Kerala VAT Act- Dettol Is Used As An Antiseptic, Would Fall Under Entry 36(8)(h)(vi) Rather Than Residuary Entry: SC

The Supreme Court in an appeal preferred by M/s Reckitt Benckiser (India) Ltd. against the Revenue has held that the Dettol is used as an antiseptic and is used in hospitals for surgical and medical use and hence, the same would fall under Entry 36(8)(h)(vi) of Schedule III of the Kerala VAT Act, 2003 (KVAT Act) rather than the residuary entry.

The Court, however, confirmed the judgment passed by the High Court as far as the products Mosquito Mats, Coils, Vaporizers, Mortein Insect Killers, Harpic Toilet Cleaner, and Lizol Floor Cleaners were concerned.

The two-Judge Bench comprising Justice M.R. Shah and Justice Krishna Murari observed, “… considering the dominant use of Dettol and the active ingredients of Dettol referred to hereinabove and that the Dettol is used as an antiseptic and is used in hospitals for surgical use, medical use and midwifery due to therapeutic & prophylactic properties the same would fall under Entry 36(8) (h) (vi) as claimed by the appellant and would not fall under the residuary entry as claimed by the Revenue. To that extent the impugned judgment and order passed by the High Court deserves to be quashed and set aside.”

The Bench applied the principles of classification in this matter being fundamental to any matter relating to classification under the taxing statute.

Advocate Siddharth Bawa appeared on behalf of the appellant while Advocate C.K. Sasi appeared on behalf of the respondents.

Facts -

An appeal was filed against the judgment passed by the Kerala High Court by which it dismissed the same and upheld the order passed by the Commissioner of Commercial Taxes with respect to the classification of the goods under the KVAT Act. The issue pertained to the classification of the appellant’s products namely (i) Mosquito Mats, Coils,   and Vaporizers; (ii) Mortein Insect Killers; (iii) Harpic Toilet Cleaner and Lizol Floor Cleaners; and (iv) Dettol Antiseptic Liquid.

As per the appellant, the products at (i) to (iii) were classifiable under Entry No. 44(5) of Schedule III of the KVAT Act as being 'pesticides, insecticides' and therefore subject to VAT at the rate of 4% and with respect to the product at (iv) hereinabove, the 'Dettol Antiseptic Liquid' was correctly classifiable under Entry 36(8)(h)(vi) being medicaments and thus also subject to tax at the rate of 4%. However, the Commissioner rejected the contention of the appellant holding that Mortein Mosquito Coil, Mat and Liquid Vaporizer are classifiable under Entry 66, and Dettol Antiseptic Liquid is classifiable under Entry 103 i.e., residual entry on the ground that the said product is not in the nature of medicine.

The Supreme Court in the above context noted, “In the present case under the KVAT Act there is a specific Entry Mosquito repellant so far as the product electric or electronic mosquito repellents, gadgets and insect repellents, devices and parts and accessories thereof are concerned and therefore the said specific entry shall be applicable in any case, the same cannot be said to be insecticides. We are in complete agreement with the view taken by the High Court that Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers products shall not be classifiable under Entry 44(5) as insecticides.”

The Court further said that merely because Harpic and Lizol kill germs, the same cannot be said to be insecticides classifiable under Entry 44(5), and that the dominant use is to be considered which is cleaning and removal of stains of the floor, and the toilet.

“In that view of the matter Entry 27(4) being a specific entry the same shall be applicable and the aforesaid two products namely Harpic and Lizol shall not be classifiable under general Entry 44(5) and in any case the same cannot be classifiable under Entry 44(5) as insecticides. We are in complete agreement with the view taken by the High Court that the product Harpic and Lizol shall not be classifiable under Entry 44(5) and shall be classifiable under Entry 27(4) of SRO 82/2006 chargeable to tax at 12.5%”, asserted the Court.

The Court further observed that Dettol is used as an antiseptic liquid and is used in hospitals for surgical use, medical use,  and midwifery, due to therapeutic and prophylactic properties therefore, the same can be said to be an item of medicament to be treated as a drug and medicine.

“The impugned judgment and order passed by the High Court in so far as the products Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers; Harpic Toilet Cleaner and Lizol Floor Cleaners is hereby confirmed”, held the Court.

Accordingly, the Court partly allowed the appeal and set aside the judgment of the High Court with respect to the Dettol Antiseptic Liquid and held it to be taxed at the rate of 4%.

Cause Title- M/s. Reckitt Benckiser (India) Ltd. v. Commissioner Commerical Taxes & Ors.

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