Custom, Excise & Service Tax Tribunal
Trivandrum Regional Co-Op. Milk ... vs Commissioner Of Customs & Central ... on 29 July, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/202/2003-DB [Arising out of Order-in-Appeal No. 556/2002 dated 13/12/2002 passed by the Commissioner of Customs & Central Excise, Cochin] For approval and signature: HON'BLE SHRI S.S GARG, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Trivandrum Regional Co-op. Milk Producers Union Ltd. Ksheera Bhavan, Pattom, Trivandrum 695 004 Appellant(s) Versus Commissioner of Customs & Central Excise C.R. Building, I.S. Press Road, Kochi 682 018 Respondent(s)
Appearance:
Shri Manoj Pillai, Advocate TAXAIDE T.C. 25/2828, Hrishikesh, Mathrubhoomi Road, Trivandrum 695 035 For the Appellant Smt Ezilmathi, AR For the Respondent Date of Hearing: 12/07/2016 Date of Decision: 29/07/2016 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. 20595/ 2016 Per: S.S GARG The present appeal is directed against the order of the Commissioner (Appeals) vide which he set aside the Order-in-Original. Briefly the facts of the present case are that the appellant is a Co-operative Society registered under Kerala Co-operative Societies Act, 1969. The main sphere of activity of the appellant is collection of milk from various primary milk societies, pasturise, pack and sell it to various consumers. The appellants also produce Curd, Ghee, flavored milk, Ice Cream etc and they also produce one product called MILMA SIP which is nothing but flavored milk packed in small pouches instead of bottles. As per the appellant SIP UP was classified under Chapter 04.04.90 CET carrying Nil rate of duty. On these facts a show-cause notice was received by the appellant from the Superintendent Central Excise, Trivandrum proposing to reclassify the MILMA SIP under heading 21.05 CET (i.e. Ice Cream and other edible ice whether or not containing cocoa) demanding duty at the appropriate rate and proposing penalty under Rule 173Q. The appellant filed a reply and the adjudicating authority accepted the contention of the appellant and held that the product is classifiable under item No. 040490 vide its order dated 20.04.1999 which item carried Nil rate of duty. Thereafter Commissioner of Central Excise, Cochin disagreed with this decision passed Order-in-Review and filed an appeal before the Commissioner (Appeals) who vide order dated 13.12.2002 decided that MILMA SIP is classifiable under Central Excise Tariff item No. 2105, that is edible ice, and confirmed the demand of Rs. 47,862/- (Rupees Forty Seven Thousand Eight Hundred and Sixty Two only). Hence the present appeal.
2. The learned counsel for the appellant submitted that MILMA SIP is rightly classifiable under heading 04.01.11 CET and if it is not possible to classify under that heading then the next possibility is to classify under heading 04.04.90. He also submitted that the impugned item cannot be taken out of the chapter 04 since it is a Dairy Product and its classification as Edible ICE is factually and legally wrong. He further submitted that MILMA SIP is a product to be sipped and not licked as Ice Cream or Edible Ice. MILMA SIP is a milk based product and Edible Ice is a water-based product. MILMA SIP is a Dairy product and hence falls under chapter 4. Further Chapter 21 deals with miscellaneous Edible Preparations as no preparation is involved in the production of MILMA SIP, it will not fall under chapter 21. He further submitted that the MILMA SIP which has a larger percentage of water, is not classifiable as water based product. It can only be classified as a milk product in a gaseous, liquid or solid form. Hence change of form due to heating or cooling will not alter tariff classification.
3. On the other hand the learned AR submitted that the impugned order is in accordance with law and the conclusion of the respondent that the product in question is Edible Ice falling under chapter heading 2105 and not 0404 on the following four grounds:
a) In MILMA SIP, the milk constituent is less than 25% and hence the product cannot fall under chapter 04.
b) The flow diagram that also shows a number of processes are being carried out in the production of MILMA SIP and this amounts to preparation of a distinct product, different from milk.
c) The third point considered by the respondent is the condition of the goods (frozen) at the time of removal from the factory of manufacture.
d) As water predominates among the constituents of the product and contains permitted flavour and colours, it clearly satisfies the definition of Edible Ice.
4. Heard both the parties and perused the records. The only question to be decided is whether MILMA SIP is classifiable under heading 04.04 as claimed by the assessee or classifiable under heading 21.05 as claimed by the Revenue. The finding of the original adjudicating authority is that MILMA SIP being milk based product hence rightly classifiable under 04.04 and does not attract any duty. On review of the Order-in-Original, the Deputy Commissioner challenged the decision of the adjudicating authority and on appeal the learned Commissioner (Appeal) reversed the Order-in-Original and held that MILMA SIP is Edible Ice falling under 21.05 and not under 04.04 mainly on the ground that in MILMA SIP milk constituent is less than 25% and therefore it cannot fall under chapter 04. As per AR product is bought and sold as solid product and it is like a lollipop. But as per asessee, the product is removed in liquid form from the factory and it continued to be a milk product and consequently the product in question is neither Ice Cream nor other Edible Ice. On account of this factual difference the Deputy Commissioner Trivandrum in his report V/21/2/9/2000 dated 07.10.2002 reported that the product is removed in solid form, in container called insulated boxes. On completion of manufacture, the product is in liquid form, but to preserve without decaying, the same is frozen by keeping it in freezers for about 2 days. The item is kept in shops also, in freezers. The product is actually a solidified liquid and while using it has to be in a liquid form to sip. Further the learned Commissioner (Appeals) has observed in para 5 as under:
On a perusal of the flow chart submitted by the appellants it is seen that the product contains milk fat 2%, protein 3.5% and total solid not less than 20%. Hence about 75% of the product contains water, cane sugar, sweetening agents, colours etc. Explanatory note 4 of chapter 4 applies to butter milk, curded milk, cream, whey, curd etc wherein the milk constituents predominate. In the case of MILMA SIP, the milk constituent is less than 25% and hence their plea that the product falls under chapter 4 cannot be accepted. Further the flow diagram given also shows a number of processes being carried out and amounting to preparation of a distinct product different from milk. In the case of Nestle India Ltd. V. CCE [2001 (132) ELT 134 (T)] the products viz Milkmaid Kalakand Mix was having 68.8% of Dairy powder and Milkmaid Rabri Mix was having 57.5% of Milk Powder. Hence the constituent of milk predenominate and CEGAT correctly held that the products are classifiable under heading 04.04. In the instant case milk constituent is only about 25% and hence the above CEGAT decision is clearly distinguishable and cannot be made applicable in the instant case. Further, the respondents have not disputed that the classification of an excisable product has to be done with reference to the form and condition in which the goods are cleared from the factory. As per the report of Deputy Commissioner, the product is in solid form and is removed in solid form in insulated boxes. Though the respondents pleaded that it is ready for clearance in liquid form as soon as it is manufactured, they have admitted that, being a product containing cane sugar it will get fermented quickly and thus deteriorate in quality and hence it is kept in freezers and transported in insulated boxes in the forms in which the goods are or can be marketed as in solid form. Further as water predominate among the constituents of the product and contains permitted flavours and colours, it clearly satisfy the definition of edible ice, as per definition contained in Prevention of Food Adulteration Rules 1955. Even if the definition of edible ice as under the Prevention of Food Adulteration Act 1955 is not adopted, the goods would still be nothing but edible ice. The Chemical Examiners report on the factual aspect also is in line with this. Hence, the product MILMA SIP manufactured by the appellant is to be held as classifiable under heading 2105.
5. The learned Commissioner has also observed in para 7 which is reproduced herein:
As regards eligibility of SSI Exemption, it is seen that in the case of appellants, the issue was considered earlier and as per Order-in-Appeal No. 331/2001 and 332/2001 dt. 30.10.2001 it was held that the appellants used brand name of another viz Kerala Co-operative Milk Marketing Federation Ltd. and hence not eligible for exemption.
6. After considering the entire submissions of the parties and perusal of the records, we do not find any infirmity in the Order-in-Appeal classifying the product MILMA SIP as classifiable under heading 2105 as the said product contains about 75% water, cane sugar, sweetening agents, colours etc. Hence we dismiss the appeal of the appellant.
(Order pronounced in open court on 29/07/2016) (ASHOK K. ARYA) TECHNICAL MEMBER (S.S GARG) JUDICIAL MEMBER iss