2021 (8) TMI 193 - AAAR - GST

Classification of goods - UHT Sterilized Flavoured Milk supplied by the appellant as Britannia Winking Cow Thick Shake in various flavours in tetra packs/bottles - classifiable under Chapter 4, Tariff Heading 0402 or alternatively, Tariff Heading 0404? - HELD THAT - In the case at hand, as per the label, the Milk constituent is Standardised Milk or Toned Milk which are not Full Cream Milk or Skimmed Milk as per the definitions. The Chapter Note 1 clarifies the nature of Milk covered under the expression Milk which is limited only to Full cream Milk or partially or completely Skimmed Milk . This shows that the other types of Milk are excluded for the purposes of this Tariff heading. In the products at hand, the percentage composition of Standardised Milk or Toned Milk is 80 to 90% and the products are not of Full Cream Milk or Skimmed Milk and therefore are undoubtedly excluded from the purview of Tariff Heading 0402. Therefore, irrespective of the contentions that the product remains a Milk even 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 is any type of drink except water . Thus, it becomes evident that the product in hand is a Beverage. In the case at hand, the classification is based on the Specific entry applicable to the product vide the Tariff heading read with the related HSN Explanatory Notes and the applicable Chapter Notes - the Explanatory Notes have been taken as a guidance only, which is permitted under the Explanation to Notification No.01/2017. Further the classification is squarely dealt with by the application of GRI Rule 1 and therefore there is no need to examine the applicability of Rule 3(a) or 3(b) as claimed by the appellant. The UHT Sterilized Flavoured Milk marketed under the brand name Britannia Winkin Cow Thick Shake by the appellant is not classifiable under the Tariff heading 0402 /0404 but classifiable under CTH 22029930 as held by the Lower Authority - appeal disposed off.

Summary

Issues Involved:
1. Classification of UHT Sterilized Flavoured Milk under Chapter 4 or Chapter 22 of the Customs Tariff.
2. Applicability of FSSAI Regulations in determining the classification.
3. Interpretation of the General Rules for the Interpretation of Import Tariff (GRI).
4. Relevance of judicial precedents and HSN Explanatory Notes.

Detailed Analysis:

1. Classification of UHT Sterilized Flavoured Milk:
The primary issue is whether UHT Sterilized Flavoured Milk marketed as 'Britannia Winkin' Cow Thick Shake' should be classified under Chapter 4 (Dairy produce) or Chapter 22 (Beverages) of the Customs Tariff. The appellant argued that the product, consisting of 80-90% milk, should be classified as a milk product under Chapter 4. The Original Authority classified it under CTH 22029930 (Beverages containing milk).

2. Applicability of FSSAI Regulations:
The appellant contended that the product should be classified as a milk product based on the Food Safety and Standards Authority of India (FSSAI) Regulations, which categorize flavoured milk under dairy products. The appellant argued that the FSSAI's categorization should influence the product's classification under the GST regime.

3. Interpretation of GRI:
The appellant argued that according to the General Rules for the Interpretation of Import Tariff (GRI), the product should be classified based on its essential character, which is milk. They claimed that the specific entry under Chapter 4 should prevail over the general entry under Chapter 22.

4. Relevance of Judicial Precedents and HSN Explanatory Notes:
The appellant cited various judicial precedents supporting the classification of similar products under Chapter 4. They also argued against the reliance on HSN Explanatory Notes by the lower authority, claiming that these notes should not override the tariff descriptions and judicial rulings.

Judgment Analysis:

1. Classification under Chapter 4 vs. Chapter 22:
The appellate authority examined the product's composition and manufacturing process. It found that the product, consisting of standardized/toned milk with added sugar, water, stabilizers, and flavours, is not covered under Chapter 4. Specifically, Chapter Note 1 to Chapter 4 defines "milk" as full cream milk or partially/completely skimmed milk, excluding standardized/toned milk used in the appellant's product. Thus, the product does not qualify under CTH 0402 or 0404.

2. FSSAI Regulations:
The appellate authority acknowledged the FSSAI's categorization but clarified that for tariff classification purposes, the Customs Tariff and HSN Explanatory Notes take precedence. It emphasized that the product's classification under GST must align with the Customs Tariff, which categorizes beverages containing milk under Chapter 22.

3. General Rules for the Interpretation of Import Tariff (GRI):
The authority applied GRI Rule 1, which states that classification should be determined according to the terms of the headings and any relevant Section or Chapter Notes. It concluded that the product fits the description under CTH 22029930 (Beverages containing milk) based on its essential character as a ready-to-drink beverage.

4. Judicial Precedents and HSN Explanatory Notes:
The authority reviewed the cited judicial precedents and found them inapplicable to the present case. It noted that the decisions were based on different contexts and products. The authority also defended the use of HSN Explanatory Notes, stating that they serve as a guide for interpreting tariff headings and are aligned with the Customs Tariff.

Final Ruling:
The appellate authority upheld the Original Authority's decision, classifying UHT Sterilized Flavoured Milk under CTH 22029930 (Beverages containing milk). The appeal was disposed of accordingly.