M/S. Sangam Milk Producer Company Limited vs. The Assistant Commissioner (St) Ltu

Held

The Court allowed the writ petitions, following its prior judgment dated 10.12.2024 in W.P.No.254 of 2024. In that earlier decision, the Court had considered the material placed before it and held that flavoured milk should be classified under tariff heading No. 0402 9990. Consequently, the present Court found that flavoured milk ought to be taxed under this heading. The reasoning was based on the specific nature of the product and its primary composition. The ratio decidendi is that flavoured milk, by its essential character, is a milk-based product and thus falls under the HSN code for milk and cream products, not under beverages. All orders passed by the revenue authorities contrary to this classification were set aside. The Assessing Authority was directed to redo the assessments in accordance with the Court's directions. No costs were awarded. Interlocutory applications, if any, were closed.

Facts

These writ petitions involve multiple petitioners, including M/s. Srichakra Milk Products LLP and M/s. Sangam Milk Producer Company Limited, challenging orders passed by various GST and Commercial Tax authorities. The primary dispute concerns the correct classification and tax rate applicable to flavoured milk. For M/s. Srichakra Milk Products LLP, the impugned orders relate to tax periods April 2019-March 2020, April 2018-March 2019, and July 2017-March 2018. M/s. Sangam Milk Producer Company Limited challenges orders for tax periods April 2012 to March 2015 under the APVAT Act, 2005, and July 2017 to March 2018, April 2018 to March 2019, April 2019 to March 2020, and April 2020 to March 2021 under GST. The petitioners seek to set aside these orders and declare that flavoured milk is taxable under HSN Code 0402 9990 at 5% (2.5% CGST and 2.5% SGST).

Key Issues

1. Whether the supply of flavoured milk falls under HSN Code 0402 9990 and is taxable at 5% (CGST 2.5%, SGST 2.5%) as per Schedule-1 of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and G.O.Ms.No.258 dated 29.06.2017, as contended by the petitioners, or under HSN Code 2202 9930, as determined by the revenue authorities. Petitioner's Arguments: The petitioners argue that flavoured milk should be classified under HSN Code 0402 9990, which pertains to milk and cream, not otherwise specified, and is subject to a 5% tax rate. They rely on Notification No. 1/2017-Central Tax (Rate) and G.O.Ms.No.258, which they interpret as supporting their classification. They also challenge the procedural validity of some orders, citing a lack of digital signatures on Form GST DRC-07. Revenue's Arguments: The revenue authorities contend that flavoured milk falls under HSN Code 2202 9930, which covers other non-alcoholic beverages. They have issued orders and notices demanding tax based on this classification, leading to the disputed amounts.