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CASE NO.: Appeal (civil)  2720 of 2008

PETITIONER: M/s. Mauri Yeast India Pvt. Ltd.

RESPONDENT: State of U.P. and another

DATE OF JUDGMENT: 10/04/2008

BENCH: S.B. SINHA & HARJIT SINGH BEDI

JUDGMENT: JUDGMENT REPORTABLE

CIVIL APPEAL NO. 2720 OF 2008 (Arising out of SLP (C) No. 11744 of 2007) AND CIVIL APPEAL NO. 2721 OF  2008 (Arising out of SLP (C) No. 12775 of 2007) M/s.Kothari Fermentation and Biochem Ltd.               \005 Appellant         Versus State of U.P. and another                                               \005. Respondents

S.B. SINHA, J.

1.      Leave 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 16th  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 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               M or I             8 %                    fuel gases.

       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               M or I             10 %                    fuel gases.                                    Provided that in the                                                         case of fuel gases if                                                         the sale is by any of  the undertaking registered

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as dealer in the name and  style of M/s. I.O.C. Ltd.,  B.P.C.. Ltd., H.P.C. Ltd., and I.B.P. Co. Ltd., the  tax shall be levied at the  point of sale by such  dealer to a person other than any of the aforesaid dealers.   

       Yet again on or about 1st March, 2003 a Notification was issued, entry  (i) whereof is as under :-         ________________________________________________________

       Sl. No.    Description of goods                  Point of Tax      Rate of tax         ________________________________________________________             (i)   Chemicals of all kinds                        M or I             4 %  

        4.      Before embarking on the question of law, we may notice the  representative fact of the matter involved in the appeal arising out of SLP  (C) No. 11744 of 2007.  

       Appellants carry on business of manufacturing and sale of yeast which  is used for the purposes of manufacturing bread etc.  They had been filing  returns before the sales tax authorities treating ’yeast’ to be a ’chemical’  within the meaning of the aforesaid entry for a long time.  The said returns  had been accepted and orders of assessment were passed relying on or on the  basis thereof.   

5.      We may at the outset notice that, a Bench of the Gujarat High Court in  State of Gujarat  vs. Bhagwati General Agency (Import) : 1991 (83) Sales  Tax Cases 347 held ’yeast’ to be  a ’chemical’ within the meaning of Entry 9  of Part A Schedule II of the Gujarat Sales Tax Act, 1969 and a Bench of the  Kerala High Court in State of Kerala  vs. A.M. Jose :  2004 (137) STC 82  opined ’yeast’ to be a  ’living organism’ and, thus, not a "chemical"  interpreting Entry 29 of the Kerala General Sales Tax Act.   

6.      By an order dated 10th March, 2005 the Assessing Officer while  accepting the books of account as well as the disclosed turnover, rejected the  classification of sale of ’yeast’ under the head ’chemical’ and imposed tax  thereupon treating the same to be as "unclassified item".   In support of the  said order, reliance was placed on the decision of the Kerala High Court in  A.M. Jose (supra).  Appeals preferred 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 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

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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 31st January, 1985.   

10.     Mr. Krishnan Venugopal, learned counsel appearing on behalf of the  respondents, on the other hand, submitted:-  

1)      In view of the fact that the question whether yeast would be a  plant or not being a mixed question of law and the process for  finding out the same having not been gone into, this Court  should not pronounce any judgment thereupon.

2)      In any event ’yeast’ being a ’fungi’ is not a plant as has been  noticed in the New Encyclopedia Britannica Volume 19 page  59.  

3)      The ’dictionary’ and the ’chemical meaning’ of ’yeast’ being  ’living organism’ whereas the chemical being a non organism,  the decision of the Kerala High Court should be held to have  laid down a correct law as opposed to the decision of the  Gujarat High Court.  4)      If in other Acts or Circulars, ’yeast’ has been shown to be a  ’chemical’ the same should be held to be wholly irrelevant for  the purpose of interpretation of an ’Entry’ in a fiscal statute  which must be interpreted on its own.   

5)      A dictionary meaning, in a case of this nature, is required to be   considered with a view to reconcile and harmonise the tariff  entry and only because an article is exclusively used for  manufacture of a particular item, the same should not be held to  be decisive.   

6)      Classification under a tariff entry being essentially a question of  fact, should be determined on the basis of relevant material by  the authorities.  Onus of proof being on the assessee, it is for it  to establish that ’yeast’ is not a ’plant’ and for the said purpose  the matter should be remitted to the assessing authority.  

7)      The question, admittedly being pending before the High Court  in Tax Revision Cases for the earlier years, a writ petition was  not maintainable.  11.     Before embarking on the questions raised before us by the learned  counsel for the parties we may notice the chemical composition of ’yeast’ :-

"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"   

                       (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 :

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       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  represents its synthesis based on sucrose :-

0.55 C12  H22 O11 + 0.57 NH3  + 2.51 O2 + 0.02P2 O5   ---  (Sucrose)

C3.92  H6.3 O0.6 N0.57  P0.04  + 2.68 Co2 + 3.83 H2O                    (Bakers’ yeast) Yeast is widely used in baking, pharmaceutical  industries and for domestic applications.  In bread  making process and related sweet dough processes, yeast  ferments simple sugars and produces Carbon dioxide and  alcohol as shown by following equation.

C6  H12 O6  + Yeast  -----     2 Co2 +    2 C2 H5 OH Glucose           Carbon dioxide       Ethanol

The fermentation is gradual, beginning slowly and  increase in rate with time.  This is due to two conditions  in dough :

i)      Yeast wells are multiplying and their enzymes are  becoming more active while the dough is prepared and held,  and  

ii)     Sugar for fermentation is gradually being liberated  from starch in the dough by the action of natural flour enzymes.

The evolved carbon dioxide acts as a leavening agent,  which leads to the porosity of bread.  The porosity is  caused by the carbon dioxide produced and retained in  the dough by the film forming properties of a pertain  complex present in the dough called gluten.

The bakers’ yeast is available as compressed cake or in  dried form as powder, small granules, pellets or flakes.  It  should not be slimy or mouldy and should not show any  sign of deterioration or decomposition.  It should be free  from adulterants and other extraneous materials."  

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15.     In an order dated 28th May, 1999, the Yeast Controller and Excise  Commissioner, U.P. stated:-

"After carefully consideration application/representation  of the Yeast Manufacturing Association of India, it has  been decided that yeast has been included in the category  of Chemical Industries in the current yeast session of  1998-99 because it is a bio-chemical for yeast units.  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 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" \026 (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 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 alcohol produced in bread making is driven off when  the dough is baked."  Encyclopedia Americana describes yeast as "a tiny living plant". "It  makes the bread light and tender; it also adds flavour."  18.     Sri. S.C. Dubey, a Baking Technician of repute of U.S. Wheat  Associates, New Delhi has done an extensive research on yeast and its  functions. It is profitable to refer to the following passage from his writing:- "Yeast is unicellular microscopic plant. Its structure  consists of cell wall, protoplasm, and vacuole. It requires  food (in the form of simple sugar), moisture and  temperature climate for its growth and reproduction.  Yeast multiplies by budding. When yeast cell is placed in  a liquid medium at optimum temperature (80-85F)  containing simple sugar (dextrose or fructose), then the  cell starts growing buds on its cell wall which keep on  growing until daughter cells acquire the same size as  mother’s cell. Then the buds separate from mother cell  and start producing other buds. The protoplasm of yeast contains certain enzymes  by which fermentation activity of ’yeast’ is made  possible. Enzymes are very minute substances produced  by living organisms, which, by its mere presence, are  capable of bringing about or speeding up certain

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chemical changes. For example, food is digested through  the action of certain enzymes, starch is converted into  sugar by the action of enzymes. Although an enzyme  does affect chemical changes, a very small quantity of  enzyme is capable of converting a very large quantity of  substance from one form to another form, but enzyme  itself is neither destroyed nor changed. Hence, enzymes  are known as catalytic agents."

19.     Bakers Handbook on Practical Baking compiled by U.S. Wheat  Associates, New Delhi describes yeast as follows:- "Yeast is a microscopic 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 :-  ________________________________________________________  Description of goods                Rate of sales       Rate of purchase                                                 tax                        tax ________________________________________________________          9.  Dyes and chemicals other            Three paise in        Three paise in                than those specified in any            the rupee                the rupee              other entry in this or any other                 Schedules.          13. All goods other than those           Five paise in          Three paise in               specified from time to time          the rupee                the rupee               in Section 18 and in                Schedules I and II and in             the preceding entries.     ________________________________________________________

23.     It was held that ’yeast’ is a composition of chemicals and its  properties have chemical reaction through the process of enzymatic  conversion of carbohydrates into alcohol and carbon dioxide and thus  capable of bringing about a chemical reaction or chemical effect.  It was  held to be a "chemical".  In so opining the High Court referred to Webster’s  Seventh New Collegiate Dictionary, stating:- "       With the above meaning of the word "chemical"  the question which is required to be answered is whether  "yeast" is a substance which is used in chemical  operations or for producing chemical effect in the  manufacture of breads, pastries or other products  resulting from baking process. About the basis  ingredients of it, viz., that it possesses reactive properties  of bringing about a chemical reaction, there is no dispute  and, therefore, it can be said to be a substance used for

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producing a chemical effect. In that sense of the term, we  find that yeast can be described as "chemical". From the  composition of yeast and its essential characteristics, it is  clear that it is a substance obtained by a certain process  and is used for producing certain chemical effect."  

24.     A contention was also raised before the High Court that ’yeast’ is  generally used in baking process for bringing about fermentation which in  turn is brought about by the life activities of an unicellular plant,  microscopically small yeast cell. The process is fundamentally biological  and, therefore, yeast is primarily a biological agent and it is not a chemical.   The said submission was repealed holding :- "We are not in a position to accept the submission of  learned Assistant Government Pleader firstly, because  there 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 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 and includes  such forms as mushroom, mould, rust and puffball. As  we have already noted above yeast is a uni-cellular  fungus. All the authorities referred to above have in  unmistakable terms expressed that fungus is a living  organism, a plant which has its own mode of  multiplication mainly by budding and occasionally by  fission. It is not a lifeless substance, but a living  organism. Merely because a living organism is used in a  chemical process, it cannot be held that that living  organism is a chemical substance. It retains its

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characteristic as a living organism even in the process."

       Differing with the views of the Gujarat High Court, it was observed:- "Thus the decision though heavily relied on by the  learned Government Pleader, is distinguishable on those  two major counts: Firstly the court was considering  whether yeast powder obtained by a process using  molasses and ammonia is a chemical. We have already  held that there cannot be any quarrel that any substance  obtained by using a chemical substance can be termed as  chemical. Secondly it has to be seen that the court was  not deciding the question as to whether yeast is a living  micro-organism whereas in the instant case the question  which we have been analysing is as to what is yeast. In  other words, what we have tried to analyse is as to what  is yeast and not what is there in yeast. For the purpose of  understanding an entry in a taxing statute it is sufficient  to understand as to what is the item."

The commercial parlance test was rejected, inter alia, relying upon the  decision of this Court in Rallis 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 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 making, food, feed and  medicinal purposes are the primary product of the  fermentation process and produce little alcohol.  The  spent medium is the byproduct and is discarded after

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centrifuging out the yeast cells.  Yeasts grown during  fermentations for beer, ale, spirits, wine, and industrial  alcohol, however are the byproducts, while the spent  medium becomes the final consumer product."   

28.     The rate of tax for ’yeast’ was 8%.  In the year 1998 the rate was  increased to 10%, whereas in the year 2003 it was brought down to 4%.   Strangely enough from 1981 to 2003 no attempt was made to classify ’yeast’  as a residuary item.   

29.     Submission of Mr. Krishnan Venugopal that the rate of tax being the  same, it was not necessary to do so cannot be accepted, as from 1998 to  2003 the rate of tax was 10%.            30.     It is now a well settled principle of law that in interpreting different  entries, attempts shall be made to find out as to whether the same answers  the description of the contents of the basic entry and only in the event it is  not possible to do so, recourse to the residuary entry should be taken by way  of last resort.   

31.     The interpretation of the entry which fell for consideration before the  Kerala High Court ex facie speaks purely of ’organism’ and not of the man- made chemical.  It does not speak of an organic chemical.   

32.     The entry in question, however, is of wide import.  It takes within its  purview chemicals of all kinds.  It does 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 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 \026 a broad application of the Greek  word for mushroom, mykes.  Fungi other than  mushrooms are sometimes collectively called molds,

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although this term is better restricted to fungi of the sort  represented by bread mold."                                                      (Emphasis added)                                        

33.     The meaning of the word ’of’ used in an item in a fiscal statute must  be considered having regard to the intention of the maker thereof.  The court  shall, for the said purpose, put itself in the chair of the legislature.  It would  presume the ’legislation’ to be reasonable.

34.     The Executive Act of issuing a notification is a legislative action.  The  authorities are supposed to know the meaning of the word used therein.   

’Yeast’, admittedly, has a chemical composition.  It has a chemical  formula.  It was accepted to be a chemical by the assessing authority for a  long time.  It not only takes within its sweep as to what it would be, but what  it can be or what it does.   

35.     The Kerala High Court itself opined that any substance obtained by  using a chemical substance can also be termed as "a chemical".   

36.     For the purpose of determining the question, the chemical  composition of yeast is relevant.  Determination of and what is there in  ’yeast’ would also be relevant.   

37.     No test laid down by this Court i.e. common parlance test or user test  or any other test can be said to be decisive in a situation of this nature.   

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’ 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.

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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 would, thus, be a relevant factor.           It is equally true that the category of the persons using the same, as for  example the boys using a particular item, would not necessarily lead to the  conclusion that they are ’toy’ as they may answer the description of any  other entry and in that view of the matter the decision of this Court  in O.K.  Play (India) Ltd.  Vs.  Commissioner of Central Excise, Delhi-III, Gurgaon  :  (2005) 2 SCC 460, in our opinion, has no application to the fact of the  present case.   

42.     Strong reliance has been placed by Mr. Venugopal on CCE  vs.  Acer  Inda Ltd. : (2004) 8 SCC 173 wherein the question which arose for  consideration was whether a computer without software loses its character of  a marketable commodity. Therein it was held that it did not.  Such a question  does not arise herein for our consideration.  

43.     Reliance has also been placed by Mr. Venugopal on Commissioner of  Central Excise, Delhi   vs.  Carrier Aircon Ltd. : (2006) 5 SCC 596 for the  proposition that for the purpose of classification, the relevant factors are  statutory fiscal entry, the basic character, function and use of the goods; and  for the said 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, 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 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

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Tariff Item 26-AA, with the incorporation of Chapter  Note 6, the item now has to be classified either under  Chapter 84 or under Chapter 73. These balls cannot be  classified under Chapter 84 and thus necessarily have to  be classified under Chapter 73.  6.       We are unable to accept the submission that it still  continues to be a forged item and therefore must fall  under Tariff Item 72.08 (which according to counsel for  the appellant, is equivalent to old Tariff Item 26-AA).  Such an argument, in our view, merely needs to be stated  to be rejected. An item has to be classified in accordance  with chapter notes. The only reason these balls were  earlier classified under old Tariff Item 26-AA was  because there was no such chapter note. Once Chapter  Note 6 was introduced, the classification must be in  accordance therewith."

       It was in the aforementioned situation that the circular issued by the  Board prior to introduction of Chapter VI was held to be not applicable  stating:-   7.    It must also be mentioned that an attempt was made  to rely on a Board circular. We, however, find that the  circular was not relied upon before the Collector nor  before the Tribunal. Material not presented before the  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 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 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

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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 whether the Department is  right in claiming that the items in question are dutiable  under Tariff Entry 68. This, as mentioned already, is the  residuary entry and only such goods as cannot be brought  under the various specific entries in the tariff should be  attempted to be brought under the residuary entry. In other  words, unless the Department can establish that the goods  in question can by no conceivable process of reasoning be  brought under any of the tariff items, resort cannot be had  to the residuary item."  

50.     In our opinion ’yeast’ is a chemical within the meaning of the entry in  question.

51.     For the views we have taken, it is not necessary for us to consider the  other contentions raised by the parties.

52.     For the reasons abovementioned, the impugned judgment cannot be  sustained which is accordingly set aside.  The appeals are allowed with  costs.  Counsel’s fee assessed at Rs.50,000/- (Rupees fifty thousand only).