2019 (5) TMI 573 - HC - VAT and Sales Tax

Rate of tax - cream milk mixed - flavoured milk - assessment year 2000-01 - HELD THAT - From pleading and from the perusal of the documents enclosed along with the present revision, it is not in dispute that the dealer/assessee has sold flavoured milk and cream milk mixed. The department itself has issued a circular clearly holding that the flavoured milk is covered by the entry 'milk' - In the instant case, the Tribunal has rightly dismissed the appeal filed by the Commissioner while affirming the order of the first appellate authority. The first appellate authority has quashed the proceedings under Section 21 of the Act. Assessee itself has admitted the tax on cream milk mixed and flavoured milk at the rate of 8%. The orders passed by the first appellate authority and Commercial Tax Tribunal are upheld - revision dismissed.

Summary

Issues:
Tax rate on cream milk mixed and flavoured milk sold by the assessee, interpretation of circular dated 27.11.2002, applicability of circular on taxability of flavoured milk, review of previous decisions based on circular.

Analysis:
The judgment revolves around the dispute concerning the tax rate applicable to cream milk mixed and flavoured milk sold by the respondent/assessee for the assessment year 2000-01 under the Central Sales Tax Act. Initially, the assessing authority taxed flavoured milk at 8% but later, in re-assessment proceedings, increased the rate to 16% for flavoured milk and 10% for cream milk mixed. The first appellate authority upheld the original 8% tax rate, which was also supported by the Commercial Tax Tribunal in the second appeal.

The crux of the matter lies in the interpretation of a circular dated 27.11.2002, which clarified the tax liability on flavoured milk. The circular emphasized that flavoured milk falls under the category of 'milk' and should be taxed accordingly. This circular, being binding on the department, plays a pivotal role in determining the taxability of flavoured milk. The Tribunal rightly considered this circular and dismissed the appeal by the Commissioner, affirming the 8% tax rate on flavoured milk.

The judgment also references previous decisions where similar tax disputes were settled based on the interpretation of the circular. The High Court, in a review application, reiterated the applicability of the circular and directed the Tribunal to reconsider the matter in light of this circular. The Tribunal's decision to uphold the 8% tax rate on flavoured milk aligns with the circular's directive and previous judgments.

In conclusion, the High Court upheld the orders of the first appellate authority and the Commercial Tax Tribunal, dismissing the revision filed by the Commissioner. The consistent application of the circular and past decisions regarding the taxability of flavoured milk solidifies the 8% tax rate on such products. The judgment emphasizes the importance of adhering to departmental circulars and precedent in resolving tax disputes effectively.