High Court Of Allahabad
Godrej Consumer Products Ltd. Vs. Commissioner of Commercial tax
Suneet Kumar, J.
Sales/Trade Tax Revision No. 320 of 2017
August  21, 2017
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ORDER
1. Heard Sri Kavin Gulati, learned Senior Counsel assisted by Sri Nishant Mishra and Sri Rohit Sthalekar, learned counsel appearing for the revisionist and Sri B.K. Pandey, learned counsel appearing for the Revenue.
2. The instant revision arises from an order dated 17 March 2017 passed by the Full Bench of the Commercial Tax Tribunal, Lucknow, in Appeal No. 4 of 2016 Godrej Consumer Products Ltd. v. Commissioner Trade Tax, whereby, the appeal of the revisionist has been dismissed.
3. The facts on which the controversy rests is in a narrow compass. The revisionist manufactures various kinds of Mosquito repellent/destroyer products including “Good Knight Advance Fast Card”. It filed an application before the Commissioner Commercial Taxes, Lucknow, U.P. under Section 59 of the UP Value Added Tax Act, seeking a clarification about the rate of tax applicable to the sales of “Good Knight Advance Fast Card”.
4. The following questions of law arise in the present revision:
(a) whether Good Knight Advanced Fast Card is an “insecticide covered” by Entry No. 20 of Part-A of Schedule-II of UP VAT Act, 2008?
(b) whether the Tribunal erred in law in classifying “Good Knight Advanced Fast Card” under the residuary entry without establishing that “Good Knight Advanced Fast Card” can by, no conceivable process of reasoning be brought under Entry No. 20 Schedule II of U.P. VAT Act, 2008?
The matter primarily pertains to classification.
5. By notification No. 1730 dated 30 December 2013, Entry No. 20 was amended with effect from 31 December 2013. Entry No. 20 is extracted :
“20. Chemical fertilizers, except those which are described in entry no. 26 of the schedule-I; micronutrients and also plant growth promoters & regulators, herbicides, rodenticide, insecticide, weedicide and pesticides excluding Mosquito repellent/destroyer coils Mats and Liquid.”
6. After amendment, “Mosquito repellent/destroyer coils, mats and liquid” was excluded from the purview of Entry No. 20.
7. Tribunal dismissed the appeal on the ground that Good Knight Fast Card (for short ‘Fast Card’) and Mosquito Repellent Mat being rectangular in shape, though of different thickness and size but on mere observation, both Mat and Fast Card do not appear to be distinct or different product, therefore, Fast Card would include Mat. Applying common parlance test, without adopting technical approach or dictionary definition, Tribunal opined that Fast Card would fall within the category of Mat, therefore, is excluded under the Entry. Further, since legislature has excluded Mosquito repellent/destroyer from the expression “insecticide”, therefore, the intention of the legislature is to exclude all kinds of Mosquito repellent/destroyer.
8. The learned Senior Counsel appearing for the revisionist would submit that Mat has been used along with the expression Mosquito repellent/destroyer, therefore, would urge that only Mosquito repellent/destroyer Mat is outside the purview of the Entry, Fast Card being a different product has not been expressly excluded, therefore, would be outside the purview of “Mosquito repellent/destroyer Mat, coil and liquid”. The expression “insecticide” will cover Fast Card, which being a household insecticide, therefore, would fall within the basic entry.
9. In common parlance Mosquito Mat is understood by the consumer as a Tablet distinct and different from Fast Card. Mat consisting of metalised film has to be inserted in an electric heating machine/instrument for use, whereas, in Fast Card, insecticide formulation is impregnated on paper and upon burning the Fast Card, the active ingredient gets released, therefore, would urge that Fast Card and Mosquito repellent/destroyer Mat are understood as different products in common commercial parlance, both by the trade and the consumer. The customers do not treat or understand the Fast Card as Mosquito repellent/destroyer Mat, hence, Fast Card is not identified in the market as Mat but as insecticide.
10. Further, it is contended that the intention of the legislature in taxation statute is to be gathered from the language of the entry, particularly, where the language is plain and unambiguous. It is not possible to assume any intention or governing purpose of the statute more than what is stated in plain language. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. Fast Card is insecticide. Primary chemical composition of Fast Card is transfluthrin 1.0% (household insecticide), whereas, Mat constitutes prallethrin 1.20%, Isopropyl Myristate 3.24%, both though an insecticide but on plain reading of the language only mat, coils and liquid are excluded from Entry 20. The other categories of products viz. Spray, Fast Card (Mosquito Card) are not excluded from the Entry.
11. Fast Card manufactured and marketed by the revisionist, primarily contains transfluthrin as an active ingredient, which is insecticide under the Insecticide Act 19681. Insecticide is defined under Section 3(e) of the Act 1968, which is extracted:
‘3(e) “insecticides” means
(i) any substance specified in the Schedule; or
(ii), or;** ** **
(iii) any preparation containing any one or more of such substance.’
12. It is, further, contended that it is not in dispute between the parties that the Fast Card is insecticide in view of the decision rendered by this Court in Knight Queen Industries(P.) Ltd. v. State of U.P. [2006] 145 STC 226 (All.), wherein, Mosquito repellent/destroyer, Coils and Mats were held to be insecticide.
13. Supreme Court and this Court has consistently taken the view, that in determining the meaning or connotation of words and expressions describing an article in a tarrif schedule, one principle which is fairly well settled is that those words and expressions should be construed in the sense in which they are understood in the trade, by the dealer and the consumer. The reason is that it is they who are concerned with it and, it is the sense in which they understand it which constitutes the definitive index of the legislative intention.
14. Therefore, what flows that in the absence of a statutory definition in precise terms; words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. Resort to rigid interpretation in terms of scientific and technical meanings should be avoided in such circumstances. It is generally by its functional character that a product is so identified. This, however, is by no means an absolute rule. When the legislature has expressed a contrary intention, such as by providing a statutory definition of the particular entry, word or item in specific, scientific or technical terms, then, interpretation ought to be in accordance with the scientific and technical meaning and not according to common parlance understanding. (Refer: Ramavatar Budhiprashad v. Assistant Sales Tax Officer AIR 1961 SC 1325; CST v. Macneill & Barry Ltd. [1985] taxmann.com 434 (SC); CCE v. Connaught Plaza Restaurant (P.) Ltd. (2012) 13 SCC 639; CCE v. Sharma Chemicals Works (2003) taxmann.com 1240 (SC).
Sales tax primarily deals with dealers who are engaged in commercial activity. Therefore, what is of the essence is to find out, upon enquiry, whether in commercial circles, Mosquito repellent/destroyer Mat is identical to or identified as Fast Card/Mosquito Card. Identity of goods is one of the essential elements to be borne in mind in deciding the nature of the transaction. Therefore, whether Mat and Fast Card are two different things in ordinary parlance and have distinct identity as goods has to be determined upon enquiry.
15. It is settled law that when one particular item is covered by one specified entry then the Revenue is not permitted to travel to the residuary entry. If from the records, it is established that the product in question could be brought under a specific entry, then there is no reason to take resort to the residuary entry by contending that the intention of the legislature was such. It is settled law that onus or burden to show that a product falls within a particular tariff item is always on the Revenue. If the Revenue leads no evidence then the onus is not discharged. The Tax Authority would have to make an enquiry to produce evidence to show that in common parlance ‘Fast Card’ is a product akin to Mosquito repellent/destroyer Mat. It is further urged that even taking a case that the basic ingredient may be the same so as to classify a product as Mosquito repellent/destroyer but in the event of the end product being known differently in trade and to the customers as a separate item is a question for determination. The chemical composition of both the Mat and Fast Card are different having different shape and size. Mechanism of their use has no remote resemblance or comparison, therefore, the products are entirely different items and could be having distinct identity in the market. Mat cannot be used directly by the customer unless it is accompanied by an electric machine/instrument. Whereas, Fast Card sold in rectangular leaflets is required to be merely lighted, which burns out in three minutes killing the mosquitoes and not repelling them as is in the case of Mat.
16. Mats, coils, liquid, spray and fast card may or may not qualify as mosquito repellent/destroyer but having due regard to their chemical composition some of the products may be insecticide within the meaning of the Insecticide Act, but that what is excluded from Entry 20 is not all kinds of products used as Mosquito repellent/destroyer but only a particular kind of product mentioned, therein, viz. coils, mats and liquids and no other. Had the legislature intended to exclude all kinds of products used as Mosquito repellent/destroyer, as opined by the Tribunal, the legislature would have aptly used the expression “excluding Mosquito repellent/destroyer” or “excluding All Mosquito repellent/destroyer” or “excluding Mosquito repellent/destroyer coils, mats, liquids etc.”. The expressions, hereinabove, is not unknown to the legislature, rather, similarly worded expression has been employed in other entries of the same Schedule. In my, considered opinion, Tribunal committed gross error in misreading the exclusion clause of Entry 20 to conclude that the intention of the legislature was to exclude all Mosquito repellent/destroyer including Fast Card since being a Mosquito repellent/destroyer.
17. Further, Tribunal committed an error in coming to a conclusion that Mats would include Fast Card. To reach such a conclusion Tribunal embarked upon a course of comparing the shape and size of the product viz. Mats and Fast Card. In classification, such a course is not available , if adopted may lead to erroneous results deviating from the intended intention of the legislature as expressly provided from the plain language employed by the legislature. Different kinds of Mosquito repellent/destroyer products used differently in trade and by the customers are known as different products. It is available in different forms, viz. coils, mats, liquid, spray and fast card. Each product is put to application by the customer in different ways and for different purpose. Mats can be used with an electric machine/instrument and not otherwise. Fast Card on the other hand, is a paper impregnated with insecticide which has to be lighted and burnt. The duration of the products is also different. The products by no stretch of imagination in common parlance are the same. The basic ingredients are also not the same, both products are known differently in trade and whether treated as a separate item in common parlance is a question of enquiry. Only specified items of Mosquito repellent/destroyer mentioned therein, has been excluded. The items that remain viz. Fast Card/Mosquito Card/Spray, whether, fall within the ambit of the specified entry would have to be determined by the Revenue in the light of Knight Queen (supra).
18. Intention of the legislature is not a tool of interpretation available at the hands of the Tax Authorities in taxation statutes to include or exclude items which otherwise cannot be discerned from the plain reading of the language employed by the legislature. The intention of the legislature is to be gathered from the language used and how the item/product is understood in trade or by the consumers. Residuary entry is made to cover only those category of goods which clearly fall outside the ambit of the main entry. Resort can be made to a residuary heading only when by liberal construction the specific entry cannot cover the goods in question. (Refer: Commissioner of Commercial Tax, v. A.R. Thermosets (P.) Ltd. [2016] 73 taxmann.com 254/58 GST 1 (SC).
19. Having due regard to the facts, reasons and statement of law, in my considered opinion, the impugned order passed by the Tribunal is unsustainable, consequently, the judgment and order dated 17 March 2017 passed by the Commercial Tax Tribunal, Lucknow, is set aside. The matter is remitted to the Tribunal to decide afresh in the light of the settled principle of law stated hereinabove.
20. The revision is, accordingly, allowed.
[Citation : 2017-Taxcaselaw-83-H.C-Allahabad-GST]
