Flavoured milk classification under tax law held to fall within milk entry, not soft beverages, despite sealed packaging.

Flavoured milk sold in sealed containers was held to remain milk for tax purposes, because the addition of flavour did not alter its character and a departmental circular treating flavoured milk as covered by the entry of milk was binding on the department. The Court therefore held that the soft beverages entry did not apply, and the product was not taxable as soft beverages or milk products outside the milk exemption. Sale in sealed containers did not change the classification. The revision failed.

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Issues: Whether flavoured milk sold in sealed containers was taxable as soft beverages or milk products, or whether it fell within the entry of milk and was exempt from tax.

Analysis: The product was found to be flavoured milk. The departmental circular dated 27.11.2002 stated that flavoured milk is covered by the entry of milk and does not cease to be milk merely because flavour is added. The Court treated the circular as binding on the department. Since the goods were held to be milk, the entry relating to soft beverages had no application. The fact that the milk was sold in sealed containers did not change its character for tax purposes.

Conclusion: Flavoured milk was held to fall within the entry of milk and not to be taxable as soft beverages or milk products; the revision failed.

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