2016 (3) TMI 1153 - HC - VAT and Sales Tax

Levy of tax u/s 6E - exemption granted by notification dated May 31, 2003 - the appellant is a premier co-operative society dealing in manufacture and sale of milk products including milk powder - Held that - it is apparent that skimmed milk powder may be consumed or not consumed as baby food or marketed as baby food; skimmed milk will have relevance under item No. 76 only when it is sold by KMF to its unions or when there is an inter-union sale. Therefore, one has to independently consider for interpretation of the entry regarding milk powder in entry Nos. 7 and 76. It may fall in item No. 76 and the exemption may be available if sold by K. M. F, to its union or inter-union sale. If both the entries at items Nos. 7 and 76 are considered in juxtaposition, it is not possible to accept the contention of the appellant that all milk powder would get included in entry No. 7. As such, if such a contention is accepted, it would make entry No. 76 redundant. Further, even otherwise also, initially, entry No. 7 includes milk powder used only as baby food or marketed as baby food and not as milk powder per se - no error committed by the revisional authority. The appellant-assessee is not entitled to the exemption by virtue of entry No. 7 as per notification dated May 31, 2003 - appeal dismissed - decided against assessee.

Summary

Issues:
1. Interpretation of exemption under notification dated May 31, 2003 for milk powder.
2. Applicability of entry No. 7 and entry No. 76 in the notification.
3. Consideration of legal precedents regarding skimmed milk powder.
4. Charging of interest in subsequent demand notices.

Interpretation of Exemption under Notification:
The appellant, a co-operative society dealing in milk products, appealed against an order levying tax under the Karnataka Sales Tax Act. The first appellate authority had granted exemption, but the revisional authority restored the tax levy. The central issue was whether the appellant was entitled to exemption under entry No. 7 of the notification dated May 31, 2003. The appellant argued that all types of milk powder should be exempt under the term "baby foods including milk powder." However, the court rejected this interpretation, stating that only milk powder used or marketed as baby food qualifies for exemption, not all types of milk powder.

Applicability of Entry No. 7 and Entry No. 76:
The court compared entry No. 7 with entry No. 76, which specifically mentions skimmed milk powder sold by the Karnataka Milk Federation. It highlighted that skimmed milk powder could be relevant under entry No. 76 even if not consumed as baby food, demonstrating that different types of milk powder have distinct considerations for exemption. The court emphasized that interpreting all milk powder under entry No. 7 would render entry No. 76 redundant, clarifying that only milk powder used as baby food or marketed as such falls under the exemption.

Consideration of Legal Precedents:
The appellant cited precedents from the Andhra Pradesh High Court regarding skimmed milk powder's tax liability. However, the court distinguished these cases, emphasizing that the issue in the present case focused on the interpretation of the exemption notification and not on whether milk and milk powder are identical. The court concluded that the cited decisions were not applicable to the current scenario.

Charging of Interest in Subsequent Demand Notices:
The appellant raised concerns about interest charged in demand notices following the revisional authority's order. The court deemed this aspect beyond the scope of the current appeal, suggesting that such matters could be addressed when relevant. The court refrained from expressing a view on this issue, emphasizing that it was not pertinent to the present case.

In conclusion, the court ruled against the appellant, holding that they were not entitled to exemption under entry No. 7 of the notification. Consequently, the appeal was dismissed as meritless, with no costs awarded. Additionally, any stay application was also dismissed due to the main appeal's dismissal.