2016 (8) TMI 828 - HC - VAT and Sales Tax

Classification of goods KVAT rate of tax ultra heat treatment (UHT) milk under Third Schedule to the KVAT Act taxable at 4%/5% fresh milk and pasteurized milk under Entry 19 of the First Schedule exempt - HSN code - Held that - UHT milk cannot be included under the exempted category coming under the First Schedule. First of all, there is a specific entry as UHT milk in Schedule 3 Item No.118. Therefore, it is taxable at 4% during the relevant years. The entry in the exempted category in the First Schedule is with reference to milk and pasteurized milk. The product of the petitioner as per the invoice is UHT milk. When such fact is admitted, there cannot be any classification made with reference to the liquid form or powder form. The very fact that UHT milk is incorporated in the Third Schedule as item No.118 clearly indicates that it is a value added product and cannot be compared with ordinary milk or pasteurized milk - Contention of petitioner unsustainable no interference with assessment orders - petition dismissed.

Summary

Issues:
Challenge to assessment orders and demand notices for different assessment years regarding tax treatment of Ultra Heat Treated (UHT) milk.

Analysis:
The petitioner contested the assessment of UHT milk under the Third Schedule to the KVAT Act, which imposes a 5% tax on the product. The petitioner argued that UHT milk, being in liquid form, should be exempted under Entry 19 of the First Schedule, which covers fresh milk and pasteurized milk. The assessing officer, however, classified UHT milk under Entry 118 of the Third Schedule, where tax is levied at 4%. The petitioner relied on the HSN code for UHT milk (0402.10.10) to support their contention. The court noted that while skimmed milk is in powder form as per the HSN code, there is no specific entry for UHT milk. The court emphasized that the specific entry for UHT milk in the Third Schedule indicates it is a value-added product distinct from ordinary or pasteurized milk, making the petitioner's argument unsustainable.

The government pleader argued that the assessing officer thoroughly considered the issue and provided ample opportunity for the petitioner to present evidence supporting their claim that UHT milk should be exempted. Despite the petitioner's failure to provide such evidence, the government pleader contended that when a specific entry exists in the Schedule, deviations are not permissible, and the entry must be interpreted as is. The court agreed with the government's position, highlighting that UHT milk's inclusion in the Third Schedule at 4% tax rate during the relevant years contradicts the petitioner's claim for exemption under the First Schedule for milk and pasteurized milk. The court concluded that since UHT milk is a distinct product with its own entry in the Schedule, it cannot be equated with ordinary milk or pasteurized milk, thereby upholding the assessment orders and dismissing the writ petition.