid extent. However, in the facts and circumstances of the case there shall be no order as to costs. …………………………………J. (M. R. SHAH) …………………………………J. (KRISHNA MURARI) New Delhi, April 10, 2023