TMI Blog2017 (4) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... that if an entry has been interpreted consistently in a particular manner for several assessment years ordinarily it would not be permissible for the revenue to depart therefrom unless there is a material change. The claim of the assessee that the products being sold by the assessee would fall in Entry 21 or 29 of the Act as the case made be is well reasoned and justified and the authorities were unjustified in taking it under the residuary Schedule (V). The claim of the assessee is just and proper. Penalty - Held that:- There is no occasion of levy of penalty, even otherwise, it is a case of classification of entries which is being considered. Admittedly, the books of accounts has been maintained and such books have been accepted by the Assessing Officer, all the entries were entered in the Stock Register and there is no unrecorded sale noticed or found or adversely commented by the ld. A.O. even at the time of survey - penalty not warranted. Appeal allowed - decided in favor of appellant. - S.B. SALES TAX REVISION/REFERENCE No. 11/2012, 8/2012, 9/2012, 7/2012, 12/2012, 13/2012, 14/2012, 15/2012, 16/2012, 111/2012, 123/2012, 124/2012, 125/2012, 117/2012, 118/2012, 119/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board has committed an error of law in not appreciating that Harpic being disinfectant, could not be classified under Schedule V of the RVAT Act? Petitions filed by Revenue; SB STR Nos. 111/2012, 117/2012, 118/2012, 121/2012, 122/2012, 123/2012, 124/2012 125/2012:- 1. Whether in the facts and circumstances of the case the Rajasthan Tax Board was justified in deleting the penalty under section 61 of the Act despite the fact that the tax at the lesser rate was deposited contrary to the applicable rate of tax on the goods sold by the assessee? 2. WHETHER in the facts and circumstances of the case of Rajasthan Tax Board was justified in law in holding that the product of respondent Dettol falls within the ambit of drug and medicine despite of the fact that the assessing authority as well as appellate authority have categorically held same to be falling in residuary entry liable to be taxed at higher rate? 3. WHETHER in the facts and circumstances of the case the Rajasthan Tax Board was justified in deleting the penalty u/Sec.61 of the Act solely on the ground that the entries were recorded in the books of accounts though the same were incorrect and deliberately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and thus, deleted the penalty u/Sec.61 of the Act, as two views are possible. 5. Further appeal was preferred by both assessee as well as the revenue, while the assessee assailed the matter on merits on differential rate, however, the revenue filed an appeal on deletion of penalty u/Sec. 61 of the Act. 6. The Tax Board also did not interfere in the order of the Dy. Commissioner (A) and maintained that the said product does not fall under the category of Entry 21 or/and Entry 29 of the Schedule IV of the RVAT Act and thus, upheld the order passed by both the Authorities. However, the Tax Board was satisfied that it is not a case of penalty and accordingly upheld the order of the Dy. Commissioner (A). 7. Learned counsel for the assessee contended that the two products namely; Harpic Lizol are classifiable under Entry 21 or Entry 29 of Schedule IV of the RVAT Act. and the same being used as Insecticides or Pesticides and the entry being specific and clear, the Assessing Officer as well as the Appellate Authorities have gone wrong in holding that they fall under the residuary entry namely; Schedule (V) and the burden was on the revenue to hold and to say that it falls ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the active ingredient of Harpic is Hydrochloric Acid, which is a well known Benzalkonium Chloride Solution I.P., and other ingredients and these products are used for disinfecting the surface on which it is applied. Harpic is effective in killing various Micro- Organisms (germs/bacteria) and the function of Harpic is disinfectant and it has additional function of completely removing tough stains from the surface on which it is applied. 10. Insofar as the Lizol is concerned, it is effective in killing Micro-organisms which are generally found on hard surfaces like floors that cause urinary track infections, respiratory system infections, dermatitis, soft tissue infections, bone and joint infections, etc. and the test reports given by the Government Laboratories classifies Harpic and Lizol as Insecticides and thus contended that the finding reached by the Authorities below is contrary to the material on record. Insofar as Dettol is concerned, counsel supported the view expressed by the Tax Board as it is certainly in the nature of drug/medicine. 11. Counsel also contended that the penalty u/Sec.61 was rightly deleted by the Tax Board as admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in 2014, all these products were taken in Schedule (V) Entry 18(iii). Counsel contended that if the Entry 21 29 of the Schedule are perused then they refer to the products for agricultural use and the Government intended to grant benefits to such class of people/farmers/agriculturist with a lower rate of 4%, if such products are being used in farming or for agricultural operations. Counsel contended that whatever the test reports may be there but it does not prove them to be categorized in Entry 21 or 29 of the Act as the case may be and these being basically Toilet Cleaners for upper class of people, all the three authorities in unison have held in favour of the revenue. Counsel also contended that even under common parlance test, these products are merely called of general household items as Toilet Cleaners and floor cleaners and not as Insecticide/Pesticides. Counsel also contended that in the case of the assessee itself, the Judgment of the Division Bench of the Kerala High Court in M/s. Reckitt Benckiser (India) Ltd. Vs. Commissioner Ors in OT Appeal No.6 of 2006 vide judgment and order dt. 17.12.2008 considered the question regarding these very products and where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertilizers and Micronutrients also plant growth promoters and regulators, herbicides, rodenticide, insecticide, weedicide etc. 29. Chemical fertilizers and pesticides. 18. The entry as they stand does mention Insecticide or Pesticide as part of the Entry and it may be that these are categorized for the benefits to farmer/agriculturist who may use such products in farming to prevent Insects or germs which may damage the crop but still Insecticide/Pesticides is certainly forming part of the Entry. 19. Once specific entry is available then the burden shifts on the revenue to say and hold that it would fall in Schedule (V). Even Schedule (V) categorically observes that :- Those goods which are not covered in any other Schedule or not covered by any notification issued u/Sec.4 of the Act. It should mean that if it is not covered in any Entry then only it may be carried to Schedule (V). 20. The assessee in the aforesaid cases has been able to procure and place reports of Government owned Laboratories which do specify that these products are falling in the category of Insecticide/Pesticides. In my view, such test reports ought not to have been discarded by the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any material. If the intention of the legislature was quite clear then it had to be specified in the Notification which was brought in September, 2014, unless specifically stated it has to be prospective. 23. It would also be appropriate to quote the judgment of the Apex court in the case of Bombay Chemical Pvt Ltd. (supra) where disinfectant fluids was in issue, held to be entitled to exemption in respect of item 18 added to list of extract items under the Central Excise and Salt Act, 1944 where the Entry 18 was added to it which reads as under:- 18. Insecticides, Pesticides, Weedicides and Fungicides. The Apex Court in the aforesaid case defined after taking note of the dictionary meaning of disinfectant and Pesticides and it would be appropriate to quote relevant paras of the said judgment which reads ad-infra:- 5. Disinfectant is defined in Webster Comprehensive Dictionary as a substance used to disinfect or to destroy the germs of infectious and contagious diseases . In the Concise Oxford Dictionary of Current English, disinfectant is defined as a commercially produced chemical liquid that destroys germs . In Encyclopedia Britannica, Vol.4, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 8. A disinfectant which, therefore, is used for killing many broadly be covered in the word pesticide . Disinfectants, may be of two types; one to disinfect and other to destroy the germs. The former, i.e., those products which are used as disinfectant for instance lavender etc. may not be covered in the expression pesticide . But those products which are used for killing insects by use of substances such as high boiling tar acid have the same characteristic as pesticide . 9. Item No.18 which was added in 1978 grants exemption to the categories of goods which can be classified as insecticides, pesticides, weedicides or fungicides. They have to be understood in broad sense. The reasoning of the Tribunal that if an expression is cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and in my view, squarely covers the issue in favour of the assessee. 24. The Gauhati High Court in assessee s own case Reckitt Benckiser India Pvt. Ltd. Vs. The State of Assam and Ors (supra) had also an occasion to consider the similar identical entries and it would be appropriate to quote relevant para Nos.3 4 of the aforesaid Judgment which reads adinfra:- 3. Entry No.19 of Part A of the Second Schedule to Assam VAT Act reads as follows:- Chemical fertilizers, pesticides, weedicides and insecticides excluding mosquito repellents including electric or electronic mosquito repellents gadgets and insect repellents, devices and parts and accessories thereof. The petitioner claims that the products Harpic and Lizol fall under the aforesaid Entry No.19 as these are disinfectants and covered by the expression pesticides . 4. Entry 21 of the Fourth Schedule of the Assam VAT Act, as existed prior to 07.08.2005 which read as, Drugs Medicines (On Maximum Retail Price basis) was modified by the subsequent notification dated 08.08.2005, which now reads as follows:- Drug and medicines including vaccines, disposable hypodermic syringes, hypo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lect the observations of the Hon ble Supreme Court in the Dunlop India Ltd. Vs. Union of India, (1976) 2 SCC 241, where the Hon ble Supreme Court held as:- 35. It is good fiscal policy not to put people in doubt and quandary about their liability to duty. Ween a particular product like V.P. Latex known to trade and commerce in this country and abroad is imported, it would have been better if the article is, eo nomine, put under a proper classification to avoid controversy over the residuary clause. AS a matter of fact in the Red Book (Import Trade Control Policy of the Ministry of Commerce) under Item 150, in Section II, which relates to rubber, raw and gutta percha, raw , synthetic latex including vinyl pyridine latex and copolymer of styrene butadiene latex are specifically included under the sub-head Synthetic Rubber . We do not see any reason why the same policy could not have been followed in the ICT book being complementary to each other. When an article has, by all standards, a reasonable claim to be classified under an enumerated item in the Tariff Schedule, it will be against the very principle of classification to deny it the parentage and consign it to an orphana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of human beings or animals but substances that affect structure or function of human body or used for destruction of vermin or insects which cause disease in the human beings and animals are also drugs. Further all substances intended for use as components of a drugs. Further all substances intended for use as components of a drug and such devices intended for internal or external use among others, in the mitigation or prevention of disease would be drugs. When a manufacturer produces any disinfectant fluids, they are basically intended for prevention of disease by destroying and/or controlling bacteria and microorganisms that are unusually present. That may be one reason why even under the Drugs and Cosmetics Rules, 1945 (the Drugs Rules) the disinfectants are placed in Schedule-K in respect of which they were exempted from the provisions of Chapter IV and the Rules made thereunder. Harpic and Lizol are the products/goods sold even in general stores and on the counters of departmental stores. We therefore reject the submission of the State that Harpic and Lizol fall under entry 88 merely because they are manufactured under drug licence. 28. Placing of reliance by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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