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2017 (3) TMI 1636 - AT - Central ExciseClassification of goods - NESCLAC Nutritious Milk Drink - Revenue sought to reclassify the above product under Tariff Item 1901 90 90 - appellant classified the above product under Tariff Heading 0404 - Revenue was of the view that the item manufactured would go out of the purview of Tariff Item 0404 since only sugar or other sweetening matter is allowed to be added to natural milk constituent under Heading 0404 - whether the addition of artificial flavour would make it a food preparation and therefore, it would no more remain dairy produce and would be covered under Heading 19.01? Held that: - The disputed product, ‘NESLAC NUTRITIOUS Milk Drink’ is made up of milk predominantly but is added with a few additional ingredients - The reference to HSN Notes to Chapters 4 and 19 clearly indicates that there is no reference to flavouring substance being one of the prohibited ingredients for the product in Chapter 4. HSN Notes also make it clear that product would fall under Chapter 1901 only when natural milk constituents are added with other items such as cereal, groats, yeast, etc., or the milk constituent is replaced by an other substance such as oleic fats. From what is stated before us, we are convinced that this is not a case. Addition of small quantity of artificial flavouring substance does not change the essential nature of the product from what is covered under 0404. It does not make it a food preparation of milk instead of a “product consisting of natural milk constituent” - there is no justification to shift the classification of the main product from 0404 to 1901, on account of addition of a minuscule quantity of flavouring substance. Even when the stabilizers were not specifically mentioned in the Chapter Note 4 of the Central Excise Tariff Act, still the milk shake mixes containing the same were held classifiable under the Tariff Heading 0404 by the Hon’ble Supreme Court in the case of Commissioner of Central Excise Versus M/s Amrit Food (A. Division of Amrit Corporation Ltd) [2015 (9) TMI 1269 - SUPREME COURT], on the ground that stabilizers do not interfere with basic characteristics of the milk products and are added merely to impart stability to the product - same analogy can be drawn in the present case where flavouring agent of 0.03% of the total composition is added, which does not change the basic characteristic of the product and the product remains a nutritious milk drink only. The appropriate classification for the impugned product will be under Chapter Tariff Item 0404 90 00 of the Central Excise Tariff Act, 1985, as contended by the appellant - appeal allowed - decided in favor of appellant.
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