TMI Blog2018 (10) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Lizol fall under the residuary entry namely Schedule (V). Petition dismissed - decided against Revenue. - Sales/Trade Tax Revision No. - 91 of 2014 - - - Dated:- 9-10-2018 - Ashok Kumar J. For the Applicant : S.C. For the Opposite Party : Kunal Ravi Singh ORDER Heard Sri BK Pandey, learned counsel for the appellant, the Commissioner, Commercial Tax, U.P. Lucknow and Sri Jawahar Lal assisted by Sri Kunal Ravi Singh, learned counsels for the Assessee-Opposite Party. The instant Commercial Tax Revision is filed, under Section 58 of the U.P. Value Added Act,2008 VAT Act against the judgment and order dated 17.8.2013, passed by the Trade Tax Tribunal Tribunal in Second Appeal No. 853 of 2013 for the Assessment Year 2008-09, by which, the Tribunal has allowed the appeal filed by the Assessee-Opposite Party and has set aside the order passed by the First Appellate Authority. The brief facts of the case are that the Assessee-Opposite Party-Dealer is carrying on a business of manufacture, purchase and sale of Lizol / Harpic. For the assessment year in question, the Assessee-Opposite Party has charged and deposited the tax on the sale of Harpic and L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered the correct meaning of the word 'pesticide'. For ready reference, it would be appropriate to incorporate the relevant extract of the judgment of the Apex Court in the Case of Bombay Chemicals (supra) are reproduced below :- 8. A disinfectant which, therefore, is used for killing may 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 St-ants 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 capable of a broader and a narrower meaning then it is the latter which could be preferred does not appear to be correct. Where entries are descriptive of category of goods they have ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctant fluids which have the capability of killing bacteria which are nothing but pests, the appellant was entitled to exemption under Item 18 of the notification issued in 1978. The appellant shall be entitled to its costs. Similar issue came up before the Andhra Pradesh High Court in the case of M/s Reckitt Benckiser (India) Ltd., Old Bowenpally, Secunderabad represented by Mr. R.A. Ramasubramanian v. State of Andhra Pradesh , in Tax Revision Case No. 10 of 2007 and connected writ petitions and the High Court has considered the issue and the taxability of Harpic and Lizol, which has been referred to Entries 20 and 88 of Schedule IV to VAT Act as well as the Government Order in G.O.Ms.No.1615, Revenue (CT.II) Department dated 31.8.2005 requiring the use of HSN Code for the purpose of classification o goods. 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 excluding mosquito repellents in any form). 88. Drugs and medicines whether patent or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oming into force UP VAT Act, the Assessee-Opposite Party has been bonafide classifying the item namely Harpic and Lizol under Entry 20, Part-A of Schedule II to the UP Act, which reads as under :- Rationale for classification adopted by the Respondent : Since coming into force of the UPVAT Act, the Respondent has been bona -fide classifying Harpic and Lizol under Entry 20 of Part-A of Schedule-II to the UPVAT Act, which reads as: Chemical fertilizers, except those which are described in entry No. 26 of the Schedule I; micro-nutrients and also plant growth promoters and regulators, herbicides, rodenticide, insecticide, weedicide and pesticides. The Respondent classified Harpic and Lizol under Entry 20 of Part II of Schedule II to the UPVAT Act, based on the following principles: (a) Classification adopted under UP Trade Tax Act as well as other Sales Tax Act, CST and Central Excise; (b) supported by a large number of Judgments including Judgment of Hon ble Supreme Court in Bombay Chemicals (supra); (c) Test Reports of Indian Institute of Chemical Technology, Hyderabad certifying Harpic Lizol as disinfectants; hence a pesticide/ insecticide, which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of Lizol are Fragrance-BBA P 2062 M, Propylene Glycol I.P, Sodium bicarbonate I.P, Tartazine Yellow, Fatty Alcohol Ethoxylate, Isoprpyl alcohol I.P and other chemicals, used for disinfecting the floor, cooking platform, sink and similar hard surfaces. It is effective in killing Micro-organisms like S. aurus, E.coli (MTCC 1687) Pseudomonas aeruginosa (MTCC-741) which are generally found on hard surfaces like floors that cause urinary tract infections, respiratory system infections, dermatitis, soft tissue infections, bone and joint infections, infections to patients with severe burns, cancer etc. Hence, it is apparent that the primary function of Harpic and Lizol is to act as disinfectant and to kill germs, bacteria and microorganisms and it has additional function of completely removing tough stains from the surface on which it is applied. He has further submitted that Government recognizes Harpic and Lizol as disinfectants. Harpic and Lizol being disinfectants are considered as a drug under Section 3(b) of the Drugs and Cosmetics Act, 1940 read with Rule 126 of the Drugs Cosmetics Rules. Section 3 (b) (ii) of D C Act defines drug to include such substances (ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nience:- 72. Furthermore, an expert in the field has also given his opinion in favour of the appellant. This Court in Quinn India Ltd. v. CCE classified a product relying, inter alia, on the report of the clerical (sic chemical) examiner as under: (SCC p. 563, para 7) 7. .. The Tribunal has completely ignored the report of the Chemical Examiner dated 6-10-1981 and the final opinion of the Chief Chemist dated 2-4-1992 coupled with the classification issued by the Department regarding use of wetting agents in the textile industries falling under Sub-Heading 3402.90. Test reports of the Chemical Examiner and Chief Chemist of the Revenue unless demonstrated to be erroneous, cannot be lightly brushed aside. The Revenue has not made any attempt to discredit or to rebut the genuineness and correctness of the report of the Government, Chemical Examiner and Chief Chemist. Thus, the reports are to be accepted along with other documentary evidence in the form of classification issued by the Department regarding use of wetting agents in the textile industries to hold that the product Penetrator 4893 possessed surface active properties and, therefore, is covered by Exemption Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts, put up in forms or packagings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and flypapers) Accordingly, the Respondent / assessee had paid excise duty on the said Products, treating them as disinfectants and the Returns are being accepted by the Central Excise authorities. In fact, even under GST, the Respondent has been paying GST treating Harpic and Lizol as disinfectants. The classification of tax entries worldwide are based on Harmonized System of Nomenclature, Brussels and even India has adopted the same for Customs and Central Excise Entries. The Sales Tax/VAT Entries are based on Customs/Central Excise Entries. Therefore, the HSN Entries and Explanatory Notes have relevance for understanding entries under Sales Tax/ VAT Acts. As per the HSN Explanatory Notes 2002, based on which Central Excise Customs Entries are made in India. HSN Explanatory Notes 2002 provides as: Disinfectants are agents which destroy or irreversibly inactivate undesirable bacteria viruses or other microorganisms generally on inanimate objects. Disinfectants are used for example in hospitals for cleaning walls etc. or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . The above judgment of the Hon ble Supreme Court squarely applies to Harpic and demonstrates that they are disinfectants and have very high capability to kill bacteria and germs (99.999999%) as is clear from the Test Reports. The Hon ble Supreme Court dealt in detail with disinfectant, pesticides etc. in Bombay Chemicals and rejected the stand of the Department (as approved by the Tribunal) in paras 5 to 8 and in para 9 of its Judgment, it held that insecticide, pesticide etc. have broad meaning in common parlance also, which reads as: Each of the words insecticides, pesticides, fungicides or weedicides are understood both in the technical and common parlance as having broad meaning. Therefore, if any goods or items satisfy the test of being covered in either of the expression, then it is entitled to exemption. The broad and basic characteristic for exemption under the notification is that the goods must have the property of killing germs and bacteria, insects or pests and it should be understood in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pesticide , which term covers chemical compounds exclusively used to kill living organisms such as insects, fungus or weed affecting livestock, crop, plant or stored produce. It was also held at even if it is accepted that the products Harpik and Lizol posses some additional attributes of killing microorganisms mainly bacteria or viruses (the main use being of toilet cleaner or surface cleaner), the latter are definitely not pests and the products are also not to be regarded as pesticides. Referring to the package, it was also held that the brochure of the product clearly points to the use for removal of tough stains, killing germs and fighting odours. It was also observed that the brochure also contains an assurance that Harpic is suitable for all types of toilet bowls and does not affect the septic tank. Accordingly, the Revenue held that all these clearly pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be liable to be assessed as an item under Entry 21 of the Fourth Schedule of the Assam VAT Act and will not fall within the excluded category under the Explanation. Re: Judgment of Rajasthan High Court holds Harpic and Lizol as insecticide/ pesticide: Similarly the Rajasthan High Court has also held Harpic and Lizol to be a pesticide. The Supreme Court of India has dismissed the Special Leave Petition filed by the State of Rajasthan. This Court while disposing of Writ Tax No. 635 of 2013 and Writ Tax No. 636 of 2013 (in proceedings arising out of interlocutory Orders passed by the UP Tax Tribunal in Appeal relating to classification of Harpic and Lizol) took note of the Judgments passed by other Hon ble High Courts and observed as under: Learned Standing Counsel is not in a position to dispute the correctness and the applicability of the two judgments of the Gauhati and the Andhra Pradesh High Courts and that the above products in which the Petitioner is dealing are taxable as pesticides and further that the Order of the Commissioner would not come in way for assessing the taxability of the Petitioner on the above products. . The Court is consciou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Re: Burden to prove classification in a particular entry is always on the Revenue: The burden to prove that a particular item falls under a specific entry is on the Revenue and not the assesse. The Hon ble Supreme Court in Union of India Vs. Garware Nylons Ltd. 91996 (10) SCC 413); HPL Chemicals Vs. Commissioner of Central Excise) 2006 (5) SCC 208) and Voltas Ltd. Vs. State of Gujarat (2015 (7) SCC 527) has held that the burden of proof is on the taxing authority to demonstrate that a particular class of goods or item in question is taxable in the manner claimed by the Revenue and that a mere assertion in that regard is of no avail. The said principle has been so stated by the Hon ble Supreme Court in para 26 of Voltas Ltd. which is extracted herein below for ease of reference: Qua the issue of classification of goods to determine the chargeability thereof and the rates of levy applicable, it is no longer res integra that the burden of proof is on the taxing authority to demonstrate that a particular class of goods or item in question is taxable in the manner claimed by them and that mere assertion in that regard is of no avail as has been enunciated by this Court in Union ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Harpic and Lizol are manufactured under license under the Drugs Act. The Special Counsel nextly submits that Harpic and Lizol are manufactured under licence under the Drugs Act; and they are therefore drugs falling under entry 88 but being toilet preparations stand excluded therefrom. A careful reading of entry 88(b) would show that Harpic and Lizol would be odd men out among the goods mentioned in the entry. The said entry speaks of only the products capable of being used as cosmetics and toilet preparations. Illustratively it mentions tooth pastes, tooth powders, cosmetics, toilet articles and soaps. It does not deal with toilet cleaner or floor cleaner used as disinfectants to kill bacteria and germs. When the language of the taxing entry is plain, it is not for the Courts, to introduce words to uphold the assessment. The High Court, however, has observed as follows :- We cannot read Harpic and Lizol as being included in toilet preparations to bring them under the excluded category under entry 88(b) of IV Schedule to the VAT Act. Even if the manufacturer obtained drug licence, for manufacturing disinfectants they do not cease to be pesticides and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate that Harpic and Lizol fall under entry 88 merely because they are manufactured under drug licence. In view of the aforesaid, the High Court reached at a conclusion and held that Harpic and Lizol are disinfectants capable of destroying germs and microorganisms like Escheriachia coli, Staphylocococcus aureus, Enterococcus hirae, Pseudomonas aeruginosa and Candida albicans etc. Being disinfectants they fall within the category of pesticides covered by entry 20 of IV Schedule. Against the aforesaid judgment of the Andhra Pradesh High Court dated 13 June 2012, a Special Leave Petition was filed by the department which was dimissed on the ground of delay. Similar issue was also considered by the Division Bench of the Guwahati High Court in case bearing Writ Petition No. 1377 of 2010, Reckitt Benckiser India Pvt. Ltd. v. The State of Assam and Others, vide judgment and order dated 18.9.2012. A Division Bench of Guwahati High Court has held that harpic and Lizol having been declared to be pesticide, would be liable to Tax under Entry No. 19 of the Part A of the Second Schedule of the Assam VAT Act being as pesticides while allowing the writ petition. It is, however, submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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