Case Note & Summary
The appellant, Yakult Danone India Pvt Ltd, is the manufacturer of a product called 'Yakult', which it claimed is akin to 'lassi' and thus a milk product entitled to the benefit of Entry 19 of the First Schedule of the Karnataka Value Added Tax Act, 2003 (KVAT Act). The appellant approached the Authority for Clarification & Advance Rulings constituted under Section 60 of the KVAT Act seeking a clarification on the rate of tax chargeable on the product. By an order dated 21.4.2012, the Authority held that the product would be chargeable to tax under Section 4(1)(b)(iii) of the KVAT Act at the rate of 14%. Challenging this order, the appellant filed the present appeal under Section 66(1) of the KVAT Act. The High Court heard Sri Shivadas, counsel for the appellant, and Sri K M Shivayogiswamy, Additional Government Advocate for the respondent. The court noted that although several grounds on the merits were raised, a preliminary ground regarding the constitution of the Authority was taken up. The Authority under Section 60 of the KVAT Act must include a member from the commercial taxes department. The court found that the Authority which gave the ruling did not have such a member, rendering it not properly constituted. Consequently, the impugned order was liable to be set aside on this ground alone. Additionally, on the merits, the court observed that the product 'Yakult' is akin to 'lassi', a milk product, and thus falls under Entry 19 of the First Schedule, which covers milk products and is taxable at 4%, not under Section 4(1)(b)(iii) at 14%. The court allowed the appeal, set aside the impugned order, and directed that the product be classified under Entry 19 of the First Schedule of the KVAT Act, taxable at 4%.
Headnote
A) Constitution of Authority - Section 60 KVAT Act - Requirement of Member from Commercial Taxes Department - The Authority for Clarification & Advance Rulings under Section 60 of the Karnataka Value Added Tax Act, 2003 must include a member from the commercial taxes department; the absence of such a member renders the Authority not properly constituted and its order invalid. Held that the impugned order is liable to be set aside on this preliminary ground alone (Paras 3-4). B) Classification of Goods - Milk Product - Entry 19 First Schedule KVAT Act - The product 'Yakult' is akin to 'lassi' and is a milk product; hence it falls under Entry 19 of the First Schedule of the KVAT Act, which covers milk products, and is taxable at 4% rather than under Section 4(1)(b)(iii) at 14%. Held that the Authority's classification was erroneous (Paras 2, 5).
Issue of Consideration
Whether the Authority for Clarification & Advance Rulings was properly constituted under Section 60 of the Karnataka Value Added Tax Act, 2003, and whether the product 'Yakult' is classifiable under Entry 19 of the First Schedule as a milk product taxable at 4% or under Section 4(1)(b)(iii) at 14%.
Final Decision
The appeal is allowed. The impugned order dated 21.4.2012 passed by the Authority for Clarification & Advance Rulings is set aside. It is held that the product 'Yakult' is a milk product falling under Entry 19 of the First Schedule of the Karnataka Value Added Tax Act, 2003, and is taxable at 4%.
Law Points
- Constitution of Authority for Clarification & Advance Rulings under Section 60 of KVAT Act must include a member from the commercial taxes department
- absence renders order invalid
- Classification of goods under VAT
- Interpretation of taxing entries
- Milk product classification
