DEPUTY COMMISSIONER LAW BOARD OF REVENUE TAXES ERNAKULAM Vs. THIRUVANANTHAPURAM REGIONAL CO-OPERATIVE MILK PRODUCERS UNION LTD

JUDGEMENT

(1.) State is the revision petitioner. Assessee is the respondent. The assessment year is 199192. The matter arises under the Kerala General Sales Tax Act, 1963, for short the Act.

(2.) The respondent/assessee is a Milk Marketing Cooperative Society at Kollam. For the assessment year 1991-92, the assessee filed a return disclosing a total turnover of Rs. 7,63,47,185.39 and claimed exemption on a turnover of Rs. 7,07,51,515.89. The assessee admitted only a taxable turnover of Rs. 62,13,269.22. The assessing authority after verification of the books of accounts of the assessee completed the assessment on a taxable turnover of Rs. 62,13, 270 as per order dated 28th November 1992 (Annexure-A). The question is whether 'Skimmed Milk Powder' when sold as milk after adding water is 'Fresh Milk'.

(3.) The Deputy Commissioner, A.I.T. and S.T., Kollam initiated suo motu proceedings under S.35 of the Act stating that on a scrutiny of the assessment records for the year 1991-92, it is seen that the assessee had effected interstate purchase of skimmed milk powder for Rs. 65,41,200 and considering the opening and closing stock of the above item, there is sale or consumption of skimmed milk powder valued at Rs. 64,57,934. The Deputy Commissioner also observed that as the assessee had sufficient purchase of fresh milk, it cannot be presumed that the milk powder was used for making milk and that the society had not produced any evidence to show that skimmed milk powder purchased was used for making milk. It was further stated that "Fresh Milk'' is exempted from tax under S.R.O.342/63. The Deputy Commissioner, therefore, was of the view that the turnover of Rs. 65,41,300 representing the purchase turnover of skimmed milk powder has escaped assessment. The assessee filed objection to the notice issued by the Deputy Commissioner. However, rejecting the said objections the Deputy Commissioner passed the order dated 25th September 1996 (Annexure-B) setting aside the assessment order for the year 1991-92 and remanding the matter to the assessing authority for fresh disposal in accordance with law. The petitioner challenged the said order before the Sales Tax Appellate Tribunal, Trivandrum. Before the Tribunal, the petitioner contended that milk procurement in dairies is highly influenced by seasons, which in dairy parlance is termed as "Flush and Lean Seasons". Acute shortage of milk procurement is a grave phenomenon felt during the lean months of January to April every year. This situation necessitates reconstitution of skimmed milk powder in order to maintain the fluid milk stock and sustain the marked demand during the lean months. It is further stated that during lean season, the petitioner usually procure skimmed milk powder from neighbouring State since the said powder is less voluminous than fluid milk and can be transported without incurring substantial transportation costs. Being dried form of fresh milk, buffer stock of S.M.P. can be stored in the dairy by which the appellants can assure the milk availability during lean months. It was also contended that reconstitution of skimmed milk powder to make fresh fluid milk is legally permitted and that reconstituted milk is not a product but a liquified form of fresh skimmed milk powder. The process is also explained. In the dairy, "S.M.P." reconstituted milk is pasteurized, standardized and converted into fresh pasteurized toned milk for sale. It is further contended that ever since from the commencement of their business, the department has completed the assessments for all the previous years by accepting the return and the books of accounts. The assessee also contended that the Deputy Commissioner had no material or data before him for invoking the suo motu proceedings under S.35 of the Act and that the assessment was set aside on mere surmises and presumptions. The Tribunal found force in the contention of the petitioner that there is no material on record before the Deputy Commissioner to establish that the appellants have effected any sales of skimmed milk powder as such. The Tribunal accordingly set aside the order of the Deputy Commissioner and restored the order of the assessing authority.