2019 (10) TMI 1016 - AAR - GST

Classification of goods - Flavoured Milk - to be classified under HSN 0402 99 90 or under 2202 99 30 or under any other Chapter? HELD THAT - T he headings 0401 is not relevant as it is related to milk cream that is neither concentrated nor containing sugar or other sweetening matter and does not cover the flavoured milk. Tariff heading 0403 is also not relevant as the said heading is related to fermented or acidified milk, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa and the instant product is neither fermented nor acidified. Further, the tariff headings 0405 0406 are also not relevant as they are related to butter/fats derived from milk and cheese curd respectively and does not cover the instant product. The product in question i.e. flavoured milk cannot be covered under whey and hence it is not covered under HSN 0404 10. The residual entry of heading 0404 is tariff heading 0404 9000 which is related to the products having constituents of natural milk, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included - In the instant case, the Flavoured Milk is made out of milk (pasteurized / standardized) added with sugar, colour and flavour Therefore predominant part of the product is milk and naturally contain the constituents of natural milk. The said heading does not cover flavoured products. The applicant has relied upon the description of FSSAI on Flavoured Milk . Though the said Act deals with food safety and standards, it contains, under Schedule-11, The Milk and Milk Products Order, 1992. in accordance to which, under Section 2(f) milk means milk of cow, buffalo, sheep, goat, or a mixture thereof either raw or processed in any manner and includes pasteurised, sterilized, recombined, flavoured, acidified, skimmed, toned, double toned, standardised or full cream milk - thus, Milk includes pasteurised, sterilized and flavoured milk. Therefore, the product of the applicant is covered under Milk . The flavoured milk is not a water based drink whereas the tariff heading 2202 deals with water based beverages and other non alcoholic beverages. Therefore it could be inferred that the pre-dominant part of the beverages covered under the heading 2202 is water. In the instant case the predominant constituent is milk and hence the flavoured milk does not merit classification under beverage containing milk, under tariff heading 2202 9930. but merits classification as milk, under tariff heading 0402 - Tariff heading 0402 covers milk and cream, concentrated or containing added sugar or other sweetening matter . The instant product flavoured milk is covered under milk as discussed already. Therefore the instant product merits classification under tariff heading 0402 99 90.

Summary

Issues Involved:
1. Classification of "Flavoured Milk" under HSN 0402 99 90 or 2202 99 30 or any other Chapter.

Issue-wise Detailed Analysis:

1. Classification under HSN 0402 99 90:
The applicant, engaged in the processing of milk and milk products, contends that "Flavoured Milk" should be classified under Chapter 4 with HSN 0402 99 90, taxable at 5%. The applicant argues that Chapter 4 covers dairy products, including milk and cream, which are concentrated or containing added sugar or other sweetening matter. The composition of "Flavoured Milk" includes 91.44% milk, 8.5% sugar, 0.05% flavor, and 0.01% color, retaining the essential character of milk. The applicant references the Food Safety and Standards Authority of India (FSSAI) definition, which includes flavored milk under dairy products. The applicant also cites the Customs Tariff Act, 1975, which specifies that Chapter 4 covers dairy products and excludes products obtained by replacing natural milk constituents with other substances.

2. Exclusion from Chapter 22:
Chapter 22 of the Customs Tariff Act covers beverages, spirits, and vinegar. The applicant argues that Chapter 22 does not cover liquid dairy products of Chapter 4. The applicant contends that "Flavoured Milk" is a natural dairy product without any alcoholic content, thus should not be classified under Chapter 22, which covers non-alcoholic beverages. The applicant references Chapter Note 22, which excludes liquid dairy products from Chapter 22. The applicant also mentions that Chapter 22 covers beverages made from concentrates with less than 0.5% alcohol, which does not apply to "Flavoured Milk."

3. Supporting Judgments and References:
The applicant cites several judgments to support their classification under Chapter 4. The Supreme Court in Board of Revenue, Ernakulam v. PIO Food Packers held that a processed commodity should be recognized as a new and distinct article. The applicant argues that "Flavoured Milk" retains its essential character of milk despite the addition of sugar and flavors. The Allahabad High Court in Gujarat Co-op Milk Marketing Federation Ltd. v. State of U.P held that flavored milk is a form of milk and not a derivative or milk product. The Supreme Court in Commissioner of Central Excise Vs. Amrit Foods held that the addition of stabilizers does not change the basic character of a product. The Kerala High Court in Gujarat Co-operative Milk Marketing Federation Ltd. v. State of Kerala held that the addition of vitamins to pasteurized milk does not alter its natural characteristics.

4. Findings and Discussion:
The authority examined the submissions and the nature of the product "Flavoured Milk." The FSSAI describes flavored milk as a product prepared from milk and other products derived from milk, with or without the addition of sugar, nutritive sweeteners, other non-dairy ingredients, stabilizers, and food colors. The authority noted that "Flavoured Milk" is supplied as a ready-to-consume drink in tetra pack containers or bottles. The authority referred to the Customs Tariff Act and the relevant Chapter Notes. Chapter 4 covers dairy products, including milk and cream, concentrated or containing added sugar or other sweetening matter. The authority concluded that "Flavoured Milk" is covered under tariff heading 0402 99 90, as it retains the essential character of milk.

Ruling:
The commodity "Flavoured Milk" is classified under the Tariff heading 0402 99 90.