Facts of the Case

The Krishna District Milk Producers Co-operative Union Limited challenged the common order passed by the Sales Tax Appellate Tribunal, which had affirmed the orders of the Deputy Commissioner of Commercial Taxes. The Tribunal held that the assessee was not entitled to exemption in respect of cattle feed because it was engaged not only in milk and milk products but also in cattle feed. The Tribunal further held that flavored milk marketed under the brand name "Milk Break" was commercially different from fresh or pasteurized milk and, therefore, was not eligible for exemption under the relevant Government Orders.

The assessee filed Tax Revision Cases before the High Court under Section 22(1) of the APGST Act challenging these findings.

 

Issues Involved

  1. Whether the purchases of milk from unregistered dealers and its utilization for manufacture and sale of milk by-products were liable to tax under Section 6A of the APGST Act.
  2. Whether flavored milk sold under the brand name "Milk Break" was entitled to exemption applicable to milk products.
  3. Whether the assessee was entitled to exemption in respect of procurement and sale of cattle feed under the applicable Government Orders.
  4. Whether the assessment orders confirmed by the Sales Tax Appellate Tribunal were legally sustainable.

 

Petitioner's Arguments

The petitioner contended that the Government had subsequently issued a clarification and the Commissioner of Commercial Taxes had also issued a Circular dated 28.11.2006 making it clear that purchases of milk from unregistered dealers used in the manufacture of milk by-products were not liable to tax under Section 6A of the APGST Act.

The petitioner further argued that the Government had directed withdrawal of the earlier circular authorizing levy of tax and had also ordered that all demands raised on the basis of such circular should be treated as waived.

It was also submitted that identical issues had already been decided by the Composite High Court in favour of similarly placed milk producers' cooperative societies. Therefore, the present case was fully covered by those earlier judicial precedents.

Regarding cattle feed, the petitioner relied upon the Division Bench judgment extending the benefit of G.O.Ms. No.302 dated 20.03.1992 and contended that the exemption was equally applicable to the petitioner.

 

Respondent's Arguments

The State contended that the Tribunal had rightly denied exemption since the petitioner was engaged in cattle feed business in addition to milk and milk products.

It was also argued before the Tribunal that flavored milk sold under the brand name "Milk Break" was commercially distinct from pasteurized milk and therefore not eligible for exemption.

However, before the High Court, the learned Assistant Government Pleader fairly submitted that the issue relating to cattle feed stood covered by the earlier Division Bench decision. The State only requested that if the petitioner had collected tax from customers on cattle feed sales, the Revenue should be permitted to retain or recover such amount to avoid unjust enrichment.

 

Court Order / Findings

The Andhra Pradesh High Court observed that, in view of the Government clarification dated 17.11.2006 and the Circular dated 28.11.2006 issued by the Commissioner of Commercial Taxes, purchases of milk from unregistered dealers utilized for manufacture and sale of milk by-products were not liable to tax under Section 6A of the APGST Act.

The Court noted that the Government had rescinded the earlier circular authorizing levy of tax and had also directed waiver of demands raised on that basis.

The Court further relied upon the earlier judgment of the Composite High Court in the case concerning Guntur District Milk Producers' Mutually Aided Co-operative Union (Sangam Dairy), wherein similar assessments had already been set aside.

With regard to cattle feed, the Court held that the issue was no longer res integra as a Division Bench had already extended the benefit of G.O.Ms. No.302 dated 20.03.1992 in similar circumstances. Accordingly, the petitioner was entitled to the same benefit.

The assessment relating to both the sale of cattle feed and sale of "Milk Break" and its by-products was set aside.

However, the Court clarified that where the petitioner had already collected tax on sales of cattle feed from customers, the Revenue would be entitled to retain such amount on the principle of unjust enrichment.

Accordingly, both Tax Revision Cases were allowed without any order as to costs.

 

Important Clarification

  • Purchases of milk from unregistered dealers used in manufacture of milk by-products are not liable to tax under Section 6A of the APGST Act in view of the Government clarification.
  • Earlier circular authorizing levy of tax stood rescinded.
  • Tax demands raised pursuant to the rescinded circular were liable to be waived.
  • Exemption relating to cattle feed was available in view of the binding Division Bench precedent.
  • Revenue may retain tax already collected from consumers to prevent unjust enrichment.
  • The Tribunal's assessment on cattle feed and flavored milk products was set aside.

 

Sections Involved

  • Section 22(1), Andhra Pradesh General Sales Tax Act, 1957
  • Section 6A, Andhra Pradesh General Sales Tax Act, 1957
  • G.O.Ms. No. 1091 dated 10.06.1957
  • G.O.Ms. No. 501 dated 25.05.1987
  • G.O.Ms. No. 302 dated 20.03.1992
  • Government Memo dated 17.11.2006
  • Commissioner of Commercial Taxes Circular dated 28.11.2006

 

Link to download the order

https://www.mytaxexpert.co.in/uploads/1784616506_1618compressed.pdf

 

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