Flavoured milk GST classification under Tariff 0402 vs 2202, treated as milk not beverage; demands quashed, refund ordered.

The dominant issue was whether flavoured milk is classifiable under GST Tariff Heading 0402 (milk containing added sugar/other sweetening matter) attracting 5% GST, or under Heading 2202 as a beverage. Relying on binding parity with an earlier DB decision in the assessee's own case and an identical ruling affirmed by SC order, the HC held that Heading 0402 is the specific entry and prevails over the general entry under 2202; the same principle applies to flavoured milk. Consequently, the impugned classification demands were quashed and the tax amounts already paid were ordered to be refunded with applicable interest within three months.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the impugned adjudication and first appellate orders demanding GST at a higher rate on "flavoured milk" were legally sustainable, in view of binding/covering judicial determinations on classification of flavoured milk under the GST tariff.

(ii) Whether, upon quashing the impugned orders, the petitioner was entitled to refund of the GST amount paid under protest, together with applicable interest, and within what timeframe.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of the demand orders on classification/rate applicable to flavoured milk

Legal framework (as discussed by the Court): The Court proceeded on the footing that the controversy concerned classification of "flavoured milk" for GST purposes, and assessed whether the question stood covered by existing judicial rulings relied upon in the record.

Interpretation and reasoning: The Court examined the material placed and found that, in the petitioner's own case and in identical matters, a High Court had ruled in favour of classification of flavoured milk under the tariff heading attracting 5% GST. The Court further noted that in an identical case the same High Court's view had been confirmed by the Apex Court by dismissal of the special leave petition. The Court treated these developments as directly and squarely covering the controversy before it. On that basis, the Court concluded that the impugned adjudication and appellate orders could not stand.

Conclusion: The Court held that the impugned adjudication order and the first appellate order "deserve to be quashed" since the issue was covered by the aforementioned judicial determinations, and accordingly quashed both orders.

Issue (ii): Refund of tax paid under protest and interest

Legal framework (as discussed by the Court): The Court considered the petitioner's payment made under protest pursuant to the impugned demand and the consequential relief following quashing of the demand orders.

Interpretation and reasoning: Having set aside the very orders that formed the basis for the demand, the Court treated the amount deposited under protest as liable to be returned. The Court expressly directed refund along with "applicable interest" and fixed a definite period for compliance.

Conclusion: The Court directed the respondents to refund the amounts paid under the specified challans together with applicable interest within three months from receipt of the order.

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