While denying the benefit of composition scheme to M/s Milano Ice Cream Private Limited, Kerala High Court recently held that Ice-Cream cannot be treated as cooked food and therefore, a higher rate of tax applicable to it.
Assessee M/s Milano Ice Cream Private Limited, engaged in the manufacture and sale of ice-creams.
In the year, 2015 the Assessee had made an application for compounding and the same was rejected by the Assessing Officer (AO). Thereafter, the Assessee commenced payment of tax on the quarterly basis and continued for three quarters.
During the year 2016, it was noted by the AO that there could be no compounding for ice creams and the same is not a cooked food and accordingly, he issued a notice to the Assessee threatening cancellation of the compounding and regular assessment.
Again, the Assessee filed another application for compounding during the year 2016 and it was also not responded to, then the Assessee remitted tax as per the compounding scheme again for three quarters. In the year 2017, another notice for cancellation of the compounding was issued to the Assessee and regular assessment under section 25 of the Kerala Value Added Tax Act, 2003 was completed for the four quarters deviating from the compounding scheme.
The Assessee challenged the order passed by the AO and contended that though specific permission was not granted on the compounding application and an order issued, the payment of quarterly tax, as per the scheme makes it a concluded contract and the Department cannot resile from it in the course of a year.
On appeal, the single Judge allowed the claim of the Assessee by holding that when an assessee opts for payment of tax on compounded basis and discharges his liability as per the scheme and when such amounts are accepted by the department without demur, then the department cannot subsequently turn around and subject the assessee to regular assessment under the provisions of the Act.
Thereafter, the Revenue approached the High Court on appeal against the order passed by the single Judge and contended that ice cream is not a cooked food and it is also specifically included in the notified list of goods taxable at the rate of 12.5% under entry 64(9).
After considering the above-specified facts and circumstances the high Court Justice K.Vinod Chandran and Justice Ashok Menon observed that ”Ice-creams” having been specifically referred to under the notified goods, there can be no general meanings applied to permit a particular scheme applicable to a different entry. When “ice- cream” “cooked food” and “food” are separately included in the schedules and notifications prescribing the rates of taxation, we cannot understand the legislature having an intention to include all cooked foods, in common parlance, under the compounding scheme.
The Court further held that when ice-cream is treated as a separate commodity included in the notified goods taxable at 14.5% there could not have been a compounding application filed by the petitioner, taking ice creams to be coming within the definition of cooked-food.
While concluding the issue the Court also declared that Ice-cream, as is seen from KVAT Act, is treated differently from cooked food and is taxable at a higher rate and included in the notified goods. There could not have been an application for compounding filed and in such circumstances, and accordingly, the Court set aside the order passed by the single judge and denied the claim of the Assessee.
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