Binding circular on flavoured milk supported classification as milk and barred higher-rate reassessment

A binding departmental circular treated flavoured milk as falling within the milk entry and stated that flavouring does not make milk cease to be milk. On that basis, the reassessment that sought to tax flavoured milk and cream milk mixed as an unclassified commodity at a higher rate was not justified. The Tribunal had considered the circulars and record material, and the earlier appellate view applying tax at 8% was correctly affirmed. The revision by the revenue was dismissed, and the product was held taxable as milk rather than as a higher-rated unclassified item.

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Issues: Whether flavoured milk and cream milk mixed were exigible to tax at a higher rate or were covered by the entry of milk, and whether the reassessment made under the Act could be sustained in view of the departmental circular.

Analysis: The dispute turned on the character of flavoured milk and cream milk mixed for tax purposes. The departmental circular dated 27.11.2002 treated flavoured milk as falling within the entry of milk and stated that milk does not cease to be milk merely because of flavouring. The circular was not disputed by the department and was binding on it. The Tribunal had also considered the relevant circulars and the materials already on record. In these circumstances, the reassessment treating flavoured milk as an unclassified item at a higher rate was not justified, and the earlier appellate view accepting tax at 8% was correctly affirmed.

Conclusion: The issue was decided in favour of the assessee; flavoured milk and cream milk mixed were held taxable as milk, and the reassessment order could not be sustained.

Final Conclusion: The order of the first appellate authority and the Tribunal was upheld, and the revision filed by the revenue was dismissed.

Ratio Decidendi: A binding departmental circular classifying flavoured milk within the entry of milk governs the department, and the product cannot be subjected to a higher rate as an unclassified commodity when the circular and surrounding materials show it remains milk for tax purposes.

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