Mortein Spray, Harpic & Lizol Cleaner- Not Classifiable as ‘Insecticide’ Under KVAT; Dettol A 'Medicament': Supreme Court

The Supreme Court bench comprising Justices M. R. Shah and Krishna Murari has ruled that Mosquito Mats, Coils and Vaporizers, Mortein Insect Killers, Harpic Toilet Cleaner and Lizol Floor Cleaners, are not be classifiable under Entry 44(5) of the 3rd Schedule to the Kerala VAT Act (KVAT), 2003 as ‘insecticides’.While observing that Entry 44(5) of the 3rd Schedule to the Act is a general entry, the bench observed that the said products would fall under Sl.No.66 and 27(4) of Notification SRO 82/06, dated 21.01.2006, issued under the KVAT Act, which is a specific entry which covers ‘Mosquito Repellants’ and ‘stain busters/ stain removers’, respectively. The said products would thus attract a VAT of 12.5% under the said Notification.On the issue of classification of Harpic Toilet Cleaner and Lizol Floor Cleaners, the court, by applying the dominant use test, held that the said products are essentially used as stain removers and deodorants and because they kill germs as well, they cannot be said to be insecticides classifiable under Entry 44(5).The top court, however, ruled that ‘Dettol Antiseptic Liquid’ would continue to fall under Entry 36(8) (h) (vi) of the 3rd Schedule to the Act, being a ‘Medicament’, attracting a tax of 4%, and would not fall under the residual entry of the said Notification.The court reiterated that a specific entry under a taxing statute would override a residuary entry; and that resort to residuary entry is to be taken as a last measure, only when by a liberal construction the specific entry cannot cover the goods in question. Further, the burden to prove classification in a particular entry is always on the Revenue. It added that any ambiguity has to be resolved in favour of the assessee and in case of a reasonable doubt, the construction most beneficial to the assessee must be adopted.The Commissioner of Commercial Taxes had earlier passed an order holding that the products- Mortein Insect Killer and Harpic/Lizol Cleaners- shall fall under the said Notification, issued under Section 6(1)(d) of the KVAT Act, which covers “Mosquito Repellants” and “stain busters, stain removers and all kinds of cleaning powder and liquids”, attracting a VAT of 12.5%.It was further held by the Commissioner that ‘Dettol Antiseptic Liquid’ is classifiable under Entry 103 of the said Notification, i.e., the residual entry, on the ground that the said product is not in the nature of a medicine having therapeutic or prophylactic properties, but it is used only for cleaning purposes. In an appeal, the Kerala High Court had upheld the order of the Commissioner.In the appeal filed before the Supreme Court against the order of the Kerala High Court, the appellant, M/s Reckitt Benckiser (India) Ltd, submitted that even after introduction of Notification SRO 82/2006, Mortein range & Mortein Spray products continue to be classifiable as insecticides, as they are manufactured under an insecticides license issued under the Insecticides Act. It contended that Mortein Spray kills insects, thus it cannot fall under Item No.66 of the said Notification- as contended by the revenue- since Item no.66 deals only with Mosquito repellants.Dismissing the contentions of Reckitt Benckiser, the Court observed that the HSN Code 3808 has been deleted from Entry 44(5) w.e.f. 01.07.2006 and from 21.01.2006, the said products would fall under Sl. No.66, namely “Mosquito repellent”, which is a specific entry and subject to VAT at 12.5%.While holding that Sl.No.66 of the said Notification, which covers “Mosquito Repellants”, is a specific entry and Entry 44(5) of the 3rd Schedule to the Act is a general entry, the court said, “Once there is a specific entry the ‘Mosquito Repellant’, thereafter one is not required to go to the definition under another Act namely Insecticides Act.”The court added: “Even otherwise it is required to be noted that Entry 44(5) which includes insecticides relates to products which are used in agricultural operations. All the products in the Entry are used in the agricultural field in relation to growing of agricultural products and controlling of pets, insecticides etc. which are attacking the plants. Therefore, in view of the specific Entry 66 of Notification SRO 82/06 dated 21.01.2006 the aforesaid products namely Mosquito Repellants, electric or electronic mosquito repellants, gadgets and insect repellants, devices and parts and accessories thereof are rightly classified as Mosquito repellants.”On the issue of classification of products Harpic and Lizol, the court remarked that after the introduction of the said Notification, w.e.f. 22.01.2006, the said products would fall under Sl. No. 27(4) of the said Notification, which is a specific entry. After referring to the product description and the nature of use of the said products, the Court further remarked that they are essentially used as stain removers and deodorants. Merely because they kill germs as well, the same cannot be said to be insecticides...

Mortein Spray, Harpic & Lizol Cleaner- Not Classifiable as ‘Insecticide’ Under KVAT; Dettol A 'Medicament': Supreme Court

Parina Katyal

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