Surplus milk exemption upheld despite integrated milk project status and regular sale of by-products

Exemption under item No. 3 of Notification IV was upheld for products derived from surplus milk. The assessee's status as an integrated milk project did not, by itself, defeat eligibility for the exemption, because the notification applied where exempt products were shown to arise from utilisation of surplus milk. Regular and large-scale sale of by-products was also insufficient to displace the exemption, since such sales did not necessarily mean the products were not realised from surplus milk. The revision was rejected and the exemption claim sustained.

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Issues: Whether the products sold by the respondent were entitled to exemption under item No. 3 of Notification IV of G.O. Ms. No. 1091, Revenue, dated 10 June 1957, and whether the status of the assessee as an integrated milk project or the regular large-scale sale of by-products defeated the exemption.

Analysis: The Tribunal's view was upheld that the exemption applied to the products sold by the respondent. The fact that the assessee was an integrated milk project did not change the applicability of the notification. It was also accepted that by-products prepared out of surplus milk need not arise sporadically, and their regular large-scale sale did not, by itself, show that they were not realised from the utilisation of surplus milk.

Conclusion: The exemption under item No. 3 of the notification was held applicable to the respondent's products.

Final Conclusion: The revision was rejected, and the respondent's claim to exemption was sustained.

Ratio Decidendi: Where exempt products are shown to arise from the utilisation of surplus milk, the mere character of the undertaking as an integrated milk project and the regular sale of by-products do not displace the exemption.

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