Madras High Court
State Of Tamil Nadu vs Wander Limited on 8 October, 1990
Author: K. Venkataswami
Bench: K. Venkataswami
JUDGMENT J. Kanakaraj, J.
1. All the cases relate to the interpretation of entry 24 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called as "the Act"), as it stood before Tamil Nadu Act 39 of 1983, entry 103 as amended by Tamil Nadu Act 39 of 1983 and the Notification G.O.P. No. 253 dated 17th March, 1986, issued under section 17 of the Act.
2. The Tax Case No. 1145 of 1987 has been filed by the Revenue against the order of the Sales Tax Appellate Tribunal dated 21st July, 1986, made in T.A. No. 74 of 1985. The respondent/assessee are manufacturers and dealers in the product known as "Spert". For the year 1982-83, the assessing officer treated the turnover of sales of "Spert" as food made of milk, cereals flour and starch coming within the entry 103 of the First Schedule to the Act attracting 10 per cent sales tax. During the year 1982-83, the relevant entries were as follows :
"24. Milk foods (excluding At the point of first 4 per cent.
milk but including sale in the State. milk powder.) 103. (i) Biscuits (ii) do. 10 per cent." toffees (iii) chocolates, (iv) confectionery, (v) butter, (vi) ghee, (vii) cheese, and (viii) foods including preparations of vegetables fruits, milk, cereals flour, starch, birds' eggs, meat and meat offals, animal blood, fish crustaceans and molluses.
In his order dated 31st March, 1984, according to the assessing officer entry 24 was specifically introduced to cover pure milk food and baby food only. As some dealers in malted milk food were taking shelter under entry 24, the very entry was deleted effective from 1st July, 1983. As "Spert" is not a baby food and it contains vitamins and minerals, it was considered as food drink falling under entry 103. Accordingly, the turnover was assessed to 10 per cent tax. The Appellate Assistant Commissioner agreed with the finding of the assessing officer in and by his order dated 27th August, 1984. The Tribunal in is order dated 21st July, 1986, relied on a letter of the Commissioner of Commercial Taxes dated 19th May, 1983 to come to the conclusion that "Horlicks", "Spert", "Viva", etc., contain skimmed milk powder and constitute milk food and not milk preparation or food. Accordingly, the Tribunal held that those foods are mostly taken as diet, though the richer class makes them a part of their foods habit. The Tribunal held that the commodity falls under entry 24 and they are entitled to lower rate of tax under that entry. The appeal was accordingly allowed. Against this the Revenue has preferred the Tax Revision Case No. 1145 of 1987. The contention is that "Spert" sold by the assessee, will come under entry 103 and not under entry 24. It was not milk food, because it contains predominantly three types of cereal extracts, besides proteins, milk and vitamins. In this connection, it has to be noticed that the tax under entry 103 was originally 8 per cent and subsequently raised to 10 per cent by Tamil Nadu Act 23 of 1982 with effect from 1st March, 1982.
3. Writ Petition No. 6318 of 1990 is for the issue of a writ of certiorari to quash the proceedings of the respondent in TNGST No. 180826/89-90 dated 20th April, 1990. In and by the said order dated 20th April, 1990, the respondent provisionally assessed the petitioner at 10 per cent on the sales of Horlicks amounting to Rs. 29,33,81,474.52 for the period from 1st April, 1989 to 28th February, 1990. In coming to this conclusion, it was noticed that the petitioner had paid tax a 4 per cent treating Horlicks as a milk food. According to the respondent, Horlicks is not a milk food coming within the sub-entry (viii) of entry 103 but will come under sub-entry (x) of entry 103 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959. The objection of the petitioner that Horlicks is commercially looked upon as a milk food was rejected and the said order was passed. The contention in the writ petition is that the respondent had no jurisdiction to pass a provisional assessment under section 13 of the Act for the year 1989-90 after the expire of the year on 31st March, 1990. The respondent is bound to make only a final assessment under section 12 of the Act after calling for the books of account and following rules 11 and 12 of the Tamil Nadu Sales Tax Rules, 1959. The petitioners have all along been treated as malted milk food industry under the licence granted under the Industries (Development and Regulation) Act. The petitioners are entitled to the lesser rate of tax as per G.O.P. No. 253 dated 17th March, 1986, issued under section 17 of the Act. Inasmuch as the assessment is termed as a provisional assessment, the petitioners have no right of appeal. Hence the writ petition had been filed. A counter-affidavit has been filed by the respondent stating that rule 18(4) enables the assessing officer to make a provisional assessment. Only the period from April, 1989 to February, 1990, had been brought under assessment and therefore, it cannot be said that the year is over. The petitioner do have a right of appeal or revision under the Act. It is also contended that the licence is only for "malted milk food" which means it is no a milk food so as to bring it within sub-entry (viii) of entry 103 of the First Schedule. The claim that milk had been predominantly used in the manufacturer of Horlicks is disputed. It is asserted that the G.O.P. No. 253 dated 17th March, 1986 will not apply to the product "Horlicks" manufactured by the petitioner.
4. Writ Petitions Nos. 9079, 11204 and 13828 of 1990 have been filed by M/s. F.D.C. Limited, who claimed to be manufacturers of pharmaceuticals and food products. In particular, they manufacture two products called, "Soyal" and "Prosoyal spray dried powder". They are special baby infant foods and registered under the Trade and Merchandise Marks Act, 1958. The basic ingredients of these products are soya bean powder. The product is said to be highly nutritious and replace milk in all respects. These two products are advised by doctors in respect of babies with lactose intolerance. The petitioners claimed the product as baby milk food product or as life-saving drugs and medicines. They were writing letters to the second respondent seeking clarification on the rate of sales tax. They also claimed the reduced rate of tax under G.O.P. No. 253 dated 17th March, 1986. The third respondent had originally accepted the claim of the petitioners and passed an order on 9th September, 1988 in TNGST No. 006433/87-88 under section 12 of the Act. Subsequently, notices were issued on 27th January, 1990, 26th March, 1990 and 14th June, 1990, proposing to disallow the lower rate of tax at 4 per cent and holding that the two products do not find place in the list of life-saving drugs and can be taxed only under entry 103 taxable at 10 per cent. The petitioners again filed objections. Writ Petition No. 9079 of 1990 was filed for a writ of declaration to declare that the benefit of exemption and lower rate of tax at 4 per cent under the relevant Government orders are applicable to the two products "Soyal" and "Prosoyal spray dried powder". Writ Petition No. 11204 of 1990, was filed for the writ of certiorarified mandamus to quash the notices dated 27th January, 1990, 26th March, 1990 and 14th June, 1990 and to direct the respondents to grant exemption and levy the lower rate of 4 per cent. Writ Petition No. 13828 of 1990 is for the writ of certiorarified mandamus to quash the assessment order dated 5th July, 1990 for the year 1987-88 and to direct the third respondent to grant exemption or for the levy of the reduced rate of 4 per cent as per the relevant Government orders. Counter-affidavits have been filed in all the writ petitions stating that there is absolutely no milk ingredient in the two products manufactured by the petitioners. Therefore, by no stretch of imagination, the products can be called as milk food. The products being manufactured from extracts of cereal or vegetables or starch or flour, the same can be classified only under sub-entry (x) of entry 103 of the First Schedule to the Tamil Nadu General Sales Tax Act. For the same reason, G.O.P. No. 253 dated 17th March, 1986, reducing the rate of tax from 10 per cent to 4 per cent will not apply to the products manufactured by the petitioners. It is also stated that the contention that the products are baby milk food or they are life-saving drugs is mutually contradictory and cannot be accepted. It is also contended that inasmuch as final assessment orders were passed on 5th July, 1990, Writ Petitions Nos. 9079 and 11204 of 1990 have become infructuous. Against the final order of the assessment dated 5th July, 1990, the petitioners have right of a regular appeal.
5. We will first take up the group of writ petitions regarding the products, "Soyal" and "Prosoyal spray dried powder". As rightly contended by the learned Additional Government Pleader, Writ petitions Nos. 9079 and 11204 of 1990 have become infructuous after the passing of the final order of assessment on 5th July, 1990 in TNGST No. 6433/ 1987-88. Accordingly, those two petitions are dismissed as infructuous. Taking Writ Petition No. 13828 of 1990, we are unable to understand how the products can be treated as milk food. Admittedly the products are used as substitute for natural milk and mother's milk. It is only in cases of lactose intolerant babies, that the products of the petitioners-company are recommended by doctors. Therefore it goes without saying that there cannot be any natural milk in the products of the petitioners. In fact, if natural milk is used as a constituent, then it cannot be prescribed as a substitute for lactose intolerant babies. Mr. C. Vekatarman, learned counsel for the petitioners, aruges that the products should not be treated as a subsutitute for milk but be treated as milk itself. Even so, we are unable to agree with Mr. C. Venkataraman that the products will come under the category of milk food under sub-entry (viii) of entry 103. Consequently, the products cannot also be eligible for exemption under G.O.P. No. 253, CT & RE dated 17th March, 1983 which reads as follows :
"G.O.P. No. 253, CT & RE dated 17th March, 1986 reported in [1986] 61 STC Statutes 119 :
Notification No. II(1)/CTRE/47(c)/86 dated 17th March, 1986.- In exercise of the powers conferred by sub-section (1) of section 17 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959), the Governor of Tamil Nadu hereby makes a reduction in the rate of tax from ten per cent to four per cent in respect of the tax payable by any dealer under the said Act, on the sale of milk food including baby milk foods.
2. The notification hereby made shall come into force with immediate effect."
The said notification relates only to sale of milk food including baby milk foods. Reliance is placed on Porrits & Spencer (Asia) Ltd. v. State of Haryana . In , the following passage is referred to at page 436 :
"......... the particular words used by the Legislature in the denomination of articles are to be understood according to the common commercial understanding of the terms used, and not in their scientific or technical sense, 'for the Legislature does not suppose our merchants to be naturalists, or geologists, or botanists'."
Again the learned counsel for the petitioner relies on the following passage at page 437 :
"There is such phenomenal advance in science and technology so wondrous is the variety of fabrics manufactured from materials hitherto unknown or unthought of and so many are the new techniques invented for making fabric out of yarn that it would be most unwise to confine the weaving process to the warp and woof pattern. Whatever be the mode of weaving employed, woven fabric would be 'textiles'. What is necessary is no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric."
The contention of learned counsel for the petitioners is that even though natural milk is not used in the manufacture of products, the milk produced from soya bean should also be treated as milk and the benefit of the notification should be made available to the petitioners. We are unable to accept the contention of the petitioner because the notification as well as entry 103 only talk of natural milk as understood in common parlance like cow's milk or buffalo's milk. Milk is defined in "Dairy India 1987" as follows :
"A white or yellowish fluid secreted by the mammary gland of mammals. It consists of emulsion of fat in water with casein and other proteins, milk, sugar and inorganic salts."
We are, therefore, constrained to reject the arguments of Sri C. Venkataraman and on the materials placed before us, we are unable to hold that the products are covered by the Notification No. 253, CT & RE, dated 17th March, 1986. We, however, do not want to prevent the petitioners from filing an appeal against the final assessment order dated 5th July, 1990 on any other ground. If such an appeal had already been filed in time, it is open to the authorities under the Act to consider the case of the petitioners in accordance with law. Therefore, this Writ Petition No. 13828 is also dismissed. There will be, however, no order as to costs.
6. We will now take up Writ Petition No. 6318 of 1990, where Mr. C. Natarajan, learned counsel for the petitioners, elaborately argued on the question whether Horlicks is a milk food coming within sub-entry (viii) of entry 103 or is a food preparation using milk coming within sub-entry (x) of entry 103. We have now seen that till 1st July, 1983 (Tamil Nadu Act 39 of 1983), milk foods (excluding milk but including milk powder) was under entry 24 and the rate of tax was 4 per cent. On and after 1st July, 1983, entry 24 was omitted and the words "milk foods including milk powder" were brought under entry 103 as sub-entry (viii). The rate of tax under this entry is 10 per cent. There is no difficulty in understanding the intention of the Legislature in levying a higher rate of tax in respect of milk foods with effect from 1st July, 1983. The problem is created only by the Notification in G.O.P. No. 253, CT & RE, dated 17th March, 1986 issued under section 17(1) of the Tamil Nadu General Sales Tax Act reducing the rate of tax from 10 per cent 4 per cent in respect of sale of milk food including baby milk foods. Products which had been treated as coming within entry 24 till 1st July, 1983, should normally be brought under sub-entry (viii) of entry 103. If that is so, such products automatically get the reduced rate of tax under the above notification. It is said to be the reason why the Revenue now tried to bring product like Horlicks under sub-entry (x) of entry 103, so that they will not get the benefit of the notification. Mr. C. Natarajan builds up his arguments in the following manner :
(i) Licence for the manufacture of Horlicks :
The petitioners were granted an industrial licence on 26th February, 1971 to manufacture "malted milk foods". As per condition Nos. 5 and 6 of the licence, the industry is treated as a milk industry and the area of collection of milk is earmarked. The company is obliged to increase milk production in conjunction with the Animal Husbandry Department of Andhra Pradesh. For the purpose of serial No. 27(2) of the First Schedule to the Industries (Development and Regulation) Act, Horlicks is treated as malted milk food. In fact, the application dated 26th November, 1968, for the grant of licence under the Act itself is for the manufacture of malted milk food under rule 7 of the Registration and Licensing of Industrial Undertakings Rules, 1952. Therefore, it is argued that basically what is manufactured is only malted milk food and the same can be brought only under sub-entry (viii) of entry 103.
(ii) Constituents of Horlicks and how it is made :
The raw materials for manufacturing Horlicks are said to be milk, malted barley, wheat flour and salts. Malted milk is made by combining whole milk with a mash ground barely malt, wheat flour with or without the addition of salt and bicarbonate of soda. It is not necessary to go into the other details of manufacture. What it matters is that in making 450 grammes of Horlicks, 921 grammes of milk are said to be used. In a bottle of Horlicks of 450 grammes valued at Rs. 5,499, the cost of milk is said to be Rs. 3,641.
The overall input weight and costs in the manufacture of Horlicks, after mixing, evaporation, drying and grinding is said to be as follows :
Horlicks per 1000 grammes
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Input by weight Input by cost
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Gms. Per cent Rs. Per cent
* Milk 2047 69 8.092 66.25
Malted barley 431 14 2.055 16.82
Wheat flour 467 16 1.804 14.77
Calcium and salt 27 1 0.264 2.16
--------- ---------
100 100.00
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* Milk 69 per cent in weight and 66.25 per cent in cost by way of
inputs in Horlicks.
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What is sought to be made out by the petitioners is that Horlicks is essentially a milk food.
(iii) The literature on the subject :
In "Dairy India 1987", the word "malted" is defined as a product obtained by combining milk with the extract from a mash of ground barely malt and wheat flour, with or without the addition of salt, sodium or potassium bicarbonate, cocoa powder. In the Chemical Analysis of Food by David Pearson, 6th Edition, there is a write-up on malted milk. There also it is stated that the malted milk is made by combining whole milk with a mash of ground barley malt and meal with or without the addition of salt and bicarbonate of soda. In "Codex Alimentarius Commission" issue by the World Health Organization, it is stated that the term, "milk" may be used for milk treated without altering its composition, or for milk, the fat content of which has been standardized under domestic legislation. In the "Indian Standards Institution" dated January, 1976 malted milk food not containing cocoa powder is said to be the material obtained by a combination of whole milk, partially skimmed milk or milk powder, with the wort separated from a mash of ground barley malt, any other malted cereal grain and wheat flour or any other cereal flour, or malt extract, with or without addition of optional ingredients and without added sugars, and prepared in a powder or granule or flake form by roller drying, or other mechanical process. In the New Encyclopedia Britannica, 15th Edition, From 5, there is a write-up on dairy products. There is a reference to dried malted milk which naturally contains malts and dextrines. Fluid or market milk is generally considered to refer to bottled fresh milk and its associated products while concentrated milk refers to plain and sweetened, condensed and evaporated milk. In the National Dairy Development Board Act, 1987, milk product is defined to include malted milk foods with or without cocoa powder. There is no need to multiply the literature on the subject. What we can deduce from the above definitions is that malted milk contains a large amount of wholesome milk.
(iv) Interpretation of the entries :
Mr. C. Natarajan compares entry 103 (viii) with entries like 116 and 120 of the First Schedule to the Tamil Nadu General Sales Tax Act. He stressed the absence of the words "wholly or exclusively" in entry 103(viii). He argues that the Legislature is deemed to be aware of the normal rule of construction and therefore, the absence of the word, "wholly or exclusively" in entry 103(viii) should be given due weightage. The addition of the mash of ground barley and wheat flour to the milk will no therefore take the product Horlicks away from the entry 103(viii). Reference is made to (Union of India v. Tata Iron and Steel Co. Ltd.) and (Aluminium Corporation of India Ltd. v. Union of India). It is no necessary to go through the said decisions to accept the proposition that Legislature is deemed to be aware of the normal rule of construction and the use of the words, "wholly" or "partly". Learned counsel also relies on (Collector of Central Excise v. Calcutta Steel Industries) on the question of burden of proof. We do not think that it is necessary to rest the case entirely on the technical aspect of the burden of proof. When both the parties are placing all the materials before the court, it is not necessary to accept or reject a case purely on the ground of burden of proof. A series of decisions starting from Commissioner of Sales Tax v. Pure Ice Cream Company [1975] 36 STC 18(Bom), Dayal Singh Kulfiwale v. Commissioner of Sales Tax [1979] 43 STC 374 (All), Collector of Central Excise v. Parle Export (P.) Ltd. , State of Tamil Nadu v. Indodan Milk Products [1980] 45 STC 498 (Mad.), Indodan Milk Products Ltd. v. Commissioner of Sales Tax [1974] 33 STC 381 (All.) and Collector of Central Excise v. Protein Products of India Ltd. are referred to for understanding the entry "milk food". These are decisions relating to ice-creme kulfi, as a milk product, bone product milk product like condensed milk and so on and so forth. We do not think that it is necessary to go into details of those decisions because they cannot help us in uderstanding the difference between entry 103(vii) and 103(x). We feel it is better to refer to the entries in dispute before coming to a conclusion one way or the other. The entry 103(vii) deals with milk foods including milk powder whereas entry 103(x) deals with foods including preparations of vegetables, fruits milk, cereals, flour, starch, etc. It is argued that milk product may fall short of milk food and fall under entry 103(x). It is also argued that entry 103(viii) is a specific provision whereas entry 103(x) is a general provision. Under entry 103(x) milk need not be predominant in the product. Under entry 103(viii), it is argued that the milk must be the predominant ingredient in the manufacture of the product. Reference is also made to (State of Tamil Nadu v. Pyare Lal Malhotra) to interpret the entries. That was the case relating to the entry "iron and steel" in the Second Schedule to the Tamil Nadu General Sales Tax Act. That entry started by saying "iron and steel, that is to say," and proceeded to describe the various forms of iron and steel sold in the market. The Supreme Court in that case explained that each sub-item is a fresh starting point and is a separate taxable commodity for the purpose of sales tax and each of them forms a separate species for each series of sales of them, and they may all belong to the same genus (iron and steel). Even this judgment may not be of much help in understanding the entry 103(viii) and 103(x). In Commissioner of Sales Tax v. Agarwala and Company [1983] 52 STC 117 (Bom) it was held that milk would ordinarily include milk in all its forms including evaporated or dehydrated milk or milk powder. It was held that skimmed milk powder would fall under the entry "milk powder". There is however, one Division Bench judgment of our High Court which is more helpful to decide the case. That is, State of Tamil Nadu v. A. K. Sundaram [1983] 54 STC 82. In that case, the question was whether arrowroot powder sold by the assessee would fall under entry 103(viii) of the First Schedule or not. At the time of the said decision, the present entry 103(x) was 103(viii) and entry 24 was available. In other words, the said judgment is an interpretation of entry 103(x) for the purpose of our case. The following passage may be noticed :
"According to the learned counsel for the Revenue even if it is not a preparation of vegetable, it is still an article of food. Normally, the dictionary meaning of food is something taken into the system to maintain life and growth and to supply nourishment. We do no think that in that sense arrowroot powder sold by the assessee can be taken to be an article of food. As has been pointed out by the Tribunal, even if arrow-root is a vegetable, every product of vegetable cannot be taken to be an item of food. If every product of vegetable is taken as food, then even turmeric powder has to be taken as food, which is obviously untenable. In this view of the matter, we are in entire agreement with the view of the Tribunal and we accordingly hold that arrow-root powder sold by the assessee in this case cannot be taken to be either an article of food or a preparation of vegetable, which alone will bring it under item 103(viii) of the First Schedule to the Act."
We have extracted the main portion of the judgment for the purpose of our conclusion that entry 103(x) has to be read along with the main item, viz., "food". A controversy was raised by learned Additional Government Pleader that any beverage can also be a food item. Several judgments were cited on that point. For instance, in Commissioner of Sales Tax v. Sunhari Lal Jain [1975] 35 STC 425 (All.), it was held that hot tea is not a cooked food but only a beverage. In that case, the court was considering the expression, "cooked food" in the U.P. Sales Tax Act. In State of Gujarat v. Sarabhai Chemicals [1971] 27 SC 170 (Guj), "Limical", a product manufactured in the form of biscuits as well as in the form of powder with flavours and used mainly for the purpose of reducing obesity was held to be not an article of foodstuff or food provision. In Collector of Central Excise v. Parle Exports (P.) Limited , the question was whether non-alcoholic beverage bases are "food Products" or "food preparations" covered by the exemption Notification No. 55/75-CE dated 1st March, 1975, issued under the Central Excises and Salt Act, 1944. The Supreme Court held as follows at page 117 :
"Bearing the aforesaid principles in mind, in our opinion, the Revenue is right that the non-alcoholic beverage bases in India cannot be treated or understood as new 'nutritive material absorbed or taken into the body of an organism which serves for the purpose of growth work or repair and for the maintenance of the vital process' and an average Indian will not treat nonalcoholic beverage bases as food products or food preparations in that light."
The conclusion of the Supreme Court is as follows :
"We have no doubt, in our opinion that having regard to the language used, it would not be in consonance with the sprit and the reason of law to give exemption for non-alcoholic beverage bases under the notification in question. Bearing the aforesaid purpose in our opinion, it cannot be contended that expensive items like Gold Sport base, Limca base or Thums-Up base were intended to be given exemption at the cost of public exchequer."
The Supreme Court was concerned with the "beverage base" and the decision was that it will not be a food product or food preparation.
7. An analysis of all the judgments and the arguments of the learned counsel for the petitioners as well as the Additional Government Pleader lead us to the following conclusion. In the context of entry 103 and all the items of food mentioned therein, we are of the opinion that milk food can also be in the form of a beverage. In fact, the sub-entry (viii) of entry 103 says "milk foods including milk powder". It cannot be disputed that milk powder in not taken as such but is only taken as a beverage. The fact that Horlicks is normally taken as a beverage will not therefore be a ground to take it away from item "milk Foods". Therefore we reject the contention that because Horlicks is normally taken as beverage it cannot be a milk food. We are still left with the question which of the entry 103(viii) and 103(x) that can be comprehensively applied to the item Horlicks. We think that the most reasonable way of understanding the item is to hold that a product which is made predominantly out of milk should be treated as a milk food. A product which is manufactured as food item making use of milk as one of the ingredients will fall under entry 103(x). In this connection the argument of Mr. C. Natarajan that a milk product may fall short of milk food and fall under entry 103(x) appeals to us as the correct approach. Similarly for bringing the item under entry 103(viii), milk must be a predominant ingredient. On the basis of the above construction and taking note of the literature on the word, "malted milk food" we have no hesitation to conclude that Horlicks will come under entry 103(viii).
(v) The manner in which the Revenue has treated Horlicks for the past several years :
It is argued by the learned Additional Government Pleader that due to the fact that the department has all alone been accepting Horlicks as a milk food, it will not necessarily estop them from taking a different view now. In this connection, it was conceded that the Revenue has been treating Horlicks all along as a milk food falling under entry 24. Even after Tamil Nadu Act 39 of 1983 came into force from 1st July, 1983, Horlicks was being treated as falling under entry 103(viii), which was the replacement of entry 24. It is only when the Notification G.O.P. No. 253 dated 17th March, 1986 was promulgated reducing the tax from 10 per cent to 4 per cent in respect of milk foods that the department has changed its approach purely with a view to prevent the products like Horlicks from getting the benefit of reduced rate of tax. We may also refer to a series of letters from the said of the Revenue indicating that products like Horlicks are only milk foods. The Commissioner of Commercial Taxes in his letter dated 29th April, 1986 says as follows :
"Viva' is a milk food taxable at the reduced rate of 4 per cent single point with effect from 17th March, 1986. The copy of the Board's Proceedings Rt. 33/72 dated 6th January, 1972 is not furnished, as it is not readily available."
In the Government Memorandum No. 129579-ST/Spl./61-2 dated 9th February, 1962, certain clarifications were issued in respect of the entries as they stood at that time. The said notification refers to specific items and in respect of Horlicks, it is stated as 3 per cent single point tax under entry 24 of the First Schedule. We have also noticed that if Horlicks comes under entry 24, it has necessarily to come under entry 103(viii) as per the amended Schedule. It is now well-settled that the fact that Horlicks has been treated as a milk food for over two decades cannot be ignored altogether. Though such treatment by the Revenue will not estop them from pleading otherwise, the conduct of the Revenue shows that Horlicks is only a milk food. It is interesting to note that in Tax Case No. 1145 of 1987 relating to "Spert", the argument was that "Spert" cannot be categorised as milk food and compared with Horlicks which is a malted food made out of skimmed milk. The Appellate Assistant Commissioner in that case says that Horlicks is a malted milk food and does not contain any vitamin or mineral and therefore, it was being treated as coming under entry 24. We are, therefore, concerned with the factual question whether Horlicks is a milk food or not. On this aspect, the fact that Horlicks has been treated as milk food cannot be suddenly ignored unless the manner of preparation of Horlicks is itself changed and milk is not used to some extent as it was being used in the previous years. That is not the case of the Revenue. Therefore on the factual bass that Horlicks was being treated as a milk food all these years. It is not pretended that there is a change in the year 1990 is respect of the constituents of Horlicks.
8. A pertinent question was raised by learned Additional Government Pleader that in common parlance, Horlicks is not equated to a milk food. He says that nobody will be remained of Horlicks if one asks for "milk food." Learned counsel for the petitioner competently answers these points by saying that the common parlance meaning can be used only in respect of items which are in day-to-day use. Inasmuch as milk food is not a word of everyday use, there is no question of going to a shop and asking for milk food. Therefore, it is contended that the common parlance meaning cannot be applied in the instance case. For this purpose, Mr. C. Natarajan relies on the decision in Union of India v. Delhi Cloth and General Mills . It was held in that case :
".......... that excise duty being leviable on the manufacture of goods and no on their sale, the petitioners would no doubt be liable if they produced, 'refined oil', as known in the market, at an intermediate stage. But, it was clear that there could be no 'refined oil' as known in the market without deodorisation according to the specification of the Indian Standards Institute and the affidavits of the experts. Since, however, the process of deodorisation was admittedly applied in the respondents' factories only after hydrogenation was complete, they could not be said to produce 'refined oil' at any stage."
9. We therefore hold that the impugned order made in TNGST No. 1808226/89-90 dated 28th April, 1990 is vitiated by errors of law apparent on the face of facts and liable to be quashed. We also accept the contention of the learned counsel for the petitioner and the ratio of Mahendrakumar Ishwaralal and Company v. Deputy Commercial Tax Officer [1971] 28 STC 551 (Mad.) that it is not open to the Revenue to pass a provisional order of assessment after the end of the assessment year. Therefore, there is no point in directing the petitioners to seek the statutory remedies available under the Act. Accordingly, the writ petition is allowed and the impugned order is quashed and here will be no order as to costs.
10. We are left with Tax Case No. 1145 of 1987. We have already set out the facts of the case and the question is whether "Spert" will fall under entry 24 as it stood prior to Tamil Nadu Act 39 of 1983 or whether it will come under entry 103(viii) as it stood prior to Tamil Nadu Act 39 of 1983. We have only to apply the tests which we have formulated while discussing the case of Horlicks. An affidavit has been filed by the Vice-Presiden of the company setting out the manner and method of preparing "Spert" and also giving the constituents of the product. As in the case of Horlicks, the following facts are furnished.
SPERT 1000 grammes
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Input by weight Input by cost
---------------------------------
Gms. per cent Rs. Per cent
* Milk in form of calcium
caseinate 7040 66.15 18.20 44.88
Milk in form of skimmed
milk powder 2940 27.63 11.70 28.85
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Total milk input 9980 93.78 29.90 73.73
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Maltodextrin 480 4.15 4.50 11.10
Sugar 110 1.03 1.00 2.46
Malt extract 60 0.65 0.80 1.97
Vitamins, Minerals and
flavours 1157 0.11 4.35 10.72
* Milk 93.78 per cent in weight and 73.73 per cent in cost by way
of input in Spert.
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We, therefore agree with the finding of the Tribunal that "Spert" is a product obtained by blending skimmed milk powder with malted extract. The fact that the product is fortified by a small percentage of vitamins and minerals will not change the nomenclature of the product as a milk food. The Tribunal also relied on the letter of the Commissioner of Commercial Taxes dated 19th May, 1983, which runs as follows :
"It was found that malted milk foods like Horlicks, etc., which are not considered as baby food, but are really invalid foods or nutritious foods continued to enjoy the power rate of tax under entry 24 though they merited a higher rate of tax at 10 per cent leviable under entry 103 on a par with other beverages such as Bournvita, Ovaltine, etc. It was also considered that as baby foods are purchased generally by the comparatively well-to-do sections, entry 24 can be deleted and all milk foods brought under entry 103. Incidentally, condensed milk was also proposed for inclusion under entry 103. Thus, consequent on the deletion of entry 24 and amendment of entry 103, eleven milk foods previously taxed under entry 24 and condensed milk, sold under brand name, registered under the Trade and Merchandise Marks Act, would be liable to tax at 8 per cent at the point of first sale in the State with effect from 1st July, 1983."
11. We agree with the finding of the Tribunal having regard to the analysis of the various decisions on the aspect to which we have already made reference. Accordingly, the tax case is dismissed. There will be no order as to costs.
12. To sum up, Writ Petitions Nos. 9079, 11204 and 13828 of 1990 are dismissed. Writ Petition No. 6318 of 1990 is allowed. Tax Case No. 1145 of 1987 filed by the Revenue is also dismissed. We make no order as to costs in any of the cases.