Flavoured milk retains milk character for tax exemption, and sealed-pack sales do not by themselves create liability.

Flavoured milk sold in sealed containers was treated as retaining the character of milk for exemption purposes under the U.P. Sales/Trade Tax Act, 1948. Section 4 exempted milk, with exclusions limited to condensed milk, milk powder and baby milk, and the 31.01.1985 notification was read as continuing that exemption; the sealed-container exclusion was confined to milk products, not milk itself. Notifications fixing rates under Section 3-A could not override the statutory exemption, and flavoured milk did not cease to be milk merely because sugar, flavour or permitted colour was added.

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Issues: Whether flavoured milk sold in sealed containers is milk exempt from tax under Section 4 of the U.P. Sales/Trade Tax Act, 1948 read with the notification dated 31.01.1985, and whether it is taxable as soft beverage or milk product under the notifications issued under Section 3-A of the Act.

Analysis: Section 4 of the Act grants exemption to milk, while excluding only condensed milk, milk powder and baby milk. The notification dated 31.01.1985 was read as continuing that exemption and as exempting milk products, with the phrase excluding products sold in sealed containers applying to milk products and not to milk itself. The notifications dated 07.09.1981 and 12.10.1983 were held to operate only for fixation of tax rates on specified taxable goods and could not override the statutory exemption of milk under Section 4. On a common understanding, flavoured milk remains milk and does not lose its basic character by the addition of sugar, flavour or permitted colour. It was also held that the earlier view treating flavoured milk as soft beverage did not survive after remand and could not govern the present controversy.

Conclusion: Flavoured milk is exempt from tax as milk under Section 4 of the Act and is not taxable merely because it is sold in sealed containers.

Final Conclusion: The demand notice and assessment orders taxing flavoured milk sold in sealed packs were quashed, and the writ petition was allowed.

Ratio Decidendi: A specific statutory exemption for milk cannot be displaced by rate notifications framed under a separate charging-rate provision, and flavoured milk retains its character as milk unless expressly excluded by the exemption scheme.

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