Retrospective exemption for tetra plain milk required fresh reconsideration of the levy under sales tax law.

A later departmental clarification granting retrospective exemption to tetra plain milk required reconsideration of the earlier tax levy under the Tamil Nadu General Sales Tax Act, 1959. The appellate authority had sustained tax on the basis that the 2001 exemption notification operated only prospectively for the 1999-2000 assessment year, but the 2007 clarification stated that pasteurised raw milk sold in tetra packs was covered by the exempt schedule entry with retrospective effect for 1997-98 to 2000-01. The appellate orders sustaining the levy were set aside to that extent, and the matter was remitted for fresh decision after hearing the assessee.

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Issues: Whether the levy of tax on sales of tetra plain milk could be sustained in view of the later clarification treating such goods as exempt under the relevant schedule entry, and whether the appellate orders were liable to be interfered with and the matters remitted for reconsideration.

Analysis: The dispute centered on the taxability of tetra plain milk under the Tamil Nadu General Sales Tax Act, 1959. The appellate authority had sustained the levy on the ground that the exemption notification issued on 28 August 2001 operated only prospectively and could not govern sales relating to the assessment year 1999-2000. During pendency of the writ petitions, however, a later clarification dated 30 July 2007 stated that raw milk made bacteria-free by pasteurisation and sold in tetra packs was similar to milk packed in polythene sachets and was eligible for exemption under Entry No. 27(i) of Part B of the Third Schedule, with retrospective effect for the years 1997-98 to 2000-01. In light of that clarification, the existing appellate orders could not stand without reconsideration on the basis of the updated departmental view.

Conclusion: The appellate orders were set aside to the extent they sustained the levy on tetra plain milk, and the matter was remitted to the appellate authority to consider the later clarification and pass fresh orders after giving the assessee an opportunity of hearing.

Ratio Decidendi: Where a later departmental clarification expressly grants retrospective exemption to the very commodity in dispute, an earlier assessment or appellate order sustaining tax on the footing of prospective operation alone cannot be maintained without fresh consideration of that clarification.

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