2019 (3) TMI 405 - HC - VAT and Sales Tax

Classification of goods - rate of tax - skimmed milk powder - whether would fall under Entry 103 Clause 8 of the 1st Schedule to TNGST Act or otherwise - whether the petitioner is entitled to the reduced rate of tax at 4% claiming benefit under notification G.O.P No.253, dated 17.03.1986? - Held that - Admittedly, on and after 26.09.1991, the benefit of reduced rate of tax is inapplicable because milk food was removed from the notification and the reduced rate of tax at 4% was restricted only to baby milk foods. The petitioner s case is that the skimmed milk powder only undergoes a process of drying and therefore, it is a milk food in dry form. First of all, the notification in G.O.P. No.253 dated 17.03.1986 is a notification issued under exercise of powers conferred under Section 17 of the Act is an exemption notification or in other words, a notification to reduce the rate of tax. Therefore, interpretation given to such a notification should clearly and wholly lean in favour of the Revenue. We are not entitled to read any words or figures into a notification and we have to go by the plain meaning of the items mentioned in notification. The notification in G.O.P.No.253 gives relief of reduced rate of tax for two products namely milk food and baby milk foods. On or after 26.09.1991, the reduced rate of tax for milk foods were totally removed and it was restricted only to baby milk foods - The Entry 103(viii) deals with the items which are chargeable to tax at 10%. The items, which we are concerned in this case is milk food. Two distinct products have been mentioned in Entry 103(viii), they are milk food and milk food including milk powder. The argument of the learned counsel for the petitioner that the words milk powder are mentioned in Entry 103(viii), therefore, it is a milk food is not tenable. The entry is inclusive entry not for all purposes, but the entry includes only one of the products namely milk powder, there may be other products which are not included in Entry 103. Therefore to state that milk food is same as milk powder is a wrong interpretation of the Entry - the Assessing Officer rightly taxed the sale of skimmed milk powder which goes through a process before being marketed, at 10%, the finding is just and proper and calls for no interference. Tax case revision revision allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to order of Sales Tax Appellate Tribunal regarding levy of sales tax on skimmed milk powder at 10% instead of 4% under notification G.O.P No.253 dated 17.03.1986.

Analysis:
1. The petitioner contested the order of the Sales Tax Appellate Tribunal regarding the levy of sales tax on skimmed milk powder at 10% instead of 4% under notification G.O.P No.253 dated 17.03.1986. The Tribunal upheld the decision of the Assessing Officer, who treated skimmed milk powder as milk and taxed it at 10%. The petitioner argued for the reduced rate of tax at 4% based on the notification's wording.

2. The key issue revolved around the interpretation of the notification G.O.P No.253 dated 17.03.1986, which reduced the tax rate from 10% to 4% for the sale of milk food, including baby milk foods. The petitioner claimed that skimmed milk powder qualified as milk food, entitling it to the reduced rate. However, the Assessing Officer categorized it under Entry 103 (viii) of the First Schedule, subjecting it to 10% tax.

3. The notification was amended in 1991 to restrict the reduced tax rate only to baby milk foods, excluding milk food. The petitioner argued that skimmed milk powder should be considered a milk food in dry form due to minimal processing. However, the Court emphasized that the notification should be interpreted in favor of revenue, and plain language should guide the understanding of items mentioned.

4. The Court analyzed Entry 103(viii) of the First Schedule, which includes milk food and milk food including milk powder as items chargeable at 10%. It clarified that the inclusion of milk powder under milk food did not make milk powder itself a milk food. The Court upheld the Assessing Officer's decision to tax skimmed milk powder at 10%, as it did not qualify for the reduced rate of 4% under the notification.

5. Ultimately, the Court dismissed the Tax Case Revision, affirming the decision to tax skimmed milk powder at 10% and rejecting the petitioner's claim for the reduced tax rate. The substantial questions of law were answered against the petitioner, and no costs were awarded in the judgment.