Dessert mix classification dispute: milk-powder based products held under Heading 04.04; demand set aside for no fresh notice

Where a show cause notice proposed classification under Heading 21.08 and the appellate authority rejected that classification, no differential duty could be sustained or re-quantified by adopting Heading 19.01 without issuing a fresh notice proposing that tariff entry; consequently, the demand founded on Heading 21.08 failed and re-computation under Heading 19.01 was set aside. On merits of classification, the dessert mixes, predominantly milk powder with added sugar and minor additions (including starch below 5%, nuts, flavouring agents, and citric/tartaric acids), retained the essential character of milk products covered by Heading 04.04; therefore, Heading 19.01 ("not elsewhere specified or included") was inapplicable and classification under Heading 04.04 was upheld.

---

---

Issues: (i) Whether differential duty claimed in the show cause notice based on classification under Chapter Heading 21.08 is recoverable where the appellate authority has held that Chapter 21.08 does not apply. (ii) Whether the subject products (Nestle Milkmaid Kalakand Mix, Rabri Mix and Kesar Kulfi Mix) are classifiable under Heading 04.04 or under Heading 19.01 of the Central Excise Tariff Act, 1985.

Issue (i): Whether the differential duty claimed under a show cause notice on the ground of classification under Heading 21.08 can be recovered after the appellate authority has held that Heading 21.08 does not apply.

Analysis: The show cause notice specifically alleged classification under Heading 21.08 and sought differential duty accordingly. Tribunal precedent establishes that recovery of duty under a tariff heading different from that proposed in the show cause notice is impermissible. The appellate authority unequivocally found Chapter 21.08 inapplicable and did not sustain the classification alleged in the notice. No separate show cause notice was issued proposing classification under any other heading prior to any attempt to recover duty on that basis.

Conclusion: Differential duty based on the show cause notice alleging classification under Heading 21.08 is irrecoverable; no amount of duty is leviable from the appellant pursuant to that notice.

Issue (ii): Whether the three specified products are classifiable under Heading 04.04 or Heading 19.01.

Analysis: Chapter Heading 04.04, read with Chapter Note 4 and HSN nomenclature, covers products consisting of natural milk constituents even if containing added sugar, sweetening matters, flavouring or fruit. Ingredients of the products (including dairy powder majority, sugar, minor starch below 5%, nuts and flavouring acids) are permitted within Headings 04.0104.04 and do not introduce prohibited additional ingredients that would route the products to Heading 19.01. Heading 19.01 applies to food preparations of milk and cream only when they contain other ingredients not permitted in Headings 04.0104.04. The acids present function as flavouring/acidulant and do not exclude the goods from Heading 04.04. Comparative authority relied upon by Revenue concerned materially different products (protein concentrates) and is inapplicable.

Conclusion: The subject products are classifiable under Heading 04.04 and not under Heading 19.01; the demand based on classification under Chapter 21.08 cannot stand.

Final Conclusion: The appeal is allowed; the subject dessert mix products are classifiable under Heading 04.04 of the Central Excise Tariff Act, 1985, and no differential duty is leviable on the basis of the show cause notice alleging classification under Heading 21.08.

Ratio Decidendi: Where a show cause notice alleges a specific tariff heading, duty cannot be recovered on a different heading unless a fresh notice is issued; products consisting of natural milk constituents containing permitted additives and flavourings fall under Heading 04.04 per HSN-based interpretation and Chapter Note 4 of the Central Excise Tariff Act, 1985.

---