Flavoured milk classification treated as milk, with departmental circulars binding and higher-rate taxation rejected.

Flavoured milk and cream milk mixed were treated as falling within the entry of milk, not as a separate unclassified commodity taxable at a higher rate. The departmental circular dated 27.11.2002, which stated that flavoured milk comes within the milk entry, was treated as binding on the department. On that basis, and consistently with earlier decisions, flavoured milk was not regarded as losing its character as milk merely because of flavouring. The first appellate authority's setting aside of the reassessment was therefore upheld, and the revision was dismissed in favour of the assessee.

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Issues: Whether flavoured milk and cream milk mixed were taxable as a separate commodity at a higher rate, or were covered by the entry of milk so as to remain taxable at the lower rate accepted by the assessee.

Analysis: The assessment and reassessment record showed that the assessee sold flavoured milk and cream milk mixed. The departmental circular dated 27.11.2002 itself stated that flavoured milk falls within the entry of milk, and the Court treated such circulars as binding on the department. In the light of that circular and the earlier decisions relied upon, flavoured milk did not cease to be milk merely because of flavouring. The first appellate authority had therefore correctly set aside the reassessment, and the Tribunal rightly affirmed that view.

Conclusion: Flavoured milk and cream milk mixed were covered by the entry of milk and were not liable to be taxed as a separate unclassified commodity at the higher rate; the revision was dismissed in favour of the assessee.

Ratio Decidendi: A departmental circular clarifying that flavoured milk falls within the entry of milk is binding on the department, and flavoured milk does not acquire a separate taxable identity merely because of flavouring.

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