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2014 (6) TMI 28 - HC - VAT and Sales TaxValidity of Tribunal Order - Rate of Tax - Manufacture and sale of Lizol (floor cleaner), Harpic (toilet cleaner) and Mortein mosquito repellents Classification - Entry 88 or Entry 20 to Schedule IV Interpretation of Statute - Andhra Pradesh Value Added Tax Act, 2005 - Held That - Judgment in Nuclear Fuel Complex v. State of Andhra Pradesh 2011 (2) TMI 1253 - Andhra Pradesh High Court followed - In interpreting entries in a Sales Tax Act, resort should be not to the scientific and technical meaning of the terms or expressions used, but to their popular meaning i.e., the meaning attached to them by those dealing in them Indo International Industries v. CST 1981 (3) TMI 77 - SUPREME COURT OF INDIA - Where the definition of a word has not been given, it must be constructed in its popular sense, that sense which people conversant with the subject-matter, with which the statute is dealing, would attribute to it Asian Paints India Ltd. v. CCE 1988 (3) TMI 61 - SUPREME COURT OF INDIA - The test to such cases is How is the product identified by the class or section of people dealing with or using the product - Relying upon Atul Glass Industries (P) Ltd. v. CCE 1986 (7) TMI 90 - SUPREME COURT OF INDIA - It is, generally, by its functional character that a product is so identified. Relying upon BOMBAY CHEMICAL PVT. LTD. Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY 1995 (4) TMI 59 - SUPREME COURT OF INDIA - The disinfectant fluid produced by the appellant had the capability of killing any insects or pests - The test for classifying a tariff was reiterated - Each of the words insecticides, pesticides, fungicides or weedicides are understood both in the technical and common parlance as having broad meaning - Therefore, if any goods or items satisfy the test of being covered in either of the expression, then it is entitled to exemption - Since the goods produced by the appellant are capable of killing bacteria and fungi which too, is covered in the expressions pesticide and fungicide there appears no reason to exclude the goods from the aforesaid notification. Both SGS Laboratory, Calcutta and IICT, Hyderabad reports support the view that Harpic and Lizol are disinfectants - Applying the ratio in Bombay Chemical Pvt. Ltd. the conclusion is irresistible that Harpic and Lizol are covered in pesticides liable to tax at 4% - When the language of the taxing entry is plain, it is not for the Courts, to introduce words to uphold the assessment This Court cannot read Harpic and Lizol as being included in toilet preparations to bring them under the excluded category under entry 88(b) of IV Schedule - Even if the manufacturer obtained drug licence, for manufacturing disinfectants they do not cease to be pesticides and hence fall under in entry 20. According to G.O. No. 1615, dated 31-8-2005, all the goods in entry 20 of IV Schedule are also covered under the HSN Code (heading) 3808 except three products, namely, repellents for mosquitoes, Gibberillic acid and plant growth regulators - The product disinfectants are in sub-heading 3808.40.00 and they are not excluded from the main heading Harpic and Lizol are disinfectants capable of destroying germs and micro-organisms like Escherichia coli, Staphylococcus aureus, Enterococcus hirae, Pseudomonas aeruginosa and Candida albicans etc. - Being disinfectants they fall within the category of pesticides covered by entry 20 of IV Schedule - Even though Harpic Lizol are manufactured under drug licence issued in Form 25 issued under Rule 70 of the Drug Rules, they do not fall under entry 88, therefore, the question of these goods coming within the excluded category under entry 88(b) does not arise - Both the goods in question, therefore, are exigible to tax at 4% but not at 12.5% - The ruling of the ARA cannot be approved as affirmed by Tribunal - In all the matters, it is left open to the respective assessing officers to undertake fresh reassessment - Revision and Writ Petitions, as also miscellaneous petitions, shall stand disposed of Decided in Favour of Assessee.
Issues Involved:
1. Applicability of VAT rate on Mortein mosquito repellents, Lizol, and Harpic. 2. Interpretation of entries 20 and 88 of Schedule IV to the Andhra Pradesh Value Added Tax Act, 2005. 3. Use of HSN Codes for classification of goods. 4. Validity of orders by the Advance Ruling Authority (ARA) and Sales Tax Appellate Tribunal (STAT). Issue-wise Detailed Analysis: 1. Applicability of VAT Rate: M/s. Reckitt Benckiser (India) Limited sought clarification on the VAT rate applicable to their products: Mortein mosquito repellents, Lizol, and Harpic. The ARA initially ruled that Mortein is taxed at 12.5% under Schedule V, as it falls under HSN Code 3808.10.91, while Harpic and Lizol were also taxed at 12.5%, not recognized as disinfectants under entry 20 of Schedule IV. 2. Interpretation of Entries 20 and 88: Entry 20 includes pesticides, insecticides, fungicides, herbicides, weedicides, and other plant protection equipment but specifically excludes mosquito repellents. Entry 88 includes drugs and medicines but excludes medicated goods, cosmetics, toilet preparations, and mosquito repellents. The court emphasized that usual methods for interpreting tax entries should consider the popular meaning and functional utility of the products. 3. Use of HSN Codes: The court discussed the application of HSN Codes as per G.O.Ms. No. 1615, which directed the use of HSN Codes for classifying goods under Schedule I and IV. The HSN Code 3808 includes various sub-headings, including insecticides, fungicides, herbicides, and disinfectants. The court found no inconsistency between entry 20 and HSN Codes for pesticides and insecticides, concluding that all pesticides under entry 20 are taxed at 4%. 4. Validity of Orders by ARA and STAT: The court rejected the ARA and STAT's classification of Harpic and Lizol under entry 88(b) and their subsequent taxation at 12.5%. The court relied on test reports proving that Harpic and Lizol are disinfectants capable of killing germs, thus classifying them as pesticides under entry 20, taxable at 4%. The court also noted that even though these products are manufactured under a drug license, they do not fall under entry 88. Conclusion: The court concluded that Harpic and Lizol are disinfectants and fall under the category of pesticides as per entry 20 of Schedule IV, taxable at 4%. Mortein mosquito repellents are taxed at 12.5% under Schedule V. The orders by ARA and STAT were set aside, and the respective assessing officers were directed to undertake fresh reassessment in light of this judgment. The writ petitions and tax revision cases were disposed of accordingly.
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