Milk-product exemption under sales tax law prevails for ice-cream and lassi despite separate taxing notifications.

Milk-product exemptions under section 4 of the U.P. Sales Tax Act were treated as controlling for the relevant period, so ice-cream and lassi fell outside the net taxable turnover despite separate section 3-A notifications mentioning them for tax. The reasoning was that exemption notifications operated on the taxable turnover framework and prevailed where the items were already recognised as milk products in prior judicial interpretation. The later exclusion of ice-cream from the exemption was not relevant to the period in dispute. On that basis, ice-cream was held exempt and lassi was also held exempt, making the revising authority's contrary view unsustainable.

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Issues: (i) Whether ice-cream was exempt from sales tax as a milk product under the exemption notifications issued under section 4 of the U.P. Sales Tax Act notwithstanding the notifications issued under section 3-A making it taxable. (ii) Whether lassi was similarly exempt as a milk product notwithstanding the notifications under section 3-A.

Issue (i): Whether ice-cream was exempt from sales tax as a milk product under the exemption notifications issued under section 4 of the U.P. Sales Tax Act notwithstanding the notifications issued under section 3-A making it taxable.

Analysis: The exemption notifications under section 4 covered milk and milk products, and judicial interpretation had already treated ice-cream as a milk product. The notifications under section 3-A brought ice-cream to tax when served to customers, but exemption under section 4 operated in the field of taxable turnover. An exemption presupposes a tax liability; however, where both sets of notifications operate, the exemption notification controls the inclusion of the item in the net taxable turnover. The later amendment excluding ice-cream from the exemption was not the basis of the controversy for the period in question.

Conclusion: Ice-cream was exempt from tax under section 4 and was not taxable on the footing adopted by the revising authority.

Issue (ii): Whether lassi was similarly exempt as a milk product notwithstanding the notifications under section 3-A.

Analysis: Lassi had already been treated as a milk product in earlier judicial decisions and therefore fell within the exemption granted to milk products under section 4. The mere fact that section 3-A notifications also mentioned lassi did not displace the exemption applicable to milk products for the relevant period. On the same reasoning as for ice-cream, the turnover of lassi could not be brought into the net taxable turnover where the exemption notification applied.

Conclusion: Lassi was exempt from tax under section 4 and the revising authority's view treating it as taxable was not justified.

Final Conclusion: The common legal position was that milk-product exemptions under section 4 prevailed for the relevant period in respect of ice-cream and lassi, so the revisions concerning ice-cream failed while the revision concerning lassi succeeded.

Ratio Decidendi: Where an item is covered by a valid exemption notification as a milk product, it is excluded from the net taxable turnover notwithstanding a separate notification under another charging provision mentioning that item for taxation.

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