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TMI Blog2019 (11) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... , spirits and vinegar; tobacco and manufactured tobacco substitutes and the Chapter 22 deals with items/goods of Beverages, Spirits and Vinegar . The tariff item no. 2202 99 30 covers Beverages containing milk . Thus, the 'flavoured milk' is classifiable under tariff item 2202 9930 of the First Schedule to the Customs Tariff Act,1975 as a beverage containing milk under HS code 2202. The rate of tax applicable for the said tariff item is 12% GST (6% CGST + 6% SGST) under entry no. 50 of Schedule II of Notification No.1/2017 - Central (Rate) dated 28.06.2017 as amended. - AAR No. 27/AP/GST/2019 - - - Dated:- 15-7-2019 - D. RAMESH, AND S. NARASIMHA REDDY, MEMBER Represented by: Sri. Phani Raja Kumar Boggaram ORDER (Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub-section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017) 1. The present application has been filed u/s. 97 of the Central Goods Services Tax Act, 2017 and AP Goods Services Tax Act, 2017, (hereinafter referred to CGST Act and APGST Act respectively) by M/s. Sri Chakra Milk Products LLP., D.No. 23B, Bendapudi vari Street Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant is of the view that mere adding of sugar and different flavours to milk does not change essential character of milk. Flavoured milk or milk shake is consumed as a substitute for milk and it is a simple preparation of milk; no manufacturing process is involved nor does milk changes its composition in any way and classification of flavoured milk falls under Chapter 4 of the Customs Tariff Act, 1975 and sought clarification on the applicable HSN code under the said Chapter by providing extract of the same. 7. Record of Personal Hearing: Sri. Phani Raja Kumar Boggaram, authorized representative of the Applicant appeared for personal hearing on 16.04.2019 and they reiterated the submission already made in the application. 8. Discussion and Findings: 8.1 We have examined the issue raised by the applicant regarding the HSN code and rate of duty on their outward supply of flavoured milk . The relevant legal provisions are discussed hereunder. The Section 9 (1) of CGST Act, 2017 is as follows: LVEY COLLECTION 9 (1) Subject to the provisions of sub-section (2), there shall be levied a tax called central goods and service tax on all intra-State supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimant in regard to the preparation of flavoured milk . The applicant informed that the process of the flavoured milk is standardisation of fresh milk according to the fat contents and then heating at certain temperature followed by filtration, pasteurisation, and homogenisation and then mixing of sugar and various flavours and finally bottling. As per the flow chart, it involves various operations by RMRD team, weighing team, processing team, packing team and warehousing / despatch teams and thereby it is a preparation and no more it is fresh milk after adding flavours. The applicant informed that they are preparing flavoured milk of badam. 8.3 The applicant stated that (i) adding flavours to milk does not change essential character of milk; (ii) flavoured milk is a substitute for milk (iii) it is a simple preparation of milk; (iv) no manufacturing process is involved nor does milk change its composition in any way and opined that the commodity milk and milk products are enumerated in Chapter 4 and they want clarification that under which tariff item / HSN code is applicable to the above said flavoured milk. Under the GST provisions the interpretation of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T-408-(Guj)] = 2007 (8) TMI 707 - GUJARAT HIGH COURT dealt the issue of classification of flavoured milk, which is as follows: Quote (Order per : M.S. Shah, J. (Oral)]. What is challenged in this petition under Article 226 of the Constitution of India is the constitutional validity of the Central Government Notification No. 28/2007-Central Excise, dated 15-6-2007, particularly Serial No. 1 in the table in so far as in column No. 2, code 2202 90 30 is given to Flavoured milk of animal origin while giving the said item exemption from duty. The dispute is about the flavoured milk being produced by the petitioners under the brand name Amul Kool/Amul Kool Cafe. 2. Mr. Paresh M. Dave for the petitioners has submitted as under :- 2.1 Earlier under the six digit code system prevailing till 27-02-2005, the flavoured milk made by the petitioners was falling under Entry 0401.11 which read as under :- CHAPTER 4 DAIRY PRODUCE; EDIBLE PRODUCTS OF ANIMAL ORIGIN, NOT ELSEWHERE SPECIFIED OR INCLUDED Notes :- 1. The expression, Milk means full cream milk or partially or completely skimmed milk. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter or to change classification of the excisable goods, nor was the objective to change the rate structure of the excisable goods. 2.4 According to the department, as per the show cause notice dated 16-04-2007, the Flavoured milk falls in Chapter 22 under Tariff Item No. 2202 90 30. CHAPTER 22 Beverages, spirits and vinegar Tariff Item Description of goods Unit Rate of duty (1) (2) (3) (4) 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 90 30 Beverages containing milk 1 16% Mr. Dave further states that only items like Milkis and Swerve (Vanana) being made by other foreign producers can be considered as beverages containing milk because over and above milk, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce has been defeated because the classification of this product is shown under this Notification as 2202 90 30. 2.7 The petitioners submission is that Section 5A of the Central Excise Act empowers the Central Government to exempt excisable goods of any specific description from the whole or any part of the duty of excise leviable thereon. The power is thus, to grant exemption of excisable goods of any specified description, but not to decide a classification of any excisable goods by way of a notification issued under this Section. The Central Government could have very well prescribed nil rate of duty for flavoured milk of animal origin without referring to its classification in the said Notification, but having prescribed these goods as falling under classification Code No. 2202 90 30 under this Notification, the Central Government has decided classification of the product by virtue of Notification under Section 5A of the Act, and therefore also, this action is also ultra vires the powers conferred upon the Government under Section 5A of the Act. The petitioners submission is that if this Notification had been issued without indicating Tariff Item No. 2202 90 30, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of in the above terms. 6. Liberty to apply in case of difficulty. 7. Direct service is permitted. Unquote. The above, decisions relate to the Central Excise regime. However, the interpretation and Ratio Decidendi is applicable to the very goods under GST also. In fact many dairy companies approached GST Council seeking clarification on the classification of flavoured milk. The matter recorded in the Agenda for 31St GST Council Meeting (Volume-2) dated 22.12.2018, in this regard is as follows: S. No Description HSN Present GST Rate (%) Requested GST Rate (%) Comments 18 Flavoured Milk 2202 12 Clarification on that it is classificable under Chapter 4 1. The Explanatory Notes to HSN describe the goods classifiable under the heading 0402 as under: This heading covers milk (as defined in Note 1 to this Chapter) and cream, whether or not pasteurised, sterilised or otherwise preserved, homogenised or peptonised; but it excludes milk and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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