1974 (3) TMI 91 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether ice-cream is a milk product within the meaning of entry No. 12 in the Second Schedule of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, and therefore exempt from assessment from sales tax.

Detailed Analysis:

Issue 1: Whether ice-cream is a milk product within the meaning of entry No. 12 in the Second Schedule of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, and therefore exempt from assessment from sales tax.

The common question for determination in these writs and sales tax references is whether ice-cream qualifies as a milk product under entry No. 12 in the Second Schedule of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi, and hence, is exempt from sales tax assessment. The petitioners, who are manufacturers of ice-cream, argue that ice-cream is prepared mainly from milk and cream, despite adding other ingredients for flavor and stabilization. The respondents counter that ice-cream includes ingredients such as milk, cream, butter, sugar, G.M.S. (smoother), straps, and milk powder, with essences and fruits added for flavor.

The judgment proceeds on the basis that ice-cream conforms to the standards prescribed under the Prevention of Food Adulteration Act, 1954, and the Prevention of Food Adulteration Rules, 1955. According to Standard No. A. 11.11, ice-cream is defined as a frozen food made with cream, milk, or other milk products, sweetened with sugar or honey, with or without additional ingredients like eggs, fruits, nuts, chocolates, stabilizers, and permissible flavors or colors. The court notes that ice-cream contains a substantial quantity of milk and considers whether it qualifies as a milk product under entry No. 12 of the Second Schedule to the Act.

The term "milk product" is not defined in the Act. However, the courts have held that such expressions should be understood in common parlance by those who ordinarily deal in such commodities. The Supreme Court has consistently applied this principle in cases like Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Commissioner of Sales Tax v. Jaswant Singh Charan Singh, State of Gujarat v. Prakash Trading Company, and others, where the meaning of terms in sales tax statutes was determined based on their common understanding rather than technical or scientific definitions.

Applying this principle, the court examines whether ice-cream is commonly understood to be a milk product. The court finds guidance from various decisions where similar interpretations were made for other products. For instance, in Nestle's Products (India) Ltd. v. Commissioner of Sales Tax, powdered milk and condensed milk were considered milk products. Similarly, in J. Shamdas v. State of Andhra Pradesh, zarda was held to be a tobacco product based on its substantial tobacco content. The court also refers to decisions where the essential character of a product determined its classification, such as in B. Dar Laboratories v. State of Gujarat and Jagabandhu Roul v. State of Orissa.

The court notes that the Prevention of Food Adulteration Rules, the Gazette of India, and the Delhi Milk Scheme all consider ice-cream a milk product. Therefore, by applying the common parlance test, the court concludes that ice-cream is a milk product within the meaning of entry No. 12 in the Second Schedule of the Act. Consequently, ice-cream is exempt from sales tax assessment under section 6 of the Act.

The court rejects the respondents' argument that only specific milk products mentioned in entry No. 16-A are exempt from assessment. The court also dismisses the contention that the rule of ejusdem generis should be applied to restrict the meaning of "milk products" to those directly produced from fresh milk. The court clarifies that the use of the adjunct "and" between fresh milk and milk products indicates that milk products are distinct from fresh milk.

Finally, the court addresses the concern that exempting all varieties of ice-cream could lead to the exemption of ice-cream with little or no milk content. The court reiterates that only ice-cream conforming to the standards prescribed under the Prevention of Food Adulteration Rules qualifies as a milk product and is exempt from assessment.

As a result, the court holds that ice-cream is a milk product within the meaning of entry No. 12 in the Second Schedule of the Act and is exempt from sales tax assessment. The writ petitions are accepted, and the assessment orders levying sales tax on the sale of ice-cream by the petitioners are quashed. The questions referred in the sales tax references are answered in favor of the assessee and against the revenue.

Separate Judgment:

KHANNA, J. concurs with the observations and conclusions of Ansari, J., emphasizing that clear statutory provisions should be given their full and natural meaning without resorting to technical rules of interpretation like the rule of ejusdem generis. The entry "milk products" is unambiguous and should be understood in its common and ordinary sense. Therefore, ice-cream, being a well-known milk product, is exempt from sales tax assessment under the relevant entry in the schedule. The writ petitions are allowed, and the references are answered accordingly, without any order as to costs.