TaxTMI 
TaxTMI 
2014 (9) TMI 299
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....lossom shoe polish, etc., has challenged the assessment of the respondents authorities of the products of Harpic, Lizol and Dettol at the higher rate of these products at 12.5 per cent VAT charges classifying under the residual items under entry No. 1 of the Fifth Schedule of the Assam Value Added Tax Act, 2003 (hereinafter referred to as, "the Assam VAT Act"), contrary to the claim of the petitioner that the petitioner-company would be liable to pay only at rate of four per cent as these items are covered by specific entries provided under Schedule to the said Act at the said rate. As all these writ petitions challenge similar orders and under similar fact-situations, these writ petitions are heard together and disposed of by this common judgment. According to the petitioner, the petitioner had been paying taxes at the rate of four per cent in respect of the aforesaid products as these (Harpic and Lizol) are covered under entry No. 19 of Part A of the Second Schedule to the Assam Value Added Tax Act chargeable at four per cent and Dettol is covered under entry No. 21 of the Fourth Schedule to the Assam Value Added Tax Act also chargeable at the same rate of four per cent. ....
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....petitioner on receipt of the said notices dated July 4, 2009, submitted the replies on July 15, 2009, wherein the petitioner had stated that Harpic and Lizol being disinfectant, are to be treated as pesticide or insecticide and accordingly, would be covered under entry No. 19 of Part A of the Second Schedule to the Assam Value Added Tax Act and would be chargeable for VAT at four per cent only. As regards, Dettol, the petitioner submitted that since it possesses therapeutic and prophylactic properties, it is a drug or a medicine which falls under entry 21 of the Fourth Schedule and accordingly, chargeable for VAT only at four per cent on the maximum retail price. However, respondent No. 3 by ignoring the aforesaid explanation submitted by the petitioner rejected the same by holding that Harpic is merely a toilet cleaner and Lizol is a floor cleaner and Dettol is only a toilet preparation, and not covered by any of the entries No. 19 or 21 as claimed by the petitioner, and respondent No. 3, vide notice dated September 8, 2009, directed the petitioner to file correct and amended returns for the years 2005-06, 2006-07, 2007-08 and 2008-09 by holding the petitioner is liable to pay ....
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....story of the entry, the purpose for which the product is used, the manner in which it has been dealt with under the relevant statute as also the interpretation thereof by the implementing authorities." Respondent No. 3, the Superintendent of Taxes, in his impugned assessment orders dated October 15, 2009, for rejecting the claim of the petitioner that the items Harpic and Lizol are covered under entry 19 of Part A of the Second Schedule, based it on common parlance test and the package describing the product, it was held that in common parlance of the consumers as well as traders, the items Harpic and Lizol are not understood as pesticides but FMCG products of daily use. Referring to the Chamber's 21st Century Dictionary, it was held that "pest" means a living organism such as insect, fungus or weed, that has a damaging effect on animal livestock, crop plant or stored produce and "pesticide" means any of the various chemical compounds, insecticides, herbicides and fungicides that are used to kill "pests". The products, "Harpic" and "Lizol" are meant to be used as toilet cleaner by the manufacturers as well as the consumers, and cannot be regarded in common parlance as "pesti....
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....aning. It was also held that "Dettol" cannot be understood as an item of medicament. Assailing the aforesaid findings, the petitioner has contended that under the Central excise, Harpic and Lizol are treated as insecticides and/or disinfectants as covered under Chapter 3808.40 of the Central excise classification. It has also been submitted that under Note 2 to the Second Schedule to the Assam VAT Act, the Rules for the interpretation of the Central Excise Tariff Act, 1985, read with the Explanatory notes as updated from time to time published by the Customs Co-operation Council Brussels, shall apply for interpretation of that part and submitted that since Harpic and Lizol are covered under Chapter 3808.40 of the Central excise classification in accordance with HSN entry 3808.40 issued by the Custom Co-operation Council, Brussels, the same would be also applied to entry No. 19 of Part A of the Second Schedule to the Assam VAT Act. The petitioner has contended that the products "Harpic" and "Lizol" are disinfectants and since disinfectants are also covered by the expression "pesticides", these products would be covered by entry 19 of Part A of the Second Schedule. The petit....
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.... petitioner, through the product labels, had been publicly and commercially representing "Harpic" and "Lizol" as disinfectants and the consumers purchase the products for their disinfectant properties apart from the cleansing utility. The consumers purchase and use the same for mainly disinfectant purpose while keeping their toilets/homes clean. Thus, the primary purpose of the products is disinfectant and is not the secondary as held by the Revenue. As regards the aforesaid contention, it is noticed that the product labels of both the products clearly indicate that the petitioner has made representation of their disinfectant property as the primary purpose. In the impugned order, though the label has been referred to, the representation about the disinfectant property has been glossed over, not highlighted and has held the disinfectant property to be only the secondary one. The products labels of both the products indicate that the said products are in the nature of disinfectant which prominently display the potential of the products to kill germs. In the product label of Lizol, it is clearly stated thereon that the product is a "disinfectant surface cleaner". Moreover, it is p....
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.... whether any particular item would be covered under any relevant entry or classification, the opinion of the expert in the field can be taken into consideration. The petitioner has also relied on several orders passed by the Revenue authorities in other States and by various High Courts to drive home the point that these products, Harpic and Lizol are disinfectants. Therefore, in view of the materials which have been placed on record, which are not denied by the Revenue, it can be held that Harpic and Lizol are disinfectants. It may be mentioned that even though a writ court would not normally enter into areas of disputed questions of fact and appreciate evidence in the proceedings, in the present case the aforesaid materials had also been relied upon by the petitioner before respondent No. 3, the Superintendent of Taxes, Guwahati, which were not controverted by the authorities in this proceeding also, and accordingly, we have no hesitation to rely on the aforesaid materials and draw reasonable conclusions based on the same. However, determination of the issue that "Harpic" and "Lizol" are disinfectants do not ipso facto lead to the conclusion that these are to be treat....
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.... boiling tar acid as the principal active ingredient. It then noticed the definition of pesticide and disinfectant and observed that, 'it appears from the above definition that disinfectants are used for killing or inactivating micro-organisms, in some literature for oils (containing high boiling tar acid) are mentioned in pesticide manual'. But he opined that it was not clear whether the formulations containing tar acids, as in the case of the goods, produced by the appellant which were used as disinfectants, will be covered broadly by the term 'pesticides'. As regards, 'pesticide', the honourable Supreme Court observed that, 6. 'Pesticide' has been defined in Butterworths Medical Dictionary, Second Edition, as 'a comprehensive word to include substances that will kill any form of pests, e.g., insects, rodents and bacteria'. The term 'pesticide' includes a large variety of compounds of diverse chemical nature and biological activity grouped together usually on the basis of what kind of pests they are used to destroy or eliminate. Under the US Federal Environment Pesticide Control Act, the term 'pesticide' has been defin....
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....considered "pesticides". However, by giving a broader meaning to the word "pest" as has been done by the honourable Supreme Court in the aforesaid case, by 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. Accordingly, we also hold that "Harpic" and "Lizol" which are disinfectants being "pesticides", in terms of the decision of the honourable Supreme Court in Bombay Chemical Private Limited [1995] 99 STC 339 (SC); [1995] Supp 2 SCC 646, 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. As regards Dettol, respondent No. 3 in the impugned order observed that the product "Dettol" according to own admission of the petitioner, was meant for diverse uses in bathing, shaving, nappy wash, first aid, personal hygiene (removal of dandruff), surgical, medical, midwifery and the like, and further observed that the "Dettol" on the conspectus of attendant factual attributes of its usages, marketing and consumption, etc., was e....
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....ourselves as to what is meant by drug and medicine and cosmetics and toilet preparations. None of these words is defined under the Assam VAT Act. However, it is defined under the relevant Acts, namely, the Drugs and Cosmetics Act, 1940, Medicinal and Toilet Preparations (Excise Duty) Act, 1955. Though definitions given in these Acts may not be determinative of the issues at hand, yet in absence of definitions in the Assam VAT Act, these would provide the beacon on which basis we may properly understand the meaning of the words in issue to reach the correct conclusion. Section 3(b) of the Drugs and Cosmetics Act, 1940 defines "drug" as follows: "3(b) 'drug' includes,- (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes; (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects whi....
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....se provided, it can be considered a drug. In the instant case also, the 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, is only because of its prophylactic properties. The main purpose for the use of Dettol is to prevent infections which may occur due to minor cuts, injuries, abrasions, grazes, insect bites, etc. Thus, by applying the "users test", it would squarely fall under the definition of "drug" as defined under section 3(b) of the Drugs and Cosmetics Act, 1940 as well as under the definition of section of the Medicinal and Toilet Preparations (Excise Duty) Act, 1955. It may be apposite herein to refer to the decision of the Supreme Court in Sujanil Chemo Industries v. CCE [2005] 4 SCC 189, in which the Supreme Court held that, "6. . . . Any medicine or substance which treats disease or is a palliative or curative is therapeutic. Licel cures the infection or infestation of lice in human hair. It is thus t....
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..... These are facts which had been pleaded by the petitioner before respondent No. 3, but there is neither any reference to the same in the impugned order nor was it contested by the authorities. These facts are also clearly indicative of the fact that "Dettol" is a drug and not a cosmetic item. Thus, in our view there are sufficient materials and consideration to hold that Dettol is a drug or medicine to be covered by entry 21 of the Fourth Schedule to the Assam VAT Act and also not covered by Explanation to the said entry 21. We briefly refer to the judgment of the Kerala High Court, which has been referred to by respondent No. 3 for coming to a finding to the effect that Harpic and Lizol are merely cleansing substances and the Dettol is not a medicament. As regards the products Harpic and Lizol, it was held that from the product description and the nature of use stated in the products, there can be no doubt that items are essentially used as stain remover and deodorants, though they actually kill germs as well. The said finding was arrived at on the basis of the product description and the nature of use stated in the products. No other parameters were adopted or examined in ....
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....ions reached by the Kerala High Court in the aforesaid case. In respect of the aforesaid products, as discussed above, the disinfectants qualities of the Harpic and Lizol and the prophylactic qualities of Dettol have not been denied by the Revenue authorities. The only stand taken by the Revenue authorities is that these were not dominant nature of the products. However, it cannot be denied that these disinfectant and the prophylactic qualities of the aforesaid products are not insignificant, rather because of the aforesaid disinfectant and prophylactic qualities, the aforesaid products are used. It is now well-settled principle of law that when two views are possible, the one which favours assessee should be adopted. In Mauri Yeast India Pvt. Ltd. v. State of U.P. [2008] 14 VST 259 (SC); [2008] 5 SCC 680 (page 272 in 14 VST): "46. It is now a well-settled principle of law that when two views are possible, one which favours the assessee should be adopted. (See Bihar State Electricity Board v. Usha Martin Industries [1997] 5 SCC 289)." Here, in the present case, there are two possible views: either to take the products Harpic and Lizol to be merely stain remover and clea....
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....determination of this kind, this court will be loath to say that it will not interfere." It has been the plea of the petitioner that the petitioner had been consistently assessed treating the aforesaid products as disinfectants, pesticides and as a drug/medicines during the earlier assessment years 2005-06, 2006-07, 2007-08 and 2008-09 till the Revenue decided to review the said assessment only in the year 2009 by the impugned orders. The petitioner had been contending that there is no material change in the circumstances for the Revenue authorities to make reassessment except for the judgment rendered by the Kerala High Court as stated above. We find force in the aforesaid contention of the petitioner inasmuch as except for the judgment rendered by the Kerala High Court, there is no other material which has been brought on record to depart from their earlier assessment. In Radhasoami Satsang, Saomi Bagh, Agra v. Commissioner of Income-tax [1992] 193 ITR 321 (SC); [1992] 1 SCC 659, the honourable Supreme Court held as (page 329 in 193 ITR): "16. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year b....