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TMI Blog2014 (9) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... y including bacteria and germs within the meaning of "pests", Harpic and Lizol which are disinfectants would be clearly covered by the item "pesticide", in which event, the petitioner would be liable to be assessed only at the rate of four per cent. "Harpic" and "Lizol" which are disinfectants being "pesticides", in terms of the decision of the honourable Supreme Court in Bombay Chemical Private Limited [1995 (4) TMI 59 - SUPREME COURT OF INDIA] would be covered by entry No. 19 of Part A of the Second Schedule to the Assam VAT Act and chargeable at four per cent. Whether Dettol is an item of medicament to be treated as a drug and medicine as contended by the petitioner or is to be treated as "cosmetic" or "toilet preparation" because of its general attributes and would stand excluded from entry No. 21 of the Fourth Schedule in terms of the Explanation to it - Held that:- Revenue does not seem to controvert or deny the use of Dettol for first aid, nappy wash, shaving, uses in personal hygiene, surgical, medical, midwifery and the like. It cannot be denied that use of Dettol for the purposes mentioned above primarily to prevent infections, which is also admitted by the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to be assessed as an item under entry 21 of the Fourth Schedule to the Assam VAT Act and will not fall within the excluded category under the Explanation. - Decided in favour of assessee. - W.A. Nos. 15542 of 2011 - - - Dated:- 17-9-2012 - GOEL A.K. C.J. AND KOTISWAR SINGH N., J. For the Appellant : N. Venkataraman, Senior Advocate, Sriyuths V Lakshmi Kumaran, V. Sridharan, Shivadass, Harish R, Syed Peeran and B.G. Chidananda Urs, For the Appellant : N.R. Bhaskar, Senior Central Government Standing Counsel, Ashok Haranahalli, Senior Advocate and Special Counsel and K. M. Shivayogi Swamy, High Court Government Pleader, The judgment of the court was delivered by N. KOTISWAR SINGH J.- By this batch of writ petitions, W.P. (C) No. 1377 of 2010, W.P. (C) No. 1378 of 2010, W.P. (C) No. 1379 of 2010 and W.P. (C) No. 1377 of 2010, the petitioner-company, registered under the Companies Act and engaged in manufacturing, sale and marketing of various household products including insecticides such as Mortein mosquito coils, mats, vaporizers and disinfectants like Harpic and Lizol dispirit and Dettol antiseptic liquid, cherry blossom shoe polish, etc., has challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a toilet article and does not come under the exclusion Explanation, and as such taxable at the rate of four per cent. According to the Revenue, the said products not being specifically covered either under entry 19 or 21 as stated above, would be covered by the residuary entry, viz., entry No. 1 in Fifth Schedule to the Assam Value Added Tax Act which reads as follows: All other goods not covered by First, Second, Third and Fourth Schedule. The petitioner states that petitioner had filed its returns under the assessment category as provided under the Rules in respect of the assessment year 2005-06 and had been collecting tax at four per cent on the aforesaid products from its dealer/distributors and it duly deposited the same to the authorities. However, after more than four years of filing of final return by the petitioner for the assessment year 2005-06, on July 4, 2009, respondent No. 3 issued a notice to the petitioner directing the petitioner to pay VAT at 12.5 per cent on the aforesaid products, Harpic, Lizol and Dettol. Similar notices were issued in respect of the assessment years 2006-07, 2007-08 and 2008-09. The petitioner on receipt of the said no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting the claim of the petitioner that the aforesaid items fall under entries No. 19 and 12, respectively, as stated above. As we proceed to deal with the issues raised herein, we have kept in mind what the honourable Supreme Court had observed in Ponds India Ltd. (Merged With H. L. Ltd.) v. Commissioner of Trade Tax, Lucknow [2008] 15 VST 256 (SC); [2008] 8 SCC 369, while dealing with a similar issue, that such a question has been considered from various perspectives. The honourable Supreme Court held in the said case that (pages 269 and 270 in 15 VST): 35. . . . While interpreting an entry in a taxing statute, the court's role would be to consider the effect thereof, upon considering the same from different angles. 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. ... 38. Whether a product would be a drug or a cosmetic sometimes poses a difficult question and, thus, answer thereto may not be easy. For the said purpose, the court may not only be required to consider the contents thereof, but also the history of the entry, the purpose for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that the brochure indicates the uses for first aid, bathing, nappy wash, shaving, and other uses in personal hygiene, surgical, medicinal, midwifery and the like. Referring to the Explanation given to entry 21 of the Fourth Schedule, which provided that the drugs and medicines shall not include products capable of being used as cosmetics and toilet preparations including tooth paste, tooth powder, cosmetics, toilet articles and soaps and also holding that the product Dettol according to the own admission of the dealer was meant for diverse uses like bathing, shaving, nappy wash, first aid, personal hygiene, surgical, medical, midwifery, and the like, cannot fall within the item drug and medicines. The Revenue also relied upon the decision rendered by the Kerala High Court in Reckitt Benckiser (India) Ltd. v. Commissioner, Commercial Taxes [2009] 22 VST 459 (Ker) involving the same dealer where the Kerala High Court had held that the products Harpic and Lizol do not fall under the description of pesticides or germicides. It was also held that the dominant use of these products is of stain removing and deodorising and surface cleaning. It was also held that Dettol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Forests, Government of India (under Environment Protection Act, 1986), New Delhi, to substantiate the contention that Harpic is a disinfectant. The aforesaid contention of the petitioner that Harpic is a disinfectant was not doubted or contradicted by the Revenue. Similarly, the primarily disinfectant quality of Lizol , supported by expert opinion also remained unrebutted. The petitioner also contended that similarly, Lizol has the active ingredient benzalkonium chloride solution I.P. and other ingredients fragrance-BBA P 2062 M, propylene glyeel I.P, sodium bicarbonate I.P, tartazine yellow, fatty alchocol ethoxylate, lsoprpyl alcohol I.P. and other chemicals, used for disinfecting floor, cooking platform, sink and similar hard surfaces. It is effective in killing micro-organisms like S. Aurus E. Coli (MTCC 1687) Pseudomonas Aeruginosa (MTCC-741) which are generally found on hard surfaces like floors that cause urinary tract infections, respiratory system infections, dermatitis, soft tissue infections, bone and joint infections, infections to patients with severe burns, cancer and AIDS, etc. Accordingly, it was submitted that the petitioner, through the product lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products would be reduced to mere cleaning agents and not different from any other cleaning solutions. It may be also noted that stain caused on the toilet or floor is because of dirts which carry germs and bacteria. Therefore, removing the stain and cleaning of floor or toilet is also for the purpose of sanitising the same which is most effective with the disinfectant component of these liquids. Therefore, in any event, whether used for removing stains or cleaning, the sanitising aspect cannot be ignored. Thus, what stands out in respect of these products is the disinfectant quality these products possess. Therefore, the most distinguishable attribute of these products is the disinfectant quality. The compositions of the products show that these are meant to be disinfectants, to kill germs and bacteria, which has not been seriously contested. The expert opinions by way of certificates from various individuals, organisation, relied upon by the petitioner have not been refuted or contradicted by the respondents. In Ponds India Ltd. case [2008] 15 VST 256 (SC); [2008] 8 SCC 369, the honourable Supreme Court held that while deciding the issue whether any particular item would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Volume 4, it is explained to mean, 'any substance, such as creosote or alcohol, applied to inanimate objects to kill micro-organisms. Disinfectants and antiseptics are alike in that both are germicidal, but antiseptics are applied primarily to living tissue. The ideal disinfectant would rapidly destroy bacteria, fungi, viruses and protozoans, would not be corrosive to surgical instruments, and would not destroy or discolour materials on which it is used'. It thus cannot be disputed that a disinfectant is also a killing agent. Even the Tribunal found that the goods produced by the appellant which contained high boiling tar acid kill the bacteria in the gutters and the bathrooms. In the report of the Deputy Chief Chemist it was mentioned that all above products numbering 14 were formulations containing high boiling tar acid as the principal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose products which are used for killing insects by use of substances such as high boiling tar acid have the same characteristic as 'pesticide'. Accordingly, the honourable Supreme Court decided the issue before it by holding that (page 343 in 99 STC): 10. . . . the goods produced by the appellant from phenolic compounds and high boiling tar acid being disinfectant fluids which have the capability of killing bacteria which are nothing but pests, the appellant was entitled to exemption under item 18 of the notification issued in 1978. . . What can be culled from the aforesaid decision is that disinfection fluids which have the capability to kill bacteria, which are also treated as pests; would be considered pesticide . From the above, what is also clearly evident is that the Supreme Court gave a broader meaning to pests to include bacteria and germs thus bringing disinfectant within the meaning of pesticide. If the word pests is to be given a restrictive meaning by limiting to the dictionary meaning as had been done by the Revenue in the impugned order, disinfectants which primarily kills germs and bacteria cannot be considered pesticides . However, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol kills germs and prevents illness and it is squarely covered by definition of drug, as per section 3(b) of the Drugs and Cosmetics Act, 1940 and it cannot be treated as a cosmetic or toilet preparation for the purpose of bringing under the Explanation of entry 21 of the Fourth Schedule. In fact, Dettol can be sold only under a licence under the Drugs and Cosmetics Act, 1940 and the petitioner had obtained a licence from the authority for dealing with Dettol under the Drugs and Cosmetics Act, 1940. The petitioner also stated that Dettol is used as an antiseptic liquid in hospitals and homes and it is used prior to and after surgery, for its well known therapeutic and prophylactic properties. Therefore, what is to be considered by us in respect of Dettol is, whether it is an item of medicament to be treated as a drug and medicine as contended by the petitioner or is to be treated as cosmetic or toilet preparation because of its general attributes and would stand excluded from entry No. 21 of the Fourth Schedule in terms of the Explanation to it as has been held by respondent No. 3. In undertaking this exercise, we may first acquaint ourselves as to what is meant by dru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstance intended to cleanse, improve or alter the complexion, skin, hair or teeth, and includes deodorants and perfumes. Section 3(aaa) of the Drugs and Cosmetics Act, 1940 defines cosmetic as follows: 3(aaa) 'cosmetic' means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic. From the above definitions of drug and medicinal preparations provided under the Drugs and Cosmetics Act, 1940 and the Medicinal and Toilet Preparations (Excise Duty) Act, 1955, one of the attributes of a substance to qualify to be considered as a drug is the use for human beings for the purpose of prevention of disease. The use of a drug is not only for cure of any disease or illness but for prevention also and both these curative and preventive aspects have been incorporated in the definition of drug in the aforesaid Acts. Therefore, if the purpose of a substance is to prevent disease, unless otherwise provided, it can be considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of view, it cannot also be considered a toilet preparation in terms of the definition given in the Medicinal and Toilet Preparations (Excise Duty) Act, 1955. Though it may be kept in the toilet, it is not used on human body to improve or alter the complexion, skin, hair or teeth. It is also not used as deodorant or perfume. Of course, it is also used for cleansing purpose, but only because of its prophylactic qualities, i.e., to cleanse any wound, or minor injuries or cuts, etc. In the definition of cosmetic and toilet preparations as discussed above, the element of any medicinal quality, either for treatment or prevention of disease is conspicuously absent. Therefore, we are of the view that Dettol cannot be considered either as a cosmetic or a toilet preparation by applying the common parlance test and users test so as to bring it within the excluded items as per Explanation to entry No. 21 of the Fourth Schedule to the Assam VAT Act. It has been also noted that Dettol is manufactured and sold by the petitioner under a licence issued under the Drugs and Cosmetics Act, 1940 and the Drug Price Control Order applies to Dettol also. These are facts which had been ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties cannot be disputed and the fact that it is used for surgical, medical and midwifery also cannot be disputed. Though the aforesaid qualities had been mentioned in the judgment, there is no reference to such while giving the finding that it is not a medicament. In view of use of Dettol for preventing disease or infections due to cuts, abrasions to body, etc., it cannot be said that it does not have any prophylactic qualities. Further, the Kerala High Court also had held that it is a product generally to maintain hygiene. Dictionary meaning of hygiene given in Oxford Advanced Learner's Dictionary, New Eighth Edition, is as: the practice of keeping yourself and your living and working areas clean in order to prevent illness an disease. Maintenance of hygiene is possible only when such substance is used to prevent illness or disease. Therefore, if Dettol is used for maintaining hygiene, it cannot be said that it does not have prophylactic qualities and its medicinal value cannot be ignored. Therefore, it is difficult to hold the view that Dettol is not a medicament. Hence, we respectfully are not able to agree with the conclusions reached by the Kerala High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Red Book (Import Trade Control Policy of the Ministry of Commerce) under item 150, in section II, which relates to 'rubber, raw and gutta percha, raw', synthetic latex including vinyl pyridine latex and copolymer of styrene butadiene latex are specifically included under the sub-head 'synthetic rubber'. We do not see any reason why the same policy could not have been followed in the ICT book being complementary to each other. When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause. The question of competition between two rival classifications will, however, stand on a different footing. 36. It is not for the court to determine for itself under article 136 of the Constitution under which item a particular article falls. It is best left to the authorities entrusted with the subject. But where the very basis of the reason for including the article under a residuary head in order to charge higher duty is foreign to a proper determination of this kind, this cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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