2021 (4) TMI 616
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted the following with regard to the case about flavoured milk:- * The process of the flavoured milk is standardization of fresh milk according to the fat contents and then heating at certain temperature followed by filtration, pasteurization, and homogenization and then mixing of sugar and various flavours and finally bottling. The flow chart of the manufacturing process is enclosed and marked as Annexure-"A". * As aforesaid, the process involves various operations, but it comes out from the process that (i) adding flavours to milk does not change essential character of milk; (ii) flavoured milk is a substitute for milk; (iii) it is a simple preparation of milk; (iv) no manufacturing process is involved nor does milk change its composition in any way. Since the commodity milk and milk products are enumerated in Chapter 4, the applicant understands that tariff item/ HSN code 0402 9990 is applicable to flavoured milk. * As per Harmonised System of Nomenclature, Chapter 4 covers the following Diary products. i. Milk (i.e. Full Cream Milk, and partially or completely skimmed milk), ii. Cream, iii. Butter milk, Curdled milk and cream, yogurt, kephir and other....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... skimmed milk. Heading Nos. 0401 and 0402 would therefore, cover milk, that is to say, full cream milk or partially or completely skimmed milk. * A reference may be made to the judgement of the Hon'ble Punjab & Haryana High Court in case of Food Specialities Ltd. V/s UOI at this stage, because the Hon'ble High Court has, in the said judgment reported in 1991 (51) ELT 310 (P&H), held that the Indian Standard specifications for milk powder issued by the ISI as well as the Standards under the Prevention of Food Adulteration Rules, 1955 were relevant to decide even under the Central Excise law as to what was skimmed milk or partly skimmed milk or full skimmed milk. The view of the Hon'ble Punjab & Haryana High Court, as expressed in the above judgment, is also affirmed by the Hon'ble Supreme Court, and therefore, the Indian Standards as well as PF Rules may be applied to consider classification of the product in question under the GST Tariff which is an adoption of the Customs Tariff. * A product containing fat more than 1.5 and less than 26.0% is considered to be partially skimmed milk/powder under the PF Rules. Same parameters for partly skimmed milk/powder i.e. fat percent by ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Supreme Court] that PFA Standards were relevant for classifying milk under Chapter 4 of the Tariff * The National Diary Research Institute, Bangalore has also confirmed that flavored milk falls, under Dairy produce as per the FSSAI, 2006. Under FSSAI regulations 2011, section 2.1.3 defines flavoured milk as a "product prepared from milk or other products derived from milk, or both, and edible flavorings with or without addition of sugar, nutritive sweeteners, other non-diary ingredients, including stabilizers and food colors". Flavoured milk shall be subjected to heat treatment as provided in sub-regulation 2.1.1 (general standards for milk and milk products). Where flavoured milk is dried or concentrated, the dried or concentrated product on addition of prescribed amount of water also gives a product conforming to the requirements of flavoured milk. * The applicants submits that a similar Advance Ruling Application seeking clarification regarding the HSN code and rate of duty for "flavoured milk" was made by M/s. Karnataka Co-operative Milk Producers' Federation Ltd., Bengaluru reported at 2019 (30) G.S.T.L. 350, which has been decided by the Adjudicating Authority in Bangalor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esar and Rose flavour, which is sold under the trade name of "Power Sip". 7. The facts of the case is that the process of the flavored milk is standardization of fresh milk according to the fat contents and then heating at certain temperature followed by filteration, pasturisation and homogenization and then mixing of sugar and various flavors and finally bottling. The essential constituents of the milk have not changed even after adding sugar and permitted flavors and still retain its essential character of milk. Further stated that the process involves various operations, but it comes out from the process that (i) adding flavors to milk does not change essential character of the milk; (ii) flavoured milk is a substitute for milk (iii) It is a simple preparation of milk (iv) no manufacturing process is involved nor does milk change its composition in any way. The word "milk" is statutorily defined under Note 1 to Chapter 4, and according to Note 1, the expression "milk" means full cream milk or partially or completely skimmed milk. Chapter 4 of GST tariff covers "dairy Product" and Sub-heading No. 0402 covers "Milk and cream, concentrated or containing added sugar or other sweete....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k or partially or completely skimmed milk. The relevant explanatory notes of CTH 04.02 and 04.04as per the HSN is as below: CTH 04.02 04.02 Milk and cream, concentrated or containing added sugar or other sweetening matter (+). 0402.10 -In powder, granules or other solid forms, of a fat content, by weight, not exceeding 1.5% -In powder, granules or other solid forms, of a fat content, by weight, exceeding 1.5% : 0402.21 --Not containing added sugar or other sweetening matter 0402.29 --Other -Other : 0402.91 --Not containing added sugar or other sweetening matter 0402.99 --Other This heading covers milk (as defined in Note I to this Chapter) and cream, concentrated (for example, evaporated) or containing added sugar or other sweetening matter, whether liquid, paste or solid (in blocks, powder or granules) and whether or not preserved or reconstituted. Milk powder may contain small quantities of starch (not exceeding 5% by weight), added, in particular, to maintain the reconstituted milk in its normal physical state. The heading does not cover : (a) Curdled, fermented or acidified milk or cream (heading 04.03). (b) Beverages consisting of milk....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oteins, calculated on the dry matter) (heading 35.02) or globulins (heading 35.04). 8.2 From the above, the following are deduce: * 'Milk', to be covered in this chapter are 'full cream milk or partially or skimmed milk' * Beverages consisting of milk flavoured with cocoa or other substances (heading 22.02) are not covered under CTH 0402 * CTH 0404 90 covers fresh or preserved products consisting of milk constituents, which do not have the same composition as the natural product, provided they are not more specifically covered elsewhere 9. From the constituents of the product as furnished by the applicant, it is seen that the product consists of Standardized Milk (92.00%) without removal of Fat content thereon, which is sweetened with around 8% of sugar to which color 0.08% and flavor in kesar & Badam Milk 0.120%, Rose milk 0.075% and Elaichi Milk 0.150% etc. are added and is supplied in tetra packs/ Bottle after necessary processes. The products are marketed as "Power Sip" i.e. "Flavoured milk" and are ready for consumption as stated by the applicant. Comparing the product and those covered under CTH 0402/0404, it is evident that the product in hand consisting of milk flav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to decide the classification under the GST Tariff which is aligned with Custom Tariff because the purpose and objective of the other Act i.e. PFA (Prevention of Food and Adulteration Act) are different from the Custom Tariff Act. The standards of PFA cannot be considered to decide the classification of any product under GST Act because objective and purpose of both the Act are different and both cannot be mixed to decide the particular issue of one Act. When this is the fact, there appears to be no relevance to import the ingredients from another legislation/Act. Constitution Bench of the Apex Court in Hari Khemu Gawali Vs. Deputy Commissioner of Police, Bombay and Another [AIR 1956 SC 559], has stated : "It has been repeatedly said by this Court that it is not safe to pronounce on the provisions of one Act with reference to decisions dealing with other Acts which may not be in pari materia." 10.1 In the light of the above it would not be proper to transplant the provisions of PFA Act, which has a different object and purposes, for determining the classification under the coded Tariff, when there is no ambiguity 11. The applicant has claimed that the addition of flavour do n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on-alcoholic beverages, not including fruit or vegetable Juices of heading 20.09. This group includes, inter alia : (1) Tamarind nectar rendered ready for consumption as a beverage by the addition of water and sugar and straining. (2) Certain other beverages ready for consumption, such as those with a basis of milk and cocoa. From the above, it is clear that other non-alcoholic beverages, not including fruit or vegetable juice of Heading 20.09 are covered under '2202.99 - Other' and as per the explanation at (B)(2), the group covers beverages ready for consumption such as those with a basis of milk. The word "beverage", though not defined under CGST Act, 2017, is considered, in common parlance, as a drink that can be consumed directly and the instant product "flavored milk" can be consumed as it is and hence is a beverage with a basis of milk. Therefore, the product is appropriately classifiable under CTH 2202 99 30. 11.3 The Hon'ble Madras High Court in the case of the State of Tamil Nadu v. TVL. Ganesh Corporation, vide Order dated 3 April, 2012, recorded that "as per the Oxford Dictionary "beverage" means "a type of drink except water". In Webster's 3rd International Dic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y fall under Chapter 4 Heading No. 0402, more particularly under sub-heading No. 0402 99 90 reading as under :- CHAPTER 4 DAIRY PRODUCE; BIRD'S EGGS; NATURAL HONEY; EDIBLE PRODUCTS OF ANIMAL ORIGIN, NOT ELSEWHERE SPECIFIED OR INCLUDED Notes :- 1. The expression 'milk' means full cream milk or partially or completely skimmed milk. Tariff Item Description of goods Unit Rate of duty (1) (2) (3) (4) 0401 Milk and cream, not concentrated nor containing added sugar or other sweetening matter. 0402 Milk and cream, concentrated or containing added sugar or other sweetening matter. 0402 91 Not containing added sugar or other sweetening matter. 0402 99 Other 0402 99 10 Whole milk kg. Nil 0402 99 20 Condensed milk kg. 16% 0402 99 90 Other kg. Nil 2.3 Simultaneously with bringing into operation the above Tariff Amendment Act, the Central Government has issued various Notifications thereby maintaining the effective rates as they stood for various products till 28-2-2005 once again signifying that the objective of the above Tariff Amendment Act was not to change scope of any Chapter or to change c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by specifying nil rate of duty for flavoured milk of animal origin. As the product in question was classified as flavoured milk under SH No. 0401.11 of the Tariff as it stood till 28-2-2005 and since it is not disputed by the Revenue even at this stage that Amul Kool/Amul Kool Cafe is flavoured milk, the respondents would now treat the goods as chargeable to nil rate of duty from 15-6-2007. However, in the process, the petitioners' right to establish classification of these goods under Chapter 4 of the Tariff as dairy produce has been defeated because the classification of this product is shown under this Notification as 2202 90 30. 2.7 The petitioners' submission is that Section 5A of the Central Excise Act empowers the Central Government to exempt excisable goods of any specific description from the whole or any part of the duty of excise leviable thereon. The power is thus, to grant exemption of excisable goods of any specified description, but not to decide a classification of any excisable goods by way of a notification issued under this Section. The Central Government could have very well prescribed nil rate of duty for flavoured milk of animal origin without referring to i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....epresentation. 4. As regards pendency of the proceedings arising from the show-cause notice, it will be open to the petitioners to make a request before the Commissioner of Central Excise to adjourn the hearing suitably so as to await the decision of the Central Government on the representation. We are sure that such a request will be considered by the Commissioner in the proper perspective when the matter comes up for hearing before the Commissioner on 16-8-2007. 5. The petition stands disposed of in the above terms. 6. Liberty to apply in case of difficulty. 7. Direct service is permitted." 11.6 The above, decisions relate to the Central Excise regime. However, the interpretation and Ratio Decidendi is applicable to the very goods under GST also. 11.7 In fact many dairy companies approached GST Council seeking clarification on the classification of flavoured milk. The matter recorded in the Agenda for 31st GST Council Meeting (Volume-2), dated 22-12-2018, in this regard is as follows : S.No. Description HSN Present GST Rate (%) Requested GST Rate (%) Comments 18 Flavoured Milk 2202 12 Clarification on that it is classifiable under Chapter 4 1. The Explanator....