2021 (4) TMI 595 - AAR - GST

Classification of goods - HSN Code - rate of tax - Flavored Milk - to be classified under the Tariff heading 04029990 or otherwise? - HELD THAT - The product consists of Standardized Milk (92.1%) without removal of Fat content thereon, which is sweetened with around 8% of sugar to which color 0.08% and flavor 0.02%, etc. are added and is supplied in tetra packs/ Bottle/ Tin container after necessary processes. The products are marketed as Amul Beverages i.e. Amul Kool Flavoured Milk , Amul Kool Caf Milk shakes Sports Drink and Smoothies and are ready for consumption as stated by the applicant. Comparing the product and those covered under CTH 0402/0404, it is evident that the product in hand consisting of milk flavored with Badam/Elaichi/Kesar/Rose/Vanila/Strawberry/Mango/Lemon/Orange/Choclate/Cocoa powder being ready for consumption beverages based on Milk is specifically excluded under CTH 0402, as seen from the Explanatory notes to HSN of the said chapter and hence not classifiable under CTH 0402 - Also the product being not Whey , the plausible CTH will be 0404 90 only and there again the Explanatory notes clearly states that this heading includes products which lack one or more natural milk constituents, to which natural milk constituents are added, whereas in the case at hand, the product do not lack any natural milk constituents nor any natural milk constituents is added to the product - Therefore, the product is not classifiable under either CTH 0402 or 0404. Whether classifiable under the said tariff item 22029930 or otherwise? - HELD THAT - Other non-alcoholic beverages, not including fruit or vegetable juice of Heading 20.09 are covered under 2202.99 - Other and as per the explanation at (B)(2), the group covers beverages ready for consumption such as those with a basis of milk. The word beverage , though not defined under CGST Act, 2017, is considered, in common parlance, as a drink that can be consumed directly and the instant product flavored milk can be consumed as it is and hence is a beverage with a basis of milk. Therefore, the product is appropriately classifiable under CTH 2202 99 30. Thus, flavoured milk is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975 as a beverage containing milk under HS Code 2202.

Summary

Issues Involved:
1. Classification of "Flavored Milk" under GST Tariff.

Detailed Analysis:

Issue 1: Classification of "Flavored Milk" under GST Tariff

Applicant's Submission:
The applicant, a cooperative society producing various milk products, including flavored milk under the trade names Amul Kool and Amul Kool Café, sought an advance ruling on the classification of flavored milk. They argued that flavored milk should be classified under Heading 0402, Sub Heading 04029990 of the GST Tariff, as it retains the essential character of milk despite the addition of sugar and flavors.

Process and Composition:
The process involves standardizing fresh milk according to fat content, heating, filtering, pasteurizing, homogenizing, and then adding sugar and flavors before bottling. The essential character of milk remains unchanged. The product, being partially skimmed milk with added sugar, was argued to fall under Heading 0402 of the GST Tariff, specifically under Sub Heading 04029990.

Relevant Legal References:
The applicant referred to the Harmonized System of Nomenclature (HSN) and various judicial precedents, including the Punjab & Haryana High Court ruling in Food Specialities Ltd. v/s UOI and the CESTAT decision in Mehsana District Co-operative Milk Producers Unions Ltd., to support their classification under Chapter 4 of the GST Tariff.

Authority's Discussion and Findings:
The authority examined the relevant chapter notes of CTH 0402 and 0404, and the Explanatory Notes as per HSN. The product in question is flavored milk, which is a beverage ready for consumption and based on milk. The Explanatory Notes to HSN of Chapter 04.02 explicitly exclude beverages consisting of milk flavored with cocoa or other substances, directing such products to Chapter 22 under Heading 2202.

Examination of CTH 2202:
The authority noted that CTH 2202 covers waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored, and other non-alcoholic beverages. Sub-heading 2202 99 30 specifically includes "Beverages containing milk."

Judicial Precedents:
The authority referred to various judicial precedents, including the Hon’ble Madras High Court in the State of Tamil Nadu v. TVL. Ganesh Corporation and the Hon’ble High Court of Gujarat in M/s. Kaira Dist. Coop. Milk Producers’ Union Ltd. v. UOI, which supported the classification of flavored milk under Chapter 22 as a beverage containing milk.

Advance Rulings:
The authority also considered similar advance rulings from Tamil Nadu and Andhra Pradesh, which classified flavored milk under Tariff Item 2202 99 30.

Conclusion:
The authority concluded that flavored milk is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975, as a "beverage containing milk."

Ruling:
The flavored milk is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975, as a "beverage containing milk."