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TMI Blog2019 (10) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... the Flavoured Milk is liable to be classified under HSN 0402 99 90 or under 2202 99 30 or under any other Chapter? 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that they are engaged in the business of processing of milk and milk products. They are manufacturing and marketing Flavoured Milk and classified the same under Chapter 4 with HSN 0402 99 90 taxable at 5%. b. The applicant states that as per the Food Safety and Standards Authority of India, flavoured milk means "the product prepared from milk or other products derived from milk or both and edible flavourings with or without addition of sugar, nutritive sweeteners, other non-diary ingredients, stabilizers and food colours. Flavoured milk shall be subject to heat treatment. c. Flavoured milk, if dried or concentrated, then dried or concentrated product on addition of prescribed amount of water shall give a product conforming to the requirements of Flavoured milk. d. The applicant states that as per Harmonised System of Nomenclature, Chapter 4 covers Diary products,- i. Milk (i.e. Full Cream Milk, and partially or completely skimmed milk) ii. Cream iii. Butter mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alcoholic content less than 0.5% of volume. 5.2 The applicant contends that in the instant case, the flavoured milk is a natural diary milk, and does not have any alcoholic content as certified in the laboratory report. Further ICAR-National Diary Research Institute Southern Regional Station has confirmed that flavoured milk is a diary product. 5.3 Further, the applicant states that as Chapter 22 specifically excludes liquid diary products falling under Chapter 4 as per Chapter Note 22. the same cannot be classified under Chapter 22. 6. The applicant has cited the rules prescribed under the Customs Tariff Act, 1975 applicable for classification of the goods and stated that as per rule 1, one has to see the chapter notes for determining the classification. Chapter 4 specifically covers Diary produce, bird's eggs, natural honey, edible products of animal origin, not elsewhere specified or included. As per note 1 of Chapter 4, milk means full cream milk or partially or completely skimmed milk. The applicant again refers to the note 4 of the Chapter Notes. 6.1 The applicant states that flavoured milk is made up for milk added with sugar and permitted flavours. The reason for addin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ume. Further, Chapter 22 covers "waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured and other non-alcoholic beverages, not including fruit or vegetable juices of heading 2009. Further as per the HSN, the products of chapter 22 constitute a group distinct from the food stuffs covered by the preceding chapters of the nomenclature. 8.1 The applicant further states that Chapter 22 does not cover:- a. Liquid diary products of Chapter 4 b. Products of this Chapter prepared for culinary- purpose and thereby rendered unsuitable for consumption as beverages c. Medicaments of heading 30.03 or 30.04 d. Perfumery or toilet preparations. 8.2 The applicant states that they believe that flavoured milk could not fall under chapter 22 as liquid diary products of chapter 4 are specifically excluded from the purview of chapter 22 as per chapter note. 8.3 Tariff Item 2202 99 30 covers "beverages containing milk". The applicant states that the term "beverage" is not defined in the GST Act. As per the dictionary meaning, beverage means "a drink other than water". The term beverage is a wider term which covers everything right fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shelf life and merely because it improved the body and texture of the product and added some smoothness thereto, that would not change the basic character of the product". 11. Further, Hon'ble High Court of Kerala in the case of Gujarat Co-operative Milk Marketing Federation Ltd. v. State of Kerala (2008) 15 VST 384 (Ker) = 2007 (5) TMI 575 - KERALA HIGH COURT has held that mere addition of Vitamins A and D to the milk pasteurized, would not make the milk any less pasteurized milk and by such addition milk retains its natural characteristics. PERSONAL HEARING: / PROCEEDINGS HELD ON 29.04.2019. 12. Sri. Lokesh Reddy, Chartered Accountant and duly authorised representative of the applicant appeared for personal hearing proceedings held on 29.04.2019 & reiterated the facts narrated in their application and also submitted copies of judgements that they intend to rely on. Further the applicant were requested to submit the process of manufacture of flavoured milk and normal milk. The applicant vide their letter dated 03.05.2019, submitted the flow charts related to the aforesaid manufacturing activity. 13. FINDINGS & DISCUSSION: 13.1 We have considered the submissions made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Tax (Rate), dated 28.06.2017 are relevant. The said explanations are reproduced below for ease of reference.- (iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. Accordingly we make a reference to the Section Notes and Chapter Notes of the relevant Chapters of the Customs Tariff and also the corresponding Explanatory Notes. 13.6 Milk and Milk products are classified in Chapter 4 as under: Tariff Item Description of goods 0401 Milk and cream, not concentrated nor containing added sugar or other sweetening matter 0402 Milk and cream, concentrated or containing added sugar or other sweetening matter 0403 Buttermilk. Curdled milk and cream, yogurt, kephir and other fermented or acidified milk and cream, whether or not concentrated or con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k". 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. It could be seen from above that "Milk" includes pasteurised, sterilized and flavoured milk. Therefore, the product of the applicant is covered under "Milk". 13.9 Now we proceed to examine the alternate / competing entry under Chapter 22 under tariff heading 2202, which reads as under Tariff Item Description of goods 2202 Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured, and other non-alcoholic beverages, not including fruit or vegetable juices of Heading 2009 2202 10 - Waters, including mineral waters and aerated waters, containing added sugar or other sweetened matter or flavoured - Other 2202 91 00 -- Non alcoholic beer 2202 99 -- Other 2202 99 10 --- Soya milk drinks, whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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