2004 (6) TMI 608 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of fungicides, herbicides, insecticides, weedicides, etc., under the category of insecticides and pesticides.
2. Classification of specific chemical compounds (gramaxone, vitto-plant, zimag, etc.) under insecticides and pesticides.
3. Applicability of exemption from turnover tax for second and subsequent sales of these chemical compounds under section 6-B of the Karnataka Sales Tax Act, 1957.

Detailed Analysis:

Issue I: Classification of Fungicides, Herbicides, etc.
The primary question was whether fungicides, herbicides, insecticides, weedicides, etc., fall under the category of insecticides and pesticides. The court referred to the amendments made to entry No. 117 of the Second Schedule to the Karnataka Sales Tax Act, 1957, which initially included only insecticides and pesticides. Fungicides, weedicides, and herbicides were added later, effective from April 1, 1992. The Tribunal had held that the addition of these items indicated they were different from insecticides and pesticides. However, the court disagreed, citing the decision in B.H. Vasudeva Pai & Sons v. State of Karnataka, which stated that the entries in different Schedules have no relevance to levy of tax under section 6-B of the Act. The court endorsed the view that fungicides, herbicides, and weedicides are included within the term "pesticides."

Issue II: Classification of Specific Chemical Compounds
The Tribunal had classified gramaxone, vitto-plant, zimag, etc., as fungicides, herbicides, and weedicides, thereby excluding them from the category of insecticides and pesticides. The court referred to the dictionary definitions and the Manual for Pesticides published by the Pesticides Association of India, which included insecticides, fungicides, herbicides, and rodenticides under the term "pesticides." The court concluded that these chemical compounds should be classified under pesticides.

Issue III: Exemption from Turnover Tax
The petitioner claimed exemption from turnover tax on the second sales of these chemical compounds based on the Government Notification dated June 29, 1981, which exempted second and subsequent sales of insecticides and pesticides. The Tribunal and the authorities had denied this exemption, arguing that the compounds were not insecticides and pesticides. The court, however, found that the petitioner was eligible for the exemption as the compounds fell within the broader category of pesticides. The court emphasized a liberal and purposive interpretation of exemption notifications, as supported by the apex court's decision in Bombay Chemical Private Limited v. Collector of Central Excise, Bombay.

Conclusion:
The court allowed the revision petitions, set aside the orders of the Karnataka Appellate Tribunal, and remanded the matter back to the assessing authority to re-compute the tax liability, recognizing the chemical compounds as pesticides eligible for exemption from turnover tax under the notification dated June 29, 1981. The parties were directed to bear their own costs.