That soft-serve ice-creams dispensed through vending machines in fast food chain outlets contain just 5 per cent milk fat whereas hardened ice-creams served as dessert must mandatorily contain more than 8 per cent does not change the innate character of the product held the Supreme Court in Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant (P) Ltd., New Delhi. While ice-creams attracted 16 per cent excise duty, edible preparations not specified elsewhere enjoyed complete exemption. Predictably, the respondent plumped for the latter and the Revenue the former.
During the relevant period, the Respondent was engaged in the business of selling burgers, nuggets, shakes, soft-serve through its fast food chain of restaurants, under the brand name McDonalds. As far as the manufacture and service of ‘soft serve’ was concerned, the respondent used to procure soft serve mix in liquid form. At the producer’s end, raw milk was pasteurised, skimmed milk powder was added (the milk fat content in the said mixture is stated to be 4.9 per cent, not exceeding 6 per cent at any stage), sweetening agent in the form of sugar or glucose syrup and permitted stabilisers were added, the mixture, in liquid form, was then homogenised, packed in polyethylene pouches and stored at 0 to 4 °C. This material was then transported to the outlets under the same temperature control, where the liquid mix was pumped into a ‘Taylor-make’ vending machine, further cooled along with the infusion of air, and finally, the end product, ‘soft serve’, was drawn through the nozzle into a wafer cone or in a plastic cup and served to the customers at the outlet.
The Supreme Court held that in the market, ice creams both hard and soft were known as ice creams, period and hence exigible to excise duty as such i.e. at 16 per cent.
(The author is a New Delhi-based chartered accountant)