Pasteurised milk exemption applies to UHT toned milk without additives, and related penalty cannot survive

Toned milk sold in tetra packs, pasteurised and subjected to ultra high temperature treatment without additives, was treated as exempt milk under the Tamil Nadu General Sales Tax Act because the exemption entry covered fresh milk, pasteurised milk and directly reconstituted milk, and did not distinguish UHT processing from pasteurisation. The Court also noted that the Tribunal wrongly relied on the Tamil Nadu Value Added Tax Act, 2006 when assessing liability under the 1959 Act. In the absence of any separate entry for UHT milk or evidence that the product was flavoured milk, the assessee was entitled to exemption, and the penalty under section 12(3)(b) could not survive once the assessment failed.

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Issues: Whether toned milk sold in tetra packs, subjected to pasteurisation and ultra high temperature treatment without additives, falls within the exemption entry for fresh milk or pasteurised milk under the Tamil Nadu General Sales Tax Act, and whether the levy of penalty survives if the turnover is held exempt.

Analysis: The exemption entry under the Tamil Nadu General Sales Tax Act covered fresh milk, pasteurised milk and directly reconstituted milk. The Court held that the statutory entry made no distinction between pasteurised milk and milk subjected to ultra high temperature treatment, and that the mere use of a higher heat process did not alter the essential character of the product when it remained toned milk without additives or flavouring. The Tribunal had erred in relying on the Tamil Nadu Value Added Tax Act, 2006 while deciding liability under the Tamil Nadu General Sales Tax Act, 1959. In the absence of any separate taxing or exemption entry for UHT milk and in the absence of material showing that the product was flavoured milk, the assessee was entitled to the exemption. Since the assessment itself failed, the penalty under section 12(3)(b) could not stand.

Conclusion: The toned milk was held to be pasteurised milk eligible for exemption, and the levy of penalty was unsustainable.

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