2014 (8) TMI 1108 - HC - VAT and Sales Tax

Insecticides - classification - whether G.K.Aerosol, Hit Aerosol, Hit Rat and Hit Line are Insecticides falling under Entry 23 of Schedule-III of Karnataka Value Added Tax Act, 2003? - taxable at 4% or 12.5%? - Held that - Where a word has a scientific or technical meaning and also an ordinary meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless contrary intention is clearly expressed by the legislature. The products, which are in dispute are not mosquito repellants nor mosquito coils much less phenyl, liquid toilet cleaners or floor cleaners. It is a killer for crawling, flying insects and rats. An insecticide is a substance used to kill insects and rodenticide to kill rodents. They include ovicides and larvicides used against insect eggs and larvae respectively. They are used in agriculture, medicine, industry and by consumers. The aforesaid product provides an instant kill solution to all insect and rodent problems. Depending on the nature of the problem, a specialist product is available to deal with it. HIT comes in a specialist Flying insect killer format to provide an instant solution to mosquito and fly problem, a specialist crawling insect killer format to ensure a sustained roach free and ant free house and a multi insect killer format, if a single solution is needed. Therefore, HIT Aerosol is meant for flying insects, which kills both flies and mosquitoes. HIT Aerosol for crawling insects eliminates cockroaches for six weeks. It has an applicator which kills hidden cockroaches. HIT Aerosol for crawling and flying insects is a multi insect killer for crawling and flying insects and therefore, all these products fall within the word insecticide . It is not a repellant. Incidentally, it also kills mosquitoes. What is excluded from the ambit of insecticide is mosquito repellants and not mosquito killers. Hit Rat are for killing rodents and Hit Line are meant for killing crawling insects. Revision petition dismissed - decided against Revenue.

Summary

Issues Involved:

1. Classification of goods under Entry 23 of Schedule-III of the Karnataka Value Added Tax Act, 2003.
2. Interpretation of the exclusion clause and the phrase "and the like" in Entry 23.

Issue-wise Detailed Analysis:

1. Classification of Goods:

The primary issue revolves around whether the goods sold by the respondent, namely G.K.Aerosol, Hit Aerosol, Hit Rat, and Hit Line, qualify as insecticides under Entry 23 of Schedule-III of the Karnataka Value Added Tax Act, 2003, and are thus taxable at 4%. The Tribunal held that these goods are indeed insecticides containing chemicals capable of killing mosquitoes, rats, cockroaches, etc., and thus fall under Entry 23, making them assessable to tax at 4%. The State challenged this finding, asserting that these goods should be taxed at 12.5% as they are used for non-agricultural or non-horticultural purposes and fall under the exclusion clause.

2. Interpretation of Exclusion Clause and "and the like":

The State argued that the exclusion clause in Entry 23, which includes phenyl, liquid toilet cleaners, floor cleaners, mosquito coils, mosquito repellants, and the phrase "and the like," should apply to the disputed goods, making them taxable at 12.5%. The principle of "ejusdem generis" was invoked, suggesting that the phrase "and the like" should cover all similar goods used for non-agricultural or non-horticultural purposes.

Conversely, the respondent contended that the goods in question are insecticides as per the legislative intent, and the exclusion clause specifically targets mosquito repellants, not mosquito killers. The legislative history was examined, showing that mosquito repellants were previously treated as separate from insecticides and taxed differently. The amendment to Entry 23 was made to clarify this distinction, excluding only mosquito repellants and not all insecticides used for non-agricultural purposes.

Judgment Analysis:

The court analyzed the legislative history and the specific wording of Entry 23. It noted that the exclusion clause was intended to exclude specific items like mosquito repellants, phenyl, and toilet cleaners, which do not kill insects but act as repellants or cleaners. The phrase "and the like" was interpreted to refer to items similar to those explicitly mentioned, not to broaden the exclusion to all insecticides used for non-agricultural purposes. The court emphasized that the goods in question are insecticides designed to kill insects and rodents, not repellants, and thus fall within the taxable category at 4%.

Conclusion:

The court upheld the Tribunal's decision, affirming that the goods sold by the respondent are insecticides under Entry 23 of Schedule-III of the Karnataka Value Added Tax Act, 2003, and are taxable at 4%. The substantial questions of law were answered in favor of the respondent, and the State's revision petitions were dismissed.