TMI Blog2021 (4) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... CTH 0402 - Also the product being not Whey , the plausible CTH will be 0404 90 only and there again the Explanatory notes clearly states that this heading includes products which lack one or more natural milk constituents, to which natural milk constituents are added, whereas in the case at hand, the product do not lack any natural milk constituents nor any natural milk constituents is added to the product - Therefore, the product is not classifiable under either CTH 0402 or 0404. Whether classifiable under the said tariff item 22029930 or otherwise? - HELD THAT:- Other non-alcoholic beverages, not including fruit or vegetable juice of Heading 20.09 are covered under 2202.99 - Other and as per the explanation at (B)(2), the group covers beverages ready for consumption such as those with a basis of milk. The word beverage , though not defined under CGST Act, 2017, is considered, in common parlance, as a drink that can be consumed directly and the instant product flavored milk can be consumed as it is and hence is a beverage with a basis of milk. Therefore, the product is appropriately classifiable under CTH 2202 99 30. Thus, flavoured milk is classifiable under Tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd finally bottling. The flow chart of the manufacturing process is submitted. Further submitted that the process involves various operations, but it comes out from the process that (i) adding flavors to milk does not change essential character of the milk; (ii) flavored milk is a substitute for milk (iii) It is a simple preparation of milk (iv) no manufacturing process is involved nor does milk change its composition in any way. Since the commodity milk and milk products are enumerated in Chapter 4, the applicant understands that tariff item/ HSN code 04029990 is applicable to flavored milk. 4.1 The applicant submitted that as per Harmonised System of Nomenclature, Chapter 4 covers the following Dairy Products; i. Milk (i.e. Full Cream Milk and partially or completely skimmed milk). ii Cream iii Butter milk, Curdled milk and cream, yogurt, kephir and other fermented acidified milk and cream iv Whey v Products consisting of natural milk constituent, nor elsewhere specified or included, and vi Cheese and curd. As per the GST Tariff, Chapter 4 specifically covers Dairy produce; birds eggs; natural honey; edible products of animal origin, not els ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Specialities Ltd. V/s UOI at this stage, because the Hon ble High Court has, in the said judgment reported in 1991 (51) ELT 310 (P H), held that the Indian Standard specifications for milk powder issued by the ISI as well as the Standards under the prevention of Food Adulteration Rules, 1955 were relevant to decide even under the Central Excise Law as to what was skimmed milk or partially skimmed milk or full skimmed milk. The view of the Hon ble Punjab Haryana High Court, as expressed in the above judgment, is also affirmed by the Hon ble Supreme Court, and therefore, the Indian Standard as well as PF Rules may be applied to consider classification of Amul Kool/Amul Kool Caf under the GST tariff which is an adoption of the Customs tariff. 4.5 The applicant submitted that a product containing fat more than 1.5 and less than 26.0% is considered to be partially skimmed milk/powder under the PF Rules. Same parameters for partly skimmed milk/powder i.e. fat percent by mass being above 1.6 and below 26.0% is prescribed under ARE: 1165- 1975 also. These Standards are applied by the Punjab Haryana High Court as could be seen from paras 7 to 10 of the above judgment. Since f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Dairy Research Institute, Bangalore has also confirmed that flavored milk falls under Dairy produce as per the FSSAI, 2006. Under FSSAI regulations 2011, section 2.1.3 defines flavored milk as a product prepared from milk or other products derived from milk, or both, and edible flavoring with or without addition of sugar, nutritive sweeteners, other non-diary ingredients, including stabilizers and food colours . Flavored milk shall be subjected to heat as provided in sub-regulation 2.1.1 (general standards for milk and milk products). Where flavored milk is dried or concentrated, the dried or concentrated product an addition of prescribed amount of water also gives a product conforming to the requirements of flavored milk. 7. The applicant submitted that a similar Advance Ruling Application seeking clarification regarding the HSN code and rate of duty for flavored milk was made by M/s. Karnataka Co-operative Milk producers Federation Ltd., Bangaluru, which has been decided by the Adjudicating in Bangalore. It is held by the said Advance Ruling Authority that the commodity flavored milk is classified under the Tariff heading 04029990. The said Advance Ruling Authority has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he taste. The essential constituents of the milk have not changed even after adding sugar and permitted flavours and still retain its essential character of milk. Further stated that the process involves various operations, but it comes out from the process that (i) adding flavors to milk does not change essential character of the milk; (ii) flavoured milk is a substitute for milk (iii) It is a simple preparation of milk (iv) no manufacturing process is involved nor does milk change its composition in any way. The word milk is statutorily defined under Note 1 to Chapter 4, and according to Note 1, the expression milk means full cream milk or partially or completely skimmed milk. Heading Nos. 0401 and 0402 would therefore, cover milk, that is to say, full cream milk or partially or completely skimmed milk. Since the commodity milk and milk products are enumerated in Chapter 4, the applicant is of the view that tariff item/ HSN code 04029990 is applicable to flavored milk. 14. In terms of explanation (iii) and (iv) to Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017, tariff heading, sub-heading, heading and chapter shall mean respectively a tariff item, sub-headin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining added sugar or other sweetening matter : 0404 10 10 ---Whey, concentrated, evaporated or condensed, liquid or semi-solid 0404 10 20 ---Whey, dry, blocks and powdered 0404 10 90 ---Other 0404 90 00 -Other The Chapter Note 1 of Custom Tariff Act,1975 is read as under : I. The expression milk means full cream milk or partially or completely skimmed milk. The relevant explanatory notes of CTH 04.02 and 04.04as per the HSN is as below: CTH 04.02 04.02 Milk and cream, concentrated or containing added sugar or other sweetening matter (+). 0402.10 -In powder, granules or other solid forms, of a fat content, by weight, not exceeding 1.5% -In powder, granules or other solid forms, of a fat content, by weight, exceeding 1.5% : 0402.21 --Not containing added sugar or other sweetening matter 04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural milk constituents and the additives mentioned in the General Explanatory Note to this Chapter, the products of this heading may also contain added sugar or other sweetening matter. The powdered products of this heading, particularly whey, may contain small quantities of added lactic ferments, with a view to their use in prepared meat products or as additives for animal feed. The heading does not cover: (a) Skimmed milk or reconstituted milk having the same qualitative and quantitative composition as natural milk (heading 04.01 or 04.02). (b) Whey cheese (heading 04.06). (c) Products obtained from whey, containing by weight more than 95% lactose, expressed as anhydrous lactose, calculated on the dry matter (heading 17412). (d) Food preparations based on natural milk constituents but containing other substances not allowed in the products of this Chapter (in particular, heading 19.01). (e) Albumins (including concentrates of two or more whey proteins, containing by weight more than 80% whey proteins, calculated on the dry matter) (heading 35.02) or globulins (heading 35.04). 14.2 From the above, the following are deduce: Milk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred case CETAT was to decide whether skimmed milk powder produced by them is classifiable under sub-heading 0401.19 of the Schedule to the Central Excise Tariff Act as claimed by them or under sub-heading 0401.13 as confirmed by the Commissioner (Appeals) under the impugned order whereas the present application is with regard to the classification of Beverages containing milk and not of skimmed milk powder . Hon ble Punjab Haryana High Court in case of Food Specialities Ltd. V/s UOI reported in 1991 (51) ELT 310 (P H), held that the Indian Standard specifications for milk powder issued by the ISI as well as the Standards under the prevention of Food Adulteration Rules, 1955 were relevant to decide even under the Central Excise Law as to what was skimmed milk or partially skimmed milk or full skimmed milk. The aforesaid judgement is not applicable in the instant Advance Ruling case because the said judgement is with regard to decide the nature of skimmed milk or partially skimmed milk or full skimmed milk whereas in the case at hand is to decide the classification of Beverage containing milk . Further, the other Act cannot be considered to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2202 99 10 ---Soya milk drinks, whether or not sweetened or flavoured 2202 99 20 ---Fruit pulp or fruit juice based drink 2202 99 30 ---Beverages containing milk 2202 99 90 ---Other The relevant Explanatory notes as per HSN is as below: 22.02 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09. 2202.10 -Waters, including mineral waters anti aerated waters, containing added sugar or other sweetening matter or flavoured -Other : 2202.91 --Non-alcoholic beer 2202.99 --Other This headings covers non-alcoholic beverages, as defined in Note 3 to this Chapter not classified under other headings, particularly heading 20.09 or 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redients has considered the item to be beverage containing milk falling under Chapter 22 as against classification under Chapter 4 - Milk and Milk Products . The item cannot be used as milk per se in view of the addition of flavour added to it and it has to be considered as a beverage. This is our prima facie finding. 17.5 The Hon ble High Court of Gujarat, in the case of M/s. Kaira Dist. Coop. Milk Producers Union Ltd. v. UOI [2015 (320) E.L.T. 408 (Guj.)] dealt with the issue of classification of flavoured milk, which is as follows : [Order per : M.S. Shah, J. (Oral)]. - What is challenged in this petition under Article 226 of the Constitution of India is the constitutional validity of the Central Government Notification No. 28/2007-Central Excise, dated 15-6-2007, particularly Serial No. 1 in the table insofar as in column No. 2, code 2202 90 30 is given to Flavoured milk of animal origin while giving the said item exemption from duty. The dispute is about the flavoured milk being produced by the petitioners under the brand name Amul Kool/Amul Kool Cafe. 2. Mr. Paresh M. Dave for the petitioners has submitted as under :- 2.1 Earlier under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kg. Nil 2.3 Simultaneously with bringing into operation the above Tariff Amendment Act, the Central Government has issued various Notifications thereby maintaining the effective rates as they stood for various products till 28-2-2005 once again signifying that the objective of the above Tariff Amendment Act was not to change scope of any Chapter or to change classification of the excisable goods, nor was the objective to change the rate structure of the excisable goods. 2.4 According to the department, as per the show cause notice dated 16-04-2007, the Flavoured milk falls in Chapter 22 under Tariff Item No. 2202 90 30. CHAPTER 22 Beverages, spirits and vinegar Tariff Item Description of goods Unit Rate of duty (1) (2) (3) (4) 2202 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in. As the product in question was classified as flavoured milk under SH No. 0401.11 of the Tariff as it stood till 28-2-2005 and since it is not disputed by the Revenue even at this stage that Amul Kool/Amul Kool Cafe is flavoured milk, the respondents would now treat the goods as chargeable to nil rate of duty from 15-6-2007. However, in the process, the petitioners right to establish classification of these goods under Chapter 4 of the Tariff as dairy produce has been defeated because the classification of this product is shown under this Notification as 2202 90 30. 2.7 The petitioners submission is that Section 5A of the Central Excise Act empowers the Central Government to exempt excisable goods of any specific description from the whole or any part of the duty of excise leviable thereon. The power is thus, to grant exemption of excisable goods of any specified description, but not to decide a classification of any excisable goods by way of a notification issued under this Section. The Central Government could have very well prescribed nil rate of duty for flavoured milk of animal origin without referring to its classification in the said Notification, but having pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency of the proceedings arising from the show-cause notice, it will be open to the petitioners to make a request before the Commissioner of Central Excise to adjourn the hearing suitably so as to await the decision of the Central Government on the representation. We are sure that such a request will be considered by the Commissioner in the proper perspective when the matter comes up for hearing before the Commissioner on 16-8-2007. 5. The petition stands disposed of in the above terms. 6. Liberty to apply in case of difficulty. 7. Direct service is permitted. 17.6 The above, decisions relate to the Central Excise regime. However, the interpretation and Ratio Decidendi is applicable to the very goods under GST also. 17.7 In fact many dairy companies approached GST Council seeking clarification on the classification of flavoured milk. The matter recorded in the Agenda for 31st GST Council Meeting (Volume-2), dated 22-12-2018, in this regard is as follows : S.No. Description HSN Present GST Rate (%) Requested GST Rate (%) Comments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Andhra Pradesh Advance Authority in case of M/s. TIRUMALA MILK PRODUCTS PVT. LTD in ELT 2020 (32) G.S.T.L. 558 (A.A.R. - GST - A.P.) has held that, Milk - Flavoured milk - Classifiable under Tariff Item 2202 99 30 of First Schedule to the Customs Tariff Act, 1975 as a beverage containing milk under HS Code 2202 - Rate of tax applicable is 12% GST (6% CGST + 6% SGST) under Entry No. 50 of Schedule II to Notification No. 1/2017-C.T. (Rate) as amended. [para 8.6] (ii) Andhra Pradesh Advance Authority in case of M/s. SRI CHAKRA MILK PRODUCTS LLP in ELT 2020 (32) G.S.T.L. 206 (A.A.R. - GST - A.P.) has held that, Milk - Flavoured milk - Classifiable under Tariff Item 2202 99 30 of First Schedule to the Customs Tariff Act, 1975 as a beverage containing milk under HS Code 2202 - Rate of tax applicable is 12% GST (6% CGST + 6% SGST) under Entry No. 50 of Schedule II to Notification No. 1/2017-C.T. (Rate) as amended. [para 8.6] The above Rulings of Advance Authority are squarely applicable in the applicant case. In view of the said Rulings, it can be concluded that applicant s product Flavoured milk merits classifiable under Tariff Heading 22029930 of the Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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