Yeast classification under sales tax law: living fungus held outside chemical and food entries

Yeast was held not to be a chemical for Kerala sales tax classification because it is a living microscopic fungus, and its use in fermentation or other chemical processes does not alter its essential character. The court applied the ordinary and commercial meaning of the entry and rejected the common parlance and functional approach urged by the Revenue, finding that a clear fiscal entry cannot be expanded by reference to use. Yeast also did not qualify as food or food preparation under the alternative entry. It therefore fell outside entry 29, the earlier entry 42, and entry 56, and was not taxable as a chemical commodity.

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Issues: Whether yeast is a chemical falling under entry 29 (earlier entry 42) of the First Schedule to the Kerala General Sales Tax Act, 1963, or an unclassified commodity, and whether it can alternatively be brought under entry 56 as food or food preparation.

Analysis: Yeast was found to be a living organism, specifically a microscopic fungus, capable of fermentation and enzyme production, but not a chemical substance. The fact that it is used in a chemical process or has chemical effects does not change its essential character for taxation. In construing a fiscal entry, the article itself must be identified by its ordinary and commercial meaning, and the use to which it may be put cannot expand the scope of a clear entry. The common parlance theory and functional test could not justify treating yeast as a chemical when the entry was confined to chemicals. The decision relied on by the Revenue was distinguished on the ground that it dealt with yeast powder manufactured through a chemical process and did not decide whether yeast is a living micro-organism. Yeast also did not answer the description of food or food preparation under entry 56.

Conclusion: Yeast is not a chemical and cannot be classified under entry 29 or the earlier entry 42, nor under entry 56; it remains outside those entries and is not taxable as a chemical commodity.

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