IMPORTANT POINT
When the classification adverted to by the assessee had been accepted by the revenue for more than 20 years, it cannot resort to a different construction to the entry only because the rate of tax has been lowered.

Headnote:(a) Interpretation of Statutes– Well settled 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. (Para 30)
        (b) U.P. Trade Tax Act, 1948 – Section 3-A(1)(d) – Entry 22 – The entry in question is of wide import taking within its purview chemicals of all kinds – It does not make any distinction between an inorganic chemical and an organic chemical. (Para 32)
        (c) Administrative Law – The Executive Act of issuing a notification is a legislative action – The authorities are supposed to know the meaning of the word used therein – The word used in the statute, it is well settled, must take its colour from the object it seeks to achieve. (Paras 34 and 37)
        (d) Judicial Review – Determination of nature of ‘yeast’ – No test laid down by the Supreme 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. (Para 37)
        (e) Interpretation of statutes– Well settled that when two views are possible, one which favours the assessee should be adopted – Case at hand is not one where application of a commercial meaning or trade nomenclature runs contrary to the context in which the word was used. (Para 40)
        (1997) 5 SCC 289 – Relied upon.
        (1990) 2 SCC 203; (2005) 2 SCC 460; (2004) 8 SCC 173; (2006)5 SCC 596 – Distinguished.
        (f) U.P. Trade Tax Act, 1948 – Section 3-A(1)(d) – Entry 22 – Interpretation – The classification adverted to by the assessee accepted by the revenue for more than 20 years – It is estopped from resorting to a different construction to an entry only because the rate of tax has been lowered – In view of the acceptance of the 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. (Para 45)
        (g) Interpretation of Taxing statute – 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. (Para 48)
        (2004) 11 SCC 239 – Referred.
        (h) Interpretation of Statutes – By applying Common Parlance test, ‘yeast’ held to be a chemical within the meaning of the entry in question. (Paras 49 and 50)
        (2006) 5 SCC 208 – Relied upon.
       Facts of the case:
        1. Interpretation of an Entry in the U.P. Trade Tax Act, 1948 is in question in these appeals.
        2. The State of Uttar Pradesh enacted the U.P. Sales Tax 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,
        3. 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.
        4. 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”.
        5. Appeals preferred thereagainst by the appellants before the Joint Commissioner (Appeals) and the Trade Tax Tribunal were dismissed.
        6. Questioning the legality thereof, a writ petition was filed by the appellant which has been dismissed by the High Court.
       Findings of the Court :
        ‘Yeast’ is a chemical within the meaning of the entry in question.
       Result : Appeal allowed with cost.

JUDGMENT

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 M or I 8 %

including fuel gases.

In supersession of the said Notification, another notification was issued on 23rd November, 1998, Entry 22 whereof reads as under : -

Provided that in the case of fuel gases if the sale is by any of the undertaking registered 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 :-

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 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

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2008 Supreme(SC) 631

IMPORTANT POINT When the classification adverted to by the assessee had been accepted by the revenue for more than 20 years, it cannot resort to a different construction to the entry only because the rate of tax has been lowered.

Cases Referred (7)

IMPORTANT POINT
When the classification adverted to by the assessee had been accepted by the revenue for more than 20 years, it cannot resort to a different construction to the entry only because the rate of tax has been lowered.