‘Milk Cream’ Cannot be Classifiable under Category of ‘Milk’: Himachal Pradesh HC upholds VAT Demand [Read Order]

In a recent case, the Himachal Pradesh High Court held that milk cream cannot be classified under the category of milk. The milk cream was entirely different from the milk and these two products had different purposes. Also, the Court upheld the demand for Value Added Tax (VAT) imposed on the assessee. 

Gujarat Co-Operative Milk Marketing Federation Ltd, the appellant assessee filed a revision petition under Section 48(1) of the Himachal Pradesh Value Added Tax Act, 2005 challenging the order passed by the Himachal Pradesh Tax Tribunal. 

The assessee was a registered dealer under the statute and was engaged in trading milk products, milk, edible oils, etc the department found that the assessee was not paying the value-added tax on the sale of milk cream and imposed the demand of tax and against this demand, the assessee filed a revision petition for quashing the demand. 

Arjun Lall, the counsel for the assessee contended that selling fresh milk cream, was nothing but fresh milk, wherein through a separator, the cream contents up to 25% (low-fat cream) was retained, as a result of which, low-fat milk cream was the outcome. 

Further submitted that the dealer had not charged any VAT on its sale and that the milk cream was a tax-free item and the assessee was not liable to pay the demand raised by the adjudicating authority. 

Navlesh Verma, Rakesh Dhaulta, and Gautam Sood, the counsels for the department relied on the decisions made by the lower authorities and contended that milk cream was neither fresh milk, nor pasteurized milk, nor separated milk and was taxable @ 12.5%/13.75%. 

The Court quoted that a ‘ person who wishes to buy milk cream would not go to the market and ask for milk and he would only ask for milk cream because it was a separate product though also a milk product’. 

The two-member bench comprising M.S. Ramachandra Rao and Ajay Mohan Goel upheld the demand for Value Added Tax (VAT) imposed on the assessee and dismissed the revision petition filed by the assessee. 

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