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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 ..... ve granted. 2. Interpretation of an Entry in the U.P. Trade Tax Act, 1948 is in question in these appeals which arise out of a judgment and order dated 16 th April, 2007 of the High Court of Judicature at Allahabad in CMWP No. 554 of 2006 and CMWP No.98 of 2007. 3. The State of Uttar Pradesh enacted the U.P. Sales Tax Act (for short, "the said Act"). In exercise of its powers conferred upon it under clause (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Kerala High Court, no tax would be payable thereupon in view of the Entry No.25 of the Notification dated 31 st January, 1985. 10. Mr. Kr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horous 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 this composition, the Empirical formula is C8 H12 O4 NP0.1 . It is produced on commercial scale using fermentation of molasses (as a source of sugar). The following chemical equation re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 single-celled fungi". It is further stated that "in food manufacture 'yeast' is used to cause fermentation and leavening. The fungi feed on sugars, producing alcohol (ethanol) and carbon dioxide; in beer and wine manufacture the former is the desired product, in baking, the latter. In sparkling wines and beer some of the carbon dioxide is retained in the finished beverage. The alcoh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Three paise in the rupee 13. All goods other than those specified from time to time in Section 18 and in Schedules I and II and in the preceding entries. Five paise in the rupee Three paise in the rupee 23. It was held that 'yeast' is a composition of chemicals and its properties have chemical reaction through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mical" 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 chemical is generally attributed to mean a substance obtained in or used for chemical operation. Necessarily the substance is a chemical. It is one thing to say that a substance is a chemical and yet another thing to say that an organism is capable of chemical operation. A chemical process may be there in fermentation since the fungi feed on sugars and produce alcohol and carbon dioxide. But it is to be noted that the organism that is used in the process is fungus. It needs no research to understand that fungus is a non-green plant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 procedures for growing yeasts are fundamentally the same in each industry. A pure culture is obtained by isolating a single yeast cell and growing it on a nutrient medium consisting of sugars (molasses, starchy grains, potatoes), a source of nitrogen (ammonia, grain steepwater), minerals and water of controlled acidity. As growth proceeds, the culture is transferred to successively larger batches of medium until the final batch often exceeds 100,000 gallons. When growth is completed, the yeast cells are separated from the spent medium on which they grew. Yeast grown for bread m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack 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 water; others form parasitic or symbiotic relationships with plants or animals, respectively. (Slime molds, straddling the animal and plant worlds, are treated in the article PROTISTS.) The mushrooms, by no means the most numerous or economically significant of the fungi, are the most conspicuous members of the group; thus, the Latin word for mushroom, fungus (plural fungi), has come to stand for the whole group. Similarly, the study of fungi is known as mycology-a broad application of the Greek word for mushroom, mykes. Fungi other than mushrooms are sometimes collectively called molds, although this term is better restricted to fungi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. 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 an entry in a fiscal statute may also be held to be a chemical. 40. It is now a well settled principle of law that when two views are possible, one which favours the assessee should be adopted. [See - Bihar State Electricity Board and another vs. M/s. Usha Martin Industries and another : (1997) 5 SCC 289. It is not a case where application of a commercial meaning or trade nomenclature runs contrary to the context in which the word was used as was the case in Akbar Badrudin Giwani vs. Collector of Customs : (1990) 2 SCC 203. 41. There cannot be any quarrel with the proposition that construction of the word is to be adopted to the fitness of the matter of the statute. But for determining the said question, several factors which would be relevant are required to be gone into. The trade or commercial meaning or the end user context w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted 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 a different interpretation thereof should be resorted to particularly when no change in the statutory provision has taken place. 46. Reliance has been placed by the learned counsel on Krishna Steel Industries vs. vs Collector of Central Excise, Patna : (2004) 11 SCC 239 wherein having regard to the interpretation of Chapter Note 6, the classification had been made either under Chapter 84 or under Chapter 73 and the subject matter thereof having held to be not classifiable under Chapter 84, was held to be classifiable only under Chapter 73 stating : "5. The authorities below, have on the basis of Note 6 held that these balls are classifiable under Tariff Item 73.08. We are in complete agreement with the view taken by the Collector and the Tribunal. Even though earlier these balls could have been classified under the then Tariff Item 26-AA, with the incorporation of Chapter Note 6, the item now has to be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner 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 chemical or allied industries, not elsewhere specified or included" which was the last item covered by Heading 38.23. The said Heading 38.23 is only a residuary heading covering residual product of chemical or allied industries " not elsewhere specified or included ". In the present case since the goods were covered by a specific heading i.e. Heading 25.01, the same cannot be classified under the residuary heading at all. This position is clearly laid down in Rule 3(a) of the Interpretative Rules set out above. As per the said Interpretative Rule 3( a ), the heading which provides the most specific description shall be preferred to the heading providing a more general description. This position is also well settled by a number of judgments of this Court. Reference may be made to Bharat Forge and Press Industries (P) Ltd. v. CCE 4. It was observed in para 4 inter alia as under: (SCC p.534) " 4. The question before us is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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