Court Upholds Tax Treatment of UHT Milk, Denies Exemption Claim

The court upheld the assessment orders and dismissed the writ petition challenging the tax treatment of Ultra Heat Treated (UHT) milk. The court determined that UHT milk, classified under a specific entry in the Third Schedule with a 4% tax rate, is distinct from ordinary or pasteurized milk, thus not qualifying for exemption under the First Schedule. Despite the petitioner's arguments based on the HSN code and the liquid form of UHT milk, the court emphasized the specific entry for UHT milk in the Schedule, affirming the assessing officer's decision and denying the petitioner's claim for exemption.

---

---

Issues:
Challenge to assessment orders and demand notices for different assessment years regarding tax treatment of Ultra Heat Treated (UHT) milk.

Analysis:
The petitioner contested the assessment of UHT milk under the Third Schedule to the KVAT Act, which imposes a 5% tax on the product. The petitioner argued that UHT milk, being in liquid form, should be exempted under Entry 19 of the First Schedule, which covers fresh milk and pasteurized milk. The assessing officer, however, classified UHT milk under Entry 118 of the Third Schedule, where tax is levied at 4%. The petitioner relied on the HSN code for UHT milk (0402.10.10) to support their contention. The court noted that while skimmed milk is in powder form as per the HSN code, there is no specific entry for UHT milk. The court emphasized that the specific entry for UHT milk in the Third Schedule indicates it is a value-added product distinct from ordinary or pasteurized milk, making the petitioner's argument unsustainable.

The government pleader argued that the assessing officer thoroughly considered the issue and provided ample opportunity for the petitioner to present evidence supporting their claim that UHT milk should be exempted. Despite the petitioner's failure to provide such evidence, the government pleader contended that when a specific entry exists in the Schedule, deviations are not permissible, and the entry must be interpreted as is. The court agreed with the government's position, highlighting that UHT milk's inclusion in the Third Schedule at 4% tax rate during the relevant years contradicts the petitioner's claim for exemption under the First Schedule for milk and pasteurized milk. The court concluded that since UHT milk is a distinct product with its own entry in the Schedule, it cannot be equated with ordinary milk or pasteurized milk, thereby upholding the assessment orders and dismissing the writ petition.

---