TaxTMI 
TaxTMI 
2014 (6) TMI 28
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.... 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 vapouriser, the test report from Haffkine Institute for training, research and testing, Mumbai, covering mosquito coil, the test report from National Chemical Laboratory, Pune, covering mosquito coil, test report from International Institute of Bio-technology and Toxicology, Kanchipuram, Tamilnadu, the Drug manufacturing licence covering Harpic and Lizol and a copy of the decision of the S....
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....288 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 Kill are goods exigible to tax @ 4% under entry 20 of Schedule IV of the VAT Act. 6. The core controversy circles round entries 20 and 88 to Schedule IV, which read as below. 20. Pesticides, Insecticides, fungicides, herbicides, weedicides and other plant protection equipment and accessories thereof (including drip and sprinkle irrigation systems but exclu....
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.... 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 14 20 Pesticides, Insecticides, fungicides, herbicides, weedicides and other plant protection equipment and accessories thereof but including drip and sprinkle irrigation system but excluding mosquito repellents in any form 1. Insecticides, fungicides, etc. 3808 (except 3808.10.91, 3808.30.30 & 3808.30.40 ....
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....s, 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 Kg. 16% 3808 10 15 Chlorobenzilate Kg. 16% 3808 10 16 D.D.V.P. (Dimethyl-cichloro-vinyl- phosphate) Kg. 16% 3808 10 17 D.D.T. (excluding D.D.T. of heading 2903 62) --- Diaginal, heptachlor, lindane, methyl bromide, parathion methyl, dimethoate technical, malathion : Kg. 16% 3808 10 21 Diaginal Kg. 16% 3808 10 22 Heptachlor Kg. 16% 3808 10 23 Lindane Kg. 16% 3808 10 24 Methyl bromide Kg. 16% 3808 10 25 Parathion, methyl Kg. 16% 3808 10 26 Dimethoate, technical grade Kg. 16% 3808 10 27 Malathion --- Endosulphan technical, quinal phos, isoproturon, fenthion, cipermethrin technical, allethrin, synthetic pyreth....
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....by its absence in the relevant HSN Code in G.O.Ms. No. 1615 referred to herein above. 13. This Court has referred to the classification of goods under the Tariff Act and to the extent relevant to the classification of goods based on HSN Code in G.O.Ms. No. 1615 to show that all the goods in entry 20 fall under HSN Code 3808 except "repellents for insects such as flies, mosquitoes" (HSN Code 3808.10.91). Gibberellic acid (HSN Code 3808.30.30) and plant growth regulators (HSN Code 3808.30.40) and taxable at 4%. The Division Bench decision in MGRM Medicare Ltd. v. CTO - (2011) 45 VST 47 (AP) to which one of us (VVSR, J) is a member following the decision of another Division Bench in ESPI Industries & Chemicals Pvt. Ltd v. Commercial Tax Officer - (2008) 12 VST 112 (AP) held that wherever any HSN Code restricts the scope of any entry in the Schedule to the VAT Act, it would be ultra vires and that any instructions issued under Section 76(2) of the VAT Act would not override the Schedules unless they are amended validly. The relevant observations are as follows : A Schedule to an enactment forms an integral part of the said Act. It is only if the Schedule is amended following....
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.... the popular meaning or the meaning attached to the products by those who deal in them. Functional utility and predominant use play an important role in determining the classification of the taxable goods. The dictionary meaning, the technical meaning and the meaning from users' point of view or popular meaning would all furnish a clue to understand the classification of a product. 17. In Nuclear Fuel Complex v. State of Andhra Pradesh - (2011) 42 VST 273 (AP) a Division Bench of this Court to which one of us (VVSR, J) is a member summarised the principles of interpretation of entries in tax laws. It would be relevant to extract the same hereunder. Interpretation of an entry, under the Tax Laws, is a quasi-judicial function [State of Kerala v. Kurian Abraham (P) Ltd. - (2008) 3 SCC 582]. While interpreting an entry, the Court's role is to consider its effect after examining it from different angles [Ponds India Ltd. v. CIT - (2008) 8 SCC 369]. Neither can one single universal test be applied nor can there be a static parameter for proper classification. Functional utility, design, shape and predominant usage have also to be taken into account while determining the classi....
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.... successively; to inflict with a virus". The word "disinfect" means "to rid of disease-causing bacteria, etc., by cleaning, especially with a chemical". The word "disinfectant" as a noun means "a chemical that destroys bacteria" (see The Chambers Dictionary, 10th Edition, 2007). The "disinfectant" thus is a chemical substance that destroys bacteria and pathogenic micro-organisms when it is used for cleaning. 19. In Bombay Chemical Pvt. Ltd. the Supreme Court was concerned with item 18 of the First Schedule to the Central Excise and Salt Act, 1944. The said item included insecticides, pesticides, weedicides and fungicides. As per Notification No. 55/75-C.E. issued under Rule 8(1) of the Central Excise Rules, 1944 these products were exempted from the whole of the duty of excise. Therein appellant - a manufacturer of disinfectant fluids, unsuccessfully claimed exemption under item 18 before Central Excise authorities as well as the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi. Before the Apex Court, it was contended that the disinfectant fluid produced by the appellant had the capability of killing any insects or pests. The test for classifying a tariff was ....
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....cid; batch Nos. # PFDE049 and PFDE048) clearly demonstrates that a percent reduction in viable counts from 1.5 - 5.0x108 cell/ml to not more than 650 cfu/ml after definite contact time 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 "Harpic Power" 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 toilet bowls.                         (emphasis supplied) 21. The summary of the test report in respect of Lizol (disinfectant surface cleaner) is as follows. SUMMARY AND CONCLUSION The data obtained from the present study clearly indicates that the both marketed samples of "LIZOL" - a disinfectant surface cleaner products (containing Benzalkonium Chloride IP 4....
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....d to destroy or eliminate. Under the US Federal Environment Pesticide Control Act, the term 'pesticide' has been defined to include "(1) any substance or mixture of substances intended for preventing, destroying, repelling, or mitigating any pest, insect, rodent, nematode, fungus, weed, other forms of terrestrial or aquatic plants or other forms of animal life, e.g., viruses, bacteria, or other micro-organisms, which the administrator declares to be a pest and (2) any substance or mixture of substances intended for use as a plant regulator, defoliant or desiccant" (Pesticides in the Indian Environment, by P.K. Gupta p. 2). 'Fungicide' inhibits growth or destroys fungi pathogenic to man or other animals or inanimate surfaces. The appellant had imported tar acid to manufacture insecticide, pesticide and fungicide. The Director General had permitted import for this purpose. In the letter written by the appellant claiming exemption, it was stated that disinfectant fluids manufactured by it were capable of being used for the purpose of destroying fungi of medical importance. A disinfectant which, therefore, is used for killing may broadly be covered in the word 'pesticide'. Disinfect....
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....m "pesticides" also derive support from HSN Code based classification of items in IV Schedule as ordered by the Government in G.O.Ms. No. 1615, dated 31-8-2005. As seen from the said G.O. extracted hereinabove, all the goods in entry 20 of IV Schedule are covered under the HSN Code (heading) 3808 except three products, namely, repellents for mosquitoes, Gibberillic acid and plant growth regulators. The product "disinfectants" are in sub-heading 3808.40.00 and they are not excluded from the main "heading". Thus all the disinfectants would fall within HSN Code 3808 which deals with most of the goods mentioned in entry 20. That being the position, in our considered opinion, any reference to entry 88 may not be called for. Even if the manufacturer obtained drug licence for producing Harpic and Lizol the same cannot be a conclusive that these goods within the ambit of entry 88. 26. We may passingly mention that Section 18 of Drugs Act mandates a licence for manufacture, sale or distribution of any drug, cosmetic or medicine. The word "drug" is defined in Section 3(b) of the Drugs Act. It is inclusive definition. A plain reading of Section 3(b)(iv) thereof shows that not only med....