2021 (1) TMI 551 - AAR - GST

Classification of goods - Chocolate Milk Powder - to be classified under HSN 0402 or under 1806 or under any other Chapter? - HELD THAT - Milk and Milk products are classified in Chapter 4 and the headings 0401 86 0402 are relevant to Milk / Milk in the form of powder or granules and cr me. The product in the instant case is neither milk nor milk powder but Chocolate Milk Powder , which is admittedly obtained on blending of Whole Milk Powder with Chacolate Flavoured Powder in the ratio of 97.5 to 2.5. Further it is an admitted / undisputed fact that the product in question also does not have the characteristics, required under FSSAI and BIS, to be considered as Milk Powder. Thus the instant product does not cover under the heading 0401 or 0402. The other remaining headings of Chapter 4 are not relevant to the instant product. Scope of alternate / competing entry under Chapter 18 - HELD THAT - The entry covers cocoa (including cocoa beans) in all forms, cocoa butter, fat and oil preparations containing cocoa. Explanatory Notes of World Customs Organisation to heading 1805 clearly specify that cocoa powder to which milk powder or peptones have been added fall under tariff heading 1806. Heading 1806 covers Chacolate and other food preparations containing cocoa and World Customs Organisation explanatory notes to the said heading clearly specify that the heading 1806 includes all food preparations containing cocoa. The instant product being a food preparation made out of blending of white milk powder with cocoa. Thus the instant product merits classification under heading 1806.

Summary

Issues involved: Classification of "Chocolate Milk Powder" under HSN 0402 or 1806.

Analysis:

Issue 1: Admissibility of the application
The applicant, a cooperative engaged in processing milk products, sought an advance ruling on the classification of their product "Chocolate Milk Powder." The application was admitted as it pertained to issues covered under Section 97(2)(a) of the CGST Act 2017.

Issue 2: Applicant's interpretation of law
The applicant argued that the composition of their product, as per FSSAI and BIS standards, deviates from traditional milk powder specifications after blending with chocolate powder. They contended that the product should be classified under chapter 1806 due to these alterations.

Issue 3: Findings & Discussion
The Authority considered the submissions and examined the nature of the product. It was noted that the product, a blend of Whole Milk Powder and Chocolate Flavoured Powder, did not meet the criteria for classification under headings 0401 or 0402. The product's characteristics aligned more with heading 1806, which covers food preparations containing cocoa.

Conclusion:
The Authority ruled that the "Chocolate Milk Powder" should be classified under Tariff heading 1806 based on the analysis of the product's composition and characteristics.