Supreme Court Finds Whether Dettol Product Should Be Subjected To Tax

Case title:

M/s Reckitt Benckiser (India) Ltd V/S Commissioner Commercial Taxes and Others

Date of Order:

10th April 2023

Bench:

Justice M R Shah and Krishna Kumar

Parties:

Petitioner: M/s Reckitt Benckiser (India) Ltd

Defendant: Commissioner Commercial Taxes and Others

Facts:

• The assesses filed the current appeal because he felt wronged and unsatisfied by the impugned judgement and order dated 17.12.2008 issued by the High Court of Kerala in Ernakulam in OT Appeal No.6 of 2006, which upheld the Commissioner's order regarding the classification of the in-question goods and dismissed the said appeal.
• The classification of the appellant's products, including I mosquito mats, coils, and vaporizers; (ii) mortein insect killers; (iii) harpic toilet cleaner and lizol floor cleaner; and (iv) dettol antiseptic liquid for the purposes of Kerala VAT Act, 2003 (hereinafter referred to as "KVAT Act"), must be noted at the outset. It was argued on behalf of the appellant that the items at I through (iii) were classifiable as "pesticides, insecticides" under Entry No. 44(5) of the III Schedule to the Kerala VAT Act, which corresponds to HSN Code 3808, and as such were subject to VAT at the rate of 4%.
• Both Shri Siddharth Bawa and Shri C.K. Sasi, knowledgeable attorneys, have testified on behalf of the appellant and respondents, respectively.
• The learned attorney who is representing the appellant has vehemently argued that, given the facts and circumstances of the case, the High Court made a significant error by rejecting the appellant's argument that the products listed above in numbers 1 through 3 should be classified under Entry 44(5) of Schedule III of the KVAT Act.
• With effect from January 21, 2006, Mortein range and Mortein Spray would fall under Sl. No. 66 (mosquito repellant), which is the specific entry and subject to VAT at 12.5%, while insecticide (Entry 44(5) of the III Schedule) is a general entry, according to the learned counsel appearing on behalf of the appellant.
• So, it is claimed, the classification dispute between two competing entries—Entry 44(5) (insecticide) and Sl. No. 66 (mosquito repellant), which was added as of January 21, 2006—has arisen. It is claimed that as there is no explicit entry for "mosquito repellents" in the entries under the other VAT Acts, Revenue believes that the High Court's decision on the Mortein repellant/Moretin range shall not apply.
• It is also argued that this Court has determined that any medication that treats a condition or is a palliative or curative is therapeutic in the case of Sujanil Chemo Industries vs. CCE & Customs, Pune (2005) 4 SCC 189 (paragraph 6), which involved Licel used to kill lice in human hair. It is claimed that Licel is medicinal because it eliminates the lice infestation in human hair. It is asserted that Dettol also functions as a medication when applied similarly.
• It is further claimed that in the cases of Reckitt Benckiser India Ltd. vs. Assistant Commercial Taxes Officer & Ors., STR­11/2012, the Gawahati High Court and the Rajasthan High Court determined that Dettol is a drug under the respective entries of the Assam VAT Act and Rajasthan VAT Act, respectively, and rejected the argument made by the revenue in those States that Dettol falls under the residuary entry. It is said that this Court dismissed the Revenue's SLPs challenging the Rajasthan High Court's ruling.
• It is urged to grant the current appeal based on the arguments and the rulings.

Issue Raised:

Whether mosquito repellents and other commodities belong under Entry 44(5) of Schedule III to the Kerala VAT Act, 2003 is at issue in this civil appeal?

Arguments:

• Whilst opposing the current appeal, Shri Sasi, learned counsel representing the Revenue fiercely asserted that the Mortein range and Mortein Spray would not be classifiable under Entry No. 44(5) as insecticides as stated on behalf of the appellant.
• It is argued that "Mortein Mosquito coil, mat and liquid vaporizer" cannot be classified as an insecticide and that this claim is unsupportable in light of this Court's ruling in Sonic Electrochem vs. STO, (1998) 6 SCC 397, which determined that the item "Jet Mat," a trade name for "d­Allethrin 4%," which is marketed as "Mosquito Repellent Mat," is a mosquito repellent. According to the submission, the item "Mortein Mosquito Coil, Mat and Liquid Vaporizer" would unquestionably fall under Entry 66 "Mosquito Repellent."
• It is urged to dismiss the current appeal in light of the aforementioned arguments.
• We spent much time listening to the knowledgeable attorneys representing the various parties.
• As far as the products mosquito mats, coils, vaporizers, and mortein insect killers are concerned, the appellant makes the argument that these items would be covered by Entry 44(5) of Schedule III of the KVAT Act and HSN Code 3808, respectively. As a result, it is the appellant's position that the aforementioned items should be classified as pesticides under Article 44(5) and thus subject to a 4% tax.
• The argument made on behalf of the appellant is that as the aforementioned items are produced in accordance with a permit issued under the Insecticides Act, they can be categorised as pesticides under Entry 44. (5). The aforementioned is meaningless. It is necessary to note that HSN Code 3808 has been removed from Entry 44(5), making it possible to classify this entry as general. Sl.No.66 of Notification SRO 82/06 dated 21.01.2006 issued under Section 6(1)(d) of the Kerala VAT Act which covers "Mosquito Repellants" states that once there is a specific entry for "Mosquito Repellant," one is not necessary to refer to the definition under another Act, the Insecticides Act.
• Due to its therapeutic and preventative qualities, Dettol is employed as an antiseptic liquid and is utilised in hospitals for surgical usage, medicinal use, and midwifery. Thus, the same can be considered a medicament item to be treated as a drug and medicine. Another important factor in this situation is the prevalent use.
• It is determined that the product Dettol would fall under Entry 36(8) (h)(vi) of Schedule III of the KVAT Act and would be subject to 4% taxation.
• As a result, the present appeal is partially granted to the aforementioned degree. However, there shall be no order as to expenses given the facts and circumstances of the case.

Analysis:

• The question to be considered is whether the above nature of use will bring the item as medicament. 
• A medicament is an item used for therapeutic or prophylactic treatment, that is in the course of prevention and cure of diseases.
• Appellant has no case that the above disinfectant, that is Dettol, is able to prevent or cure any disease. 
• It certainly kills germs and is used for various purposes referred to in the leaflet attached to it which includes even washing. It is a product generally to maintain hygiene.
•  Therefore, we are unable to uphold the appellant's contention that Dettol is a medicament. Appellant has no case that the item falls under any other Entry in Second or Third Schedule to the Act.

Conclusion:

In the present case, it is concluded by the court that the appeal is partially successful. This affirms the challenged judgement and order made by the Supreme Court with regard to the goods Lizol Floor Cleaners, Harpic Toilet Cleaner, and Mortein Insect Killers (mosquito mats, coils, and vaporizers). It is determined that the product Dettol would fall under Entry 36(8) (h)(vi) of Schedule III of the KVAT Act and would be subject to 4% taxation. The impugned judgement and order rendered by the High Court with regard to Dettol Antiseptic Liquid are now set aside

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