TMI Blog2021 (8) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... en with added flavours until it is consumed, it is clearly established that the Milk referred to in this Tariff heading and that of the appellant are not the same and the products in hand are not covered under CTH 0402. The products in hand are products of Standardized/Toned Milk which are UTH sterilized and added with flavours, sugar, water, stabilizers, regulators, etc These are not Full cream milk or partially or completely skimmed milk and therefore not covered as Milk under CTH 0402. Further, the products do not lack any natural constituents and further no natural milk constituents are added to it and therefore, are not covered under CTH 0404 also - there are no infirmity in the findings of the lower authority that the product in hand do not fall under Chapter 4 of the Customs Tariff, though the product is categorized under Dairy products and analogues under FSSAI Regulation 2011. NDDB being a nodal agency in the Dairy products and the 'Flavoured Milk' is categorized as Beverage as can be seen above. The process mentioned under Flavoured Milk , above is the one followed by the appellant in the case at hand. Further, Beverage as per the dictionary definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. The subject appeal has been filed under Section 100(1) of the Tamilnadu Goods Services Tax Act 2017/Central Goods Services Tax Act 2017 (hereinafter referred to the Act ] by Brittania Industries Limited (hereinafter referred to as Appellant ). The appellant is registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant had filed an application before Hon ble Authority for Advance Ruling, seeking clarification on the following questions: Whether UHT Sterilized Flavoured Milk is classifiable under Chapter 4 (Tariff Heading 0402 which covers Milk... containing added sugar or other sweetening matter... or alternatively, Tariff Heading 0404 which covers Other , i.e. products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included ) 3. The Original Authority has ruled as follows: UHT Sterilized Flavoured Milk marketed under the brand name Britannia Winkin Cow Thick Shake by the applicant is not classifiable under the Tariff heading 0402 /0404 but classifiable under CTH 22029930. 4. Aggrieved by the above decision, the Appellant has filed the present appeal. The grounds of appeal are as follows: The product under consideration i.e., flavoured milk is a daily produce. It is essentially milk added with sugar and permitted additives. The single largest ingredient in the product, in quantity and essence is milk which constitutes more than 80-90% of the product. The other ingredient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. The Ld. AAR has also failed to appreciate and consider the catena of earlier judicial precedents (detailed hereunder) which squarely support the view that the product is classifiable under Chapter 4. The Impugned Order deserves to be set-aside on this ground alone. The position and treatment adopted by the Food Safety and Standards Authority of India, which is the regulator for the Food sector, is of utmost relevance in determining classification of a product. The Ld. AAR ought to have appreciated that the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 ( the FSS Regulations ) set out the categorisation of foods for prescribing standards and permitted ingredients and additives. It is clear that in common parlance and as per the FSSAI, flavoured milk is essentially milk / dairy product, rather than a beverage made from milk. In view of this aforesaid, the Ld. AAR ought to have appreciated that flavoured milk is nothing but milk, rather than a beverage containing milk. The Appellant therefore submits that the product deserves to be classified under Chapter heading 0402. At Para No. 6.8 of the Impugned Ruling, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, it is submitted that the reliance on the aforesaid decision by the Ld. AAR is not relevant to the factual matrix or question of law in the present case and is hence wholly misplaced. In the present case they do not seek to apply a provision from the FSS Regulations, as much as it seeks to refer to the provisions to better understand the nature of the product as per the government regulator of the concerned product. The question before the Ld. AAR was merely determination of classification of the said product. In this context of determining classification of a product, the Hon ble Apex Court has held that the FSSAI Regulations are relevant and can be relied on, in the decision in Parle Agro(supra). Therefore, it is submitted that the FSSAI Regulations relied on by them ought to have been considered by the Ld. AAR while passing the Impugned Ruling. The Impugned Ruling is therefore unsustainable. Even if flavored milk is considered not to be milk itself, but a product containing milk/milk constituents, it would still be classifiable under Chapter 4, specifically Entry 0404 90 00. While in terms of the foregoing submissions, the most appropriate classification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifiable under two or more headings, the entry which provides the more specific description will cover the product in question. Thus, even if flavoured milk is classifiable under two or more headings i.e. under Chapter 4 and Chapter 22, then as per the General Rules, the most specific description shall be preferred over general description. The product in the present case is commonly known and understood as flavoured milk , as it is essentially a form of milk rather than a derivative of milk or milk product. It does not lose its basic characteristics and nutritive value merely by the process of heating and cooling or by addition of sugars or flavour. Therefore, the entry most specifically applicable is under Chapter 4. Rule 3(b) of the General Rules which is applicable in the event that classification cannot be determined under Rule 3(a) inter alia states that mixture and composite goods consisting of different materials shall be classified as if they consist of the material or component which gives them their essential character. The general explanatory notes for Chapter 4 under the Harmonized Commodity Description and Coding System ( HSN ) specifies as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in terms of the Tariff as it reads today, Chapter 2202 seeks to include products such as mineral waters, aerated waters and non-alcoholic beverages. It is clear that under the entry for beverages containing milk , the legislature seeks to cover beverages in which milk is one amongst various other ingredients, such as tea, coffee etc. and not products where the predominant ingredient and nature is that of milk. In all these cases, in common parlance the products are known in their generic name such as coffee, tea though they contain milk powder. For this purpose, on application of the principle of Ejusdem Generis , either milk is absent or would be a negligible portion of the preparations like Fruit pulp, soya milk drinks, beverages containing milk etc, while Winkin Cow is a product, which is substantially and predominantly only milk. In Nestle India Limited vs. Commissioner of Central Excise [2001 (132) ELT 134 (Tri. Del)] wherein it was held that Milkmaid Kesar Kulfi Mix (consisting of 57.5% of dairy powder), Milkmaid Shahi Rabri Mix (consisting of 57.5% of dairy powder) and Milkmaid Kalakand Mix (consisting of 68.8% of dairy powder) were classifiable under Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... east India Private Limited Vs. State of U.P. [2008 (4) TMI 101 - Supreme Court and Samsung India Electronic Pvt. Ltd. Vs. State of Gujarat [2020 (2) TMI 1247 - Gujarat High Court. In terms of well settled law in a catena of judgments including in Cavinkare (supra), addition of a small quantity of artificial flavorings does not change the essential nature of the product and the product continues to be classified under Chapter 4. The Impugned Ruling seeks to make a reference to HSN explanatory notes to contend that beverages consisting of milk flavoured with cocoa or other substances fall under HS 2202 as per the said explanatory notes and the said reference is misconceived and is without any basis in fact or law. Factually, the product under consideration is milk / produce of animal origin and this is also accepted vide a catena of judgments on identical products. Given this factual and legal position, reference to beverage consisting of milk under the HSN explanatory notes is not relevant to the present case, in as much as the product at hand is essentially milk / milk product falling under chapter 4. Even assuming without accepting that said HSN explanatory not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the GRI, the classification of goods is to be determined according to the terms of the headings of the Tariff Schedule and any related Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1 and if the Section Notes and Chapter Notes do not otherwise require, the remaining GRI s may then be applied. In this regard, reliance is placed in the decision in Modi Xerox Ltd. Vs. Collector of Customs, New Delhi/Bombay [1997 (12) TMI 642 - CEGAT New Delhi] In the present case, the product can be classified under Chapter 4 in accordance with GRI 1 in terms of the headings of the Tariff Schedule itself. The said product is essentially milk and thus the product in question is classifiable under Chapter 4 on the basis of the Chapter heading itself. Hence, there is no requirement to seek to classify the said product in accordance with the explanatory notes under Heading 2202. Judicial precedents relied on by them shall prevail over the interpretation sought to be adopted by referring to HSN explanatory note by the Ld. AAR. Without prejudice, it is submitted that even assuming that there are two views possible, it is a well settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of change in GST rate and has not been issued in the context of the product under consideration. The characteristics of the product at hand (being essentially milk), ingredients thereof, etc. are not referred or considered therein. In any case, it is settled law inter-alia in Kalyani Packaging Industry v. Union of India [2004 (168) E.L.T. 145 (S.C)] that Departmental circulars cannot prevail over law laid down by a Court. Reliance in this regard is also placed on the judgment in Commissioner of C.Ex., Bolpur v. Ratan Melting Wire Industries [2008 (231) E.L.T. 22 (S.C.)] where a similar position was taken. It is submitted that the said product, i.e. flavoured milk, merits classification under Chapter 4 as it constitutes 90% milk and the product is essentially milk only. It is submitted that even products that contain less than 90% of milk are being classified under Chapter 4, as elaborated hereunder. In Nestle India Ltd. v. CCE, New Delhi [2001 (3) TMI 157- CEGAT. New Delhi] (supra), the products in question were Nestle Milkmaid Kalakand Mix (containing dairy powder of 68.8%), Nestle milkmaid rabri mix (containing dairy powder of 57.5%) and nestle milkmaid ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril 2021 or later. Accordingly, the hearing was held virtually on 15th June 2021. 5.2 Shri. Anandodaya Mishra, Advocate and authorized representative appeared for the hearing virtually. He reiterated the written submissions. He emphasized that: (1) their product is made up of 80-90% of Milk and is only Milk (2) GST Council has not clarified the classification of the product as mentioned in the impugned order (3) Non-Reliance of FSSAI regulation by the lower authority is not correct He stated that their product is a new product launched post-GST and as an abundant caution they classified it under Chapter 22 of Customs Tariff. He relied on a catena of decisions and requested to permit them to furnish a written submission which was allowed. The authorized representative was asked to furnish invoice copy and rulings supporting similar product under CTH 0402/0404. 5.3 The appellant furnished their written submissions dated 24.06.2021 through e-mail. In the submissions, they had furnished the background, concept of Flavoured Milk, issues involved, judicial precedents in detail along with the copies of all the case laws relied upon by them, copy of the FSSAI Cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for non-alcoholic beverages Under the entry 22029930, the intent of the legislature is to cover beverages in which milk is one amongst various other ingredients, such as tea, coffee, etc and not products where the predominant ingredient and nature is that of milk Flavoured Toned milk, as per FSSAI regulations, means the product prepared from milk or other products derived from milk, or both, and edible flavourings with or without addition of sugar, nutritive sweeteners, other non-diary ingredients including stabilizers and food colours Therefore the product in the present case is flavoured milk and comes under the ambit of Milk Product as per the FSSAI Regulations, 2011 and in accordance with Chapter 4 of the Customs Tariff as the Tariff Heading 0402 covers Milk and cream, concentrated or containing added sugar or other sweetening matter , the product merits classification under tariff heading 0402 What is flavor? To what extent flavor can be used so that it does not change the nature of the original product? FSSAI has classified flavours into three categories:- Natural Flavouring substances and Natural Flavours; Flavouring substances tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 90, i.e., others as the Product is neither skimmed milk, milk food for babies, whole milk or condensed milk but toned milk with added flavours that would classify the Product under the Entry 0402 99 90 5.5 The appellant has relied on the following judicial precedents: Addition of small quantity of flavor does not take milk/milk products outside purview of Chapter 4 Cavinkare Private Limited Vs. Commissioner of Central Excise [2019 (11) TMI 1054 - CESTAT Chennai] Nestle India Ltd Vs. CCE New Delhi [2018 (8) G.S.T.L. 211(Tri. - Del.)] The product in question is essentially milk and deserves to be classified under Chapter 4 Gujarat Coop. Milk Marketing Federeation Ltd Vs. State of U.P. [2017(5) GSTL351 (All.)] Karnataka Co-operative Milk Producers Federation Ltd [(2020)79GST 11 (AAR)] Deputy Commissioner of Sales Tax (Law), Board of Revenue, Ernakulam Vs. PIO Food Packers [AIR 1980 SC 1227] Applicability of FSSAI Act Regulations Parle Agro (P) Ltd Vs. Commissioner of Commercial Taxes, Trivandrum [ 2017 (5) TMI 592-SC] Brindavan Beverages Private Limited Vs. CCE ST [ 2019 (10) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the submissions, we find that the manufacturing process of the product involves heating (UHT sterilization) and cooling of milk, to which the constituents are added at different points of the heating/cooling process, filtered and deaerated/homogenised and thereafter packaged. The product is made in multiple flavours -strawberry (strawbericious), Mango(mangolicious), Vanilla (vanillicious) and chocolate(chocolicious)(hereinafter referred to as the Products ). As per the label, the constituent of the products is tabulated below: S.No. Winkin Cow - Thick shakes Constituent 1 Strawbericious Standardised Milk (89%), Sugar, Water, Emulsifier and Stabilizers, Strawberry Puree (0.1%), Acidity Regulato 2 Mangolicious Standardised Milk (89%), Sugar, Water, Emulsifier and Stabilizers, Alphonso mango Puree (0.1%), Acidity Regulator 3 Chocolicious Toned Milk (87%), Sugar, Water, Milk solids, Emulsifier and Stabilizers, Cocoa powder(l%), Acidity Regulator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder FSSAI Regulation 2011, the food products are categorized by specific products, i.e, 2.1-Diary products and Analogues; 2.2 Fats, Oils and Fat Emulsions; 2.3-Fruit Vegetable Products; 2.4 - Cereal and Cereal Products; 2.5 -Meat and Meat Products; and so on....and Regulation 2.10 Beverages excluding dairy and Fruits Vegetables based products. Under 2.1-Diary products and Analogues, the regulation gives the standards for the various dairy products as follows: Regulation 2.1-DAIRY PRODUCTS AND ANALOGUES; 2.1.1 gives the general standards of Milk and Milk Products; 2.1.2 gives the standards of Milk - Species Identified Milk , Mixed Milk , Full Cream Milk, Standardised Milk, Toned Milk, Double Toned Milk, or Skimmed Milk , Low Lactose or Lactose free milk; 2.1.3 gives the standards for Flavoured Milk; and under regulation 2.10, the standards for 2.10 BEVERAGES, (Other than Dairy and Fruits Vegetables based) is given. Thus, it is evident that Beverages which are ready to drink drinks except water, when based on Dairy products, Fruits Vegetable, the standards for the same are given under 2.1 -Dairy Products , 2.3 -Fruits Vegetable produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of goods. The Heading 0402 of the Customs Tariff is as under: 0402 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% : 0402 10 10 --- Skimmed Milk 0402 10 20 --- Milk food for babies 0402 10 90 --- Other - In powder, granules or other solid forms, of a fat content, by weight exceeding 1.5% : 0402 21 00 -- Not containing added sugar or other sweetening matter 0402 29 -- Other : 0402 29 10 --- Whole milk 0402 29 20 --- Milk for babies 0402 29 90 --- Other - Other : 0402 91 -- Not containing added sugar or other swee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 FOOD SAFETY AND STANDARDS (FOOD PRODUCTS STANDARDS AND FOOD ADDITIVES) REGULATIONS, 2011(FSSAI), defines Full Cream Milk, skimmed Milk, Standardised Milk and Toned Milk as under: 1.2.6. Full Cream Milk means milk or a combination of buffalo or cow milk or a product prepared by combination of both that has been standardised to fat and solids-not-fat percentage, given in the table below in 2.1.1:1, by adjustment/addition of milk solids, Full Cream Milk shall be pasteurised. It shall show a negative phosphatase test. It shall be packed in clean, sound and sanitary containers properly sealed so as to prevent contamination. 1.2.19. SKIMMED MILK means the product prepared from milk from which almost ail the milk fat has been removed mechanically. 1.2.21. STANDARDISED MILK means cow milk or buffalo milk or sheep milk or goat milk or a combination of any of these milk that has been standardised to fat and solids-not-fat percentage given in the table below in 2.1.1:1 by the adjustment of milk solids. Standardised milk shall he pasteurised and shall show a negative Phosphatase Test. 1.2.24. TONED MILK means the product prepared by admixture of cow or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included . Thus this tariff item covers products of natural Milk constituents with or without added sugar which is not elsewhere specified or included. The relevant Explanatory notes to this tariff item states as follows: 04.04 Whey, whether or not concentrated or containing added sugar or other sweetening matter; products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included. 0404.10 - Whey and modified whey, whether or not concentrated or containing added sugar or other sweetening matter 0404.90 Other Thus heading covers whey (i.e., the natural constituents of milk which remain after the fat and casein have been removed) and modified whey (see Subheading Note 1 to this Chapter), These may be in liquid, paste or solid (including frozen) form, and may be concentrated (e.g. powder) or preserved. The heading also covers fresh or preserved products consisting of milk constituents, which do not have the same composition as the natural product, provided they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are added to it and therefore, are not covered under CTH 0404 also. Thus we find no infirmity in the findings of the lower authority that the product in hand do not fall under Chapter 4 of the Customs Tariff, though the product is categorized under Dairy products and analogues under FSSAI Regulation 2011. 9.1 The product in hand is a ready to drink product. The appellant has contended that their product though is ready to drink, it is Milk, being a diary produce in which additions as admissible under the GMP as allowed under the FSSAI regulations are only added and has further contended that to be a Beverage , the product should have water as the dominating ingredient. In this connection, we find that the National Daily Development Board as seen in the page https: //www.nddb.coop/services/ppd/dairyproducts/beverages holds Flavoured Milk as a Diary based Beverage. The Same is given as under : MILK BEVERAGE WITH RAGI A preparation of ragi (finger millet) in milk is a refreshing and satiating drink for older infants, growing kids and adults. NDDB has developed a simple technology for manufacturing milk beverage with ragi for commercial production at the dairy p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. 9.2 Chapter 22 of Customs Tariff covers Beverages, Spirit and Vinegar . Tariff Heading 2202 covers- Waters, including Mineral Waters and Aerated Waters, containing added sugar or other sweetening Matters or Flavoured, and Other Nonalcoholic Beverages, Not including Fruit or Vegetable Juices of heading 2009. Thus, this heading covers waters under CTH 2202 10 and other Non-alcoholic Beverages other than Non-alcoholic Beer under CTH 2202 99. The relevant tariff items are given below: 2202 99 -- Other: 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: (B) Other non-alcoholic beverages, not including fruit or vegetable juices of heading 20.09 This group includes, inter-alia : (1) Tamarind nectar rendered ready for consumption as a beverage by the addition of water and sugar and straining. (2) Certain other beverages ready for consumption , such as those with a basis of milk and cocoa. As per HSN explanatory notes to Chapter 22, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition of the flavour but of the fact that as per Chapter Note 1 to Chapter 4, the Milk is not full cream Milk or Skimmed Milk and therefore not applicable. a. The decision in the case of Cavinkare Private Limited Vs. Commissioner of Central Excise do not have a precedent value as per Section 35-R of the Central Excise Act 1944 and b. In the case of Nestle India Ltd Vs. CCE, New Delhi, the classification dispute was between 0404 and 1901. NESCLAC Nutritious Milk Drink being a baby milk powder based drink which is not comparable with the product 2. The product in question is essentially milk and deserves to be classified under Chapter 4 - a. Gujarat Coop Milk Marketing Federation Ltd Vs State of U.P.[2017(5)GSTL 351 (All.)]- The decision is a VAT case and is on the exemption to be extended based on the wordings of the description the listing of products under VAT laws of U.P. is different from the Tariff Classification. b. Karnataka Co-operative Milk Producers Federation Ltd-The decision of AAR has been declared as voidab initio by the appellate authority in the Order No. KAR/AAAR-13/2019-20 dated 11/02/2020 c. Deputy Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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