1991 (4) TMI 370 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry 9 of Schedule II, Part A of the Gujarat Sales Tax Act, 1969 regarding the classification of yeast as a chemical for taxation purposes.

Detailed Analysis:
The case involved a dispute over the classification of yeast for sales tax purposes under the Gujarat Sales Tax Act, 1969. The Tribunal had to decide whether yeast sold by a dealer should be taxed under entry 9 of Schedule II, Part A as a chemical or under the residuary entry 13 of Schedule III. The opponent contended that yeast should be taxed at 3% under entry 9, while the Revenue argued for a 5% tax under entry 13.

The Tribunal held that yeast is a chemical by composition and its reactive properties qualify it as a chemical falling under entry 9 of Schedule II, Part A. The composition of yeast includes various chemical constituents, and its use in the baking process involves bringing about a chemical reaction. The Tribunal referred to dictionary definitions of "chemical" to support its conclusion.

The Court analyzed the definitions of "chemical" and emphasized that yeast, being a substance used in chemical operations to produce a chemical effect in baking, can be classified as a chemical. The Court also referenced a previous decision regarding the interpretation of a similar entry in a different statute to support its reasoning that entry 9 is a residuary entry encompassing all types of dyes and chemicals not specifically mentioned elsewhere.

The Assistant Government Pleader argued that yeast should be classified as a biological agent due to its role in fermentation during the baking process. However, the Court rejected this argument, noting that yeast's composition and ability to bring about a chemical reaction justify its classification as a chemical under entry 9.

Ultimately, the Court upheld the Tribunal's decision, ruling that yeast sold by the opponent should be taxed as a chemical under entry 9 of Schedule II, Part A. The judgment favored the opponent, and no costs were awarded in the reference.

In conclusion, the Court's detailed analysis focused on the composition and properties of yeast to determine its classification as a chemical for taxation purposes under the relevant entry of the Gujarat Sales Tax Act, 1969.