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TMI Blog2017 (3) TMI 1636X X X X Extracts X X X X X X X X Extracts X X X X ..... a penalty of Rs. 5,000/- was also imposed on the appellant under Rule 25 of the Central Excise Rules, 2002. Aggrieved by the impugned order, the present appeal has been filed. 3. With the above background, we heard Shri Rahul Tangri, ld. Advocate for the appellant and Shri H.C. Saini, ld. DR appearing for the Revenue. 4. The product under dispute is described as 'NESCLAC Nutritious Milk Drink' contains the ingredients - Milk Solids, Glucose Syrup, Sugar, Antioxidants, Vitamins, Minerals and Methyl Flavour. The appellant classified the product under Tariff Heading 0404 90 90 attracting 'nil' rate of duty as "product consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter". Revenue issued show cause notice proposing to shift the classification to Tariff Item 1901 90 90, attracting 16% rate of duty. The main grounds taken by Revenue were that the appellants were adding artificial flavouring substance i.e. Methyl Vanillin Flavour. With the addition of the above ingredients, 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 allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained that what is envisaged under Chapter 19 is substantial change in the product falling under Chapter 4, wherein it no longer remains milk powder. He submitted that in addition to flavouring substance i.e. Methyl Vanillin Flavour, which is in the nature of sweetening matter, the appellant is merely adding a very miniscule percentage of total composition of flavouring substance. Hence, it cannot be said that the milk powder ceased to be milk powder for any substantial change in the product to justify to shift the classification from Chapter 4 to Chapter 19. In the Amrit Foods case (supra), the Tribunal decided the classification of milk shake mixes under Item 0404. In the appellant's own case (supra), the dispute was pertaining to classification of Nestle Milkmaid Kesar Kulfi Mix, Nestle Milkmaid Shahi Rabri Mix, Nestle Milkmaid Kalakand Mix and the Tribunal held the products to be classifiable under Tariff Heading 0404. The decision is affirmed by the Hon'ble Supreme Court as reported in 2015 (324) E.L.T. 418 (S.C.). Accordingly, he submitted that the product in the case in hand will be classifiable under Chapter 0404 90 00 as claimed by the appellant and not under Chapter 190 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - ... 1901 90 90 --- Other The disputed product, 'NESLAC NUTRITIOUS Milk Drink' is made up of milk predominantly but is added with a few additional ingredients. The show cause notice cited the ingredients of flavouring substance i.e. Methyl Vanillin Flavour. With the addition of these items, the view taken by Revenue is that the item will no longer remain classifiable under CETH 0404 but classified under Chapter 19. In the impugned order, ld. Commissioner has taken the view that addition of Methyl Vanillin Flavour is permissible since it is in the nature of sweetening agent. But he held that addition of artificial flavouring agent will modify the item into a food preparation of goods of Headings 0401 to 0404 and hence, it will be classifiable under [Tariff Item] 1901 90 90. Since CETH is fully align with the HSN Notes, it would be useful to refer to the explanatory notes for guidance for classification of the impugned product. "This Chapter covers : (I) Dairy Products : (A) Milk, i.e. full cream milk and partially or completely skimmed milk. (B) Cream. (C) Buttermilk, curdled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the HSN Notes to Tariff Headings 0404 and 1901, it is evident that milk powder would fall under Heading 1901 only if the same is excluded from Chapter 4. That brings us to the question whether adding artificial flavouring substance will jettison the product from Chapter 4 to Chapter 19. 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". In this view of the matter, there is no justification to shift the classification of the main product from 0404 to 1901, on account of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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