2019 (10) TMI 676 - HC - VAT and Sales Tax

Tax on mosquito repellents upheld under Madhya Pradesh Entry Tax Act

The court upheld the decision to tax mosquito repellents under Schedule II of the Madhya Pradesh Entry Tax Act, 1976. It concluded that mosquito ... Classification of goods - mosquito repellent - classification under Schedule II of entry tax Act within the meaning of Section 3 (1) (b) of Madhya Pradesh Commercial Tax Act, 1994 - whether mosquito repellent is insecticide or not? HELD THAT:- The mosquito repellent has been held to be an insecticide, not only by the Division Bench of Allahabad High Court but, also by the Kerala High Court in the case of TRANSELEKTRA DOMESTIC PRODUCTS PRIVATE LIMITED VERSUS STATE OF KERALA AND OTHERS [2000 (7) TMI 945 - KERALA HIGH COURT] and by the Madras High Court in the case of TRANSELEKTRA DOMESTIC PRODUCTS PVT. LTD. VERSUS COMMERCIAL TAX OFFICER, PORUR ASSESSMENT CIRCLE, MADRAS [1992 (4) TMI 225 - MADRAS HIGH COURT]. The mosquito repellent contains an insecticide and it not only repels the mosquito but also is capable of killing the mosquito, and therefore, is covered under the entry of insecticides and pesticides. Thus, the Madhya Pradesh Commercial Tax Appellate Board was justified in coming to the conclusion that the applicant / Company was liable to be taxed on the entry of mosquito repellent under Schedule II of the Madhya Pradesh Entry Tax Act, 1976 within the meaning of Section 3 (1) b of the said Act. Appeal dismissed - decided in favor of Revenue. Issues Involved:1. Tax liability on mosquito repellent under Schedule II of the Madhya Pradesh Entry Tax Act, 1976.2. Classification of mosquito repellent as insecticide or a different commodity under the Madhya Pradesh Entry Tax Act, 1976.Issue-wise Detailed Analysis:1. Tax liability on mosquito repellent under Schedule II of the Madhya Pradesh Entry Tax Act, 1976:The core issue was whether mosquito repellent should be taxed under Schedule II of the Madhya Pradesh Entry Tax Act, 1976, as per Section 3 (1) (b). The applicant, engaged in the business of household items including mosquito repellents, contested the inclusion of mosquito repellent under the specified entry. The charging section under the Act mandates an entry tax on goods specified in Schedule II for consumption, use, or sale within a local area.2. Classification of mosquito repellent as insecticide or a different commodity:The primary contention was whether mosquito repellent qualifies as an insecticide. The assessment order against the applicant was upheld by the Deputy Commissioner and the Madhya Pradesh Commercial Tax Appellate Board. The applicant argued that mosquito repellent should not be classified as an insecticide, citing a High Court verdict distinguishing mosquito mats and coils (repellents) from insecticides (killers).Relevant Case Law and Precedents:The judgment referenced several cases to support the classification of mosquito repellents as insecticides. Notably:- Knight Queen Industries (P) Ltd. v. State of U.P.: The Allahabad High Court held that mosquito repellents are insecticides since they contain chemicals like allethrin, which are classified as insecticides under the Insecticides Act, 1968.- Transelektra Domestic Products Pvt. Ltd. v. Commercial Tax Officer: The Madras High Court and Kerala High Court similarly classified mosquito mats as insecticides, emphasizing their chemical composition and regulatory labeling under the Insecticides Act.- Sonic Electrochem & Another v. Sales Tax Officer: The Supreme Court dealt with a similar issue under the Gujarat Sales Tax Act, 1969, where a specific entry for mosquito repellent existed. The Court ruled that in the presence of a specific entry, mosquito repellent should be taxed accordingly.Court's Conclusion:The court concluded that mosquito repellents contain insecticides and are capable of killing mosquitoes. Therefore, they fall under the category of insecticides and pesticides as per Entry 20 of Schedule II of the Madhya Pradesh Entry Tax Act, 1976. The court noted that unlike the Gujarat Sales Tax Act, there was no specific entry for mosquito repellents in the Madhya Pradesh Act, reinforcing the classification under insecticides.Final Order:The Madhya Pradesh Commercial Tax Appellate Board's decision to tax mosquito repellents under Schedule II was upheld. Both questions were answered in favor of the department, affirming that mosquito repellents, mats, and coils contain insecticides and are thus covered under Entry 20 of Schedule II of the Madhya Pradesh Entry Tax Act, 1976. The tax reference was disposed of accordingly.