2015 (5) TMI 1047 - HC - VAT and Sales Tax

Classification - Whether the ice-cream is a milk product as per appellant exempt under Salex Tax Act or not as per Revenue exiqible to tax - Held that - ice-cream can certainly be said to be a product of a milk and certainly would be covered within the definition of a milk product, dahi (curd), khoa and cream. It is true that ice-cream as such is not mentioned anywhere but when ice cream is prepared basically by ingredient of milk and cream, I have no hesitation in holding that ice-cream would certainly be exempt under the Rajasthan Sales Tax Act. It is observed that the present matter is being decided for the assessment years under challenge and the judgment is based on the material available on record. In my view, the Tribunal exceeded its jurisdiction by holding that the rate of tax would be levied for succeeding assessment years as well which in my view, is contrary to the law laid down under the taxing statutes. Each year is different and the Tribunal cannot come to a conclusion that the same rate would apply for all times to come. Therefore, when cheese, paneer, lassi, shrikhand and yogurt can be said to be items which are being produced with the main ingredient being milk so also on the same analogy, ice-cream in my humble opinion, would also fall within the same category and would thus, be exempt and therefore, finding reached by the Tax Board, is required to be reversed. Even as per common parlance in every household or even otherwise one immediately understands as to how ice-cream is being prepared and even a child would know that the ice-cream would be prepared by mixing milk, cream, sugar, etc. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether 'ice cream' is an exempted item of goods under the exempted entry dated March 6, 1964, or with the amended entry dated March 9, 1966.
2. Whether 'ice cream' is a milk product or not.
3. Whether the Tribunal is competent to decide the matter for the years for which there was no dispute before it.

Issue-wise Detailed Analysis:

1. Exemption Status of Ice Cream:
The primary issue was whether ice cream falls under the category of exempted goods as per the entries dated March 6, 1964, and March 9, 1966. The assessee argued that ice cream, being a milk product, should be exempt under the Sales Tax Act. However, the assessing officer contended that ice cream is not defined as a milk product in the notification dated March 6, 1964, and thus is taxable. The Deputy Commissioner (Appeals) initially agreed with the assessee but levied a reduced tax rate of five percent. The Tribunal later upheld the assessing officer's decision, enforcing an eight percent tax rate.

2. Classification of Ice Cream as a Milk Product:
The assessee argued that ice cream, primarily made from milk and cream, should be considered a milk product and thus exempt from sales tax. The counsel for the petitioner cited several judgments to support this claim, including Assistant Commercial Taxes Officer v. Murli Brothers and Kwality Ice Cream Company and Restaurant v. Sales Tax Officer, which recognized products derived from milk as exempt. Conversely, the Revenue argued that ice cream is a distinct product involving processes that categorize it as "cooked food," making it taxable. The court ultimately held that ice cream, being primarily made from milk and cream, qualifies as a milk product and is thus exempt from sales tax, aligning with the common parlance understanding and previous judgments.

3. Tribunal's Jurisdiction on Undisputed Years:
The Tribunal's decision to apply the tax rate for succeeding assessment years was challenged. The court observed that each assessment year is distinct and the Tribunal exceeded its jurisdiction by making a blanket ruling for future years. The judgment emphasized that tax rates should be determined based on the specific circumstances and material available for each year.

Conclusion:
The court concluded that ice cream is a milk product and should be exempt from sales tax under the relevant entries. The Tribunal's decision to apply the tax rate for future years was deemed inappropriate. The revision petition was allowed, and the question of law was answered in favor of the assessee, exempting ice cream from sales tax for the assessment years in question.