The main legal point established in the judgment is the interpretation of statutory entries and the application of the nature of the product in determining its tax classification.

The judgment of the Court was delivered by

V. V. KAMAT, J. - The question that comes up for our consideration is of a limited character whether "falooda" would have to be understood as a milk product with reference to entry No. 122 of the Kerala General Sales Tax Act, 1963 or a "cooked food" including beverages as contemplated under entry 57, then prevailing for the assessment year 1991-92. Entry 57 is reproduced as follows :

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Sl. Description of goods Point of levy Rate of tax

No.

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1 2 3 4

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57 Cooked food including At the point of first 10

beverages not falling sale in the State by a

under entry 76A of dealer who is liable to

this Schedule sold tax under section 5.

or served in, -

(i) hotels and/or

restaurants, the

turnover in respect

of which is twenty

lakhs rupees and

above; and

(ii) bar attached hotels

and/or restaurants.

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It would be seen that when such a cooked food is sold or served, it is to be noted that the turnover up to 25 (20 ?) lakhs rupees is exempted and above the said limit, it was then taxable at 10 per cent.

2. At the other end, entry 122 speaks of milk products and its cognates, as specified thereunder. By the said entry, it is taxable at 8 per cent. The said entry is reproduced herein below :

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1 2 3 4

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122 Milk products, At the point of 8

including milk first sale in

powder, baby food, the State by

ghee, cheese and butter a dealer who is

except curd and liable to tax

buttermilk. under section 5.

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It would be seen that milk products would have to be understood in the context as specified in the said entry, including milk powder, baby food, ghee, cheese and butter except curd and butter milk. The controversy is limited only to the extent of application of the above two entries.

3. The assessing authority has considered the claim of the assessee with regard to an amount of Rs. 1,27,400 towards the sale of "falooda", contending that there is exemption for the whole of the above amount.

4. It is held by the assessing authority that "falooda" comes under "milk products" liable to tax at 8 per cent by virtue of entry No. 122. The authority has observed that the assessee was served with a notice affording an opportunity of being heard and further that the assessee has not availed of the opportunity, creating a situation of presumption that the assessee has no objection to the proposal on the basis of treating "falooda" as a milk product.

5. The first appellate authority, Appellate Assistant Commissioner, Agricultural Income-tax and Sales Tax, Kannur, by the order dated December 1, 1993, has considered the process of preparation of "falooda". It is as follows :

"'Falooda' is a cooked food in liquid form (beverage) and this is prepared by cooking ingredients like vermicelli, sago and rice which are added to sugar syrup obtained by boiling equal quantities of sugar and water. Dry fruits like cashewnuts, kismis, tutti-fruiti and khus khus and fresh fruits like grapes, bananas, pineapple, mango, etc., are also added to the said cooked food. Hence falooda is a cooked food for the preparation of which boiling process is involved and sold as a beverage. 'Beverage' means, 'liquid prepared for drinking' as per dictionar