Flavoured Milk Is Not 'Beverage'; Taxable At 5% GST: Karnataka High Court Provides Relief To Dodla Dairy

The Karnataka High Court held that flavoured milk qualifies as a dairy product under Tariff Heading 0402 and not as a 'beverage' under Tariff Heading 2202. Consequently, GST at 5% will be applicable on flavoured milk instead of 12%. Justice S.R. Krishna Kumar examined the classification of the flavoured milk under the GST, considering whether it falls under Tariff Heading 2202 (beverages containing milk) or under Tariff Heading 0402 (milk and cream, containing added sugar or sweetening matter). In the case at hand, the assessee/petitioner was engaged in the manufacturing and sale of milk and milk products, including flavoured milk. The revenue classified the flavoured milk under Tariff Heading 2202 and levied GST at higher rates i.e 12% and 18%, instead of Tariff Heading 0402, attracting GST @5%. A show-cause notice was issued to the assessee/petitioner under Section 74 of the CGST (Central Goods and Services Tax) Act. Further, an order was passed by the adjudicating authority confirming the demand made in the show cause notice. Subsequently, the assessee deposited the GST amount of Rs.72,95,235/- on 21.12.2021 under protest and filed an appeal, which was also dismissed by the first appellate Authority. The bench referred to the case of Sri Vijaya Vishakha Milk Producers Company Ltd. vs. Assistant Commissioner of Central Tax and others, in W.P. No. 254/2024 where Andhra Pradesh High Court held that …..flavoured milk cannot be treated to fall under the Tariff Heading 2202, the question of penalty under any of the aforesaid provisions would not arise. In any event, the question of whether a penalty can be levied, even if flavoured milk falls within 2202, merely on the ground that the dealer changed his classification of goods from one entry to another is left open. The bench further noted that the judgment passed in Sri Vijaya Vishakha Milk Producers (supra) was confirmed by the Supreme Court. The bench further referred to the case of Parle Agro Pvt. Ltd. v. Union of India, 2024(81) G.S.T.L. 283(Mad.) where the Madras High Court held that 'Flavoured milk derived from dairy milk beverage containing milk (Heading 2202, GST rate 12%) or 'milk and cream' of milch cattle or dairy animals cannot fall within Chapter 22 ibid. As per principle of 'Nosciter a sociss (meaning that words derive meaning from associated words), phrase 'Beverage containing milk can only encompass beverages with plant or seed-based milk, incidentally containing specified-strength alcohol Thus, 'Flavoured milk' should be classified under Tariff Heading 0402 of Customs Tariff Act, 1975, and is, hence, subject to Central Tax at 2.5% as per Sl. No. 8 in First Schedule to Notification No. 1/2017-C.T. (Rate), dated 28-6-2017 Section 9 of Central Goods and Services Tax Act, 2017-Section 9 of Tamil Nadu GST Council's recommendation was incorrect Goods and Services Tax Act, 2017. In view of the above, the bench allowed the petition and quashed the impugned orders. The bench further directed the department to refund the amounts paid by the assessee with applicable interest. Case Title: M/s Dodla Dairy Limited v. The Union of India Case Number: WRIT PETITION NO. 21566 OF 2025 (T-RES) Counsel for Petitioner/Assessee: T. Suryanarayan Counsel for Respondent/Department: Aravind V. Chavan, Jyoti M. Maradi2026 LLBiz HC (KAR) 1 Click Here To Read/Download Order

Flavoured Milk Is Not 'Beverage'; Taxable At 5% GST: Karnataka High Court Provides Relief To Dodla Dairy

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