1973 (7) TMI 90 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of condensed milk under the Central Sales Tax Act.
2. Definition and classification of condensed milk under the U.P. Sales Tax Act.
3. Applicability of section 8(2A) of the Central Sales Tax Act to the sale of condensed milk.

Detailed Analysis:

1. Taxability of Condensed Milk under the Central Sales Tax Act:
The primary issue was whether condensed milk is taxable under the Central Sales Tax Act, considering the U.P. Sales Tax Act notifications and section 8(2A) of the Central Sales Tax Act. The dealer argued that condensed milk sold in soldered tins and other cans during inter-State trade was not sold in sealed containers, thus exempt from sales tax under U.P. notifications. Consequently, it should also be exempt from Central sales tax under section 8(2A) of the Central Sales Tax Act. The Assistant Commissioner and Additional Judge (Revisions) held that the turnover of condensed milk was generally not exempt under U.P. notifications, making it taxable under the Central Sales Tax Act.

2. Definition and Classification of Condensed Milk under the U.P. Sales Tax Act:
The court examined whether condensed milk falls under the definition of "milk" as per section 4(a) of the U.P. Sales Tax Act, which exempts milk from sales tax. The term "milk" was not defined in the Act, so it was given its common parlance meaning. The court concluded that milk subjected to processes like pasteurization or skimming does not lose its identity as milk. Condensed milk, which is milk with reduced water content, retains the essential characteristics of milk. Therefore, condensed milk is considered milk under section 4(a) of the U.P. Sales Tax Act.

The court also considered whether condensed milk is a "milk product" under Notification No. S.T. 911/X dated 31st March 1956, which exempts milk products from sales tax unless sold in sealed containers. The court concluded that condensed milk, being milk in concentrated form, does not lose its essential characteristics and is not a milk product in the sense used in the notification.

3. Applicability of Section 8(2A) of the Central Sales Tax Act:
Section 8(2A) of the Central Sales Tax Act provides that if a sale is generally exempt from tax under the state law, it shall also be exempt from Central sales tax. The explanation to section 8(2A) clarifies that an exemption is not considered general if it applies only under specific circumstances or conditions.

The court determined that even if condensed milk were considered a milk product, its sale in sealed containers would not be generally exempt under the U.P. Sales Tax Act due to the specific condition of being sold otherwise than in sealed containers. Therefore, such sales would not qualify for exemption under section 8(2A) of the Central Sales Tax Act.

However, since the court concluded that condensed milk is milk and not a milk product, its turnover is generally exempt from sales tax under section 4(a) of the U.P. Sales Tax Act. Consequently, it is also exempt from Central sales tax under section 8(2A) of the Central Sales Tax Act.

Conclusion:
The court answered the referred question in the negative, ruling in favor of the dealer. The turnover of condensed milk is exempt from payment of sales tax under section 4(a) of the U.P. Sales Tax Act and, therefore, not liable to Central sales tax under section 8(2A) of the Central Sales Tax Act. The dealer is entitled to costs assessed at Rs. 300.