Background of the Case
The dispute originated from a demand order dated September 18, 2021, wherein the tax authorities classified flavored milk under GST Tariff Heading No. 2202 9930, which attracted a 12% GST (6% CGST + 6% SGST). Consequently, the company was held liable for a differential tax payment of ₹3.52 crore, along with a penalty of ₹3.53 crore plus applicable interest for the period spanning July 2007 to March 2020.Heritage Foods, however, contended that flavored milk should be classified under Tariff Heading No. 0402 9990, which carries a 5% GST (2.5% CGST + 2.5% SGST). The company paid the ₹3.52 crore under protest while filing a writ petition in the Andhra Pradesh High Court on November 18, 2021.
Court Ruling & Impact
After reviewing the case, the Hon’ble Andhra Pradesh High Court ruled in favor of Heritage Foods, determining that flavored milk rightfully falls under Tariff Heading No. 0402 9990. The ruling effectively quashes the demand for the additional GST, penalties, and interest, while directing Heritage Foods to file for a refund of the previously paid amount.The company has confirmed that it is in the process of claiming the refund as per the court’s directive.
Financial & Business Implications
- Immediate financial relief: The court’s ruling eliminates a potential financial burden of ₹7.05 crore (₹3.52 Cr in tax + ₹3.53 Cr penalty) along with any accrued interest.
- Cash flow boost: If the refund claim is processed successfully, it will improve Heritage Foods’ liquidity and cash reserves.
- Regulatory clarity: The judgment reinforces the company’s stance on tax classification for flavored milk, potentially benefiting the entire dairy industry.
Company Profile
Heritage Foods Limited, founded in 1992, is one of India’s leading value-added dairy brands, offering a diverse portfolio that includes milk, curd, ghee, paneer, and flavored milk. With a presence in 17 states across India and a consumer base exceeding 1.5 million households, the company operates through an extensive distribution network of 7,200+ distributors and agents.Heritage Foods is also committed to sustainability, boasting 11.70 MW of renewable energy capacity through solar and wind power.