"Flavoured Milk" Is Categorised As "Beverage": AAAR

The two-member bench of Vivek Ranjan and Milind Torawane has upheld the AAR's ruling and ruled that the 'Flavoured Milk' is classifiable under Tariff Item 2202 99 30 of the First Schedule of the Customs Tariff Act, 1975.

The appellant is in the business of manufacturing goods like ice cream, ready-to-eat food and various milk products. Among other products, they are producing flavoured milk under the trade name "Power Sip." As per the appellant, flavoured milk merits classification under Heading 04029990 of the GST Tariff. The appellant submitted that the process of production of flavoured milk is standardisation of fresh milk according to the fat content and heating at a certain temperature, followed by filtration, pasteurisation, and homogenisation, and then mixing of sugar and various flavours, and finally bottling.

The appellant sought an advance ruling in respect of the classification of "flavoured milk" sold under the trade name of Power Sip.

The Authority of Advance Ruling (AAR) ruled that "Flavoured Milk" is classifiable under Tariff Item 2202 99 30 of the First Schedule of the Customs Tariff Act, 1975 as a "beverage containing milk".

The appellant submitted that the AAR overlooked the difference between flavoured milk (which is almost 100% milk) and products like milkis, swerve, etc., which contain a small percentage of milk, and hence they were in the nature of beverages containing milk.

The AAAR held that as per the product labels submitted by the appellant, the milk constituent is "Double Toned Milk," which is not "Full Cream Milk" or "skimmed Milk" as per definitions and Chapter Note I explaining the scope of Heading 0402. Therefore,irrespective of the contentions that the product remains "milk" even with added flavours, it is clearly established that the "milk" referred to in this tariff heading and the products of the appellant are not the same and the products are not covered under Tariff Heading 0402.

Applicant's Name: M/s Vadilal Industries Ltd.

Dated: 26.08.2022

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