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2017 (4) TMI 1379 - HC - VAT and Sales TaxClassification of goods sold - rate of tax - Electrically Operated Anti-mosquito devices & repellents, Electrically Operated Anti-Mosquito Mat, Anti-Mosquito Coil, Rat Kill, Harpic , Lizol , Dettol Antiseptic - the Assessing Officer was prima-facie of the opinion that the claim of the assessee that it falls in Schedule-IV of the RVAT Act is not correct rather it falls in the residuary Schedule on which rate prescribed is 12.5% which was required to be paid and not 4% as claimed by the assessee - Held that - The entry as they stand does mention Insecticide or Pesticide as part of the Entry and it may be that these are categorized for the benefits to farmer/agriculturist who may use such products in farming to prevent Insects or germs which may damage the crop but still Insecticide/Pesticides is certainly forming part of the Entry - The Apex Court in the case of Bharat Sanchar Nigam Limited and Another Vs. Union of India and Others 2006 (3) TMI 1 - SUPREME COURT has also held that if an entry has been interpreted consistently in a particular manner for several assessment years ordinarily it would not be permissible for the revenue to depart therefrom unless there is a material change. The claim of the assessee that the products being sold by the assessee would fall in Entry 21 or 29 of the Act as the case made be is well reasoned and justified and the authorities were unjustified in taking it under the residuary Schedule (V). The claim of the assessee is just and proper. Penalty - Held that - There is no occasion of levy of penalty, even otherwise, it is a case of classification of entries which is being considered. Admittedly, the books of accounts has been maintained and such books have been accepted by the Assessing Officer, all the entries were entered in the Stock Register and there is no unrecorded sale noticed or found or adversely commented by the ld. A.O. even at the time of survey - penalty not warranted. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of "Harpic" and "Lizol" under the RVAT Act. 2. Classification of "Dettol" under the RVAT Act. 3. Justification of penalty under Section 61 of the RVAT Act. Detailed Analysis: 1. Classification of "Harpic" and "Lizol" under the RVAT Act: The primary issue was whether "Harpic" and "Lizol" should be classified under Entry 21 or Entry 29 of Schedule IV of the RVAT Act, which pertains to insecticides and pesticides, or under the residuary entry of Schedule V, which attracts a higher tax rate. The court noted that the Tax Board and lower authorities erroneously classified these products under Schedule V, failing to appreciate that these products have disinfectant and insecticidal properties. The court emphasized that specific entries should take precedence over residuary entries. It referred to the test reports from government laboratories certifying these products as insecticides/pesticides, which should not have been disregarded by the lower authorities. The court also cited various judgments, including *Ponds India Limited* and *Bombay Chemical Pvt Ltd.*, to support the classification of such products under specific entries related to insecticides and pesticides. 2. Classification of "Dettol" under the RVAT Act: The court upheld the Tax Board's classification of "Dettol" as a drug/medicine under Entry 21 of Schedule IV. It referred to the judgment in *M/s. Johnson and Johnson Ltd. vs. CTO*, which recognized "Savlon" as a drug/medicine due to its antiseptic properties. The court noted that "Dettol" has similar medicinal value and should be classified accordingly. 3. Justification of penalty under Section 61 of the RVAT Act: The court found no justification for the penalty imposed under Section 61 of the RVAT Act. It highlighted that the issue was one of classification, not evasion of tax. The books of accounts were maintained correctly, and all sales were recorded. The court referred to the judgment in *Shree Krishna Electricals vs. State of Tamil Nadu & Another*, which established that penalties are not applicable in cases of classification disputes. Consequently, the penalty was deemed inappropriate. Judgment Summary: - For "Harpic" and "Lizol": The court ruled that these products should be classified under Entry 21 or Entry 29 of Schedule IV of the RVAT Act, as they possess insecticidal and disinfectant properties. The lower authorities' decision to classify them under the residuary entry was overturned. - For "Dettol": The court upheld the classification of "Dettol" as a drug/medicine under Entry 21 of Schedule IV, aligning with its antiseptic properties. - Penalty under Section 61: The court ruled that the penalty was unjustified and should not be imposed in cases involving classification disputes. The penalty was therefore dismissed. The petitions filed by the assessee were allowed, and those filed by the revenue were dismissed, with no order as to costs.
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