The Andhra Pradesh High Court has held that 5% GST is payable on Badam Flavoured Milk.
The bench of Justice R Raghunandan Rao and Justice Maheswara Rao Kuncheam has observed that in a case where sweetened milk is to be sold, after bottling the same, it would fall within the meaning of Milk containing added sugar or other sweetening matter, under 0402 and would attract 5% GST. This drink could also be called a beverage, containing milk, falling under 2202 attracting 12% GST. The entry, in 0402, is the special entry and the entry, under 2202, is the general entry and would have to give way to entry 0402. The same principle would apply to flavoured milk.
The petitioner/assessee is a registered dealer under the GST Act, dealing with milk and milk products. As part of its business, the petitioner processes and sells, flavoured milk, to customers within and outside the State of Andhra Pradesh. For the purpose of payment of tax, on the sale of flavoured milk, the petitioner had filed its returns by placing the product “flavoured milk” in Tariff Heading No.0402 99 90 (hereinafter referred to as 402).
The department while considering the returns filed by the petitioner for the period July, 2017 to July, 2019 had rejected the classification placed by the petitioner and held that flavoured milk would fall under GST Tariff Heading No.2202 9930.
The department has passed orders by which it was held that the petitioner was earlier classifying flavoured milk under 2202 and had deliberately tried to pass it off as a product falling under 0402, to evade tax.
On this basis the department not only raised a demand for shortfall of tax but also a penalty under Section 122(2) (b) and Section74 of the Central GST act, and corresponding Sections of APGST Act and Integrated GST Act.
The petitioner while relying upon the Food Safety and Standards (Food Products Standards & Food additives) Regulations, 2011 contended that “flavoured milk” would fall within the meaning of “Milk” set out in 0402. The petitioner would contend that the Tariff Heading, claimed by the petitioner, includes milk containing sugar or other sweetening matter, and since flavoured milk, processed by the petitioner, consists of approximately 90.5% of milk and 9% of sugar apart from 0.5% of artificial natural flavorings and permitted colour, the same would fall within the meaning of “milk” under the Tariff Heading 0402.
The petitioner contended that under Tariff Heading 2202 “beverages containing milk” would not cover “flavoured milk”.
The department contended that even the petitioner had accepted that flavoured milk would fall within 2202 and had, earlier, paid taxes on that basis. However, the petitioner deliberately sought to pay tax by classifying flavoured milk under 0402 even though flavoured milk would not fall within that category. The change in classification clearly amounts to an attempt to evade payment of tax and Sections 122 (2)(b) and 74 of the GST Act would be applicable.
The court while setting aside the GST demand order held that flavoured milk cannot be treated to fall under the Tariff Heading 2202, the question of penalty would not arise.
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Case Details
Case Title: M/s. Sri Vijaya Visakha Milk Producers Company Ltd. Versus Asst. Commissioner Of Central Tax and Others
Case No.: Writ Petition No: 254/2024
Date: 20/12/2024
Counsel For Appellant: A Sarveswar Rao
Counsel For Respondent: Santhi Chandra
