2023 (11) TMI 1027 - AT - Central Excise

Classification of manufactured goods - Badam Milk Drink Ready to Drink - to be classified under 0401 11 as flavoured milk or under CETH 2202 9030? - HELD THAT - It is found that with the introduction of 8-digit Classification Code, there is a specific entry for beverages containing milk, which was not there in the earlier Central Excise Tariff. Further Tarriff item 0401.11 flavoured milk whether sweetened or not put up in unit containers ordinarily is not anymore present under Chapter 04 after the introduction of 8 digit classification code. With the introduction of the 8 digit, since there is a specific classification for the impugned item under Chapter sub-heading 2202 9030 the same has to be classified under this specific heading in view of Rule 3(a) of the General Rules for the Interpretation of Central Excise Tariff, which says that a specific heading should be preferred for a generic heading. In this case, we find that the impugned item i.e. Badam Milk Drink Ready to Drink is containing flavourings namely badam powder, cardamom, saffron, Maltodextrin and garnished with badam flakes. Further it is found that this item has also undergone the process of homogenization and pasteurization and UHT treatment to increase the shelf life of the product. Such items, which are having a longer shelf life because of the above processes are not akin to normal pasteurized, homogenized and toned milk. It is found that the Board, while issuing Section 11C Notification No. 17/2008-CE (NT) has classified flavoured milk of animal origin under chapter sub-heading 2202 9030. We find that the Notification is issued after the introduction of 8-digit classification code and after the full alignment of Central Excise Tariff with HSN. This buttresses the contention of the Department that the impugned item is classifiable under the chapter sub-heading 2202 9030. The Department contended that the product/item is classifiable under 2202 9030 and in support they cited the case-law of ERCMPU (MILMA) VERSUS COMMISSIONER OF CENTRAL EXCISE, COCHIN 2013 (5) TMI 1066 - CESTAT BANGALORE . The case-law of NESTLE INDIA LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE (LTU) , DELHI 2017 (3) TMI 1636 - CESTAT NEW DELHI cited by the appellant is distinguishable on facts as the issue involved is classification between Chapter heading 0404 and 1904 of mix and not beverage and the case is based on the Central Excise Tariff that existed before 2005 i.e. before alignment of the Central Excise Tariff with the HSN. Thus, following the ratio of the decision in Ernakulam Regional Co-operative Milk Producers Union Ltd. of this Tribunal, there are no reason to interfere with the impugned order - the appeal filed by the appellant is unsustainable and is rejected.

Summary

Issues Involved:
1. Classification of "Badam Milk Drink - Ready to Drink" under the Central Excise Tariff Act, 1985.
2. Applicability of 8-digit classification code and its impact on the classification.
3. Interpretation of flavoured milk under Chapter 04 versus beverages containing milk under Chapter 22.

Summary:

Issue 1: Classification of "Badam Milk Drink - Ready to Drink"
The appellant, a manufacturer of "Badam Milk Drink - Ready to Drink," classified the product under Chapter Heading 0402 9990, arguing it is flavoured milk. The Department issued a show-cause notice alleging the product should be classified under Chapter sub-heading 2202 9030 as 'Beverages containing Milk,' citing Rule 3(a) of the General Rules for the Interpretation of Central Excise Tariff. The adjudicating authority confirmed the classification under Chapter Sub-Heading 2202 9990. The Commissioner (Appeals) upheld this classification, leading to the present appeal.

Issue 2: Applicability of 8-digit classification code
The appellant argued that the change from a 6-digit to an 8-digit classification code should not alter the product's classification. They contended that flavoured milk was previously classified under Chapter heading 0401 11 and should remain under Chapter 04. The appellant emphasized that the introduction of the 8-digit tariff does not necessitate reclassification, as the essential character of the product remains unchanged.

Issue 3: Interpretation of flavoured milk under Chapter 04 versus beverages containing milk under Chapter 22
The appellant argued that "Badam Milk Drink" is essentially milk with added flavours and should be classified under Chapter 04. They cited the definition of flavoured milk from Wikipedia and the Food Safety and Standards Act, 2006, which includes flavoured milk under the definition of milk. The appellant also referenced several case laws supporting their classification under Chapter 04.

The Department, however, argued that the product falls under Chapter 2202 9030, as it contains multiple flavouring agents and has undergone processes like homogenization and pasteurization, giving it a longer shelf life. They cited the case of Ernakulam Regional Co-operative Milk Producers Union Ltd., where flavoured milk was classified under Chapter 2202 9030.

Judgment:
The Tribunal found that with the introduction of the 8-digit classification code, there is a specific entry for beverages containing milk under Chapter 2202 9030. The Tribunal held that the product, "Badam Milk Drink - Ready to Drink," undergoes processes that extend its shelf life and contains multiple flavouring agents, making it more akin to a beverage rather than plain milk. The Tribunal referred to the Notification No. 17/2008-CE (NT) and the case law of Ernakulam Regional Co-operative Milk Producers Union Ltd., supporting the classification under Chapter 2202 9030. The appellant's cited cases were found distinguishable on facts or not applicable.

Conclusion:
The appeal filed by the appellant was rejected, and the classification of "Badam Milk Drink - Ready to Drink" under Chapter 2202 9030 was upheld. The Tribunal found no reason to interfere with the impugned order.