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2005 (11) TMI 448
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....952 ". Parties have exchanged pleadings by filing counter-affidavit and rejoinder affidavit and there is no dispute on relevant facts. Learned counsel for the parties are agreed that the question raised for adjudication in these writ petitions is the same and all the writ petitions may be decided by a common judgment. 3.. For convenience, we will wherever necessary, refer to the facts of the case of Writ Petition No. 1214 of 2005 [Knight Queen Industries (P) Ltd. v. State of U.P. through Institutional Finance Secretary, U.P. Shasan, Lucknow] for the sake of convenience. Case of the petitioners: Contention of the petitioners is that in view of the notifications in question the goods manufactured and marketed by them, namely-"Mosquito mat/coil or refill", fall under the goods covered by entry "pesticides and insecticides" and, therefore cannot be subjected to tax as an unclassified item under section 3-A(1)(c) of the Act. 4. The dispute is with respect to articles sold on or before September 1, 2001 and relates to the assessment years 1998-1999, 1999-2000, 2000-2001, 2001-2002 (up to August 31, 2001). 5. In order to appreciate the controversy, it may be useful to first....
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....the State Government from time to time under section 3A of the Act which have been filed as annexures 9, 10, 11 and 12 to the writ petition. (ii) English Translation of Government Notification No. T.I.F.-2-23761X19(251)197-U.P. Act-15-48-Order-98, dated 23rd November, 1998. In exercise of the powers under clause (e) of sub-section (1) of section 3-A of the Uttar Pradesh Trade Tax Act, 1948 (U.P. Act No. XV of 1948) read with section 21 of the Uttar Pradesh General Clauses Act, 1904 (U.P. Act No. 1 of 1904) and in supersession of all previous notifications issued in this behalf, the Governor is pleased to declare that with effect from 1st December, 1998, the turnover in respect of the goods mentioned in column 2 of the List below shall be liable to tax at the point of sale specified in column 3 of said List at the rate specified against each in column 4 thereof. List M stands for sale by the manufacturer in Uttar Pradesh I stands for sale by the importer in Uttar Pradesh 1-62... 63. Pesticides and insecticides M or I 5% 64-70...." (iii) English translation of Kar Avam Nibandhan Anubhag-2, Government Notificatio....
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....on of the licence issued under section 9(4) of the Insecticide Act, 1968 have been placed before us. The said certificate has been issued by Government of India, Ministry of Agriculture (Department of Agriculture and Co-operation) Directorate of Plant Protection, Quarantine and Storage. A perusal of it leaves no scope of doubt that allethrin which is used in the product sold by the petitioners is "insecticide". (iv) Insecticides Rules, 1971 provides for the manner of labelling. Relevant rule 19(4) of the Rules read- "19(4) The upper portion of square, referred to in sub-rule (3) shall contain the following symbols and warning statements: (i) insecticides belonging to category I (extremely toxic) shall contain the symbol of a skull and cross-bones and the word "poison" printed in red; (a) 'KEEP OUT OF THE REACH OF CHILDREN'; (b) 'IF SWALLOWED OR IF SYMPTOMS OF POISONING OCCUR, CALL PHYSICIAN IMMEDIATELY'. (ii) insecticides in category II (highly toxic) shall bear the word 'poison' printed in red and the statement 'keep out of reach of children', shall also appear on the label at suitable pla....
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....ated by Sri S.P. Kesarwani, Advocate, representing the respondents on the basis of the pleadings contained in paragraph 7 of the counter-affidavit, sworn by Rajesh Kumar Jain, Deputy Commissioner (Assessment), Ghaziabad, relevant paragraphs of which are reproduced: "7 ...In the instant writ petition the petitioner has taken the stand that mosquito repellent coil and mats sold by him are insecticide and not the mosquito repellent (unclassified item). The following facts and evidences available on record clearly demonstrate that the mosquito repellant coil and mats are not insecticides or pesticides but repellent and thus are unclassified item liable to tax at 10 per cent: (a) The petitioner applied for registration under section 8A of the Act in 'form 14' wherein in column 7 he has mentioned the commodity traded as 'mosquito repellent mats/coils etc.'. Similarly under section 7 of the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act') the petitioner applied for registration in 'form A' wherein in column 16 he has mentioned the purchase and sale of 'mosquito repellent mats/coils, etc.'. The registration....
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....lent mats/coils, etc.' were imported by the petitioner from outside the State of U.P. through 'declaration form for import' under the Act (form-31) and in all such forms the petitioner disclosed the commodities imported by him for sale in the State of U.P. as 'repellents' and not insecticides and pesticides. True copies of declaration form No. F/FF-0423785 (relating to assessment year 1998-99), No. F/FF-0423788 (relating to assessment year 1999-2000) and form No. F/FF-4179800 (relating to assessment year 2000-01) are being annexed to this counter-affidavit and are collectively marked as annexure No. CA-15. (e) The petitioner has always been selling the commodities in question as 'repellent' and not as insecticides or pesticides and the buyers has always been purchasing the aforesaid commodities as 'repellents' and not insecticides or pesticides which fact is further evident from the own invoices of the petitioner. True copies of invoice No. 297 dated March 14, 2001, invoice No. 308 dated March 16, 2001, invoice No. 314 dated March 17, 2001, invoice No. 330 dated March 23, 2001 and invoice No. 332 dated March 23, 2001 are being annexed to....
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....n Industries pursuant to the notice issued under section 21 of the Act, the assessment order was made on August 30, 2005 during the pendency of the petition and apart from the fact that it has not been challenged, an appeal lies against the said order and so the petition should not be entertained. (iii) Learned counsel for the respondents has also referred to the statement of Pawan Kumar Agrawal recorded on December 15, 2004 wherein he admitted that the products of his company was used for repelling mosquito, and as such it is a mosquito repellent and the same was subjected to tax treating it to be a product against "insecticides and pesticides", prior to September 1, 2001. REASONS: 8. Learned counsel for both the parties have placed reliance on a number of decisions of the honourable Supreme Court and various High Courts including our court in support of their respective contentions. We consider it proper to first examine these decisions in order to find out whether mosquito mats, coils and refills would be "insecticides". 9. In Sonic Electrochem v. Sales Tax Officer [1998] 111 STC 181; STI 1998 SC 63 the honourable Supreme Court examined whether Jet mat would co....
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....nt. We are also in agreement with the submission of Mr. Lakshmikumaran that merely because the percentage of medicament in a product is less, does not ipso facto mean that the product is not a medicament. Generally the percentage or dosage of the medicament will be such as can be absorbed by the human body. The medicament would necessarily be covered by fillers/ vehicles in order to make the product usable. It could not be denied that all the ingredients used in Banphool oil are those which are set out in the Ayurveda text books. Of course, the formula may not be as per the text books but a medicament can also be under a patented or proprietary formula. The main criteria for determining classification is normally the use it is put to by the customers who use it. The burden of proving that Banphool oil is understood by the customers as an hair oil was on the Revenue. This burden is not discharged as no such proof is adduced. On the contrary we find that the oil can be used for treatment of headache, eye problem, night blindness, reeling head, weak memory, hysteria, amnesia, blood pressure, insomnia, etc. The dosages required are also set out on the label. The product is registered w....
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....ucts. The identity of an article is associated with its primary function and utility. The names of certain products have functional association in the mind of the consumers. There is a mental association in the mind of the consumer in respect of certain products keeping in view the utility of the product and also the reputation the name of the product has acquired in the market and among the consumers. 'Broadcast television receiver sets' and the 'projection television sets' are two entirely different products and the consumers in this country, as at present, do not identify these two as one and the same product. When you go to the market to buy a 'television set' you mean the conventional 'Broadcast Television Receiver set' and the dealer will never understand you to mean the 'Hotline Projector Vision 203 etc'." 15. In Atul Glass Industries (P.) Ltd. v. Collector of Central Excise [1986] 63 STC 322; (1986) 25 ELT 473 (SC) the Supreme Court observed as follows: "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 which is attr....
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.... also the view expressed in Geep Flashlight Industries Ltd. v. Union of India [1985] 22 ELT 3. Where the goods are not marketable that principle of construction is not attracted. Indian Aluminium Cables Ltd. v. Union of India (1985) 3 SCC 284; [1985] 21 ELT 3 (SC). The question whether thermometers, lactometers, Reported in [1987] 64 STC 180 (SC). syringes, eye-wash glasses and measuring glasses could be described as 'glassware' for the purpose of the Orissa Sales Tax Act, 1947, was answered by the Orissa High Court in State of Orissa v. Janata Medical Stores [1976] 37 STC 33 in the negative. To the same effect is the decision of this Court in Indo International Industries v. Commissioner of Sales Tax, U.P. [1981] 47 STC 359 (SC); [1981] 3 SCR 294; [1981] 8 ELT 325 (SC), where hypodermic clinical syringes were regarded as falling more accurately under the entry relating to 'hospital equipment and apparatus' rather than under the entry which related to 'glasswares' in the U.P. Sales Tax Act. It is pointed out that glass mirrors have been classified by the Indian Standards Institution as 'glass and glassware' in the glossary of terms prepared ....
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....6. Reliance was placed on the dictionary meaning of the word 'vegetable' as given in Shorter Oxford Dictionary where the word is defined as 'of or pertaining to, comprised or consisting of, or derived, or obtained from plants or their parts'. But this word must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of every day use it must be construed in its popular sense meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. It is to be construed as understood in common language: Craies on Statute Law, page 153 (5th Edition)..................Therefore apart from the fact that the Legislature by using two distinct and different items, i.e., item No. 6 'vegetables' and item No. 36 'betel leaves', has indicated its intention, decided cases also show that the word "vegetables" in taxing statutes is to be understood as in common parlance, i.e., denoting class of vegetables which are grown in a kitchen garden or in a farm and are used for the table." 17. In Dunlop India Ltd. v. Union of India (1976) 2 S....
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....n error in taking into account the intention of the buyer and the seller in this behalf. It was not only the intention of the buyer and the seller that was taken into account but the nature of the articles that were being sold and, obviously, the Tribunal was satisfied that they were really no more than scrap and found that they should be taxed accordingly. The High Court was, therefore, right in not interfering." 19. In Collector of Customs, Bombay v. Swastic Woollens (P.) Ltd. [1989] 72 STC 201; 1988 UPTC 1284 the Supreme Court observed: "4. We are of the opinion that when no statutory definition is provided in respect of an item in the Customs Act or the Central Excises Act, the trade understanding, meaning thereby the understanding in the opinion of those who deal with the goods in question is the safest guide... 20. In MSCO Pvt. Ltd. v. Union of India AIR 1985 SC 76; [1985] 19 ELT 15 (SC) the Supreme Court observed: "4. The expression 'industry' has many meanings. It means 'skill', 'ingenuity', 'dexterity', 'diligence', 'systematic work or labour', 'habitual employment in the productive arts'....
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.... who use it; that there is a mental association in the mind of the consumer in respect of certain products keeping in view the utility of the product and also the reputation the name of the product has acquired in the market and amongst the consumers; that when a consumer buys an article, he buys it because it performs a specific function for him; and that it is not for the court to determine for itself under which item a particular article falls, and it should be best left to the authorities entrusted with the subject, but where the very basis for including the article under a residuary head in order to charge higher duty is foreign to a proper determination of this kind, the court will be loath to hold that it will not interfere. 23. We shall now examine the decisions which deal with "insecticides and pesticides". In Sonic Electrochem (P) Ltd. v. State of Orissa [1994] 92 STC 117, the Orissa High Court considered whether "mosquito repellent mats" which admittedly were "insecticides", were entitled to exemption as "pesticides" and it observed: "...The authorities having exempted 'pesticides' from the levy of tax in exercise of powers under section 6 of the Oris....
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....squito mat insecticide'. The traders deal with insecticides in accordance with the provisions of the Insecticides Act, 1968. The preamble to that Act shows that Insecticides Act, 1968, is for regulating the import, manufacture, sale, transport, distribution and use of insecticides. We have already referred to the relevant provisions of the Insecticides Act, 1968, for the purpose of showing that nobody can deal with insecticides otherwise than in accordance with the provisions of the Insecticides Act. Accordingly, we are to hold that mat manufactured by the applicant is understood in commercial parlance or trade circle as an insecticide and as such it will be governed by the Act of 1954..." 26. In Transelektra Domestic Products Private Limited v. State of Kerala [2001] 122 STC 229, the Kerala High Court also considered whether mosquito repellent mats manufactured in the name "Good Knight" and "Banish" could be classified as "insecticides" for the purpose of levying sales tax under the Kerala General Sales Tax Act, 1963 and after placing reliance on the Madras High Court in the aforesaid case of Transelektra Domestic Products [1993] 90 STC 436 observed: "3. These good....
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....ed reliance upon those decisions of the Supreme Court wherein it was held that entries in sales tax should not be construed in any technical sense but in a manner as understood in common parlance and then concluded that "Good Knight" mats have been treated by persons dealing with it as "repellent". 31. Having considered the submissions advanced by learned counsel for the parties, the material on record and examination of the facts of these petitions, we find from the pleadings that articles/goods sold by the petitioners, though used as household articles, are nevertheless household "insecticide" which fact is also mentioned on their products. The chemical composition used in manufacturing the goods in question (though widely known and popularly understood as mosquito repellent) is allethrin which is an "insecticide". The petitioners are using chemicals for manufacturing the finished goods which have been treated as "insecticides" and under the provisions of the Insecticides Act, 1968 a certificate has been issued by Government of India, Ministry of Agriculture which leaves no scope of doubt that allethrin which is used in the product sold by the petitioners is "insecticide". Ins....
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....01] 122 STC 229. The learned Judge in Priya Distributor (T.T.R. Nos. 334 and 338 of 1996 decided on February 20, 2003- Allahabad High Court) had also placed reliance upon the said decisions. 37. Sri S.P. Kesarwani, learned counsel appearing on behalf of the respondents, also urged that Writ Petition No. 1214 of 2005 has become infructuous inasmuch as pursuant to the notice dated July 21, 2005 issued under section 21 of the Act, the proceedings were finalised and the assessment order was passed on August 30, 2005 and was also served upon the petitioner along with demand notice. It is true that the petitioner was required to challenge the assessment order dated August 30, 2005 but since the main question whether the "Good Knight mats" are "insecticides" or not is required to be examined in the other two writ petitions, we consider it appropriate to decide all the matters and do not intend to dismiss Writ Petition No. 1214 of 2005 on this ground. 38. It was also urged by the learned counsel for the respondents that the petitioners have sought the quashing of the notices issued under section 21(2) of the Act and so these petitions should not be entertained at this stage. 39. L....