1991 (3) TMI 363 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "Milkmaid full-cream condensed milk" under entry 10(i) of Schedule I to the Gujarat Sales Tax Act, 1969.
2. Classification of "Nespray full-cream powdered milk" under entry 10(i) of Schedule I to the Gujarat Sales Tax Act, 1969.
3. Classification of "Milkmaid full-cream condensed milk" under entry 6 of Schedule III to the Gujarat Sales Tax Act, 1969.

Issue-wise Detailed Analysis:

1. Classification of "Milkmaid full-cream condensed milk" under entry 10(i) of Schedule I to the Gujarat Sales Tax Act, 1969:

The Tribunal held that "Milkmaid full-cream condensed milk" was not "milk, whole or separated or reconstituted" as per entry 10(i) of Schedule I. The Tribunal interpreted that the words "milk, whole, separated or reconstituted" referred to only three categories of milk: whole milk, separated milk, and reconstituted milk. The Tribunal concluded that the manufacturing process changed the form of milk to produce condensed milk, making it "constituted milk" but not "reconstituted milk." The High Court disagreed, stating that the legislative intent behind entry 10 was to exempt milk in all its forms, including condensed milk. The Court noted that the purpose of the exemption was to avoid taxing an essential commodity like milk, regardless of its form. Thus, the Court held that "Milkmaid full-cream condensed milk" should be classified as milk under entry 10(i) of Schedule I.

2. Classification of "Nespray full-cream powdered milk" under entry 10(i) of Schedule I to the Gujarat Sales Tax Act, 1969:

Similarly, the Tribunal held that "Nespray full-cream powdered milk" was not "milk, whole or separated or reconstituted" under entry 10(i). The High Court examined previous judgments from the Bombay, Allahabad, Madras, and Andhra Pradesh High Courts, which had held that milk powder retains the characteristics of milk and thus qualifies as milk under similar tax provisions. The Court also considered the legislative intent to exempt milk in all its forms and concluded that "Nespray full-cream powdered milk" should be classified as milk under entry 10(i) of Schedule I.

3. Classification of "Milkmaid full-cream condensed milk" under entry 6 of Schedule III to the Gujarat Sales Tax Act, 1969:

The Tribunal held that "Milkmaid full-cream condensed milk" was neither "food-stuff" nor "food provisions of all kinds" within the meaning of entry 6 of Schedule III. The High Court agreed with this conclusion, noting that the legislative intent was to exempt milk and its forms from taxation under entry 10(i) of Schedule I. The Court found no reason to classify condensed milk under entry 6 of Schedule III, which pertains to food-stuff or food provisions. Thus, the Court affirmed the Tribunal's decision on this issue.

Judgment Summary:

The High Court held that both "Milkmaid full-cream condensed milk" and "Nespray full-cream powdered milk" should be classified as milk under entry 10(i) of Schedule I to the Gujarat Sales Tax Act, 1969, thereby exempting them from sales tax. The Court also affirmed that "Milkmaid full-cream condensed milk" does not fall under entry 6 of Schedule III as food-stuff or food provisions. The questions referred to the Court were answered as follows:

- Question No. 1: Answered in the negative, in favor of the assessee and against the Revenue.
- Question No. 2: Answered in the negative, in favor of the assessee and against the Revenue.
- Question No. 3: Answered in the affirmative, in favor of the assessee and against the Revenue.

There was no order as to costs in these references.