TaxTMI 
TaxTMI 
TaxTMI 
2005 (11) TMI 448
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....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 reproduce section 3-A of the Act and it is as follow....
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....ures 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 Notification No. KA.NI-2-1011X1-9(231)/94-U.P. Act-15-48-Order-2000, dated 15th January, 2000. In exercise of the powers under clause (e) of sub-section (1)....
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....ectorate 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 place outside the triangle; (iii) insecticides in category III (moderately toxic) shall bear the word 'danger' and the statement 'keep out of reach of children' shall also appear on the label at suitable place outside the triangle; (iv) insecticides in catego....
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....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 under the Act as well as under the Central Act were granted to the petitioner for trading of the aforesaid commodities. The registration numbers of the petitioner under the Act and the Central Act are UPTT No. GC-0060571 dated August 6, 1998 and CST No. GC-5035410 dated August 6, 1998. A true copy of the registration application cert....
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....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 this counter-affidavit as exemplars in which the petitioner has mentioned the commodities in question as 'repellent' and not an insecticide or pesticide and the same are collectively marked as annexure No. CA-16. (f) The customers of the petitioners are not dealing in insecticides or pesticides, but they are dealing/trading general merchandise goods l....
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.... 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 come within entry No. 129 of Schedule II, Part A of the Gujarat Sales Tax Act, 1969. The said entry gave the description of goods as "mosquito repellents". It was sought to be argued on behalf the appellant that Jet mat was an "insecticide" and not a repellent, whereas on behalf of the Revenue it was sought to be argued that the product was nothing but a mosquito repellent and a repellant does not cease ....
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....ied 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 with Drug Controller and is being manufactured under a drug licence." 12.. In Commissioner of Central Excise, Calcutta v. Pt. D.P. Sharma Chemical Works (2003) 5 SCC 288, the question that arose for consideration before the Supreme Court was whether "Himtaj oil" was "Ayurvedic medicament" or not classifiable or a "perfumed hair oil". The court negatived the argument that the product could not be considered to be a drug because....
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.... 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 attracted whenever the statute does not contain any definition. Porritts & Spencer (Asia) Ltd. v. State of Haryana [1978] 42 STC 433 (SC); (1983) 13 ELT 1607 (SC). It is generally by its functional character that a product is so identified. In Commissioner of Sales Tax, U.P. v. Macneill & Barry Ltd. [1986] 61 STC 76 (SC); (1985) 2 Scale 1093; (1986) 23 ELT 5 (SC) this Court expressed the view that ammonia paper and ferro paper, used for obtaining prints and s....
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....les 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 by it in respect of that classification. That, to our mind, furnishes a piece of evidence only as to the manner in which the product has been treated for the purpose of the specifications laid down by the Indian Standards Institution. It was a test employed by this Court in Union of India v. Delhi Cloth & General Mills [1963] Supp. 1 SCR 586; [1997] 1 ELT J199 (SC) but was regarded as supportive material only of the expert opinion furnished by way of evidence in that case. Th....
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....ople 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 SCC 241; AIR 1977 SC 597, the Supreme Court observed as follows: "...It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. But once an article is classified and put under a distinct entry, the basis of the classification is not open to question. Technical and scientific tests offer guidance only within limits. Once the articles are in circulation and come to be described and kn....
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.... "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', 'manufacturing establishment', etc. But while construing a word which occurs in a statute or a statutory instrument in the absence of any definition in that very document it must be given the same meaning which it receives in ordinary parlance or understood in the sense in which people conversant with the subject-matter of the statute or statutory instrument understand it. It is hazardous to interpret a word in accordance with its definition in another statute or statutory instrument and more so when such statute or statutory instrument is not deali....
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....ary 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 Orissa Sales Tax Act without having any limitation with regard to the kind of pesticides, it is difficult for us to give a limited meaning to the aforesaid expression 'pesticides'. In our considered opinion, 'insecticide' being also a species of 'pesticides' would be entitled to the exemption from levy of tax in view of the notification of the State Government under section 6 of the Orissa Sales Tax Act and since the appellate authority has come to the conclusion that the goods manufactured by the assessee are 'insecticide', the said item is entitled to exemption in....
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....rade 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 goods are covered by the provisions of the Insecticides Act and these goods can be classified in a specific entry and cannot be included in unclassified items. When we can attach a parentage to a product it need not be sent to orphanage, that is residuary entry as held by the Supreme Court in Dunlop India Ltd. v. Union of India (1976) 2 SCC 241. Since the mosquito repellent mat contains insecticide allethrin chemicals, which is manufactured and sold under licence issued under the Insecticides Act and it will fatally affect the nervous system of mosquitoes, we are of the opinion that it can be classified as an insecticide ti....
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....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". Insecticides Rules, 1971 provides for the manner of labeling. Labelling/packing of the products of the petitioner is as per the aforequoted rule 19(4) of the Rules. 32. D-Trans "allethrin" and "pallethrin" are used in manufacturing the goods which have been described as household "insecticides " on their products as per the statutory requirement under the Insecticides Act. In the absence of any specific entry relating to mosquito repellent/mosquito destroyer and at the same time there being an entry mentioning "insecticides", it can reasonably be said that an ordinary person will ordinarily understand the product of the petitioners fallin....
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....nt 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. Learned counsel appearing for the petitioners, however, urged that notices issued under section 21(2) of the Act are liable to be quashed since they are based upon the decisions rendered by this Court in the case of Britania Agencies (2004) 36 STJ 67 and Hindu Super Store [2006] 145 STC 223; (2004) 36 STJ 76 which decisions are contrary to the earlier decision of this Court in the matter of Priya Distributor (T.T.R. Nos. 334 and 338 of 1996 decided on February 20, 2003). Learned counsel submitted that decisions of this Court in Britania Agencies (2004) 36 STJ 67 and Hindu Super Store [2006] 145 STC 223; (2004) 36 STJ 76 do not lay down the correct law a....