1981 PLP (Trib (PTD)

(3) Ice‑cream. The Sales Tax Officer further noted in his order that when this circular was brought to the learned counsel's notice, he agreed ice‑cream‑mix was not exempt from sales tax and he signed the note to this effect on the S. T. O.'s order- sheet entry dated 31st May, 1976. In the same note the learned counsel also expressed, his inability to produce any circular or Notification to the effect that ice‑lollies were also exempt from sales tax. After examining the appellant's contentions and the consent of the learned counsel, the S. T. O. subjected both the items to sales tax. In appeal, before the learned A. A. C. also, the appellant failed because he confirmed the order of the S. T. O. The learned A. A. C. also took into consideration the learned counsel's note on the order‑sheet dated 31st May, 1976 that ice‑cream‑mix and ice‑lollies could be subjected to sales tax. Since the learned counsel contended that nothwithstanding his aforementioned note, the two items manufactured by the appellant which were not liable to tax, could not be made taxable simply by an alleged agreement. The learned counsel further relied on the exemption allowed vide Item No. 106 of Notification No. 9, dated 27th June, 1951 which, according to him, grants exemption to the sales of ice‑cream‑mix etc. For the sake of convenience, the Items Nos. 104 and 106, as amended vide Notification No. SRO.‑823(1)/73, dated 9‑6‑1973 are reproduced hereunder :‑ "

104. Fresh creams, fresh butter and ghee ;

106. Fresh meat, milk and cream preserved, concentrated or sweetened whether in liquid or in semi‑liquid form or dried such as blocks and powder." The learned counsel contends that the ice‑cream‑mix which during the course of his arguments, he mentioned as only "mix") was clearly exempt from sales tax because the ingredients of the mix were simply fresh milk, dried milk, sugar and ice and that these items being clearly exempted by the aforesaid Notifications, the product "mix" could not be subjected to tax. He submits that mix was nothing but all those items which are declared exempt and once they are so exempted they cannot become taxable simply by putting them together or by mixing them. The learned counsel also submits that "mix" being free from any essence could not be anything also than what has been exempted by the Notification. Similarly, he argued that ice‑lollies were also exempt from sales tax because they were the products of ice and sugar both of which were exempted items.

3. The learned Departmental Representative, on the other hand, contends that the ingredients mentioned by the learned counsel, as such, may not be liable to sales tax vide Item No. 106 of the Notification No. 9 mentioned above but when the same are mixed, they assume a different form and a different product. This new product is very much different from the ingredients considered separately and hence attracts sales tax. The learned Departmental Representative also made a reference to the Central Board of Revenue's Circular No. 2 of 1972, dated 6th January, 1972 which specifically laid down that notwithstanding the exemption granted to some products at Item No. 22 of the amended Notification No. 7, dated 27‑6‑1951, the following items were liable to sales tax :‑- (1) Flavoured milk ; (2) Ice‑ecream‑mix ; (3) Ice‑cream. Ho contends that Items Nos. 104 and 106 as per the amended Notification dated 9th June, 1973, were exactly the same as‑enumerated in Item No. 22 of Notification No. 7, dated 27th June, 1.951. The Central Board of Revenue's Circular No. 2 of 1972 dated 6th January, 1972 was thus squarely applicable on the appellant's products, namely, ice‑cream‑mix. The learned Departmental Representative tin the same analogy contends that ice‑lollies being different from ice, ‑were also liable to sales tax because the addition of sugar, flavour and colour converted the ingredients into an altogether new product.

4. We have heard the arguments of both the sides and have also considered the relevant facts of the case. We refrain from dealing with the controversy that in the initial stages before the Sales Tax Officer, the, learned counsel agreed that ice‑cream‑mix and ice‑lollies were liable to sales tax and he even signed the note on the order‑sheet dated 31‑5‑1976. Since the learned A. A. C. did not give any finding on this issue, because, parhaps he found substance in the learned counsel's contention that an item exempt from sales tax cannot become taxable simply because be concedes or agreed that the item is liable to sales tax. In the background of the facts considered by us in detail in the earlier paragaphs while discussing the treatment meted out by the S. T. Officer, we note that at that point of time, this Tribunal's decision reported as (1975) 31 Taxation 14 (Trib.), had given a finding that notwith standing the exemption available to the ingredients used in the manufacture of ice‑cream, the fact remains that the assessee manufactured an altogether different product which was neither milk, nor cream, nor sugar, nor favoured powder but it was ice‑cream, a different product and was liable to tax. It was, perhaps, on the basis of this knowledge of the Tribunal's decision that the learned counsel agreed before the S. T. O. that ice‑cream mix and ice lollies could also be liable to sales tax. The A. A. C. no doubt, did not decide the issue on the basis of the learned counsel's agreement but in our opinion as the background of the facts narrated above show, the learned counsel had reasons to agree with the S. T. O.

5. Coming back to the merits of the case, we find and also agree with the learned A. A. C. that whereas on the one hand the learned counsel relied on Item No. 22 which granted exemption to some ingredients but did not accept the contents of the Central Board of Revenue's clarificatory circular issued on that very Notification according to which ice‑cream‑mix and flavoured milk etc. were declared as taxable. We agree with the learned counsel that a circular of the Central Board of Revenue cannot change the legal position but the fact remains that through this circular the Central Board of Revenue clarified the Notification to suggest that although the individual items were exempt from sales tax but when processed or mixed with some other items they assume a different form and a different product which attracted sales tax. We may also mention that this Tribunal's decision cited above (about taxability of ice‑cream) was later on confirmed by the hon'ble High Court. Although separately fresh milk and cream preserved, concentrated or sweetened : . . . . . . . . . . . . . . . . were exempt from sales tax but when they were processed and converted into ice‑cream, they become a different product and attract sales tax. We do not have the benefit of going through the decision of the hon'ble High Court holding that ice‑cream was liable to sales tax. We, however, have the benefit of going through our decision cited (supra) wherein it was held that ice‑cream was liable to sales tax. The ratio of decision for holding ice‑cream to be liable to tax was that the appellant had been manufacturing something different from milk and cream and it could not be contended that its product is milk or cream as the commodities are generally known. "Ice‑cream‑is flavoured and sweetened milk" whereas milk and cream may or may not be sweetened. There is no doubt that "ice‑cream contains at least four per cent. of the powders and flavours and sixteen per cent. sugar and although eighty per cent of the other ingredients comprised of milk and cream yet, the resultant product is neither milk, nor cream nor sugar . . . . . . . . . . . . . . .". The position of mix is not different from ice‑cream because it is this very mix which chilled in ice cone machines, converts into a product known as ice‑cream. In fact, the ice‑cream‑mix is kept cold by putting ice in the mix and is supplied to owners of ice‑cream making machines where this mix is chilled and made puffy and sold as ice‑cream. In short, this mix is nothing but a raw material which after process of chilling etc., becomes ice‑cream. The ratio of decision according to which the ingredients of milk, sugar cream etc. when converted into ice‑cream becomes liable to sales tax is squarely applicable in the case of ice -cream‑mix. It no longer remains fresh milk sugar etc. but becomes a different identifiable product known as ice‑cream‑mix. This product, therefore, as also the ice‑lollies are clearly liable to sales tax. We accordingly uphold the learned A. A. C.'s order and dismiss the two appeals. Appeals dismissed.