Heard Sri B.K. Pandey and Sri Nimai Das, learned Standing Counsel for the State and Sri S.D.Singh, learned Senior Counsel assisted by Sri Nishant Mishra, learned Counsel for the assessee.
This revision has been filed by the State against an order passed by the Tribunal dated 14.11.2014 by which it has confirmed an order of the first appellate authority dated 12.01.2011 and has also arrived at its own decision by way of which it has declared that "Enzymes" would fall under the entry of the chemical under Notification No.1084 dated 25.02.2003 and would, therefore, be liable to tax @ 4% and could not be treated as an unclassified item liable to tax @ 10% as determined by the assessing authority. The question of law referred to in this revision is quoted here-under:-
"Whether under the facts and circumstances of the case, the Commercial Tax Tribunal was legally justified in holding that the enzyme falls under Notification no.1084 dated 25.2.2003 hence liable to tax @ 4% and not as unclassified item liable to tax @ 10% as determined by the assessing authority?"
The entry, which is sought to be examined is here-under:-
Sl.No Description of Goods Point of Tax Rate of tax percentage
(i) Chemicals of all kinds M or I 4 per cent
(ii) Fuel gases but excluding natural gases M or I Provided that in the case of fuel gas if the sale is by any of the undertakings registered as dealer in the name and style of M/s. Indian Oil Corporation Ltd., M/s. Bharat Petroleum Corporation Ltd. M/s. Hindustan Petroleum Corporation Ltd., and M/s. Indo Burma Petroleum Ltd., the tax shall be levied at the point of sale by such dealer to a person other than any of the aforesaid dealers.
10 per cent Learned Standing Counsel has sought to argue that an enzyme is in the nature of protein and, therefore, it cannot be classified under the entry of chemicals of all kinds but it should be treated as an unclassified item and should be charged to tax @10%.
Learned Counsel for the assessee argues to the contrary. He relies on a decision of Hon'ble Apex Court in the case of Mauri Yeast India Pvt. Ltd. vs. State of U.P. reported in 2008 (225) E.L.T. 321 (S.C.) wherein the Hon'ble Apex Court while examining the similar notification under the U.P. Trade Tax Act, 1948 wherein the entry also was chemicals of all kinds. The Apex Court in the case of Mauri (supra) relied on various expert opinions such as Harcourt Butler Technological Institute report as well as reports from the Yeast Controller and Excise Commissioner, U.P. and apart from that various dictionary -3- meanings to examine that what are the constituents of Yeast. Paragraph no.18 of the judgment is quoted here-under:-
"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 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."
It is on this paragraph of the aforesaid judgment that learned Standing Counsel has relied on to show that an enzyme would not be a chemical rather it would be a protein. Other than the submission made by learned Standing Counsel that it is a protein there is no evidence or material in its support from the State to show why even if an enzyme is to be treated as a protein it would not be included in the classification entry of chemicals of all kinds.
The Webster's American dictionary defines enzyme as :-
"en-zyme (enzaim) n. one of a large class of complex pertinacious substances of high molecular weight formed in and produced by living matter which are responsible for promoting the chemical reactions upon which life depends (e.g. digestion, respiration, reproduction). They accomplish this by acting like catalysts while themselves undergoing little or no change. Their action is often specific and reversible and may be dependent upon temperature. PH, and the presence of various coenzymes and activators (metallic salts, vitamis etc.).
Protein as:-
"pro-tein (prouti:n) n. (chem) any of a class of naturally occurring, usually colloidal, complex combinations of amino acids (containing carbon, hydrogen, oxygen, nitrogen, usually sulfar, occasionally phosphorus) which are essential constituents of all living cells, being responsible for growth and maintenance of all tissue, and the essential nitrogenous constituents of the food of animals. They can be synthesized from inorganic nitrogenous material by plants, but apparently not by animals.
Amino acid as:-
one of a class of organic acids having amino (NH2-) groups in place of hydrogen atoms, in the hydrocarbon groups of fatty acids or other organic acids. They occur in all plant and animal tissues and are considered the basic units of proteins, from which they may be obtained by hydrolysis.
Catalyst as:-
Catalyst (kaet'list) n. a substance that alters the rate of a chemical reaction and is itself unchanged by the process. Catalysts usually increase the rate of chemical reaction, so enabling them, for example, to take place under milder conditions (e.g. at lower temperatures) than would otherwise be possible cat.a.lyt.ic (kaet'litik) adj. Causing or relating to catalysis."
From a reading of these four definitions the conclusion would be that an enzyme is a catalyst that is a substance, which alters the rate of a chemical reaction and it may itself remain unchanged by the process. A catalyst, therefore, starts a chemical reaction and it may, therefore, be concluded that enzymes are in the nature of a chemical.
Learned Counsel for the assessee has placed reliance on the decision of Hon'ble Apex Court in the case of Mauri (supra) and has sought to argue that the burden of proof to establish his case lay squarely on the department, but the department did not produce any evidence or lead any evidence to show why enzymes would not be included in the classification of chemicals, which was all encompassing and would include enzymes.
The second argument of the learned counsel for the assessee is that the assessee placed expert opinion before the Tribunal as well as the appellate authority to show why enzymes fall within the category of chemicals but the expert opinion as given by the assessee was not rebutted at any stage by the State.
The third argument of the learned counsel for the assessee is that the judgment of the Apex Court in the case of Mauri (supra) would fully apply to the case of the assessee because a similar article was being classified and was included as a chemical under similar entry and lastly learned counsel for the assessee argues that the argument of the learned Standing Counsel that it should be treated as an unclassified item in the residuary clause is unacceptable because that could only happen in a case where specially when the product could not be covered under a specific entry. In this case he has argued that although the learned Standing Counsel has sought to cover enzymes as protein but he was unable to show any notification under which protein has been specifically detailed.
Learned Standing Counsel has sought to argue that an enzyme is a protein but the definition of word protein also tends to lead to the conclusion that the protein would also be included in the all encompassing entry of chemicals. Therefore, the contention of the learned Standing Counsel that enzyme should be included in the residuary entry and should be taxed @ 10% is false and untenable.
In blacks medical dictionary the Enzyme is defined as:-
"ENZYME is the name applied to a chemical ferment produced by living cells. The first enzyme was obtained in a reasonably pury state in 1926 and shown to be a protein. Since then several hundred enzymes have been obtained in pure crystalline form. Many more have been purified to less exacting standards and all have been proved to be proteins. They are present in the digestive fluids and in many of the tissues, and are capable of producing in small amount the transformation on a large scale of various compounds. Indeed, they are an integral, essential component of what might be described as the modus operandi of the body. Examples of enzymes are found in the ptyalin of saliva and diastase of pancreatic juice which split up starch into sugar, the pepsin of the gastric juice and the trypsin of pancreatic juice which break proteins into simpler molecules and eventually into the constituent amino-acids, the thrombin of the blood which causes coagulation.
PROTEIN as :-
PROTEIN is the term applied to members of a group of non-crystallizable nitrogenous substances widely distributed in the animal and vegetable kingdoms and forming the characteristic materials of their tissues and fluids. They are essentially combinations of amino acids."
Thus, the reading of two definitions shows that while proteins are in the nature of food, an enzyme is not a protein but it is only chemical substance of fluid released in the body by the process of fermentation and is found in digestive fluids such as saliva in the pancreatic juice which split up starch into sugar and absorbs in the body to provide energy.
The argument of the learned Standing Counsel, therefore, -7- that an enzyme is a protein is not acceptable. An enzyme is in the nature of chemical substance, which acts upon a protein and helps in the process of absorption of food by converting the sugars and starch into energy for the body.
In common parlance also an enzyme is understood to be a catalyst agent, which helps in the break-up of food in the intestines and leads to better digestion. It is well settled in law that while interpreting a classification it is the "word" an "item" as is understood in common parlance, which is to be taken into account. Reference may be had to the decision of Hon'ble Apex Court in the case of State of Madhya Pradesh vs. Marico Industries Ltd. (Civil Appeal No.8656 of 2015) dated 22.07.2015, in which also the Hon'ble Apex Court has applied common parlance test while determining the classification of an item.
In view of the discussion made above, this Court comes to the conclusion that the judgment and order of the Tribunal dated 14.11.2014 by which it has identified "Enzyme" as a chemical under Notification no.1084 dated 25.02.2003 to be chargeable to tax as chemical @ 4% is correct. The two concurrent orders of the first appellate court as well as the second appellate court are upheld.
The revision has no merit, it is dismissed. No costs.
Dt/-27.09.2016 S.P.