2021 (4) TMI 595 - AAR - GST

Flavored milk reclassified as beverage containing milk under Customs Tariff Act

The authority classified flavored milk as a 'beverage containing milk' under Tariff Item 2202 99 30 of the Customs Tariff Act, 1975, based on the ... Classification of flavoured milk - beverage containing milk - exclusion of beverages with a basis of milk from Chapter 04 - application of HSN explanatory notes for tariff interpretation - inapplicability of PFA/other food standards where HSN is unambiguousExclusion of beverages with a basis of milk from Chapter 04 - application of HSN explanatory notes for tariff interpretation - Flavoured milk is not classifiable under Chapter 04 (CTH 0402 or 0404). - HELD THAT: - Comparing the product composition and presentation with the CTH 0402 and 0404 Explanatory Notes, the Authority found that beverages consisting of milk flavoured with cocoa or other substances are specifically excluded from CTH 0402. The product at hand is a ready to consume drink with added sugar, flavours and marketed as beverages; it does not fall within the descriptions covered by CTH 0402 or as whey/products lacking natural milk constituents under CTH 0404. Accordingly, the flavored milk is not classifiable under either CTH 0402 or CTH 0404. [Paras 14, 15]Not classifiable under CTH 0402 or CTH 0404.Beverage containing milk - classification of flavoured milk - application of HSN explanatory notes for tariff interpretation - Flavoured milk is classifiable under Tariff Item 2202 99 30 as a 'beverage containing milk'. - HELD THAT: - The Authority applied the Explanatory Notes to Heading 22.02 and concluded that 'other non alcoholic beverages' include ready to consume beverages with a basis of milk. Flavoured milk, being directly consumable and prepared by adding sweeteners and flavours to standardized milk, falls within the description of beverages containing milk under CTH 2202.99.30. The Authority also relied on prior administrative decisions and the GST Council record recognising flavoured milk under HS code 2202 to support the classification. [Paras 17, 18, 20]Classifiable under Tariff Item 2202 99 30 as a beverage containing milk.Inapplicability of PFA/other food standards where HSN is unambiguous - classification of flavoured milk - PFA standards and other food safety specifications cannot be transposed to alter tariff classification where the HSN and its explanatory notes are clear. - HELD THAT: - The applicant's reliance on PFA standards and prior Central Excise precedents concerning the nature of milk (e.g., skimmed/partly skimmed) was examined. The Authority held that when the Customs Tariff (HSN) and its Explanatory Notes unambiguously describe the scope of Chapter 04 and Chapter 22, it is not proper to import standards from the PFA or treat those standards as decisive for tariff classification. Consequently, PFA norms were not applied to re characterise the product under Chapter 04. [Paras 16, 17]PFA/other food standards are not applied to override the HSN explanatory notes where the tariff classification is unambiguous.Final Conclusion: The Authority ruled that the applicant's flavoured milk products are not classifiable under Chapter 04 (CTH 0402/0404) but are classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975 as 'beverages containing milk'. Issues Involved:1. Classification of 'Flavored Milk' under GST Tariff.Detailed Analysis:Issue 1: Classification of 'Flavored Milk' under GST TariffApplicant's Submission:The applicant, a cooperative society producing various milk products, including flavored milk under the trade names Amul Kool and Amul Kool Café, sought an advance ruling on the classification of flavored milk. They argued that flavored milk should be classified under Heading 0402, Sub Heading 04029990 of the GST Tariff, as it retains the essential character of milk despite the addition of sugar and flavors.Process and Composition:The process involves standardizing fresh milk according to fat content, heating, filtering, pasteurizing, homogenizing, and then adding sugar and flavors before bottling. The essential character of milk remains unchanged. The product, being partially skimmed milk with added sugar, was argued to fall under Heading 0402 of the GST Tariff, specifically under Sub Heading 04029990.Relevant Legal References:The applicant referred to the Harmonized System of Nomenclature (HSN) and various judicial precedents, including the Punjab & Haryana High Court ruling in Food Specialities Ltd. v/s UOI and the CESTAT decision in Mehsana District Co-operative Milk Producers Unions Ltd., to support their classification under Chapter 4 of the GST Tariff.Authority's Discussion and Findings:The authority examined the relevant chapter notes of CTH 0402 and 0404, and the Explanatory Notes as per HSN. The product in question is flavored milk, which is a beverage ready for consumption and based on milk. The Explanatory Notes to HSN of Chapter 04.02 explicitly exclude beverages consisting of milk flavored with cocoa or other substances, directing such products to Chapter 22 under Heading 2202.Examination of CTH 2202:The authority noted that CTH 2202 covers waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavored, and other non-alcoholic beverages. Sub-heading 2202 99 30 specifically includes 'Beverages containing milk.'Judicial Precedents:The authority referred to various judicial precedents, including the Hon’ble Madras High Court in the State of Tamil Nadu v. TVL. Ganesh Corporation and the Hon’ble High Court of Gujarat in M/s. Kaira Dist. Coop. Milk Producers’ Union Ltd. v. UOI, which supported the classification of flavored milk under Chapter 22 as a beverage containing milk.Advance Rulings:The authority also considered similar advance rulings from Tamil Nadu and Andhra Pradesh, which classified flavored milk under Tariff Item 2202 99 30.Conclusion:The authority concluded that flavored milk is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975, as a 'beverage containing milk.'Ruling:The flavored milk is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975, as a 'beverage containing milk.'