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TMI Blog2019 (12) TMI 1577X X X X Extracts X X X X X X X X Extracts X X X X ..... made as per the description given by the appellant in the flow chart submitted by him - even though the product in question is a dairy produce and also an edible product of animal origin, the qualifier that it is not elsewhere specified or included makes it ineligible to be classified under the chapter 4. The product in dispute as it is already specified and included under chapter 22 dealing with goods /items of Beverages, spirits and vinegar makes it ineligible to be classified under chapter 4. Thus, the commodity flavoured milk merits classification under beverage containing milk under tariff heading 2202 90 30. The rate of tax applicable for the said tariff item is 12% GST under entry no. 50 of Schedule II of Notification No.1/2017 - Central (Rate) dated 28.06.2017 as amended - the Ruling of the AAR is in tune with legal position and it needs no interference and the appeal is accordingly dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the Appellate Authority for Advance Ruling to set-aside the order of the Advance Ruling and declare the GST rate on flavoured milk as 5% as per HSN 0402 9990 under Notification No.1/2017 - Central Tax (Rate). 2. Grounds of appeal: 2.1. The appellant (M/s Sri Chakra Milk Products LLP.,) prays that the AAR has erred in holding that Flavored Milk manufactured is classifiable under HSN Code 2202 and not under HSN Code 0402. The said Ruling is illegal and contrary to law and the HSN Codes. 2.2. The appellants states that, for classifying the commodity under the relevant schedule to the Goods and Services Tax Act, attracting different rates of taxes, one has to look to the HSN Codes, prescribed under the Customs Tariff Act, 1975. The Rules for interpretation of First Schedule to the Customs Tariff Act, including the Section, Chapter notes and general explanatory notes of the first schedule, shall so far as may be applied to the interpretation of Notification 1/2017 Central Tax (Rate), dated 28.6.2017. 2.3. The appellant opines that AAR has unnecessarily placed heavy reliance upon the Minutes of the 31' GST Council Meeting in coming to conclusion of the Ruling. While discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Milk for babies 0402 29 90 --- Other Other: 0402 91 -- Not containing added sugar or other sweetening matter: 0402 91 10 --- Condensed milk 0402 91 90 --- Other 0402 99 -- Other: 0402 99 10 --- Whole milk 0402 99 20 --- Condensed milk 0402 99 90 --- Other 2.6. The appellant takes the reference of Hon'ble Supreme Court in the case of CCE Vs. Amrit Food decided on 3.9.2015 (324 ELT 418) has observed in Paras 5, 6 & 7 as under: 5. Chapter Heading 04.04 deals with other dairy produce; edible products of animal origin not elsewhere specified or included. Thus, all the dairy produce other than those which are specified elsewhere (for example, ice cream is covered by chapter Heading 21) are covered by Chapter Heading 04.04. We would also like to mention here that Heading 04.01 which is the main heading gives the description of goods as:-- 04.01 Milk and Cream, Concentrated or containing added sugar or other sweetening matter - In or in relation to the manufacture of which any process is ordinarily carried on with the aid of power: 0401.11 - Flavoured milk, whether sweetened or not, put up on Nil unit containers and ordinarily intended for sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant opines that the above judgment did not arise under the Customs Tariff Act but under the Sales Tax Act. Since, the interpretation of Tariff Act was not involved, the judgment cannot be said to be a binding or a useful precedent. Chapter Heading 2202 specifically includes water under the category of beverages, spirit and vinegar, whereas the observation of the High Court is that the beverage would not include water. Hence, this decision, which arose under the sales tax provisions could not have been applied in ascertaining the rate of tax on flavoured milk. (2) Decision of Kerala High Court in Ernakulam Reg. Co-op Milk Products Union Limited Vs. CCE, Kochi (236 ELT 329): The appellant states that AAR had erred in relying upon this decision since it is only an interim order of the Court but not a final decision. The observation of the Hon'ble Court that Flavoured Milk would prima facie fall under Chapter 22 but not under Chapter 4 was one of the prima facie indicators, while granting stay on payment of ₹ 1.00 lakh. The AAR could not have relied on the interim order of the Court since it is not a binding precedent. (3) Decision of Gujarat in Kiara Dist. Co-op Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire submission made by the appellant along with the Ruling pronounced by the Authority for Advance Ruling. On perusal of the appeal and submission made by the appellant at the time of Personal Hearing, it is observed that the main issue of contention is whether 'flavoured milk' is classifiable under tariff item 2202 9930 of the First Schedule to the Customs Tariff Act, 1975 as a "beverage containing milk" with the rate of tax as 12% GST (6% CGST + 6% SGST), as per the ruling of AAR or it is classifiable under HSN 0402 9990 with the rate of tax as 5% under Notification No.1/2017 - Central Tax (Rate) as per the contention of the appellant. When we look into the chronology of the events, the flavoured milk was classified under entry 0401.11 under the 6 digit code system prevailing till 27.02.2005 as under: Heading No. Sub-heading No. Description of goods Rate of duty (1) (2) (3) (4) 04.01 0401.11 Flavoured whether sweetened or not, put up in unit containers and ordinarily intended for sale. milk, Nil. Later on, even under the 8 digit code introduced from 28.02.2005 flavoured milk was categorically placed under chapter IV Heading No.0402 9990 as under CHAP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and under Schedule II with Tax Rate of 12% (CGST 6% +SGST 6%) as under Schedule I -2.5% S.No. Chapter/Heading/Sub-Heading/Tariff item Description of Goods 8 0402 Milk and cream, concentrated or containing added sugar or other sweetening matter, including skimmed milk powder, milk food for babies[other than condensed milk] Schedule II -6% S.No. Chapter/Heading/Sub-Heading/Tariff item Description of Goods 50 2202 90 30 Beverages containing milk As there is ambiguity in the classification of the instant product, 'flavoured milk' i.e., whether it is to be considered under either 0402 or 2202 90 30 as mentioned above, the issue has been discussed and recorded in the Agenda for 31st GST Council Meeting Volume-II dt: 22.12.2018 as under, clarifying the classification issue. 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 pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilk. In common parlance, a beverage is "(chiefly in commercial use) a drink other than water. It is a liquid for drinking especially such liquid other than water (as tea, milk, fruit juice, beer) usually prepared (as by flavouring, heating, admixing) before being consumed". The instant product, the flavoured milk is undoubtedly a beverage containing milk. It is moreover, a 'preparation' made as per the description given by the appellant in the flow chart submitted by him. It could be inferred from the above discussion that even though the product in question is a dairy produce and also an edible product of animal origin, the qualifier that it is "not elsewhere specified or included" makes it ineligible to be classified under the chapter 4. The product in dispute as it is already specified and included under chapter 22 dealing with goods /items of "Beverages, spirits and vinegar" makes it ineligible to be classified under chapter 4. Thus, the commodity 'flavoured milk' merits classification under beverage containing milk under tariff heading 2202 90 30. The rate of tax applicable for the said tariff item is 12% GST (6% CGST + 6% SGST) under entry no. 50 of Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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