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TMI Blog2008 (4) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... said Act, a notification was issued by the State on 7th September, 1981 prescribing description of goods, point of tax and rates thereof, Entry 21 whereof reads as under:- Sl. No. Description of goods Point of Tax Rate of tax 21 Chemicals of all kinds including fuel gases. M or I 8% In supersession of the said Notification, another notification was issued on 23rd November, 1998, Entry 22 whereof reads as under:- Sl. No. Description of goods Point of Tax Rate of tax 22 Chemicals of all kinds including fuel gases. M or I & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal were dismissed. 7. For the Assessment Year 2003-2004, a notice was issued to the appellant on 9th March, 2006 directing it to show cause why tax shall not be imposed on sale of 'yeast' @ 10 % as an unclassified item. 8. Questioning the legality thereof, a writ petition was filed by the appellant which, by reason of the impugned judgment has been dismissed by the High Court. 9. Mr. S. Ganesh and Mr. Amit Chadha, learned Senior counsel appearing on behalf of appellants, would submit :- (1) That the High Court committed an error in passing the impugned order in so far as it failed to take into consideration that the 'yeast' had all along been treated to be a 'chemical'. It has been so classified under the Central Sales Tax Act. (2) The chemical composition of 'yeast' as also the purpose for which the same was used having been accepted by the respondents in their counter-affidavit and as would be evident from the other materials brought on record including the certificates issued by the users thereof, it is clearly borne out that 'yeast' is a chemical' and not a 'living organism'. (3) In any event, if 'yeast' is a plant, as has been held by the K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mical composition of yeast as also its chemical formula stand accepted by the respondent in their counter-affidavit in paragraph 4 stating :- "4. The yeast is mixture comprising of Ammonia, Diammonia Acid, Mono Ammonia Acid, Phosphorous Pentaoxide, Potassium Oxide, Mangesium Oxide, Calcium Oxide etc. In dried form, the yeast consists of the following ingredients : Carbon 46 % Oxygen 32 % Nitrogen 8.50 % Hydrogen 6.00 % Ash 7.50 % " 13. It also stands admitted that yeast is also used in baking, pharmaceutical industries and for domestic applications, for example, in bread making process. Yeast ferments simple sugar and produces carbon dioxide and alcohol. It is capable of bringing about a chemical reaction or chemical effect. 14. Harcourt Butler Technological Institute, in respect of Bakers' yeast states as under :- "Bakers' yeast is one of the biochemical industry products consisting of cellular mass/biomass of living microorganisms (Saccharomyces cerevisiae). Bakers' yeast contains (on a dry basis) about Carbon 46 %, Oxygen 32 %, Nitrogen 8.5 %, Hydrogen 6.0 % and Ash 7.5 % (P2 O5 - 5.5 %). Based on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quintals). Approval is hereby accorded to the Yeast Units of the State to lift the balance yeast within the prescribed quota/limit. However, yeast so lifted shall not exceed more than 95% of the total capacity of the Yeast Units." 16. The Central Government in a circular issued on 12th November, 1958 issued under the Central Sales Tax Act prescribed in Form No. 6, while categorizing 'Distilleries and Breweries', described 'Chemicals' as under :- "Chemicals" - (1) Sulphuric acid, (2) Ammonium sulphate, (3) Flavouring agents, (4) yeast, and (5) other chemicals." 17. Yeast has been defined in several dictionaries and treatises in various forms, some of which may hereafter be noticed. Yeast is described in the Concise Oxford Dictionary (10th Indian Edition) as "a microscopic single-celled fungus capable of converting sugar into alcohol and carbon dioxide". The dictionary further gives the biological description of yeast as "any unicellular fungus that reproduces vegetatively by budding or fission". The Medical Dictionary also attributes the same meaning to yeast. Encyclopedia Britannica describes yeast as "any of certain economically important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which covers aerobic and anaerobic changes brought about by micro-organisms and includes the production of carbon dioxide gas, alcohols, acids and some other by-products." It is further stated that in the said Handbook that "yeast is a very potent source of supply of enzymes. An enzyme is produced by living cells, either animal or vegetable............ The important enzymes in yeast are Invertase, Maltase and Zymase." 20. Although strong reliance has been placed on some certificates issued by various private organizations stating that in commercial parlance 'yeast' is treated to be a chemical, we may for the purpose of the case ignore the same. 21. Keeping in view the aforementioned backdrop we may analyse the conflicting views taken by the Gujarat High Court and the Kerala High Court. 22. The relevant entries, which were the subject matter of interpretation of the Gujarat High Court are :- Sl.No. Description of goods Rate of sales tax Rate of purchase tax 9. Dyes and chemicals other than those specified in any other entry in this or any other Schedules Three paise in the rupee &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l product or not, secondly while construing an entry in fiscal statute we shall have to keep in mind the fact that when there is a specific entry in the description of which entry the product in question can more appropriately fall, it is not permissible to have resort to a residuary entry, thirdly, we have also reached a finding that by its composition yeast can be described as chemical, fourthly we have found that yeast is a substance having reactive properties and lastly we note that we are called upon to decide as to whether yeast is "chemical" and not the question as to whether "yeast" can be appropriately classified as living micro-organism. 25. The Kerala High Court, on the other hand, was interpreting Entry 29 of Kerala General Sales Tax Act, which reads :- "Chemicals including caustic soda, caustic potash, soda ash, sodium sulphate, sodium silicate, sulphur, chemical components and mixtures not elsewhere classified in this Schedule." It was in the context of the said Entry held by the High Court :- "10. Though dictionaries are not generally meant for resolution of legal issues, yet it is one source of information relating to an issue. It may be seen that the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical operation. But yeast is not a chemical. It is a living organism. Hence by no stretch of imagination a living organism can be classified as a chemical substance for the purpose of taxation under the Act. 83 STC 347 does not apply in the facts and circumstances of the case. The question as to whether yeast is a living organism was not considered at all in the decision." 26. The authorities under the Act as also the High Court relied solely on the decision of the Kerala High Court. No attempt was made to interpret the entry in question. Evidently the High Court did not answer the question as to whether the Kerala High Court decision can be taken to its logical conclusion, keeping in view the nature of entry which was the subject matter of interpretation. Yeast in all situations was held to be a plant. For the said purpose, the question was required to be considered at some details by the appropriate authorities. 27. Encyclopedia Americana (International Edition) Vol. 29 at pages 657-658 details the procedure for growing 'yeast'. It speaks of different 'yeasts' grown to be used for different purposes, in the following:- " The proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 'Yeast' may answer both 'chemical' as also 'fungi'. It is significant to notice that whereas fungi at one point of time was considered to be a plant and in fact has been held to be so by the Kerala High Court, only in the New Encyclopedia Britannica, it is not considered to be a plant, stating :- "Fungi The kingdom Fungi (Mycota) comprises a large group of eukaryotic organisms having two common characteristics: anantomically, their principal mode of vegetative growth is through mycelium; physiologically, their nutrition is based on absorption of organic mater. Although historically included in the plant kingdom, fungi lack chlorophyll and other structures common among true plants and have therefore been placed in a separate kingdom. Fungi are the culmination of a major direction in evolution distinctly different from that of plants or animals; this evolutionary line was established by organisms whose nutrition was based on absorption of organic matter. Fungi are among the most widely distributed organisms on Earth and are of great importance. The fungi include yeasts, rusts, smuts, mildews, molds, mushrooms, and others. Many fungi are free-living in soil or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which arose for consideration therein was as to whether the Appellate Tribunal being a fact finding body and having analysed the materials on record and came to the conclusion that 'Gelatine' did not fall within the meaning of 'chemical' which had attained finality between the parties, the High Court should have re-opened the matter. It is, however, significant to note that even for the said purpose the opinion of the experts were relied upon. For the purpose of holding that Gelatine is a protein obtained from collagen which originates from the animal kingdom mainly from skin and bones with suitable pressure, opinion of the expert was relied upon which stated that 'Gelatine' has no specific formula. Yet again, another expert opined that chemical is defined as compound of substances of definite molecular composition. 39. If 'yeast' has a definite molecular composition and is a single molecular species with a definite molecular structure, it would answer the said description. It has all the trappings of a chemical. It has a definite composition or attributes of the properties. A bye-chemical substance for the purpose of interpretation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by the explanatory notes appended thereto. 44. Yet again there is no quarrel with the proposition that the classification of 'goods' under a particular entry is a question of fact. However, in the instant case, no disputed question of fact has been raised. In fact, no attempt has been made to find out the fact. The authorities as also the High Court, without assigning any reason blindly followed the Kerala High Court decision. It did not pose unto itself the right question. The difference between the entries was not considered. 45. Submission of Mr. Venugopal that having regard to the provisions contained in Section 101 of the Indian Evidence Act, onus would be on the assessee, cannot be accepted for more than one reason. Firstly, because the provisions of the Evidence Act have no application. Secondly, because the classification adverted to by the assessee had been accepted by the revenue for more than 20 years. A different construction to an entry cannot be resorted to only because the rate of tax has been lowered. As the said classification had been accepted by the revenue for a long time, the onus would be on it to show as to why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular therefore has no application. 47. Appellants had relied upon the circular dated 28th May, 1999 issued by the Yeast Controller and Excise Commissioner, Uttar Pradesh. They also referred to a Circular dated 12th November, 1958 issued by the Central Government, whereby, for the purpose of some other statutes, yeast has been considered to be a chemical. A similar interpretation having been made to the entry in question by the authorities themselves, they cannot be said to be wholly irrelevant, particularly having regard to the doctrine of 'Executive Construction' 48. We, therefore, are of the opinion that if there is a conflict between two entries one leading to an opinion that it comes within the purview of the tariff entry and another the residuary entry, the former should be preferred. 49. Common parlance or commercial parlance test, we may notice, has been applied recently in HPL Chemicals Ltd.. vs Commissioner of Central Excise, Chandigarh : (2006) 5 SCC 208 stating :-. "31. It was submitted by the learned Senior Counsel appearing for the Revenue that the goods were classifiable under Heading 38.23 (now 38.24) as "residual products of the chemi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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