1994 (4) TMI 378 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "Jet mats" as "insecticides" or "mosquito repellents" under the Gujarat Sales Tax Act.
2. The vires of Entry 129 of Schedule II, Part A of the Gujarat Sales Tax Act under Article 14 of the Constitution.
3. The legality of the assessment order passed by the Sales Tax Officer.

Detailed Analysis:

1. Classification of "Jet mats" as "insecticides" or "mosquito repellents":
The petitioners contended that "Jet mats" should be classified as "insecticides" rather than "mosquito repellents" because their primary function is to destroy mosquitoes. Up to July 31, 1990, the mats were treated as "insecticides" and taxed at a concessional rate. However, from August 1, 1990, the mats were reclassified under Entry 129 as "mosquito repellents" and taxed at a higher rate. The respondents argued that "Jet mats" are rightly considered "mosquito repellents" as they are marketed and sold as such.

The court held that "mosquito repellent mats" are distinct commodities, even if they contain insecticides. The court applied the test of common parlance, concluding that consumers do not consider "mosquito repellents" as "insecticides" because they are produced and purchased specifically for repelling mosquitoes. Therefore, the reclassification of "Jet mats" as "mosquito repellents" under Entry 129 was upheld.

2. The vires of Entry 129 of Schedule II, Part A of the Gujarat Sales Tax Act under Article 14 of the Constitution:
The petitioners argued that Entry 129 is ultra vires the Constitution as it discriminates between "insecticides" and "mosquito repellents," which are both derived from insecticides. They relied on the Supreme Court decision in Arya Vaidya Pharmacy v. State of Tamil Nadu, contending that there is no rational basis for such differentiation.

The court rejected this argument, stating that the Legislature has the authority to levy different tax rates on different commodities. The court found that "mosquito repellents" constitute a separate class distinct from "insecticides" and that the differentiation is based on intelligible criteria with a real nexus to the object sought. The court noted that the Legislature is allowed more freedom in matters of taxation and that it is not required to tax everything uniformly. Thus, Entry 129 was not violative of Article 14.

3. The legality of the assessment order passed by the Sales Tax Officer:
The petitioners challenged the assessment order, arguing that it was illegal and that filing an appeal would be futile given the Deputy Commissioner's similar stance under Section 62 of the Act. The respondents contended that the petitioners should have exhausted the appellate remedies available under the Act.

The court addressed the merits of the assessment order, concluding that the Sales Tax Officer's classification of "Jet mats" as "mosquito repellents" was correct and in accordance with Entry 129. The court emphasized that the function of the mats, whether to kill or repel mosquitoes, is irrelevant for tax classification purposes. The court also noted that the mats are a different commodity produced using insecticides but are not themselves insecticides.

Conclusion:
The court dismissed the petition, upholding the classification of "Jet mats" as "mosquito repellents" under Entry 129 and rejecting the contention that the entry was ultra vires the Constitution. The assessment order by the Sales Tax Officer was deemed legal and in accordance with the relevant tax entry. The petitioners' arguments were found to lack substance, and the rule was discharged with no order as to costs.