Case Law Details

Case Name : State of Gujarat v/s Bharat Pest Control (Gujarat High Court)
Appeal Number : Tax Appeal No. 706 of 2013
Date of Judgement/Order : 22/09/2016
Related Assessment Year :
Courts : All High Courts (4474) Gujarat High Court (388)
Apurva N. Mehta, Advocate

Pesticides and Chemicals used in Pest Control Service cannot be subjected to Value Added Tax

In a recent judgment dated 22.09.2016, rendered in the case of State of Gujarat v/s Bharat Pest Control, the Gujarat High Court has held that pesticides and chemicals used in pest control service cannot be subjected to value added tax.

The submissions made in this regard by the ld. counsel appearing for the revenue were recorded as under :

Para 5. Learned AGP submitted that the title in goods passed from the assessee to the Reliance Petroleum. The term ‘sale’ contained in section 2(23) of the VAT Act would cover such a situation and the transaction would therefore, be exigible to tax. Mere registration of the assessee for the purpose of service tax would not be conclusive. The Tribunal committed a serious error in holding that since the goods were consumable, no title passed in favour of the purchaser.

The submissions made in this regard by the ld. counsel appearing for the assessee were recorded as under :

Para 6. On the other hand, learned counsel for the assessee opposed the appeal contending that the assessee had only provided skill based service. There was no transfer of goods in the process. At the end of execution of the contract, the pesticides and chemicals were fully consumed. There was thus, no sale of goods. In any case, it was a skill based service, which also included employment of substantial labour force and, use of consumables was wholly incidental. There was no intention to sale such products.

While accepting the arguments made on behalf of the assessee on the issue, the Court held as under :

Para 9. In this context, we may refer to the relevant terms of the work order, under which, the assessee was executing the contract. The work order dated OZ 02.2009 contained work description as pest control service to be performed at SEZ office buildings and factory buildings. The details of work to be performed included the job to carry out and to provide prophylactic treatment of spraying insecticides, rodent control treatment etc. The work order specified the quantity of the work, the rate at which the assessee would be remunerated for such work, the total amount to be paid for such quantity at such rate. The work order contained at Annexure A, special conditions of the contract. It essentially required all works to be performed by the assessee under the supervision of the engineer of the company. The scope of work was further elaborated in this document as to include carrying out pest control activities in various facilities in office and factory building as per the instructions of the company. It would involve control of adult mosquito, control of rodent and crawling pests like bugs, ticks, crickets, cockroaches, silver fish, red ants, black ants spider and poisoned reptiles etc. It also required the assessee to use approved brands of pesticides, insecticides and chemicals of reputed company only. The contract envisaged the assessee to pay the service tax or the sale tax as may be applicable.

Para 10. From the terms of contract, it can thus, be seen that the assessee was awarded the contract for pest control measures at the office of factory premises of the company situated within the SEZ area. The contract would include complete treatment of pest control and rodent control, for which, the assessee would use the pesticides and chemicals of reputed companies. In essence therefore, this was a contract for carrying out the pest control service which would require special knowhow and use of pesticides in recommended measures. The concentration of the pesticides, the amount of usage, the places to be applied and all other relevant aspects would be a matter of considerable technical expertise. The use of the pesticides in the process was wholly incidental. The dominant purpose was to provide a composite pest control and rodent control service. The use of pesticides and chemicals was wholly incidental. There was no intention of sale of goods from the assessee to the company.

Referring to various judgments of Supreme Court and other High Courts on the issue, the High Court concluded as under :

Para 16. In view of such overwhelming judicial opinion, we hold that the Tribunal committed no error. All three questions are answered against the State and the tax appeal is dismissed.

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