2005 (11) TMI 448 - HC - VAT and Sales Tax

Classification of goods - Mosquito mats/coils or refills - whether the goods manufactured and marketed by the petitioners as mosquito mats/coils or refills would fall under entry titled pesticides and insecticides in the notifications issued u/s 3-A of the U.P. Trade Tax Act, 1948 ( the Act ) - HELD THAT - We find from the pleadings that articles/goods sold by the petitioners, though used as household articles, are nevertheless household insecticide which fact is also mentioned on their products. The chemical composition used in manufacturing the goods in question (though widely known and popularly understood as mosquito repellent) is allethrin which is an insecticide . The petitioners are using chemicals for manufacturing the finished goods which have been treated as insecticides and under the provisions of the Insecticides Act, 1968 a certificate has been issued by Government of India, Ministry of Agriculture which leaves no scope of doubt that allethrin which is used in the product sold by the petitioners is insecticide . Insecticides Rules, 1971 provides for the manner of labeling. Labelling/packing of the products of the petitioner is as per the aforequoted rule 19(4) of the Rules. D-Trans allethrin and pallethrin are used in manufacturing the goods which have been described as household insecticides on their products as per the statutory requirement under the Insecticides Act. In the absence of any specific entry relating to mosquito repellent/mosquito destroyer and at the same time there being an entry mentioning insecticides , it can reasonably be said that an ordinary person will ordinarily understand the product of the petitioners falling under category of the insecticides . These facts coupled with the principles enunciated in the decisions referred to above leave us in no doubt that the products sold by the petitioners are basically in the categories of insecticides particularly in the absence of any indication in the notification in question. We are, however, unable to persuade ourselves to hold that merely because the petitioners have at various stages contended that the product is described or commonly traded as mosquito repellent it should not fall in the category of insecticides . We would have accepted such a contention if there was separate or specific exclusion entry of mosquito repellant in the existing entry of pesticide and insecticide . In that case there would have been no difficulty but in the absence of specific mention as indicated above, the product in question falls under the entry insecticides . The percentage of allethrin used in the product, is of no consequence at all, since it is admittedly an insecticide . Thus, we consider it appropriate to decide the issue and matter finally at this stage and reject the objection raised by the learned counsel for the respondents, that the petitioners seeks to challenge, at this stage, show cause notice issued u/s 21(2) of the Act. All the above Writ Petitions are allowed.

Summary

Issues Involved:
1. Classification of mosquito mats/coils or refills under the U.P. Trade Tax Act, 1948.
2. Applicability of the term "pesticides and insecticides" to mosquito mats/coils or refills.
3. Validity of tax assessments and notices issued under section 21 of the Act.

Detailed Analysis:

1. Classification of Mosquito Mats/Coils or Refills:
The primary issue is whether mosquito mats/coils or refills fall under the category of "pesticides and insecticides" as per the notifications under section 3-A of the U.P. Trade Tax Act, 1948. The petitioners argued that their products should be classified as "insecticides" and not as unclassified items subject to a higher tax rate under section 3-A(1)(c). The respondents contended that these products are mosquito repellents and should be taxed as unclassified items.

2. Applicability of the Term "Pesticides and Insecticides":
The court examined various legal precedents to determine the classification. It referred to the Supreme Court's judgment in Sonic Electrochem v. Sales Tax Officer, which held that mosquito repellents could be classified as insecticides despite their repellent properties. The court also considered the Insecticides Act, 1968, which classifies chemicals like allethrin used in mosquito mats/coils as insecticides. The court concluded that the products in question are indeed insecticides based on their chemical composition and labeling requirements under the Insecticides Act.

3. Validity of Tax Assessments and Notices:
The court addressed the validity of tax assessments and notices issued under section 21 of the Act. The petitioners argued that the assessments were based on incorrect legal interpretations from previous cases (Britania Agencies and Hindu Super Store) that contradicted the earlier decision in Priya Distributor, which classified similar products as insecticides. The court found merit in the petitioners' argument and quashed the impugned orders and notices, affirming that the products should be classified under "insecticides."

Conclusion:
The court allowed all three writ petitions, quashing the impugned orders and notices. It held that mosquito mats/coils or refills fall under the category of "insecticides" as per the relevant notifications under section 3-A of the U.P. Trade Tax Act, 1948. The court emphasized the importance of interpreting tax statutes based on the popular meaning of terms and the understanding of those using the product, rather than scientific or technical definitions.