TaxTMI 
TaxTMI 
2008 (4) TMI 101
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....(d) of sub-section (1) of Section 3-A of the said Act, a notification was issued by the State on 7^th 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. &n....
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....eferred thereagainst by the appellants before the Joint Commissioner (Appeals) and the Trade Tax Tribunal were dismissed. 7. For the Assessment Year 2003-2004, a notice was issued to the appellant on 9^th 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 chemi....
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....composition, the Empirical formula is C8 H12 O4 NP0.1" (As per Harcourt Butler Technological Institute). 12. The chemical 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).&n....
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.... Out of 40% reserved for chemical units in the current yeast year 1998-99, the share/quota of the yeast manufacturing units in the State is hereby determined at 3,00,000 Quintals (Three lakhs 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 12^th 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 (10^th 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 re....
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....oscopic one-celled plant belonging to the fungus order, which ordinarily multiplies by a process known as budding and which causes fermentation when placed under suitable conditions. Fermentation is a general term 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 Rat....
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....is absence of any entry in any of the three Schedules dealing with living micro-organisms or any biological product and, by this reference, we are not called upon to decide as to whether yeast would more appropriately fall into the description of biological 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 ....
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....India Ltd. vs. State of Tamil Nadu : [1999] 112 STC 203. It was concluded :- "18. For the purpose of taxation of an article the approach should be what is an article and not what is in it or what is it capable of. Yeast may be capable of a chemical 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 detai....
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.... not make any distinction between an inorganic chemical and an organic chemical. The dictionary meanings of the terms which have been noticed by Kerala High Court as also the Gujarat High Court may not be of much relevance in the aforementioned context, although they act as a good guide. '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 wa....
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.... The word used in the statute, it is well settled, must take its colour from the object it seeks to achieve. 38. The High Court as also Mr. Kishan Venugopal has placed strong reliance on the decision of this Court in Rallis India Ltd. vs. State of Tamil Nadu : [1999] 112 STC 203. The question 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' ha....
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....d purpose, the end use to which the product is put to, cannot determine the classification of that product. In that case as to in which entry 'chiller' should be put was in question. It was held that it would come within the meaning of refrigerators, freezers and other refrigerating or freezing equipment as the same is 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, becaus....
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....e lower authorities and/or the Tribunal cannot be allowed to be relied upon for the first time in this Court. Even presuming that the circular could be shown to this Court, we find that the circular merely deals with forged items. The circular does not deal with such types of balls. Thus, the circular does not mention Chapter Note 6. The circular therefore has no application. 47. Appellants had relied upon the circular dated 28^th May, 1999 issued by the Yeast Controller and Excise Commissioner, Uttar Pradesh. They also referred to a Circular dated 12^th 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 ....