The Hon’ble Supreme Court of India on 10.04.2023 in M/S Reckitt Benckiser (India) Ltd Vs. Commissioner Commercial Taxes & Ors, disposing Civil Appeal No. 1335 of 2010 finally decided the rate of tax applicable for the products like Mortein Insect Killers, Harpic Toilet Cleaner and Lizol Floor Cleaners; and Dettol Antiseptic Liquid under the Kerala VAT Act,2003. The issue pertains to the classification of the appellant company’s products namely (i) Mosquito Mats, Coils and Vaporizers; and (ii) Mortein Insect Killers; (iii) Harpic Toilet Cleaner and Lizol Floor Cleaners; and (iv) Dettol Antiseptic Liquid for the purposes of “KVAT Act”. It was the case on behalf of the appellant that the products at (i) to (iii) were classifiable under Entry No.44(5) of the 3rd Schedule to the Kerala VAT Act as being ‘pesticides, insecticides’ corresponding to HSN Code 3808 and therefore subject to VAT at the rate of 4%. With respect to the product at (iv), it is ‘Dettol Antiseptic Liquid’ which is correctly classifiable under Entry 36(8) (h) (vi) being medicaments corresponding to HSN Code 3004.90 of the III Schedule, and thus also subject to tax at the rate of 4%.
However, the Commissioner of Commercial Taxes, Kerala rejected the contention of the appellant holding that the products (i) Mortein Mosquito Coil, Mat and Liquid Vaporizer would come under Entry 66 of Notification SRO 82/06 issued U/s.6(1)(d) of the Kerala VAT Act which attracts tax @ 12.5% (ii) Mortein Insect Killer is subject to tax at the rate of 12.5% under the residuary entry i.e. under SL No.103 of Notification SRO 82/06 on the ground that they are not specifically classifiable under the Second and the Third Schedule; (iii) Harpic Toilet Cleaner and Lizol Floor Cleaner are classifiable under SI No. 27(4) of the said Notification SRO 82/06 attracting tax @ 12.5%; and (iv) Dettol Antiseptic Liquid is classifiable under Entry 103 of the said Notification SRO 82/06 i.e. residual entry attracting tax @ 12.5%; on the ground that the said product is not in the nature of a medicine having therapeutic or prophylactic properties, but is used only for cleaning purposes. The assessee company challenged the order passed by the Commissioner of Commercial Taxes holding the above in an appeal before the High Court but the same was dismissed. Thereon Civil Appeal was filed;
HELD BY THE COURT
It is the case of the appellant that Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers shall be classifiable as insecticides under Entry 44(5) and therefore chargeable to tax at 4%. It is the case of the appellant that as the aforesaid products are manufactured under the license granted under the Insecticides Act and therefore the said products can be said to be insecticides classifiable under Entry 44(5). The aforesaid has no substance. It is required to be noted that HSN Code 3808 has been deleted from Entry 44(5) w.e.f. 01.07.2006 and from 21.01.2006 the aforesaid products would fall under Sl. No.66 namely ‘Mosquito repellant’, which is the specific entry and subject to VAT at 12.5%. The insecticides under Entry 44(5) therefore can be said to be a general entry. Once there is a specific entry the ‘Mosquito Repellant’, thereafter one is not required to go to the definition under another Act namely Insecticides Act. Therefore, this Court is in complete agreement with the view taken by the High Court that Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers products shall not be classifiable under Entry 44(5) as insecticides. (Paras 9, 9.1)
(ii) that so far as the products Harpic and Lizol is concerned, it is the case of the appellant that the same is classifiable under Entry 44(5) of III Schedule of KVAT Act – HSN Code 3808 and the said products are also classifiable as insecticides. However, it is required to be noted that after introduction of SRO 82/06 w.e.f. 22.01.2006 the Harpic and Lizol would fall under Sl. No. 27(4) of SRO 82/06. Sl. No.27(4) thus is a specific entry. The aforesaid two products are used for cleaning the floor and toilet. As noted by the High Court and even from the product description and the nature of use stated in the products, the said two items are essentially used as stain removers and deodorants. Merely because they kill germs as well, the same cannot be said to be insecticides classifiable under Entry 44(5). Therefore, this Court is in complete agreement with the view taken by the High Court that the product Harpic and Lizol shall not be classifiable under Entry 44(5) and shall be classifiable under Entry 27(4) of SRO 82/2006 chargeable to tax at 12.5%. (Paras 9.2, 9.3, 9.4)
(iii) that, as per the settled position of law while considering a particular entry the principles of classification which are fundamental to any matter relating to classification under the taxing statute are: (a) plain meaning to be given to the taxing provision; (b) burden to prove classification in a particular entry is always on the Revenue; (c) any ambiguity has to be resolved in favour of the assessee and in case of a reasonable doubt, the construction most beneficial to the assessee must be adopted; (d) specific entry would override a residuary entry; and (e) resort to residuary entry is to be taken as a last measure, only when by liberal construction the specific entry cannot cover the goods in question. (Para 9.8)
(iv) that considering the dominant use of Dettol and the active ingredients of Dettol and that the Dettol is used as an antiseptic and is used in hospitals for surgical use, medical use and midwifery due to therapeutic & prophylactic properties the same would fall under Entry 36(8) (h) (vi) as claimed by the appellant and would not fall under the residuary entry as claimed by the Revenue. To that extent the impugned judgment and order passed by the High Court deserves to be quashed and set aside (Paras 9.10)
Author/Blogger: Aji V. Dev, Advocate, High Court of Kerala at Aji V. Dev & Associates, Ernakulam, Kochi, available at ajivdev@yahoo.co.in/advajivdev@gmail.com/9447788404/9605586600
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