1990 (8) TMI 362 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether milk and powdered milk are identical commodities.
2. Validity of the notification dated May 1, 1955, issued under section 25 of the 1954 Act.
3. Whether the retrospective operation of the amending Act of 1983 is arbitrary, unreasonable, and violative of articles 14 and 19(1)(g) of the Constitution of India.

Detailed Analysis of the Judgment:

Issue 1: Whether milk and powdered milk are identical commodities.
The primary contention was whether milk and powdered milk are identical. The applicants argued that powdered milk is essentially evaporated milk and should be covered under the term "milk" in item 11 of Schedule I of the Bengal Finance (Sales Tax) Act, 1941. They cited various judgments, including a Full Bench decision of the Allahabad High Court, which held that milk in any form, including powdered milk, retains its identity as milk. However, the respondents argued that milk and powdered milk are distinct commodities, with powdered milk being a milk product. The Tribunal examined the definitions of milk in various dictionaries and authoritative texts, noting that milk is generally understood to be a fluid secreted by the mammary glands of female mammals. The Tribunal concluded that powdered milk, which undergoes a dehydration process, does not retain all the qualities of natural milk and is considered a milk product. Therefore, milk and powdered milk are not identical commodities in common parlance or commercial understanding.

Issue 2: Validity of the notification dated May 1, 1955, issued under section 25 of the 1954 Act.
Given the conclusion that milk and powdered milk are not identical, the Tribunal examined the validity of the notification dated May 1, 1955. This notification brought powdered milk within the scope of the West Bengal Sales Tax Act, 1954. The Tribunal found that since powdered milk was not an exempt item under the Bengal Finance (Sales Tax) Act, 1941, the notification was validly issued under section 25 of the 1954 Act. The Tribunal also noted that the notification had not been challenged for a long time, indicating acceptance by the trade community.

Issue 3: Whether the retrospective operation of the amending Act of 1983 is arbitrary, unreasonable, and violative of articles 14 and 19(1)(g) of the Constitution of India.
The applicants argued that the 1983 amendment, which retrospectively excluded powdered and condensed milk from the tax exemption, was arbitrary and violated constitutional rights. The respondents contended that the amendment was merely declaratory and clarificatory. The Tribunal, in light of its findings on the first issue, held that the amendment was valid and clarificatory, thus not arbitrary or unconstitutional.

Conclusion:
The Tribunal dismissed all three applications, holding that milk and powdered milk are not identical commodities, the notification dated May 1, 1955, was valid, and the retrospective amendment of 1983 was constitutional. The bank guarantee furnished by Milk Food Ltd. was to be encashed and adjusted against the tax demand. There was no order as to costs.