Setback to MTR Foods: CESTAT rules “Badam Milk Drink-Ready to Drink” classifiable under Beverages containing Milk, attracts 30% Customs Duty [Read Order]

In a major setback to MTR Foods, the Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that Badam Milk Drink-Ready to Drink” classifiable under Beverages containing Milk and hence it attracts 30% customs duty.

The appellant had manufactured and cleared “Badam Milk Drink-Ready to Drink” at “Nil" rate of duty from October 2007 onwards by classifying this final product under Chapter Heading 0402 9990 of the Central Excise Tariff Act, 1985.

In the show-cause notice the Department alleged that this final product is rightly classifiable under Chapter sub-heading 2202 9030 as Beverages containing Milk and that as per the HSN notes to Chapter Heading 2202.90 under the heading other, at Sl. No. 4 reads as Certain other beverages ready for consumption.

The adjudicating authority has confirmed the classification of “Badam Milk Drink - Ready to Drink” manufactured by the appellant under Chapter SubHeading 2202 9990 of the Central Excise Tariff Act, 1985 for the period October 2007, onwards. Aggrieved by the Order-in-Original, the appellant filed an appeal before the Commissioner (Appeals), who has rejected their appeal vide the impugned order. Hence, this appeal was filed before the Tribunal.

In the submissions the appellant contended that; from the process of making “Badam Milk Drink – Ready to Drink” the product is nothing but milk in Badam Flavour; the learned Commissioner (Appeals) did not appreciate the difference between “beverages containing milk “and “milk itself in some flavour”, therefore the product is nothing but milk in badam flavour and is rightly classifiable under Chapter 04 as milk and not under Chapter 22 as beverages, which is a general entry.

The AR has also relied on the Notification No. 17/2008-CE (NT), wherein flavoured milk of animal origin has been classified under CETH 2202 9030, while allowing Section 11AC benefit for the period 25.02.2005 to 14.06.2007. Learned AR has also contended that as per the HSN, Chapter Heading 0402 excludes “Beverages consisting of milk flavoured with cocoa or other substances”.

A Two-Member Bench of the Tribunal comprising D.M. Misra, Member (Judicial) and Pullela Nageswara Rao, Member (Technical) observed that “We find that the Board, while issuing Section 11C Notification No. 17/2008-CE (NT) has classified flavoured milk of animal origin under chapter sub-heading 2202 9030. We find that the Notification is issued after the introduction of 8-digit classification code and after the full alignment of Central Excise Tariff with HSN. This buttresses the contention of the Department that the impugned item is classifiable under the chapter sub-heading 2202 9030.”

“We do not find any reason to interfere with the impugned order. Hence the appeal filed by the appellant is unsustainable and is rejected” the Tribunal concluded.

To Read the full text of the Order CLICK HERE

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