Classification of 'Flavoured Milk' under Tariff Heading 0402 99 90: Dairy Product Status Upheld

The case involved the classification of "Flavoured Milk" under different tariff headings. The applicant argued for classification under Chapter 4 with HSN 0402 99 90, while excluding it from Chapter 22. Citing various judgments, the applicant contended that "Flavoured Milk" retains the essential character of milk despite additives. The authority considered the product's composition and packaging, ultimately classifying "Flavoured Milk" under tariff heading 0402 99 90, in line with Chapter 4 covering dairy products.

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Issues Involved:
1. Classification of "Flavoured Milk" under HSN 0402 99 90 or 2202 99 30 or any other Chapter.

Issue-wise Detailed Analysis:

1. Classification under HSN 0402 99 90:
The applicant, engaged in the processing of milk and milk products, contends that "Flavoured Milk" should be classified under Chapter 4 with HSN 0402 99 90, taxable at 5%. The applicant argues that Chapter 4 covers dairy products, including milk and cream, which are concentrated or containing added sugar or other sweetening matter. The composition of "Flavoured Milk" includes 91.44% milk, 8.5% sugar, 0.05% flavor, and 0.01% color, retaining the essential character of milk. The applicant references the Food Safety and Standards Authority of India (FSSAI) definition, which includes flavored milk under dairy products. The applicant also cites the Customs Tariff Act, 1975, which specifies that Chapter 4 covers dairy products and excludes products obtained by replacing natural milk constituents with other substances.

2. Exclusion from Chapter 22:
Chapter 22 of the Customs Tariff Act covers beverages, spirits, and vinegar. The applicant argues that Chapter 22 does not cover liquid dairy products of Chapter 4. The applicant contends that "Flavoured Milk" is a natural dairy product without any alcoholic content, thus should not be classified under Chapter 22, which covers non-alcoholic beverages. The applicant references Chapter Note 22, which excludes liquid dairy products from Chapter 22. The applicant also mentions that Chapter 22 covers beverages made from concentrates with less than 0.5% alcohol, which does not apply to "Flavoured Milk."

3. Supporting Judgments and References:
The applicant cites several judgments to support their classification under Chapter 4. The Supreme Court in Board of Revenue, Ernakulam v. PIO Food Packers held that a processed commodity should be recognized as a new and distinct article. The applicant argues that "Flavoured Milk" retains its essential character of milk despite the addition of sugar and flavors. The Allahabad High Court in Gujarat Co-op Milk Marketing Federation Ltd. v. State of U.P held that flavored milk is a form of milk and not a derivative or milk product. The Supreme Court in Commissioner of Central Excise Vs. Amrit Foods held that the addition of stabilizers does not change the basic character of a product. The Kerala High Court in Gujarat Co-operative Milk Marketing Federation Ltd. v. State of Kerala held that the addition of vitamins to pasteurized milk does not alter its natural characteristics.

4. Findings and Discussion:
The authority examined the submissions and the nature of the product "Flavoured Milk." The FSSAI describes flavored milk as a product prepared from milk and other products derived from milk, with or without the addition of sugar, nutritive sweeteners, other non-dairy ingredients, stabilizers, and food colors. The authority noted that "Flavoured Milk" is supplied as a ready-to-consume drink in tetra pack containers or bottles. The authority referred to the Customs Tariff Act and the relevant Chapter Notes. Chapter 4 covers dairy products, including milk and cream, concentrated or containing added sugar or other sweetening matter. The authority concluded that "Flavoured Milk" is covered under tariff heading 0402 99 90, as it retains the essential character of milk.

Ruling:
The commodity "Flavoured Milk" is classified under the Tariff heading 0402 99 90.

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