In Godrej Consumer Products Limited10, Entry 23 of the Third Schedule to the Karnataka VAT Act read as under: 23. Chemical fertilizers, Chemical Fertilizer mixtures, bio-fertilizers, micro nutrients, gypsum, plant growth promoters and regulators; rodenticides, fungicides, weedicides and herbicides; insecticides or pesticides but excluding phenyl, liquid toilet cleaners, floor cleaners, mosquito coils, mosquito repellants and the, like used for non-agricultural or non-horticultural purposes. The Karnataka High Court compared the said entry with Entry 5 of Part-I of the Second Schedule to the earlier Karnataka Sales Tax Act, 1957 which read thus: 5. Insecticides, pesticides, rodenticides, fungicides, weedicides, herbicides, plant regulators and plant growth nutrients excluding copper sulphate. No entry similar to Entry 78A of the Schedule-I of the APGST Act, or Entry 100(140) of Schedule-IV to the VAT Act, was considered in Godrej Consumer Products Limited10. The subject goods therein were, therefore, held to be insecticide killers falling within the word insecticide. The aforesaid decision of the Karnataka High Court does not therefore persuade us to take a similar view. Reliance placed by the petitioners, on Godrej Consumer Products Limited10, is therefore of no avail. XIX. CONCLUSION: Viewed from any angle, we find no infirmity either in the impugned orders of assessment, or the orders of the VAT appellate Tribunal which are subjected to challenge in the present proceedings by way of revision. All the Writ Petitions and the TREVCs fail and are, accordingly, dismissed. However, in the circumstances, without costs. The miscellaneous petitions pending, if any, shall also stand dismissed.
HONBLE THE ACTING CHIEF JUSTICE RAMESH RANGANATHAN AND HONBLE SRI JUSTICE M.SATYANARAYANA MURTHY
W.P. Nos.23351 OF 2008 AND BATCH
01-06-2017
Godrej Sara Lee Limited .Petitioner
The Assistant Commissioner (CT) INT LTU, Secunderabad Division, Hyderabad & Anr. . Respondents
Counsel for the petitioners: Sri S. Ravi, Learned Senior Counsel,
Sri Vivek Chandrasekhar, and
Sri Karan Talwar.
Counsel for respondents: Sri M. Govind Reddy, Sri T. Vinod
Kumar and Sri J. Anil Kumar,
Learned Special Standing Counsel
for Commercial Taxes.
<GIST:
>HEAD NOTE:
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114. AIR 1967 SC 1857
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118. AIR 1955 SC 810
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145. 1901 AC 495
HONBLE THE ACTING CHIEF JUSTICE RAMESH RANGANATHAN
AND
HONBLE SRI JUSTICE M.SATYANARAYANA MURTHY
W.P. Nos.23351, 23366, 23373, 23395 OF 2008, W.P.Nos.32987
AND 33406 OF 2010, W.P.Nos.24476, 24490 AND 25349 of 2011,
W.P.No.4092 OF 2013, W.P.Nos. 8032, 9204, 15982 AND 15983 OF
2014 AND W.P.No.6365 OF 2016
AND
T.Rev.C.No.25 of 2015 & T.Rev.C.Nos.4, 8, 10, 11 AND 12 OF 2016
COMMON ORDER: (Per the Honble The Acting Chief Justice Ramesh Ranganathan)
W.P. Nos.23351, 23366, 23373 and 23395 of 2008, W.P.
No.32987 of 2010, and W.P. No.24490 of 2011 are filed by Godrej
Sara Lee Limited questioning the assessment orders passed by the
assessing authority for the tax periods April, 2007 to March, 2008;
April, 2008 to March, 2009; April, 2006 to March, 2007; April,
2005 to March, 2006; April, 2009 to March, 2010; and April, 2010
to March, 2011 respectively. W.P. Nos.24476 and 25349 of 2011
and W.P. No.4092 of 2013 are filed questioning the penalty orders
passed by the assessing authority for the tax periods April, 2006 to
March, 2007, April, 2005 to March, 2006 and April, 2008 to
March, 2009 respectively. W.P. No.33406 of 2010 is filed
questioning the garnishee notice dated 16.12.2010, issued by the
assessing authority, for recovery of Rs.2,13,66,366/-. W.P. Nos.
8032 and 9204 of 2014, W.P. No.6365 of 2016 are filed by Godrej
Consumer Products Limited questioning the assessment orders
passed by the assessing authority for the tax periods April, 2013 to
March, 2014; April, 2014 to March, 2015; April, 2011 to March,
2012; and April, 2012 to March, 2013 respectively. W.P.
Nos.15982 and 15983 of 2014 are filed questioning the penalty
orders passed by the assessing authority for the tax periods April,
2011 to March, 2012 and April, 2012 to March, 2013 respectively.
M/s. Godrej Consumer Projects Ltd (the petitioner in W.P.
No.6365 of 2016) is engaged in the business of manufacture and
sale of Mosquito Repellant Instruments, Mosquito Repellant Mats,
Refills (Vaporizers), Coils and other products like flying insect
killers and crawling insect killers (popularly known as Lal Hit
and Kala Hit), Rat Killing Cakes, Chalk Pencils for killing
cockroaches etc. They claim to have launched a new product called
HIT Anti-Roach Gel intended to kill hidden cockroaches, especially
certain species like American and German cockroaches.
The goods manufactured by M/s.Godrej Consumer Products
Ltd, which are the subject matter of these proceedings, are HIT
AEROSOL CIK, HIT AEROSOL FIK, HIT Rat and HIT Chalk. HIT
AEROSOL CIK, popularly known as Lal Hit, is an aerosol spray
used for killing hidden cockroaches. It is said to contain poisonous
chemicals such as imiprothrin and cypermethrin. This product is
described, both on the label of the aerosol can and on the website
of the Petitioner, as 'crawling insect killer' with a 'unique seek and
kill applicator which kills hidden cockroaches'. The petitioner
claims that the said product is an insecticide that kills
cockroaches. HIT AEROSOL FIK, popularly known as Kala Hit, is
used for killing flying insects such as flies, mosquitoes etc. It is
also said to contain the poisonous element d-trans Allethrin that
fatally affects the nervous system of the flying insect thereby killing
it almost immediately. HIT Rat is a rat killing poison containing
Bromadialone. HIT Chalk is a chalk pencil used for killing ants,
cockroaches and other crawling insects, and is said to contain the
poisonous chemical Cypermethrin. In the assessment orders,
impugned in these Writ Petitions, the assessing authority held that
these goods are not pesticides/insecticides falling within the ambit
of Entry 20 of the IV Schedule to the VAT Act, and they were liable
to be taxed at 12.5%/14.5% under Schedule V of the VAT Act as
residuary goods. The Petitioner also manufactures Mosquito coils,
Mosquito repellant vaporizers, and mosquito mats.
TREVC No.25 of 2015, TREVC Nos.4, 8, 10, 11 and 12 of
2016, relating to the three assessment years 2005-06 to 2007-
2008, are filed by M/s. S.C. Johnson Products Pvt. Ltd, assailing
the common order dated 20.01.2015 passed by the Telangana
Sales Tax and VAT Appellate Tribunal, Hyderabad whereby
classification of the products manufactured by them, under the
residuary entry of the V Schedule to the Telangana Value Added
Tax Act, 2005 (hereinafter referred as the VAT Act), was upheld
primarily on the ground that Entry 20 of Schedule IV to the VAT
Act was limited to goods used for agriculture/ horticulture
purposes, and insect killers used for house-hold purposes did not
fall within its scope.
M/s. S.C.Johnson deals with, among others, various
categories of products manufactured under a License granted in
terms of the Insecticides Act, 1968 (the 1968 Act for short), and
the Rules made thereunder. The petitioner has been paying VAT @
4%, as applicable during the relevant period, classifying the said
goods under Entry 20 of the IV Schedule to the VAT Act. The
subject goods, as detailed in the table below, are referred to by
M/s. S.C.Johnson as insect killers/ insecticides.
Product
Name
Insecticide
Reg. No.
Trade
Mark
Remarks
CIK
(Crawling
Insect
Killer)
Imiprothrin
(0.07% w/w) and
Cypermethrin
(0.02% w/w)
(BAYGON)
Aerosol
CIR-
56,039/2007-
Imiprothirn +
Cypermethrin (A)
(270)-4
Baygon
Recommended to
be used against
Cockroaches
MIK
(Multi
Insect
Killer)
Cyfluthrin
(0.025% w/w)
and Transflutrin
(0.04% w/w)
Aerosol
CIR
41,056/2002-
Cyfluthrin +
Transflutrin (HH)
225-21
Baygon
Recommended
against
cockroaches, flies
and Mosquitoes
FIK
(Flying
Insect
Killer)
Cyfluthrin
(0.025% w/w)
and Transflutrin
(0.04% w/w)
Aerosol
CIR 41056/2002-
Cyfluthrin +
Transflutrin (HH)
225-21
Baygon
Recommended
against Flies and
Mosquitoes
AIK
(All Insect
Killer)
Delamethrin
(0.05 % ) and
Allethrin (0.04%
w/w)
CIR-27,667/98-
Deltamethrine +
Allethrin (HH)
Baygon
All Insect killer
Recommended
against
cockroaches,
mosquitoes and
flies.
In addition to the above, M/s. S.C.Johnson also
manufactures mosquito Repellants on which they pay VAT @
12.5%/14.5% treating them as unclassified goods under Schedule
V to the VAT Act.
It is the petitioners case that, ever since 01.09.2005, they
have been collecting tax on Mosquito Coils, Mosquito Repellant
Vaporizers, Mosquito Mats at 12.5%, (as the said goods fall under
the residuary category), and have been remitting the same to the
department. With respect to other goods, they have been filing their
returns on the basis that they fall under Entry 20 of Schedule IV,
and have been collecting and remitting tax at 4%. They contend
that a reading of the history of the Entries would show that
pesticides and insecticides were always eligible for concessional
rate of tax; w.e.f. 01.01.2000, the concessional rate of tax was not
available to mosquito repellants; till 01.09.2005, when the
amended Entry 20 was introduced, the department did not dispute
the petitioners eligibility to be extended concessional rate of tax
under Entry 78 of Schedule I of the APGST Act, or Entry 20 of
Schedule IV of the VAT Act; there has been no change in the
nomenclature of the earlier Entry 78, and the present Entry 20,
except for exclusion of mosquito repellent in any form; and the
said exclusion was earlier present by way of a separate entry viz
Entry 203.
On the other hand, it is the case of the revenue that the sole
issue, in the present case, is whether the products sold by the
petitioners are insecticides and pesticides falling under Entry 20 of
Schedule IV of the VAT Act or are unclassified goods chargeable to
tax at the rate fixed in Schedule V; as the subject goods are not
insecticides in terms of manufacturing, presentation, packaging,
ingredients, marketing, name etc, they cannot be treated as
insecticides falling under Entry 20 of Schedule IV of the VAT Act;
and there is an underlying difference between household
insecticides manufactured by the petitioners, and the
insecticide/pesticide referred to in Entry 20 of Schedule IV of the
VAT Act.
Elaborate oral submissions were put forth by Sri S. Ravi,
Learned Senior Counsel and Sri Karan Talwar, Learned Counsel
for the petitioners. Written submissions were also filed, on behalf
of the petitioners, by their Counsel Sri Vivek Chandrasekhar and
Sri Karan Talwar. Oral submissions were made, and written
submissions were filed, on behalf of the revenue by Sri M. Govind
Reddy, Sri T. Vinod Kumar and Sri J. Anil Kumar, Learned Special
Standing Counsel for Commercial Taxes. It is convenient to
examine the rival submissions, urged by Learned Counsel on either
side, under different heads.
I. FACTORS TO BE TAKEN INTO CONSIDERATION IN
DETERMINING THE CLASSIFICATION OF A PRODUCT
IN TAX STATUTES:
The dispute, in the present batch of cases, relates to the
classification of the subject goods. While the petitioners claim that
they are pesticides and insecticides under Entry 20 of the IV
Schedule to the VAT Act and are liable to be subjected to tax at the
concessional rate of tax of 4%/5%, it is the case of the revenue that
these goods do not fall within the ambit of Entry 20 of the IV
Schedule, and are therefore liable to tax at 12.5%/14.5% under the
residuary Schedule V of the VAT Act. Before examining this
question in its various facets, it is necessary at the outset to briefly
note the factors to be borne in mind in determining the
classification of goods under tax statutes. For the purposes of
classification, the relevant factors, inter-alia, are the statutory
entry, the basic character, function and use of the goods.
(Commissioner of Central Excise v. Wockhardt Life Sciences
Ltd. ; CCE v. Carrier Aircon ). The functional utility and
predominant or primary usage of the commodity must be taken
into account, apart from the understanding of the product in
common parlance. (Wockhardt Life Sciences Ltd.1; O.K. Play
(India) Ltd. v. CCE ; Alpine Industries v. CEE, New Delhi ;
Sujanil Chemo Industries v. CEE & Customs ; ICPA Health
Products (P) Ltd v. CEE ; Puma Ayurvedic Herbal(P) Ltd v. CCE,
Nagpur ; CCE Delhi v. Ishaan Research Lab (P) Ltd. ; CCE v. Uni
Products India Ltd., ).
While understanding the meaning of the words used in a tax
Statute, the legislative history should also be taken note of. (State
of Karnataka v. M/s.Godrej Consumer Products Ltd. ). If a
provision, which falls to be applied, is found to be ambiguous, a
subordinate presumption comes into play, namely that it is
presumed that there was no intention to change the meaning of
the provision which has been taken and repeated in the same or
similar language in the subsequent Act. In such circumstances, it
may be relevant to try to determine the meaning of the relevant
provision by looking at what it meant in a previous statute,
including by reference to authority on the provision as it appeared
in that statute. (Wilsons Solicitors LLP v. Serena Bentine (Acting
by her Litigation Friend, The Official Solicitor) ).
II. EVOLUTION OF ENTRY 20 OF THE IV SCHEDULE TO THE
AP VAT ACT:
Entry 78 of Schedule I of the APGST Act, as it stood in the
year 1970 (Act No.9 of 1970), read as Pesticides and Plant Protection
Equipment. The objects and reasons of Act 9 of 1970, with specific
reference to this Entry, read as follows:
Pesticides and Plant Protection Equipments are at present liable to tax at 3
paise in the rupee at each point of sale. With a view to reducing the
incidence of tax on these essential requisites for agricultural production,
the government proposes to restrict the levy of tax to single point..
(emphasis supplied)
When the scope of Entry 78 was expanded in 1976 it
included insecticides, fungicides, weedicides, etc. Prior to the year
2000, Entry No. 78 of Schedule I of the APGST Act provided for a
tax rate of 1% on Pesticides, insecticides fungicides, herbicides,
weedicides and other plant protection equipment and accessories
thereof. From 1.01.2000 onwards, the APGST Act, in its first
schedule, incorporated a distinct entry i.e. Entry 203 which
specifically provided for a higher rate of tax at 8% in respect of
Mosquito repellants and devices of all kinds including electronic
repellant devices, refills, mats, coils and accessories thereof. Entry
78 of Schedule I of the APGST Act as it stood, before introduction
of the VAT Act, read thus:-
Pesticides, Insecticides, fungicides, herbicides, weedicides and other
plant protection equipment and accessories thereof.
The evolution of Entry 78 of the First Schedule to the APGST
Act, 1956 is as under:
Act No.
Notification No.
and Date
Effective date
Description of goods
Rate of
Tax
(paise in
the
rupee)
Act 9 of 1970
27.04.1970
Item 78 First Schedule First Sale
Pesticides and plant protection
equipment.
3
Act 5 of 1974
01.03.1974
Substituted as under.
Pesticides, insecticides and plant
protection equipment.
4
Act 49 of 1976
01.09.1976
Substituted as under:
Pesticides, insecticides, fungicides,
weedicides and other plant protection
equipment and accessories thereof.
4
Entry 78A of Schedule-I of the APGST Act related to:-
Pesticides concentrate or technical grade pesticides used by any
registered manufacturer in the State for manufacture of formulated pesticides.
The A.P.G.S.T. Act was repealed with effect from 31.03.2005,
and the A.P. Value Added Tax Act, 2005 came into force with effect
from 01.04.2005. Entry 20 of Schedule IV of the VAT Act, as it then
stood, read as follows:-
Pesticides, insecticides, fungicides, herbicides, weedicides
and other plant protection equipment and accessories thereof.
Entry 20 of Schedule IV of the VAT Act was amended on
23.10.2005, carving out an exclusion in respect of Mosquito
Repellant in any form with effect from 01.09.2005. Entry 20 of
Schedule IV, with effect from 01.09.2005, reads as follows:-
Pesticides, Insecticides, fungicides, herbicides, weedicides and other plant
protection equipment and accessories thereof including drip and sprinkler
irrigation systems but excluding mosquito repellants in any form.
Entry 100 of the A.P. Value Added Tax Act, 2005 stipulates
that the following goods, when sold as industrial inputs, shall be
subject to tax of 4%/5%. Sub-Entry 140 of Entry 100 reads thus:
Insecticides, fungicides, herbicides, weedicides and pesticides of
technical grade.
III. ARE THE SUBJECT GOODS INSECTICIDES/PESTICIDES
FALLING UNDER ENTRY 20 OF THE IV SCHEDULE:
It is contended, on behalf of the petitioners, that the subject
goods are intended to kill flies, mosquitoes, cockroaches, rats, etc;
they are classifiable as insecticides/pesticides under Entry 20 of
Schedule IV to the Act; if mosquito repellants were classifiable
under the expression insecticides (prior to its amendment), there
is no reason why the subject goods are not classifiable as
insecticides under the VAT Act; the decision of the Commercial
Tax Department, to classify the subject goods under the residuary
entry, runs counter to the decision of this Court in Godrej Hicare
Ltd v. Joint Commissioner of Commercial Taxes (Legal),
Hyderabad ; the subject goods are preparations of chemicals
designed to kill insects and pests; such products can only be
classified as insecticides and/or pesticides; any preparation,
containing any substance specified in the Schedule to the 1968
Act, is an insecticide; HIT CIK contains D-trans Allethrin which is
an insecticide; HIT FIK contains imiprothrin and cypermethrin
which are insecticides; HIT Chalk contains cypermethrin which is
an insecticide; HIT Rat cake contains bromadialone which is a
rodenticide; rat is a pest and thus HIT Rat is a pesticide; HIT Anti
Roach-Gel contains fipronil which is an insecticide; the subject
goods are insecticides within the meaning of the term insecticide
as defined in the Insecticides Act, 1968; insecticide is a generic
product having wide varieties, among which mosquito repellants
stand excluded under Entry 20 of Schedule IV of the Act; it is
evident, therefore, that the rest of the varieties of household
insecticides have been included under the genus of insecticides;
since the subject goods are insect killers, they have been rightly
classified under Entry 20 of Schedule IV of the Act; the extent or
quantity of active ingredients used in the goods is not a relevant
factor for the purpose of classification; as held by the Supreme
Court in Puma Ayurvedic Herbal (P) Ltd.7, and CCE v.
Wockhardt Life Sciences Ltd1, minimal use of an active ingredient
in the subject goods does not detract from its being classified as an
insecticide; the department has acknowledged, in the impugned
order, that HIT Rat, specifically meant for rats, is a rodenticide; as
the term rodenticide is not specified in Entry 20 of Schedule IV,
the department has contended that the subject goods do not fall
within its ambit; the department has artificially tried to create a
difference without there being any distinction; the term pesticide
is of wide import, and brings within its scope rodenticide also;
and a rodent is nothing but a house-hold pest.
It is contended, on behalf of the revenue, that the subject
products are more in the nature of urban oriented household
products, and are not insecticides as understood in common
parlance; they are thus classifiable as general goods liable to tax
at the Revenue Neutral Rate (RNR) of tax; the products
manufactured and sold by the petitioners are distinct from regular
insecticides; they are not only branded as household insecticide,
but are also understood differently in common parlance; even
under the Insecticides Act, insecticides intended for household
use, which are formulations consisting of a small portion of active
ingredient, are treated as a different class/category of insecticides;
the aerosol products, manufactured by the petitioners, use
LPG/kerosene as a propellant; it is by direct application that
crawling insecticides are killed, and not because of the composition
of the active ingredient contained therein; the active ingredient in
the so called repellants, which are specifically excluded from the
scope of the Entry, contain a higher percentage of active
ingredient; it is because of the medium through which it is used,
such as electric units, that its effectiveness changes; if the same
repellant is applied through some kind of aerosol, these products
would be more effective; the medium, through which the products
are used, cannot form the basis for determination/classification of
the products; Section 18 of the Insecticides Act imposes a
prohibition on the sale of insecticides by any person without a
licence; the subject products are being sold off the shelf in the
market, which shows that the petitioners claim, on the basis of
their having obtained registration under Section 9 of the
Insecticides Act, is contrary to the provisions of the Act;
registration under Section 9 serves a different purpose; in the
absence of any material being placed on record, in relation to
compliance with Section 13 or 18 of the Insecticides Act, no
reliance can be placed thereupon; Rodenticide is not included in
Entry 20; and, therefore, it must be treated as unclassified goods.
As the words pesticides, insecticides, fungicides,
weedicides and plant protection equipment, used in Entry 20 of
the IV Schedule, are not defined in the VAT Act, it is necessary to
understand their meaning. The ordinary meaning of the word
"pest", as given in Chamber's Twentieth Century Dictionary, is:
"Any deadly epidemic disease; plague anything destructive; any
insect, fungus, etc., destructive of cultivated plants:......." and the
meaning of the word "pesticide" is "pest killer".
The expression "pesticide" has been defined in the "Glossary
for Pesticide Users" as:
"For the purposes of this handbook, pesticides include insecticides (to
control insect pests), herbicides (to control weeds), fungicides (to control fungal
diseases), nematocides (to control nematodes) and rodenticides (to control rats)."
In Encyclopedia Americana, "pesticides" are classified
according to the type of organisms they attack; for example,
substances that kill insects are known as insecticides, and agents
that kill fungi are known as fungicides. The paper on Pesticide
Application Techniques, published by the National Institute of
Plant Health Management, Department of Agriculture &
Cooperation, Ministry of Agriculture & Farmers Welfare, Govt. of
India, show that pesticides are used to prevent crop losses. A few
lines are extracted for the present purposes:-
Pesticide application plays an important role in pest management. Proper
technique of application of pesticide and the equipment used for applying
pesticide are vital to the success of pest control operations... (Page 1, Para 1)
Different types of pesticides are used for controlling various pests. For
Example Insecticides are applied against insect pests, Fungicides against
crop diseases, Herbicides against weeds etc. in order to protect crop losses.
(Page 2, Para 2 from bottom).
In "the New Pesticide User's Guide" by Bert L. Bohment,
Professor and Agricultural Chemicals Co-ordinator, College of
Agricultural Sciences, Colorado State University, U. S. A. , the
picture of a wheel is given with all its radial arches with the
nomenclature "the All-Inclusive Pesticide Wheel", and "insecticides"
are referred to in one of the arches. According to the author the
term 'pesticide' also applies to compounds used for repelling,
attracting, and sterilizing insects; during the early years of
pesticide development, farmers were considered to be the primary
users; however, as new chemicals were produced, new methods of
formulation were developed, and new application techniques were
discovered, new audience found uses for pesticides, and today
pesticides are still a major part of agriculture's production tools,
but have also found uses by industry, State and Federal
Governments, municipalities, commercial pesticide applicators, and
the public as a whole including home-owners and backyard
gardeners; many species of insects are important pests which affect
almost all of man's activities and there are well over one million
known species of insects in the world, but a very small percentage
of these are considered as economically important pests. The
expression "pesticide" has been defined in the aforesaid book, in
the "glossary for Pesticide Users", as follows :
"Pesticide (economic poison) - As defined under the Federal Insecticide,
Fungicide, and Rodenticide Act, economic poison (pesticide) means any
substance or mixture of substances intended for preventing, destroying,
repelling, or mitigating any insects, rodents, nematodes, fungi, or weeds, or any
other forms of life declared to be pests; and any substance or mixture of
substances intended for use as a plant regulator, defoliant or desiccant. "
(Sonic Electrochem (P) Ltd. v. State of Orissa ).
'Pesticide' has been defined in Butterworths Medical
Dictionary, Second Edition, as 'a comprehensive word to include
substances that will kill any form of pest, e.g., insects, rodents and
bacteria'. The term 'pesticide' includes a large variety of compounds
of diverse chemical nature and biological activity grouped together
usually on the basis of what pests they are used to destroy or
eliminate. Under the US Federal Environment Pesticide Control
Act, the term 'Pesticide' has been defined to include '(1) any
substance or mixture of substances intended for preventing,
destroying, repelling, or mitigating any pest, insect, rodent,
nematode, fungus, weed, other forms of terrestrial or aquatic plants
or other forms of animal life e.g., viruses, bacteria, or other micro
organisms, which the administrator declares to be a pest and (2)
any substance or mixture of substances intended for use as a plant
regulator, defoliant or desiccant' (Pesticides in the Indian
Environment, by P.K. Gupta p.2; Bombay Chemical Pvt. Ltd. v.
Collector of Central Excise, Bombay ).
The Asian Development Bank, in its publication called
"Handbook on the use of Pesticides in the Asia-Pacific Region", has
stated : "For the purposes of this handbook, pesticides include
insecticides (to control insect pests), herbicides (to control weeds),
fungicides (to control fungal diseases), nematocides (to control
nematodes) and rodenticides (to control rats). This being the
ordinary meaning of the words "pest" and "pesticide", "pesticide'
will include "insecticide" within it. If one of the meanings of the
word "pest" is "any insect", and the meaning of the word "pesticide"
is "pest killer", then any material which is an "insect killer", being
an "insecticide", would come within the expression "pesticide".
(Sonic Electrochem (P) Ltd.13).
The term pesticide includes a large variety of compounds of
diverse chemical nature and biological activity grouped together
usually on the basis of what kind of pests they are used to destroy
or eliminate. As noted hereinabove pesticide is a substance or
mixture of substances intended for use, as a plant regulator,
defoliant (i.e a chemical that is sprayed on plants and causes their
leaves to fall), or a desiccant (i.e a substance that promotes drying
and is used to remove moisture). It is evident, therefore, that a
pesticide is used mainly for protection of plants.
Hawleys Condensed Chemical Dictionary, by Richard J.
Lewis, SR. Fifth Edition, defines Insecticide as :
Insecticide: A type of pesticide designed to control insect life that
is harmful to humans, either directly as disease vectors or
indirectly as destroyers of crops, food products, or textile fabrics.
General types are as follows: (1) Inorganic: arsenic, lead, and
copper (inorganic compounds and mixtures); the use of these has
diminished sharply in recent years because of the development of
more effective types less toxic to humans. (2) Natural organic
compounds, such as rotenone and pyrethrins (relatively harmless
to humans since they quickly decompose to nontoxic compounds),
nicotine, copper naphthenate, and petroleum derivatives. (3)
Synthetic organic compounds: (a) Chlordane, lindane,
pdichlorobenzene; (b) the organic esters of phosphorus (the
parathions and related substances). (4) Of comparatively recent
development are pyrethroids, or insect growth regulators, which
act as neurotoxins, preventing larvae from becoming adult forms
(juvenile hormones); and metabolic inhibitors, e.g. imidazole,
which function as structural antagonists.
The word Fungicide is defined therein to mean:-
Fungicide: Any substance that kills or inhibits the growth of
fungi. Older types include a mixture of lime and sulfur, copper
oxychloride, and Bordeaux mixture. Copper naphthenate has been
used to impregnate textile fabrics such as tenting and military
clothing, Dithiocarbamate and quinone types were introduced
about 1940. Mercury compounds are also effective but have been
discontinued because of their toxicity to humans. Hypochlorite
solutions are used in swimming pools and water-cooled heat
exchangers. Some types of fungi that infect the human body are
extremely hard to eradicate and require highly specific medical
treatment.
The book on Weed Science, Principles and Practices, Fourth
Edition, published by Johnwiley & Sons, Inc define a weed as
under -
. We define a weed as a plant growing where it is not desired,
or a plant out of place some plant that, according to human
criteria, is undesirable. We decide for each particular situation
which plants are or are not desired in terms of how they affect our
health, our crops our domesticated animals, or aesthetics.
..
Weeds are also classed as pests and included with insects,
plant diseases, nematodes, and rodent pests. A chemical used to
control a pest is called a pesticide and a chemical used specifically
for weed control is known as a herbicide.
Websters Encyclopedic Unabridged Dictionary of the English
Language defines Herbicide as a substance or preparation for
killing plants, esp. weeds. It also defines Weed killer as a
herbicide.
Wikipedia defines
Herbicide(s) also commonly known as weedkillers, are
chemical substances used to control unwanted plants. Selective
herbicides control specific weed species, while leaving the
desired crop relatively unharmed, while non-selective herbicides
(sometimes called "total weedkillers" in commercial products) can
be used to clear waste ground, industrial and construction sites,
railways and railway embankments as they kill all plant material
with which they come into contact.
The book on Pesticides Developments, Impacts, and
Controls, Edited by Gerry Best, Douglas Ruthven published by
The Royal Society of Chemistry, explains the Non-agricultural Uses
of Herbicides as under:-
Herbicides have been used to control weeds in non-agricultural
areas for around 50 years, Non-agricultural uses cover very diverse
situations from forestry to parks and gardens, from waterways to
roads and railways, and from pavements to industrial sites. Not
only area the uses varied, but also the uses, many of whom have
little knowledge of plants, weed control or the use of herbicides.
Perhaps the greatest volume of herbicide is used to maintain
man-made surfaces such as railways ballast, road edges,
pavements and channels, gravelled areas etc. These are now
officially called land not intended to bear vegetation by the
Pesticides Safety Directorate. They are often referred to as hard
surfaces, and can be divided into porous or non-porous surfaces.
The equipment and its accessories, used for protection of
plants, are plant protection equipment and accessories thereof. It
is through such equipment that pesticides etc are applied to
optimise efficiency in pest control management and thereby
maximise plant health. The National Institute of Plant Health
Management (NIPHM) is a premier autonomous Institution under
the Department of Agriculture and Cooperation, Ministry of
Agriculture, Government of India with the mandate to promote
environmentally sustainable Plant Health Management practices in
diverse and changing agro-climatic conditions. According to
NIPHM, pesticide application plays an important role in pest
management; proper techniques of application of pesticides, and
the equipment used for applying pesticides, are vital to the success
of pest control operations; the use of pesticides involves knowledge
not only of the application equipment, but also of pest
management; the main purpose of pesticide application technique
is to cover the target with maximum efficiency and minimum
efforts to keep pests under control as well as minimum
contamination of non-targets; all pesticides are poisonous
substances and they can cause harm to all living things; therefore
their use must be very judicious; and the application techniques
ideally should be target oriented so that safety to the non-targets
and the environment is ensured.
Entry 20 uses the words accessories thereof in conjunction
with the words and other plant protection equipment. It also
specifically includes within its ambit drip and sprinkler irrigation
systems. The word accessories was construed by this High Court
in Indo National Ltd., v. State of Andhra Pradesh . While
dealing with the classification of Dry Batteries or Cells, it was
held that till the date of coming into force of Entry 152 of the First
Schedule to the APGST Act, covering dry batteries or cells, dry
cells, described as meant for use in transistors and/or radios, were
assessable and taxable under Entry 3 thereof as accessories of
wireless reception instruments; multipurpose cells, although
falling under both Entry 3 and Entry 38, were to be taxed only at
the lower rate under Entry 38 as other accessories of all electrical
goods; and from the date of coming into force of Entry 152, all dry-
cells, for whatever purpose they were used, would be exigible to tax
under Entry 152 only.
The Supreme Court, in Union Carbide India Ltd v. State of
Andhra Pradesh , held that dry cells batteries or cells marked for
use in transistors, as is the case of some such batteries
manufactured by the Union Carbide India Ltd. alone during the
period prior to the 1976 amendment, fell under Entry No.3;
however, multi-purpose batteries, not specified for use in
transistors alone could not be treated as accessories thereof of
wireless reception instruments etc., for the purpose of Entry 3.
By the use of the word "thereof", the deciding factor is the
predominant or ordinary purpose or use and it is not enough to
show that the articles can be put to other uses also. The general or
predominant user seems to determine the category in which an
article will fall. On a comparison between different entries in which
the term "accessories" is used in the Schedule to describe goods, the
word should be construed taking into account whether the goods
have been manufactured for use as an aid or addition to any of the
specified articles in that entry or not. When it is intended to
confine the entry to particular gadgets and particulars thereof, the
entry would say so. Therefore, the expression "accessories thereof
'must mean the general or predominant user of the article only as
an accessory of one of the specified items mentioned in that entry.
(Union Carbide India Ltd.16). The word accessories thereof in Entry
20 are accessories of plant protection equipment.
In G. Radhakrishna Murthy & Company v. Commercial
Tax Officer , the Supreme Court held that an inclusive definition
had been given clarifying that cosmetic and toilet preparations
would include scents, perfumes, face powders, talcum powders,
hair tonics, hair oils, hair lotions, face creams and snows,
pomades, depilatories, toothpowder, toothpaste, toothbrushes and
shaving creams; the things specially mentioned in the entry
"cosmetic and toilet preparations " are all of the nature of personal
application; Incense sticks or agarbattis are goods of a different
character altogether; these may emit a pleasant odour when burnt;
but that, however, would not bring agarbattis within the class of
articles mentioned in Item 36 of the First Schedule as all these
goods were articles of personal application.
Entry 20 of Schedule IV uses the words including drip and
sprinkler irrigation systems. The word "including" must be given
some meaning. In ordinary parlance it indicates that what follows
the word "including" comprises or is contained in or is a part of the
whole of the word preceding. The nature of the included items
would not only partake the character of the whole, but may be
construed as clarificatory of the whole. The word 'includes' may, in
certain contexts, be a word of limitation (South Gujarat Roofing
Tiles Manufacturers v. State of Gujarat ; Godfrey Phillips India
Ltd. v. State of U.P. ). Consequently drip and sprinkler irrigation
systems would also constitute plant protection equipment and
accessories thereof.
It is through the equipment (referred to in the second limb of
Entry 20) that the pesticides, insecticides, weedicides, fungicides
and herbicides are applied on plants for their protection. The
question whether pesticides, insecticides etc referred to in Entry 20
are only those used for plant protection, or those used for other
purposes also including to kill household insects and pests, shall
be examined hereinafter.
Reliance is placed, on behalf of the petitioners, on the
definition of insecticide in the Insecticides Act, 1968 on the
ground that the words insecticides and pesticides are not
defined in the VAT Act. In examining whether the meaning of the
word insecticide in the VAT Act can be borrowed from its
definition in the Insecticides Act, it is necessary, in the first
instance, to consider the scope and object of the said Act. The
Statement of Objects and Reasons of an Act can be referred to for
the limited purpose of ascertaining the conditions prevailing at the
time which actuated the sponsor of the Bill to introduce the same,
and the extent and urgency of the evil which he sought to remedy.
(State of West Bengal v. Subodh Gopal Bose ; M.K.
Ranganathan v. Govt. of Madras ; Chern Taong Shang v.
Commander S.D. Baijal ). For determining the purpose or object
of the legislation, it is permissible to look into the circumstances
which prevailed at the time when the law was passed and which
necessitated the passing of that law. For the limited purpose of
appreciating the background and the antecedent factual matrix
leading to the legislation, it is permissible to look into the
Statement of Objects and Reasons of the Bill which actuated the
step to provide a remedy for the then existing malady. (A. Thangal
Kunju Musaliar v. M. Venkitachalam Potti ; State of West
Bengal v. Union of India ; Pannalal Binjraj v. Union of India ;
and Shashikant Laxman Kale v. Union of India ).
From the Statement of Objects and Reasons, for enacting the
Insecticides Act, 1968, it is evident that, in the months of April and
May, 1958, many persons died in the States of Kerala and Madras
as a result of food poisoning arising from contamination of food
with a poisonous organo-phosphorous insecticide Parathion
(Falidol). There were also cases of persons who fell seriously ill,
though not fatally, on account of food poisoning in the same areas.
The Justice J.C. Shah Enquiry Commission enquired into and
reported the circumstances in which the foodstuffs came to be
contaminated; and the measures to be taken against similar
occurrences in future. On receipt of the recommendations, the
Government appointed an Inter-Ministerial Committee to suggest
measures to give effect to the recommendations made by the
Commission. The Inter-Ministerial Committee suggested certain
short-term and long term measures. The long term measures
envisaged the enactment of legislation to regulate the manufacture,
sale, storage, transport, distribution and use of insecticides
including pesticides, herbicides or fungicides in the country.
The 1968 Act, is an Act to regulate the import, manufacture,
sale, transport, distribution and use of insecticides with a view to
prevent risk to human beings or animals, and for matters
connected therewith. The purpose for which the Insecticides Act
was enacted is to ensure that all risks therefrom, to human beings
and animals, are prevented. It is with a view to achieve this object
that insecticides of all forms are brought within the ambit of the
1968 Act. Section 3(e) of the 1968 Act therefore defines
insecticide to mean (i) any substance specified in the Schedule; or
(ii) such other substances (including fungicides and weedicides) as
the Central Government may, after consultation with the Board, by
notification in the Official Gazette, include in the Schedule from
time to time; or (iii) any preparation containing any one or more of
such substances.
Before examining whether the words insecticide and
pesticide in Entry 20 of Schedule IV can be given a wide meaning
in terms of the definition in Section 3(e), it is useful to refer to the
other provisions of the 1968 Act, and the Rules made thereunder.
Section 9 of the 1968 Act relates to registration of insecticides and,
under sub-section (1) thereof, any person, desiring to import or
manufacture any insecticide, may apply to the Registration
Committee for the registration of such insecticide, and there shall
be a separate application for each such insecticide. Section 9(3)
stipulates that, on receipt of any such application for the
registration of an insecticide, the Committee may, after such
enquiry as it deems fit and after satisfying itself that the
insecticide, to which the application relates, conforms to the claims
made by the importer or by the manufacturer, as regards the
efficacy of the insecticide and its safety to human beings and
animals, register, on such conditions as may be specified by it and
on payment of such fee as may be prescribed, the insecticide, allot
a registration number thereto, and issue a certificate of registration
in token thereof, within a period of 12 months from the date of
receipt of the application. Under the second proviso thereto, if the
Committee is of the opinion that the precautions claimed by the
applicant as being sufficient to ensure safety to human beings or
animals are not such as can be easily observed or that,
notwithstanding the observance of such precautions, the use of the
insecticide involves serious risk to human beings or animals, it
may refuse to register the insecticide. Section 13 relates to grant of
licence and, under sub-section (1) thereof, any person, desiring to
manufacture or to sell, stock or exhibit for sale or distribute any
insecticide or to undertake commercial pest control operations with
the use of any insecticide, may make an application to the
licensing officer for the grant of a licence. Section 13(5) stipulates
that, in prescribing the fees for the grant or renewal of licences
under Section 13, different fees may prescribed for the sale or
distribution of insecticides for purposes of domestic use and for
other purposes.
Section 18 of the 1968 Act relates to prohibition of sale, etc.
of certain insecticides and, under sub-section (1) thereof, no person
shall himself, or by any person on his behalf, sell, stock or exhibit
for sale, distribute, transport, use, or cause to be used by any
worker (a) any insecticide which is not registered under the Act;
(b) any insecticide, the sale, distribution or use of which is, for the
time being, prohibited under Section 27; and (c) any insecticide in
contravention of any other provision of this Act or of any rule made
thereunder. Under sub-section (2) thereof, no person shall himself,
or by any person on his behalf, sell, stock or exhibit for sale or
distribute or use for commercial pest control operations any
insecticide except under, and in accordance with, the conditions of
a licence issued for such purpose under the Act. Section 36
confers power on the Central Government to make Rules and,
under Section 36(2)(zb), such Rules may prescribe the maximum
proportion of any insecticide which may be added to, or contained
in, any preparation for domestic use and the restrictions thereon.
Chapter IV of the Insecticides Rules, 1971 relates to grant of
licences, and Rule 10 prescribes licences for sale, etc. of
insecticides. Under sub-rule (1) thereof, application for the grant
or renewal of a licence to sell, stock or exhibit for sale or distribute
insecticides shall be made in Form VI or Form VII, as the case may
be, to the licensing officer and shall be accompanied by the fees
specified in sub-rule (2). Rule 10(2) prescribes that the fee,
payable under sub-rule (1) for grant or renewal of licence, shall be
Rs.500/- for every insecticide for which the licence is applied.
There shall be a separate fee for each place, if any insecticide is
sold, stocked or exhibited for sale at more than one place. Under
the first proviso thereto, the maximum fee payable in respect of
insecticides, commonly used for household purposes and registered
as such, shall be Rs.7,500/- for every place. Rule 10C prohibits
sale or storage of insecticides in certain places and, thereunder, no
person shall manufacture, store or expose for sale or permit the
sale or storage of any insecticide in the same building where any
articles, consumable by human beings or animals, are
manufactured, stored or exposed for sale. In terms of the
Explanation thereto, nothing contained in Rule 10C shall apply to
retail sales of household insecticides from the building wherefrom
other articles, consumable by human beings or animals, are
usually sold provided such household insecticides have been
registered as such, and are packed and labelled in accordance with
the Insecticide Rules.
Section 13(5) of the 1968 Act, r/w the proviso to Rule 10(2)
of the Insecticide Rules, prescribes a separate fee for grant or
renewal of licence in respect of insecticides for domestic use.
Under the Explanation to Rule 10-C, the restriction placed by Rule
10-C on the sale of insecticides does not apply to retail sales of
household insecticides. Section 18 prohibits the sale, distribution
and transport of any insecticide in contravention of the provisions
of the 1968 Act and the Rules made thereunder. Unlike other
insecticides, the subject products (household insecticides) can be
stored and sold from the same building where any article,
consumable by human beings and animals, are stored and sold.
The subject products, classified as household insecticides under
the Insecticides Act, are not insecticides as commonly understood
and considered either by the people in the trade or by those using
it. Where the context does not permit or where it would lead to
absurd or unintended result, the definition of an expression need
not be mechanically applied. (Printers (Mysore) Ltd. v. Asst.
Commercial Tax Officer ; GMR Energy Limited v. Govt. of
Karnataka ).
Even under the 1968 Act, insecticides intended for
household use, which are formulations consisting of a small
portion of active ingredients, are considered a different
class/category of insecticides. When the rigor of the Insecticides Act
is relaxed for household insecticides, which the subject products
admittedly are, can the extremely wide definition of an insecticide
therein be applied to the said word used in Entry 20 of the IV
Schedule, and the said Entry be understood to bring within its
ambit all forms of insecticides including household insecticides?
The answer to this question can only be in the negative. Whether
one or more kinds of products containing its ingredients should be
included under the Entry relating to pesticides is the exclusive
prerogative of the State, and during the period when one category
is excluded from the purview of the entry, it is not open to import
the provisions of the Insecticides Act so as to enlarge the scope of
the Entry under the Sales Tax Act. Where the words used in the
entry are clear and unambiguous, there is no need to refer to the
meaning of the words used under other enactments. (Span
Diagnostics Pvt. Ltd. v. State of Maharashtra ).
IV. DO THE SUBJECT PRODUCTS LOSE THEIR IDENTITY AS
AN INSECTICIDE ON ITS MIXTURE WITH OTHER
SUBSTANCES?
Aerosol (HIT CK), a household insecticide used against
crawling insects like cockroaches, contains as an active ingredient
imiprothrin (a.i.) at 0.07% and Cypermethrin (a.i.) at 0.20%, as
against 50% LPG as the propellant. Insecticides constitute a
miniscule component of these products. The subject products,
manufactured and sold by the petitioner, contain a very small
percentage of Insecticide, which is used as a formulation not
exceeding the percentage prescribed by the Government in terms of
Section 36(z-b) of Act, and are registered and packed for sale as
household insecticides. The subject products cater to the specific
requirement of urban households, and are not used either for plant
protection or for agricultural operations. The goods marketed and
sold by the petitioner contain a negligible quantity of d-trans
Allethrin, an insecticide mixed by a process with other ingredients
like deodorized Kerosene, perfume, pipnoil bentoxide, and
propellant Gas; and it loses its original identity and a new or a
different product/commodity emerges.
Where the quality of a product is changed, and it is
commonly and commercially known as a different commodity, it
cannot then be said that the new product would fall in the original
Entry. (Tiki Enterprises v. Commissioner of Commercial Tax,
Madhya Pradesh, Indore ). Sales tax enactments are intended to
tax sales of different commercial commodities, and not to tax the
production or manufacture of particular substances out of which
these commodities may have been made. On separate commercial
commodities comingzx into existence, they become separately
taxable goods or entities for the purpose of sales tax. (A.P.
Products v. State of A.P. ; State of Tamilnadu v. Pyare Lal
Malhotra ; and Rajasthan Roller Flour Mills Association v. State
of Rajasthan ).
In State of Kerala v. Glaxo Smithkline Pharmaceuticals
Ltd the Kerala High Court held that the contention of the
respondent that Equal is not used for food preparation was
unacceptable, as it was contrary to the companys own claim in
their website; the fact that it is used as a sweetening agent, in the
preparation of non-alcoholic drinks and other beverages like tea or
coffee, did not take it outside the Entry; and, even though
reference was made to the exemption available to sugar produced
in India, and the low rate of tax at 4% for imported sugar, to
contend that a sugar substitute should not be subjected to tax at a
higher rate, the court could not apply the rate of tax of sugar to
sugar substitute as it was a matter of legislative policy.
It is evident, therefore, that pesticides/insecticides, as they
are commonly known, are mixed with LPG/Kerosene which is used
as a propellant and, after such a process, a new product emerges
which, even under the Insecticides Act, 1968, are separately
classified as household insecticides. It is difficult, therefore, to
hold that the subject goods are pesticides/insecticides as referred
to in Entry 20 of the IV Schedule of the VAT Act.
The question which arose for consideration, in Puma
Ayurvedic Herbal (P) Ltd7, was whether the subject goods were
cosmetics or medicaments. The Supreme Court held that, while
the word cosmetic was defined in the Drugs and Cosmetics Act,
1940, the word medicament was not; a medicament is used to
treat some medical condition, and a cosmetic is used to improve
the appearance of a person; the quantity of medicament, used in a
particular product, is not relevant; and, normally, the extent of its
use as a medicinal ingredients is very low, because a larger use
may be harmful for the human body. As noted hereinabove, the
word insecticide is defined, for the purpose of the Insecticides Act,
1968, to include all kinds of insecticides irrespective of the quantity
of insecticides used in the particular product. The question, in the
present case, is not whether the quantity of insecticides used is
high or low, but whether Entry 20 includes all kinds of insecticides
or only those insecticides used for plant protection. Reliance placed
by the petitioners on Puma Ayurvedic Herbal (P) Ltd7 is,
therefore, misplaced.
In Wockhardt Life Sciences Ltd1, the question which arose
for consideration before the Supreme Court was whether the
subject products were to be classified as a medicament or as a
detergent. The Supreme Court held that there was no fixed test
for classification of a taxable commodity; this was the reason why
the common parlance test or the commercial usage test are the
most common; whether a particular article would fall within a
particular tariff heading or not had to be decided on the basis of
tangible material or evidence to determine how such as article is
understood in common parlance or in the commercial world or in
trade circle or in its popular sense meaning; it is they who are
concerned with it, and it is the sense in which they understand it,
that constitutes the definitive index of the legislative intention,
when the statute was enacted; one of the essential factors for
determining whether a product is a medicament or not is whether
the product in understood as a pharmaceutical product in common
parlance; and the quantity of medicament used in a particular
product is not a relevant factor for, normally, the extent of use of
medicaments as ingredients is very low because a larger use may
be harmful for the human body. While a miniscule quantity of
insecticide used in the product would bring it within the ambit of
an insecticide, for the purposes of the Insecticides Act, the
question which necessitates examination herein is not whether the
subject goods are insecticides for the purposes of the Insecticides
Act, but whether Entry 20 of Schedule IV of the VAT Act would
bring within its ambit only pesticides and insecticides used for
plant protection, or all insecticides including household
insecticides such as the subject goods.
V. IS THE SCOPE OF ENTRY 20 RESTRICTED ONLY TO
INSECTICIDES/PESTICIDES USED FOR AGRICULTURAL
PURPOSES OR DOES IT INCLUDE SUCH GOODS WHEN
USED FOR NON AGRICULTURAL PURPOSES ALSO?
It is contended, on behalf of the petitioners, that Entry 20 is
a comprehensive entry, and the language employed therein does
not suggest that its scope is restricted only to the items used for
agricultural/horticultural purposes; a taxing entry must be read
literally and strictly; there is no scope for intendment in a taxing
entry, and there is no presumption as to tax; Entry 20 is plain,
clear and unambiguous; an additional condition cannot be read
into it regarding the end use of the product; the scope of Entry 20
of Schedule IV of the VAT Act is not limited only to insecticides
used for agricultural purposes; merely because the term plant
protection equipment follows the terms insecticides and
pesticides, the scope of these words cannot be so restricted as to
exclude therefrom insecticides and pesticides used for house-hold
purposes; the term insecticides and pesticides are words of wide
import; the legislature has deliberately used these words, as its
intent was to include all types of insecticides and pesticides,
including those used for house-hold purposes, within the ambit of
the Entry; each term in Entry 20 must be given meaning, and
construed independently, as they are distinct classes of goods;
pesticides, insecticides, fungicides, herbicides weedicides are not
equipment; the words plant protection do not qualify the earlier
words pesticides, insecticides, fungicides, herbicides or
weedicides, but only qualify the word equipment; in Ashok
Agencies v. State of Karnataka it has been held that all kinds of
insecticides, whether used in agricultural operations for killing
insects that attack agricultural crops or used for killing domestic
insects, fall within Entry 23 of the Schedule annexed to the KVAT
Act; from the dictionary meaning and technical literature, it is
evident that both herbicide and weedicide are synonyms and
refer to similar goods having non-agricultural uses like in parks
and gardens, waterways, roads and railways, and pavements to
industrial sites; the intended usage of both herbicide and
weedicide is to kill unwanted plants either for agricultural or non-
agricultural purposes; even otherwise since weedicides and
herbicides are only one category of plant associates amidst three
other categories that are not exclusively for the use of plants, Entry
20 cannot be confined only to plants; the intended usage of
insecticides, mentioned in the Entry, is to kill unwanted insects
either for agricultural or non-agricultural purposes; usage is not
restricted only for agricultural purposes as there is nothing in the
said entry to qualify the usage of the items mentioned therein; and
the contention that insect killers, meant for household purposes,
are not covered by the scope of Entry 20 has no merit.
The best rule of construction of a statutory provision,
including an Entry in a Schedule to a Tax Statute, is that which
takes the words to comprehend a subject that falls within their
usual sense, unless there is something plain to the contrary. You
are to give the words their larger meaning, unless you find
something which plainly shows that they were intended to be read
in a more restricted sense. (Anderson v. Anderson ; Church v.
Mundy ). If the definition has deliberately used words of wide
import, it would be necessary to read those words in their wide
denotation. (State of Bombay v. The Hospital Mazdoor Sabha ).
General words are to be taken in their larger sense, unless you can
find that in the particular case the true construction requires you
to conclude that they are intended to be used in a sense limited to
things ejusdem generis with those which have been specifically
mentioned before. (Anderson36; Church37). As shall be elaborated
hereinafter the object and reasons for Act 9 of 1970, in so far as it
related to Entry 78 of Schedule I of the APGST Act, states that the
incidence of tax on pesticides and plant protection equipment was
reduced as these were essential requisites for agricultural
production. Similarly the white paper on VAT shows that all
agricultural and industrial inputs were to be taxed at the
concessional rate of 4% tax.
Light is thrown on the ambit of the words by the context in
which they appear. An object of general concern, other than those
mentioned, to come within the Section, must have a degree of
similarity to those mentioned. (Director of Public Prosecutions v.
Jordan ). While the subject goods no doubt contain as small
element of insecticide, it has no similarity with the insecticides
mentioned in Entry 20 which brings within its ambit only
insecticides used for plant protection. It is not in dispute that the
subject products are household insecticides used to kill insects in
households, and are not used for plant protection.
Where the words of a Statute are plain and unambiguous,
effect must be given to them. The legislature may be safely
presumed to have intended what the words plainly say. The plain
words can be departed from when reading them as they are leads
to patent injustice, anomaly or absurdity or invalidation of a law.
(Bhaiji v. SDO ; Girdhari Lal & Sons v. Balbir Nath Mathur ).
The use of general words in a statute does not preclude inquiry
into the object of the statute or the mischief which it was intended
to remedy. (Attorney-General v. Brown ; Cox v. Hakes ). In a
taxation statute where literal interpretation leads to a result that
does not subserve the object of the legislation, another
construction in consonance with the object can be adopted. (State
of Kerala v. A.P. Mammikutty ; Keshavji Ravji & Co. v. CIT ).
Where various interpretations of a Section are admissible, it is a
strong reason against adopting a particular interpretation if it shall
appear that the result would be unreasonable or oppressive.
(Attorney-General v. Brown42; Attorney-General v. Till ). In all
doubtful matters, an enactment which is in general terms is to
receive such a construction as may be agreeable to the rules of
common law in cases of that nature, and the Section ought
therefore to be construed according to the appropriate rule of the
common law. (Attorney-General v. Brown42; Arthur v.
Bokenham ).
Courts can, by ascertaining legislative intent, place such
construction on a Statute as would advance its purpose and object.
(Bhaiji40; Girdhari Lal & Sons41). Though Courts must find the
intention of the statute from the language used, but language more
often than not is an imperfect instrument of expression of human
thought. It would be idle to expect every statutory provision to be
drafted with divine prescience and perfect clarity. We must not
make a fortress out of the dictionary but remember that statutes
must have some purpose or object, whose imaginative discovery is
judicial craftsmanship. The Court need not always cling to
literalness and should seek to endeavour to avoid an unjust or
absurd result. One should not make a mockery of legislation. To
make sense out of an unhappily worded provision, where the
purpose is apparent to the judicial eye, some violence to language
is permissible. (A.P. Mammikutty44; State of T.N. v. Kodaikanal
Motor Union (P) Ltd. ; K.P. Varghese v. ITO and Luke v. IRC ).
While all the chemicals, referred to in the first limb of Entry
20, may have other uses also, they are all primarily used for plant
protection. As the second limb of Entry 20 deals with equipment
used for plant protection, it is evident that the chemicals referred to
in the first limb are those which are to be applied for plant
protection through the equipment referred to in the second limb of
the said Entry. Entry 20 must be read restrictively so as to exclude
pesticides, insecticides etc which are not used for plant protection, and
are used for other purposes, including as household insecticides.
As a plain reading of Entry 20 shows that it was intended to be
read in a restricted sense, and as being limited only to those goods
used for plant protection, there is no justification in bringing such
goods within the ambit of Entry 20 which, on a plain reading, are
excluded from its ambit.
It is no doubt true that the words plant protection qualify
the word equipment in the second limb of Entry 20 and not the
chemicals referred to in its first limb as the words and other are
used between them. The very fact that plant protection
equipment are placed in Entry 20 along with the chemicals
referred to in the first limb which are mainly used for plant
protection, makes it clears that the chemicals, referred to in the
first limb of Entry 20, are only those used for plant protection, and
none else.
Entry 20 of Schedule IV is conditional. It does not bring
within its ambit all kinds of pesticides, insecticides, weedicides etc.
The concessional rate of tax at @ 4%/ 5%, under the IV Schedule is
available only when these goods are used for plant protection. All
the goods included in the first limb of Entry 20 are commonly used
for plant protection. The second limb of Entry 20 brings within its
ambit equipment used for plant protection. Chemicals used for
plant protection, and the equipment through which they are
applied on plants, are grouped together in Entry 20 which is a
combined entry. Insecticides, covered by Entry 20 are those used
by farmers for purposes of protection of crops/plants.
While a broad meaning was given to Entry 23 of the KVAT
Act by the Karnataka High Court in Ashok Agencies35, and
insecticides of all kinds were brought within its ambit, the said
judgment has only persuasive value and does not constitute a
precedent binding on this Court. It is not known whether an
Entry similar to Entry 78-A of Schedule I of the APGST Act or
Entry 100 (140) of the Telangana VAT Act, existed in the Karnataka
Sales Tax Act or the Karnataka VAT Act. In any event no such
provisions were considered by the Karnataka High Court in the
said judgment. Judicial decorum, propriety and discipline require
that the High Court should, especially in the event of its contra
view or dissent, discuss the judgments of the other High Courts
and record its own reasons for its contra view. While the judgments
of a High Court are not binding on the other High Court(s), they
have persuasive value. A High Court would be within its right to
differ with the view taken by other High Courts but, in all fairness,
it should record its dissent with reasons therefor. That the
judgments of other High Court have persuasive value should be
taken note of by the High Court and dissented from only by
recording its own reasons. (Pradip J. Mehta v. Commissioner of
Income Tax, Ahmedabad ).
The decision of a High Court will have the force of a binding
precedent only in the State or territories over which the Court has
jurisdiction. In other States or outside the territorial jurisdiction of
that High Court it may, at best, have persuasive effect. The
doctrine of stare decisis cannot be so stretched as to give the
judgments of one High Court the status of a binding precedent so
far as other High Courts are concerned. (Geoffrey Manners & Co.
Ltd. v. CIT ; CIT v. Thana Electricity Supply Co. Ltd. ;
Consolidated Pneumatic Tool Co. v. CIT ). This doctrine is
applicable only to different benches of the same High Court. The
ratio of the decisions of other High Courts cannot be exalted to the
status of a binding precedent nor can the ratio decidendi of those
decisions be perpetuated by invoking the doctrine of stare decisis.
(Valliama Champaka Pillai v. Sivathanu Pillai ; Thana
Electricity Supply Co. Ltd.53). Reliance placed by the petitioners
on Ashok Agencies35 is therefore misplaced.
Insecticides and pesticides which kill insects and pests
which cause damage to plants are chemicals used for plant
protection. As shall be elaborated hereinafter, if the legislative
intent was to include all forms of insecticides and pesticides within
the ambit of Entry 20, it was wholly unnecessary to provide for a
separate entry in Entry 100(140) for technical grade insecticides,
fungicides, weedicides, herbicides and pesticides, that too at the
same rate of tax at 4%/5%. It is evident, therefore, that the
legislature intended to tax insecticides, pesticides etc at a
concessional rate only when they were used either as industrial
inputs or for plant protection, and not otherwise. The subject
products, dealt with by petitioners, are used for purposes other
than for plant protection or as industrial inputs. They are
household insecticides, considered as a separate class of goods
even under the Insecticides Act, and are outside the scope of Entry
20 of the IV Schedule. The products manufactured and sold by the
petitioners, though they contain a small percentage of Insecticide,
are used as a formulation not exceeding the percentage prescribed
by the Government in terms of Section 36 (z-b) of the Insecticides
Act, and are registered and packed as specified for being sold as
household insecticides. They are not insecticides as commonly
understood, and considered by people dealing with it or by those
who put it to use. These products are largely urban household
products, and are not connected with plant protection which alone
fall under Entry 20 of Schedule IV of the VAT Act.
VI. CAN THE STATEMENT OF OBJECTS & REASONS OF AN
EARLIER STATUTE, AND THE WHITE PAPER ON VAT BE
RELIED UPON?
It is contended, on behalf of the petitioners, that the
Statement of Objects and Reasons issued in the year 1970, for the
earlier APGST Act, cannot be relied upon to restrict and control the
plain meaning of the language employed by the Legislature in the
VAT Act; even if the APGST Act did not contemplate coverage of
present day household insecticides within its purview, it does not
preclude their coverage within the existing VAT Act when words of
wide import, like insecticides and pesticides, are used by the
Legislature; when Entry 78 was introduced, the objects and
reasons referred to the essential requisites for agricultural
production, but did not state that it was meant only for
agricultural production or that it could not be applied to any other
product; in the year 1974, when insecticides was inserted in the
said entry, there was no Statement of Objects and Reasons to
clarify that insecticides referred only to agricultural production;
further in the year 1976, when the words fungicides and
weedicides were inserted, there was no Statement of Objects and
Reasons to clarify that the items were intended only for
agricultural production; it is evident that the legislature sought to
expand rather than restrict the scope of the Entry; it is not open to
the department to rely upon extraneous material such as the White
Paper, to interpret the words insecticides etc when the language
used by the Legislature is plain, clear and unambiguous; the White
Paper does not even remotely indicate any such exclusion; the
discussion paper, on road map for national and sub-national VATs
in India, was appended by a list of floor rates of 4% categories, as
finalized by the Empowered Committee of State Finance Ministers;
Entry 17 in the said list makes no mention of plant protection
equipment, unlike the present Entry 20 under the VAT Act; both
the Entries are at variance; there are many entries such as Entry 2,
Entry 20, Entry 39, Entry 123, etc of Schedule IV which neither
relate to agricultural nor to basic necessities; and reliance placed
on the White Paper, in order to contend that the scope of the Entry
is restrictive in nature and is only for agricultural purposes, is
incorrect.
The Statement of Objects and Reasons of Act No.9 of 1970,
by which Entry 78 was inserted in the First Schedule to the APGST
Act, states that levy of tax was restricted to a single point with a
view to reduce the incidence of tax on the essential requisites for
agricultural production. A reference to the Statement of Objects
and Reasons is permissible for understanding the background, the
antecedent state of affairs, the surrounding circumstances in
relation to the statute, and the evil which the statute sought to
remedy. The weight of judicial authority leans in favour of the view
that the Statement of Objects and Reasons cannot be utilized for
the purpose of restricting and controlling the plain meaning of the
language employed by the legislature in drafting a statute, and
excluding from its operation such transactions which it plainly
covers. The Statement of Objects and Reasons, Parliamentary
Debates, Reports of Committees and Commissions preceding the
legislation and the legislative history can be referred to for the
purpose of gathering the legislative intent. (Bhaiji40; Principles of
Statutory Interpretation by Justice G.P. Singh, 8th Edn., 2001,
pp. 206-09). A report which precedes an Enactment is invaluable
as an aid to construction, but it is one thing to use it to resolve a
real ambiguity in the statutory language, and quite another to use
it to cut down the meaning of the language that Parliament has
used in implementing the reports recommendation when the
ordinary meaning of that language is plain. (Comdel Commodities
Ltd. v. Siporex Trade Sa ).
The White Paper on State Level Value Added Tax, prepared
by the Empowered Committee of State Finance Ministers dated
17th January 2005, formed the basis for the changed system of
taxation under the VAT regime. The 'Preface' to the White Paper
explains the rationale for the uniform system of VAT which is to
avoid unhealthy competition, and have certain features of VAT
common to all the States. These features were to constitute the
basic design of VAT. It was expected that, at the same time, the
States would have the freedom for appropriate variation consistent
with the basic design. The White Paper was a collective attempt of
the States to strike a balance between the need for commonality,
and the desired federal flexibility in the VAT structure. (Sony India
Pvt. Ltd. v. The Commissioner of Trade & Taxes ).
In para 1.4 of the White Paper the methodology adopted by
the Empowered Committee, in preparing the White Paper, has been
explained. One of the tasks was to harmonise the tax structure
"through implementation of uniform floor rates of sales tax and
discontinuation of sales tax related incentive schemes". With a view
to simplify the tax structure, the Empowered Committee
recommended that there should basically be only two rates of VAT
i.e. 4% and 12.5%, plus a specific category of tax exempted goods
and a special VAT rate of 1% only for gold and silver ornaments etc.
It was suggested that "under 4% VAT rate category, there should be
the largest number of goods (about 270), common for all the States,
comprising of items of basic necessities such as medicines and
drugs, all agricultural and industrial inputs, capital goods and
declared goods". The list of goods with 4% floor rate, as finalized
by the Empowered Committee of State Finance Ministers,
contained about 41 items under the table "Goods with 4% Floor
Rate". The basic entries in the list finalised by the Empowered
Committee were more or less reproduced in the same manner in
many of the State Legislations, including in the VAT legislation of
Andhra Pradesh. (Sony India Pvt. Ltd.57). The White Paper on
Value Added Tax, (which is a result of the efforts of all States in
formulating the basic design of State Level Value Added Tax),
under the caption VAT Rates and Classification of Commodities,
read as follows:
. Under 4% VAT rate category there will be the largest number of goods
(about 270), common for all the States, comprising of items of basic necessities
such as medicines and drugs, all agricultural and industrial inputs, capital
goods and declared goods. The schedule of commodities will be attached to the
VAT Bill every State.
Para 3.3 of the discussion paper on VAT records that the first
reform related to the adoption of a four rate structure (i.e zero, 4, 8
and 12 per cent) in the existing sales tax structure; in addition,
there are two special rates of 1% and 20% for a few specified items;
the recommended rates are floor rates the States have the freedom
to adopt a higher rate on any of the commodity from the list, but
they cannot go below these rates; this checks the rate war and
prevents diversion of trade; the Standing Committee of Finance
Ministers made a few changes in the items falling under the
exempt list; some changes were made in the items falling in other
categories as well; this was necessitated due to the fact that the
Report of the Finance Ministers Committee (1995) had suggested
that fine tuning of this classification would have to be done by a
special group; as this was not done prior to adoption of the floor
rates, it was of paramount importance that the same was attempted
now; and the list of floor rates of 4% categories, as finalized by the
Empowered Committee of State Finance Ministers, was appended
as Annexure-I to the discussion paper. Annexure-I of the
discussion paper prescribed the floor rates of sales tax and,
thereunder, various goods were brought under four broad heads:
(1) zero floor rate or exempted goods; (2) goods with 4% floor rate;
(3) goods with 8% floor rate; and (4) goods with 12% floor rate.
Entry 17, under the head goods with 4% floor rate, read thus:-
chemical fertilizers, pesticides, weedicides and insecticides.
Entry 2 of the IV Schedule to the A.P.VAT Act relates to goods
of intangible or incorporeal nature as may be notified, from time to
time, by the State Government, and includes the goods mentioned
under the said head. Entry 39 are I.T products. Entry 123 are
mosquito nets, insect screens, perimeter screens, meshes for insect
protection, meshes for gardening and agro meshes, made up of
plastic (polymer) and articles thereof. While all the goods referred
to in Schedule IV may not relate only to agriculture, the very fact
that they have been included in the said Schedule would show that
the legislature intended to provide for a concessional rate of tax on
these goods.
The word insecticide, used by the legislature in Entry 20,
when read with the preceding and succeeding terms, shows that
the legislature intended to group items of the same kind under one
entry. The legislative intent, in the present case, can be gathered
from the Statement of Objects and Reasons when the entry was
inserted, and also on a reference to the White Paper on VAT,
wherein a broad consensus as to the rate of tax on goods of basic
necessities, and agriculture and industrial inputs, was agreed
upon. Both the White Paper on the VAT Act, and the Statement of
Objects and Reasons of Act 9 of 1970 (under the APGST Regime)
view agricultural inputs, and essential requisites for agricultural
production, as requiring reduction in the incidence of tax. The
legislative intent, when Entry 78 was initially introduced in the
APGST Act, was to cover essential requisites of agriculture
production. The consensus, arrived at the time of introduction of
VAT across the country, was that a uniform rate structure should
be imposed. The lower rate of 4% tax was agreed upon in respect of
basic necessities, and all agriculture and industrial inputs. On a
plain reading of the contents of the White Paper, the products
enumerated in Entry 20 of Schedule IV are those goods required for
Agriculture/Plant Protection; they are, therefore, placed in
Schedule IV for being extended the concessional rate of tax @ 4%/
@ 5%. The products, dealt with by the assessees, can neither be
said to be basic necessities nor are they agriculture products; or
products used for plant protection.
While Entry 17 of Annexure I to the White Paper does not
include plant protection equipment, it includes, among others,
insecticides and pesticides under the head goods with 4% floor
rate. Under the caption VAT rates and classification of
commodities the 4% VAT rate category was to comprise of items of
basic necessities such as all agricultural and industrial inputs. It is
evident therefore that only pesticides and insecticides, used as
agricultural and industrial inputs, were extended the concessional
rate of 4% tax. This understanding of the Empowered Committee,
in the White Paper, has weighed with the State Legislature in
providing for pesticides and insecticides, when used as
agricultural inputs/plant protection, under Entry 20, and when
used as industrial inputs under Entry 100(140) of the IV Schedule
to the VAT Act.
VII. CAN THE DICTIONARY MEANING AND TRADE PARLANCE
MEANING OF WORDS, NOT DEFINED IN THE ACT, BE
RELIED UPON?
It is contended, on behalf of the petitioners, that the terms
insecticides and pesticides have not been defined in the Act;
hence recourse may be taken to the dictionary meaning, and the
trade parlance meaning, for the purposes of interpreting Entry 20;
Butterworths Medical Dictionary, Second Edition, defines
pesticide as a comprehensive word to include substances that will
kill any form of pest, e.g., insects, rodents and bacteria; the
Commercial Tax Department, the traders marketing the goods, and
the consumers using the goods have all understood the subject
goods as insecticides and pesticides; in the absence of a precise
definition in the Statute, the common parlance test should form
the basis for interpreting the nature of the subject goods, in the
context of levy of VAT; many Entries in the Schedules are a
description of the category of the goods; a person, intending to
procure or purchase the goods, may either go by the description or
the alternative name or the trade name; it is necessary, while
determining whether a class of commodities fall within a particular
entry, to understand the meaning of the said commodity as
understood in common parlance; the popular sense meaning
would be 'that sense which people conversant with the subject-
matter, with which the statute deals, would attribute to it; in the
instant case, the subject goods were manufactured under a license
issued under the Insecticides Act, 1968, and the goods are meant
for the purpose of killing insects viz., mosquitos, cockroaches and
flies; the subject goods are sold and bought as insect killers; the
technical meaning of the subject goods also indicates that the
goods are meant for the purpose of killing insects; the subject
goods are packaged and marked as insecticides; the package of the
products, and the leaflets in the package, state that the products
are insect killers, and are useful for killing cockroaches, houseflies,
mosquitoes, etc; and, in common parlance, the subject goods are
known as insecticides.
While the meaning of an ordinary word of the English
language is not a question of law, the proper construction of the
Statute is. (Revenue and Customs v. Premier Foods Ltd. ). When
considering the meaning of a word, often one goes to a dictionary.
But we have been warned, time and again, not to substitute other
words with the words of the Statute and there is a very good reason
for that. Few words have exact similes. The overtones are almost
always different. (Premier Foods Ltd.58). The question of what a
word means in its context within the Act is a question of legal
interpretation and, therefore, of law. The Court is required to arrive
at the legal meaning of the term. If the word is not a term of art, it
must be interpreted according to its ordinary meaning as a word in
the English language and the context in which it has to be
construed; that is to say, the Court is to interpret it as a man who
speaks English and understands English correctly, but not
pedantically, would interpret it. (Premier Foods Ltd.58; Benyon on
Statutory Interpretation, 3rd Edition, page 945 to 956; Brutus
v. Cozens ). The Court, in determining what is the true meaning
of a particular word used in a Statute which it has to construe, has
to ascertain in what sense the word has been used: all the help the
Court can derive from dictionaries in such a case is, in case of
doubt, to ascertain that the meaning, which it comes to the
conclusion ought to be attributed to the word, is one which may
properly be given to it. (Mills v. Cannon Brewing Co. Ltd. ;
Deputy Commissioner of Taxation (NSW) v. Zest Manufacturing
Co. Pvt. Ltd. ).
The Legislature, in enacting Sections and Schedules, is not
using words which were applied to any particular science or art
and, therefore, the words used are to be construed as they are
understood in common language. (Commissioner, Sales Tax,
Uttar Pradesh v. Prayag Chemical Works ). While interpreting
the words in the Schedule, its language should not be strained;
and it is only the meaning, which is attributed to the disputed
word in commercial parlance, which should be given to it.
(Scientific and Glass Laboratories v. The State of Gujarat ;
Sales Tax Commissioner v. S. N. Bros. ). There is no fixed test
for classification of a taxable commodity. (Wockhardt Life
Sciences Ltd.1; A. Nagaraju Bros. v. State of A.P., ). Whether a
particular article will fall within a particular Entry or not has to be
decided on the basis of tangible material or evidence to determine
how such an article is understood in `common parlance' or in the
commercial world' or in the trade circle' or in its popular sense
meaning. It is they who are concerned with it, and it is the sense in
which they understand it, that constitutes the definitive index of
the legislative intention, when the statute was enacted. The
combined factors that are required to be taken note of, for the
purpose of classification of the goods, are the composition, the
product literature, the label the character of the product and
functional utility and predominant or primary use of the
commodity which is being classified. (Wockhardt Life Sciences
Ltd.1; D.C.M. v. State of Rajasthan ).
The words, used in a law imposing a tax, should be
construed in the same way in which they are understood in
ordinary parlance in the area in which the law is in force.
(Annapurna Biscuit Manufacturing Co. v. CST ). The words or
expressions must be construed in the sense in which they are
understood in the trade, by the dealer and the consumer. It is they
who are concerned with it, and it is the sense in which they
understand it that constitutes the definitive index of the legislative
intention when the statute was enacted. (Delhi Cloth & General
Mills Co. Ltd. v. State of Rajasthan ; Porritts & Spencer (Asia)
Ltd v. State of Haryana ).
We must give the word its ordinary meaning, and must ask
what view would be taken by the ordinary man in the street, who
had been informed as we have been informed. Shortly put, the
only issue is whether such a man in the street would regard this
product as a pesticide or an insecticide. (Customs and Excise
Commissioners v. Ferrero UK Ltd. ; United Biscuits (UK) Ltd. v.
The Commissioners of Customs and Excise ). Technical and
scientific tests offer guidance only within limits. Once the articles
are in circulation and come to be described and known in common
parlance, then there is no difficulty for statutory classification
under a particular entry. (Dunlop India Ltd. v. Union of India ;
M/s. Godrej Consumer Products Ltd.10).
In Bombay Chemicals Pvt. Ltd.,14, the Supreme Court held
that disinfectant fluids used in bathrooms, gutters, for floor
cleaning, etc., capable of killing bacteria are understood in
commercial parlance as insecticides and classified accordingly. It
observed:-
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 pest and it should
be understood in the common parlance as well as being covered in one of the
broad categories mentioned in the notification. Since the goods produced by
the appellant are capable of killing bacteria and fungi which too, is covered
in the expressions `pesticide and `fungicide there appears no reason to
exclude the goods from the aforesaid notification.
Fiscal or tax statutes are to be understood in the manner in
which the common man would understand it, and not in its
botanical or technical sense. The common parlance test requires
Entry 20 of Schedule IV to be understood in the manner in which
people dealing with it understand it (ie, not only the sellers but
also the users understand it). Even the petitioners, while selling
the product, have declared/specified the product as Household
Insecticide or Insecticide for Household Use which clearly
establishes that the product is intended to cater to a different class
or segment, and is not intended for general use as a
pesticide/insecticide. The subject product is not used as an
insecticide in general application for plant protection, growth and
regulation, but for killing insects and other household pests.
As noted hereinabove, the composition of the subject goods
contains a very small portion of insecticide as its active
ingredient. The product literature and the label classify the subject
goods as household insecticide. When a consumer purchases
these products he does not ask for a pesticide or an insecticide but
asks for the product by its brand name as it is a household
insecticide used to kill household insects and pests. People in the
trade, i.e the persons who sell the goods in the market and those
who purchase it, would ask for pesticides and insecticides when
they require them as agricultural inputs or for plant protection.
Even, on application of the common parlance test, the subject
goods, which are all household insecticides, would not fall within
the ambit of pesticides and insecticides under Entry 20 of the IV
Schedule to the VAT Act.
VIII. CERTIFICATION BY GOVERNMENT AGENCIES : ITS
EFFECT:
It is contended, on behalf of the petitioners, that the Central
Insecticide Board, after carrying out the required tests of safety,
efficacy and utility of the product, issues a certificate to the
applicant; in the certificate issued to the Petitioner, the subject
goods are described as 'household insecticides'; the Central
Insecticide Board is the apex body regulating production, storage
and disposal of insecticides; the finding of the expert body, that the
impugned goods are insecticides, is sacrosanct; a government
agency, called the Haffkine Institute, has confirmed that, as per the
mortality test conducted by it, HIT aerosol and HIT chalk have cent
percent mortality effect (killing effect on mosquitoes, flies, ants,
etc); and the tests of bio-efficacy were conducted as a pre-condition
for obtaining the certificate from the Central Insecticides Board.
In State of Haryana v. Anil Pesticides Limited , the
Punjab & Haryana High Court held that, where the disputes are
highly technical in nature, and the court does not possess the
requisite expertise to determine whether the items manufactured
by the company are "chemicals" as alleged by it, or "pesticides" as
claimed by the department, it has necessarily to depend on
technical opinion in such matters.
The case on hand does not, however, present any such
difficulty. The certificate issued to the petitioners is by the Central
Insecticides Board, a body constituted under the Insecticides Act to
regulate the manufacture, sale, distribution and use of insecticides.
As noted hereinabove, the Insecticides Act brings all kinds of
insecticides within its ambit with a view to ensure the safety of
human beings and animals from the use of such insecticides. As a
person who manufactures products, using any of the insecticides
enumerated in the Schedule to the Insecticides Act, is required to
be registered under the 1968 Act, the subject products were
certified by the Board as household insecticides. The Insecticides
Act has itself made an exception of household insecticides, and has
exempted it from the rigors of the Insecticides Act. The mere fact
that it contains a very small portion of insecticides, would not
make the subject products pesticides and insecticides falling
within the ambit of Entry 20.
IX. WOULD THE INTERPRETATION PLACED ON ENTRY 78, OF
SCHEDULE I OF THE A.P.G.S.T. ACT, BE APPLICABLE TO
ENTRY 20 OF SCHEDULE IV OF THE A.P. VAT ACT?
It is contended, on behalf of the petitioners, that the
expression in item 78 of Schedule I to the APGST Act, i.e
Pesticides, insecticides, fungicides, herbicides, weedicides and
other plant protection equipment and accessories thereof, was
comprehensive enough, even according to the Commercial Tax
Department, to include the subject goods; tax was, hitherto, being
levied on the said goods under item 78 prior to the introduction of
the VAT Act; the same has been reproduced verbatim in Entry 20 of
Schedule IV to the AP VAT Act (w.e.f. 01.04.2005); consequently,
the legal position prevailing under the APGST Act should continue
to receive the same interpretation under the VAT Act also; the Sales
Tax Appellate Tribunal, while interpreting the erstwhile Entry 78
of the First Schedule of APGST Act in Kumar Agencies, Nellore v.
The State of Andhra Pradesh ), held that the word and clearly
indicates that the words plant protection do not qualify the earlier
words pesticides, insecticides, fungicides, herbicides or
weedicides but only qualifies the word equipment, and Jet Mat
falls within the expression insecticides as they are used for
repelling or killing mosquitos in residential and non-residential
buildings; the said decision has been followed by the Tribunal in
Amitha Agencies Hindupur v. State of Andhra Pradesh ); the
contention that the Entry is only meant for agricultural production
is contrary to the interpretation placed on Entry 78 of Schedule I to
the APGST Act by the Tribunal in Kumar Agencies74 and Amitha
Agencies75; the legislature must be deemed to have known the pre-
existing legal position, while enacting the VAT Act; the subject
goods are, therefore, liable to be classified under Entry 20 of
Schedule IV to the APVAT Act; the Commercial Tax Department
was taxing the subject goods under item 78 of Schedule I to the
APGST Act upto 31.03.2005; they had accepted the returns filed by
the petitioner, declaring the subject goods under Entry 20 of
Schedule IV of the APVAT Act after 01.04.2005, without demur;
and if the department did not dispute eligibility of the subject
goods earlier, it is not open to them to now dispute the same.
In Kumar Agencies74, the question which arose for
consideration before the Sales Tax Appellate Tribunal was whether
Jet Mats, used in electric mosquito repellers, should be treated as
Insecticides or as an unclassified item? The assessing authority
had treated Jet Mats as an unclassified item. The appellate
authority had held that Jet Mat was an insecticide, but only
insecticides intended for plant protection fell under Item 78 of
Schedule I of the APGST Act. The Tribunal held that the words
other plant protection equipment and accessories thereof started
with the word and; this clearly indicated that the words plant
protection therein did not qualify the earlier words pesticides,
insecticides, fungicides, herbicides or weedicides, but only
qualified the word equipment; weedicides are not plant protection
equipment, but are chemicals used as suppressors of weeds and
killers of weeds; the word insecticides is normally used to denote
chemicals used in buildings for eradication of insects like
cockroaches, flies, mosquitoes, ants, white-ants etc; plant
protection insecticides are generally known by the word
pesticides; the Ministry of Agriculture, Directorate of Plant
Protection, had specifically stated in its circular that Allothrin 4,
which is a chemical used in mosquito mats, is an insecticide;
and, therefore, they were unable to agree with the interpretation
that though Jet Mats came under insecticides, as clarified by the
Department of Agriculture, Directorate of Plant Protection, it did
not fall under Item 78. The Tribunal held that Jet Mats fell under
insecticides as they are used for repelling or killing Mosquitos
from residential and non-residential buildings, and as the chemical
is classified as an insecticide even by the Directorate of Plant
Protection.
In Amitha Agencies75, the question which arose for
consideration before the Sales Tax Appellate Tribunal was whether
Mosquito Repellents, sold by the appellants, were insecticides
falling under Entry 78 of the 1st Schedule to APGST Act as
contended by the appellants, or whether they were not covered by
the Entry and were to be treated as unclassified goods. While
reliance was placed on behalf of the assessee on the earlier order of
the Tribunal in Kumar Agencies74, and the judgment of the
Madras High Court in Transelektra Domestic Products Pvt. Ltd.
v. Commercial Tax Officer, Porur Assessment Circle, Madras ,
the learned State Representative relied upon the judgment of the
Gujarat High Court in Sonic Electrochem Limited v. Sales Tax
Officer, City Division, Ahmedabad as affirmed by the Supreme
Court in Sonic Electrochem Limited v. Sales Tax Officer .
The Tribunal held that the judgments of the Gujarat High
Court, as affirmed by the Supreme Court, related to the
interpretation of entries contained in the Gujarat Sales Tax Act,
and the same could not be imported while dealing with other Sales
Tax Acts in other States; the interpretation placed by the Gujarat
High Court and the Supreme Court were in the light of a separate
and specific entry dealing with mosquito repellents; in the APGST
Act there was no such separate entry dealing with mosquito
repellents, during the relevant assessment years; a specific entry
was introduced for mosquito repellents, as Entry 203 of the 1st
Schedule to APGST Act, only w.e.f. 1.1.2000; in the absence of a
specific entry for mosquito repellents, the question which arose for
consideration was whether mosquito repellents fell within the
Entry dealing with insecticides; insecticides may be sold in the
form of powder, liquid to be spread or sprayed or they may be
manufactured in the shape of coils and mats, the use of which has
the effect of repelling or killing insects like mosquitos; in the
absence of a specific entry dealing with mosquito repellents, the
articles dealt with by the assessees should be considered as
nothing but insecticides falling under Entry 78 of Schedule I, and
not as unclassified goods; in Transelektra Domestic Products P
Ltd.76, the Kerala High Court was dealing with mosquito repellents
manufactured by the dealer in the name of Good Knight and
Banish; in support of its decision that, in the absence of a specific
entry, mosquito repellent should be classified as insecticides, the
Kerala High Court referred to the relevant observations made by
the Supreme Court in Sonic Electrochem Ltd78 that Jet Mat
had, as one of its constituents, d-Allathrin 4%, and the qualities
of an insecticide; it not only repelled mosquitos but was also
capable of killing them, but in view of the most specific entry
mosquito repellent in the Schedule, it could be classified only
under that entry; and in the absence of a specific entry, during the
relevant assessment years, mosquito repellents fell under classified
insecticides covered by Entry 78 of the 1st Schedule to the APGST
Act.
Where the legislature uses in an Act a legal term which has
received judicial interpretation, it must be assumed that the term is
used in the sense in which it has been judicially interpreted unless
a contrary intention appears. (Craies on Statute Law; Dewan
Brothers v. Central Bank of India ). Where the Legislature uses
an expression bearing a well-known legal connotation, it must be
presumed to have used the said expression in the sense in which it
has been so understood. (Banarsi Debi v. Income Tax Officer ).
Where a word of doubtful meaning has received a clear judicial
interpretation, the subsequent statute which incorporates the same
word or the same phrase in a similar context, must be construed so
that that word or phrase is interpreted according to the meaning
that has been previously assigned to it. (Barras v. Aberdeen Steam
Trawling and Fishing Co. Ltd., ; Banarsi Debi80; Dewan
Brothers79).
It is true that ordinarily the department, having accepted the
principles laid down in the earlier case, cannot be heard to take a
contra stand in subsequent cases (Commissioner of Central
Excise., Hyderabad-I, v. Aurobindo Pharma Ltd ). It is also well
settled that an Entry in a tax statute should be interpreted as at
the relevant date on which it falls to be applied, giving the words
its natural meaning without recourse to antecedent previous
legislation. (Willsons Solicitors L.L.P.11).
While this Court would, ordinarily, not permit the
department to agitate the same issue repeatedly, and may have
non-suited them as they have implemented the earlier orders of the
Tribunal, we are satisfied that the conclusion of the Tribunal, in
the aforesaid judgments, suffers from a serious infirmity, and since
the earlier decision of the Tribunal is sought to be relied upon in
construing Entry 20, it is necessary for us to revisit the issue and
consider the ambit of Entry 78 and 78-A of the first Schedule to the
APGST Act, in examining the scope of Entry 20 and 100 (140) of
Schedule IV of the VAT Act. Further the scope of Entry 20 has been
considered by the VAT Appellate Tribunal in the orders under
revision, and it is the assessee which has questioned it by way of a
revision before this Court. As the view taken by the Tribunal in the
present case is at variance with the earlier decisions of the Tribunal
in Kumar Agencies74 and Amitha Agencies75, it is also necessary
for this Court to decide this issue in the light of the conflicting
opinions of the Tribunal.
While Entry 78 of Schedule I of the APGST Act (which is
similar to the earlier part of Entry 20 of Schedule IV of the A.P. VAT
Act) was considered by the Tribunal in Kumar Agencies74 and
Amitha Agencies75, the scope of Entry 78-A of the I Schedule,
(similar to Entry 100 (140) of the IV Schedule to the A.P. VAT Act)
and its inter-play with Entry 78 was not examined. Entry 78 of
the 1st Schedule to the APGST Act related to:-
pesticides, insecticides, fungicides, herbicides, weedicides and other plant
protection equipment and accessories thereof;
Entry 78A related to:-
pesticides concentrate or technical grade pesticides used by any
registered manufacturer in the State for manufacture of formulated pesticides.
A pesticide formulation is a combination of active and inert
ingredients that form an end-use pesticide product. Active
ingredients in pure (technical grade) form are not suitable for
application, and pesticides are formulated to make them safer or
easier to use. Entry 78-A of the I Schedule to the APGST Act
brought within its scope technical grade pesticides or pesticides
concentrate. Pesticide formulations (including household
pesticides) do not fall within its ambit. If Entry 78 were to be read
widely, and construed as bringing within its fold all kinds of
pesticides, then pesticides concentrate and technical grade
pesticides would also fall within the ambit of Entry 78, and it was
wholly unnecessary for the legislature to have prescribed a separate
entry i.e., Entry 78-A for pesticides concentrate and technical grade
pesticides. Such a construction would also have rendered Entry
78-A redundant. Courts have adhered to the principle that effort
should be made to give meaning to each and every word used by
the legislature, and it is not a sound principle of construction to
brush aside words in a statute as being inapposite surplusage if
they can have a proper application in circumstances conceivable
within the contemplation of the statute. (Gurudevdatta VKSSS
Maryadit v. State of Maharashtra ; Manohar Lal v. Vinesh
Anand ; Aswini Kumar Ghose v. Arabhinda Bose ). A
construction that reduces one of the provisions to a dead letter
must be avoided. (Anwar Hasan Khan v. Mohd. Shafi ).
In both Kumar Agencies74 and Amitha Agencies75, the
Tribunal failed to consider the scope of Entry 78-A of Schedule I of
the APGST Act nor was the said Entry read or understood in the
light of Entry 78 thereof. In construing a provision in a statute
regard may be had to the other provisions of the Statute.
(Attorney-General v. Brown42). For the purpose of construing any
enactment, it is right to look not only at the provision immediately
under construction, but at any others found in connection with it,
which may throw light upon it, and afford an indication that
general words employed in it were not intended to be applied
without some limitation. (Cox v. Hakes43; Jordan39).
X. ENTRY 100(140) OF THE IV SCHEDULE ITS SCOPE:
It is contended, on behalf of the petitioners, that reliance
placed on Entry 100(140) of the IV Schedule is misplaced; the
items covered under Entry 100(140) of the IV Schedule are
technical grade insecticides, fungicides, herbicides, weedicides, and
pesticides which are used as industrial inputs / chemicals for
manufacture of pesticides, insecticides, etc; the STAT- Hyderabad,
in Revathi Pulvarisers, Kurnool v. The State of Andhra
Pradesh , has held that technical grade Methyl Parathion 80%
solution is not a pesticide falling under item 78 of the First
Schedule to the APGST Act; it is a chemical and cannot be used as
a pesticide, and the ratio laid down in Anil Pesticides Ltd.73, is
attracted; technical grade items, mentioned under Entry 100(140)
of IV Schedule, cannot be used for agricultural purposes without
undergoing a manufacturing process; and the items, covered under
Entry 100(140), are only meant for industrial use.
Entry 100 of the IV Schedule relates to goods when sold as
industrial inputs, and contains 235 sub-entries. It is only if all of
them are sold as industrial inputs would they qualify to be taxed
under this Entry. Entry 100(140) relates to technical grade
insecticides, fungicides, herbicides, weedicides and pesticides, that
too those used as industrial inputs to manufacture pesticides,
insecticides etc. If all forms of insecticides are understood to fall
within the ambit of Entry 20, it was unnecessary for the legislature
to separately provide for these goods in Entry 100(140). As
pesticides and insecticides, when used as industrial inputs, fall
under Entry 100(140), the pesticides and insecticides referred to in
Entry 20 can only be those used for plant protection, and not
others.
It is only because technical grade insecticides and pesticides
cannot be directly used for agricultural purposes would they not
fall under Entry 20. The Legislature has, in its wisdom, provided
for tax to be levied at the concessional rate of 4%/5% on technical
grade insecticides and pesticides also, provided they are used as
industrial inputs/chemicals for manufacture of pesticides and
insecticides. While technical grade insecticides and pesticides used
as inputs are brought within the ambit of Entry 100(140), the
pesticides and insecticides, which are the outputs of such a process
of manufacture, are brought within the ambit of Entry 20 provided
they are used for plant protection. All other pesticides and
insecticides (i.e other than those falling within Entry 20 and
100(140) of the IV Schedule) would only fall within the residuary
entry in the V Schedule, in the absence of a specific Entry for such
goods.
XI. SPECIFIC ENTRY PREVAILS OVER THE GENERAL ENTRY:
It is contended, on behalf of the petitioners, that, when there
is a specific entry covering the subject goods, they cannot be
subjected to tax under the residuary entry; and since the
competing entry is a residuary entry, the subject goods must be
brought within the ambit of Entry 20 of the IV Schedule.
It is well settled that, unless the department can establish
that the goods in question can, by no conceivable process of
reasoning, be brought under any of the specific items mentioned in
the Schedule, resort cannot be had to the residuary item. (Indian
Metals & Ferro Alloys Ltd. v. Collector of Central Excise ;
Bharat Forge & Press Industries (P) Ltd. v. Collector of Central
Excise ). Only such goods, as cannot be brought under the
various specific entries, should be attempted to be brought under
the residuary entry. In other words, unless the department can
establish that the goods in question can, by no conceivable process
of reasoning, be brought under any of the Entries, resort cannot be
had to the residuary item. (Bharat Forge & Press Industries (P)
Ltd.89). A residuary entry can be taken refuge of only in the
absence of a specific entry; that is to say, the latter will always
prevail over the former. (Wockhardt Life Sciences Ltd.1; CCE v.
Jayant Oil Mills (P) Ltd ; HPL Chemicals v. CCE ; Western
India Plywoods v. Collector of Customs ; Carrier Aircon2). A
commodity cannot be classified in a residuary entry, in the
presence of a specific entry, even if such specific entry requires the
product to be understood in the technical sense. (Wockhardt Life
Sciences Ltd.1; Akbar Badrudin Giwani v. Collector of
Customs ; Commissioner of Customs v. G.C. Jain ). A specific
entry would override a general entry. Resort should be had to the
residuary entry only when a liberal construction by the specific
heading cannot cover the goods in question. (State of Maharashtra
v. Bradma of India Ltd ; CCE v. Wood Craft Products Limited ).
In Bradma of India Ltd.95 the Supreme Court, while dealing
with the classification of Electronic Cash Register under the
Bombay Sales Tax Act, 1959, held that a specific entry would
override the general entry; and resort should be had to the
residuary heading only when a liberal construction by the specific
heading cannot cover the goods in question. In Bharat Forge and
Press Industries (P) Ltd.89 the Supreme Court held that the
question before it was whether the Department was right in
claiming that the items in question are dutiable under tariff entry
No.68; this was the residuary entry, and only such goods as could
not be brought under the various specific entries in the tariff
should be attempted to be brought under the residuary entry; in
other words, unless the department can establish that the goods in
question can, by no conceivable process of reasoning, be brought
under any of the tariff items, resort cannot be had to the residuary
item.
In Wockhardt Life Sciences Ltd1 the Supreme Court
considered the issue of classification of Povidone Iodine Cleaning
Solution used by surgeons for the purpose of cleaning or
degerming their hands and scrubbing the surface of the skin of the
patient in that portion which is operated upon to prevent infection
or disease. The assessee claimed the classification of the product as
medicament under chapter sub-heading 3003 which is a specific
entry, whereas the revenue contended that, as the product in
question was primarily used as detergents/ cleansing preparation,
they cannot be brought under the definition of medicaments and
sought classification under chapter sub-heading 3402.90 which is
a residuary entry. The Supreme Court held that a commodity
cannot be classified in a residuary entry, in the presence of a
specific entry, even if such specific entry requires the product to be
understood in the technical sense. A residuary entry can be taken
refuge of only in the absence of a specific entry; that is to say, the
latter will always prevails over the former.
The Supreme Court, in Dunlop India Ltd. & Madras Rubber
Factory Ltd. v. Union of India , held that 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 orphanage of the residuary clause. The question of competition
between two rival classification will, however, stand on a different
footing.
It is no doubt true that in case of competing entries, one
falling under the specified items mentioned in the Schedules and
the other a residuary entry, the burden is on the revenue to show
that the goods can, by no conceivable process of reasoning, be
brought within the specific Entry. As noted hereinabove, it is only
if all kinds of pesticides and insecticides are held to fall within the
ambit of Entry 20, can the subject goods, which are household
insecticides, be said to fall within the said Entry. Such a
construction would then render Entry 100 (140) redundant, as
technical grade pesticides which are classified under Entry
100(140) would also fall within Entry 20. The only manner in
which these two entries can be reconciled is if pesticides and
insecticides used for plant protection are alone construed as falling
within Entry 20, and technical grade insecticides and pesticides
alone as falling within the scope of Entry 100(140). In such an
event household insecticides, which are neither used for plant
protection nor do they constitute technical grade pesticides and
insecticides used as industrial inputs for manufacture of pesticides
and insecticides, would not fall either under Entry 20 or 100(140)
of the IV Schedule to the VAT Act. They would, therefore, be
taxable at the revenue neutral rate of 12.5%/14.5% treating them
as falling within the residuary items in Schedule V of the VAT Act.
XII. APPLICABILITY AND EFFECT OF COMPETING ENTRIES IN
THE SAME/DIFFERENT SCHEDULES OF A TAX STATUTE:
It is contended, on behalf of the petitioners, that the scope of
competing Entries (Entry 1 of Schedule 1, Entry 1 of Schedule IV
and Entry 20 of Schedule IV) cannot be examined for testing the
appropriate classification of the equipment; the submission of the
revenue does not disclose any rationality in taxing goods under
Entry 1 of Schedule IV, and the goods under Entry 20 of Schedule
IV, at the same rate; Entry 226 of the First Schedule to the APGST
Act dealt with Agricultural implements, and was introduced with
effect from 01.01.2000; prior thereto there was no entry in the First
Schedule which dealt with agricultural implements; however, the
phrase Plant Protection Equipment finds mention in Entry 78 i.e.
with effect from 27.04.1970; and, if the contention of the Revenue
is accepted, then agricultural equipment, sought to be taxed under
Entry 20 of Schedule IV, would be sufficient to cover Entry 1 of
Schedule IV also.
It is true that Entry 226 of the First Schedule to the APGST
Act, introduced with effect from 01.01.2000, read as under:
Agricultural implements whether hand operated, animal drawn or power
operated including post harvesting instruments and hand tools, sprayers and
dusters (and parts and accessories thereof).
Entry 1 of Schedule I of the AP VAT Act relates to agricultural
implements manually operated or animal driven, hand operated
sprayers including knapsack/backpack power sprayers (powered
upto 35 cc engines developing 0.8 to 1.4 HP), dusters and parts
thereof. Entry 1 of Schedule IV of the AP VAT Act relates to
agricultural implements not operated manually or not driven by
animals. Entry 20 of Schedule IV of the AP VAT Act relates to
Pesticides, Insecticides, fungicides, herbicides, weedicides and
other plant protection equipment and accessories thereof including
drip and sprinkle irrigation systems, but excluding mosquito
repellants in any form.
It is evident from Entry 1 of the First Schedule and Entry 1 of
the IV Schedule to the VAT Act, that Entry 20 covers only such
physical equipment which are not covered by either of the aforesaid
Entries. While the first part of Entry 20 relates to products i.e.,
goods used for plant protection, the second part deals with
equipment & accessories meant for plant protection through which
the goods, covered by the first part, are applied/used. Entry 20
brings within its ambit two different categories i.e., goods &
equipment of the same genus. The Entry has to be read in its
entirety, and each word used therein has to be given meaning. No
part of the Entry can be considered surplussage nor can the
legislature be said to have used words in the Entry superfluously.
The words ..and other in Entry 20 of Schedule IV do not take
within its fold items under Entry 1 of Schedule I of the VAT Act &
Entry 1 of Schedule IV of the VAT Act. Only plant protection
equipment, other than those mentioned in both Entry I of
Schedule I and Entry I of Schedule IV, qualify to be assessed under
Entry 20 of Schedule IV of the VAT Act; and by no means are the
words ..and other in Entry 20 a surplusage, as no statutory
provision can be so read as to make any word used in an Entry
redundant or inapposite surplussage.
Agricultural implements which fell within Entry 226 of the I
Schedule to the APGST Act have now been divided between Entry I
of Schedule I and Entry I of Schedule IV of the VAT Act. While
hand operated or animal drawn agricultural implements in Entry
226 are now classified under Entry I of Schedule I of the VAT Act,
power operated agriculture implements, which hitherto formed part
of Entry 226 of the I Schedule, are now classified under Entry 1 of
Schedule IV. Plant protection equipment, which was classified
within Entry 78 of the I Schedule to the APGST Act earlier, are now
brought under Entry 20 of the IV Schedule to the VAT Act. Even
under the APGST regime, other plant protection equipment were
brought within a separate Entry (i.e., Entry 78) other than the
entry relating to agricultural implements (i.e., Entry 226). The
mere fact that both of them are in Schedule IV and are liable to tax
at the same rate is of no consequence as pesticides and
insecticides used for plant protection and technical grade
pesticides and insecticides also fall within Schedule IV albeit in
two separate entries (Entry 20 and Entry 100 (140)).
XIII. DOCTRINE OF NOSCITUR A SOCIIS AND EJUSDEM
GENERIS:
It is contended, on behalf of the petitioners, that the
principle of noscitur a sociis cannot be applied to artificially
curtail the scope of Entry 20 only to items used for
agricultural/horticultural purposes; this legal maxim is merely an
aid to interpretation, and is applied where a particular piece of
legislation is ambiguous or susceptible of more than one
interpretation; the language employed in Entry 20 is capable of
only one interpretation; as Entry 20 enumerates various items that
are mutually exclusive, each term must be given its own meaning
and construed independently; the maxim noscitur a sociis is not
applicable as the terms pesticides and insecticides are terms of
wide import that have been deliberately used to include insecticides
and pesticides of all forms including those used for household
purposes; this maxim is not applicable in cases where wider words
are deliberately used to broaden the scope of the word/phrase; if
the genus of Plant Associates is applied to the former three items
then, because of Herbicide and Weedicide, they would include
plant killers and plant protection products; such an
interpretation would also not have a common genus amongst all
the items; accepting the contention of the department would mean
that the suggested common genus of Plant Associates would cover
both plant protectors and plant killers, for it is only then can the
common genus of Plant Associates be attributed to all the five
items in the Entry; it would then mean that herbicide and
weedicide would cover both plant protectors and plant killers; the
preceding three items i.e pesticides, insecticides and fungicides
would only cover plant protectors; even to apply the rule of
Noscitur a Sociis, there must be a common genus to all the items
in the entry; if the common genus of Plant Associates is applied to
the Entry, herbicide and weedicide would, in effect, cover two
categories of products i.e. plant killers and plant protectors; in
effect the only common genus would again be of plant protectors
from pesticides till weedicides; all the five items in the first part of
the entry are capable of covering not only plant protectors but also
non-plant protectors; attributing a common genus of plant
protection or plant associates would not be justified on a true
interpretation of Entry 20; the doctrine of ejusdem generis has no
application; the terms insecticides and pesticides, and the term
plant protection equipment, belong to two different categories of
products; insecticides and pesticides are not equipment; not just
the species, but the genus of the Entry itself is different i.e. while
insecticides, etc. belong to one genus, plant protection equipment
belong to an entirely different genus; the words plant protection
cannot be read separately from equipment; they form one phrase
as a whole to classify products of a distinct genus i.e. plant
protection equipment; if insecticides on the one hand, and plant
protection equipment on the other, are not of the same genus or
category, neither can influence the interpretation of the other; if
the preceding words do not constitute mere specifications of a
genus, but constitute description of a complete genus, the rule of
ejusdem generis has no application; insecticides and pesticides are
not equipment; as there is no ambiguity in the language employed
in Entry 20, the suggested rule of Ejusdem Generis has no
application; the doctrine of ejusdem generis is not an inviolable
rule of law; it can be applied only in the absence of an indication to
the contrary; and it cannot be applied when the preceding words
and the general words constitute description of two categories, or
the general words themselves constitute description of a distinct
category.
In Bharat Heavy Electricals Ltd v. Globe Hi-Fabs Ltd ,
while interpreting a clause of an agreement providing that no
interest shall be payable on earnest money, security deposit or on
any money due to the contractor by employer, the Supreme Court
held that in the present case we noticed that the clause barring
interest is very widely worded. It uses the words any amount due
to the contractor by the employer. In our opinion, these words
cannot be read as ejusdem generis along with the earlier words
earnest money or security deposit. Accordingly, the Supreme
Court held that no interest is payable for pre-award period.
Entries, which are descriptive of the category of goods, have
certain characteristics. Therefore, when a question arises whether a
particular good is covered in any category or not, it has to be
examined if it satisfies the characteristic which go to make it a good
of that category, whether in trade circle it is understood as such,
and if it is a good of a technical nature then whether technically it
falls in the one or the other category. Once it is found that a
particular good satisfies the test, then the issue which would arise
for consideration is whether it should be construed broadly or
narrowly. (Bombay Chemical Pvt. Ltd.14). It is while examining
the question whether the Entry should be read broadly or narrowly
that the rules of Noscitur a sociis and ejusdem generic should be
borne in mind.
The Rule Noscitur a sociis, according to Maxwell, means
that where two or more words which are susceptible of analogus
meaning are coupled together they are understood to be used in
their cognate sence. They take, as it were, their colour from each
other, the meaning of the more general being restricted to a sense
analogous to that of the less general. (Hospital Mazdoor Sabha38;
Lokmat Newspapers Pvt. Ltd v. Shankarprasad ; Bharat Heavy
Electricals Ltd98; Brindavan Bangles Stores v. Asst.
Commissioner of Commercial Taxes ). Nositur a Sociis means
that when two words are capable of being analogously defined,
then they take colour from each other. The term ejusdem generis, a
facet of Nositur a Sociis, means that the general words following
certain specific words would take colour from the specific words.
(Commissioner of Trade Tax, U.P. v. M/s. Kartos
International ). Entries in the Schedules of Sales Tax statutes list
some articles separately, and some articles are grouped together.
When they are found grouped together, each word in the entry
draws colour from the other words therein. This is the principle of
noscitur a socis. (Paradeep Aggarbatti, Ludhiana v. State of
Punjab ; M/s. Kartos International101).
In examining the question as to what is the meaning of
words occurring in an entry in the Schedules to a sales tax
enactment, the Court should not only look at the words, but
should also look at the context, the collection and the object of
such words, relating to such a matter and interpret the meaning,
according to what would appear to be the meaning intended to be
conveyed by the use of the words under such circumstances. A
word is known by the company it keeps. (Deputy Commissioner
of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. K.A.
Latheef ; Rein v. Lane ; Varkey v. Agricultural Income-tax
and Rural Sales Tax Officer ; and M.K. Ranganathan21). The
rule of construction noscitur a sociis is that the meaning of each of
the words is to be understood by the company it keeps. It is a
legitimate rule of construction to construe words in an Act with
reference to the words found in immediate connection with them.
The rule is explained differently: that meaning of doubtful words
may be ascertained by reference to the meaning of words associated
with it. (Ahmedabad (P) Primary Teachers Assn. v.
Administrative Officer ; Principles of Statutory Interpretation
by Justice G.P. Singh, 8th Edn.).
It is a legitimate rule of construction to construe words in an
Act with reference to words found in immediate connection with
them. (M.K. Ranganathan21; Angus Robertson v. George Day ).
When two or more words, which are susceptible of analogous
meaning, are coupled together noscuntur a sociis, they are
understood to be used in their cognate sense. They take, as it were,
their colour from each other, i.e the more general is restricted to a
sense analogous to the less general. (M.K. Ranganathan21;
Maxwell on Interpretation of Statutes, Tenth Edition, p 332).
The rule of nositur a sociis cannot, however, prevail where
it is clear that the wider words have been deliberately used in order
to make the scope of the defined word correspondingly wider. It is
only where the intention of the legislature in associating wider
words with words of narrower significance is doubtful, or otherwise
not clear, that this rule of construction can be usefully applied; it
can also be applied where the meaning of the words of wider
import is doubtful; but where the object of the legislature in using
wider words is clear and free from ambiguity, this rule of
construction cannot be pressed into service. (Hospital Mazdoor
Sabha38; Brindavan Bangle Stores100).
The Latin words ejusdem generic (of the same kind or nature)
are attached to a principle of construction whereby wide words
associated in the text with more limited words are taken to be
restricted by implication to matters of the same limited character.
The doctrine of ejusdem generis applies when (i) the statute
contains an enumeration of specific words; (ii) the subjects of the
enumeration constitute a class or category; (iii) that class or
category is not exhausted by the enumeration; and (iv) there is no
indication of a different legislative intent. General words must
ordinarily bear their natural and larger meaning, and need not be
confined "ejusdem generis" to things previously enumerated unless
the language of the statute spells out an intention to that effect.
(GMR Energy Limited28; M/s. Siddeshwari Cotton Mills (P) Ltd.
v. Union of India ).
The general expression has to be read to comprehend things
of the same kind as those referred to by the preceding specific
things constituting a genus, unless of course from the language of
the statute it can be inferred that the general words were not
intended to be so limited and no absurdity or unintended and
unforeseen complication is likely to result if they are allowed to
take their natural meaning. Unless there is a genus which can be
comprehended from the preceding words, there can be no question
of invoking this rule. Nor can this rule have any application where
the general words precede specific words. (Asstt. C.C.E. v.
Ramdev Tobacco Company ; Tribhuban Parkash Nayyar v.
Union of India ; GMR Energy Limited28). The preceding words
or expressions of restricted meaning must be susceptible of the
import that they represent a class. (GMR Energy Limited28;
Statutory Interpretation Rupert Cross (p.116); Amar Chandra
Chakraborty v. The Collector of Excise, Tripura ; UPSEB v.
Hari Shankar )
For the ejusdem generis principle to apply there must be
sufficient indication of a category that can properly be described as
a class or genus, even though not specified as such in the
enactment. (Francis Bennion : Statutory Construction [pgs 830-
831). Unless you can find a category' 'there is no room for the
application of the ejusdem generis doctrine'. The only test is
whether the specified things which precede the general words can
be placed under some common category. This means that the
specified things must possess some common and dominant feature.
(S.S. Magnhild v. Mclntyre Bros. & Co., ).
To invoke the application of the ejusdem generis rule, there
must be a distinct genus or category running through the bodies
already named. The specific words must apply not to different
objects of a widely differing character but to something which can
be called a class or kind of objects. Unless there is a genus or
category, there is no room for the application of the ejusdem
generis doctrine. (Rajasthan State Electricity Board v. Mohan
Lal ; Maxwell : Interpretation of Statutes; United Town
Electric Co., Ltd. v. Attorney-General for Newfoundland ). The
nature of the special words and the general words must be
considered before the rule is applied. (Jagdish Chander Gupta v.
Kajaria Traders (India) Ltd ). The inclusion of several articles
under the same heading does not mean that they all constitute one
commodity when it is apparent that a particular article belongs to a
distinct category. (Sukhu Ram Tamrakar v. State of Madhya
Pradesh ).
It is a requisite that there must be a distinct genus, which
must comprise more than one species, before this rule can be
applied. (State of Bombay v. Ali Gulshan ). Interpretation
ejusdem generis or noscitur a sociis need not always be made when
words showing particular classes are followed by general words.
Before the general words can be so interpreted there must be a
genus constituted or a category disclosed with reference to which
the general words can and are intended to be restricted. (Jagdish
Chander Gupta116).
The construction placed by the petitioners, on Entry 20 of
Schedule IV, ignores the Noscitur a sociis and Ejusdem Generis
principles. If the principle Noscitor a sociis, is applied, the word
insecticide cannot be considered in isolation, ignoring the other
words used in Entry 20 which form part of the same genus, all of
which are connected with plant protection. The words Insecticide
would get its color from the associated words which are all
chemicals, among others, to be used for plant protection as
generally understood in common parlance, and not the technical
usage of the commercialized products sold by the petitioners. The
words plant protection add colour to both the first and the second
limb of Entry 20. If the doctrine of Noscitor-a-sociis is applied to
the first part, and the rule of Ejusdem Generis to the second,
plant protection would be the genus, equipment and accessories
thereof, being general words, would be restricted by the specific
words plant protection. The artificial distinction sought to be
made between plant protectors and plant killers necessitates
rejection, as the goods referred to in sales tax enactments must be
understood in its commercial sense, as those involved in the trade
understand it, and not as understood by agricultural scientists in
its technical sense. Applying the common parlance test it is
evident that the subject goods, which are household insecticides
and pesticides, are not covered under Entry 20 of the IV Schedule
to the VAT Act.
The words pesticides, insecticides, fungicides,
herbicides and weedicides, in the first limb of Entry 20, are
susceptible of analogous meaning, and are compiled together so
that they are understood as being used in their cognate sense.
Pesticides and insecticides are used to control pests and insects,
herbicides and weedicides to kill unwanted plants especially
weeds, and fungicides are used to inhibit or kill the growth of
fungi. These chemicals prevent destruction or damage to
crops/plants, and are mainly used for plant protection. While
they may have other uses also, the meaning of the words
pesticides, insecticides and fungicides is to be restricted to a
sense analogous to herbicides and weedicides which are less
general. When each of these words take colour from each other, it
is evident that the scope of Entry 20 is restricted to these chemicals
when they are used for plant protection alone, and not when it is
used for other purposes. The common genus is plant protection
and each of these items are species of plant protectors.
Pesticides, Insecticides, fungicides, herbicides, weedicides,
in the first part of Entry 20, are goods basically intended for plant
protection/connected with plant protection. While herbicides and
weedicides are indisputably related/ connected with plants, and
are used for their growth and protection, pesticide and
insecticide, which are words used along with herbicides,
weedicides and fungicides, also form part of the same group of
chemicals meant for plant protection. The genus of all these
products, as one group, is plant protection, growth and
regulation. Applying the rules of noscitur a sociis and ejusdem
generics it is evident that the pesticides and insecticides
referred to in Entry 20 of Schedule IV are those used for plant
protection, and do not bring within its ambit the subject goods
which are household insecticides.
Entry 1 of Schedule 1 of the Vat Act relates to manually
operated or animal driven agricultural implements. Entry 1 of
Schedule IV relates to agricultural implements not manually
operated and not driven by animals. Plant protection equipment,
other than those referred to in Entry 1 of Schedule 1 and Entry 1
of Schedule IV, are placed in Entry 20 of Schedule IV along with
the chemicals used for plant protection. The basis, underlying
both the first and second limb of Entry 20, is plant protection
and while the first limb refers to the chemicals used for plant
protection, the second limb refers to the equipment used for plant
protection, with the word other denoting equipment other than
those mentioned in Entry 1 of Schedule I and Entry I of Schedule
IV of the VAT Act. The items in the first limb of Entry 20 constitute
a common category in that they are all chemicals used for plant
protection.
Accepting the submission, urged on behalf of the petitioners,
that pesticides and insecticides constitute one genus and plant
protection equipment a completely different genus would render
the word and other used in Entry 20 between the words
weedicides and plant protection equipment redundant, which as
held hereinabove is impermissible. The object of placing the words
plant protection equipment in Entry 20 is only because the
preceding items in the said Entry, including pesticides and
insecticides relate only to those used for plant protection, and
none else.
Although the doctrine of ejusdem generis is to be applied
with caution, where in a legislative enactment there are strong
reasons (a) from the history and circumstances connected with its
passing, (b) from the structure of the Act itself, to indicate the real
meaning of the Legislature, the doctrine of ejusdem generis is one
which not only can, but ought to, be applied. (Attorney-General v.
Brown42). The statement of objects and reasons of Act 9 of 1970 in
so far as it related to Entry 78 of Schedule I of the APGST Act, the
white paper on VAT, and the very structure of Entry 20 of Schedule
IV of the VAT Act require application of the ejusdem genus rule,
and when so applied it is evident that the insecticides and
pesticides used in Entry 20 of Schedule IV relate only to those
used for plant protection.
XIV. IS ENTRY 20 A COMBINED ENTRY:
It is contended, on behalf of the petitioners, that the terms
insecticides and pesticides, and the term plant protection
equipment, belong to different categories of products; insecticides
and pesticides are not equipment; the interpretation placed by the
revenue, in effect, restricts the scope of the entire Entry; the
contention that the scope of the items, mentioned in the said entry,
are restricted only for agricultural purposes is not supported by
any reasoning except referring to the words plant protection
equipment; the various items, enumerated in the Entry, are of wide
import and there is no ambiguity in the language employed
therein; and inclusion of several articles, under the same heading,
does not mean that they all constitute one commodity when it is
apparent that a particular article belongs to a distinct category.
The mere fact that certain articles are mentioned under the
same heading in a statute does not automatically mean that they
all constitute one commodity. The inclusion of several articles
under the same heading may also be for reasons other than that
the articles constitute one and the same thing. (Sukhu Ram
Tamrakar117; Haji Abdul Shakoor v. State of Madras ). In the
present case, however, all the items in the first limb of Entry 20,
are analogous to each other, and their purpose is to provide plant
protection. Entry 20 is a combined Entry which covers items viz.,
pesticides, insecticides, fungicides, weedicides and plant
protection equipment used for agricultural purposes. While the
second part of Entry 20 deals with Plant Protection Equipment
and Accessories thereof, the first part of the Entry basically deals
with products which gets consumed in the process of their
application, and are joined together with products of a physical
nature which are used for plant protection ie they are not
consumed in the process, and are physically available for multiple
uses. The goods mentioned in the first part of the Entry are
applied by the use of the goods referred to in the second part. The
term equipment and accessories are general words, and are
restricted by the specific words plant protection. Not all
equipment, which are of general use, are covered under Entry 20.
It is only those equipment, used or intended for the use of plant
protection, which are covered thereunder. The term plant
protection is the genus in Entry 20, and covers not only
equipment and its accessories which are physical goods meant for
plant protection, but also the goods, referred to in the first part of
Entry 20, which are consumables used for plant protection.
XV. SHOULD THE MEANING OF WORDS, USED IN AN ENTRY
IN A SCHEDULE TO A TAX STATUTE, BE ASCERTAINED
IN THE LIGHT OF DEVELOPMENT OF SCIENCE &
TECHNOLOGY?
It is contended, on behalf of the petitioners, that once the
goods, manufactured by the assessee, are held to be "insecticides",
there is no justification in excluding them from the term
"pesticides"; with development of science and technology, a
continually expanding content and a new kind of
pesticide/insecticide may be found; a Statute is to be understood
as a dynamic document which contemplates changes in
technological and socio-economic conditions; the House of Lords,
in Comdel Commodities Ltd.56, has held that when a change in
the social conditions produces a novel situation, which was not in
contemplation at the time when the statute was first enacted, there
can be no apriori assumption that the enactment does not apply to
the new circumstances; and if the language of the enactment is
wide enough, to extend to those circumstances, there is no reason
why it should not apply in the instant case.
In Porritts & Spencers (Asia) Ltd69, the Supreme Court,
while considering the question whether dry felts fell within the
category of all varieties of cotton, woolen or silken textiles
specified in Item 30 of Schedule B to the Punjab General Sales
Tax Act, 1948, held:-
. there may be wide ranging varieties of woven fabric and
they may go on multiplying and proliferating with new
developments in sciences and technology and inventions of new
methods, materials and techniques but nonetheless they would all
be textiles. It is true that our minds are conditioned by old
antiquated notions of what are textiles and, therefore, it may
sound a little strange to regard dryer felts as textiles: But it
must be remembered that the concept of textiles is not a
static concept. It has, having regard to newly developing
materials, methods, techniques and processes, a continually
expanding content and new kinds of fabric may be invented
which may legitimately, without doing any violence to the
language, be regarded as textiles. (emphasis supplied)
In Commissioner of Sales Tax v. La Bela Products the
Bombay High Court opined that the connotation of the term
kumkum has been enlarged with the passage of time; Entries in a
Schedule to a Sales Tax Act must be interpreted in the light of
current conditions; and, thereby, auto-sticking bindies, sold
under the name of beauty spots, more appropriately fell within
the Entry in respect of kumkum, and not under the Entry in
respect of toilet articles. The Orissa High Court, in Sonic
Electrochem (P) Ltd.13, observed that pesticides have wide usage
apart from agriculture; pests includes insects; and any material
which is used as an insect killer would come within the ambit of
pesticide.
In interpreting statutes, the primary object of which is to
raise revenue and for which purpose various products are
differently classified, resort should not be had to the scientific and
technical meaning of the terms and expressions used, but to their
popular meaning, ie the meaning attached to them by those using
the product. Scientific and technical meanings should not be
applied if they run counter to how the product is understood in
popular parlance. (Shree Baidyanath Ayurved Bhavan Ltd. v.
Collector of Central Excise, Nagpur ). The usual method would
be to provide the popular meaning or the meaning attached to the
products by those who deal in them i.e in their commercial sense.
Functional utility, and predominant use, play an important role in
determining the classification of taxable goods. The dictionary
meaning, the technical meaning and the meaning from users' point
of view or popular meaning would all furnish a clue to understand
the classification of a product. (Reckitt Benckiser (India) Ltd v.
State of A.P. ; Scientific and Glass Laboratories63;
Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant
Singh Charan Singh ; Prayag Chemical Works62). The words,
used in Entries in sales tax legislations, must be construed as
understood in common parlance. The words used by the
legislature must be given their popular sense meaning "that sense
which people conversant with the subject-matter with which the
statute is dealing would attribute to it." (Deputy Commissioner of
Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. G.S.
Pai & Co. ).
Words, in a sales tax statute, must be construed not in any
technical sense nor from the botanical point of view but as
understood in common parlance. If it has not been defined in the
Act, and is a word of every day use, it must be construed in its
popular sense. It is to be construed as understood in common
language. (Ramavatar Budhaiprasad v. Asstt. STO ; Craies on
Statute Law, p. 153 (5th Edn.); Planters Nut Chocolate Co. Ltd.
v. The King ; Madhya Pradesh Pan Merchants Association,
Santra Market, Nagpur v. The State of Madhya Pradesh (Sales
Tax Department) ). Where a word has a scientific or technical
meaning, and also an ordinary meaning according to common
parlance, it is in the latter sense that the word must be held to
have been used in a taxing Statute, unless a contrary intention is
clearly expressed by the Legislature. The reason is that the
Legislature does not suppose our merchants to be naturalists, or
geologists, or botanists. (Porritts & Spencer (Asia) Ltd.69; Prayag
Chemical Works62). That word should be given the meaning
attributed to it by people who daily deal with it as consumers or
dealers in the market. The reason for this rule is that the Sales Tax
Act concerns itself with commercial goods and, therefore, these
commercial goods should be attributed with that meaning which is
generally attributed to it in the market by the persons who deal
with it daily. A purely scientific meaning, which is theoretical and
is given from a scientific point of view, of a particular article would
be of no help in ascertaining whether the article in question falls
within the purview of a particular Entry. (Scientific and Glass
Laboratories63; Ramavatar Budhaiprasad125; Jaswant Singh
Charan Singh123).
The subject products, manufactured by the petitioners,
would not be considered as insecticide in common parlance.
These products are, admittedly, not used for agriculture/ plant
protection. They are not essential requisites for agricultural
production. These products are therefore liable to be taxed at a
higher rate, and not at the concessional rate @ 4 % / @ 5 %. While
passage of time has no doubt resulted in new found uses of
pesticides, insecticides, weedicides, fungicides and herbicides, what
we are called upon to examine is whether the subject products fall
within the ambit of an Entry in a Schedule to a Sales Tax
enactment. As a Sales Tax enactment relates to levy of tax on
commercial goods, the words used in an Entry in a Schedule to a
Sales Tax Act must be given the meaning attributed to it in the
market by persons dealing with them daily, and not in their
technical or scientific sense. When construed in its popular sense,
it is evident that the words pesticides and insecticides used in
Entry 20 relate to chemicals used as inputs for agriculture or plant
protection, and not to household insecticides used to kill
household insects and pests.
XVI. REASONS FOR EXCLUSION OF MOSQUITO
REPELLENTS FROM THE AMBIT OF ENTRY 20:
It is contended, on behalf of the petitioners, that the subject
goods cannot be construed as mosquito repellants; HIT CIK, HIT
Rat and HIT Chalk pertain to rats and cockroaches, and other
crawling insects; they are not used in relation to mosquitoes; HIT
FIK is an insecticide as it is used as a flying insect killer i.e. its
application pertains to all kind of flying insects, and not only to
mosquitoes; HIT FIK contains d-Transallethrin, a poisonous
substance that directly affects the nervous system of the flying
insect thereby killing it almost immediately; the subject goods,
especially HIT FIK, cannot be construed as a mosquito repellant;
Entry 20 of Schedule IV specifically excludes mosquito repellants
from its ambit; an Entry cannot exclude from its scope what is not
included within its ambit; even the exclusion, i.e. mosquito
repellents in any form, in Entry 20 establishes that the legislature
never intended to limit the scope of the Entry to insecticides,
pesticides, etc used only for agricultural/horticulture purposes; the
words in any form demonstrate that mosquito repellents used for
household use alone fall outside the ambit of the said entry; if the
intention of the Legislature was to limit the scope of Entry 20 only
to goods used for agricultural/horticulture purposes, the words in
any form would not have been used along with mosquito
repellents; the contention that the legislature was conscious that
mosquito repellents (which undisputably are used in households)
were not insecticides, yet it thought that they should be excluded
from the Entry is as absurd as exclusion of paper and pencil from
insecticides; the specific exclusion of mosquito repellants shows
that the intention of the legislature was not to restrict the scope of
Entry 20 only to agriculture uses, but to extend it to domestic uses
also; since Entry 20 specifically excludes goods which are
otherwise covered within its purview, and the item mosquito
repellants are used as household insecticides, it is incorrect to
restrict the scope of the said Entry only for agricultural purposes;
various legal fora, including this High Court, have held that
mosquito repellants are insecticides, and have classified them
within the ambit of the Entries covering pesticides or
insecticides; this Court in Godrej Hicare Ltd.12, held that, since
there was no separate entry for mosquito repellents in the said
Act at the relevant time, but a specific entry had been carved out in
the Schedule with effect from 01.01.2000 as Entry 203, mosquito
repellents should be treated as insecticides till 01.01.2000; the
Sales Tax Appellate Tribunal, Hyderabad, while interpreting the
erstwhile Entry 78 of the First Schedule to the APGST Act, in
Kumar Agencies74, held that Jet Mat falls within the expression
insecticides as they are used for repelling or killing mosquitos
from residential and non-residential buildings, and the chemical is
classified as an insecticide even by the Directorate of Plant
Protection; the Sales Tax Appellate Tribunal, Hyderabad, in
Amitha Agencies75 following the decision in Kumar Agencies74,
held that Mosquito Repellent is an insecticide falling under Entry
78 of the First Schedule to the APGST Act; and a similar view was
taken in Transelectra Domestic Products Pvt. Ltd.76.
Learned Counsel for the petitioners would submit that the
judgment in Sonic Electrochem78 is not applicable to the facts of
the present case, as it dealt with the interpretation of a specific
Entry which deals with mosquito repellants under the Gujarat
Sales Tax Act, and the Entry therein specifically dealt with jet
mats i.e. mosquito repellant mats, whereas undisputedly the
subject goods were different; in any event, the Supreme Court
denied the benefit to Jet Mats on the ground that the same were
commonly known and perceived by the market as mosquito
repellant mats, and therefore the said goods were to be treated as
mosquito repellants irrespective of their ability to kill mosquitoes;
in the present case, the subject goods are not perceived by the
market as mosquito repellants, but as insect killers which, in
turn, are only insecticides; except for CIK, which is meant for
Cockroaches, all other products ie MIK, FIK, AIK, have multi-
purpose uses against cockroaches, flies, and mosquitoes; these
products are meant for killing these insects; and, therefore, the
goods are classifiable as insect killers, and do not fall under the
ambit of mosquito repellent.
As Entry 20 of Schedule IV specifically excludes mosquito
repellents in any form from its ambit, it is necessary to
understand what a mosquito repellent is. A repellent is defined
as any chemically volatile substance that induces arthropods to
move in the opposite direction from its source thereby preventing
man and vector contact. Repellents may be formulated in various
dosage forms like lotions, aerosols, sprays, cream oils and grease
sticks. Different chemicals show different intrinsic protection and
repellency time. Most repellents act by a common mechanism.
They repel arthropods by providing vapors around the applied area.
Volatile oils from plant sources possess this property and thus they
act as a natural mosquito repellent. Many commercially available
formulations use volatile oil as an active ingredient. Repellant
activity is reduced due to washing with water, rubbing and
sweating of skin. A repellent is a substance that causes an insect
or animal to turn away from it or reject it as food. Repellents may
be in the form of gases (olfactory), liquids, or solids (gustatory). The
aerosol products, manufactured by the petitioners, use LPG/
kerosene as propellant and it is by direct application that crawling
insects are killed. Repellents, which are specifically excluded from
the scope of Entry 20, contain a slightly higher percentage of
active ingredient but its effectiveness is less due to the medium
through which it is used such as electric units.
In Sonic Electrochem78, mosquito repellents were subjected
to tax under the residuary Entry 13 of Schedule III prior to August
1990, i.e before insertion of Entry 129 in the Gujarat Sales Tax Act
with effect from 1-8-1990. A notification was issued, under Section
49(2) of the said Act, granting partial exemption to the sale or
purchase of pesticides and insecticides under Entry 98. The
Supreme Court held that, in view of the specific Entry 129 dealing
with mosquito repellents, it was difficult to accept the contention
that the product in question would not come within the ambit of
Entry 129 since one of its constituents d-Allethrin 4% happened
to be an insecticide; the product Jet Mat, which was the trade
name, contained d-Allethrin 4%; it was commercially known as
Mosquito Repellent Mat, and was a mosquito repellent
notwithstanding the fact that it not only repelled mosquitoes but
was also capable of killing mosquitoes; it was difficult to hold that
it was an insecticide entitled for partial exemption under Entry 98
of the Act; and when Entry 129 clearly stipulated that mosquito
repellent was taxable, the rate of tax had been provided therein,
and as the product in question was also a mosquito repellent, there
was no infirmity in the judgment of the High Court.
In Godrej Hicare Limited12 the question which fell for
consideration was whether "mosquito repellents" were exigible to
tax under Entry 78 of the First Schedule which included pesticides
and insecticides, or whether "mosquito repellents" were exigible to
tax under "general goods". The Division Bench held that, prior to
01.01.2000, mosquito repellents were classifiable as insecticides
under Entry 78; however w.e.f. 1.01.2000, mosquito repellents
were specifically classifiable under the specific entry i.e. Entry 203
at the rate of 8%; and even after incorporation of Entry 203 in the
APGST Act, w.e.f 01.01.2000, the subject goods (being insecticides
and pesticides) were being taxed under Entry 78; even the
Department understood the scope of the Entry to include all
insecticides and pesticides, and not merely those used in
agriculture; Entry 78 of the APGST Act was introduced verbatim, in
the AP VAT Act, 2005, as Entry 20 in Schedule IV and was
amended on 23.10.2005 w.e.f 01.09.2005; this matter had been
decided by the Sales Tax Appellate Tribunal in Kumar Agencies74,
a Full Bench of this Court, in Indo- National Limited v.
Commissioner of Commercial Taxes, A. P. Hyderabad , had
held that the judgments of the Tribunal were binding on the sales
tax authorities; however, it was contended on behalf of the revenue
that, after the judgment of the Tribunal, the Supreme Court had
delivered its judgment in Sonic Electrochem78, which
differentiated "mosquito repellents" from "pesticides and
insecticides"; the Supreme Court, in Sonic Electrochem78, was
dealing with a case under the Gujarat Sales Tax Act which had a
specific entry for "jet Mat"; the Supreme Court had therefore
concluded that, as there was an entry for "jet Mat" separately, it
could not be included in an entry for "pesticides and insecticides";
admittedly, there was no separate entry for "mosquito repellents" in
the APGST Act at the relevant time; a specific entry, however, had
been carved out in the Schedule with effect from January 1, 2000
as Entry 203; and, in these circumstances, "mosquito repellents"
should be treated as "insecticides" till January 1, 2000.
In Ashok Agencies35, a Division Bench of the Karnataka
High Court held that it was not in dispute that Mosquito repellants
contained the chemical Allethrin as one of its constituents; since
Allethrin is a constituent chemical in Mosquito repellants, it comes
within the definition of insecticide which also finds place in Entry
23 of the III Schedule annexed to KVAT Act without any further
qualification as to its kind; whether an insecticide is used in
agricultural operations for the purpose of killing insects that attack
agricultural crops, or it is used for killing domestic insects, the fact
remains that all kinds of insecticides fall within Entry 23 of the III
Schedule annexed to the Karnataka VAT Act; and therefore
mosquito repellant, being insecticide, fell within Entry 23 of the
said Schedule.
In M/s.Godrej Consumer Products Ltd.10, it was held that
mosquito repellants, including devices, parts and accessories, were
not treated as part of the Entry relating to Insecticides; it had an
independent entry; when the Karnataka Sales Tax Act came into
force, it had only one entry; it was subsequently substituted by the
Entry at Sl.No.23; the understanding of the Legislature was that,
as the words used in the said entry were clear and unambiguous, it
did not include mosquito repellant; but when the Karnataka High
Court in Ashok Agencies35 ruled that, because of the presence of
"allethrin" in the mosquito repellant, it fell within the definition of
"insecticide", it became necessary for the Legislature to make their
intention clear; therefore, they substituted the said entry by a later
entry specifically excluding mosquito coils and mosquito repellants;
they also added the words "and the like", used for non- agricultural
or non-horticultural purposes; therefore, the entire object of the
substituted provision was to exclude mosquito repellant from the
ambit of the word "insecticide", if it was used for non-agricultural
or non-horticultural purposes.
As noted hereinabove mosquito repellents in any form was
excluded from the ambit of Entry 20, by the amendment made on
23.10.2005 with retrospective effect from 01.09.2005. The
amendment was necessitated in view of the Judgment of the
Tribunal, in Kumar Agencies74 and Amitha Agencies75, that
mosquito repellents were insecticides. The basis of these
judgments was removed by the Legislature, by way of the aforesaid
amendment, making it clear that mosquito repellents were not
insecticides as referred to in Entry 20. While the legislature
cannot declare any decision of a court of law to be void or of no
effect, it can pass an amending Act to remedy the defects pointed
out by a court of law or on coming to know of it aliunde. In other
words, a courts decision must always bind unless the conditions
on which it is based are so fundamentally altered that the decision
could not have been given in the altered circumstances. (State of
T.N. v. State of Kerala ). The cause for ineffectiveness or
invalidity of the Act or the proceedings is sometimes removed by re-
enacting a valid and legal taxing provision. Sometimes the
legislature gives its own meaning and interpretation of the law
under which the tax was collected, and by legislative fiat makes the
new meaning binding upon courts. The legislature may follow any
one method or all of them and while it does so it may neutralise the
effect of the earlier decision of the court which becomes ineffective
after the change of the law. (Amarendra Kumar Mohapatra v.
State of Orissa ; Shri Prithvi Cotton Mills Ltd v. Broach
Borough Municipality ).
A competent legislature can always validate a law which has
been declared by courts to be invalid, provided the infirmities and
vitiating factors noticed in the declaratory judgment are removed or
cured. If in the light of such validating and curative exercise made
by the legislaturegranting legislative competencethe earlier
judgment becomes irrelevant and unenforceable, that cannot be
called an impermissible legislative overruling of the judicial
decision. All that the legislature does is to usher in a valid law in
the light of which the earlier judgment becomes irrelevant. (Ujagar
Prints v. Union of India ; State of Karnataka v. Pro Lab ).
Once the circumstances are altered by legislation, it may neutralise
the effect of the earlier decision of the Court which becomes
ineffective after the change of the law. (Ujagar Prints132; Pro Lab133).
The object of such an enactment is to remove and rectify the defect
in phraseology or lacuna of other nature, which has been found by
the Court to be vitiated by an infirmity. Its aim is to effectuate and
carry out the object for which the earlier principal Act had been
enacted. Such an amending Act to make small repairs is a
permissible mode of legislation and is frequently resorted to in
fiscal enactments. (Pro Lab133; Krishnamurthi & Co. v. State of
Madras ).
The question whether the subject goods, (none of which are
mosquito repellents in any form), were insecticides/pesticides or
not did not arise for consideration in any of the aforesaid
judgments wherein the goods involved were mosquito repellents. It
was not necessary for the Legislature, therefore, to clarify what was
not declared by Courts/Tribunal to be insecticides/pesticides.
Existence of an illegal act, proceedings or rule or legislation is the
sine-quo-non for any validating legislation to validate the same.
There can be no validation of what has yet to be done, suffered or
enacted. (Amarendra Kumar Mohapatra130).
The petitioners claim that the subject goods kill insects and
are not repellants. Hawleys Condensed Chemical Dictionary
defines the word repellant as a substance that causes an insect or
animal to turn away from it or reject it as food; repellants may be
in the form of gases (olfactory), liquids, or solids (gustatory); a
Paper published by Literati Journal of Pharmaceutical Drug Deliver
Technologies 01(02) 2015, 08-13, on A Review on Plant based
Mosquito Repellants states that a repellant is defined as any
chemical volatile substance that induces arthropods to move in the
opposite direction from its source thereby preventing man and
vector contact; The International Journal of Research and
Development in Pharmacy and Life Sciences Vol.4 No.5, pp 1760
1765 Article on Plants Having Mosquito Repellant Activity states
that an ethnobotanical Survey defines mosquito repellant as a
substance applied to skin, clothing, or other surfaces which
discourages insects (and arthropods in general) from landing or
climbing on that surface; there is also mosquito repellant products
available based on sound production, particularly ultrasound
(inaudibly high frequency sounds); the Paper on Advances in Plant
Biopesticides by Dwijendra Singh, has dealt with the nature of
repellant and insect killer; and states that, sometimes, a given
insecticide may act as an insecticide or as a repellent depending on
the concentration; and the major difference between the two is that
a repellent does not kill insects but keeps them away by exuding
pungent vapours or exhibiting slightly toxic effects.
As noted hereinabove, exclusion of mosquito repellants
from Entry 20 can be traced to the fact that the Sales Tax Appellate
Tribunal had treated mosquito repellants as Insecticides. The
legislature, in its wisdom, has excluded mosquito repellants in any
form from its ambit. Thereby the Entry has been confined to
agriculture/plant protection products only. It is not applicable to
the assessees products.
The contention that the words following (excluding mosquito
repellents in any form) reflect the intention of the legislature to
include all other forms (house hold or agriculture) of insecticides
which may have the propensity to kill, immaterial of its mixture
with the other ingredients (kerosene, propellant gas to name a few)
which goes into the manufacture of such goods, is not tenable. It
is wholly unnecessary for us to dwell on the distinction, if any,
between insect killers and insect repellents as the
pesticides/insecticides referred to in Entry 20 are those used for
plant protection, and not household insecticides.
XVII. EFFECT OF AN EXCLUSION CLAUSE IN AN ENTRY:-
It is contended, on behalf of the petitioners, that what was
excluded from Entry 20 is mosquito repellant which is a
household insecticide; the exclusion clause expands the genus of
various items enumerated in the said entry; and when Entry 20
was amended to specifically exclude mosquito repellents, there was
nothing that prevented the legislature from specifying that the
Entry was applicable only to goods used for
agricultural/horticultural purposes, and not for items used for
house-hold purposes.
In Allen v. Emmerson , it was held:-
No theatre or other place of public entertainment (other than such
places of entertainment as are now subject to the provisions of the
Barro-in-Furnacess Corporation Act, 1868, Section 164, and which
last mentioned places are to continue subject to the provisions of
that Act) shall be opened or used unless the same shall first have
been licensed;
Are the words theatre or other place of public
entertainment in s. 33 of the Act of 1872 to be read subject to the
ejusdem generis rule or not? We are satisfied, on the one hand,
that, if they have to be read subject to the restriction of this rule, a
fun fair of the kind involved in this case is not a kind of public
entertainment of the same genus as a theatre. We are not,
however, of opinion that the ejusdem generis rule applies to the
words in question, and this for the following, among other,
reasons:-
(a) Words excepting a species from a genus are
meaningless unless the species in question prima facie falls
within the genus. All hats other than top hats makes sense.
All top hats other than bowler hats does not: nor does all
hats and other articles except gloves if other articles is to be
construed ejusdem generis with hats. Now, the places covered
by s. 164 of the Act of 1868 the places excepted do not
fall within the assumed genus theatres and other similar places
of public entertainment although there may be an overlap
between the two.
(b) No case was cited to us in which a genus has been held to
be constituted, not by the enumeration of a number of classes
followed by the words and other, but by the mention of a single
class (in this case theatres) followed by those words.
(c) The tendency of the more modern authorities is to
attenuate the application of the ejusdem generis rule.. (emphasis
supplied)
The Supreme Court in Indian Aluminium Company Ltd., v.
Asst. Commissioner of Commercial Taxes (Appeals) , while
interpreting Entries No.11 and 67 which deals with petroleum
products, held that the very fact that there is an exclusion clause,
means that, but for the said exclusion, aviation fuel, LPG., etc.,
would be included in the said entries.
It is no doubt true that an exclusion clause is used in an
Entry to exclude the goods referred to in the exclusion clause
from the ambit of the Entry and, but for the exclusion, the goods
mentioned in the exclusion clause would have fallen within the
ambit of the Entry. As noted hereinabove, the exclusion clause in
Entry 20 was necessitated as the Tribunal had earlier held that
mosquito repellents were insecticides/pesticides falling within the
ambit of Entry 78 of Schedule I to the APGST Act (similar to Entry
20 of Schedule IV of the VAT Act). It is to remove the basis of the
judgments of the Tribunal was the exclusion clause inserted. The
words in any form refer to all kinds of mosquito repellents be it in
the form of coils, mats or liquids. The Legislature has, thereby,
made it clear that mosquito repellents in any form were not
pesticides/insecticides falling within the ambit of Entry 20. That
does not, however, mean that the subject goods are
insecticides/pesticides falling within the ambit of Entry 20.
XVIII. ARE TWO VIEWS OF ENTRY 20 POSSIBLE
NECESSITATING THE ONE WHICH FAVOURS THE
ASSESSEE TO BE ADOPTED?
It is contended, on behalf of the petitioners, that insect
killers, being insecticides, fall under Entry 20 of Schedule IV to the
VAT Act; even if the product is conceivably classifiable both under
Entry 20 as well as the residuary entry, benefit should be given to
the assessee of Entry 20; and in Mauri Yeast India Pvt. Ltd. v.
State of U.P the Supreme Court held that it is a settled principle
of law that, when two views are possible, one which favours the
assessee should be adopted.
The subject goods are not pesticides/insecticides used for
plant protection which alone fall within the ambit of Entry 20 of
the IV Schedule. The petitioners contention that it is classifiable
also under Entry 20, even if it were to fall under the residuary
entry, does not therefore merit acceptance. Household
insecticides do not fall under Entry 20, and are liable to tax only
under the residuary entry in Schedule V of the VAT Act.
It is submitted, on behalf of the petitioners, that this Court,
in Reckitt Benckiser (India) Ltd.122, held that Lizol (floor cleaner)
and Harpic (toilette cleaner) are insecticides and pesticides, and are
duly classifiable under Entry 20 of Schedule IV of the VAT Act; the
said order was passed relying on various dictionary definitions of
the term pesticides and insecticides; applying the test of trade
parlance, this Court held that what was a key guiding factor to
classification was how the said product was perceived by
consumers, trade and industry; Lizol and Harpic (used for cleaing
bathrooms) are viewed in the market as disinfectants i.e. solutions
that kill germs; since germs are also included within the scope of
the term pest, the said goods could be classified as pesticides; the
subject goods are perceived by consumers as pesticides i.e.
products that kill pests like cockroaches, ants, rats, mosquitoes,
flies etc; the Gauhati High Court has taken an identical view, in
Reckitt Benckiser India Pvt. Ltd.122, with respect to the same
goods sold by the same assessee, that Lizol and Harpic were
disinfectant fluids that had the capacity to kill bacteria and germs,
and were duly classifiable as pesticides; the Karnataka High Court,
in Godrej Consumer Products Ltd.10, examined a similar issue on
the classification of pest killing products under a similar Entry
under the Karnataka Value Added Tax Act, 2003 which excluded
mosquito repellents from coverage; the Karnataka High Court
answered the substantial question of law in favour of the Petitioner
holding that what is excluded from the ambit of "insecticide" is
mosquito repellants, and not mosquito killers, and Hit Rat are for
killing rodents and Hit Chalk are meant for killing crawling
insects; the first part of Entry 20 of the IV Schedule to VAT Act, is
identical to Entry 18 which was construed by the Supreme Court
in Bombay Chemicals Pvt. Ltd.14; the suggested restrictive
interpretation is contrary to the ratio laid down by the Supreme
Court; and applying the said ratio, to the facts of the present case,
the subject goods, capable of killing cockroaches, mosquitos,
houseflies, etc., are classifiable as insecticides under Entry 20.
In Reckitt Benckiser (India) Ltd122, the attention of this
Court was not drawn to Entry 100(140) of Schedule IV and,
consequently, that all forms of pesticides/insecticides did not fall
under Entry 20. The question whether pesticides/insecticides
falling under Entry 20 are only those which are used for plant
protection was also not examined therein. A judgment is a
precedent binding on a co-ordinate bench only for what it actually
decides, and not what logically follows therefrom. Observations of
Courts are neither to be read as Euclids theorems nor as
provisions of a Statute and that too taken out of their context.
(Amar Nath Om Prakash v. State of Punjab ; CCE v. Alnoori
Tobacco Products ; London Graving Dock Co. Ltd. v.
Horton ; Home Office v. Dorset Yacht Co. ; Shepherd Homes
Ltd. v. Sandham British Railways Board v. Herrington ). The
decision of a Court is only an authority for what it actually decides.
What is of the essence in a decision is its ratio, and not every
observation found therein nor what logically follows from the
various observations made in it. (State of Orissa v. Sudhansu
Sekhar Mistra Hegde ; Quinn v. Leathem ). In any event it is
not even the petitioners case that the subject goods are
disinfectants/toilet cleaners/ bathroom cleaners. Reliance placed
on Reckitt Benckiser (India) Ltd.122 is therefore misplaced.
Item 18 of the First Schedule to the Central Excise and Salt
Act, 1944 read as insecticides, pesticides, weedicides and
fungicides. The question which fell for consideration before the
Supreme Court, in Bombay Chemicals Pvt. Ltd14, was whether
the subject goods, which were disinfectants, fell within the ambit of
the said entry. The Supreme Court held that a disinfectant was
defined in Webster Comprehensive Dictionary as a substance used
to disinfect or to destroy the germs of infectious and contagious
diseases; disinfectant destroyed bacteria, fungi, viruses and
protozoans; it was therefore a killing agent; a disinfectant which
was used for killing, would be broadly covered in the word
pesticide; disinfectants may be of two types; one to disinfect and
other to destroy the germs; the former 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 a pesticide; where the entries are
descriptive of the category of goods, they have certain
characteristics; therefore, when a question arises whether
particular goods are covered in any category or not, it has to be
examined whether it satisfies the characteristic which go to make it
a good of that category, and whether in trade circle it is understood
as such; if they are goods of technical nature, then whether it
technically falls in the one or the other category; and once it is
found that the particular goods satisfy the test, then the issue
which arises for consideration is whether it should be construed
broadly or narrowly. While Item 18, the scope of which fell for
consideration in Bombay Chemical Pvt Ltd14, is no doubt similar
to the first limb of Entry 20 of Schedule IV of the VAT Act, when
the first limb of Entry 20 is read along with the second limb
applying the common parlance test, it is evident that only
pesticides and insecticides used for plant protection would fall
within the ambit of the said entry, and not all kinds of pesticides
and disinfectants. Even otherwise neither did any Entry, similar to
Entry 100 (140) of the IV Schedule fall for consideration nor was
the scope of any such entry examined along with Item 18 of the I
Schedule to the Central Excise Act. Reliance placed on Bombay
Chemical Pvt. Ltd.14 is, therefore, misplaced.
In Godrej Consumer Products Limited10, Entry 23 of the
Third Schedule to the Karnataka VAT Act read as under:
23. Chemical fertilizers, Chemical Fertilizer mixtures, bio-fertilizers,
micro nutrients, gypsum, plant growth promoters and regulators; rodenticides,
fungicides, weedicides and herbicides; insecticides or pesticides but excluding
phenyl, liquid toilet cleaners, floor cleaners, mosquito coils, mosquito repellants
and the, like used for non-agricultural or non-horticultural purposes.
The Karnataka High Court compared the said entry with
Entry 5 of Part-I of the Second Schedule to the earlier Karnataka
Sales Tax Act, 1957 which read thus:
5. Insecticides, pesticides, rodenticides, fungicides, weedicides,
herbicides, plant regulators and plant growth nutrients excluding copper
sulphate.
No entry similar to Entry 78A of the Schedule-I of the APGST
Act, or Entry 100(140) of Schedule-IV to the VAT Act, was
considered in Godrej Consumer Products Limited10. The subject
goods therein were, therefore, held to be insecticide killers falling
within the word insecticide. The aforesaid decision of the
Karnataka High Court does not therefore persuade us to take a
similar view. Reliance placed by the petitioners, on Godrej
Consumer Products Limited10, is therefore of no avail.
XIX. CONCLUSION:
Viewed from any angle, we find no infirmity either in the
impugned orders of assessment, or the orders of the VAT appellate
Tribunal which are subjected to challenge in the present
proceedings by way of revision. All the Writ Petitions and the
TREVCs fail and are, accordingly, dismissed. However, in the
circumstances, without costs. The miscellaneous petitions
pending, if any, shall also stand dismissed.
_________________________________
(RAMESH RANGANATHAN, ACJ)
___________________________________
(M. SATYANARAYANA MURTHY, J)
Date:01.06.2017
W.P. Nos.23351 OF 2008 AND BATCH
01-06-2017
Godrej Sara Lee Limited .Petitioner
The Assistant Commissioner (CT) INT LTU, Secunderabad Division, Hyderabad & Anr. . Respondents
Counsel for the petitioners: Sri S. Ravi, Learned Senior Counsel,
Sri Vivek Chandrasekhar, and
Sri Karan Talwar.
Counsel for respondents: Sri M. Govind Reddy, Sri T. Vinod
Kumar and Sri J. Anil Kumar,
Learned Special Standing Counsel
for Commercial Taxes.
<GIST:
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HONBLE THE ACTING CHIEF JUSTICE RAMESH RANGANATHAN
AND
HONBLE SRI JUSTICE M.SATYANARAYANA MURTHY
W.P. Nos.23351, 23366, 23373, 23395 OF 2008, W.P.Nos.32987
AND 33406 OF 2010, W.P.Nos.24476, 24490 AND 25349 of 2011,
W.P.No.4092 OF 2013, W.P.Nos. 8032, 9204, 15982 AND 15983 OF
2014 AND W.P.No.6365 OF 2016
AND
T.Rev.C.No.25 of 2015 & T.Rev.C.Nos.4, 8, 10, 11 AND 12 OF 2016
COMMON ORDER: (Per the Honble The Acting Chief Justice Ramesh Ranganathan)
W.P. Nos.23351, 23366, 23373 and 23395 of 2008, W.P.
No.32987 of 2010, and W.P. No.24490 of 2011 are filed by Godrej
Sara Lee Limited questioning the assessment orders passed by the
assessing authority for the tax periods April, 2007 to March, 2008;
April, 2008 to March, 2009; April, 2006 to March, 2007; April,
2005 to March, 2006; April, 2009 to March, 2010; and April, 2010
to March, 2011 respectively. W.P. Nos.24476 and 25349 of 2011
and W.P. No.4092 of 2013 are filed questioning the penalty orders
passed by the assessing authority for the tax periods April, 2006 to
March, 2007, April, 2005 to March, 2006 and April, 2008 to
March, 2009 respectively. W.P. No.33406 of 2010 is filed
questioning the garnishee notice dated 16.12.2010, issued by the
assessing authority, for recovery of Rs.2,13,66,366/-. W.P. Nos.
8032 and 9204 of 2014, W.P. No.6365 of 2016 are filed by Godrej
Consumer Products Limited questioning the assessment orders
passed by the assessing authority for the tax periods April, 2013 to
March, 2014; April, 2014 to March, 2015; April, 2011 to March,
2012; and April, 2012 to March, 2013 respectively. W.P.
Nos.15982 and 15983 of 2014 are filed questioning the penalty
orders passed by the assessing authority for the tax periods April,
2011 to March, 2012 and April, 2012 to March, 2013 respectively.
M/s. Godrej Consumer Projects Ltd (the petitioner in W.P.
No.6365 of 2016) is engaged in the business of manufacture and
sale of Mosquito Repellant Instruments, Mosquito Repellant Mats,
Refills (Vaporizers), Coils and other products like flying insect
killers and crawling insect killers (popularly known as Lal Hit
and Kala Hit), Rat Killing Cakes, Chalk Pencils for killing
cockroaches etc. They claim to have launched a new product called
HIT Anti-Roach Gel intended to kill hidden cockroaches, especially
certain species like American and German cockroaches.
The goods manufactured by M/s.Godrej Consumer Products
Ltd, which are the subject matter of these proceedings, are HIT
AEROSOL CIK, HIT AEROSOL FIK, HIT Rat and HIT Chalk. HIT
AEROSOL CIK, popularly known as Lal Hit, is an aerosol spray
used for killing hidden cockroaches. It is said to contain poisonous
chemicals such as imiprothrin and cypermethrin. This product is
described, both on the label of the aerosol can and on the website
of the Petitioner, as 'crawling insect killer' with a 'unique seek and
kill applicator which kills hidden cockroaches'. The petitioner
claims that the said product is an insecticide that kills
cockroaches. HIT AEROSOL FIK, popularly known as Kala Hit, is
used for killing flying insects such as flies, mosquitoes etc. It is
also said to contain the poisonous element d-trans Allethrin that
fatally affects the nervous system of the flying insect thereby killing
it almost immediately. HIT Rat is a rat killing poison containing
Bromadialone. HIT Chalk is a chalk pencil used for killing ants,
cockroaches and other crawling insects, and is said to contain the
poisonous chemical Cypermethrin. In the assessment orders,
impugned in these Writ Petitions, the assessing authority held that
these goods are not pesticides/insecticides falling within the ambit
of Entry 20 of the IV Schedule to the VAT Act, and they were liable
to be taxed at 12.5%/14.5% under Schedule V of the VAT Act as
residuary goods. The Petitioner also manufactures Mosquito coils,
Mosquito repellant vaporizers, and mosquito mats.
TREVC No.25 of 2015, TREVC Nos.4, 8, 10, 11 and 12 of
2016, relating to the three assessment years 2005-06 to 2007-
2008, are filed by M/s. S.C. Johnson Products Pvt. Ltd, assailing
the common order dated 20.01.2015 passed by the Telangana
Sales Tax and VAT Appellate Tribunal, Hyderabad whereby
classification of the products manufactured by them, under the
residuary entry of the V Schedule to the Telangana Value Added
Tax Act, 2005 (hereinafter referred as the VAT Act), was upheld
primarily on the ground that Entry 20 of Schedule IV to the VAT
Act was limited to goods used for agriculture/ horticulture
purposes, and insect killers used for house-hold purposes did not
fall within its scope.
M/s. S.C.Johnson deals with, among others, various
categories of products manufactured under a License granted in
terms of the Insecticides Act, 1968 (the 1968 Act for short), and
the Rules made thereunder. The petitioner has been paying VAT @
4%, as applicable during the relevant period, classifying the said
goods under Entry 20 of the IV Schedule to the VAT Act. The
subject goods, as detailed in the table below, are referred to by
M/s. S.C.Johnson as insect killers/ insecticides.
Product
Name
Insecticide
Reg. No.
Trade
Mark
Remarks
CIK
(Crawling
Insect
Killer)
Imiprothrin
(0.07% w/w) and
Cypermethrin
(0.02% w/w)
(BAYGON)
Aerosol
CIR-
56,039/2007-
Imiprothirn +
Cypermethrin (A)
(270)-4
Baygon
Recommended to
be used against
Cockroaches
MIK
(Multi
Insect
Killer)
Cyfluthrin
(0.025% w/w)
and Transflutrin
(0.04% w/w)
Aerosol
CIR
41,056/2002-
Cyfluthrin +
Transflutrin (HH)
225-21
Baygon
Recommended
against
cockroaches, flies
and Mosquitoes
FIK
(Flying
Insect
Killer)
Cyfluthrin
(0.025% w/w)
and Transflutrin
(0.04% w/w)
Aerosol
CIR 41056/2002-
Cyfluthrin +
Transflutrin (HH)
225-21
Baygon
Recommended
against Flies and
Mosquitoes
AIK
(All Insect
Killer)
Delamethrin
(0.05 % ) and
Allethrin (0.04%
w/w)
CIR-27,667/98-
Deltamethrine +
Allethrin (HH)
Baygon
All Insect killer
Recommended
against
cockroaches,
mosquitoes and
flies.
In addition to the above, M/s. S.C.Johnson also
manufactures mosquito Repellants on which they pay VAT @
12.5%/14.5% treating them as unclassified goods under Schedule
V to the VAT Act.
It is the petitioners case that, ever since 01.09.2005, they
have been collecting tax on Mosquito Coils, Mosquito Repellant
Vaporizers, Mosquito Mats at 12.5%, (as the said goods fall under
the residuary category), and have been remitting the same to the
department. With respect to other goods, they have been filing their
returns on the basis that they fall under Entry 20 of Schedule IV,
and have been collecting and remitting tax at 4%. They contend
that a reading of the history of the Entries would show that
pesticides and insecticides were always eligible for concessional
rate of tax; w.e.f. 01.01.2000, the concessional rate of tax was not
available to mosquito repellants; till 01.09.2005, when the
amended Entry 20 was introduced, the department did not dispute
the petitioners eligibility to be extended concessional rate of tax
under Entry 78 of Schedule I of the APGST Act, or Entry 20 of
Schedule IV of the VAT Act; there has been no change in the
nomenclature of the earlier Entry 78, and the present Entry 20,
except for exclusion of mosquito repellent in any form; and the
said exclusion was earlier present by way of a separate entry viz
Entry 203.
On the other hand, it is the case of the revenue that the sole
issue, in the present case, is whether the products sold by the
petitioners are insecticides and pesticides falling under Entry 20 of
Schedule IV of the VAT Act or are unclassified goods chargeable to
tax at the rate fixed in Schedule V; as the subject goods are not
insecticides in terms of manufacturing, presentation, packaging,
ingredients, marketing, name etc, they cannot be treated as
insecticides falling under Entry 20 of Schedule IV of the VAT Act;
and there is an underlying difference between household
insecticides manufactured by the petitioners, and the
insecticide/pesticide referred to in Entry 20 of Schedule IV of the
VAT Act.
Elaborate oral submissions were put forth by Sri S. Ravi,
Learned Senior Counsel and Sri Karan Talwar, Learned Counsel
for the petitioners. Written submissions were also filed, on behalf
of the petitioners, by their Counsel Sri Vivek Chandrasekhar and
Sri Karan Talwar. Oral submissions were made, and written
submissions were filed, on behalf of the revenue by Sri M. Govind
Reddy, Sri T. Vinod Kumar and Sri J. Anil Kumar, Learned Special
Standing Counsel for Commercial Taxes. It is convenient to
examine the rival submissions, urged by Learned Counsel on either
side, under different heads.
I. FACTORS TO BE TAKEN INTO CONSIDERATION IN
DETERMINING THE CLASSIFICATION OF A PRODUCT
IN TAX STATUTES:
The dispute, in the present batch of cases, relates to the
classification of the subject goods. While the petitioners claim that
they are pesticides and insecticides under Entry 20 of the IV
Schedule to the VAT Act and are liable to be subjected to tax at the
concessional rate of tax of 4%/5%, it is the case of the revenue that
these goods do not fall within the ambit of Entry 20 of the IV
Schedule, and are therefore liable to tax at 12.5%/14.5% under the
residuary Schedule V of the VAT Act. Before examining this
question in its various facets, it is necessary at the outset to briefly
note the factors to be borne in mind in determining the
classification of goods under tax statutes. For the purposes of
classification, the relevant factors, inter-alia, are the statutory
entry, the basic character, function and use of the goods.
(Commissioner of Central Excise v. Wockhardt Life Sciences
Ltd. ; CCE v. Carrier Aircon ). The functional utility and
predominant or primary usage of the commodity must be taken
into account, apart from the understanding of the product in
common parlance. (Wockhardt Life Sciences Ltd.1; O.K. Play
(India) Ltd. v. CCE ; Alpine Industries v. CEE, New Delhi ;
Sujanil Chemo Industries v. CEE & Customs ; ICPA Health
Products (P) Ltd v. CEE ; Puma Ayurvedic Herbal(P) Ltd v. CCE,
Nagpur ; CCE Delhi v. Ishaan Research Lab (P) Ltd. ; CCE v. Uni
Products India Ltd., ).
While understanding the meaning of the words used in a tax
Statute, the legislative history should also be taken note of. (State
of Karnataka v. M/s.Godrej Consumer Products Ltd. ). If a
provision, which falls to be applied, is found to be ambiguous, a
subordinate presumption comes into play, namely that it is
presumed that there was no intention to change the meaning of
the provision which has been taken and repeated in the same or
similar language in the subsequent Act. In such circumstances, it
may be relevant to try to determine the meaning of the relevant
provision by looking at what it meant in a previous statute,
including by reference to authority on the provision as it appeared
in that statute. (Wilsons Solicitors LLP v. Serena Bentine (Acting
by her Litigation Friend, The Official Solicitor) ).
II. EVOLUTION OF ENTRY 20 OF THE IV SCHEDULE TO THE
AP VAT ACT:
Entry 78 of Schedule I of the APGST Act, as it stood in the
year 1970 (Act No.9 of 1970), read as Pesticides and Plant Protection
Equipment. The objects and reasons of Act 9 of 1970, with specific
reference to this Entry, read as follows:
Pesticides and Plant Protection Equipments are at present liable to tax at 3
paise in the rupee at each point of sale. With a view to reducing the
incidence of tax on these essential requisites for agricultural production,
the government proposes to restrict the levy of tax to single point..
(emphasis supplied)
When the scope of Entry 78 was expanded in 1976 it
included insecticides, fungicides, weedicides, etc. Prior to the year
2000, Entry No. 78 of Schedule I of the APGST Act provided for a
tax rate of 1% on Pesticides, insecticides fungicides, herbicides,
weedicides and other plant protection equipment and accessories
thereof. From 1.01.2000 onwards, the APGST Act, in its first
schedule, incorporated a distinct entry i.e. Entry 203 which
specifically provided for a higher rate of tax at 8% in respect of
Mosquito repellants and devices of all kinds including electronic
repellant devices, refills, mats, coils and accessories thereof. Entry
78 of Schedule I of the APGST Act as it stood, before introduction
of the VAT Act, read thus:-
Pesticides, Insecticides, fungicides, herbicides, weedicides and other
plant protection equipment and accessories thereof.
The evolution of Entry 78 of the First Schedule to the APGST
Act, 1956 is as under:
Act No.
Notification No.
and Date
Effective date
Description of goods
Rate of
Tax
(paise in
the
rupee)
Act 9 of 1970
27.04.1970
Item 78 First Schedule First Sale
Pesticides and plant protection
equipment.
3
Act 5 of 1974
01.03.1974
Substituted as under.
Pesticides, insecticides and plant
protection equipment.
4
Act 49 of 1976
01.09.1976
Substituted as under:
Pesticides, insecticides, fungicides,
weedicides and other plant protection
equipment and accessories thereof.
4
Entry 78A of Schedule-I of the APGST Act related to:-
Pesticides concentrate or technical grade pesticides used by any
registered manufacturer in the State for manufacture of formulated pesticides.
The A.P.G.S.T. Act was repealed with effect from 31.03.2005,
and the A.P. Value Added Tax Act, 2005 came into force with effect
from 01.04.2005. Entry 20 of Schedule IV of the VAT Act, as it then
stood, read as follows:-
Pesticides, insecticides, fungicides, herbicides, weedicides
and other plant protection equipment and accessories thereof.
Entry 20 of Schedule IV of the VAT Act was amended on
23.10.2005, carving out an exclusion in respect of Mosquito
Repellant in any form with effect from 01.09.2005. Entry 20 of
Schedule IV, with effect from 01.09.2005, reads as follows:-
Pesticides, Insecticides, fungicides, herbicides, weedicides and other plant
protection equipment and accessories thereof including drip and sprinkler
irrigation systems but excluding mosquito repellants in any form.
Entry 100 of the A.P. Value Added Tax Act, 2005 stipulates
that the following goods, when sold as industrial inputs, shall be
subject to tax of 4%/5%. Sub-Entry 140 of Entry 100 reads thus:
Insecticides, fungicides, herbicides, weedicides and pesticides of
technical grade.
III. ARE THE SUBJECT GOODS INSECTICIDES/PESTICIDES
FALLING UNDER ENTRY 20 OF THE IV SCHEDULE:
It is contended, on behalf of the petitioners, that the subject
goods are intended to kill flies, mosquitoes, cockroaches, rats, etc;
they are classifiable as insecticides/pesticides under Entry 20 of
Schedule IV to the Act; if mosquito repellants were classifiable
under the expression insecticides (prior to its amendment), there
is no reason why the subject goods are not classifiable as
insecticides under the VAT Act; the decision of the Commercial
Tax Department, to classify the subject goods under the residuary
entry, runs counter to the decision of this Court in Godrej Hicare
Ltd v. Joint Commissioner of Commercial Taxes (Legal),
Hyderabad ; the subject goods are preparations of chemicals
designed to kill insects and pests; such products can only be
classified as insecticides and/or pesticides; any preparation,
containing any substance specified in the Schedule to the 1968
Act, is an insecticide; HIT CIK contains D-trans Allethrin which is
an insecticide; HIT FIK contains imiprothrin and cypermethrin
which are insecticides; HIT Chalk contains cypermethrin which is
an insecticide; HIT Rat cake contains bromadialone which is a
rodenticide; rat is a pest and thus HIT Rat is a pesticide; HIT Anti
Roach-Gel contains fipronil which is an insecticide; the subject
goods are insecticides within the meaning of the term insecticide
as defined in the Insecticides Act, 1968; insecticide is a generic
product having wide varieties, among which mosquito repellants
stand excluded under Entry 20 of Schedule IV of the Act; it is
evident, therefore, that the rest of the varieties of household
insecticides have been included under the genus of insecticides;
since the subject goods are insect killers, they have been rightly
classified under Entry 20 of Schedule IV of the Act; the extent or
quantity of active ingredients used in the goods is not a relevant
factor for the purpose of classification; as held by the Supreme
Court in Puma Ayurvedic Herbal (P) Ltd.7, and CCE v.
Wockhardt Life Sciences Ltd1, minimal use of an active ingredient
in the subject goods does not detract from its being classified as an
insecticide; the department has acknowledged, in the impugned
order, that HIT Rat, specifically meant for rats, is a rodenticide; as
the term rodenticide is not specified in Entry 20 of Schedule IV,
the department has contended that the subject goods do not fall
within its ambit; the department has artificially tried to create a
difference without there being any distinction; the term pesticide
is of wide import, and brings within its scope rodenticide also;
and a rodent is nothing but a house-hold pest.
It is contended, on behalf of the revenue, that the subject
products are more in the nature of urban oriented household
products, and are not insecticides as understood in common
parlance; they are thus classifiable as general goods liable to tax
at the Revenue Neutral Rate (RNR) of tax; the products
manufactured and sold by the petitioners are distinct from regular
insecticides; they are not only branded as household insecticide,
but are also understood differently in common parlance; even
under the Insecticides Act, insecticides intended for household
use, which are formulations consisting of a small portion of active
ingredient, are treated as a different class/category of insecticides;
the aerosol products, manufactured by the petitioners, use
LPG/kerosene as a propellant; it is by direct application that
crawling insecticides are killed, and not because of the composition
of the active ingredient contained therein; the active ingredient in
the so called repellants, which are specifically excluded from the
scope of the Entry, contain a higher percentage of active
ingredient; it is because of the medium through which it is used,
such as electric units, that its effectiveness changes; if the same
repellant is applied through some kind of aerosol, these products
would be more effective; the medium, through which the products
are used, cannot form the basis for determination/classification of
the products; Section 18 of the Insecticides Act imposes a
prohibition on the sale of insecticides by any person without a
licence; the subject products are being sold off the shelf in the
market, which shows that the petitioners claim, on the basis of
their having obtained registration under Section 9 of the
Insecticides Act, is contrary to the provisions of the Act;
registration under Section 9 serves a different purpose; in the
absence of any material being placed on record, in relation to
compliance with Section 13 or 18 of the Insecticides Act, no
reliance can be placed thereupon; Rodenticide is not included in
Entry 20; and, therefore, it must be treated as unclassified goods.
As the words pesticides, insecticides, fungicides,
weedicides and plant protection equipment, used in Entry 20 of
the IV Schedule, are not defined in the VAT Act, it is necessary to
understand their meaning. The ordinary meaning of the word
"pest", as given in Chamber's Twentieth Century Dictionary, is:
"Any deadly epidemic disease; plague anything destructive; any
insect, fungus, etc., destructive of cultivated plants:......." and the
meaning of the word "pesticide" is "pest killer".
The expression "pesticide" has been defined in the "Glossary
for Pesticide Users" as:
"For the purposes of this handbook, pesticides include insecticides (to
control insect pests), herbicides (to control weeds), fungicides (to control fungal
diseases), nematocides (to control nematodes) and rodenticides (to control rats)."
In Encyclopedia Americana, "pesticides" are classified
according to the type of organisms they attack; for example,
substances that kill insects are known as insecticides, and agents
that kill fungi are known as fungicides. The paper on Pesticide
Application Techniques, published by the National Institute of
Plant Health Management, Department of Agriculture &
Cooperation, Ministry of Agriculture & Farmers Welfare, Govt. of
India, show that pesticides are used to prevent crop losses. A few
lines are extracted for the present purposes:-
Pesticide application plays an important role in pest management. Proper
technique of application of pesticide and the equipment used for applying
pesticide are vital to the success of pest control operations... (Page 1, Para 1)
Different types of pesticides are used for controlling various pests. For
Example Insecticides are applied against insect pests, Fungicides against
crop diseases, Herbicides against weeds etc. in order to protect crop losses.
(Page 2, Para 2 from bottom).
In "the New Pesticide User's Guide" by Bert L. Bohment,
Professor and Agricultural Chemicals Co-ordinator, College of
Agricultural Sciences, Colorado State University, U. S. A. , the
picture of a wheel is given with all its radial arches with the
nomenclature "the All-Inclusive Pesticide Wheel", and "insecticides"
are referred to in one of the arches. According to the author the
term 'pesticide' also applies to compounds used for repelling,
attracting, and sterilizing insects; during the early years of
pesticide development, farmers were considered to be the primary
users; however, as new chemicals were produced, new methods of
formulation were developed, and new application techniques were
discovered, new audience found uses for pesticides, and today
pesticides are still a major part of agriculture's production tools,
but have also found uses by industry, State and Federal
Governments, municipalities, commercial pesticide applicators, and
the public as a whole including home-owners and backyard
gardeners; many species of insects are important pests which affect
almost all of man's activities and there are well over one million
known species of insects in the world, but a very small percentage
of these are considered as economically important pests. The
expression "pesticide" has been defined in the aforesaid book, in
the "glossary for Pesticide Users", as follows :
"Pesticide (economic poison) - As defined under the Federal Insecticide,
Fungicide, and Rodenticide Act, economic poison (pesticide) means any
substance or mixture of substances intended for preventing, destroying,
repelling, or mitigating any insects, rodents, nematodes, fungi, or weeds, or any
other forms of life declared to be pests; and any substance or mixture of
substances intended for use as a plant regulator, defoliant or desiccant. "
(Sonic Electrochem (P) Ltd. v. State of Orissa ).
'Pesticide' has been defined in Butterworths Medical
Dictionary, Second Edition, as 'a comprehensive word to include
substances that will kill any form of pest, e.g., insects, rodents and
bacteria'. The term 'pesticide' includes a large variety of compounds
of diverse chemical nature and biological activity grouped together
usually on the basis of what pests they are used to destroy or
eliminate. Under the US Federal Environment Pesticide Control
Act, the term 'Pesticide' has been defined to include '(1) any
substance or mixture of substances intended for preventing,
destroying, repelling, or mitigating any pest, insect, rodent,
nematode, fungus, weed, other forms of terrestrial or aquatic plants
or other forms of animal life e.g., viruses, bacteria, or other micro
organisms, which the administrator declares to be a pest and (2)
any substance or mixture of substances intended for use as a plant
regulator, defoliant or desiccant' (Pesticides in the Indian
Environment, by P.K. Gupta p.2; Bombay Chemical Pvt. Ltd. v.
Collector of Central Excise, Bombay ).
The Asian Development Bank, in its publication called
"Handbook on the use of Pesticides in the Asia-Pacific Region", has
stated : "For the purposes of this handbook, pesticides include
insecticides (to control insect pests), herbicides (to control weeds),
fungicides (to control fungal diseases), nematocides (to control
nematodes) and rodenticides (to control rats). This being the
ordinary meaning of the words "pest" and "pesticide", "pesticide'
will include "insecticide" within it. If one of the meanings of the
word "pest" is "any insect", and the meaning of the word "pesticide"
is "pest killer", then any material which is an "insect killer", being
an "insecticide", would come within the expression "pesticide".
(Sonic Electrochem (P) Ltd.13).
The term pesticide includes a large variety of compounds of
diverse chemical nature and biological activity grouped together
usually on the basis of what kind of pests they are used to destroy
or eliminate. As noted hereinabove pesticide is a substance or
mixture of substances intended for use, as a plant regulator,
defoliant (i.e a chemical that is sprayed on plants and causes their
leaves to fall), or a desiccant (i.e a substance that promotes drying
and is used to remove moisture). It is evident, therefore, that a
pesticide is used mainly for protection of plants.
Hawleys Condensed Chemical Dictionary, by Richard J.
Lewis, SR. Fifth Edition, defines Insecticide as :
Insecticide: A type of pesticide designed to control insect life that
is harmful to humans, either directly as disease vectors or
indirectly as destroyers of crops, food products, or textile fabrics.
General types are as follows: (1) Inorganic: arsenic, lead, and
copper (inorganic compounds and mixtures); the use of these has
diminished sharply in recent years because of the development of
more effective types less toxic to humans. (2) Natural organic
compounds, such as rotenone and pyrethrins (relatively harmless
to humans since they quickly decompose to nontoxic compounds),
nicotine, copper naphthenate, and petroleum derivatives. (3)
Synthetic organic compounds: (a) Chlordane, lindane,
pdichlorobenzene; (b) the organic esters of phosphorus (the
parathions and related substances). (4) Of comparatively recent
development are pyrethroids, or insect growth regulators, which
act as neurotoxins, preventing larvae from becoming adult forms
(juvenile hormones); and metabolic inhibitors, e.g. imidazole,
which function as structural antagonists.
The word Fungicide is defined therein to mean:-
Fungicide: Any substance that kills or inhibits the growth of
fungi. Older types include a mixture of lime and sulfur, copper
oxychloride, and Bordeaux mixture. Copper naphthenate has been
used to impregnate textile fabrics such as tenting and military
clothing, Dithiocarbamate and quinone types were introduced
about 1940. Mercury compounds are also effective but have been
discontinued because of their toxicity to humans. Hypochlorite
solutions are used in swimming pools and water-cooled heat
exchangers. Some types of fungi that infect the human body are
extremely hard to eradicate and require highly specific medical
treatment.
The book on Weed Science, Principles and Practices, Fourth
Edition, published by Johnwiley & Sons, Inc define a weed as
under -
. We define a weed as a plant growing where it is not desired,
or a plant out of place some plant that, according to human
criteria, is undesirable. We decide for each particular situation
which plants are or are not desired in terms of how they affect our
health, our crops our domesticated animals, or aesthetics.
..
Weeds are also classed as pests and included with insects,
plant diseases, nematodes, and rodent pests. A chemical used to
control a pest is called a pesticide and a chemical used specifically
for weed control is known as a herbicide.
Websters Encyclopedic Unabridged Dictionary of the English
Language defines Herbicide as a substance or preparation for
killing plants, esp. weeds. It also defines Weed killer as a
herbicide.
Wikipedia defines
Herbicide(s) also commonly known as weedkillers, are
chemical substances used to control unwanted plants. Selective
herbicides control specific weed species, while leaving the
desired crop relatively unharmed, while non-selective herbicides
(sometimes called "total weedkillers" in commercial products) can
be used to clear waste ground, industrial and construction sites,
railways and railway embankments as they kill all plant material
with which they come into contact.
The book on Pesticides Developments, Impacts, and
Controls, Edited by Gerry Best, Douglas Ruthven published by
The Royal Society of Chemistry, explains the Non-agricultural Uses
of Herbicides as under:-
Herbicides have been used to control weeds in non-agricultural
areas for around 50 years, Non-agricultural uses cover very diverse
situations from forestry to parks and gardens, from waterways to
roads and railways, and from pavements to industrial sites. Not
only area the uses varied, but also the uses, many of whom have
little knowledge of plants, weed control or the use of herbicides.
Perhaps the greatest volume of herbicide is used to maintain
man-made surfaces such as railways ballast, road edges,
pavements and channels, gravelled areas etc. These are now
officially called land not intended to bear vegetation by the
Pesticides Safety Directorate. They are often referred to as hard
surfaces, and can be divided into porous or non-porous surfaces.
The equipment and its accessories, used for protection of
plants, are plant protection equipment and accessories thereof. It
is through such equipment that pesticides etc are applied to
optimise efficiency in pest control management and thereby
maximise plant health. The National Institute of Plant Health
Management (NIPHM) is a premier autonomous Institution under
the Department of Agriculture and Cooperation, Ministry of
Agriculture, Government of India with the mandate to promote
environmentally sustainable Plant Health Management practices in
diverse and changing agro-climatic conditions. According to
NIPHM, pesticide application plays an important role in pest
management; proper techniques of application of pesticides, and
the equipment used for applying pesticides, are vital to the success
of pest control operations; the use of pesticides involves knowledge
not only of the application equipment, but also of pest
management; the main purpose of pesticide application technique
is to cover the target with maximum efficiency and minimum
efforts to keep pests under control as well as minimum
contamination of non-targets; all pesticides are poisonous
substances and they can cause harm to all living things; therefore
their use must be very judicious; and the application techniques
ideally should be target oriented so that safety to the non-targets
and the environment is ensured.
Entry 20 uses the words accessories thereof in conjunction
with the words and other plant protection equipment. It also
specifically includes within its ambit drip and sprinkler irrigation
systems. The word accessories was construed by this High Court
in Indo National Ltd., v. State of Andhra Pradesh . While
dealing with the classification of Dry Batteries or Cells, it was
held that till the date of coming into force of Entry 152 of the First
Schedule to the APGST Act, covering dry batteries or cells, dry
cells, described as meant for use in transistors and/or radios, were
assessable and taxable under Entry 3 thereof as accessories of
wireless reception instruments; multipurpose cells, although
falling under both Entry 3 and Entry 38, were to be taxed only at
the lower rate under Entry 38 as other accessories of all electrical
goods; and from the date of coming into force of Entry 152, all dry-
cells, for whatever purpose they were used, would be exigible to tax
under Entry 152 only.
The Supreme Court, in Union Carbide India Ltd v. State of
Andhra Pradesh , held that dry cells batteries or cells marked for
use in transistors, as is the case of some such batteries
manufactured by the Union Carbide India Ltd. alone during the
period prior to the 1976 amendment, fell under Entry No.3;
however, multi-purpose batteries, not specified for use in
transistors alone could not be treated as accessories thereof of
wireless reception instruments etc., for the purpose of Entry 3.
By the use of the word "thereof", the deciding factor is the
predominant or ordinary purpose or use and it is not enough to
show that the articles can be put to other uses also. The general or
predominant user seems to determine the category in which an
article will fall. On a comparison between different entries in which
the term "accessories" is used in the Schedule to describe goods, the
word should be construed taking into account whether the goods
have been manufactured for use as an aid or addition to any of the
specified articles in that entry or not. When it is intended to
confine the entry to particular gadgets and particulars thereof, the
entry would say so. Therefore, the expression "accessories thereof
'must mean the general or predominant user of the article only as
an accessory of one of the specified items mentioned in that entry.
(Union Carbide India Ltd.16). The word accessories thereof in Entry
20 are accessories of plant protection equipment.
In G. Radhakrishna Murthy & Company v. Commercial
Tax Officer , the Supreme Court held that an inclusive definition
had been given clarifying that cosmetic and toilet preparations
would include scents, perfumes, face powders, talcum powders,
hair tonics, hair oils, hair lotions, face creams and snows,
pomades, depilatories, toothpowder, toothpaste, toothbrushes and
shaving creams; the things specially mentioned in the entry
"cosmetic and toilet preparations " are all of the nature of personal
application; Incense sticks or agarbattis are goods of a different
character altogether; these may emit a pleasant odour when burnt;
but that, however, would not bring agarbattis within the class of
articles mentioned in Item 36 of the First Schedule as all these
goods were articles of personal application.
Entry 20 of Schedule IV uses the words including drip and
sprinkler irrigation systems. The word "including" must be given
some meaning. In ordinary parlance it indicates that what follows
the word "including" comprises or is contained in or is a part of the
whole of the word preceding. The nature of the included items
would not only partake the character of the whole, but may be
construed as clarificatory of the whole. The word 'includes' may, in
certain contexts, be a word of limitation (South Gujarat Roofing
Tiles Manufacturers v. State of Gujarat ; Godfrey Phillips India
Ltd. v. State of U.P. ). Consequently drip and sprinkler irrigation
systems would also constitute plant protection equipment and
accessories thereof.
It is through the equipment (referred to in the second limb of
Entry 20) that the pesticides, insecticides, weedicides, fungicides
and herbicides are applied on plants for their protection. The
question whether pesticides, insecticides etc referred to in Entry 20
are only those used for plant protection, or those used for other
purposes also including to kill household insects and pests, shall
be examined hereinafter.
Reliance is placed, on behalf of the petitioners, on the
definition of insecticide in the Insecticides Act, 1968 on the
ground that the words insecticides and pesticides are not
defined in the VAT Act. In examining whether the meaning of the
word insecticide in the VAT Act can be borrowed from its
definition in the Insecticides Act, it is necessary, in the first
instance, to consider the scope and object of the said Act. The
Statement of Objects and Reasons of an Act can be referred to for
the limited purpose of ascertaining the conditions prevailing at the
time which actuated the sponsor of the Bill to introduce the same,
and the extent and urgency of the evil which he sought to remedy.
(State of West Bengal v. Subodh Gopal Bose ; M.K.
Ranganathan v. Govt. of Madras ; Chern Taong Shang v.
Commander S.D. Baijal ). For determining the purpose or object
of the legislation, it is permissible to look into the circumstances
which prevailed at the time when the law was passed and which
necessitated the passing of that law. For the limited purpose of
appreciating the background and the antecedent factual matrix
leading to the legislation, it is permissible to look into the
Statement of Objects and Reasons of the Bill which actuated the
step to provide a remedy for the then existing malady. (A. Thangal
Kunju Musaliar v. M. Venkitachalam Potti ; State of West
Bengal v. Union of India ; Pannalal Binjraj v. Union of India ;
and Shashikant Laxman Kale v. Union of India ).
From the Statement of Objects and Reasons, for enacting the
Insecticides Act, 1968, it is evident that, in the months of April and
May, 1958, many persons died in the States of Kerala and Madras
as a result of food poisoning arising from contamination of food
with a poisonous organo-phosphorous insecticide Parathion
(Falidol). There were also cases of persons who fell seriously ill,
though not fatally, on account of food poisoning in the same areas.
The Justice J.C. Shah Enquiry Commission enquired into and
reported the circumstances in which the foodstuffs came to be
contaminated; and the measures to be taken against similar
occurrences in future. On receipt of the recommendations, the
Government appointed an Inter-Ministerial Committee to suggest
measures to give effect to the recommendations made by the
Commission. The Inter-Ministerial Committee suggested certain
short-term and long term measures. The long term measures
envisaged the enactment of legislation to regulate the manufacture,
sale, storage, transport, distribution and use of insecticides
including pesticides, herbicides or fungicides in the country.
The 1968 Act, is an Act to regulate the import, manufacture,
sale, transport, distribution and use of insecticides with a view to
prevent risk to human beings or animals, and for matters
connected therewith. The purpose for which the Insecticides Act
was enacted is to ensure that all risks therefrom, to human beings
and animals, are prevented. It is with a view to achieve this object
that insecticides of all forms are brought within the ambit of the
1968 Act. Section 3(e) of the 1968 Act therefore defines
insecticide to mean (i) any substance specified in the Schedule; or
(ii) such other substances (including fungicides and weedicides) as
the Central Government may, after consultation with the Board, by
notification in the Official Gazette, include in the Schedule from
time to time; or (iii) any preparation containing any one or more of
such substances.
Before examining whether the words insecticide and
pesticide in Entry 20 of Schedule IV can be given a wide meaning
in terms of the definition in Section 3(e), it is useful to refer to the
other provisions of the 1968 Act, and the Rules made thereunder.
Section 9 of the 1968 Act relates to registration of insecticides and,
under sub-section (1) thereof, any person, desiring to import or
manufacture any insecticide, may apply to the Registration
Committee for the registration of such insecticide, and there shall
be a separate application for each such insecticide. Section 9(3)
stipulates that, on receipt of any such application for the
registration of an insecticide, the Committee may, after such
enquiry as it deems fit and after satisfying itself that the
insecticide, to which the application relates, conforms to the claims
made by the importer or by the manufacturer, as regards the
efficacy of the insecticide and its safety to human beings and
animals, register, on such conditions as may be specified by it and
on payment of such fee as may be prescribed, the insecticide, allot
a registration number thereto, and issue a certificate of registration
in token thereof, within a period of 12 months from the date of
receipt of the application. Under the second proviso thereto, if the
Committee is of the opinion that the precautions claimed by the
applicant as being sufficient to ensure safety to human beings or
animals are not such as can be easily observed or that,
notwithstanding the observance of such precautions, the use of the
insecticide involves serious risk to human beings or animals, it
may refuse to register the insecticide. Section 13 relates to grant of
licence and, under sub-section (1) thereof, any person, desiring to
manufacture or to sell, stock or exhibit for sale or distribute any
insecticide or to undertake commercial pest control operations with
the use of any insecticide, may make an application to the
licensing officer for the grant of a licence. Section 13(5) stipulates
that, in prescribing the fees for the grant or renewal of licences
under Section 13, different fees may prescribed for the sale or
distribution of insecticides for purposes of domestic use and for
other purposes.
Section 18 of the 1968 Act relates to prohibition of sale, etc.
of certain insecticides and, under sub-section (1) thereof, no person
shall himself, or by any person on his behalf, sell, stock or exhibit
for sale, distribute, transport, use, or cause to be used by any
worker (a) any insecticide which is not registered under the Act;
(b) any insecticide, the sale, distribution or use of which is, for the
time being, prohibited under Section 27; and (c) any insecticide in
contravention of any other provision of this Act or of any rule made
thereunder. Under sub-section (2) thereof, no person shall himself,
or by any person on his behalf, sell, stock or exhibit for sale or
distribute or use for commercial pest control operations any
insecticide except under, and in accordance with, the conditions of
a licence issued for such purpose under the Act. Section 36
confers power on the Central Government to make Rules and,
under Section 36(2)(zb), such Rules may prescribe the maximum
proportion of any insecticide which may be added to, or contained
in, any preparation for domestic use and the restrictions thereon.
Chapter IV of the Insecticides Rules, 1971 relates to grant of
licences, and Rule 10 prescribes licences for sale, etc. of
insecticides. Under sub-rule (1) thereof, application for the grant
or renewal of a licence to sell, stock or exhibit for sale or distribute
insecticides shall be made in Form VI or Form VII, as the case may
be, to the licensing officer and shall be accompanied by the fees
specified in sub-rule (2). Rule 10(2) prescribes that the fee,
payable under sub-rule (1) for grant or renewal of licence, shall be
Rs.500/- for every insecticide for which the licence is applied.
There shall be a separate fee for each place, if any insecticide is
sold, stocked or exhibited for sale at more than one place. Under
the first proviso thereto, the maximum fee payable in respect of
insecticides, commonly used for household purposes and registered
as such, shall be Rs.7,500/- for every place. Rule 10C prohibits
sale or storage of insecticides in certain places and, thereunder, no
person shall manufacture, store or expose for sale or permit the
sale or storage of any insecticide in the same building where any
articles, consumable by human beings or animals, are
manufactured, stored or exposed for sale. In terms of the
Explanation thereto, nothing contained in Rule 10C shall apply to
retail sales of household insecticides from the building wherefrom
other articles, consumable by human beings or animals, are
usually sold provided such household insecticides have been
registered as such, and are packed and labelled in accordance with
the Insecticide Rules.
Section 13(5) of the 1968 Act, r/w the proviso to Rule 10(2)
of the Insecticide Rules, prescribes a separate fee for grant or
renewal of licence in respect of insecticides for domestic use.
Under the Explanation to Rule 10-C, the restriction placed by Rule
10-C on the sale of insecticides does not apply to retail sales of
household insecticides. Section 18 prohibits the sale, distribution
and transport of any insecticide in contravention of the provisions
of the 1968 Act and the Rules made thereunder. Unlike other
insecticides, the subject products (household insecticides) can be
stored and sold from the same building where any article,
consumable by human beings and animals, are stored and sold.
The subject products, classified as household insecticides under
the Insecticides Act, are not insecticides as commonly understood
and considered either by the people in the trade or by those using
it. Where the context does not permit or where it would lead to
absurd or unintended result, the definition of an expression need
not be mechanically applied. (Printers (Mysore) Ltd. v. Asst.
Commercial Tax Officer ; GMR Energy Limited v. Govt. of
Karnataka ).
Even under the 1968 Act, insecticides intended for
household use, which are formulations consisting of a small
portion of active ingredients, are considered a different
class/category of insecticides. When the rigor of the Insecticides Act
is relaxed for household insecticides, which the subject products
admittedly are, can the extremely wide definition of an insecticide
therein be applied to the said word used in Entry 20 of the IV
Schedule, and the said Entry be understood to bring within its
ambit all forms of insecticides including household insecticides?
The answer to this question can only be in the negative. Whether
one or more kinds of products containing its ingredients should be
included under the Entry relating to pesticides is the exclusive
prerogative of the State, and during the period when one category
is excluded from the purview of the entry, it is not open to import
the provisions of the Insecticides Act so as to enlarge the scope of
the Entry under the Sales Tax Act. Where the words used in the
entry are clear and unambiguous, there is no need to refer to the
meaning of the words used under other enactments. (Span
Diagnostics Pvt. Ltd. v. State of Maharashtra ).
IV. DO THE SUBJECT PRODUCTS LOSE THEIR IDENTITY AS
AN INSECTICIDE ON ITS MIXTURE WITH OTHER
SUBSTANCES?
Aerosol (HIT CK), a household insecticide used against
crawling insects like cockroaches, contains as an active ingredient
imiprothrin (a.i.) at 0.07% and Cypermethrin (a.i.) at 0.20%, as
against 50% LPG as the propellant. Insecticides constitute a
miniscule component of these products. The subject products,
manufactured and sold by the petitioner, contain a very small
percentage of Insecticide, which is used as a formulation not
exceeding the percentage prescribed by the Government in terms of
Section 36(z-b) of Act, and are registered and packed for sale as
household insecticides. The subject products cater to the specific
requirement of urban households, and are not used either for plant
protection or for agricultural operations. The goods marketed and
sold by the petitioner contain a negligible quantity of d-trans
Allethrin, an insecticide mixed by a process with other ingredients
like deodorized Kerosene, perfume, pipnoil bentoxide, and
propellant Gas; and it loses its original identity and a new or a
different product/commodity emerges.
Where the quality of a product is changed, and it is
commonly and commercially known as a different commodity, it
cannot then be said that the new product would fall in the original
Entry. (Tiki Enterprises v. Commissioner of Commercial Tax,
Madhya Pradesh, Indore ). Sales tax enactments are intended to
tax sales of different commercial commodities, and not to tax the
production or manufacture of particular substances out of which
these commodities may have been made. On separate commercial
commodities comingzx into existence, they become separately
taxable goods or entities for the purpose of sales tax. (A.P.
Products v. State of A.P. ; State of Tamilnadu v. Pyare Lal
Malhotra ; and Rajasthan Roller Flour Mills Association v. State
of Rajasthan ).
In State of Kerala v. Glaxo Smithkline Pharmaceuticals
Ltd the Kerala High Court held that the contention of the
respondent that Equal is not used for food preparation was
unacceptable, as it was contrary to the companys own claim in
their website; the fact that it is used as a sweetening agent, in the
preparation of non-alcoholic drinks and other beverages like tea or
coffee, did not take it outside the Entry; and, even though
reference was made to the exemption available to sugar produced
in India, and the low rate of tax at 4% for imported sugar, to
contend that a sugar substitute should not be subjected to tax at a
higher rate, the court could not apply the rate of tax of sugar to
sugar substitute as it was a matter of legislative policy.
It is evident, therefore, that pesticides/insecticides, as they
are commonly known, are mixed with LPG/Kerosene which is used
as a propellant and, after such a process, a new product emerges
which, even under the Insecticides Act, 1968, are separately
classified as household insecticides. It is difficult, therefore, to
hold that the subject goods are pesticides/insecticides as referred
to in Entry 20 of the IV Schedule of the VAT Act.
The question which arose for consideration, in Puma
Ayurvedic Herbal (P) Ltd7, was whether the subject goods were
cosmetics or medicaments. The Supreme Court held that, while
the word cosmetic was defined in the Drugs and Cosmetics Act,
1940, the word medicament was not; a medicament is used to
treat some medical condition, and a cosmetic is used to improve
the appearance of a person; the quantity of medicament, used in a
particular product, is not relevant; and, normally, the extent of its
use as a medicinal ingredients is very low, because a larger use
may be harmful for the human body. As noted hereinabove, the
word insecticide is defined, for the purpose of the Insecticides Act,
1968, to include all kinds of insecticides irrespective of the quantity
of insecticides used in the particular product. The question, in the
present case, is not whether the quantity of insecticides used is
high or low, but whether Entry 20 includes all kinds of insecticides
or only those insecticides used for plant protection. Reliance placed
by the petitioners on Puma Ayurvedic Herbal (P) Ltd7 is,
therefore, misplaced.
In Wockhardt Life Sciences Ltd1, the question which arose
for consideration before the Supreme Court was whether the
subject products were to be classified as a medicament or as a
detergent. The Supreme Court held that there was no fixed test
for classification of a taxable commodity; this was the reason why
the common parlance test or the commercial usage test are the
most common; whether a particular article would fall within a
particular tariff heading or not had to be decided on the basis of
tangible material or evidence to determine how such as article is
understood in common parlance or in the commercial world or in
trade circle or in its popular sense meaning; it is they who are
concerned with it, and it is the sense in which they understand it,
that constitutes the definitive index of the legislative intention,
when the statute was enacted; one of the essential factors for
determining whether a product is a medicament or not is whether
the product in understood as a pharmaceutical product in common
parlance; and the quantity of medicament used in a particular
product is not a relevant factor for, normally, the extent of use of
medicaments as ingredients is very low because a larger use may
be harmful for the human body. While a miniscule quantity of
insecticide used in the product would bring it within the ambit of
an insecticide, for the purposes of the Insecticides Act, the
question which necessitates examination herein is not whether the
subject goods are insecticides for the purposes of the Insecticides
Act, but whether Entry 20 of Schedule IV of the VAT Act would
bring within its ambit only pesticides and insecticides used for
plant protection, or all insecticides including household
insecticides such as the subject goods.
V. IS THE SCOPE OF ENTRY 20 RESTRICTED ONLY TO
INSECTICIDES/PESTICIDES USED FOR AGRICULTURAL
PURPOSES OR DOES IT INCLUDE SUCH GOODS WHEN
USED FOR NON AGRICULTURAL PURPOSES ALSO?
It is contended, on behalf of the petitioners, that Entry 20 is
a comprehensive entry, and the language employed therein does
not suggest that its scope is restricted only to the items used for
agricultural/horticultural purposes; a taxing entry must be read
literally and strictly; there is no scope for intendment in a taxing
entry, and there is no presumption as to tax; Entry 20 is plain,
clear and unambiguous; an additional condition cannot be read
into it regarding the end use of the product; the scope of Entry 20
of Schedule IV of the VAT Act is not limited only to insecticides
used for agricultural purposes; merely because the term plant
protection equipment follows the terms insecticides and
pesticides, the scope of these words cannot be so restricted as to
exclude therefrom insecticides and pesticides used for house-hold
purposes; the term insecticides and pesticides are words of wide
import; the legislature has deliberately used these words, as its
intent was to include all types of insecticides and pesticides,
including those used for house-hold purposes, within the ambit of
the Entry; each term in Entry 20 must be given meaning, and
construed independently, as they are distinct classes of goods;
pesticides, insecticides, fungicides, herbicides weedicides are not
equipment; the words plant protection do not qualify the earlier
words pesticides, insecticides, fungicides, herbicides or
weedicides, but only qualify the word equipment; in Ashok
Agencies v. State of Karnataka it has been held that all kinds of
insecticides, whether used in agricultural operations for killing
insects that attack agricultural crops or used for killing domestic
insects, fall within Entry 23 of the Schedule annexed to the KVAT
Act; from the dictionary meaning and technical literature, it is
evident that both herbicide and weedicide are synonyms and
refer to similar goods having non-agricultural uses like in parks
and gardens, waterways, roads and railways, and pavements to
industrial sites; the intended usage of both herbicide and
weedicide is to kill unwanted plants either for agricultural or non-
agricultural purposes; even otherwise since weedicides and
herbicides are only one category of plant associates amidst three
other categories that are not exclusively for the use of plants, Entry
20 cannot be confined only to plants; the intended usage of
insecticides, mentioned in the Entry, is to kill unwanted insects
either for agricultural or non-agricultural purposes; usage is not
restricted only for agricultural purposes as there is nothing in the
said entry to qualify the usage of the items mentioned therein; and
the contention that insect killers, meant for household purposes,
are not covered by the scope of Entry 20 has no merit.
The best rule of construction of a statutory provision,
including an Entry in a Schedule to a Tax Statute, is that which
takes the words to comprehend a subject that falls within their
usual sense, unless there is something plain to the contrary. You
are to give the words their larger meaning, unless you find
something which plainly shows that they were intended to be read
in a more restricted sense. (Anderson v. Anderson ; Church v.
Mundy ). If the definition has deliberately used words of wide
import, it would be necessary to read those words in their wide
denotation. (State of Bombay v. The Hospital Mazdoor Sabha ).
General words are to be taken in their larger sense, unless you can
find that in the particular case the true construction requires you
to conclude that they are intended to be used in a sense limited to
things ejusdem generis with those which have been specifically
mentioned before. (Anderson36; Church37). As shall be elaborated
hereinafter the object and reasons for Act 9 of 1970, in so far as it
related to Entry 78 of Schedule I of the APGST Act, states that the
incidence of tax on pesticides and plant protection equipment was
reduced as these were essential requisites for agricultural
production. Similarly the white paper on VAT shows that all
agricultural and industrial inputs were to be taxed at the
concessional rate of 4% tax.
Light is thrown on the ambit of the words by the context in
which they appear. An object of general concern, other than those
mentioned, to come within the Section, must have a degree of
similarity to those mentioned. (Director of Public Prosecutions v.
Jordan ). While the subject goods no doubt contain as small
element of insecticide, it has no similarity with the insecticides
mentioned in Entry 20 which brings within its ambit only
insecticides used for plant protection. It is not in dispute that the
subject products are household insecticides used to kill insects in
households, and are not used for plant protection.
Where the words of a Statute are plain and unambiguous,
effect must be given to them. The legislature may be safely
presumed to have intended what the words plainly say. The plain
words can be departed from when reading them as they are leads
to patent injustice, anomaly or absurdity or invalidation of a law.
(Bhaiji v. SDO ; Girdhari Lal & Sons v. Balbir Nath Mathur ).
The use of general words in a statute does not preclude inquiry
into the object of the statute or the mischief which it was intended
to remedy. (Attorney-General v. Brown ; Cox v. Hakes ). In a
taxation statute where literal interpretation leads to a result that
does not subserve the object of the legislation, another
construction in consonance with the object can be adopted. (State
of Kerala v. A.P. Mammikutty ; Keshavji Ravji & Co. v. CIT ).
Where various interpretations of a Section are admissible, it is a
strong reason against adopting a particular interpretation if it shall
appear that the result would be unreasonable or oppressive.
(Attorney-General v. Brown42; Attorney-General v. Till ). In all
doubtful matters, an enactment which is in general terms is to
receive such a construction as may be agreeable to the rules of
common law in cases of that nature, and the Section ought
therefore to be construed according to the appropriate rule of the
common law. (Attorney-General v. Brown42; Arthur v.
Bokenham ).
Courts can, by ascertaining legislative intent, place such
construction on a Statute as would advance its purpose and object.
(Bhaiji40; Girdhari Lal & Sons41). Though Courts must find the
intention of the statute from the language used, but language more
often than not is an imperfect instrument of expression of human
thought. It would be idle to expect every statutory provision to be
drafted with divine prescience and perfect clarity. We must not
make a fortress out of the dictionary but remember that statutes
must have some purpose or object, whose imaginative discovery is
judicial craftsmanship. The Court need not always cling to
literalness and should seek to endeavour to avoid an unjust or
absurd result. One should not make a mockery of legislation. To
make sense out of an unhappily worded provision, where the
purpose is apparent to the judicial eye, some violence to language
is permissible. (A.P. Mammikutty44; State of T.N. v. Kodaikanal
Motor Union (P) Ltd. ; K.P. Varghese v. ITO and Luke v. IRC ).
While all the chemicals, referred to in the first limb of Entry
20, may have other uses also, they are all primarily used for plant
protection. As the second limb of Entry 20 deals with equipment
used for plant protection, it is evident that the chemicals referred to
in the first limb are those which are to be applied for plant
protection through the equipment referred to in the second limb of
the said Entry. Entry 20 must be read restrictively so as to exclude
pesticides, insecticides etc which are not used for plant protection, and
are used for other purposes, including as household insecticides.
As a plain reading of Entry 20 shows that it was intended to be
read in a restricted sense, and as being limited only to those goods
used for plant protection, there is no justification in bringing such
goods within the ambit of Entry 20 which, on a plain reading, are
excluded from its ambit.
It is no doubt true that the words plant protection qualify
the word equipment in the second limb of Entry 20 and not the
chemicals referred to in its first limb as the words and other are
used between them. The very fact that plant protection
equipment are placed in Entry 20 along with the chemicals
referred to in the first limb which are mainly used for plant
protection, makes it clears that the chemicals, referred to in the
first limb of Entry 20, are only those used for plant protection, and
none else.
Entry 20 of Schedule IV is conditional. It does not bring
within its ambit all kinds of pesticides, insecticides, weedicides etc.
The concessional rate of tax at @ 4%/ 5%, under the IV Schedule is
available only when these goods are used for plant protection. All
the goods included in the first limb of Entry 20 are commonly used
for plant protection. The second limb of Entry 20 brings within its
ambit equipment used for plant protection. Chemicals used for
plant protection, and the equipment through which they are
applied on plants, are grouped together in Entry 20 which is a
combined entry. Insecticides, covered by Entry 20 are those used
by farmers for purposes of protection of crops/plants.
While a broad meaning was given to Entry 23 of the KVAT
Act by the Karnataka High Court in Ashok Agencies35, and
insecticides of all kinds were brought within its ambit, the said
judgment has only persuasive value and does not constitute a
precedent binding on this Court. It is not known whether an
Entry similar to Entry 78-A of Schedule I of the APGST Act or
Entry 100 (140) of the Telangana VAT Act, existed in the Karnataka
Sales Tax Act or the Karnataka VAT Act. In any event no such
provisions were considered by the Karnataka High Court in the
said judgment. Judicial decorum, propriety and discipline require
that the High Court should, especially in the event of its contra
view or dissent, discuss the judgments of the other High Courts
and record its own reasons for its contra view. While the judgments
of a High Court are not binding on the other High Court(s), they
have persuasive value. A High Court would be within its right to
differ with the view taken by other High Courts but, in all fairness,
it should record its dissent with reasons therefor. That the
judgments of other High Court have persuasive value should be
taken note of by the High Court and dissented from only by
recording its own reasons. (Pradip J. Mehta v. Commissioner of
Income Tax, Ahmedabad ).
The decision of a High Court will have the force of a binding
precedent only in the State or territories over which the Court has
jurisdiction. In other States or outside the territorial jurisdiction of
that High Court it may, at best, have persuasive effect. The
doctrine of stare decisis cannot be so stretched as to give the
judgments of one High Court the status of a binding precedent so
far as other High Courts are concerned. (Geoffrey Manners & Co.
Ltd. v. CIT ; CIT v. Thana Electricity Supply Co. Ltd. ;
Consolidated Pneumatic Tool Co. v. CIT ). This doctrine is
applicable only to different benches of the same High Court. The
ratio of the decisions of other High Courts cannot be exalted to the
status of a binding precedent nor can the ratio decidendi of those
decisions be perpetuated by invoking the doctrine of stare decisis.
(Valliama Champaka Pillai v. Sivathanu Pillai ; Thana
Electricity Supply Co. Ltd.53). Reliance placed by the petitioners
on Ashok Agencies35 is therefore misplaced.
Insecticides and pesticides which kill insects and pests
which cause damage to plants are chemicals used for plant
protection. As shall be elaborated hereinafter, if the legislative
intent was to include all forms of insecticides and pesticides within
the ambit of Entry 20, it was wholly unnecessary to provide for a
separate entry in Entry 100(140) for technical grade insecticides,
fungicides, weedicides, herbicides and pesticides, that too at the
same rate of tax at 4%/5%. It is evident, therefore, that the
legislature intended to tax insecticides, pesticides etc at a
concessional rate only when they were used either as industrial
inputs or for plant protection, and not otherwise. The subject
products, dealt with by petitioners, are used for purposes other
than for plant protection or as industrial inputs. They are
household insecticides, considered as a separate class of goods
even under the Insecticides Act, and are outside the scope of Entry
20 of the IV Schedule. The products manufactured and sold by the
petitioners, though they contain a small percentage of Insecticide,
are used as a formulation not exceeding the percentage prescribed
by the Government in terms of Section 36 (z-b) of the Insecticides
Act, and are registered and packed as specified for being sold as
household insecticides. They are not insecticides as commonly
understood, and considered by people dealing with it or by those
who put it to use. These products are largely urban household
products, and are not connected with plant protection which alone
fall under Entry 20 of Schedule IV of the VAT Act.
VI. CAN THE STATEMENT OF OBJECTS & REASONS OF AN
EARLIER STATUTE, AND THE WHITE PAPER ON VAT BE
RELIED UPON?
It is contended, on behalf of the petitioners, that the
Statement of Objects and Reasons issued in the year 1970, for the
earlier APGST Act, cannot be relied upon to restrict and control the
plain meaning of the language employed by the Legislature in the
VAT Act; even if the APGST Act did not contemplate coverage of
present day household insecticides within its purview, it does not
preclude their coverage within the existing VAT Act when words of
wide import, like insecticides and pesticides, are used by the
Legislature; when Entry 78 was introduced, the objects and
reasons referred to the essential requisites for agricultural
production, but did not state that it was meant only for
agricultural production or that it could not be applied to any other
product; in the year 1974, when insecticides was inserted in the
said entry, there was no Statement of Objects and Reasons to
clarify that insecticides referred only to agricultural production;
further in the year 1976, when the words fungicides and
weedicides were inserted, there was no Statement of Objects and
Reasons to clarify that the items were intended only for
agricultural production; it is evident that the legislature sought to
expand rather than restrict the scope of the Entry; it is not open to
the department to rely upon extraneous material such as the White
Paper, to interpret the words insecticides etc when the language
used by the Legislature is plain, clear and unambiguous; the White
Paper does not even remotely indicate any such exclusion; the
discussion paper, on road map for national and sub-national VATs
in India, was appended by a list of floor rates of 4% categories, as
finalized by the Empowered Committee of State Finance Ministers;
Entry 17 in the said list makes no mention of plant protection
equipment, unlike the present Entry 20 under the VAT Act; both
the Entries are at variance; there are many entries such as Entry 2,
Entry 20, Entry 39, Entry 123, etc of Schedule IV which neither
relate to agricultural nor to basic necessities; and reliance placed
on the White Paper, in order to contend that the scope of the Entry
is restrictive in nature and is only for agricultural purposes, is
incorrect.
The Statement of Objects and Reasons of Act No.9 of 1970,
by which Entry 78 was inserted in the First Schedule to the APGST
Act, states that levy of tax was restricted to a single point with a
view to reduce the incidence of tax on the essential requisites for
agricultural production. A reference to the Statement of Objects
and Reasons is permissible for understanding the background, the
antecedent state of affairs, the surrounding circumstances in
relation to the statute, and the evil which the statute sought to
remedy. The weight of judicial authority leans in favour of the view
that the Statement of Objects and Reasons cannot be utilized for
the purpose of restricting and controlling the plain meaning of the
language employed by the legislature in drafting a statute, and
excluding from its operation such transactions which it plainly
covers. The Statement of Objects and Reasons, Parliamentary
Debates, Reports of Committees and Commissions preceding the
legislation and the legislative history can be referred to for the
purpose of gathering the legislative intent. (Bhaiji40; Principles of
Statutory Interpretation by Justice G.P. Singh, 8th Edn., 2001,
pp. 206-09). A report which precedes an Enactment is invaluable
as an aid to construction, but it is one thing to use it to resolve a
real ambiguity in the statutory language, and quite another to use
it to cut down the meaning of the language that Parliament has
used in implementing the reports recommendation when the
ordinary meaning of that language is plain. (Comdel Commodities
Ltd. v. Siporex Trade Sa ).
The White Paper on State Level Value Added Tax, prepared
by the Empowered Committee of State Finance Ministers dated
17th January 2005, formed the basis for the changed system of
taxation under the VAT regime. The 'Preface' to the White Paper
explains the rationale for the uniform system of VAT which is to
avoid unhealthy competition, and have certain features of VAT
common to all the States. These features were to constitute the
basic design of VAT. It was expected that, at the same time, the
States would have the freedom for appropriate variation consistent
with the basic design. The White Paper was a collective attempt of
the States to strike a balance between the need for commonality,
and the desired federal flexibility in the VAT structure. (Sony India
Pvt. Ltd. v. The Commissioner of Trade & Taxes ).
In para 1.4 of the White Paper the methodology adopted by
the Empowered Committee, in preparing the White Paper, has been
explained. One of the tasks was to harmonise the tax structure
"through implementation of uniform floor rates of sales tax and
discontinuation of sales tax related incentive schemes". With a view
to simplify the tax structure, the Empowered Committee
recommended that there should basically be only two rates of VAT
i.e. 4% and 12.5%, plus a specific category of tax exempted goods
and a special VAT rate of 1% only for gold and silver ornaments etc.
It was suggested that "under 4% VAT rate category, there should be
the largest number of goods (about 270), common for all the States,
comprising of items of basic necessities such as medicines and
drugs, all agricultural and industrial inputs, capital goods and
declared goods". The list of goods with 4% floor rate, as finalized
by the Empowered Committee of State Finance Ministers,
contained about 41 items under the table "Goods with 4% Floor
Rate". The basic entries in the list finalised by the Empowered
Committee were more or less reproduced in the same manner in
many of the State Legislations, including in the VAT legislation of
Andhra Pradesh. (Sony India Pvt. Ltd.57). The White Paper on
Value Added Tax, (which is a result of the efforts of all States in
formulating the basic design of State Level Value Added Tax),
under the caption VAT Rates and Classification of Commodities,
read as follows:
. Under 4% VAT rate category there will be the largest number of goods
(about 270), common for all the States, comprising of items of basic necessities
such as medicines and drugs, all agricultural and industrial inputs, capital
goods and declared goods. The schedule of commodities will be attached to the
VAT Bill every State.
Para 3.3 of the discussion paper on VAT records that the first
reform related to the adoption of a four rate structure (i.e zero, 4, 8
and 12 per cent) in the existing sales tax structure; in addition,
there are two special rates of 1% and 20% for a few specified items;
the recommended rates are floor rates the States have the freedom
to adopt a higher rate on any of the commodity from the list, but
they cannot go below these rates; this checks the rate war and
prevents diversion of trade; the Standing Committee of Finance
Ministers made a few changes in the items falling under the
exempt list; some changes were made in the items falling in other
categories as well; this was necessitated due to the fact that the
Report of the Finance Ministers Committee (1995) had suggested
that fine tuning of this classification would have to be done by a
special group; as this was not done prior to adoption of the floor
rates, it was of paramount importance that the same was attempted
now; and the list of floor rates of 4% categories, as finalized by the
Empowered Committee of State Finance Ministers, was appended
as Annexure-I to the discussion paper. Annexure-I of the
discussion paper prescribed the floor rates of sales tax and,
thereunder, various goods were brought under four broad heads:
(1) zero floor rate or exempted goods; (2) goods with 4% floor rate;
(3) goods with 8% floor rate; and (4) goods with 12% floor rate.
Entry 17, under the head goods with 4% floor rate, read thus:-
chemical fertilizers, pesticides, weedicides and insecticides.
Entry 2 of the IV Schedule to the A.P.VAT Act relates to goods
of intangible or incorporeal nature as may be notified, from time to
time, by the State Government, and includes the goods mentioned
under the said head. Entry 39 are I.T products. Entry 123 are
mosquito nets, insect screens, perimeter screens, meshes for insect
protection, meshes for gardening and agro meshes, made up of
plastic (polymer) and articles thereof. While all the goods referred
to in Schedule IV may not relate only to agriculture, the very fact
that they have been included in the said Schedule would show that
the legislature intended to provide for a concessional rate of tax on
these goods.
The word insecticide, used by the legislature in Entry 20,
when read with the preceding and succeeding terms, shows that
the legislature intended to group items of the same kind under one
entry. The legislative intent, in the present case, can be gathered
from the Statement of Objects and Reasons when the entry was
inserted, and also on a reference to the White Paper on VAT,
wherein a broad consensus as to the rate of tax on goods of basic
necessities, and agriculture and industrial inputs, was agreed
upon. Both the White Paper on the VAT Act, and the Statement of
Objects and Reasons of Act 9 of 1970 (under the APGST Regime)
view agricultural inputs, and essential requisites for agricultural
production, as requiring reduction in the incidence of tax. The
legislative intent, when Entry 78 was initially introduced in the
APGST Act, was to cover essential requisites of agriculture
production. The consensus, arrived at the time of introduction of
VAT across the country, was that a uniform rate structure should
be imposed. The lower rate of 4% tax was agreed upon in respect of
basic necessities, and all agriculture and industrial inputs. On a
plain reading of the contents of the White Paper, the products
enumerated in Entry 20 of Schedule IV are those goods required for
Agriculture/Plant Protection; they are, therefore, placed in
Schedule IV for being extended the concessional rate of tax @ 4%/
@ 5%. The products, dealt with by the assessees, can neither be
said to be basic necessities nor are they agriculture products; or
products used for plant protection.
While Entry 17 of Annexure I to the White Paper does not
include plant protection equipment, it includes, among others,
insecticides and pesticides under the head goods with 4% floor
rate. Under the caption VAT rates and classification of
commodities the 4% VAT rate category was to comprise of items of
basic necessities such as all agricultural and industrial inputs. It is
evident therefore that only pesticides and insecticides, used as
agricultural and industrial inputs, were extended the concessional
rate of 4% tax. This understanding of the Empowered Committee,
in the White Paper, has weighed with the State Legislature in
providing for pesticides and insecticides, when used as
agricultural inputs/plant protection, under Entry 20, and when
used as industrial inputs under Entry 100(140) of the IV Schedule
to the VAT Act.
VII. CAN THE DICTIONARY MEANING AND TRADE PARLANCE
MEANING OF WORDS, NOT DEFINED IN THE ACT, BE
RELIED UPON?
It is contended, on behalf of the petitioners, that the terms
insecticides and pesticides have not been defined in the Act;
hence recourse may be taken to the dictionary meaning, and the
trade parlance meaning, for the purposes of interpreting Entry 20;
Butterworths Medical Dictionary, Second Edition, defines
pesticide as a comprehensive word to include substances that will
kill any form of pest, e.g., insects, rodents and bacteria; the
Commercial Tax Department, the traders marketing the goods, and
the consumers using the goods have all understood the subject
goods as insecticides and pesticides; in the absence of a precise
definition in the Statute, the common parlance test should form
the basis for interpreting the nature of the subject goods, in the
context of levy of VAT; many Entries in the Schedules are a
description of the category of the goods; a person, intending to
procure or purchase the goods, may either go by the description or
the alternative name or the trade name; it is necessary, while
determining whether a class of commodities fall within a particular
entry, to understand the meaning of the said commodity as
understood in common parlance; the popular sense meaning
would be 'that sense which people conversant with the subject-
matter, with which the statute deals, would attribute to it; in the
instant case, the subject goods were manufactured under a license
issued under the Insecticides Act, 1968, and the goods are meant
for the purpose of killing insects viz., mosquitos, cockroaches and
flies; the subject goods are sold and bought as insect killers; the
technical meaning of the subject goods also indicates that the
goods are meant for the purpose of killing insects; the subject
goods are packaged and marked as insecticides; the package of the
products, and the leaflets in the package, state that the products
are insect killers, and are useful for killing cockroaches, houseflies,
mosquitoes, etc; and, in common parlance, the subject goods are
known as insecticides.
While the meaning of an ordinary word of the English
language is not a question of law, the proper construction of the
Statute is. (Revenue and Customs v. Premier Foods Ltd. ). When
considering the meaning of a word, often one goes to a dictionary.
But we have been warned, time and again, not to substitute other
words with the words of the Statute and there is a very good reason
for that. Few words have exact similes. The overtones are almost
always different. (Premier Foods Ltd.58). The question of what a
word means in its context within the Act is a question of legal
interpretation and, therefore, of law. The Court is required to arrive
at the legal meaning of the term. If the word is not a term of art, it
must be interpreted according to its ordinary meaning as a word in
the English language and the context in which it has to be
construed; that is to say, the Court is to interpret it as a man who
speaks English and understands English correctly, but not
pedantically, would interpret it. (Premier Foods Ltd.58; Benyon on
Statutory Interpretation, 3rd Edition, page 945 to 956; Brutus
v. Cozens ). The Court, in determining what is the true meaning
of a particular word used in a Statute which it has to construe, has
to ascertain in what sense the word has been used: all the help the
Court can derive from dictionaries in such a case is, in case of
doubt, to ascertain that the meaning, which it comes to the
conclusion ought to be attributed to the word, is one which may
properly be given to it. (Mills v. Cannon Brewing Co. Ltd. ;
Deputy Commissioner of Taxation (NSW) v. Zest Manufacturing
Co. Pvt. Ltd. ).
The Legislature, in enacting Sections and Schedules, is not
using words which were applied to any particular science or art
and, therefore, the words used are to be construed as they are
understood in common language. (Commissioner, Sales Tax,
Uttar Pradesh v. Prayag Chemical Works ). While interpreting
the words in the Schedule, its language should not be strained;
and it is only the meaning, which is attributed to the disputed
word in commercial parlance, which should be given to it.
(Scientific and Glass Laboratories v. The State of Gujarat ;
Sales Tax Commissioner v. S. N. Bros. ). There is no fixed test
for classification of a taxable commodity. (Wockhardt Life
Sciences Ltd.1; A. Nagaraju Bros. v. State of A.P., ). Whether a
particular article will fall within a particular Entry or not has to be
decided on the basis of tangible material or evidence to determine
how such an article is understood in `common parlance' or in the
commercial world' or in the trade circle' or in its popular sense
meaning. It is they who are concerned with it, and it is the sense in
which they understand it, that constitutes the definitive index of
the legislative intention, when the statute was enacted. The
combined factors that are required to be taken note of, for the
purpose of classification of the goods, are the composition, the
product literature, the label the character of the product and
functional utility and predominant or primary use of the
commodity which is being classified. (Wockhardt Life Sciences
Ltd.1; D.C.M. v. State of Rajasthan ).
The words, used in a law imposing a tax, should be
construed in the same way in which they are understood in
ordinary parlance in the area in which the law is in force.
(Annapurna Biscuit Manufacturing Co. v. CST ). The words or
expressions must be construed in the sense in which they are
understood in the trade, by the dealer and the consumer. It is they
who are concerned with it, and it is the sense in which they
understand it that constitutes the definitive index of the legislative
intention when the statute was enacted. (Delhi Cloth & General
Mills Co. Ltd. v. State of Rajasthan ; Porritts & Spencer (Asia)
Ltd v. State of Haryana ).
We must give the word its ordinary meaning, and must ask
what view would be taken by the ordinary man in the street, who
had been informed as we have been informed. Shortly put, the
only issue is whether such a man in the street would regard this
product as a pesticide or an insecticide. (Customs and Excise
Commissioners v. Ferrero UK Ltd. ; United Biscuits (UK) Ltd. v.
The Commissioners of Customs and Excise ). Technical and
scientific tests offer guidance only within limits. Once the articles
are in circulation and come to be described and known in common
parlance, then there is no difficulty for statutory classification
under a particular entry. (Dunlop India Ltd. v. Union of India ;
M/s. Godrej Consumer Products Ltd.10).
In Bombay Chemicals Pvt. Ltd.,14, the Supreme Court held
that disinfectant fluids used in bathrooms, gutters, for floor
cleaning, etc., capable of killing bacteria are understood in
commercial parlance as insecticides and classified accordingly. It
observed:-
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 pest and it should
be understood in the common parlance as well as being covered in one of the
broad categories mentioned in the notification. Since the goods produced by
the appellant are capable of killing bacteria and fungi which too, is covered
in the expressions `pesticide and `fungicide there appears no reason to
exclude the goods from the aforesaid notification.
Fiscal or tax statutes are to be understood in the manner in
which the common man would understand it, and not in its
botanical or technical sense. The common parlance test requires
Entry 20 of Schedule IV to be understood in the manner in which
people dealing with it understand it (ie, not only the sellers but
also the users understand it). Even the petitioners, while selling
the product, have declared/specified the product as Household
Insecticide or Insecticide for Household Use which clearly
establishes that the product is intended to cater to a different class
or segment, and is not intended for general use as a
pesticide/insecticide. The subject product is not used as an
insecticide in general application for plant protection, growth and
regulation, but for killing insects and other household pests.
As noted hereinabove, the composition of the subject goods
contains a very small portion of insecticide as its active
ingredient. The product literature and the label classify the subject
goods as household insecticide. When a consumer purchases
these products he does not ask for a pesticide or an insecticide but
asks for the product by its brand name as it is a household
insecticide used to kill household insects and pests. People in the
trade, i.e the persons who sell the goods in the market and those
who purchase it, would ask for pesticides and insecticides when
they require them as agricultural inputs or for plant protection.
Even, on application of the common parlance test, the subject
goods, which are all household insecticides, would not fall within
the ambit of pesticides and insecticides under Entry 20 of the IV
Schedule to the VAT Act.
VIII. CERTIFICATION BY GOVERNMENT AGENCIES : ITS
EFFECT:
It is contended, on behalf of the petitioners, that the Central
Insecticide Board, after carrying out the required tests of safety,
efficacy and utility of the product, issues a certificate to the
applicant; in the certificate issued to the Petitioner, the subject
goods are described as 'household insecticides'; the Central
Insecticide Board is the apex body regulating production, storage
and disposal of insecticides; the finding of the expert body, that the
impugned goods are insecticides, is sacrosanct; a government
agency, called the Haffkine Institute, has confirmed that, as per the
mortality test conducted by it, HIT aerosol and HIT chalk have cent
percent mortality effect (killing effect on mosquitoes, flies, ants,
etc); and the tests of bio-efficacy were conducted as a pre-condition
for obtaining the certificate from the Central Insecticides Board.
In State of Haryana v. Anil Pesticides Limited , the
Punjab & Haryana High Court held that, where the disputes are
highly technical in nature, and the court does not possess the
requisite expertise to determine whether the items manufactured
by the company are "chemicals" as alleged by it, or "pesticides" as
claimed by the department, it has necessarily to depend on
technical opinion in such matters.
The case on hand does not, however, present any such
difficulty. The certificate issued to the petitioners is by the Central
Insecticides Board, a body constituted under the Insecticides Act to
regulate the manufacture, sale, distribution and use of insecticides.
As noted hereinabove, the Insecticides Act brings all kinds of
insecticides within its ambit with a view to ensure the safety of
human beings and animals from the use of such insecticides. As a
person who manufactures products, using any of the insecticides
enumerated in the Schedule to the Insecticides Act, is required to
be registered under the 1968 Act, the subject products were
certified by the Board as household insecticides. The Insecticides
Act has itself made an exception of household insecticides, and has
exempted it from the rigors of the Insecticides Act. The mere fact
that it contains a very small portion of insecticides, would not
make the subject products pesticides and insecticides falling
within the ambit of Entry 20.
IX. WOULD THE INTERPRETATION PLACED ON ENTRY 78, OF
SCHEDULE I OF THE A.P.G.S.T. ACT, BE APPLICABLE TO
ENTRY 20 OF SCHEDULE IV OF THE A.P. VAT ACT?
It is contended, on behalf of the petitioners, that the
expression in item 78 of Schedule I to the APGST Act, i.e
Pesticides, insecticides, fungicides, herbicides, weedicides and
other plant protection equipment and accessories thereof, was
comprehensive enough, even according to the Commercial Tax
Department, to include the subject goods; tax was, hitherto, being
levied on the said goods under item 78 prior to the introduction of
the VAT Act; the same has been reproduced verbatim in Entry 20 of
Schedule IV to the AP VAT Act (w.e.f. 01.04.2005); consequently,
the legal position prevailing under the APGST Act should continue
to receive the same interpretation under the VAT Act also; the Sales
Tax Appellate Tribunal, while interpreting the erstwhile Entry 78
of the First Schedule of APGST Act in Kumar Agencies, Nellore v.
The State of Andhra Pradesh ), held that the word and clearly
indicates that the words plant protection do not qualify the earlier
words pesticides, insecticides, fungicides, herbicides or
weedicides but only qualifies the word equipment, and Jet Mat
falls within the expression insecticides as they are used for
repelling or killing mosquitos in residential and non-residential
buildings; the said decision has been followed by the Tribunal in
Amitha Agencies Hindupur v. State of Andhra Pradesh ); the
contention that the Entry is only meant for agricultural production
is contrary to the interpretation placed on Entry 78 of Schedule I to
the APGST Act by the Tribunal in Kumar Agencies74 and Amitha
Agencies75; the legislature must be deemed to have known the pre-
existing legal position, while enacting the VAT Act; the subject
goods are, therefore, liable to be classified under Entry 20 of
Schedule IV to the APVAT Act; the Commercial Tax Department
was taxing the subject goods under item 78 of Schedule I to the
APGST Act upto 31.03.2005; they had accepted the returns filed by
the petitioner, declaring the subject goods under Entry 20 of
Schedule IV of the APVAT Act after 01.04.2005, without demur;
and if the department did not dispute eligibility of the subject
goods earlier, it is not open to them to now dispute the same.
In Kumar Agencies74, the question which arose for
consideration before the Sales Tax Appellate Tribunal was whether
Jet Mats, used in electric mosquito repellers, should be treated as
Insecticides or as an unclassified item? The assessing authority
had treated Jet Mats as an unclassified item. The appellate
authority had held that Jet Mat was an insecticide, but only
insecticides intended for plant protection fell under Item 78 of
Schedule I of the APGST Act. The Tribunal held that the words
other plant protection equipment and accessories thereof started
with the word and; this clearly indicated that the words plant
protection therein did not qualify the earlier words pesticides,
insecticides, fungicides, herbicides or weedicides, but only
qualified the word equipment; weedicides are not plant protection
equipment, but are chemicals used as suppressors of weeds and
killers of weeds; the word insecticides is normally used to denote
chemicals used in buildings for eradication of insects like
cockroaches, flies, mosquitoes, ants, white-ants etc; plant
protection insecticides are generally known by the word
pesticides; the Ministry of Agriculture, Directorate of Plant
Protection, had specifically stated in its circular that Allothrin 4,
which is a chemical used in mosquito mats, is an insecticide;
and, therefore, they were unable to agree with the interpretation
that though Jet Mats came under insecticides, as clarified by the
Department of Agriculture, Directorate of Plant Protection, it did
not fall under Item 78. The Tribunal held that Jet Mats fell under
insecticides as they are used for repelling or killing Mosquitos
from residential and non-residential buildings, and as the chemical
is classified as an insecticide even by the Directorate of Plant
Protection.
In Amitha Agencies75, the question which arose for
consideration before the Sales Tax Appellate Tribunal was whether
Mosquito Repellents, sold by the appellants, were insecticides
falling under Entry 78 of the 1st Schedule to APGST Act as
contended by the appellants, or whether they were not covered by
the Entry and were to be treated as unclassified goods. While
reliance was placed on behalf of the assessee on the earlier order of
the Tribunal in Kumar Agencies74, and the judgment of the
Madras High Court in Transelektra Domestic Products Pvt. Ltd.
v. Commercial Tax Officer, Porur Assessment Circle, Madras ,
the learned State Representative relied upon the judgment of the
Gujarat High Court in Sonic Electrochem Limited v. Sales Tax
Officer, City Division, Ahmedabad as affirmed by the Supreme
Court in Sonic Electrochem Limited v. Sales Tax Officer .
The Tribunal held that the judgments of the Gujarat High
Court, as affirmed by the Supreme Court, related to the
interpretation of entries contained in the Gujarat Sales Tax Act,
and the same could not be imported while dealing with other Sales
Tax Acts in other States; the interpretation placed by the Gujarat
High Court and the Supreme Court were in the light of a separate
and specific entry dealing with mosquito repellents; in the APGST
Act there was no such separate entry dealing with mosquito
repellents, during the relevant assessment years; a specific entry
was introduced for mosquito repellents, as Entry 203 of the 1st
Schedule to APGST Act, only w.e.f. 1.1.2000; in the absence of a
specific entry for mosquito repellents, the question which arose for
consideration was whether mosquito repellents fell within the
Entry dealing with insecticides; insecticides may be sold in the
form of powder, liquid to be spread or sprayed or they may be
manufactured in the shape of coils and mats, the use of which has
the effect of repelling or killing insects like mosquitos; in the
absence of a specific entry dealing with mosquito repellents, the
articles dealt with by the assessees should be considered as
nothing but insecticides falling under Entry 78 of Schedule I, and
not as unclassified goods; in Transelektra Domestic Products P
Ltd.76, the Kerala High Court was dealing with mosquito repellents
manufactured by the dealer in the name of Good Knight and
Banish; in support of its decision that, in the absence of a specific
entry, mosquito repellent should be classified as insecticides, the
Kerala High Court referred to the relevant observations made by
the Supreme Court in Sonic Electrochem Ltd78 that Jet Mat
had, as one of its constituents, d-Allathrin 4%, and the qualities
of an insecticide; it not only repelled mosquitos but was also
capable of killing them, but in view of the most specific entry
mosquito repellent in the Schedule, it could be classified only
under that entry; and in the absence of a specific entry, during the
relevant assessment years, mosquito repellents fell under classified
insecticides covered by Entry 78 of the 1st Schedule to the APGST
Act.
Where the legislature uses in an Act a legal term which has
received judicial interpretation, it must be assumed that the term is
used in the sense in which it has been judicially interpreted unless
a contrary intention appears. (Craies on Statute Law; Dewan
Brothers v. Central Bank of India ). Where the Legislature uses
an expression bearing a well-known legal connotation, it must be
presumed to have used the said expression in the sense in which it
has been so understood. (Banarsi Debi v. Income Tax Officer ).
Where a word of doubtful meaning has received a clear judicial
interpretation, the subsequent statute which incorporates the same
word or the same phrase in a similar context, must be construed so
that that word or phrase is interpreted according to the meaning
that has been previously assigned to it. (Barras v. Aberdeen Steam
Trawling and Fishing Co. Ltd., ; Banarsi Debi80; Dewan
Brothers79).
It is true that ordinarily the department, having accepted the
principles laid down in the earlier case, cannot be heard to take a
contra stand in subsequent cases (Commissioner of Central
Excise., Hyderabad-I, v. Aurobindo Pharma Ltd ). It is also well
settled that an Entry in a tax statute should be interpreted as at
the relevant date on which it falls to be applied, giving the words
its natural meaning without recourse to antecedent previous
legislation. (Willsons Solicitors L.L.P.11).
While this Court would, ordinarily, not permit the
department to agitate the same issue repeatedly, and may have
non-suited them as they have implemented the earlier orders of the
Tribunal, we are satisfied that the conclusion of the Tribunal, in
the aforesaid judgments, suffers from a serious infirmity, and since
the earlier decision of the Tribunal is sought to be relied upon in
construing Entry 20, it is necessary for us to revisit the issue and
consider the ambit of Entry 78 and 78-A of the first Schedule to the
APGST Act, in examining the scope of Entry 20 and 100 (140) of
Schedule IV of the VAT Act. Further the scope of Entry 20 has been
considered by the VAT Appellate Tribunal in the orders under
revision, and it is the assessee which has questioned it by way of a
revision before this Court. As the view taken by the Tribunal in the
present case is at variance with the earlier decisions of the Tribunal
in Kumar Agencies74 and Amitha Agencies75, it is also necessary
for this Court to decide this issue in the light of the conflicting
opinions of the Tribunal.
While Entry 78 of Schedule I of the APGST Act (which is
similar to the earlier part of Entry 20 of Schedule IV of the A.P. VAT
Act) was considered by the Tribunal in Kumar Agencies74 and
Amitha Agencies75, the scope of Entry 78-A of the I Schedule,
(similar to Entry 100 (140) of the IV Schedule to the A.P. VAT Act)
and its inter-play with Entry 78 was not examined. Entry 78 of
the 1st Schedule to the APGST Act related to:-
pesticides, insecticides, fungicides, herbicides, weedicides and other plant
protection equipment and accessories thereof;
Entry 78A related to:-
pesticides concentrate or technical grade pesticides used by any
registered manufacturer in the State for manufacture of formulated pesticides.
A pesticide formulation is a combination of active and inert
ingredients that form an end-use pesticide product. Active
ingredients in pure (technical grade) form are not suitable for
application, and pesticides are formulated to make them safer or
easier to use. Entry 78-A of the I Schedule to the APGST Act
brought within its scope technical grade pesticides or pesticides
concentrate. Pesticide formulations (including household
pesticides) do not fall within its ambit. If Entry 78 were to be read
widely, and construed as bringing within its fold all kinds of
pesticides, then pesticides concentrate and technical grade
pesticides would also fall within the ambit of Entry 78, and it was
wholly unnecessary for the legislature to have prescribed a separate
entry i.e., Entry 78-A for pesticides concentrate and technical grade
pesticides. Such a construction would also have rendered Entry
78-A redundant. Courts have adhered to the principle that effort
should be made to give meaning to each and every word used by
the legislature, and it is not a sound principle of construction to
brush aside words in a statute as being inapposite surplusage if
they can have a proper application in circumstances conceivable
within the contemplation of the statute. (Gurudevdatta VKSSS
Maryadit v. State of Maharashtra ; Manohar Lal v. Vinesh
Anand ; Aswini Kumar Ghose v. Arabhinda Bose ). A
construction that reduces one of the provisions to a dead letter
must be avoided. (Anwar Hasan Khan v. Mohd. Shafi ).
In both Kumar Agencies74 and Amitha Agencies75, the
Tribunal failed to consider the scope of Entry 78-A of Schedule I of
the APGST Act nor was the said Entry read or understood in the
light of Entry 78 thereof. In construing a provision in a statute
regard may be had to the other provisions of the Statute.
(Attorney-General v. Brown42). For the purpose of construing any
enactment, it is right to look not only at the provision immediately
under construction, but at any others found in connection with it,
which may throw light upon it, and afford an indication that
general words employed in it were not intended to be applied
without some limitation. (Cox v. Hakes43; Jordan39).
X. ENTRY 100(140) OF THE IV SCHEDULE ITS SCOPE:
It is contended, on behalf of the petitioners, that reliance
placed on Entry 100(140) of the IV Schedule is misplaced; the
items covered under Entry 100(140) of the IV Schedule are
technical grade insecticides, fungicides, herbicides, weedicides, and
pesticides which are used as industrial inputs / chemicals for
manufacture of pesticides, insecticides, etc; the STAT- Hyderabad,
in Revathi Pulvarisers, Kurnool v. The State of Andhra
Pradesh , has held that technical grade Methyl Parathion 80%
solution is not a pesticide falling under item 78 of the First
Schedule to the APGST Act; it is a chemical and cannot be used as
a pesticide, and the ratio laid down in Anil Pesticides Ltd.73, is
attracted; technical grade items, mentioned under Entry 100(140)
of IV Schedule, cannot be used for agricultural purposes without
undergoing a manufacturing process; and the items, covered under
Entry 100(140), are only meant for industrial use.
Entry 100 of the IV Schedule relates to goods when sold as
industrial inputs, and contains 235 sub-entries. It is only if all of
them are sold as industrial inputs would they qualify to be taxed
under this Entry. Entry 100(140) relates to technical grade
insecticides, fungicides, herbicides, weedicides and pesticides, that
too those used as industrial inputs to manufacture pesticides,
insecticides etc. If all forms of insecticides are understood to fall
within the ambit of Entry 20, it was unnecessary for the legislature
to separately provide for these goods in Entry 100(140). As
pesticides and insecticides, when used as industrial inputs, fall
under Entry 100(140), the pesticides and insecticides referred to in
Entry 20 can only be those used for plant protection, and not
others.
It is only because technical grade insecticides and pesticides
cannot be directly used for agricultural purposes would they not
fall under Entry 20. The Legislature has, in its wisdom, provided
for tax to be levied at the concessional rate of 4%/5% on technical
grade insecticides and pesticides also, provided they are used as
industrial inputs/chemicals for manufacture of pesticides and
insecticides. While technical grade insecticides and pesticides used
as inputs are brought within the ambit of Entry 100(140), the
pesticides and insecticides, which are the outputs of such a process
of manufacture, are brought within the ambit of Entry 20 provided
they are used for plant protection. All other pesticides and
insecticides (i.e other than those falling within Entry 20 and
100(140) of the IV Schedule) would only fall within the residuary
entry in the V Schedule, in the absence of a specific Entry for such
goods.
XI. SPECIFIC ENTRY PREVAILS OVER THE GENERAL ENTRY:
It is contended, on behalf of the petitioners, that, when there
is a specific entry covering the subject goods, they cannot be
subjected to tax under the residuary entry; and since the
competing entry is a residuary entry, the subject goods must be
brought within the ambit of Entry 20 of the IV Schedule.
It is well settled that, unless the department can establish
that the goods in question can, by no conceivable process of
reasoning, be brought under any of the specific items mentioned in
the Schedule, resort cannot be had to the residuary item. (Indian
Metals & Ferro Alloys Ltd. v. Collector of Central Excise ;
Bharat Forge & Press Industries (P) Ltd. v. Collector of Central
Excise ). Only such goods, as cannot be brought under the
various specific entries, should be attempted to be brought under
the residuary entry. In other words, unless the department can
establish that the goods in question can, by no conceivable process
of reasoning, be brought under any of the Entries, resort cannot be
had to the residuary item. (Bharat Forge & Press Industries (P)
Ltd.89). A residuary entry can be taken refuge of only in the
absence of a specific entry; that is to say, the latter will always
prevail over the former. (Wockhardt Life Sciences Ltd.1; CCE v.
Jayant Oil Mills (P) Ltd ; HPL Chemicals v. CCE ; Western
India Plywoods v. Collector of Customs ; Carrier Aircon2). A
commodity cannot be classified in a residuary entry, in the
presence of a specific entry, even if such specific entry requires the
product to be understood in the technical sense. (Wockhardt Life
Sciences Ltd.1; Akbar Badrudin Giwani v. Collector of
Customs ; Commissioner of Customs v. G.C. Jain ). A specific
entry would override a general entry. Resort should be had to the
residuary entry only when a liberal construction by the specific
heading cannot cover the goods in question. (State of Maharashtra
v. Bradma of India Ltd ; CCE v. Wood Craft Products Limited ).
In Bradma of India Ltd.95 the Supreme Court, while dealing
with the classification of Electronic Cash Register under the
Bombay Sales Tax Act, 1959, held that a specific entry would
override the general entry; and resort should be had to the
residuary heading only when a liberal construction by the specific
heading cannot cover the goods in question. In Bharat Forge and
Press Industries (P) Ltd.89 the Supreme Court held that the
question before it was whether the Department was right in
claiming that the items in question are dutiable under tariff entry
No.68; this was the residuary entry, and only such goods as could
not be brought under the various specific entries in the tariff
should be attempted to be brought under the residuary entry; in
other words, unless the department can establish that the goods in
question can, by no conceivable process of reasoning, be brought
under any of the tariff items, resort cannot be had to the residuary
item.
In Wockhardt Life Sciences Ltd1 the Supreme Court
considered the issue of classification of Povidone Iodine Cleaning
Solution used by surgeons for the purpose of cleaning or
degerming their hands and scrubbing the surface of the skin of the
patient in that portion which is operated upon to prevent infection
or disease. The assessee claimed the classification of the product as
medicament under chapter sub-heading 3003 which is a specific
entry, whereas the revenue contended that, as the product in
question was primarily used as detergents/ cleansing preparation,
they cannot be brought under the definition of medicaments and
sought classification under chapter sub-heading 3402.90 which is
a residuary entry. The Supreme Court held that a commodity
cannot be classified in a residuary entry, in the presence of a
specific entry, even if such specific entry requires the product to be
understood in the technical sense. A residuary entry can be taken
refuge of only in the absence of a specific entry; that is to say, the
latter will always prevails over the former.
The Supreme Court, in Dunlop India Ltd. & Madras Rubber
Factory Ltd. v. Union of India , held that 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 orphanage of the residuary clause. The question of competition
between two rival classification will, however, stand on a different
footing.
It is no doubt true that in case of competing entries, one
falling under the specified items mentioned in the Schedules and
the other a residuary entry, the burden is on the revenue to show
that the goods can, by no conceivable process of reasoning, be
brought within the specific Entry. As noted hereinabove, it is only
if all kinds of pesticides and insecticides are held to fall within the
ambit of Entry 20, can the subject goods, which are household
insecticides, be said to fall within the said Entry. Such a
construction would then render Entry 100 (140) redundant, as
technical grade pesticides which are classified under Entry
100(140) would also fall within Entry 20. The only manner in
which these two entries can be reconciled is if pesticides and
insecticides used for plant protection are alone construed as falling
within Entry 20, and technical grade insecticides and pesticides
alone as falling within the scope of Entry 100(140). In such an
event household insecticides, which are neither used for plant
protection nor do they constitute technical grade pesticides and
insecticides used as industrial inputs for manufacture of pesticides
and insecticides, would not fall either under Entry 20 or 100(140)
of the IV Schedule to the VAT Act. They would, therefore, be
taxable at the revenue neutral rate of 12.5%/14.5% treating them
as falling within the residuary items in Schedule V of the VAT Act.
XII. APPLICABILITY AND EFFECT OF COMPETING ENTRIES IN
THE SAME/DIFFERENT SCHEDULES OF A TAX STATUTE:
It is contended, on behalf of the petitioners, that the scope of
competing Entries (Entry 1 of Schedule 1, Entry 1 of Schedule IV
and Entry 20 of Schedule IV) cannot be examined for testing the
appropriate classification of the equipment; the submission of the
revenue does not disclose any rationality in taxing goods under
Entry 1 of Schedule IV, and the goods under Entry 20 of Schedule
IV, at the same rate; Entry 226 of the First Schedule to the APGST
Act dealt with Agricultural implements, and was introduced with
effect from 01.01.2000; prior thereto there was no entry in the First
Schedule which dealt with agricultural implements; however, the
phrase Plant Protection Equipment finds mention in Entry 78 i.e.
with effect from 27.04.1970; and, if the contention of the Revenue
is accepted, then agricultural equipment, sought to be taxed under
Entry 20 of Schedule IV, would be sufficient to cover Entry 1 of
Schedule IV also.
It is true that Entry 226 of the First Schedule to the APGST
Act, introduced with effect from 01.01.2000, read as under:
Agricultural implements whether hand operated, animal drawn or power
operated including post harvesting instruments and hand tools, sprayers and
dusters (and parts and accessories thereof).
Entry 1 of Schedule I of the AP VAT Act relates to agricultural
implements manually operated or animal driven, hand operated
sprayers including knapsack/backpack power sprayers (powered
upto 35 cc engines developing 0.8 to 1.4 HP), dusters and parts
thereof. Entry 1 of Schedule IV of the AP VAT Act relates to
agricultural implements not operated manually or not driven by
animals. Entry 20 of Schedule IV of the AP VAT Act relates to
Pesticides, Insecticides, fungicides, herbicides, weedicides and
other plant protection equipment and accessories thereof including
drip and sprinkle irrigation systems, but excluding mosquito
repellants in any form.
It is evident from Entry 1 of the First Schedule and Entry 1 of
the IV Schedule to the VAT Act, that Entry 20 covers only such
physical equipment which are not covered by either of the aforesaid
Entries. While the first part of Entry 20 relates to products i.e.,
goods used for plant protection, the second part deals with
equipment & accessories meant for plant protection through which
the goods, covered by the first part, are applied/used. Entry 20
brings within its ambit two different categories i.e., goods &
equipment of the same genus. The Entry has to be read in its
entirety, and each word used therein has to be given meaning. No
part of the Entry can be considered surplussage nor can the
legislature be said to have used words in the Entry superfluously.
The words ..and other in Entry 20 of Schedule IV do not take
within its fold items under Entry 1 of Schedule I of the VAT Act &
Entry 1 of Schedule IV of the VAT Act. Only plant protection
equipment, other than those mentioned in both Entry I of
Schedule I and Entry I of Schedule IV, qualify to be assessed under
Entry 20 of Schedule IV of the VAT Act; and by no means are the
words ..and other in Entry 20 a surplusage, as no statutory
provision can be so read as to make any word used in an Entry
redundant or inapposite surplussage.
Agricultural implements which fell within Entry 226 of the I
Schedule to the APGST Act have now been divided between Entry I
of Schedule I and Entry I of Schedule IV of the VAT Act. While
hand operated or animal drawn agricultural implements in Entry
226 are now classified under Entry I of Schedule I of the VAT Act,
power operated agriculture implements, which hitherto formed part
of Entry 226 of the I Schedule, are now classified under Entry 1 of
Schedule IV. Plant protection equipment, which was classified
within Entry 78 of the I Schedule to the APGST Act earlier, are now
brought under Entry 20 of the IV Schedule to the VAT Act. Even
under the APGST regime, other plant protection equipment were
brought within a separate Entry (i.e., Entry 78) other than the
entry relating to agricultural implements (i.e., Entry 226). The
mere fact that both of them are in Schedule IV and are liable to tax
at the same rate is of no consequence as pesticides and
insecticides used for plant protection and technical grade
pesticides and insecticides also fall within Schedule IV albeit in
two separate entries (Entry 20 and Entry 100 (140)).
XIII. DOCTRINE OF NOSCITUR A SOCIIS AND EJUSDEM
GENERIS:
It is contended, on behalf of the petitioners, that the
principle of noscitur a sociis cannot be applied to artificially
curtail the scope of Entry 20 only to items used for
agricultural/horticultural purposes; this legal maxim is merely an
aid to interpretation, and is applied where a particular piece of
legislation is ambiguous or susceptible of more than one
interpretation; the language employed in Entry 20 is capable of
only one interpretation; as Entry 20 enumerates various items that
are mutually exclusive, each term must be given its own meaning
and construed independently; the maxim noscitur a sociis is not
applicable as the terms pesticides and insecticides are terms of
wide import that have been deliberately used to include insecticides
and pesticides of all forms including those used for household
purposes; this maxim is not applicable in cases where wider words
are deliberately used to broaden the scope of the word/phrase; if
the genus of Plant Associates is applied to the former three items
then, because of Herbicide and Weedicide, they would include
plant killers and plant protection products; such an
interpretation would also not have a common genus amongst all
the items; accepting the contention of the department would mean
that the suggested common genus of Plant Associates would cover
both plant protectors and plant killers, for it is only then can the
common genus of Plant Associates be attributed to all the five
items in the Entry; it would then mean that herbicide and
weedicide would cover both plant protectors and plant killers; the
preceding three items i.e pesticides, insecticides and fungicides
would only cover plant protectors; even to apply the rule of
Noscitur a Sociis, there must be a common genus to all the items
in the entry; if the common genus of Plant Associates is applied to
the Entry, herbicide and weedicide would, in effect, cover two
categories of products i.e. plant killers and plant protectors; in
effect the only common genus would again be of plant protectors
from pesticides till weedicides; all the five items in the first part of
the entry are capable of covering not only plant protectors but also
non-plant protectors; attributing a common genus of plant
protection or plant associates would not be justified on a true
interpretation of Entry 20; the doctrine of ejusdem generis has no
application; the terms insecticides and pesticides, and the term
plant protection equipment, belong to two different categories of
products; insecticides and pesticides are not equipment; not just
the species, but the genus of the Entry itself is different i.e. while
insecticides, etc. belong to one genus, plant protection equipment
belong to an entirely different genus; the words plant protection
cannot be read separately from equipment; they form one phrase
as a whole to classify products of a distinct genus i.e. plant
protection equipment; if insecticides on the one hand, and plant
protection equipment on the other, are not of the same genus or
category, neither can influence the interpretation of the other; if
the preceding words do not constitute mere specifications of a
genus, but constitute description of a complete genus, the rule of
ejusdem generis has no application; insecticides and pesticides are
not equipment; as there is no ambiguity in the language employed
in Entry 20, the suggested rule of Ejusdem Generis has no
application; the doctrine of ejusdem generis is not an inviolable
rule of law; it can be applied only in the absence of an indication to
the contrary; and it cannot be applied when the preceding words
and the general words constitute description of two categories, or
the general words themselves constitute description of a distinct
category.
In Bharat Heavy Electricals Ltd v. Globe Hi-Fabs Ltd ,
while interpreting a clause of an agreement providing that no
interest shall be payable on earnest money, security deposit or on
any money due to the contractor by employer, the Supreme Court
held that in the present case we noticed that the clause barring
interest is very widely worded. It uses the words any amount due
to the contractor by the employer. In our opinion, these words
cannot be read as ejusdem generis along with the earlier words
earnest money or security deposit. Accordingly, the Supreme
Court held that no interest is payable for pre-award period.
Entries, which are descriptive of the category of goods, have
certain characteristics. Therefore, when a question arises whether a
particular good is covered in any category or not, it has to be
examined if it satisfies the characteristic which go to make it a good
of that category, whether in trade circle it is understood as such,
and if it is a good of a technical nature then whether technically it
falls in the one or the other category. Once it is found that a
particular good satisfies the test, then the issue which would arise
for consideration is whether it should be construed broadly or
narrowly. (Bombay Chemical Pvt. Ltd.14). It is while examining
the question whether the Entry should be read broadly or narrowly
that the rules of Noscitur a sociis and ejusdem generic should be
borne in mind.
The Rule Noscitur a sociis, according to Maxwell, means
that where two or more words which are susceptible of analogus
meaning are coupled together they are understood to be used in
their cognate sence. They take, as it were, their colour from each
other, the meaning of the more general being restricted to a sense
analogous to that of the less general. (Hospital Mazdoor Sabha38;
Lokmat Newspapers Pvt. Ltd v. Shankarprasad ; Bharat Heavy
Electricals Ltd98; Brindavan Bangles Stores v. Asst.
Commissioner of Commercial Taxes ). Nositur a Sociis means
that when two words are capable of being analogously defined,
then they take colour from each other. The term ejusdem generis, a
facet of Nositur a Sociis, means that the general words following
certain specific words would take colour from the specific words.
(Commissioner of Trade Tax, U.P. v. M/s. Kartos
International ). Entries in the Schedules of Sales Tax statutes list
some articles separately, and some articles are grouped together.
When they are found grouped together, each word in the entry
draws colour from the other words therein. This is the principle of
noscitur a socis. (Paradeep Aggarbatti, Ludhiana v. State of
Punjab ; M/s. Kartos International101).
In examining the question as to what is the meaning of
words occurring in an entry in the Schedules to a sales tax
enactment, the Court should not only look at the words, but
should also look at the context, the collection and the object of
such words, relating to such a matter and interpret the meaning,
according to what would appear to be the meaning intended to be
conveyed by the use of the words under such circumstances. A
word is known by the company it keeps. (Deputy Commissioner
of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. K.A.
Latheef ; Rein v. Lane ; Varkey v. Agricultural Income-tax
and Rural Sales Tax Officer ; and M.K. Ranganathan21). The
rule of construction noscitur a sociis is that the meaning of each of
the words is to be understood by the company it keeps. It is a
legitimate rule of construction to construe words in an Act with
reference to the words found in immediate connection with them.
The rule is explained differently: that meaning of doubtful words
may be ascertained by reference to the meaning of words associated
with it. (Ahmedabad (P) Primary Teachers Assn. v.
Administrative Officer ; Principles of Statutory Interpretation
by Justice G.P. Singh, 8th Edn.).
It is a legitimate rule of construction to construe words in an
Act with reference to words found in immediate connection with
them. (M.K. Ranganathan21; Angus Robertson v. George Day ).
When two or more words, which are susceptible of analogous
meaning, are coupled together noscuntur a sociis, they are
understood to be used in their cognate sense. They take, as it were,
their colour from each other, i.e the more general is restricted to a
sense analogous to the less general. (M.K. Ranganathan21;
Maxwell on Interpretation of Statutes, Tenth Edition, p 332).
The rule of nositur a sociis cannot, however, prevail where
it is clear that the wider words have been deliberately used in order
to make the scope of the defined word correspondingly wider. It is
only where the intention of the legislature in associating wider
words with words of narrower significance is doubtful, or otherwise
not clear, that this rule of construction can be usefully applied; it
can also be applied where the meaning of the words of wider
import is doubtful; but where the object of the legislature in using
wider words is clear and free from ambiguity, this rule of
construction cannot be pressed into service. (Hospital Mazdoor
Sabha38; Brindavan Bangle Stores100).
The Latin words ejusdem generic (of the same kind or nature)
are attached to a principle of construction whereby wide words
associated in the text with more limited words are taken to be
restricted by implication to matters of the same limited character.
The doctrine of ejusdem generis applies when (i) the statute
contains an enumeration of specific words; (ii) the subjects of the
enumeration constitute a class or category; (iii) that class or
category is not exhausted by the enumeration; and (iv) there is no
indication of a different legislative intent. General words must
ordinarily bear their natural and larger meaning, and need not be
confined "ejusdem generis" to things previously enumerated unless
the language of the statute spells out an intention to that effect.
(GMR Energy Limited28; M/s. Siddeshwari Cotton Mills (P) Ltd.
v. Union of India ).
The general expression has to be read to comprehend things
of the same kind as those referred to by the preceding specific
things constituting a genus, unless of course from the language of
the statute it can be inferred that the general words were not
intended to be so limited and no absurdity or unintended and
unforeseen complication is likely to result if they are allowed to
take their natural meaning. Unless there is a genus which can be
comprehended from the preceding words, there can be no question
of invoking this rule. Nor can this rule have any application where
the general words precede specific words. (Asstt. C.C.E. v.
Ramdev Tobacco Company ; Tribhuban Parkash Nayyar v.
Union of India ; GMR Energy Limited28). The preceding words
or expressions of restricted meaning must be susceptible of the
import that they represent a class. (GMR Energy Limited28;
Statutory Interpretation Rupert Cross (p.116); Amar Chandra
Chakraborty v. The Collector of Excise, Tripura ; UPSEB v.
Hari Shankar )
For the ejusdem generis principle to apply there must be
sufficient indication of a category that can properly be described as
a class or genus, even though not specified as such in the
enactment. (Francis Bennion : Statutory Construction [pgs 830-
831). Unless you can find a category' 'there is no room for the
application of the ejusdem generis doctrine'. The only test is
whether the specified things which precede the general words can
be placed under some common category. This means that the
specified things must possess some common and dominant feature.
(S.S. Magnhild v. Mclntyre Bros. & Co., ).
To invoke the application of the ejusdem generis rule, there
must be a distinct genus or category running through the bodies
already named. The specific words must apply not to different
objects of a widely differing character but to something which can
be called a class or kind of objects. Unless there is a genus or
category, there is no room for the application of the ejusdem
generis doctrine. (Rajasthan State Electricity Board v. Mohan
Lal ; Maxwell : Interpretation of Statutes; United Town
Electric Co., Ltd. v. Attorney-General for Newfoundland ). The
nature of the special words and the general words must be
considered before the rule is applied. (Jagdish Chander Gupta v.
Kajaria Traders (India) Ltd ). The inclusion of several articles
under the same heading does not mean that they all constitute one
commodity when it is apparent that a particular article belongs to a
distinct category. (Sukhu Ram Tamrakar v. State of Madhya
Pradesh ).
It is a requisite that there must be a distinct genus, which
must comprise more than one species, before this rule can be
applied. (State of Bombay v. Ali Gulshan ). Interpretation
ejusdem generis or noscitur a sociis need not always be made when
words showing particular classes are followed by general words.
Before the general words can be so interpreted there must be a
genus constituted or a category disclosed with reference to which
the general words can and are intended to be restricted. (Jagdish
Chander Gupta116).
The construction placed by the petitioners, on Entry 20 of
Schedule IV, ignores the Noscitur a sociis and Ejusdem Generis
principles. If the principle Noscitor a sociis, is applied, the word
insecticide cannot be considered in isolation, ignoring the other
words used in Entry 20 which form part of the same genus, all of
which are connected with plant protection. The words Insecticide
would get its color from the associated words which are all
chemicals, among others, to be used for plant protection as
generally understood in common parlance, and not the technical
usage of the commercialized products sold by the petitioners. The
words plant protection add colour to both the first and the second
limb of Entry 20. If the doctrine of Noscitor-a-sociis is applied to
the first part, and the rule of Ejusdem Generis to the second,
plant protection would be the genus, equipment and accessories
thereof, being general words, would be restricted by the specific
words plant protection. The artificial distinction sought to be
made between plant protectors and plant killers necessitates
rejection, as the goods referred to in sales tax enactments must be
understood in its commercial sense, as those involved in the trade
understand it, and not as understood by agricultural scientists in
its technical sense. Applying the common parlance test it is
evident that the subject goods, which are household insecticides
and pesticides, are not covered under Entry 20 of the IV Schedule
to the VAT Act.
The words pesticides, insecticides, fungicides,
herbicides and weedicides, in the first limb of Entry 20, are
susceptible of analogous meaning, and are compiled together so
that they are understood as being used in their cognate sense.
Pesticides and insecticides are used to control pests and insects,
herbicides and weedicides to kill unwanted plants especially
weeds, and fungicides are used to inhibit or kill the growth of
fungi. These chemicals prevent destruction or damage to
crops/plants, and are mainly used for plant protection. While
they may have other uses also, the meaning of the words
pesticides, insecticides and fungicides is to be restricted to a
sense analogous to herbicides and weedicides which are less
general. When each of these words take colour from each other, it
is evident that the scope of Entry 20 is restricted to these chemicals
when they are used for plant protection alone, and not when it is
used for other purposes. The common genus is plant protection
and each of these items are species of plant protectors.
Pesticides, Insecticides, fungicides, herbicides, weedicides,
in the first part of Entry 20, are goods basically intended for plant
protection/connected with plant protection. While herbicides and
weedicides are indisputably related/ connected with plants, and
are used for their growth and protection, pesticide and
insecticide, which are words used along with herbicides,
weedicides and fungicides, also form part of the same group of
chemicals meant for plant protection. The genus of all these
products, as one group, is plant protection, growth and
regulation. Applying the rules of noscitur a sociis and ejusdem
generics it is evident that the pesticides and insecticides
referred to in Entry 20 of Schedule IV are those used for plant
protection, and do not bring within its ambit the subject goods
which are household insecticides.
Entry 1 of Schedule 1 of the Vat Act relates to manually
operated or animal driven agricultural implements. Entry 1 of
Schedule IV relates to agricultural implements not manually
operated and not driven by animals. Plant protection equipment,
other than those referred to in Entry 1 of Schedule 1 and Entry 1
of Schedule IV, are placed in Entry 20 of Schedule IV along with
the chemicals used for plant protection. The basis, underlying
both the first and second limb of Entry 20, is plant protection
and while the first limb refers to the chemicals used for plant
protection, the second limb refers to the equipment used for plant
protection, with the word other denoting equipment other than
those mentioned in Entry 1 of Schedule I and Entry I of Schedule
IV of the VAT Act. The items in the first limb of Entry 20 constitute
a common category in that they are all chemicals used for plant
protection.
Accepting the submission, urged on behalf of the petitioners,
that pesticides and insecticides constitute one genus and plant
protection equipment a completely different genus would render
the word and other used in Entry 20 between the words
weedicides and plant protection equipment redundant, which as
held hereinabove is impermissible. The object of placing the words
plant protection equipment in Entry 20 is only because the
preceding items in the said Entry, including pesticides and
insecticides relate only to those used for plant protection, and
none else.
Although the doctrine of ejusdem generis is to be applied
with caution, where in a legislative enactment there are strong
reasons (a) from the history and circumstances connected with its
passing, (b) from the structure of the Act itself, to indicate the real
meaning of the Legislature, the doctrine of ejusdem generis is one
which not only can, but ought to, be applied. (Attorney-General v.
Brown42). The statement of objects and reasons of Act 9 of 1970 in
so far as it related to Entry 78 of Schedule I of the APGST Act, the
white paper on VAT, and the very structure of Entry 20 of Schedule
IV of the VAT Act require application of the ejusdem genus rule,
and when so applied it is evident that the insecticides and
pesticides used in Entry 20 of Schedule IV relate only to those
used for plant protection.
XIV. IS ENTRY 20 A COMBINED ENTRY:
It is contended, on behalf of the petitioners, that the terms
insecticides and pesticides, and the term plant protection
equipment, belong to different categories of products; insecticides
and pesticides are not equipment; the interpretation placed by the
revenue, in effect, restricts the scope of the entire Entry; the
contention that the scope of the items, mentioned in the said entry,
are restricted only for agricultural purposes is not supported by
any reasoning except referring to the words plant protection
equipment; the various items, enumerated in the Entry, are of wide
import and there is no ambiguity in the language employed
therein; and inclusion of several articles, under the same heading,
does not mean that they all constitute one commodity when it is
apparent that a particular article belongs to a distinct category.
The mere fact that certain articles are mentioned under the
same heading in a statute does not automatically mean that they
all constitute one commodity. The inclusion of several articles
under the same heading may also be for reasons other than that
the articles constitute one and the same thing. (Sukhu Ram
Tamrakar117; Haji Abdul Shakoor v. State of Madras ). In the
present case, however, all the items in the first limb of Entry 20,
are analogous to each other, and their purpose is to provide plant
protection. Entry 20 is a combined Entry which covers items viz.,
pesticides, insecticides, fungicides, weedicides and plant
protection equipment used for agricultural purposes. While the
second part of Entry 20 deals with Plant Protection Equipment
and Accessories thereof, the first part of the Entry basically deals
with products which gets consumed in the process of their
application, and are joined together with products of a physical
nature which are used for plant protection ie they are not
consumed in the process, and are physically available for multiple
uses. The goods mentioned in the first part of the Entry are
applied by the use of the goods referred to in the second part. The
term equipment and accessories are general words, and are
restricted by the specific words plant protection. Not all
equipment, which are of general use, are covered under Entry 20.
It is only those equipment, used or intended for the use of plant
protection, which are covered thereunder. The term plant
protection is the genus in Entry 20, and covers not only
equipment and its accessories which are physical goods meant for
plant protection, but also the goods, referred to in the first part of
Entry 20, which are consumables used for plant protection.
XV. SHOULD THE MEANING OF WORDS, USED IN AN ENTRY
IN A SCHEDULE TO A TAX STATUTE, BE ASCERTAINED
IN THE LIGHT OF DEVELOPMENT OF SCIENCE &
TECHNOLOGY?
It is contended, on behalf of the petitioners, that once the
goods, manufactured by the assessee, are held to be "insecticides",
there is no justification in excluding them from the term
"pesticides"; with development of science and technology, a
continually expanding content and a new kind of
pesticide/insecticide may be found; a Statute is to be understood
as a dynamic document which contemplates changes in
technological and socio-economic conditions; the House of Lords,
in Comdel Commodities Ltd.56, has held that when a change in
the social conditions produces a novel situation, which was not in
contemplation at the time when the statute was first enacted, there
can be no apriori assumption that the enactment does not apply to
the new circumstances; and if the language of the enactment is
wide enough, to extend to those circumstances, there is no reason
why it should not apply in the instant case.
In Porritts & Spencers (Asia) Ltd69, the Supreme Court,
while considering the question whether dry felts fell within the
category of all varieties of cotton, woolen or silken textiles
specified in Item 30 of Schedule B to the Punjab General Sales
Tax Act, 1948, held:-
. there may be wide ranging varieties of woven fabric and
they may go on multiplying and proliferating with new
developments in sciences and technology and inventions of new
methods, materials and techniques but nonetheless they would all
be textiles. It is true that our minds are conditioned by old
antiquated notions of what are textiles and, therefore, it may
sound a little strange to regard dryer felts as textiles: But it
must be remembered that the concept of textiles is not a
static concept. It has, having regard to newly developing
materials, methods, techniques and processes, a continually
expanding content and new kinds of fabric may be invented
which may legitimately, without doing any violence to the
language, be regarded as textiles. (emphasis supplied)
In Commissioner of Sales Tax v. La Bela Products the
Bombay High Court opined that the connotation of the term
kumkum has been enlarged with the passage of time; Entries in a
Schedule to a Sales Tax Act must be interpreted in the light of
current conditions; and, thereby, auto-sticking bindies, sold
under the name of beauty spots, more appropriately fell within
the Entry in respect of kumkum, and not under the Entry in
respect of toilet articles. The Orissa High Court, in Sonic
Electrochem (P) Ltd.13, observed that pesticides have wide usage
apart from agriculture; pests includes insects; and any material
which is used as an insect killer would come within the ambit of
pesticide.
In interpreting statutes, the primary object of which is to
raise revenue and for which purpose various products are
differently classified, resort should not be had to the scientific and
technical meaning of the terms and expressions used, but to their
popular meaning, ie the meaning attached to them by those using
the product. Scientific and technical meanings should not be
applied if they run counter to how the product is understood in
popular parlance. (Shree Baidyanath Ayurved Bhavan Ltd. v.
Collector of Central Excise, Nagpur ). The usual method would
be to provide the popular meaning or the meaning attached to the
products by those who deal in them i.e in their commercial sense.
Functional utility, and predominant use, play an important role in
determining the classification of taxable goods. The dictionary
meaning, the technical meaning and the meaning from users' point
of view or popular meaning would all furnish a clue to understand
the classification of a product. (Reckitt Benckiser (India) Ltd v.
State of A.P. ; Scientific and Glass Laboratories63;
Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant
Singh Charan Singh ; Prayag Chemical Works62). The words,
used in Entries in sales tax legislations, must be construed as
understood in common parlance. The words used by the
legislature must be given their popular sense meaning "that sense
which people conversant with the subject-matter with which the
statute is dealing would attribute to it." (Deputy Commissioner of
Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. G.S.
Pai & Co. ).
Words, in a sales tax statute, must be construed not in any
technical sense nor from the botanical point of view but as
understood in common parlance. If it has not been defined in the
Act, and is a word of every day use, it must be construed in its
popular sense. It is to be construed as understood in common
language. (Ramavatar Budhaiprasad v. Asstt. STO ; Craies on
Statute Law, p. 153 (5th Edn.); Planters Nut Chocolate Co. Ltd.
v. The King ; Madhya Pradesh Pan Merchants Association,
Santra Market, Nagpur v. The State of Madhya Pradesh (Sales
Tax Department) ). Where a word has a scientific or technical
meaning, and also an ordinary meaning according to common
parlance, it is in the latter sense that the word must be held to
have been used in a taxing Statute, unless a contrary intention is
clearly expressed by the Legislature. The reason is that the
Legislature does not suppose our merchants to be naturalists, or
geologists, or botanists. (Porritts & Spencer (Asia) Ltd.69; Prayag
Chemical Works62). That word should be given the meaning
attributed to it by people who daily deal with it as consumers or
dealers in the market. The reason for this rule is that the Sales Tax
Act concerns itself with commercial goods and, therefore, these
commercial goods should be attributed with that meaning which is
generally attributed to it in the market by the persons who deal
with it daily. A purely scientific meaning, which is theoretical and
is given from a scientific point of view, of a particular article would
be of no help in ascertaining whether the article in question falls
within the purview of a particular Entry. (Scientific and Glass
Laboratories63; Ramavatar Budhaiprasad125; Jaswant Singh
Charan Singh123).
The subject products, manufactured by the petitioners,
would not be considered as insecticide in common parlance.
These products are, admittedly, not used for agriculture/ plant
protection. They are not essential requisites for agricultural
production. These products are therefore liable to be taxed at a
higher rate, and not at the concessional rate @ 4 % / @ 5 %. While
passage of time has no doubt resulted in new found uses of
pesticides, insecticides, weedicides, fungicides and herbicides, what
we are called upon to examine is whether the subject products fall
within the ambit of an Entry in a Schedule to a Sales Tax
enactment. As a Sales Tax enactment relates to levy of tax on
commercial goods, the words used in an Entry in a Schedule to a
Sales Tax Act must be given the meaning attributed to it in the
market by persons dealing with them daily, and not in their
technical or scientific sense. When construed in its popular sense,
it is evident that the words pesticides and insecticides used in
Entry 20 relate to chemicals used as inputs for agriculture or plant
protection, and not to household insecticides used to kill
household insects and pests.
XVI. REASONS FOR EXCLUSION OF MOSQUITO
REPELLENTS FROM THE AMBIT OF ENTRY 20:
It is contended, on behalf of the petitioners, that the subject
goods cannot be construed as mosquito repellants; HIT CIK, HIT
Rat and HIT Chalk pertain to rats and cockroaches, and other
crawling insects; they are not used in relation to mosquitoes; HIT
FIK is an insecticide as it is used as a flying insect killer i.e. its
application pertains to all kind of flying insects, and not only to
mosquitoes; HIT FIK contains d-Transallethrin, a poisonous
substance that directly affects the nervous system of the flying
insect thereby killing it almost immediately; the subject goods,
especially HIT FIK, cannot be construed as a mosquito repellant;
Entry 20 of Schedule IV specifically excludes mosquito repellants
from its ambit; an Entry cannot exclude from its scope what is not
included within its ambit; even the exclusion, i.e. mosquito
repellents in any form, in Entry 20 establishes that the legislature
never intended to limit the scope of the Entry to insecticides,
pesticides, etc used only for agricultural/horticulture purposes; the
words in any form demonstrate that mosquito repellents used for
household use alone fall outside the ambit of the said entry; if the
intention of the Legislature was to limit the scope of Entry 20 only
to goods used for agricultural/horticulture purposes, the words in
any form would not have been used along with mosquito
repellents; the contention that the legislature was conscious that
mosquito repellents (which undisputably are used in households)
were not insecticides, yet it thought that they should be excluded
from the Entry is as absurd as exclusion of paper and pencil from
insecticides; the specific exclusion of mosquito repellants shows
that the intention of the legislature was not to restrict the scope of
Entry 20 only to agriculture uses, but to extend it to domestic uses
also; since Entry 20 specifically excludes goods which are
otherwise covered within its purview, and the item mosquito
repellants are used as household insecticides, it is incorrect to
restrict the scope of the said Entry only for agricultural purposes;
various legal fora, including this High Court, have held that
mosquito repellants are insecticides, and have classified them
within the ambit of the Entries covering pesticides or
insecticides; this Court in Godrej Hicare Ltd.12, held that, since
there was no separate entry for mosquito repellents in the said
Act at the relevant time, but a specific entry had been carved out in
the Schedule with effect from 01.01.2000 as Entry 203, mosquito
repellents should be treated as insecticides till 01.01.2000; the
Sales Tax Appellate Tribunal, Hyderabad, while interpreting the
erstwhile Entry 78 of the First Schedule to the APGST Act, in
Kumar Agencies74, held that Jet Mat falls within the expression
insecticides as they are used for repelling or killing mosquitos
from residential and non-residential buildings, and the chemical is
classified as an insecticide even by the Directorate of Plant
Protection; the Sales Tax Appellate Tribunal, Hyderabad, in
Amitha Agencies75 following the decision in Kumar Agencies74,
held that Mosquito Repellent is an insecticide falling under Entry
78 of the First Schedule to the APGST Act; and a similar view was
taken in Transelectra Domestic Products Pvt. Ltd.76.
Learned Counsel for the petitioners would submit that the
judgment in Sonic Electrochem78 is not applicable to the facts of
the present case, as it dealt with the interpretation of a specific
Entry which deals with mosquito repellants under the Gujarat
Sales Tax Act, and the Entry therein specifically dealt with jet
mats i.e. mosquito repellant mats, whereas undisputedly the
subject goods were different; in any event, the Supreme Court
denied the benefit to Jet Mats on the ground that the same were
commonly known and perceived by the market as mosquito
repellant mats, and therefore the said goods were to be treated as
mosquito repellants irrespective of their ability to kill mosquitoes;
in the present case, the subject goods are not perceived by the
market as mosquito repellants, but as insect killers which, in
turn, are only insecticides; except for CIK, which is meant for
Cockroaches, all other products ie MIK, FIK, AIK, have multi-
purpose uses against cockroaches, flies, and mosquitoes; these
products are meant for killing these insects; and, therefore, the
goods are classifiable as insect killers, and do not fall under the
ambit of mosquito repellent.
As Entry 20 of Schedule IV specifically excludes mosquito
repellents in any form from its ambit, it is necessary to
understand what a mosquito repellent is. A repellent is defined
as any chemically volatile substance that induces arthropods to
move in the opposite direction from its source thereby preventing
man and vector contact. Repellents may be formulated in various
dosage forms like lotions, aerosols, sprays, cream oils and grease
sticks. Different chemicals show different intrinsic protection and
repellency time. Most repellents act by a common mechanism.
They repel arthropods by providing vapors around the applied area.
Volatile oils from plant sources possess this property and thus they
act as a natural mosquito repellent. Many commercially available
formulations use volatile oil as an active ingredient. Repellant
activity is reduced due to washing with water, rubbing and
sweating of skin. A repellent is a substance that causes an insect
or animal to turn away from it or reject it as food. Repellents may
be in the form of gases (olfactory), liquids, or solids (gustatory). The
aerosol products, manufactured by the petitioners, use LPG/
kerosene as propellant and it is by direct application that crawling
insects are killed. Repellents, which are specifically excluded from
the scope of Entry 20, contain a slightly higher percentage of
active ingredient but its effectiveness is less due to the medium
through which it is used such as electric units.
In Sonic Electrochem78, mosquito repellents were subjected
to tax under the residuary Entry 13 of Schedule III prior to August
1990, i.e before insertion of Entry 129 in the Gujarat Sales Tax Act
with effect from 1-8-1990. A notification was issued, under Section
49(2) of the said Act, granting partial exemption to the sale or
purchase of pesticides and insecticides under Entry 98. The
Supreme Court held that, in view of the specific Entry 129 dealing
with mosquito repellents, it was difficult to accept the contention
that the product in question would not come within the ambit of
Entry 129 since one of its constituents d-Allethrin 4% happened
to be an insecticide; the product Jet Mat, which was the trade
name, contained d-Allethrin 4%; it was commercially known as
Mosquito Repellent Mat, and was a mosquito repellent
notwithstanding the fact that it not only repelled mosquitoes but
was also capable of killing mosquitoes; it was difficult to hold that
it was an insecticide entitled for partial exemption under Entry 98
of the Act; and when Entry 129 clearly stipulated that mosquito
repellent was taxable, the rate of tax had been provided therein,
and as the product in question was also a mosquito repellent, there
was no infirmity in the judgment of the High Court.
In Godrej Hicare Limited12 the question which fell for
consideration was whether "mosquito repellents" were exigible to
tax under Entry 78 of the First Schedule which included pesticides
and insecticides, or whether "mosquito repellents" were exigible to
tax under "general goods". The Division Bench held that, prior to
01.01.2000, mosquito repellents were classifiable as insecticides
under Entry 78; however w.e.f. 1.01.2000, mosquito repellents
were specifically classifiable under the specific entry i.e. Entry 203
at the rate of 8%; and even after incorporation of Entry 203 in the
APGST Act, w.e.f 01.01.2000, the subject goods (being insecticides
and pesticides) were being taxed under Entry 78; even the
Department understood the scope of the Entry to include all
insecticides and pesticides, and not merely those used in
agriculture; Entry 78 of the APGST Act was introduced verbatim, in
the AP VAT Act, 2005, as Entry 20 in Schedule IV and was
amended on 23.10.2005 w.e.f 01.09.2005; this matter had been
decided by the Sales Tax Appellate Tribunal in Kumar Agencies74,
a Full Bench of this Court, in Indo- National Limited v.
Commissioner of Commercial Taxes, A. P. Hyderabad , had
held that the judgments of the Tribunal were binding on the sales
tax authorities; however, it was contended on behalf of the revenue
that, after the judgment of the Tribunal, the Supreme Court had
delivered its judgment in Sonic Electrochem78, which
differentiated "mosquito repellents" from "pesticides and
insecticides"; the Supreme Court, in Sonic Electrochem78, was
dealing with a case under the Gujarat Sales Tax Act which had a
specific entry for "jet Mat"; the Supreme Court had therefore
concluded that, as there was an entry for "jet Mat" separately, it
could not be included in an entry for "pesticides and insecticides";
admittedly, there was no separate entry for "mosquito repellents" in
the APGST Act at the relevant time; a specific entry, however, had
been carved out in the Schedule with effect from January 1, 2000
as Entry 203; and, in these circumstances, "mosquito repellents"
should be treated as "insecticides" till January 1, 2000.
In Ashok Agencies35, a Division Bench of the Karnataka
High Court held that it was not in dispute that Mosquito repellants
contained the chemical Allethrin as one of its constituents; since
Allethrin is a constituent chemical in Mosquito repellants, it comes
within the definition of insecticide which also finds place in Entry
23 of the III Schedule annexed to KVAT Act without any further
qualification as to its kind; whether an insecticide is used in
agricultural operations for the purpose of killing insects that attack
agricultural crops, or it is used for killing domestic insects, the fact
remains that all kinds of insecticides fall within Entry 23 of the III
Schedule annexed to the Karnataka VAT Act; and therefore
mosquito repellant, being insecticide, fell within Entry 23 of the
said Schedule.
In M/s.Godrej Consumer Products Ltd.10, it was held that
mosquito repellants, including devices, parts and accessories, were
not treated as part of the Entry relating to Insecticides; it had an
independent entry; when the Karnataka Sales Tax Act came into
force, it had only one entry; it was subsequently substituted by the
Entry at Sl.No.23; the understanding of the Legislature was that,
as the words used in the said entry were clear and unambiguous, it
did not include mosquito repellant; but when the Karnataka High
Court in Ashok Agencies35 ruled that, because of the presence of
"allethrin" in the mosquito repellant, it fell within the definition of
"insecticide", it became necessary for the Legislature to make their
intention clear; therefore, they substituted the said entry by a later
entry specifically excluding mosquito coils and mosquito repellants;
they also added the words "and the like", used for non- agricultural
or non-horticultural purposes; therefore, the entire object of the
substituted provision was to exclude mosquito repellant from the
ambit of the word "insecticide", if it was used for non-agricultural
or non-horticultural purposes.
As noted hereinabove mosquito repellents in any form was
excluded from the ambit of Entry 20, by the amendment made on
23.10.2005 with retrospective effect from 01.09.2005. The
amendment was necessitated in view of the Judgment of the
Tribunal, in Kumar Agencies74 and Amitha Agencies75, that
mosquito repellents were insecticides. The basis of these
judgments was removed by the Legislature, by way of the aforesaid
amendment, making it clear that mosquito repellents were not
insecticides as referred to in Entry 20. While the legislature
cannot declare any decision of a court of law to be void or of no
effect, it can pass an amending Act to remedy the defects pointed
out by a court of law or on coming to know of it aliunde. In other
words, a courts decision must always bind unless the conditions
on which it is based are so fundamentally altered that the decision
could not have been given in the altered circumstances. (State of
T.N. v. State of Kerala ). The cause for ineffectiveness or
invalidity of the Act or the proceedings is sometimes removed by re-
enacting a valid and legal taxing provision. Sometimes the
legislature gives its own meaning and interpretation of the law
under which the tax was collected, and by legislative fiat makes the
new meaning binding upon courts. The legislature may follow any
one method or all of them and while it does so it may neutralise the
effect of the earlier decision of the court which becomes ineffective
after the change of the law. (Amarendra Kumar Mohapatra v.
State of Orissa ; Shri Prithvi Cotton Mills Ltd v. Broach
Borough Municipality ).
A competent legislature can always validate a law which has
been declared by courts to be invalid, provided the infirmities and
vitiating factors noticed in the declaratory judgment are removed or
cured. If in the light of such validating and curative exercise made
by the legislaturegranting legislative competencethe earlier
judgment becomes irrelevant and unenforceable, that cannot be
called an impermissible legislative overruling of the judicial
decision. All that the legislature does is to usher in a valid law in
the light of which the earlier judgment becomes irrelevant. (Ujagar
Prints v. Union of India ; State of Karnataka v. Pro Lab ).
Once the circumstances are altered by legislation, it may neutralise
the effect of the earlier decision of the Court which becomes
ineffective after the change of the law. (Ujagar Prints132; Pro Lab133).
The object of such an enactment is to remove and rectify the defect
in phraseology or lacuna of other nature, which has been found by
the Court to be vitiated by an infirmity. Its aim is to effectuate and
carry out the object for which the earlier principal Act had been
enacted. Such an amending Act to make small repairs is a
permissible mode of legislation and is frequently resorted to in
fiscal enactments. (Pro Lab133; Krishnamurthi & Co. v. State of
Madras ).
The question whether the subject goods, (none of which are
mosquito repellents in any form), were insecticides/pesticides or
not did not arise for consideration in any of the aforesaid
judgments wherein the goods involved were mosquito repellents. It
was not necessary for the Legislature, therefore, to clarify what was
not declared by Courts/Tribunal to be insecticides/pesticides.
Existence of an illegal act, proceedings or rule or legislation is the
sine-quo-non for any validating legislation to validate the same.
There can be no validation of what has yet to be done, suffered or
enacted. (Amarendra Kumar Mohapatra130).
The petitioners claim that the subject goods kill insects and
are not repellants. Hawleys Condensed Chemical Dictionary
defines the word repellant as a substance that causes an insect or
animal to turn away from it or reject it as food; repellants may be
in the form of gases (olfactory), liquids, or solids (gustatory); a
Paper published by Literati Journal of Pharmaceutical Drug Deliver
Technologies 01(02) 2015, 08-13, on A Review on Plant based
Mosquito Repellants states that a repellant is defined as any
chemical volatile substance that induces arthropods to move in the
opposite direction from its source thereby preventing man and
vector contact; The International Journal of Research and
Development in Pharmacy and Life Sciences Vol.4 No.5, pp 1760
1765 Article on Plants Having Mosquito Repellant Activity states
that an ethnobotanical Survey defines mosquito repellant as a
substance applied to skin, clothing, or other surfaces which
discourages insects (and arthropods in general) from landing or
climbing on that surface; there is also mosquito repellant products
available based on sound production, particularly ultrasound
(inaudibly high frequency sounds); the Paper on Advances in Plant
Biopesticides by Dwijendra Singh, has dealt with the nature of
repellant and insect killer; and states that, sometimes, a given
insecticide may act as an insecticide or as a repellent depending on
the concentration; and the major difference between the two is that
a repellent does not kill insects but keeps them away by exuding
pungent vapours or exhibiting slightly toxic effects.
As noted hereinabove, exclusion of mosquito repellants
from Entry 20 can be traced to the fact that the Sales Tax Appellate
Tribunal had treated mosquito repellants as Insecticides. The
legislature, in its wisdom, has excluded mosquito repellants in any
form from its ambit. Thereby the Entry has been confined to
agriculture/plant protection products only. It is not applicable to
the assessees products.
The contention that the words following (excluding mosquito
repellents in any form) reflect the intention of the legislature to
include all other forms (house hold or agriculture) of insecticides
which may have the propensity to kill, immaterial of its mixture
with the other ingredients (kerosene, propellant gas to name a few)
which goes into the manufacture of such goods, is not tenable. It
is wholly unnecessary for us to dwell on the distinction, if any,
between insect killers and insect repellents as the
pesticides/insecticides referred to in Entry 20 are those used for
plant protection, and not household insecticides.
XVII. EFFECT OF AN EXCLUSION CLAUSE IN AN ENTRY:-
It is contended, on behalf of the petitioners, that what was
excluded from Entry 20 is mosquito repellant which is a
household insecticide; the exclusion clause expands the genus of
various items enumerated in the said entry; and when Entry 20
was amended to specifically exclude mosquito repellents, there was
nothing that prevented the legislature from specifying that the
Entry was applicable only to goods used for
agricultural/horticultural purposes, and not for items used for
house-hold purposes.
In Allen v. Emmerson , it was held:-
No theatre or other place of public entertainment (other than such
places of entertainment as are now subject to the provisions of the
Barro-in-Furnacess Corporation Act, 1868, Section 164, and which
last mentioned places are to continue subject to the provisions of
that Act) shall be opened or used unless the same shall first have
been licensed;
Are the words theatre or other place of public
entertainment in s. 33 of the Act of 1872 to be read subject to the
ejusdem generis rule or not? We are satisfied, on the one hand,
that, if they have to be read subject to the restriction of this rule, a
fun fair of the kind involved in this case is not a kind of public
entertainment of the same genus as a theatre. We are not,
however, of opinion that the ejusdem generis rule applies to the
words in question, and this for the following, among other,
reasons:-
(a) Words excepting a species from a genus are
meaningless unless the species in question prima facie falls
within the genus. All hats other than top hats makes sense.
All top hats other than bowler hats does not: nor does all
hats and other articles except gloves if other articles is to be
construed ejusdem generis with hats. Now, the places covered
by s. 164 of the Act of 1868 the places excepted do not
fall within the assumed genus theatres and other similar places
of public entertainment although there may be an overlap
between the two.
(b) No case was cited to us in which a genus has been held to
be constituted, not by the enumeration of a number of classes
followed by the words and other, but by the mention of a single
class (in this case theatres) followed by those words.
(c) The tendency of the more modern authorities is to
attenuate the application of the ejusdem generis rule.. (emphasis
supplied)
The Supreme Court in Indian Aluminium Company Ltd., v.
Asst. Commissioner of Commercial Taxes (Appeals) , while
interpreting Entries No.11 and 67 which deals with petroleum
products, held that the very fact that there is an exclusion clause,
means that, but for the said exclusion, aviation fuel, LPG., etc.,
would be included in the said entries.
It is no doubt true that an exclusion clause is used in an
Entry to exclude the goods referred to in the exclusion clause
from the ambit of the Entry and, but for the exclusion, the goods
mentioned in the exclusion clause would have fallen within the
ambit of the Entry. As noted hereinabove, the exclusion clause in
Entry 20 was necessitated as the Tribunal had earlier held that
mosquito repellents were insecticides/pesticides falling within the
ambit of Entry 78 of Schedule I to the APGST Act (similar to Entry
20 of Schedule IV of the VAT Act). It is to remove the basis of the
judgments of the Tribunal was the exclusion clause inserted. The
words in any form refer to all kinds of mosquito repellents be it in
the form of coils, mats or liquids. The Legislature has, thereby,
made it clear that mosquito repellents in any form were not
pesticides/insecticides falling within the ambit of Entry 20. That
does not, however, mean that the subject goods are
insecticides/pesticides falling within the ambit of Entry 20.
XVIII. ARE TWO VIEWS OF ENTRY 20 POSSIBLE
NECESSITATING THE ONE WHICH FAVOURS THE
ASSESSEE TO BE ADOPTED?
It is contended, on behalf of the petitioners, that insect
killers, being insecticides, fall under Entry 20 of Schedule IV to the
VAT Act; even if the product is conceivably classifiable both under
Entry 20 as well as the residuary entry, benefit should be given to
the assessee of Entry 20; and in Mauri Yeast India Pvt. Ltd. v.
State of U.P the Supreme Court held that it is a settled principle
of law that, when two views are possible, one which favours the
assessee should be adopted.
The subject goods are not pesticides/insecticides used for
plant protection which alone fall within the ambit of Entry 20 of
the IV Schedule. The petitioners contention that it is classifiable
also under Entry 20, even if it were to fall under the residuary
entry, does not therefore merit acceptance. Household
insecticides do not fall under Entry 20, and are liable to tax only
under the residuary entry in Schedule V of the VAT Act.
It is submitted, on behalf of the petitioners, that this Court,
in Reckitt Benckiser (India) Ltd.122, held that Lizol (floor cleaner)
and Harpic (toilette cleaner) are insecticides and pesticides, and are
duly classifiable under Entry 20 of Schedule IV of the VAT Act; the
said order was passed relying on various dictionary definitions of
the term pesticides and insecticides; applying the test of trade
parlance, this Court held that what was a key guiding factor to
classification was how the said product was perceived by
consumers, trade and industry; Lizol and Harpic (used for cleaing
bathrooms) are viewed in the market as disinfectants i.e. solutions
that kill germs; since germs are also included within the scope of
the term pest, the said goods could be classified as pesticides; the
subject goods are perceived by consumers as pesticides i.e.
products that kill pests like cockroaches, ants, rats, mosquitoes,
flies etc; the Gauhati High Court has taken an identical view, in
Reckitt Benckiser India Pvt. Ltd.122, with respect to the same
goods sold by the same assessee, that Lizol and Harpic were
disinfectant fluids that had the capacity to kill bacteria and germs,
and were duly classifiable as pesticides; the Karnataka High Court,
in Godrej Consumer Products Ltd.10, examined a similar issue on
the classification of pest killing products under a similar Entry
under the Karnataka Value Added Tax Act, 2003 which excluded
mosquito repellents from coverage; the Karnataka High Court
answered the substantial question of law in favour of the Petitioner
holding that what is excluded from the ambit of "insecticide" is
mosquito repellants, and not mosquito killers, and Hit Rat are for
killing rodents and Hit Chalk are meant for killing crawling
insects; the first part of Entry 20 of the IV Schedule to VAT Act, is
identical to Entry 18 which was construed by the Supreme Court
in Bombay Chemicals Pvt. Ltd.14; the suggested restrictive
interpretation is contrary to the ratio laid down by the Supreme
Court; and applying the said ratio, to the facts of the present case,
the subject goods, capable of killing cockroaches, mosquitos,
houseflies, etc., are classifiable as insecticides under Entry 20.
In Reckitt Benckiser (India) Ltd122, the attention of this
Court was not drawn to Entry 100(140) of Schedule IV and,
consequently, that all forms of pesticides/insecticides did not fall
under Entry 20. The question whether pesticides/insecticides
falling under Entry 20 are only those which are used for plant
protection was also not examined therein. A judgment is a
precedent binding on a co-ordinate bench only for what it actually
decides, and not what logically follows therefrom. Observations of
Courts are neither to be read as Euclids theorems nor as
provisions of a Statute and that too taken out of their context.
(Amar Nath Om Prakash v. State of Punjab ; CCE v. Alnoori
Tobacco Products ; London Graving Dock Co. Ltd. v.
Horton ; Home Office v. Dorset Yacht Co. ; Shepherd Homes
Ltd. v. Sandham British Railways Board v. Herrington ). The
decision of a Court is only an authority for what it actually decides.
What is of the essence in a decision is its ratio, and not every
observation found therein nor what logically follows from the
various observations made in it. (State of Orissa v. Sudhansu
Sekhar Mistra Hegde ; Quinn v. Leathem ). In any event it is
not even the petitioners case that the subject goods are
disinfectants/toilet cleaners/ bathroom cleaners. Reliance placed
on Reckitt Benckiser (India) Ltd.122 is therefore misplaced.
Item 18 of the First Schedule to the Central Excise and Salt
Act, 1944 read as insecticides, pesticides, weedicides and
fungicides. The question which fell for consideration before the
Supreme Court, in Bombay Chemicals Pvt. Ltd14, was whether
the subject goods, which were disinfectants, fell within the ambit of
the said entry. The Supreme Court held that a disinfectant was
defined in Webster Comprehensive Dictionary as a substance used
to disinfect or to destroy the germs of infectious and contagious
diseases; disinfectant destroyed bacteria, fungi, viruses and
protozoans; it was therefore a killing agent; a disinfectant which
was used for killing, would be broadly covered in the word
pesticide; disinfectants may be of two types; one to disinfect and
other to destroy the germs; the former 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 a pesticide; where the entries are
descriptive of the category of goods, they have certain
characteristics; therefore, when a question arises whether
particular goods are covered in any category or not, it has to be
examined whether it satisfies the characteristic which go to make it
a good of that category, and whether in trade circle it is understood
as such; if they are goods of technical nature, then whether it
technically falls in the one or the other category; and once it is
found that the particular goods satisfy the test, then the issue
which arises for consideration is whether it should be construed
broadly or narrowly. While Item 18, the scope of which fell for
consideration in Bombay Chemical Pvt Ltd14, is no doubt similar
to the first limb of Entry 20 of Schedule IV of the VAT Act, when
the first limb of Entry 20 is read along with the second limb
applying the common parlance test, it is evident that only
pesticides and insecticides used for plant protection would fall
within the ambit of the said entry, and not all kinds of pesticides
and disinfectants. Even otherwise neither did any Entry, similar to
Entry 100 (140) of the IV Schedule fall for consideration nor was
the scope of any such entry examined along with Item 18 of the I
Schedule to the Central Excise Act. Reliance placed on Bombay
Chemical Pvt. Ltd.14 is, therefore, misplaced.
In Godrej Consumer Products Limited10, Entry 23 of the
Third Schedule to the Karnataka VAT Act read as under:
23. Chemical fertilizers, Chemical Fertilizer mixtures, bio-fertilizers,
micro nutrients, gypsum, plant growth promoters and regulators; rodenticides,
fungicides, weedicides and herbicides; insecticides or pesticides but excluding
phenyl, liquid toilet cleaners, floor cleaners, mosquito coils, mosquito repellants
and the, like used for non-agricultural or non-horticultural purposes.
The Karnataka High Court compared the said entry with
Entry 5 of Part-I of the Second Schedule to the earlier Karnataka
Sales Tax Act, 1957 which read thus:
5. Insecticides, pesticides, rodenticides, fungicides, weedicides,
herbicides, plant regulators and plant growth nutrients excluding copper
sulphate.
No entry similar to Entry 78A of the Schedule-I of the APGST
Act, or Entry 100(140) of Schedule-IV to the VAT Act, was
considered in Godrej Consumer Products Limited10. The subject
goods therein were, therefore, held to be insecticide killers falling
within the word insecticide. The aforesaid decision of the
Karnataka High Court does not therefore persuade us to take a
similar view. Reliance placed by the petitioners, on Godrej
Consumer Products Limited10, is therefore of no avail.
XIX. CONCLUSION:
Viewed from any angle, we find no infirmity either in the
impugned orders of assessment, or the orders of the VAT appellate
Tribunal which are subjected to challenge in the present
proceedings by way of revision. All the Writ Petitions and the
TREVCs fail and are, accordingly, dismissed. However, in the
circumstances, without costs. The miscellaneous petitions
pending, if any, shall also stand dismissed.
_________________________________
(RAMESH RANGANATHAN, ACJ)
___________________________________
(M. SATYANARAYANA MURTHY, J)
Date:01.06.2017
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