The Karnataka High Court on Wednesday brought major relief to Dodla Dairy Limited, setting aside GST demands running into nearly ₹73 lakh on the classification of flavoured milk. The court ruled that flavoured milk should be taxed as milk under the lower GST slab and not as a beverage, directing the tax department to refund the amount already collected, along with applicable interest.
The judgment was delivered by Justice S.R. Krishna Kumar while hearing a writ petition filed by the dairy major challenging earlier tax and appellate orders.
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Background of the Case
Dodla Dairy Limited, a registered GST dealer engaged in the sale of milk and milk products, was issued a show cause notice in September 2020 under Section 74 of the Central GST Act. The tax department alleged that flavoured milk sold by the company was wrongly classified under GST Tariff Heading 0402 (milk and cream) and should instead fall under Heading 2202, which attracts a higher tax rate as a beverage.
Following adjudication, the department confirmed the demand, leading Dodla Dairy to deposit ₹72.95 lakh in December 2021 under protest. An appeal before the appellate authority in Mysuru was also dismissed, prompting the company to approach the High Court.
Dodla Dairy argued that the issue was no longer open to debate, pointing out that multiple High Courts, including the Andhra Pradesh and Madras High Courts, had already held that flavoured milk remains milk for GST purposes. The company submitted that the addition of minor flavouring does not change the essential character of milk.
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On the other hand, the tax department contended that flavoured milk is perceived as a beverage by consumers and therefore attracts a higher GST rate under the relevant tariff entry.
Court’s Observations
After examining the records and earlier rulings, the court noted that identical disputes involving the same company had already been decided in its favour by the Andhra Pradesh High Court. Those rulings were later upheld by the Supreme Court, lending finality to the issue.
The court rejected the argument that adding flavour transforms milk into a different commercial product. “The addition of a small quantity of flavour does not alter the basic nature of milk,” the bench observed, noting that GST tariff entries under Heading 0402 already cover milk containing added sugar or sweetening matter.
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Justice Krishna Kumar further pointed out that judicial discipline required tax authorities to follow settled law instead of taking a contrary stand in identical cases.
The court relied heavily on prior judgments which clarified that flavoured milk predominantly consists of milk and does not become a separate beverage merely due to added flavour. The bench also referred to the Madras High Court’s ruling in Parle Agro’s case, which reached the same conclusion on GST classification.
Importantly, the court noted that the Supreme Court had declined to interfere with similar Andhra Pradesh High Court judgments, strengthening Dodla Dairy’s claim.
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Final Decision
Allowing the writ petition, the High Court quashed both the original adjudication order dated September 22, 2021, and the appellate order dated July 25, 2022.
The court directed the GST authorities to refund the entire amount paid by Dodla Dairy, along with applicable interest, within three months from receipt of the order.
With this ruling, the dispute over GST classification of flavoured milk, at least in this case, stands conclusively settled in favour of the taxpayer.
Case Title: M/s Dodla Dairy Limited v. Union of India & Ors.
Case No.: Writ Petition No. 21566 of 2025
Case Type: Writ Petition (Tax – GST)
Decision Date: 11 December 2025
