TaxTMI 
TaxTMI 
2017 (6) TMI 91
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....pplication for amending the writ petition for adding the relief so as to quash the assessment for the aforesaid two years in respect of tax imposed on sale of "flavoured milk". The amendment application was allowed by the Court on 04.08.2016 and the petitioner was permitted not only to challenge the demand notice dated 08.09.2016, but also the assessment orders of years 2006-07 and 2007-08 to the extent of taxability of "flavoured milk". The brief background of the facts leading to the controversy involved in this writ petition are necessary to be stated before addressing the controversy on merits. The petitioner is selling "flavoured milk" in the name of "Amul Elaichi Shake" and "Amul Coco Shake" in tetra brick packaging. The said "flavoured milk" is a type of processed milk in which some permitted flavours, colour and sugar are added before they are packed as aforesaid for sale. A question arose whether the sale of such "flavoured milk" is subject to payment of tax under the U.P. Sales/Trade Tax Act, 1948 (hereinafter referred to as the Act). The petitioner in order to get the aforesaid issue resolved approached the Commissioner Trade Tax under Section 35 of the Ac....
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....rew the Special Leave Petition from the Supreme Court with liberty to file a review application before the High Court. On the review application so filed, the High Court remanded the matter to the tribunal for reconsideration in the light of the circular dated 27.11.2002. Pursuant to the order of remand dated 22.02.2016 passed by this court, the Tribunal reconsidered the matter and vide order dated 29.12.2016 held that the "flavoured milk" sold by the petitioner is exempt from tax. The department challenged the said order by filing a revision before the High Court and the same was dismissed on 10.04.2017 holding that as "flavoured milk" is covered by the entry 'milk', the tribunal is perfectly justified in exempting it from tax. The aforesaid judgement and order of the High Court is conclusive and sets the controversy at rest as no further proceedings were initiated against the said order in any higher forum. The above being the situation in challenging the demand notice dated 08.09.2006 demanding tax on sale of "flavoured milk" and the subsequent orders of assessment dated 16.02.2008 and 18.02.2010 for the years 2006-07 and 2007-08, apart from technicalities....
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....69 (Tax) 1989 which was inter se the parties. The said letter therefore, would not have any legal effect in the light of the law declared by the High Court. Secondly the notifications dated 07.09.1981 and 12.02.1983 have been issued under Section 3A of the Act while notification dated 31.01.1985 has been issued under Section 4 of the Act. Therefore, in view of the decision of the Supreme Court in the case of Sales Tax Officer, Sector IX, Kanpur Vs. Dealing Dairy Products and another AIR 1994 SC 2383, the notification under Section 3-A would have the effect of withdrawing the tax exemption so as to make the product liable to tax. Lastly, any process of adding something in the milk amounts to manufacturing activity giving rise to a new product and as such "flavoured milk" becomes a "milk product" liable to tax. Additionally, even milk sold in sealed container is not exempt from tax. The ancillary or the supplementary question falling for the consideration of the bench is whether the "flavoured milk" as sold by the petitioner is a "soft beverage" or a "milk' product" or if milk it is taxable as it is sold in sealed containers? Section 3 of the Act imposes liability of tax up....
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....overnment to exempt any other goods in addition to those exempted therein from Tax under the Act by issuing notifications. The notification under Section 4 of the Act envisages to exempt the notified goods from the ambit of tax under the Act whereas the notifications issued under Section 3-A/3-D of the Act prescribes for the taxable goods and the rate of tax upon them. Therefore, the notifications issued under Section 4 of the Act and Section 3-A/3-D of the Act operate in different field. In exercise of its power under Section 3-A of the Act the State Government notified tax @ of 6% w.e.f. 07.09.1981 upon milk powder, condensed milk, baby milk, baby foods and all other food stuffs or products, whether used as such or after mixing them with any other food stuff or beverage, when sold in sealed tinned containers. The relevant entry No.30 of the aforesaid notification No.ST-II-5785 dated 07.09.1981 reads as under:- "In exercise of the powers under the proviso to clause (e) of sub-section (1) of section 3-A of the U.P. Sales Tax Act, 1948 (U.P. Act No.XV of 1948), read with section 21 of the U.P. General Clauses Act, 1904 (UP Act No.1 of 1904); and in supersession of ....
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....ion of payment of tax under the Act upon milk or flavoured milk though it proposes to levy tax @ 12% on soft beverages. On the contrary, a notification dated 31.01.1985 issued under Section 4 of the Act exempts certain goods from payment of tax under the Act w.e.f. 1st February, 1985. The aforesaid notification inter alia vide entry 40 exempts milk other than condensed milk, milk powder or baby milk from tax under the Act which is already exempt under Section 4 of the Act, and milk products excluding products sold in sealed containers, sweetmeats, ghee, butter, cream and cheese, ice-cream and ice-candy, kulfi, milk shake and lassi from the tax net. The extract of the aforesaid Notification No.ST-II-7038 dated 31.01.1985 are reproduced hereinbelow:- "In exercise of the powers under clause (a) of section 4 of the Uttar Pradesh Sales Tax Act, 1948 (U.P. Act No.XV of 1948), read with section 21 of the Uttar Pradesh Clauses Act, 1904 (U.P. Act No.1 of 1904) and in supersession of all previous notifications issued under aforesaid clause (a) of section 4, the Governor is pleased to exempt, with effect from February 1, 1985, the goods mentioned in column 2 of Schedule her....
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.... "products sold in sealed containers" refers to "milk products" only and not to the 'milk' even though a conjunction is used in between milk and milk products. It is generally seen that even raw milk these days is sold in sealed packs or sealed bottles. The intention of the aforesaid notification is not to tax such raw milk as it would violate the very purpose of exemption of tax granted to milk under Section 4 of the Act. In other words milk other than some of its forms like condensed milk, milk powder or baby milk stand exempted from payment of tax under the Act if sold in open form or even in sealed containers. In view of the above, the opinion of the learned Single Judge expressed while deciding Writ Tax No.1269 of 1987 that 'milk' sold in sealed containers is not taxable does not appear to interpret the above notification in the right perspective. In fact, there was no necessity for including milk in the aforesaid notification of exemption of goods issued under Section 4 of the Act as milk other than condensed milk, milk powder or baby milk already stood exempted from tax under the Act by virtue of Section 4 of the Act itself. So the mention of the ....
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.... specifically excluded which stand exempted in law. A reading of entry 40 of the notification dated 31.01.1985 demonstrate that milk except some of its forms and milk products other than those specified or products of milk sold in sealed containers have been exempted from payment of tax under the Act. The judgement and order of the High Court dated 25.04.2005 in the previous round of litigation covering "flavoured milk" under the "soft beverages" taxable @ 12% was made ineffective vide order dated 22.02.2016 when the matter was remanded to the Tribunal. Thus, there is no conclusive adjudication that "flavoured milk" is taxable as "soft beverages." Therefore, it is not amenable to tax as soft beverages @ 12% per notification dated 12.10.1983 issued under Section 3-A of the Act or @ 6% as per notification dated 07.09.1981 again issued under Section 3-A of the Act. A combined reading of Section 4 of the Act with the aforesaid notifications makes it crystal clear that State Government has exempted milk from payment of tax under the Act though some other forms of milk such as condensed milk, milk powder and baby milk and specified milk products have not been exempted. There is ....
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....toned, double toned, standarized or full cream milk. The aforesaid document makes no distinction between the raw or processed milk as stated above. It is on the basis of the above opinion expressed by the Secretary Milk Development Department U.P. Lucknow that a circular was issued by the Commissioner Trade Tax on 27.11.2002 clarifying that mixing of sugar and flavour would also not alter the characteristic of the milk so as to make it a different product. Now without going into the binding nature of the aforesaid circular, as the opinion of the expert referred therein is not in dispute and there is no contrary opinion, milk sold either after boiling, cooling or mixing sugar or any flavour would not takeaway the basic characteristic of the milk so as to make it a new product and it will remain to be a milk. In view of above, as flavoured milk is basically a milk that stands exempted under Section 4 of the Act read with notification dated 31.01.1985 whether sold in open form or in sealed containers. The argument that as per the ratio of Dealing Diary Products (Supra) the exemption from tax granted vide notification issued under Section 4 of the Act stands revoked once a ....