2015 (9) TMI 1269 - SC - Central Excise

Supreme Court affirms classification of milk shake mix under dairy produce category, rejects Revenue's argument.

Commissioner of Central Excise Versus M/s Amrit Food (A. Division of Amrit Corporation Ltd)

The Supreme Court upheld the Customs, Excise and Service Tax Appellate Tribunal's classification of milk shake mix and soft serve mix under Chapter ... Classification of goods - milk shake mix and soft serve mix - Classification under Chapter sub-Heading 0404.90 or under Chapter sub-Heading 1901.19 - Held that:- The Commissioner has himself noted that no chemical name of the stabilizer is used and the role played by the aforesaid ingredients of the stabilizer is to maintain a uniform emulsion of oil in water, throughout the shelf life and to improve the body and texture and to impart smoothness to the products. Thus, as far as the basic product is concerned, it demonstrates the same and the purpose is only to impart smoothness to the product and to maintain the product consistency during storage and transportation and throughout its shelf life - main purpose is to maintain the product consistency during storage and transportation as well as to improve the shelf life. Merely because it improves the body and texture of the product and adds some smoothness thereto, that would not change the basic character of the produce. Description given there is open ended inasmuch as the Chapter Note itself uses the expression 'inter alia'. Further, while mentioning the products which would be covered under the said Chapter Heading 04.04, and stating about the additions which could be made, the crucial words are 'whether or not'. Therefore, the additives which can be added while making the product are illustrative only and merely because stabilizer is not mentioned therein would not mean that after adding the stabilizer the product in question ceases to be dairy produce. - view taken by CESTAT is perfectly in tune with legal position and does not call for any interference - Decided against Revenue. Issues:Classification of milk shake mix and soft serve mix under Chapter sub-Heading 0404.90 or 1901.19.Analysis:The primary issue in this case revolves around the classification of two products, namely milk shake mix and soft serve mix, under Chapter sub-Headings 0404.90 and 1901.19. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) classified these products under 0404.90, while the appellant-Revenue sought to classify them under 1901.19. The contention was based on whether the addition of stabilizer in the products would categorize them as food preparations under Chapter Heading 19.01 rather than dairy produce under Chapter Heading 04.04.The products in question, intended for institutional sales only, are mixtures of milk, sugar, glucose, and milk powder. The manufacturing process is similar to ice-cream production, excluding air incorporation and freezing. Despite the addition of stabilizers like carbox methyl cellulose, gur gum, etc., the main purpose remains to maintain product consistency, improve texture, and extend shelf life. The stabilizers do not alter the fundamental nature of the products as dairy produce.The interpretation of Chapter Heading 04.04, covering dairy produce and animal-origin edible products, suggests that the addition of sugar or sweeteners does not change the classification. The appellant's argument that stabilizers transform the products into food preparations under Chapter Heading 19.01 is refuted based on the stabilizers' role in product consistency and texture enhancement, aligning with the dictionary definition of stabilizers.The Chapter Note 4 on Heading 04.04, mentioning various milk products and additives, does not restrict the classification to exclude stabilizers. The note's inclusive language and the phrase 'whether or not' regarding additives indicate that the addition of stabilizers does not disqualify the products from being considered dairy produce.Ultimately, the Supreme Court upheld CESTAT's classification of the products under 0404.90, emphasizing that the stabilizers' purpose does not alter the essential character of the goods. The legal position and the products' nature support the conclusion that they fall under Chapter Heading 04.04 as dairy produce, warranting the dismissal of the appeal.