Dismissed

TN/AAAR/16/2021(AR) of M/s Britaania Industries Limited

GST AAAR30 Jun 2021TN/AAAR/16/2021(AR)

Case brief

AI extract

What is this about?

In an appeal against an advance ruling, the Tamil Nadu State Appellate Authority examined the classification of UHT Sterilized Flavoured Milk. While the appellant argued it was milk with added ingredients falling under Chapter 4, the court held that standardised or toned milk drinks are ready-to-drink beverages. Citing HSN explanatory notes, the court ruled the product is a 'beverage containing mi

What did the court decide?

The appeal was dismissed, confirming the impugned order that classifies the product as 'Beverages containing milk' under CTH 2202 99 30.

TN/AAAR/16/2021(AR) of M/s Britaania Industries Limited — GST and Indirect Tax | GST AAAR (2021)

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TAMILNADU STATE APPELLATE AUTHORITY FOR ADVANCE RULING (Constituted under Section 99 of Tamilnadu Goods and Services Tax Act 20171

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A.R.Appeal No.02 / 2O2UAAAR

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Date: 30/06/2021

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BEFORE THE BENCH OF

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t. Thiru G.V.KRISHNA RAO, MEMBER

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Thiru M.A. SIDDIQUE, MEMBER

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ORDER-in-Appeal No. AAAR I L6 | 2O2l lARl

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(Passed by Tamilnadu State Appellate Authority for Advance Ruling under Section 101(1) of the Tamilnadu Goods and Services Tax Act. 2Ol7l

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Preamble

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In terms of Section 1O2 of the Central Goods & Services Tax Act 2O),7 /Tamilnadu Goods & Services Tax Act 2O|7("the Act", in Short), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the Order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the appellant has been given an opportunity of being heard. 2. Under Section 103(1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a). On the applicant who had sought it in respect of any matter referred to in subsection (2) of Section 97 for advance ruling; (b). On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made.

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Page 1 of 31

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Nameand address ofthe appellant	BritanniaIndustries Limited
	PrestigeShantiniketan,TowerC,The Business Precint, 16th&17tt'Floor,Whitefield MainRoad, Mahadevapura,Bengaluru,Karnataka
GSTINorUser ID	33AABCB2O66P7ZM
AdvanceRuling Orderagainst whichappealisfiled	OrderNo.O8/AAR/2O2O dated25rh February 2020
Dateoffilingappeal	16.o3.2021
Represented by	Shri.AnandodayaMishra,Advocate
JurisdictionalAuthority-Centre	ChennaiNorthCommissionerate
Jurisdictional Authority-State	DeputyCommissioner(ST)^-III,Large TaxpayerUnit,Chennai
Whether paymentoffeesforfiling appealisdischarged.Ifyes,the amount and challandetails	Yes . Rs.2O,OOO/- CIN: RBIS21033300103679dated 72.O3.202I

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At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Senrice Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.

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The subject appeal has been filed under Section 100(1) of the Tamilnadu Goods & Services Tax Act 2Ol7 /Central Goods & Services Tax Act 2Ol7^(hereinafter referred to the Act') by Brittania Industries Limited (hereinafter referred to as Appellant'). The appellant is registered under GST vide GSTIN 33AABCB2O66PIZM. The appeal is filed against the Order No.0B/ARA /2O2O dated 25.02.2020^passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by the appellant.

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2.1 The Appellant has stated that they manufacture /^procure and supply UHT Sterilized Flavoured Milk and market it under the brand name 'Britannia Winkin' Cow Thick Shake' (hereinafter the product'). The product is made in multiple flavours and supplied in Tetra Packs. The said product (UHT Sterilized Flavoured

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Milk) comprise mainly of milk (about 80 - 9O%) and sugar (IO - 12%). The list of ingredients is tabulated below.

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S.No.	Ingredients	Rrrpose
I	Milk(80-9o%)	Primary and predominantingredient
2.	Sugar(lo-12%l	Asasweetener
	Water	Formaintainingconsistency ofthe products
4.	Milksolids	Addedwith(liquid)milktomaintainconsistency
5.	Flavours	Thesecould beeitherStrawberryPuree,Mango extract,Cocoa,Vanilla(dependingon thepack)and areaddedinsmall quantities(lo/oorless)forflavour andcolour
6.	Emulsifierand stabilizers	ToEmulsify andstabilize (smallquantity)
.7	Acidity regulator	Toregulateacidity(smallquantity)
6.	Iodized salt	For tasteandbalance

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The process of manufacture involves heating (UHT sterilizationl and cooling of milk. The ingredients as listed above are added to the milk at different points of the heating /cooling process. Thereafter the milk is filtered and de-aerated / homogenised. The UHT Sterilized Flavoured Milk is thereafter packaged. The applicant has stated that the product is being classified by them under Tariff item 2202 90 30 as 'beverages containing milk'. However, judicial precedents and the relevant GST tariff entries support classification under Chapter 4 of Customs Tariff. 2.2 In view of the above submissions, the Appellant had filed an application before Hon'ble Authority for Advance Ruling, seeking clarification on the following questions:

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Whether UHT Sterilized Flavoured Milk is classifiable under Chapter a ffariff Heading 0402 which couers'Milk... containing added sugar or other sweetening matter...' or alternatiuelg, Tarilf Heading 0404 which couers 'Other', i.e. 'producfs consisfing of natural milk constituents, uhether or not containing added sugar or other sueetening matter, not elsewhere specified or included')

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The Original Authority has ruled as follows:

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UHT Steril2ed Flavoured Milk marketed under the brand name 'Britannia Winkin'Cow Thick Shake' by the applicant is not classifiable under the Tariff heading'O4O2 lO4O4" but classifiable under CTH 22029930.

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Aggrieved by the above decision, the Appellant has filed the present appeal. The grounds of appeal are as follows:

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/ The product under consideration i.e., flavoured milk is a dairy produce. It is essentially milk added with sugar and permitted additives. The single largest ingredient in the product, in quantity and essence is milk which constitutes more than 8O-9Oo/o of the product. The other ingredients in the product, i.e Sugar, Cocoa, Vanilla, Salt etc. are added for flavour and sweetening and additives viz. Recodan MS 4683 and ICL-Joha T New are added for stabilizing, buffering, emulsifying and thickening purposes. These additions do not in any manner change the essential nature of the product, i.e. milk. The product is marketed under the brand name Winkin' Cow thick shake' to make it more attractive to children who are the target consumers, and hence, the packaging, labelling and marketing of the product as a fun, colourful and tasty drink. At the same time, the drink holds the necessary nutrition to ensure that it is chosen by purchasers (adults) as a preferred choice for consumption. The essential nature and character of the product under consideration is nothing but milk and the Impugned Order deserves to be set-aside on this ground alone.

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'. Hon'ble CESTAT, Chennai in Cavinkare Private Limited Versus Commissioner of Central Excise 12019 (11) TMI 1054 - CESTAT Chennail in which the product under consideration was similar to the case at hand, the classification of which was under dispute, relied on the decision in Nestle India Ltd. Vs CCE Ltd., NewDelhi l2OI8 (8) G.S.T.L.211 (Tri-Del)|, affirmed by the Hon'ble Supreme Court, as reported in 2015(3241 E.L.T. 478 (S.C.)wherein it was held that the addition of small quantity of artificial flavouring substance & the essential addition of stabilizers does not change the basic characteristics of the product, being milk. lt is important to note that the Hon'ble High Court had specifically considered the explanatory notes to Chapter 4 in this decision.

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/ Ld.AAR ought to have appreciated that in the decision of the Hon'ble High Court in Gujarat Coop. Milk Marketing Federation Ltd. vs. State of U.P. l(2O17 (5) GSTL 351 (AII.)I,which was referred to before them, where for the flavoured milk marketed as^'AmulElaichi Shake' and^'Amul Coco Shake- it was inter-alia, held that flavoured milk is a form of milk, and processing of milk, with the addition of permitted flavours, colour and sugar does not alter the nature of milk or its characteristics. It was held that flavoured milk is

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covered under the sweep of the term 'milk' and even if sugar or special flavours are added it shall not become a commodity different from milk. The rationale laid down in the said case is mandated and is binding in the present case.

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/ The Ld. AAR has also failed to appreciate and consider the catena of earlier judicial precedents (detailed hereunder) which squarely support the view that the product is classifiable under Chapter 4. The Impugned Order deserves to be set-aside on this ground alone.

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'/ The position and treatment adopted by the Food Safety and Standards Authority of India, which is the regulator for the Food sector, is of utmost relevance' in determining classification of a product. The Ld. AAR ought to have appreciated that the Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 ('the FSS Regulations') set out the categorisation of foods for prescribing standards and permitted ingredients and additives.

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essentially milk / dairy product, rather than a beverage made from milk. In view of this aforesaid, the Ld. AAR ought to have appreciated that flavoured milk is nothing but milk, rather than a beverage containing milk. The Appellant therefore submits that the product deserves to be classified under Chapter heading O4O2.

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, At Para No. 6.8 of the Impugned Ruling, the Ld. AAR has held that the Appellant's reliance on the FSSAI Regulations has no relevance in the present case since there is a specific heading covering the said product in the Customs Tariff, which is aligned with the International Convention on the Harmonized Commodity Description and Coding System. The Ld. AAR further relies on the decision pronounced in Hari Khemu Gawali v. Deputy Commissioner of Police &Anr. IAIR 1956 SC 5591 to hold that it would not be proper to transplant the provisions of the PSSAI Act, for determining the classification under the coded tariff, when there is no ambiguity.

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', The aforesaid observation by the Ld. AAR is fallacious. The Hon'ble Supreme Court in Parle Agro (P) Ltd. v. Commissioner of Commercial Taxes, Trivandrum 12017 (5) TMI 592 - Supreme Courtl categorically held that the decision and opinion of the Food Safety Authorities under the Food Safety and Standards Act and Regulations framed therein is a relevant factor for

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examining the nature and content of a product for determining its classification.

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This understanding was also referred to/ followed in the CESTAT Larger Bench decision in Brindavan Beverages Private Limited Vs. CCE & ST [2019 (10) TMI 762 - CESTAT ALLAHABAD (LB)1. It is a clear and settled legal position that FSSAI regulations are relevant in examining the nature of a product for the purpose of determining its classification and also it is a settled legal position that cognate and complimentary statutes are relevant for the purpose of interpretation. This has also been affirmed by the Hon'ble Supreme Court in the decision in Parle Agro(supra).

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The reliance placed by the Ld. AAR in the decision in Hari Khemu Gawali(supra) is wholly misplaced. In the said case, the question before the Apex Court was whether the criminal proceedings shall take place as^per provisions under the Code of Criminal Procedure or as per Section 57 of the Bombay Police Act of 1951. While determining the vires of Section 57 in light of Article 9(5) of the Constitution of India, the Hon'ble Apex Court held that "it was not safe to pronounce on provisions of one act with reference to decisions dealing with other acts which may not in pari materia." The aforesaid observation by the Supreme Court in the said decision was in the context of determining the constitutionality of a provision under the Bombay Police Act. Therefore, it is submitted that the reliance on the aforesaid decision by the Ld. AAR is not relevant to the factual matrix or^question of law in the present case and is hence wholly misplaced.

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In the present case they do not seek to apply a provision from the FSS Regulations, as much as it seeks to refer to the provisions to better understand the nature of the product as per the government regulator of the concerned product. The question before the Ld. AAR was merely determination of classification of the said product In this context of determining classification of a product, the Hon'ble Apex Court has held that the FSSAI Regulations are relevant and can be relied on, in the decision in Parle Agro(supra). Therefore, it is submitted that the FSSAI Regulations relied on by them ought to have been considered by the Ld. AAR while passing the Impugned Ruling. The Impugned Ruling is therefore unsustainable.

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Even if flavored milk is considered not to be milk itself, but a^product containing milk/milk constituents, it would still be classifiable under

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Chapter 4, specifically Entry O4O4 90 00. While in terms of the foregoing submissions, the most appropriate classification of the product in question is O4O2, without prejudice, if a view is taken that flavoured milk is not milk itself but a product containing milk/milk constituents, the product would still be classifiable under Chapter 4, specifically under entry O4O4 90 OO which covers products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included.

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'. The Ld. AAR ought to have appreciated the decision in Nestle India Limited vs. Commissioner of Central Excise I2OI7 (6) GSTL 483 (Tri. - Del.)l wherein it was held that Nutritious Milk, a product made up of milk predominantly and small quantity of artificial flavouring substance is classifiable under O4O4 90 0O as a product consisting of natural milk constituents. It was also held that the addition of small quantities of other substances will not change the essential character of the product and the product will remain nutritious milk only.

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'F Therefore, in light of the above facts and submissions, the Ld. AAR ought to have held that the product (flavoured milk) is most appropriately classifiable under Chapter 4, specifically Tariff Entry O4O2 99 90, or alternatively, Tariff Entry 0404 90 00.

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UHT Sterilized Flavoured Milk is covered under Chapter 4 in terms of the General Rules of Interpretation

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, As per the General Rules for interpretation, the classification is to be determined, as a first recourse, according to the description of goods mentioned in the tariff headings or the Section Notes or Chapter Notes contained in the Schedule. The Rules further provide that when goods are prima facie covered under two or more headings, classification shall be effected such that a specific entry will prevail over a general entry.

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understanding of UHT Sterilized Flavoured Milk is Milk, considering that milk constitutes 9Ooh of the said product. Accordingly, as milk is specifically covered under the description of Heading O4O2, the product will fall for classification under the said heading.

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merit classification under Chapter 22 as^'beverage containing milk'. The more specific classification is under Chapter 4, and by application of Rule

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3(a) of the General Rules, goods if classifiable under two or more headings, the entry which provides the more specific description will cover the^product in question.

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.- Thus, even if flavoured milk is classifiable under two or more headings i.e. under Chapter 4 and Chapter 22, then as per the General Rules, the most specific description shall be preferred over general description.

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. The product in the present case is commonly known and understood as 'flavoured milk', as it is essentially a form of milk rather than a derivative of milk or milk product. It does not lose its basic characteristics and nutritive value merely by the process of heating and cooling or by addition of sugars or flavour. Therefore, the entry most specifically applicable is under Chapter 4.

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r Rule 3(b) of the General Rules which is applicable in the event that classification cannot be determined under Rule 3(a) inter alia states that mixture and composite goods consisting of different materials shall be classified as if they consist of the material or component which^gives them their essential character.

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/ The general explanatory notes for Chapter 4 under the Harmonized Commodity Description and Coding System ('HSN') specifies as follows: "(1) Dairy products:

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(A) Milk, i.e. full cream milk and partially or completely skimmed milk. (E) Products consisting of natural milk constituents, not elsewhere specified or included.

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/ The products mentioned at items (A) to (E) above may contain, in addition to natural milk constituents (e. 9., milk enriched in vitamins or mineral salts), small quantities of stabilizing agents which serve to maintain the natural consistency of the product during transport in liquid state (disodium phosphate, trisodium citrate and calcium chloride, for instance) as well as very small quantities of anti-oxidants or of vitamins not normally found in the product. Certain of these products may also contain small^quantities of chemicals (e.g., sodium bicarbonate) necessary for their^{processing..."}

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/ It is, therefore, evident from the above that Chapter 4 permits addition of certain other ingredients which could either work as stabilizers, sweeteners or flavouring agents. Therefore, flavoured milk is classifiable under Chapter 4 even if they contain any of the aforementioned additives. This is in line with the position under the FSS Regulations as well.

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;' The present issue is no longer res integra and stands squarely covered in favour of the Appellant by the decision rendered by the Hon'ble Tribunal Chennai. They did not have occasion to refer to and rely on this decision since it was passed only after the submissions were made by the Appellant before the Ld. AAR. The Impugned Ruling therefore did not consider the decision in Cavinkare(supra), and to this extent is per incuriam. The Impugned Ruling is therefore liable to be set aside on this ground alone.

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i It is settled law that the basic characteristic of a product does not change by the mere addition of ingredients for flavouring, enhancing shelf-life etc. Reliance in this regard is placed on the judgement of the Hon'ble Supreme Court in Commissioner of Central Excise vs. Amrit Food [2015 (324) ELT 418 (SC)]. Although the above judgement was passed in context of the tariff as it read in 1998, the essence of the judgement is that mere addition of additives and ingredients to milk as a sweetener, flavouring agent, stabilizer etc. will not change the nature of the product if the product per se is milk which falls within the scope of Chapter 4 of the Tariff.

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z It is further essential to note that in terms of the Tariff as it reads today, Chapter 2202 seeks to include products such as mineral waters, aerated waters and non-alcoholic beverages. It is clear that under the entry for 'beverages containing milk', the legislature seeks to cover beverages in which milk is one amongst various other ingredients, such as tea, coffee etc. and not products where the predominant ingredient and nature is that of milk. In all these cases, in common parlance the products are known in their generic name such as coffee, tea though they contain milk powder. For this purpose, on application of the principle of "Ejusdem Generis", either milk is absent or would be a negligible portion of the preparations like Fruit pulp, soya milk drinks, beverages containing milk etc, while Winkin 'Cow is a product, which is substantially and predominantly only milk.

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i In Nestle India Limited vs. Commissioner of Central Excise I2OOI (132) ELT 734 (Tri. Del)l wherein it was held that 'Milkmaid Kesar Kulfi Mix' (consisting of 57.5% of dairy powder), 'Milkmaid Shahi Rabri Mix' (consisting of 57.5o/o of dairy powder) and 'Milkmaid Kalakand Mix' (consisting of 68.8o/o of dairy powder) were classifiable under Chapter 4. In the present case, milk constitutes over 80-9ooh of the product and the product is in liquid state, i.e. natural milk form. It is not even reduced to powder. In another case of Nestle India Limited vs. Commissioner of Central

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Excise [2018 (8) GSTL 271], it was held that the mere addition of artifrcial flavouring does not change essential nature of product.

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.- Furthermore, in Danone Foods and Beverages l2OI2 (280) E.L.T. 563], the Advance Ruling Authority held as follows:

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"It is, therefore, clear that Heading 0403 permits addition of certain other ingredients which could be either stabilizers or sweeteners or flavouring agents. Therefore, dairy products classifiable under Heading 0403 of CETA continue to remain classifiable under this heading even if they contain any of the aforementioned additives. "Yum Creamy" is made by mixing sugar, flavour, vitamins, wheat and rice flour with cow's milk. Since the stabilizers, sweeteners etc. are permissible additives as mentioned in the relevant HSN Notes, the product "Yum Creamy" will be correctly classified under Heading 04039090 of CETA."

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, The product under consideration is much akin to Danone's Yum Creamy and is hence, classifiable under Chapter 4. In Commissioner of Sales Tax vs. Neera Drinks [1999 UPTC 1130], the Hon'ble High Court inter alia held that sweetened milk and badam milk sold in bottles with caps do not change the classification of the product which is basically milk.

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.- Thus, in view of the above-mentioned settled jurisprudence, it is clear that flavoured milk merits classification under Chapter 4 as Other Milk, and not under any other heading including under Chapter 22.

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. The Ld. AAR has held that the said product under consideration merits classification under the entry 2202 9930'beverages containing milk'. The said product being UHT Sterilized flavoured milk, is essentially^'milk' and not^'a beverage containing milk' and thus merits classification under Chapter 4 and not Chapter 22. Further, as per well settled law, in the HSN, the earlier chapters cover more basic f natural products and the later products feature more processed products. As already submitted, the said product is essentially milk and is thus a natural origin product. The product is appropriately classifiable under Chapter 4 than Chapter 22. In this regard, reliance is placed on the decision in Mauri Yeast India Private Limited Vs. State of U.P. [2008 (4) TMI 101 - Supreme Court and Samsung India Electronic Pvt. Ltd. Vs. State of Gujarat I2O2O (2) TMI 1247 - Gujarat High Court.

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, In terms of well settled law in a catena ofjudgments including in Cavinkare (supra), addition of a small quantity of artificial flavorings does not change the essential nature of the product and the product continues to be classified under Chapter 4.

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i The Impugned Ruling seeks to make a reference to HSN explanatory notes to contend that^"beverages consisting of milk flavoured with cocoa or other substances" fall under HS 2202 as per the said explanatory notes and the said reference is misconceived and is without any basis in fact or law. Factually, the product under consideration is milk / produce of animal origin and this is also accepted vide a catena of judgments on identical products. Given this factual and legal position, reference to "beverage consisting of milk" under the HSN explanatory notes is not relevant to the present case, in as much as the product at hand is essentially milk / mllk product falling under chapter 4.

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;, Even assuming without accepting that said HSN explanatory note is relevant to the product at hand, they submit and highlight the decision in Collector of Customs, Bombay vs. HICO Products Ltd [1984 (S) TMI 324 , CEGAT New Delhil wherein it was held that HSN Explanatory Notes do not have legal force and that for legal purposes, classification has to be determined in according to the Headings read with the relevant Section and Chapter Notes. It was further held that in case the HSN explanatory notes do not accord with the classification determined on the basis of the Chapter Headings read with relevant Section and Chapter Notes, then the latter shall prevail.

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i They have placed reliance in the case of Texspan Vs. Collector of Customs [1989^{(11) Thill 169 - CEGAT, New Delhi], which relied} on the ratio^laid down in Hico Products(supra) and held that HSN Explanatory Notes do not have legal force and that the relevant Tariff Headings along with Section and Chapter Notes will prevail over HSN Explanatory Notes in case of a contradiction and on Hindustan Motors Ltd. Vs, Commissioner of Customs, Calcutta 11999 (1) TMI 222 - CEGAT, Calcutta where it was held that HSN Explanatory Notes are not binding and cannot prevail over a Tariff description.

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-z I.d. AAR is incorrect in holding that the said product is classifiable under Chapter 22 and not under Chapter 4 on the basis of HSN Explanatory Notes mentioned at Para No. 6.5 of the Impugned Ruling. As is clear from the aforesaid judicial precedents relied on, HSN Explanatory Notes cannot

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prevail over a Tariff Heading and relevant Section and Chapter Notes, to determine classification of a product and the former is not legally binding^as well. In the present case, the said product is classifiable under Chapter^{4 in} terms of the Tariff Headings itself. Therefore, the AAR's reliance on the^HSN Explanatory Notes while rejecting the plain reading of the Tariff Entry^is unfounded and unsustainable.

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r The Ld. AAR has also held at Para No. 6.6 of the Impugned Ruling that the said product is classifiable under Chapter 22 as^per Rule¹ of General^Rules of Interpretation of Tariff. lt is submitted that this is^{whollyerroneous and} not sustainable. The classification of goods under the Customs Tariff^is governed by^'General Rules for the Interpretation of Import tariff^("GRI") which are fashioned on^'General Rules for the Interpretation of the Harmonized System'. In terms of Rule I of the GRI, the classification^of goods is to be determined according to the terms of the headings of the Tariff Schedule and any related Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI¹ and if^{the Section} Notes and Chapter Notes do not otherwise require, the remaining GRI's^may then be applied. ln this regard, reliance is placed in the decision in^Modi Xerox Ltd. Vs. Collector of Customs, New Delhi/Bombay 11997⁽¹²⁾ TMI642 - CEGAT New Delhil

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F In the present case, the product can be classilied under Chapter 4 in accordance with GRI 1 in terms of the headings of the Tariff Schedule^itself, The said product is essentially^'milk' and thus the product in question^is classifiable under Chapter 4 on the basis of the Chapter heading^itself. Hence, there is no requirement to seek to classify the said product in accordance with the explanatory notes under Heading 2202.

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r Judicial precedents relied on by them shall prevail over the interpretation sought to be adopted by referring to HSN explanatory note by the Ld. AAR. Without prejudice, it is submitted that even assuming that there are two views possible, it is a well settled legal position that one favourable to the assessee in matters of taxation has to be preferred.

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/ The Impugned Order seeks to refer to certain recommendations of the Fitment Committee as mentioned in Agenda of 3l't GST Council Meeting^to conclude that Flavoured milk is classifiable under Tariff Entry^2202. Annexure-lll to the Agenda for the 31st meeting of the GST Council mentions the list of goods not recommended for change in GST rate. SI. No. 18 to

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Annexure-Ill provides that the Fitment Committee does not recommend issuance of clarification that the proposed rate of 'flavoured milk' be l2oh. The Ld. AAR has relied on this recommendation of the Fitment Committee to hold that^'flavoured milk' is classifiable under Chapter 22 only. The AAR has however failed to appreciate that the aforesaid recommendation of the Fitment Committee has not fructified into a decision by the GST Council. Reference in this regard is made to Paras14.42, 14.43, 14.44 at Page No. 27 to the Minutes of Meeting of the 31st GST Council Meeting. It has been stated nowhere in the Minutes of Meeting that the GST Council either accepts or rejects this particular recommendation of the Fitment Committee. In fact, at Para 14.42, it has been recorded that the Hon'ble Chairperson has stated that any other request for reconsideration of change in GST rate could be sent in writing for reconsideration, thereby, leaving it open-ended. On the other hand, at Para No. 14.41 at Page No. 27 of the Minutes of Meeting, wherein it has been clearly recorded that the council agreed to the proposals contained in S.Nos. 1 to 19 of Annexure-ll, recommended by Fitment Committee in its meeting of 14th and 1Sth December,2OIB," Reference is also made to Para No. 14.29 at Page No. 24 of the Minutes of Meeting, wherein the GST Council has expressly agreed to the Fitment Committee recommendations. It is thus submitted that the GST Council has not pronounced a decision regarding the tariff rate applicable to the said product. Therefore, the Id. AAR is incorrect in relying on the Fitment Committee recommendation, when it has not been expressly agreed to by the GST Council.

¶84

The reference to the Fitment Committee recommendations and statements made therein in the context of change of GST rate cannot be a basis to decide the classification of goods at hand. Thus, the said recommendation is essentially in the context of change in GST rate and has not been issued in the context of the product under consideration. The characteristics of the product at hand (being essentially milk), ingredients thereof, etc. are not referred or considered therein.

¶85

In any case, it is settled law inter-alia in Kalyani Packaging Industry v. Union of India I2OO4 (168) E.L.T. 145 (S.C)l that Departmental circulars cannot prevail over law laid down by a Court. Reliance in this regard is also placed on the judgment in Commissioner of C.Ex., Bolpur v. Ratan Melting & Wire Industries [2008 (231) E.L.T. 22 (S.C.)] where a similar position was taken.

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¶87

/ It is submitted that the said product, i.e. flavoured milk, merits classification under Chapter 4 as it constitutes 9Ooh milk and the product is essentially milk only. It is submitted that even products that contain less than 90oh of milk are being classified under Chapter 4, as elaborated hereunder.

¶88

r In Nestle India Ltd. v. CCE, New Delhi I2OOI (3) TMI 157- CEGAT. New Delhil (supra), the products in question were Nestle Milkmaid Kalakand Mix (containing dairy powder of 68.80 l, Nestle milkmaid rabri mix (containing dairy powder of 57.5o/o) and nestle milkmaid kulfi mix (containing dairy powder of 57.5o/o). These products thus contained much lesser than 9Ooh of milk. However, it was held by the Hon'ble Tribunal that they are to be classified under Chapter 4. This decision was affirmed by the Supreme Court as reported in 2015 (324) E.L.T. 418 (S.C.).

¶89

/ Similarly, in M/s. Danone Foods and Beverages (supra), the product in question was fermented milk containing 83.O4o/o of cow milk. It was held in this case that the product merits classification under Chapter 4.

¶90

r Further, reliance is also placed in on Amrit Food (supra), in which the products under question were milkshake mix and soft serve mix. The products constituted of milk, to which sugar, glucose and milk powder were added. lt was held that the products were to be classified under Chapter 4 only. The ratio of this decision was relied upon by the Tribunal in the case of M/s. Fun Foods Pvt. Ltd.(supra) in which it was held that milkshake mixes are classifiable under Chapter 4. ln the present case, the said product contains 9Oo/o milk, to which substances like sugar, flavouring agents, etc. are added. Thus, the said product also merits classification under Chapter 4 only.

¶91

/ It is thus submitted that even products that constitute less than 907o milk have been classified under Chapter 4, as can been seen from the aforesaid judicial decisions. In the present case, it is an admitted fact that the product, i.e. flavoured milk constitutes 90% milk and that the product is essentially milk only. Addition of a miniscule quantity of flavouring substance does not alter the essential character of the product, as has been held in the various judicial precedents cited above. Therefore, on the basis of the aforesaid grounds, the product UHT Sterilized Flavoured Milk deserves to be classified under Chapter 4 and not Chapter 22. The Impugned Ruling

¶92

Page 14 of 31

¶93

is consequently erroneous, arbitrary and without appreciation of the true nature of the r:roduct. and deserves to be set aside.

¶94

PERSONAL HEARING:

¶95

5.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the appellant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media vide e-mail dated 22",1 March 2021. The appellant provided their consent to be heard through digital means towards end of April 2021 or later. Accordingly, the hearing was held virtually on 15th June 2O2I. 5.2 Shri. Anandodaya Mishra, Advocate and authorized representative appeared for the hearing virtually. He reiterated the written submissions. He emphasized that:

¶96

(1) their product is made up of 8o-gooh of Milk and is only "Milk"

¶97

(21 GST Council has not clarified the classification of the product as mentioned in the impugned order

¶98

(3) Non-Reliance of FSSAI regulation by the lower authority is not correct He stated that their product is a new product launched post-GST and as an abundant caution they classified it under Chapter 22 of Customs Tariff. He relied on a catena of decisions and requested to permit them to furnish a written submission which was allowed. The authorized representative was asked to furnish invoice copy and rulings supporting similar product under CTH O4O2/O4O4.

¶99

5.3 The appellant furnished their written submissions dated 24.06.202I through e-mail. In the submissions, they had furnished the background, concept of Flavoured Milk, issues involved, judicial precedents in detail along with the copies of all the case laws relied upon by them, copy of the FSSAI Certificate and copies of the labels of their products. They have not furnished any invoice copy supporting similar product under CTH O4O2/O4O4.

¶100

5.4 On the issues involved, the following are stated:

¶101

'. Whether the product is 'beverage containing milk' or 'milk and milk product?

¶102

Page 15 of 31

¶103

The product is a diary produce of which the primary and predominant ingredient is milk and additions such as sweetening and flavours do not affect the nature of basic ingredient, 'Milk' lose its characteristics

¶104

According to Schedule-ll of the Food Safety and Standards Act, 2006 and clause (f) of Paragraph 2 of the Milk and Milk Products Order, 1992; milk is defined to include flavoured milk;

¶105

The product is milk based and not water based drink and hence Tariff heading 2202 dealing with water based beverages and other nonalcoholic beverages will not be applicable to it

¶106

The more specific classification exists under Chapter 4 of the Customs Tariff and by application of Rule 3(a) of the GRI, goods if classifiable under two or more headings, the entry which provides the more specific description will cover the product

¶107

Chapter 4 does not have any categorical exclusions for Flavoured Milk and thus, there is no reason for resortingto Chapter 22

¶108

Rule 3(b) of the GRI states that mixture and composite^goods consisting of different materials shall be classified as if they consist of the material or component which gives them their essential character. The flavoured milk is a milk based product and does not lose its characteristics when sugar or flavor is added to it and therefore the product merits classification under tariff heading O4O2

¶109

What is the difference between 'beverage containing milk'and 'milk and milk product and when a product is 'beverage containing milk'and 'milk and milk product'?

¶110

As per the Oxford dictionary, a beverage is 'any type of drink except water'

¶111

Para 2.lO of the FSSAI Regulations, 2011, i.e., Beverages^(other than Diary and Fruits & Vegetables based) includes 2.1O.6- Beverages NonAlcoholic-Carbonated is mentioned; Tariff heading 2202 covers nonalcoholic beverages

¶112

Non-alcoholic beverages as under 2.7O.6 of the FSSAI regulation does not include milk in any form; Since there is no component of milk as per the FSSAI regulations, the product cannot be classified under the heading 22O2 that provides for non-alcoholic beverages

¶113

Under the entry 22029930, the intent of the legislature is to cover beverages in which milk is one amongst various other ingredients,

¶114

Page 16 of 31

¶115

such as tea, coffee, etc and not products where the predominant ingredient and nature is that of milk

¶116

Flavoured Toned milk, as per FSSAI regulations, means the product prepared from milk or other products derived from milk, or both, and edible flavourings with or without addition of sugar, nutritive sweeteners, other non-diary ingredients including stabilizers and food colours

¶117

Therefore the product in the present case is flavoured milk and comes under the ambit of Milk Product as per the FSSAI Regulations, 201 1 and in accordance with Chapter 4 of the Customs Tariff as the Tariff Heading O4O2 covers 'Milk and cream, concentrated or containing added sugar or other sweetening matter', the product merits classification under tariff heading O4O2

¶118

'. What is flavor? To what extent flavor can be used so that it does not chanse the nature of the original product?

¶119

FSSAI has classified flavours into three categories:- Natural Flavouring substances and Natural Flavours; Flavouring substances that are Nature-identical; Substances of Artificial Flavours

¶120

Flavours can be added to the food in accordance with Good Manufacturing Practices (GMP) Guidelines

¶121

Chapter 4 of the Customs Tariff permits addition of certain other ingredients which could either work as stabilizers, sweeteners or flavouring agents. Therefore, flavoured milk is classifiable under Chapter 4 even if it contains any additives

¶122

The process of manufacturing the product includes heating of milk, adding stabilizers, adding flavor, blending the flavor, adjusting the pH balance so that the pH of the product is neutral, further processing and filling and finally packaging and storage. As per FSSAI, flavoured milk is subject to heating as a part of its manufacturing process

¶123

As per Note 1 of Chapter 4, milk means full cream milk or partially or completely skimmed milk, referring to the not 4 of Chapter Notes. Therefore, the product comes under the ambit of Milk and Milk product as under Chapter 4 and not under Chapter 22

¶124

Page 17 of 31

¶125

Chapter Notes 4 (b) excludes only products obtained from milk by replacing one or more of its natural constituents and their product do not fall under this category

¶126

The product would not have fallen into the category of Tariff heading 0402 under Chapter 4 when water would have been removed from cow's milk referred as condensed milk but in the present case, the water content is present and has not been removed thereby acting as supportive ingredient with cow's milk

¶127

The base content of beverage is water which is dominating ingredient on the other hand water is sub part of the Product which maintains consistency and here Milk is the base content, i.e., the dominating ingredient which makes it milk product or diary produce. Hence, the flavoured milk cannot be classified as condensed milk and is to be classified under Tariff heading 0402

¶128

The product is classifiable under Entry 04029990

¶129

As per the description and ingredients, the product is toned milk with added sugar and flavor

¶130

CTH 0402 talks about 'Milk and Cream, concentrated or containing added sugar or other sweetening matter'; their product is Milk with added sugar and flavours, therefore it would be categorized under Chapter 4 in the CTH O4O2

¶131

As per the specific entry, the product falls under the Entry O4O2 99 90, i.e., others as the Product is neither skimmed milk, milk food for babies, whole milk or condensed milk but toned milk with added flavours that would classify the Product under the Entry O4O2 99 90

¶132

5.5 The appellant has relied on the following judicial precedents:

¶133

Addition of small quantity of flavor does not take milk/milk products outside purview of Chapter 4

¶134

Cavinkare Private Limited Vs. Commissioner of Central Excise [2Or9(1I)TMI¹⁰⁵⁴ -^{CESTAT Chennai]}

¶135

Nestle India Ltd Vs. CCE New Delhi [2018 (8) G.S.T.L.2Il(Tri. - Del.)]

¶136

The product in question is essentially milk and deserves to be classified under Chapter 4

¶137

Gujarat Coop. Milk Marketing Federeation Ltd Vs. State of u.P.[2017(s) GSTL 3s1 (All.)]

¶138

Page 18 of 31

¶139

Karnataka Co-operative Milk Producers Federation Ltd [ (2020)79GST 1 1(AAR)I

¶140

Deputy Commissioner of Sales Tax (Law), Board of Revenue, Ernakulam Vs. PIO Food Packers I AIR 1980 SC 1227)

¶141

'/ Applicability of FSSAI Act & Regulations

¶142

ParleAgro (P) Ltd Vs. Commissioner of Commercial Taxes, Trivandrum [^{2017(s) TMr se2-SC]}

¶143

Brindavan Beverages Private Limited Vs. CCE & ST | 2OI9 (10) TMI 7 62-CESTAT Allahabad (LB)l

¶144

F Flavoured Milk is classified under Chapter 4

¶145

Commissioner of Central Excise Vs. Amrit Food [ 2Ol5 (324) ELT 418 (SC)]

¶146

Fun foods Pvt Ltd Vs. Commissioner of Central Excise, Jaipur - I I 2oI7 (348) ELT 3s7 (Tri- Del)l

¶147

Nestle India Limited Vs. Commissioner of Central Excise | 2OOI (132) ELT 134 (Tri Del)l

¶148

Danone Foods and Beverages (I) Pvt Ltd Vs. The Commissioner of Central Excise [ 2012 (280) E.L.T. 563]

¶149

Commissioner of Sales Tax Vs. Neera Drinks I 1999 UPTC 1130]

¶150

Mauri Yeast India Private Limited vs. State of U.P. [2008 (4) TMI 101S.C]

¶151

Samsung India Electronic Pvt. Ltd Vs. State of Gujarat | 2O2O(21 TMI 1247 -Gvjarat High Courtl

¶152

description

¶153

Collector of Customs, Bombay Vs. HICO Products Ltd [ 1934 (B) TMI 324 - CEGAT New Delhil

¶154

Texspan Vs. Collector of Customs [ 1989 (11) TMI 169 - CEGAT New Delhil

¶155

Hindustan Motors Ltd Vs. Commissioner of Customs, Calcuttta | 7999 (1) TMI 222- CEGAT, Calcuttal

¶156

Modi Xerox Ltd Vs. Collector of Customs, New Delhi /Bombay I 1997(12) TMI 642 - CEGAT New Delhil

¶157

/ Departmental circulars cannot prevail over law laid down by a court

¶158

Page 19 of 31

¶159

Kalyani Packaging Industry Vs. Union of India 12004 (168) E.L.T. 145 (s.c.)l

¶160

C.Ex. Bolpur Vs. Ratan Melting & Wire Industries [ 2008 (231) E.L.T 22 (s.c.)l

¶161

DISCUSSIONS:

¶162

We have carefully considered the submissions of the Appellant, the impugned Order and the applicable statutory provisions. We find the issue before us for decision is whether the product 'Flavoured Milk'manufactured/procured and supplied by the appellant as 'Britannia Winking Cow Thick Shake' in various flavours in tetra packs/bottles is classifiable under Chapter 4 of the Customs Tariff, i.e., "Dairy produce;birds' eggs; natural honey; edible products of animal origin, not elsewhere specified or included", more specifically under CTH 0402 as claimed by the appellant or under Chapter 22 of the Customs Tariff, i.e., "Beverages, spirits and vinegar', more specifically under CTF{ 2202 9930 as decided by the Lower Authority.

¶163

7.7 From the submissions, we find that the manufacturing process of the^product involves heating (UHT sterilization) and cooling of milk, to which the constituents are added at different points of the heating/cooling process, filtered and deaerated/homogenised and thereafter packaged. The product is made in multiple flavours -strawberry(strawbericious), Mango(mangolicious),Vanilla(vanillicious) and chocolate(chocolicious)(hereinafter referred to as the 'Products'). As^per the label, the constituent of the products is tabulated below:

¶164

S.No.	Winkin'Cow Thickshakes	Constituent
1.	Strawbericious	StandardisedMilk(89%), Sugar, Stabilizers,StrawberryPuree(0.1%	Water,Emulsifierand ),AcidityRegulator
2.	Mangolicious	StandardisedMilk(89%o),Sugar, Stabilizers,Alphonsomango Regulator	Water,Emulsifierand Puree(O.1%),Acidity
3.	Chocolicious	TonedMilk(87o/ol,Sugar, Water, andStabilizers,Cocoapowder(1%	Milksolids,Emulsifier ),AcidityRegulator
4.	Vanillicious	StandardisedMilk(89%),Sugar, Stabilizers,AcidityRegulator, Vanilla(O.1%)	Water,Emulsifierand NaturalandArtificial

¶165

Page 20 of 31

¶166

From the above, it is seen that Standardised milk/Toned Milk are sterlised using the UHT process to which sugar, water, Emulsifier and stabilizers, flavours, Acidity regulator and Milk solids in the case of Toned Milk. The products are 'ready to drink' and are marketed as 'Thick shakes' with a shelf life of 6 months in tetra packs.

¶167

7.2 The appellant are aggrieved that when the Lower authority has found that the products are a 'form of milk', there is no finding by the Authority that - milk loses its identity; a new product comes into existence and it is not milk anymore; new product cannot be called as Toned Milk or Thick Shakes or Flavoured Milk Shake; Milk is subsided by other products say water, additives, sugar, flavours so that it cannot be bought, sold, displayed, marked, consumed as Milk; for excluding it from classifying under Chapter 4, rnore particularly CTH O4O2. The main contentions of the appellant are

¶168

'/ The product is a milk from start to end, until it is consumed;

¶169

"F The product is a Milk Product and not a beverage as per FSSAI Regulations and accordingly, should be classified as Milk product for the purposes of Taxation'also

¶170

to ascertain the essential characteristics of the product;

¶171

classification; even so circulars are not binding on the appellant; Judicial findings are to be preferred to the circulars;

¶172

'r Classifying based on GRI alone and relying the HSN Explanatory notes alone for classification is not correct

¶173

7.3 We find that the short issue to be decided is whether the ready to drink flavoured milk sold in tetra packs by the appellant is to be classified as 'Milk product'as is said to be classified in the FSSAI Regulation 2011 and therefore should cover under CTH O4O2 or whether the products are excluded under CTH O4O2 as held by the lower authority and therefore are to be classified under CTH 2202. Before proceeding to decide, the categorization under FSSAI regulation 2011 and the relevant Chapters under Customs Tariff are examined as under.

¶174

8.1 Under FSSAI Regulation 2OI1, the food products are categorized by specific products, i.e, 2.1-Diary products and Analogues; 2.2 Fats, Oils and Fat Emulsions;

¶175

Page 21 of 31

¶176

2.3-Fruit & Vegetable Products; 2.4 - Cereal and Cereal Products; 2.5 -Meat and Meat Products; and so on....and Regulation 2.10 Beverages excluding dairy and Fruits & Vegetables based products. Under 2.I-Diary products and Analogues, the regulation gives the standards for the various dairy products as follows: Regulation 2.1-DAIRY PRODUCTS AND ANALOGUES;

¶177

2.1.1 gives the general standards of Milk and Milk Products;

¶178

2.I.2 gives the standards of 'Milk'- 'species Identified Milk', 'Mixed Milk', "Full Cream Milk, Standardised Milk, Toned Milk, Double Toned Milk, or Skimmed Milk", Low Lactose or Lactose free milk;

¶179

2.1.3 gives the standards for Flavoured Milk;

¶180

and under regulation 2.IO, t!;re standards for 2.i0 BEVERAGES,^(Other than^Dairy and Fruits & Vegetables based) is given. Thus, it is evident that 'Beverages'which are 'ready to drink'drinks except water, when based on Dairy products, Fruits & Vegetable, the standards for the same are given under '2.1 -Dairy Products', '2.3 - Fruits & Vegetable products' and not under 2.10 which provides the standards for Beverages other than Dairy, Fruits & Vegetable based. This does not mean that there are no beverages which are dairy, Fruit & Vegetable based. If that is the^case, there is no requirement for an exclusion to be specified, while stating the standards at Regulation 2.10, i.e. as 'Beverages excluding dairy and Fruit & Vegetables'.^Thus, it is conclusive that FSSAI regulations gives the standards of beverages other than Diary and Fruit & Vegetables at 2.lO and the beverages based on Dairy, Fruits^and Vegetables stands covered under Regulation 2.I and 2.3 respectively.

¶181

8.2 Customs Tariff adopted for the purposes of GST is aligned to HSN and the classification of the products in the Tariff is in a sequence. The initial Sections/Chapters contain Live animals, not so^{processedgoods} and the^latter parts contain the processed goods. i.e., Section I covers 'Live Animals and Animal Produce' in Which Chapter 4 covers 'Dairy^produce; birds' eggs; natural^honey; edible products of animal origin, not elsewhere specified or included';^SectionIV coveTs^.PREPARED FOODSTUFFS, BEVERAGES, SPIRITS AND^VINEGAR, TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES'in which Chapter²² covers 'Beverages, spirits and vinegar'. From the arrangement of Tariff, it can^be seen that products in their natural state are classified in the initial^chaptersand when the same products undergoes certain^process, they are classified in the^later chapters.

¶182

Page 22 of 3t

¶183

8.3 It is the contention of the appellant that the product in hand remains a 'Milk'until consumption and that addition of flavors, sweeteners, stabilizers to it do not change the basic characteristics of the product and therefore merits classification under Chapter O4O2 only, more specifically under O4O2999O and there is no specific exclusion in the chapter notes. In terms of explanation (iii) and (iv) to Notification No. ll2Ol7 - Central Tax (Rate) dt.28-06-2017, tariff heading, subheading, heading and chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods. The Heading O4O2 of the Customs Tariff is as under:

¶184

o{01		]f lt.t' ..rrrr⁽R[,'t\t- (rf\r r:\rR.rt [.tr r]R {^{()</sup>t.rltt{i .iiltt},t} st^(...tft{}R {}t tt}-x \11];ltI r::it{; rt {l't }.t{}
u-${}r	{}	-
{tdfi: l(}tt}		Shr:r*lcd {rlk
{)44}f t{}:{}		{ilklirtlrl tbrhahrcr
tl..lfi:Io9{}		()thr}r
'	-	InSttsu'dtri.{rrrxrrlt,-rttrrlttt's/rdlirrrx-r, rt-frt.litttt'rltt:ttt,&,r'rr'lg/rr -tc'c"cry'r'rrg!.5'ln^
rr{{}l?l{f{}		{r!tL{}nt&lnrngadrJcdsug;rr rrrother jir{ccl*rllrrgnlrrItt:r
t).lflll{)		flry'rr'r".'
{}-lilf lc}t{}		\'lt*tc lnilk
ri-l{)lrVrt}		'lilk lirrbuhics
tl.lof li)9{}		{}tlrcr
		{lther.
t)"1{):ⁱ⁾t "		"'rrr^{c"ontrttrltageilrf'ry'slrg*r-rl.r'rrtr$el} .fl
r){f}:9tt{}		f"onderrscdnrilk
rl"l(lf^qI^r)(l		{)thcr *
{}.lt}1^{}t}		(.)rr,r.
{}.}fi:^t}vt{}		\'holr:nrilk
{r,l(tl^i}r}a{}		('*ndcnir'clrnrlk
{}:.t(tl9{t^q{}		{}tlr*r

¶185

From the above, it is seen that CTH O4O2 covers Milk and Cream, concentrated or containing Added Sugar or other sweetening matter; Heading O4O2 IO and O4O2 20 covers products 'In powder, granules or other solid forms...'and Heading O4O2 99 90, which is Other-Other-Other is claimed to cover the appellants' products. The explanatory notes as per the HSN to the Tariff heading 0402 is as below:

¶186

Page 23 of 31

¶187

tf4.{}2 - \lilk nrrd crrilrl}, coflcettlr{(ed ot" c{rrrtrirri'|g added lirtgar {rr other swtrltnlng rtrafler {¹ }" {},1{r'r.1., -:i$l:;il?:qrXl"l"* er^(}thr soliri fonns.^{r:i'a iirt c('ilrent. by rveiglr{, trll} Irt yrrr'.tJr, grntrttles Lrr otllef solirl firrnls" rll'a l'at r:t)IllL:lrt. h5: rc'cight' {}4,,?.r, :;, ::,:,1,,:;;.<kred susar ,}r^{(,rher-sr*.eelening} nur.lf r n4flr.:1) (")tlrnr _ {lthcx {t.ttr:.{) i - - }Jnt conl:rirrirg ildrier-l sug;rr' (}l i}lher sweete l1ifltA rlrafter tJ.!0:.1t9 - - {ftl]cr

¶188

I lrrr lr*lrrlir:g cov€t:i rrrilk 1as detlrrr:ri irr N$1r l tr, ttris C[ra1:tcr'] lrnd crennt.^{conccnlrtrtcrl{ litr} crirrrrpl(-, *';lllrDfirl{iil) Itr c'-<tnt:rinirrg ail<Ic"l slrgi{^(rr t'tlrer^{i-wccterrltlg} r}}atter.^{rvhetlle|. liclttid.} Jrir\rc^{.1r s.rlitl} {rrr^hlor:ks, nrrrwdsr^(}r !tr;rnrrld_l^{:rrrtl rr.helhetu|t)(rl} I)Ieserv'ed^{[]r rr-a$llsflruted.} ll'{ilk pptl.def nf.r!,€{rntain snelrll qrranlities ol stlrr:tr {not^{ext:eedirrg 5} ".lr; serglrr-), ;r<fuIeri., iil lrarilci:lar.^{tu rrrtriirtairl tlrerecurrsfi?utednrilk in its:rnn:ral pFrysicnl statc.} 'l l-re he;rcLng dot,s nol c{rvaar l

¶189

Lrj^(iuldlcri. ttmx:ntcd^{<rr ecidiJied} rtrilk^{c>rcre;tnr(hradlng04.O-f} )-

¶190

lhi^{tJ('1'.:rirgf,sr:onlrltitr1,,ot'*rilk llitrorrred rr,i(ht:rx:ui: or {.,tller iut!sl;{luu-s ihcarlirrg 27'll7l.}

¶191

From the Explanatory notes, which is a reasonable guide to understand the scope of the entries, it is seen that this heading covers milk as defined in Note 1 to this Chapter. Chapter Note 1 of Chapter 4 reads as follows:

¶192

l. lheexpres$l$n-'rnilk"'rnr'anslirll crcarnmilk$rpartiilll!'{}rcr"}mpL'tclr, shrmsrr'rJ rnrlk.

¶193

Thus Tariff heading O4O2, covers milk as defined in Note 1 of the Chapter, i.e., full cream milk, partially or completely skimmed milk are only covered as 'Milk'under the heading O4O2.

¶194

8.4 FOOD SAFETY AND STANDARDS (FOOD PRODUCTS STANDARDS AND FOOD ADDITIVES) REGULATIONS, 2011(FSSAI), defines Full Cream Milk, skimmed Milk, Standardised Milk and Toned Milk as under:

¶195

1.2.6. FtrII Crenm Milk nrcans nilk or a conthination of buffnlo 0r cozL) tltilk or a product prepnred hy conrbinntion of botlt thnt hns heen stnndnrdised to fnt nnd solids-not-fnt percentage, giuen in tlrc tnble helout in 2.L.L:1, hy ndjustnrcnt/nddition of nilk solids, Full Crennt Milk slnll be pnsteuriseLl. It slnll sltur) n negntiae plrcsplntnse test. It slmll be pncketl in clenn, sound and snnitary clntainers prlpefly senled so ns to preaent contanitmtion.

¶196

1.2.19. SKIMMED MILK nrcans tlrc prodttct prepnred from ruilk from uilticlt nlnrost nll tlrc nilk fnt lns heen renrcaed nrcclnnically.

¶197

1.2.21. STANDARDISED MILK nrcnns cow nilk or buffnlo nilk or slrcep ntilk or gont ntilk or n conthinntion of nny of tlrcse nilk tlmt lms heen stntdnrdised to fnt nnd solids-not-fnt percentnge giuen in tlrc table belozo in 2.1.1:1 by tlrc ndjustnrcnt of nilk solids. StnndnrLlised nilk slmll be pnsteurised nnd slmll sltow n negatiae Plnsplntnse Test.

¶198

Page 24 of 3t

¶199

1.2.24. TONED MILK nrcnns tlrc product prepnred hy ndnitturg of cutt or buffnlo nilk or botlt ruitlt fresh skinrnred nilk; or bt1 ndnixture of cuu or buffslo nilk or botlt tlmt lms hcetr stnndnrdised to fnt nnd solids-not-fnt percentnge gioen in tlrc tnhle belout in 2.1.1:1 by ndjusttuent of nilk solids. It shnll be pnsteurised nnd slnll show n negntiae Phosplntnsa Test. Wrcn fnt or Llnl non-fnt-nilk solids nre used, it slnll be ensured tlnt tlrc product renmins Itornogeneous md no deposition of solids tnkes plnce on stnnding.

¶200

In the case at hand, as per the label, the Milk constituent is 'standardised Milk'or Toned Milk'which are not 'Full Cream Milk' or 'Skimmed Milk'as per the above definitions. The Chapter Note I clarifies the nature of Milk covered under the expression 'Milk' which is limited only to 'Full cream Milk' or 'partially or completely Skimmed Milk'. This shows that the other types of 'Milk'are excluded for the purposes of this Tariff heading. In the products at hand, the percentage composition of Standardised Milk or Toned Milk is 80 to 9Oo/o and the products are not of 'Full Cream Milk'or 'Skimmed Milk'and therefore are undoubtedly excluded from the purview of Tariff Heading O4O2. Therefore, irrespective of the contentions that the product remains a 'Milk'even with added flavours until it is consumed, it is clearly established that the 'Milk' referred to in this Tariff heading and that of the appellant are not the same and the products in hand are not covered under CTH 0402.

¶201

8.5 With respect to the alternative Tariff heading 04049000, the same is examined as under:

¶202

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cndenseri.liquidrrserni-slid| |{r'{(i"lI{t:{}
|Whcl.drv.l'rlucks arrtlp*u'dered| |i)4{}4l0^.xi|{}t}rcrr| |-
0;l{}..140{ft}|{)tlrrr|

¶203

Tariff heading O4O49OOO covers 'Products consisting of of Natural Milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included'. Thus this tariff item covers products of natural Milk

¶204

Page 25 of 31

¶205

constituents with or without added sugar which is not elsewhere specified or included. The relevant Explanatory notes to this tariff item states as follows:

¶206

O{.{14 - [,hey, rr.hether' or n$t concenfrntcd o_r co-ntalninq^{addedsuga.r .rr ,r1ll.t- tl'::l:li::g} mafti'r: prOduct$ consisfing of trafural milk^{constitul-s15. $h_elht'rornot c.rnlaltrlllg} "iiOa^i,igi oierthcrswcefl.rringrnrtler'.not elstrvhere sprilidor ineludcd'

¶207

0..1{J.l.l0 - Nhev and rno.lil^icd uurhey. rvheitter.}r^{flLit coilcelrtralljdilrc$Irlatrrittg atidcd} sugai ctr orher svu"e etetring^nraner

¶208

L)4U4,90 - Llrh€r

¶209

tlrrs lread.ila c$vers-rrrhel,{i.e.. thc'naturirt cnsriturnts^{of rpilk rl'hrchrernrillrirlier lhetatrand} iii"litJte.ru rerr',r:r,e6l-and rlriclified^{rx'hev(^sr'eSubhL-,r(lirrgNote Itc' this Chaplerl'1'trcse} pri'ii".r" rnoy lr iir"liqrricl,iaste i.rr soiitl {ineludirrg fr,'zeni^{lirnri..rerdrna3-be c:i}nccrrrratedls g.} 1r'r Pil\'{lcr,{:)r pfasfl'l,f^tr.

¶210

Thc lleaciiug also covers ltgsh^{r:r pr-scrleclprr)(lllclrc:ottsisttrtg.tttlnrlk clrlrslituel)l-i. whichdo} n,,t ly1ve elri salre .criup1x;tion ,ri^rhtl ngturzil^{product" pnrvidr;il thel; are 11{rl illr)rs .tpeuilre ally} eL,!,L-rl-d else.here. This tire he*dilg iirclu.lei^{producti u'hich lack one ()r rrrcrretiiltlrrillmtlk} (:(.]n\titucnts. lnilk to **rtcfiiiaiiu"i nfilbcr,trsritil'ctrts have bern aclclsd {to obtain"^{1-rr1 gxarnple' a} prr:rtr i lr- ric h prodrtct 1,

¶211

,\n.irt lirlrrr lr;rluial lr:ilk cr.rnstitu$rltt and rhe a<ldifives^{msntionedin the {iener.rlIlxplart*t(]t1} rri,i.; r,i *lr i i,iii;r.i:. iite gririclu.ir *1 rlris heacling rnay irlso c.-rntairl adtleti suglr^{()r ()thcr'} s $,c L- t L- n I r'l='ra nti"rt I e r.

¶212

l-lrc nuwtlerLd nrocjuL'ls rrf thts hea<irng.^{pitrriculirrly 'ht'-r,} ln;t\ crlDtili!l :tnilil r{ullltittcs .ri a.lded lactit teritents. rrtth a tirlv to therr use in^prepart-d tn:ri prorluel\ ,rr ts riritlitir^{c. li,r} r'rnrtn;rl feed-

¶213

Thc hclrlir-rg doet not toler:

¶214

(rrr^j.kirnr'srl rlrilk c,r rcut)lrslttut$d rrr:llc h*ung lhe s:unc qr:ti'ilutive nn(1 iltjnnlilillrVt:^{{:otlt}11Mlloll:ts} rratut:rl rnilk {headlng^(M.Ol or 04.$?)-

¶215

1b1^\rhelrheese iheading^t,"t.O6).

¶216

( !i t Pr1rrluuls ctrrarrred iium x hel . uontarning by rveight tnore th:tn^Q5 9.i laerose,^{esprr:ssrr'it:s rtnhl'drous} ldc!r)sc. calculated on the .lry tndt{cr⁽ heading l7-O2 i.

¶217

r,.ll li-rod lwepi.rrutiotrs based cn nsrurill milk constitue$ts^{bulconratning urhsrsub:t"rrre*snot allurrt-rl in} rl.c prixhicts rrt lhii {lhirpter 1in prrtrtuinr. headfulg l9-$t)"

¶218

(ri Aihufnirls (itrclurling c'J!"lcentriltei of tno or nlor€ rvhcy pruteins. !'o$!flifiillq^{hr,'"etFhl tttutstlt-rit} riii l.; u.hel; Fr"riiiilcriiiitrt"a o" tit* il.y nrenerj thead{ng -15-O2)^{etr gtrubulirii} i'6e:rding -15.$'l^}-

¶219

From the above it is evident that the heading apart from whey, covers fresh or preserved products consisting of milk constituents, which do not have the same composition as the natural product,i.e., it includes products which lack one^or more natural milk constituents; milk to which natural milk constituents have been added and such products are not to be more specifically covered elsewhere. In^the case at hand, the product do not lack any natural constituents or no natural milk constituents are added and the product is not whey. Therefore, the^{products are} not covered under this tariff heading also.

¶220

8.6 To sum up, the products in hand are products of Standardized/Toned Milk which are UTH sterilized and added with flavours, sugar, water, stabilizers, regulators, etc These are not Full cream milk or partially or completely skimmed milk and therefore not covered as 'Milk'under CTH O4O2. Further, the^products do not lack any natural constituents and further no natural milk constituents^are added to it and therefore, are not covered under CTH 0404 also. Thus^we find^no infirmity in the findings of the lower authority that the^product in hand do not fall

¶221

Page 26 of 31

¶222

under Chapter 4 of the Customs Tariff, though the product is categorized under Dairy products and analogues under FSSAI Regulation 2O7L

¶223

9.1 The product in hand is a 'ready to drink' product. The appellant has contended that their product though is ready to drink, it is Milk, being a diary produce in which additions as admissible under the GMP as allowed under the FSSAI regulations are only added and has further contended that to be a 'Beverage', the product should have kater'as the dominating ingredient. In this connection, we find that the National Dairy Development Board as seen in the page h!jps,;//ry1,ruIcldb,_qqppl'_Cery1c_ps/ppd/dairyprodu^glaggs holds^'Flavoured Milk'as a Diary based Beverage. The same is given as under:

¶224

[}atry hased Beverages

¶225

MitK 8[V[RAGT WITH SJ6I

¶226

j.:r'::;i.l:,:lr-i.i.-.1 ,;;':;lTrlit:: j'tilr. i;rlri;|-"t;li:r3:;l it-1 i:|.ti,"i lrrigr 1{;'.''. .a' ., --'-rl'.'il-i'.. ::i,!:i]:.;::|i:iii];|:::.^;iri.,'ii]i[.].]']:,]i;'||l.]inl;libe':ell|e..,l]::,{]'jigl;;n.131;1;jp|i)ii]i'i]r l:l::?-."i:a: ;3i 3,:i i: !l:,:jiril: f,,1 t? p;fi::l .i:,-il -rtLr,:r i rg^',i..li*ri; ;;g;^i.ir plir^-:t :i1fr. :itij i.ii;l.r'' i':: ; 1r;^; '1^gr' .ii .:: '-"^;'

¶227

WIITY.BASTO ORINK

¶228

.i-.-i:]::]].i.i]]':ii.'ij..''].]i:ii-]:.!^l'.{i:...i':.l.;*;i'chi.;.iaaltlheeie;i1;'g11l,ri.q;..;,"ll-:e,icl:; .':i.:.i:'1i;:.i;l':::||li,i.lj.:1l|n.ll:i;]':;ri1,^."i;l€i-:0r.:.h.:i.lar r;r,,:.ir.'l ;j:,: l;:: :-,..lli.ll l^-t,l:i1ttr! ;i,'":i ;i'lil-1!:; ::3 i:,ibilri it i':i:ti:r'ttf'ta;t ::li-til;;-r

¶229

J,,'.r- ..1r,:,.t i''iir!-rf ri i,r-rtt,-h;lgil ber'rt;Et.. ,,\n tli r:at b,:.isei,-t ir t;.,e! qe.iefet nl; irl:[g1

¶230

'^{,{fas*ittnrhe",hererage: Thrsprodun has heen develryeel usrng rnmbinatronal shrikhanr! I ntas{,,r/ whey,nangopulpnnri nther} ndditrves.

¶231

. WheY hnseri hetnrngt h',th sprte$: lt hns been dnvelnped usrng nomlrnnlrm of {lhseseifoni,.sr whel nnd inriren spirer, li'lRnrrhrrrtrrng pnuess {or lectsse hydraf}sed rarinnl is also srsrlaiJle.

¶232

f::::.:;-llill,.]::,..,.;,l;.l..li::i.:;i;];i1,'fp.;niitrjJii?ji;::3;jl,l:;']:|;ncpati.;i]r;.;iill:t::r.||rl.i.;l ,,.1-i.; ir€^.;,1 ;- r'1; ::1:;11: ,1i:,1.; ill. r'rrl: i::!iil :i' ij:|,;'ri:l

¶233

FTAVOUAFO MILX

¶234

ii:il;til; 'r .r l.;l ,.t,it;" 'l;,.ti;tir'; ;:;j tn i,ur nt ,l:iifl io n;i; :l iiii,ef li ilrttt:t:lB l: :; ueriir; ,, ntrlialt ir;t: i', . l.l'-r:,:ttl :;;rlt" :r^l,ll.i: Hr:.^{l*.t!:tr;i,r:e} t.l-:l prgLggt rirn,,i ll s.1gpi l !tsr,ia,:i ir! i;rr :;:iir ',:it.i[]qil S|1"tp i.:irl .ir :; .ri:[ri,: liii:{e ::1 ;nli i;;i.;ir; .!'ii. 1ti! L,r rel,j,rei] i'^.: :ia li, c afi: frai flri::iii;:.': ". - ,. l-)rr-,.tt;'li : i :iii9 t;.r :l--r i; '-:ei ii'r i ;;;lllfti: 3-'ir^-he lrtStJfi iDSt i;r: {0i"ri3 t.j|i ![flgE rlrsi,itriiilii;ri l';:.: ;he i rri l,f :, i'll::.; .".. ..:rii :.lt r" ll1,;;: tl.:.:ii: :,r i.ri.lJ lirtli::;i..t ir{l ;."gi:l:t;iii l.:t<;ii

¶235

NDDB being a nodal agency in the Dairy products and the 'Flavoured Milk' is categorized as Beverage as can be seen above. The process mentioned under

¶236

Page27 of3L

¶237

'Flavoured Milk', above is the one followed by the appellant in the case at hand. Further, Beverage as per the dictionary definition is 'any type of drink except water'. Thus, it becomes evident that the product in hand is a Beverage.

¶238

9.2 Chapter 22 of Customs Tariff covers 'Beverages, Spirit and Vinegar'. Tariff Heading 2202 covers- Waters, including Mineral Waters and Aerated Waters, containing added sugar or other sweetening Matters or Flavoured, and Other Nonalcoholic Beverages, Not including Fruit or Vegetable Juices of heading 2OO9. Thus, this heading covers waters under CTH 2202 10 and other Non-alcoholic Beverages other than Non-alcoholic Beer under CTH 2202 99. The relevant tariff items are given below:

¶239

220299 - Other:

¶240

220299 10 -- Soya milk drinks, whether or not sweetened or flavoured

¶241

2202 99 20 -- Fruit pulp or fruit^juice based drink

¶242

2202 99 30 -- Eeverages containing milk

¶243

22OZ 99 90 --- Other

¶244

The relevant Explanatory notes as per HSN is as below:

¶245

r^tt I^(xhsr n$n-slcohuli* Lrt'rr:rng*, n*t inr:luding fruit $r trge tlblc iuir.-rt of huerrling i{l.li!}"

¶246

"l'hi I grcurrp inrlu.lcr*,,rJI{:.1 .,ir'iir I

¶247

r it^'I'anrarind ncr:fsr rcndsrtd rccdy for ceinsumpti$n s$ a h*remHr ht rlic url,litr,ur irf !{.itIs- ;tn{l sttgit: *rrri \tfirintllg.

¶248

ili^(lcrtnin othtr lt"'rqgts rendp'l"nr r'ortrtunptinn. uch n.r t$:n; wilh l hirsrs rrf :uiik ir.iliJ trrt:1.

¶249

As per HSN explanatory notes to Chapter 22, against Note No.(B) (2), 'Certain other beverages ready for consumption, such as those with a basis of milk and cocoa'is specifically mentioned aqainst Chapter sub-headine No.2202 as "Beverases containine milk". In the case at hand, the product after process has attained the character of a beverage being packed in tetra pack having a slot in the packing in which the straw can be inserted. Further perusal of the records reveals that the ' Flavoured Milk' is marketed in a ready to serve condition and is marketed as a beverage. The product in hand being a beverage and there being a specific classification of "Beverages containing milk" under Chapter 2202, the impugned goods is classifiable appropriately under the sub-heading 22O29O3O only.

¶250

Page 28 of 31

¶251

From the discussions in Para B and Para 9 above, it is evident that the product is classifiable on the application of the GRI 1 , which is as follows:

¶252

RULE I

¶253

'Ihe titles ofSections. C hapters and sub-Chapters are provided for ease ofrcference onlv: for legal plrposes. classificatiirn shall be determined accoi'ding to the terms of the hegdingi and anl' relatire Section or Ch,apter lotes and. provided such lieadings or Notes do not othintise require, tccording to the follon'ing prorisions.

¶254

In the case at hand as has been brought supra, the classification is based on the Specific entry applicable to the product vide the Tariff heading read with the related HSN Explanatory Notes and the applicable Chapter Notes. The reliance of the HSN Explanatory Notes cannot be disputed and the tariff adopted for GST, i.e., Customs Tariff is aligned with the HSN completely. The appellant has relied on decisions stating reliance on HSN cannot prevail over a Tariff Description. In the case at hand, the Explanatory Notes have been taken as a guidance only, which is permitted under the Explanation to Notification No.OI /2OI7 . Further the classification is squarely dealt with by the application of GRI Rule 1 and therefore there is no need to examine the applicability of Rule 3(a) or 3(b) as claimed by the appellant.

¶255

The appellant has relied on certain decisions which are not applicable to the case at hand for the reasons stated below:

¶256

Addition of small quantity of flavour does not take milk/ milk products outside purview of Chapter 4- In the case at hand, the product is outside the purview of CTH O4O2 not because of the addition of the flavour but of the fact that as per Chapter Note 1 to Chapter 4, the'Milk'is not full cream Milk or Skimmed Milk and therefore not applicable.

¶257

a. The decision in the case of Cavinkare Private Limited Vs. Commissioner of Central Excise do not have a precedent value as per Section 35-R of the Central Excise Act 1944 and

¶258

b. In the case of Nestle India Ltd Vs. CCE, New Delhi, the classification dispute was between 0404 and 1901. "'NESCLAC Nutritious Milk Drink'being a baby milk powder based drink which is not comparable with the product"

¶259

Page 29 of 31

¶260

Tt'e product in question is essentially milk and deserves to be classified under Chapter 4 -

¶261

a. Gujarat Coop Milk Marketing Federation Ltd Vs State of U.P.I2O17(S)GSTL 351 (All.)l- The decision is a VAT case and is on the exemption to be extended based on the wordings of the description & the listing of products under VAT laws of U.P. is different from the Tariff Classification.

¶262

b. Karnataka Co-operative Milk Producers Federation Ltd-The decision of AAR has bee.n declared as vaidab initio by the appellate authority in the Order No. KAR/AAAR-I3 / 20I9-2O dated lI / 02 / 2O2O

¶263

c. Deputy Commissioner of Sales Tax (Law), Board of Revenue, Ernakulam Vs. PIO Food Packers- on 'Manufacture' which is not applicable to the case

¶264

Flavoured Milk is classified under Chapter 4 -

¶265

a. Commissioner of C.Ex Vs. Amrit Food [2015(324) ELT 418 (SC)] - The facts of the case in the subject case is whether the Milk Shake Mix and soft serve is to be classified under CH:0404.90 or under CH:1901.90.90 and the question of classification under CH:22O2.9O never raised and discussed. Also, the products discussed in these cases are not 'Beverages'- Not applicable

¶266

b. Fun Foods Pvt Ltd Vs. Commissioner of Central Excise, Jaipurl[2O17(348) ELT 357(Tri-Del.)] - It relates to Milk Shake Mixes and not 'Beverages'

¶267

c. Nestle India Limited Vs. Commissioner of Central Excise I2OOI(I321 E.LT I34 (Tri-Del.)]- This Case also relates to Mix and not 'Beverage'. Also the decision of the case was based on the Central Excise Tariff existed before 2006 i.e, before alignment of the Central Excise Tariff with the HSN

¶268

d. Danone Foods and Beverages(I) Pvt Ltd Vs. The Commissioner of Central Excise[2O12(28O)8.L.T.563] - deals with CTH 0403. However, it is noticed that it is observed in Para 11 of the decision that any beverage based on milk and flavoured will fall for classification under cTH 2202.

¶269

Page 30 of 31

¶270

In view of the above, we rule as under:

¶271

RULING

¶272

For the reasons discussed above, we hold that UHT Sterilized Flavoured Milk marketed under the brand name 'Britannia Winkin'Cow Thick Shake'by the appellant is not classifiable under the Tariff heading 'O4O2 /O4O4" but classifiable under CTH 22029930 as held by the Lower Authority. The subject appeal is disposed of accordingly. r ,,

¶273

is disposed of accordingly. disposed of accordingly. accordingly. r ,, \ t'., . - -

¶274

*^t-

¶275

^t- "\t_--Lr ) ,.. (M.A.srDDreVE) frt,b (c.v.KR6frNAMo],/ t,lit ,,, Pr.Secretagy/Conlrnissioner'of State Tax Pr.Chief Commissioner of GsfaeS;i' t^{* '""} / Tamilnadu /Member fuarr{R Chennai Zonef Member AAAR

¶276

r;. -, i , AUTnuitlTy F*RAPi]f;t" LA?g AfrVAr{C€ ftuLthtc

¶277

¶278

I^{li .iUli} iilt

¶279

M/s Britannia Industries Limited, One India Bulls Park, ritindia.com sth Floor, Tower B, 3.4 Main Road, SdilDs Ahfi S€flVlCf; TAX i Ambattur Industrial Estate, Chsrrsrai-1, l"rmilnadu. , Chennai, TamilNadu-600 058.

¶280

Copy to

¶281