Classification of ‘Instant Tea Whitener’ manufactured by the applicant and Rate of GST

PJ/Case Law/2020-2021/3582

M/s. LVP Foods Private Limited 2020(32) G.S.T.L. 612 (AAR-GST-UP) dated 06.09.2019

Brief Facts:-The applicant is a limited company engaged in the processing and packing of milk in pouches. The applicant propose to manufacture and supply a new product - ‘Instant Tea Whitener’ which would be used like any milk powder used in hotels, restaurants, etc. as well as households for making instant tea and coffee and known as “milk powder” in common trade parlance. As per applicant, the main constituent of ‘Instant Tea Whitener’ would be standard liquid milk which would undergone various process like filtration, separation, pasteurization, evaporation, homogenization etc. to obtain ‘Instant Tea Whitener’ in powdered form, which would then be packed in unit container/sachets.

Issue: -Classification of ‘Instant Tea Whitener’ manufactured by the applicant and Rate of GST

Appellant’s Contention:-The applicant has further submitted that, as per their view, the aforementioned product could be most appropriately classifiable under Chapter Heading 0402. The HSN Code “0402” covers milk concentrated and containing added sugar or other sweetening matter whether liquid, solid or paste.
The applicant also submit that as per Rule 2b of The General Rules for interpretation of the first schedule (Import Tariff), any reference in a heading to a material/substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. In the Applicant’s case, the Chapter Heading 0402 covers milk and even in the addition of other material in small quantities it remains to be milk powder classifiable under Chapter Heading 0402.
The Applicant further submits that as per Rule 3a of the said Rules of interpretation, the heading which provides the most specific description shall be preferred to heading having more general description. According to Rule 3b of the Rules of Interpretation, in case Rule 3a is not applicable, the goods shall be classified as if they consisted of the material/raw material which gives their essential character. In the applicant’s case, the essential character to ‘Instant Tea Whitener’ is given by liquid milk. The said product cannot be manufactured without milk. All other ingredients are ancillary in nature.
Moreover, the applicant also provided RSS of T-Rich” manufactured by M/s. Goodrich Carbohyderate Ltd., Karnal, Haryana and submitted that their product along with ingredients will be similar in nature. Later on, they also provided a copy of Invoice for T-Rich Milk Mix, issued by M/s. Lokenath Enterprises, Changrabandha, West Bengal, wherein the classification of said product was made under Chapter Heading 0402.

Reasoning of Judgment:-The Authority observed that the product in question i.e., ‘Instant Tea Whitener’ is a product made out of standard liquid milk which undergoes various processes and added with some other additives. Even after addition of other additives, it remains to be milk powder and in common parlance, it would be known as ‘Instant Tea Whitener/milk powder’. They further observed that as per the Rule 3a of the Rules of Interpretation, the heading which provides the most specific description shall be preferred to heading having more general description and according to Rule 3b of the Rules of Interpretations, “Mixtures, composite goods consisting of different material or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable”.
In the instant case the authority observed that the main ingredient/essential character of the product in question is given by liquid milk. They are in unison with the contention of the applicant that the said product cannot be manufactured without milk and all other ingredients are ancillary in nature.

Ruling:- The product ‘Instant Tea Whitener’ as described in the application will merit classification under Chapter Heading 0402 of the GST Tariff and would be chargeable to GST at applicable rate under the said tariff entry, presently read with Notification No. 01/2017-Central Tax (Rate), dated 28-6-2017 (Sl. No. 08 of Schedule-I).

Comment:- In Karnataka Co-operative Milk Producers Federation Ltd. (GST AAR Karnataka) ruling, AAR ruled that The “flavoured milk” is not a water based drink whereas the tariff heading 2202 deals with water based beverages and other non alcoholic beverages. Therefore it could be inferred that the pre-dominant part of the beverages covered under the heading 2202 is water. In the instant case the predominant constituent is milk and hence the “flavored milk” does not merit classification under beverage containing milk, under tariff heading 2202 9930, but merits classification as milk, under tariff heading 0402.
Moreover, they relied on the decision of Gujarat Coop. Milk Marketing Federation Ltd Vs State of UP vide 2017(5)0STL 351(All) dated 31.05.2017 wherein it has decided that flavoured Milk is a form of Milk. The Court has also specifically observed that flavoured milk is a form of milk as it is neither a derivative of milk nor a milk product.
Prepared By- Bharat Rathore

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PJ/Case Law/2020-2021/3582

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