Madhya Pradesh High Court
Reckitt Benckiser Ltd vs Commercial Taxes Department on 26 September, 2019
Tax Reference No.101/2017 1
HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE
Tax Reference No.101/2017
M/s Reckitt Benckiser Limited v/s Commercial Tax Department
Indore, dated 26.09.2019
Per : S.C. Sharma, J:
Parties through their counsel.
The present Tax Reference has been made by the
Madhya Pradesh Commercial Tax Appellate Board in
exercise of power conferred under Section 17 (1) of the
Madhya Pradesh Commercial Tax Act, 1994. The following
two questions have been referred before this Court, which
are reproduced as under:-
1.Whether on the facts and circumstances of the case the Appellate Board was justified in coming to conclusion that the Applicant is liable to be taxed on the entry of Mosquito repellent under Schedule II of entry tax Act within the meaning of Section 3 (1)
(b) of the said act.
2. Whether on the facts and circumstances of the case the Appellate Board was justified in coming to the conclusion that the assessee is liable to taxed on entry of Mosquito repellent under Schedule II of Entry Tax Act within the meaning of Section 3 (1) (b) of the s aid act even in the presence of the High Court verdict that Mosquito Mat and Coils are repellent (it repulses mosquitoes) and not insecticides (it kills mosquitoes) and the two commodities represent two different kinds of goods.
02. The facts of the case reveal that an assessment order was passed against the applicant / Company - M/s Reckitt Benckiser Limited on 22.01.2008, against which, an appeal was preferred before the Deputy Commissioner, Indore and the assessment order was affirmed by the Deputy Commissioner, against which, an appeal was preferred before the Madhya Pradesh Commercial Tax Appellate Board and the same has also been dismissed.
03. The facts further reveal that the applicant / Tax Reference No.101/2017 2 Company is engaged in the business of sale and purchase of various household items like harpic, soap, medicines, mosquito repellent, insecticides, shaving cream etc. and was aggrieved by the action of the department including mosquito repellent under the entry under Schedule II of the Madhya Pradesh Entry Tax Act, 1976 within the meaning of Section 3 (1) b of the Act of 1976. Thus in short, the whole controversy was whether mosquito repellent is insecticide or not. The charging section under the Madhya Pradesh Entry Tax Act, 1976 (Madhya Pradesh Sthaniya Kshetra Mein Mal Ke Prawesh Par Kar Adhiniyam, 1976) reads as under:-
"3. Incidence of taxation:-
(i) There shall be levied an entry tax:-
(a) On the entry in the course of business of a dealer of goods specified in Schedule II, into each local area for consumption, use or sale therein; and
(b) On the entry in the course of business of a dealer of goods specified in Schedule III, into each local area for consumption, or use of such goods but not for sale therein;"
04. Schedule II appended to the Rules of 1976 at Serial No.20 includes insecticides and pesticide reads as under:-
Serial Number Description of goods Rate of tax (per cent) (1) (2) (3) 20 Insecticide & Pesticides 1
05. The question whether mosquito repellent is insecticide or not was considered by the Division Bench of Allahabad High Court in the case of Knight Queen Industries (P) Ltd. through its authorized Signatory sh. Dileep Kumar Gupta v/s the State of U.P. Through Institutional Finance Secretary, U.P. Shasan, The Tax Reference No.101/2017 3 Additional Commissioner Grade-I, Trade Tax and the Deputy Commissioner (Assessment) Trade Tax reported in (2006) 145 STC 226 (All). Paragraphs - 20 to 29 of the same reads as under:-
"20. We shall now examine the decisions which deal with insecticides and Pesticides'. In Sonic Electrochent (P) Ltd. v. State of Orissa and Ors. 1992 STC 117, Orissa High Court considered whether 'Mosquito Repellent Mats' which admittedly were 'insecticides', were entitled to exemption as 'pesticides' and it observed :-
....The authorities having exempted "pesticides" from the levy of tax in exercise of powers under Section 6 of the Orissa Sales Tax Act without having any limitation with regard to the kind of pesticides, it is difficult for us to give a limited meaning to the aforesaid expression "pesticides". In our considered opinion, " insecticide" being also a species of sticides " would he entitled to the exemption from levy of tax in view of the notification of the State Government under Section 6 of the Orissa Sales Tax Act and since the appellate authority has come to the conclusion that the goods manufactured by the assessee are "insecticide", the said item is entitled to exemption in question....
21. In Transelektra Domestic Products Pvt. Ltd.
and Ors. v. Commercial Tax Officer, Porpur Assessment Circle, Madras and Ors. 1990 STC 436 the Madras High Court considered whether Mosquito; Mats marketed under brand name "Good knight"
could be treated as 'insecticides' and consequently fall under Item No. 66 of the Scheduled to the Act. It is in this context that High Court observed:-
5. On going through the decision of the Tribunal, 1 am in entire agreement with the line of reasoning adopted therein. Even that apart, the entry No. 66 of the First Schedule to the Act while describing the various commodities as falling within it refers to insecticides generally and not with or of any particular percentage of combination or composition. As a matter of fact, the concluding portion of the entry " and combinations thereof' without prescribing any particular percentage is an indicator that what was envisaged therein is that the product may Tax Reference No.101/2017 4 he an insecticide simpliciter or a combination of an insecticide to bring it within the meaning of the entry and it need not necessarily he of any particular percentage of combination of any one or more of the category of goods referred to in the entry. The stand taken to the contra for the Revenue is wholly misconceived....
22. It may be relevant to point out that the Madras High Court in the aforesaid case of Transelektra Domestic Products (supra) had placed strong reliance upon the observations made by West Bengal Taxation Tribunal in Transelektra Domestic Products Limited v. Inspector of Commercial Taxes (l992) 86 STC 497 (W.B.T.T.) wherein it was observed :.-
In trade circle the mat is understood as an insecticide in view of the existence of the label on the package "d-Allethrin 4 per cent mosquito mat insecticide". The traders deal with insecticides in accordance with the provisions of the Insecticides Act, 1968. The preamble to that Act shows that Insecticides Act, 1968, is for regulating the import, manufacture, sale, transport, distribution and use of insecticides. We have already referred to the relevant provisions of the Insecticides Act, 1908 for the purpose of showing that nobody can deal with insecticides otherwise than in accordance with the provisions of the Insecticides Act. Accordingly, we are to hold that mat manufactured by the applicant is understood in commercial parlance or trade circle as an insecticide and as such it will be governed by the Act of 1954....
23. In Transelektra Domestic Products Private Limited v. State of Kerala and Ors. 122 STC 229, the Kerala High Court also considered whether Mosquito Repellent Mats manufactured in the name " Good Knight" and "Banish" could be classified as 'insecticide' for the purpose of levying Sales ft Tax under the Kerala General Sales Tax Act, 1963 and after placing reliance of the Madras High Court in the aforesaid case of Transelektra Domestic Products (supra) observed:-
3 These goods are covered by the provisions of the Insecticides Act and these goods can be classified if a specific entry and cannot be included in unclassified items., When we can attach a parentage to a product it need not be sent to orphanage, that is residuary entry as held by the Supreme Court in Dunlop India Tax Reference No.101/2017 5 Ltd. v. Union of India (1976) 2 SCC 241, Since the mosquito repellent, mat contains insecticide allethrin chemicals, which is manufactured and sold under licence issued under the Insecticides Act and it will fatally affect the nervous system of mosquitoes, we are of the opinion that it can be classified as an insecticide till it was specifically classified from April 1, 1991 onwards. Government mosquito repellent mat as coming specifically classified order entry 123 B from April 1, 1991 under item 85 from April 1, J992 making it a single point rate.
24. A learned Single Judge of this Court in the case of Commissioner Trade Tax v. Priya Distributor Trade Tax Revision No. 334 of 1996 connected with Trade Tax Revision No. 338 of 1996, The Commissioner of Trade Tax U.P. v. Priya Distributor, Ghaziabad considered whether the Trade Tax Tribunal was justified in holding that Mosquito Mats fall under the category of 'insecticides'. The Court placed reliance upon the decision of the Madras High Court and Orissa High Court in the case of Transelektra Domestic Products (supra) and Sonic Electrochem (supra) respectively arid held that Tribunal was justified in holding that Mosquito Mats fall under category 'insecticides' and liable to tax accordingly.
Special Leave Petitions No. 13187 of 2003 and 17018 of 2003 against the aforesaid decisions dated 20-2-2003 in TTR No. 334 of 1996 and in TTR No. 338 of 1996 were filed. Both the SLPs were dismissed on 23.2.2004 and the order passed by Supreme Court is quoted below-
We see no reason to interfere. The special leave petitions are dismissed.
However, in Commissioner of Trade Tax of Tax, U.P. Lucknow v. Britania Agencies 2004 (36) STJ 67 and Commissioner of Trade Tax U.P. Lucknow v. Hindu Superstore 2004 (36) STJ 76 another learned Single Judge of this Court took a contrary view and held that "Kachuwa Chap Agarbatti" was a Mosquito Repellent and not an 'insecticide' or 'pesticide'. In coming to the aforesaid conclusion the Court placed reliance upon those decisions of the Supreme Court wherein it was held that entries in sales tax should not be construed in any technical sense but in a manner as understood in common parlance and then concluded that Tax Reference No.101/2017 6 "Good Knight" mats have been treated by persons dealing with it as repellent'.
Having considered the submissions advanced by learned Counsel for the parties, the material on record and examination of the facts of these petitions, we find from the pleadings that Articles/goods sold by the petitioners, though used as household articles, is never the less house hold 'insecticide' which fact is also mentioned on their products. The chemical composition used in manufacturing the goods in question (though widely known and popularly understood as Mosquito Repellent) is allethrin which is an 'insecticide. The petitioners are using chemicals for manufacturing the finished goods which have been treated as 'insecticides' and under the provisions of the Insecticides Act, 1968 a certificate has been issued by Government of India, Ministry of Agriculture which leave no scope of doubt that allethrin which is used in the product sold by the petitioners is 'insecticide'. Insecticides Rules, 1971 provides for the manner of labelling. Labelling/packing of the products of the petitioner is as per the afore-quoted Rule 19(4) of the Rules.
25. D-Trans 'allethrin' and 'pallethrin' are used in manufacturing the goods which have been described as household 'insecticides' on their products as per the statutory requirement under Insecticides Act. In the absence of any specific entry relating to Mosquito Repellent/Mosquito Destroyer and at the same time there being an entry mentioning 'insecticides', it can reasonably be said that an ordinary person will ordinarily understand the product of the petitioners falling under category of the insecticides.
26. These facts coupled with the Principles enunciated in the decisions referred to above leave us in no doubt that the products sold by the petitioners are basically in the categories of 'insecticides' particularly in the absence of any indication in the Notification in question.
27. It has, however, been urged by Sri Kesarwani, learned Counsel for the Revenue that the petitioner applied for registration under Section 8A of the Act ''Form 14" wherein in column 7 it has been mentioned that the commodity traded is "Mosquito Repellent Mats/Coils etc.". Similarly under Section 7 of the Central Sales Tax Act, 1956, the petitioner Tax Reference No.101/2017 7 applied for registration in Form-A wherein in column 16 it has been mentioned that the purchase and sales of "Mosquito Repellent Mats/Goils etc".
28. We are, however, unable to persuade ourselves to hold that merely because the petitioners have at various stages contended that the product is described or commonly traded as 'Mosquito Repellant' it should not fall in the category of insecticides'. We would have accepted such a contention if there was separate or specific exclusion entry of Mosquito Repellant in the existing entry of 'Pesticide & Insecticide'. In that case there would have been no difficulty but in the absence of specific mention as indicated above, the product in question falls under the entry insecticides'. The percentage of 'allethrin' used in the product is of no consequence at all, since it is admittedly an 'insecticide'.
29. We entirely agree with the view taken by the Madras High Court in Transelektra Domestic Products Pvt. Ltd. (supra), and by Kerala High Court in Transelektra Domestic Products Private Ltd. (supra) The learned Judge in M/s. Priya Distributor (supra) had also placed reliance upon the said decisions.'"
06. In the present case, the same issue is involved and mosquito repellent has been held to be an insecticide, not only by the Division Bench of Allahabad High Court but, also by the Kerala High Court in the case of Transelektra Domestic Products Private Limited v/s The State of Kerala & Others reported in 122 STC 229 and by the Madras High Court in the case of Transelektra Domestic Products Private Limited & Others v/s Commercial Tax Officer reported in 1990 STC 436.
07. The mosquito repellent contains an insecticide and it not only repels the mosquito but also is capable of killing the mosquito, and therefore, is covered under the entry of insecticides and pesticides.
08. The Hon'ble Supreme Court in the case of Sonic Tax Reference No.101/2017 8 Electrochem & Another v/s Sales Tak Officer and Others reported in (1998) 6 SCC 397, while dealing with Gujrat Sales Tax Act, 1969, has dealt with the similar issue. Under the Gujrat Sales Tax Act, 1969, there was specific entry i.e. Entry No.129 under Schedule II Part - A and the same reads as under:-
Sl. No. Description of goods Rate of sales tax Rate of purchase Act 129 Mosquito repellent Twelve paise in the Twelve paise in the rupee rupee
09. In spite of there being a specific entry i.e. Entry No.129 dealing with mosquito repellent, a claim was made by the assessee therein to treat the entry as insecticide under Entry No.98.
10. The Hon'ble Supreme Court was dealing with Jet Mat and has arrived at a conclusion that there is a specific entry of mosquito repellent and once there is a specific entry of mosquito repellent, tax has to be charged keeping in view Entry No.129 and Jet Mat cannot be treated under the entry of insecticides. Thus in short, in the aforesaid case, there were two specific entries at Serial No.98 and 129 in respect of insecticides and mosquito repellent and in those circumstances, as there was a specific entry of mosquito repellent, Jet Mat was treated to be covered under the heading mosquito repellent, whereas in the present case, there is no specific entry of mosquito repellent under the Madhya Pradesh Entry Tax Act, 1976, and therefore, as it contains an insecticide, it has to be treated within the ambit and meaning of Entry 20 i.e. insecticides and pesticides.Tax Reference No.101/2017 9
11. Hence, the Madhya Pradesh Commercial Tax Appellate Board was justified in coming to the conclusion that the applicant / Company was liable to be taxed on the entry of mosquito repellent under Schedule II of the Madhya Pradesh Entry Tax Act, 1976 within the meaning of Section 3 (1) b of the said Act.
Thus, both the questions are answered in favour of the department. The mosquito repellent, mosquito mat and coils are repellent and they contain insecticide, and therefore, they are to be treated covered under Entry 20 Schedule II of the Madhya Pradesh Entry Tax Act, 1976.
With the aforesaid, the present Tax Reference stands disposed of.
Certified copy, as per rules.
(S.C. SHARMA) (SHAILENDRA SHUKLA)
JUDGE JUDGE
Ravi
Digitally signed by Ravi Prakash
Date: 2019.10.03 11:13:03 +05'30'