Flavoured milk classification stayed under Chapter 4 as minimal flavouring did not change its essential character.

Flavoured milk in liquid form remained classifiable under Chapter Tariff Item 0404 90 00 because the addition of a minuscule flavouring agent did not alter its essential character. Applying the HSN Notes and a co-ordinate Bench ruling, the Tribunal held that milk products stay within Chapter 4 unless added ingredients change their basic nature or are inconsistent with that heading. It also relied on the principle affirmed in the milk shake mix decision that stabilizers added only for stability do not change the product's essential character. The assessee's classification was therefore accepted and the department's contrary demand failed.

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Issues: Whether flavoured milk was classifiable under Chapter Tariff Item 0404 90 00 of the Central Excise Tariff Act, 1985 or under the competing heading, and whether the addition of a small quantity of flavouring agent shifted the product from Chapter 4 to a different tariff entry.

Analysis: The Tribunal followed the co-ordinate Bench decision that milk products in liquid form remain classifiable under Chapter 4 unless their essential nature is altered by the addition of other ingredients not permitted for that heading. Relying on the HSN Notes, it held that flavouring substance by itself is not a prohibited ingredient and that the addition of a minuscule quantity of flavouring agent does not change the basic character of the product. The Tribunal also applied the earlier decision affirmed by the Supreme Court on milk shake mixes, where stabilizers added only for stability did not change the essential character of the milk product.

Conclusion: The impugned product was held classifiable under Chapter Tariff Item 0404 90 00 of the Central Excise Tariff Act, 1985. The assessee's classification was accepted and the department's contrary demand could not stand.

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