The Andhra Pradesh High Court, in a recent decision held that flavuored milk comes under GST Tariff Heading 0402 and deleted a tax evasion penalty.
The petitioner, M/s. Sri Vijaya Visakha Milk Producers Company Ltd., is engaged in the business of processing and selling flavored milk to customers within and outside the State of Andhra Pradesh.
While going through the returns filed by the petitioner, for July 2017 to July 2019 the Asst. Commissioner of Central Tax noticed that the petitioner was earlier classifying milk under GST Tariff Heading No. 2202 9930 and for the said period, the petitioner had filed returns by considering the product to fall under the Tariff Heading 0402.
Become PF & ESIC Pro: Basic to Advance Course – Enroll Today
Due to this observation made by the Asst. Commissioner, a demand for shortfall of tax as well as penalty under Section 122(2) (b) and Section 74 of the Central GST Act was made.
Thus, according to the respondent, flavoured milk, containing sugar and Badam flavour, falls under Entry 2202 as a “beverage containing milk” rather than Entry 0402, which pertains to plain milk. The respondent further observed that the addition of flavour transforms it into a special drink and under Rule 3(a) of the Customs Tariff Act, when goods fit multiple headings, the more specific one prevails, 2202 being more precise for beverages, flavoured milk is classified accordingly.
The petitioner contended that flavoured milk falls under Tariff Heading 0402, as it consists of 90.5% milk, 9% sugar, and minimal flavoring. By relying on the Food Safety and Standards Regulations, 2011, the petitioner claimed that it qualifies as “milk” rather than a “beverage containing milk” under 2202.
The HC observed that the conclusion reached by the respondent that only plain milk would fall under the tariff heading 0402 was incorrect.
Become PF & ESIC Pro: Basic to Advance Course – Enroll Today
The bench, by relying on the judgement of the Madras High Court in the case of M/s
Parle Agro Pvt. Limited Vs. Union of India held that flavoured milk would fall under 0402 and not under 2202.
The bench further 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. This drink could also be called a beverage, containing milk, falling under 2202. 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 bench, comprising Justice R. Raghunandan Rao and Justice Maheshwara Rao Kuncheam, quashed the penalty that was levied against the petitioner and allowed the writ petition.
The bench, comprising Justice R. Raghunandan Rao and Justice Maheshwara Rao Kuncheam, quashed the penalty that was levied against the petitioner and allowed the writ petition.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
