2011 (11) TMI 606 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of tax exemption for specific items under the Uttarakhand Value Added Tax Act, 2005 regarding the classification of a product as buttermilk and liability to pay tax.

Analysis:
The judgment addressed the dispute revolving around the tax liability of a product named "Amul Masti Spiced Buttermilk" under the Uttarakhand Value Added Tax Act, 2005. The product was sold in various packet sizes, and the assessing officer initially levied tax on the product as it was not explicitly listed in the tax-exempt items under Serial No. 25 of Schedule I of the Act. The appellate authority, despite acknowledging the product as cultured buttermilk, deemed it not falling under the tax exemption category. The revisionist contended that the product was indeed buttermilk, emphasizing the manufacturing process involving pasteurized toned milk, incubation, inoculation with bacteria, and the addition of water and masala.

The Tribunal's decision was crucial in determining the nature of the product. The Tribunal observed that the product was an artificial cultured product, distinct from traditional buttermilk, due to its taste and appearance. However, it did not dispute the manufacturing process presented by the revisionist, including the inoculation of bacteria and the addition of water to curd. The Tribunal's conclusion that the product was neither milk nor curd was challenged based on the undisputed manufacturing steps and the initial use of pasteurized toned milk, which could be considered either milk or curd under the Act.

The judgment delved into the distinction between buttermilk and curd, emphasizing that buttermilk is obtained when there is no or negligible butter/fat content in curd. The traditional method involves churning curd to remove butter/fat, resulting in a lower viscosity product. Despite the absence of a specific distinction between UHT buttermilk and ordinary buttermilk in the Act, the court concluded that the product in question, "Amul Masti Spiced Buttermilk," was essentially buttermilk with added masala.

In conclusion, the court allowed the revision applications, overturning the Tribunal and appellate authority judgments, and nullified the assessment orders and tax demands related to the product in question.