Milk food classification and provisional assessment rules governed tax treatment of Horlicks, Spert, and similar products.

Milk-based products are classified by their true commercial and functional character: where milk is the predominant constituent, the product falls under the milk food entry rather than the general food-preparation entry. On that basis, Horlicks and Spert were treated as milk food under the relevant First Schedule entry, and the reduced tax rate under the notification applied to them. A provisional assessment cannot be made after the close of the assessment year where the statutory scheme requires the matter to proceed by final assessment; a belated provisional assessment is therefore without authority.

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Issues: (i) Whether Horlicks, Spert and similar products are to be classified as milk food under entry 24 and later entry 103(viii) of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, or as food preparations under entry 103(x), and whether they are entitled to the reduced rate of tax under the Government notification issued under section 17 of the Act; (ii) Whether a provisional assessment could be made after the close of the assessment year.

Issue (i): Whether Horlicks, Spert and similar products are to be classified as milk food under entry 24 and later entry 103(viii) of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, or as food preparations under entry 103(x), and whether they are entitled to the reduced rate of tax under the Government notification issued under section 17 of the Act.

Analysis: The classification turned on the true commercial and functional character of the products and on the structure of the relevant entries. Milk food under entry 103(viii) was held to cover products made predominantly out of milk, even if consumed as beverages, because milk powder and similar milk-based foods are commonly taken in beverage form. Where milk is used only as one ingredient in a food preparation, the item falls under entry 103(x). Applying that approach, Horlicks was treated as a milk food because milk remained the predominant ingredient and the product had long been treated by the department as such. Spert was also found to be a milk food because it was substantially a blend of skimmed milk powder with malted extract, and the added vitamins and minerals did not alter its essential character. The notification reducing tax to 4 per cent applied only to milk food, including baby milk foods, and therefore covered these products.

Conclusion: Horlicks and Spert fall under entry 103(viii) as milk food, and the reduced rate under the notification applies in their case.

Issue (ii): Whether a provisional assessment could be made after the close of the assessment year.

Analysis: The assessment order was made after the relevant year had ended, and the Court followed the principle that once the assessment year is over, the statutory course is a regular final assessment rather than a provisional assessment. On that footing, the impugned provisional assessment was held to suffer from an error apparent on the face of the record and to be without authority in the circumstances.

Conclusion: The provisional assessment could not validly be made after the close of the assessment year.

Final Conclusion: The challenge to the classification adopted by the Revenue succeeded in relation to the milk-food products, while the objection to the belated provisional assessment also succeeded; the remaining writs were disposed of according to their separate procedural posture.

Ratio Decidendi: For sales tax classification, a milk-based product is to be placed under the milk-food entry when milk is its predominant constituent and it answers that commercial description, even if it is ordinarily consumed as a beverage; a provisional assessment cannot be made after the assessment year has ended where the statute contemplates final assessment.

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