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TMI Blog2014 (6) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufacturer) is engaged in the manufacture and sale of Lizol (floor cleaner). Harpic (toilet cleaner) and Mortein mosquito repellents. Whether these goods are exigible to value added tax @ 4% under entry 20 of Schedule IV to the Andhra Pradesh Value Added Tax Act, 2005 (the VAT Act)? This question falls for consideration in the tax revision case filed under Section 34 of the VAT Act and in all the writ petitions filed under Article 226 of the Constitution of India. 2. The essential fact of the matter for proper appreciation of the issue is as follows. Mortein mosquito repellents, Lizol and Harpic are statedly household products manufactured by M/s. Reckitt Benckiser (India) Limited having registered office at Okhla Industrial Estate, New Delhi and branches all over India. After introduction of the VAT, they made an application under Section 67 of the VAT Act to the Advance Ruling Authority (ARA) seeking clarification as to the rate of tax applicable to household insecticides and disinfectants. Along with their application, they submitted copies of insecticides licence. CIB Registration Certificates, Write up published by WHO covering mosquito coil mat vapouriser and liquid va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The manufacturer, therefore, filed two writ petitions being W.P. Nos. 143 and 145 of 2011 assailing the order of the STAT and also seeking declaration that Harpic and Lizol are exigible to VAT @ 4%. Thus. TREVC. No. 10 of 2007 and W.P. Nos. 143 and 145 of 2011 are filed by the manufacturer assailing the order of the STAT confirming the decision of ARA. W.P. Nos. 2652, 18288 and 23875 of 2009, W.P. Nos. 2443, 7202 and 2408 of 2010 are filed assailing the order of the ARA for declaration as above. W.P. No. 11613 of 2009, W.P. Nos. 31010, 31012, 14521, 14522, 14523, 14525, 14526, 14530, 27457, 27519, 27470 of 2011 are filed seeking a declaration that the goods are liable to tax @ 4% under entry 20 to Schedule IV to the VAT Act. The writ petitions being W.P. Nos. 4033, 11272, 11301 and 11703 of 2009 are filed by the manufacturer or the distributors/dealers challenging assessment orders as well as orders imposing penalty, where the officials applied rate of tax at 12.5% under Schedule V. While doing so, needless to mention, the assessing officers relied on the ruling of ARA. In W.P. No. 27470 of 2011, M/s. Raghu Agencies, a dealer seeks a declaration that Mortein spray and Mortein Rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand excluded from entry 88. For this reason these products were classified under entry 88(b) attracting tax @ 12.5% under residuary schedule. HSN Code an Interpretation tool 9. After commencement of the VAT Act, with a view to remove difficulties and clarify the scope and application of thirteen (13) entries under Schedule-I and 54 entries under Schedule IV of the VAT Act, the Government of Andhra Pradesh (GoAP) issued clarification about the applicability of HSN Code followed and applied under the Central Excise Tariff Act, 1985. Initially the Government issued two orders in G.O.Ms. No. 398, dated 31-3-2005 followed by G.O.Ms. No. 490, dated 15-4-2005. A few months thereafter the Government issued G.O.Ms. No. 1615, dated 31-8-2005 in supercession of two earlier orders directing to apply HSN Code in respect of Schedule-I and Schedule-IV as specified in Annexures-I and II to the said G.O. The relevant portion in Annexure-II of the said order reads as under. Sl. No. Entry No. in Schedule Description of Goods HSN Code 1 to 13 are omitted here as not relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items the first four-digits of which correspond to that number; and sub-heading in respect of goods means and includes the tariff provisions accompanied by a six-digit number and includes all tariff items the first six-digits of which correspond to that number. Here we may quote the classification of tariff item (HSN Code 3808 with all its sub-headings). 3808 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly-papers) 3808 10 Insecticides : --- Aldrin, aluminium phosphate, calcium cyanide, chlordane 3808 10 11 Aldrin Kg. 16% 3808 10 12 Aluminium phosphate (for example phostoxin) Kg. 16% 3808 10 13 Calcium Cyanide Kg. 16% 3808 10 14 Chlordane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phenate (santobrite) Kg. 16% 3808 20 30 Thiram (tetramethyl thiuram disulphide) Kg. 16% 3808 20 40 Zineb Kg. 16% 3808 20 50 Copper oxychloride Kg. 16% 3808 20 90 Other Kg. 16% 3808 30 Herbicides, anti-sprouting products and plant-growth regulators 3808 30 10 Chloromethyl phenozy acetic acid (M.C.P.A) Kg. 16% 3808 30 20 2 : 4 Dichlorophenozy acetic acid and its esters Kg. 16% 3808 30 30 Gibberellic acid Kg. 16% 3808 30 40 Plant-growth regulators Kg. 16% 3808 30 50 Weedicides and weed killing agents Kg. 16% 3808 30 90 Other Kg. 16% 3808 40 00 Disinfectan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the procedure stipulated in section 79 of the VAT Act, or by way of a legislative exercise, would it be valid and not by mere issuance of a notification under section 76(2) of the VAT Act. It is not even the case of the respondents that the notification in G.O.Ms. No. 1615 is a legislative exercise. The power to remove difficulties under section 76(2) of the VAT Act, by issuance of an executive/administrative order, can neither nullify nor circumscribe entries in the Schedules to the VAT Act. Reliance placed by the respondent-assessing authority on the HSN Codes to restrict the scope of entry 2 of the First Schedule to the VAT Act is, therefore, illegal... 14. The Special Counsel made an attempt to impress upon us to ignore HSN Codes especially 3808 as per G.O.Ms. No. 1615. We are not able to accept the submission. We do not find any inconsistency between entry 20 of IV Schedule and HSN Codes for the pesticides and insecticides included in tariff item 3808 and of its sub-headings. From this, we may conclude that all pesticides and insecticides among others mentioned in entry 20 including all other products falling within the classification pesticides attract tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item [O.K. Play (India) Ltd. v. CCE - (2005) 2 SCC 460; A. Nagaraju Bros. v. State of A.P. - (1994) Supp (3) SCC 122]. Different tests are laid down for interpretation of an entry in a taxing statute namely, dictionary meaning, technical meaning, user s point of view, popular meaning, etc. [Ponds India Ltd.]. 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) 2 SCC 528; Shri Bharuch Coconut Trading Co. v. Municipal Corpn., Ahmedabad - (1992) Supp (1) SCC 298; Ponds India Ltd.]. 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 [CIT v. Taj Mahal Hotel - (1971) 3 SCC 550; Asian Paints India Ltd. v. CCE - (1988) 2 SCC 470; Ponds India Ltd.]. The test commonly applied to such cases is : How is the product identified by the class or section of people dealing with or using the product? That is a test whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when a question arises whether a particular goods is covered in any category or not, it has to be examined if it satisfies the characteristic which go to make it a goods of that category. And whether in trade circle it is understood as such and if it is a goods of technical nature then whether technically it falls in the one or the other category. Once it is found that a particular goods satisfies the test then the issue which arises for consideration is whether it should be construed broadly or narrowly. 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. The broad and basic characteristic for exemption under the notification is that the goods must have the property of killing germs and bacteria, insects or pests and it should be understood in the common parlance as well as being covered in one of the broad categories mentioned in the notification. Since the goods produced by the appellant are capable of killing bacteria and fungi which too, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intervals (5 - 30 min) against the test organisms; Escherichia coli, Staphylococcus aureus, Enterococcus hirae, Pseudomonas aeruginosa and Candida albicans. Both the products are deemed to have passed the test. INTERPRETATION OF THE RESULTS LIZOL supplied by M/s. Reckitt Benckister (India) Ltd., Gurgaon-122 016 is effective and could be used in the control of common household microorganisms. The product when tested against this standard passed the test and can be described as DISINFECTANT for surfaces. (emphasis supplied) 22. We are not persuaded to take a different view ignoring the test report of IICT as above. In Bombay Chemical Pvt. Ltd. the Supreme Court ruled that a disinfectant which is used for killing germs may be broadly covered in the word pesticide . The relevant observations are as follows. Disinfectant is defined in Webster Comprehensive Dictionary as a substance used to disinfect or to destroy the germs of infectious and contagious diseases . In the Concise Oxford Dictionary of Current English, disinfectant is defined as a commercially produced chemical liquid that destroys germs . In Encyclopaedia Britannica, Vol. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as high boiling tar acid have the same characteristic as pesticide . (emphasis supplied) 23. The Special Counsel for CT would also rely on Bombay Chemical Pvt. Ltd. to submit that even according to the manufacturer Harpic and Lizol only control the germs and in the absence of such capability to kill the germs they cannot be classified as disinfectants. We have no hesitation in rejecting the submission. We have referred to the test report for SGS Laboratory, Calcutta and IICT, Hyderabad. Both these 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%. 24. The Special Counsel nextly submits that Harpic and Lizol are manufactured under licence under the Drugs Act; and they are therefore drugs falling under entry 88 but being toilet preparations stand excluded therefrom. A careful reading of entry 88(b) would show that Harpic and Lizol would be odd men out among the goods mentioned in the entry. The said entry speaks of only the products capable of being used as cosmetics and toilet preparat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a manufacturer produces any disinfectant fluids, they are basically intended for prevention of disease by destroying and/or controlling bacteria and micro-organisms that are unusually present. That may be one reason why even under the Drugs and Cosmetics Rules, 1945 (the Drugs Rules) the disinfectants are placed in Schedule-K in respect of which they were exempted from the provisions of Chapter IV and the Rules made thereunder. Harpic and Lizol are the products/goods sold even in general stores and on the counters of departmental stores. We therefore reject the submission of the State that Harpic and Lizol fall under entry 88 merely because they are manufactured under drug licence. 27. Thus to sum up on this aspect we hold that 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. We also conclude that 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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