B.9 – Vadodara Zone – Classification – Classification of “Milking Machines and Dairy Machines”- Whether Classifiable Under Tariff Item 84.18 or 84.19:
The Bulk Milk Cooler is described as an insulated tank made up of SS 304 stainless steel sheets with evaporators, direct expansion condensing unit and smooth agitation, which is installed at village unions of dairy co-operative societies and in the farms. This equipment is defined by the international standard ISO 5708 which require: to cool down the temperature of milk from 35 degree C to 4 degree C in less than 3 hours with an ambient temperature upto 38 degree C and then to keep the temperature of milk at 4 degree C constant so that the quality of milk doesn’t get deteriorated and bacteria are not generated in the milk. The unit classified the said product under tariff item 84342000 prior to 2011. However, after objection by the audit, accepting the suggestion to classify the goods under tariff item 84198990 instead of 84342000, the assessee started to classify “Bulk Milk Cooler” under tariff item 84198990 which attract duty @ 12.5%. References have been received from the Trade that in respect of the said product there is no uniformity of practice. Different classifications under contention in different zones are under the headings 8418, 8419 and 8434. Sponsoring zone requested that the scope of these headings and classification of the product may be decided.
Discussion & Decision
The issue was discussed in the conference with respect to scope of the three headings. It was noted that in the context of the goods under discussion heading 8418 applies to refrigerators, freezers and other refrigerating or freezing equipment; tariff item 8419 applies to machinery, plant for treatment of material by a process involving a change of temperature whereas tariff item 8434 applies to Milking machines and dairy machinery. Note 2 of chapter 84 interalia provides that a machine or appliance which answers to a description of one or more of the heading of 8401 to 8424 and at the same time to a description in one or other of the headings 8425 to 8480 is to be classified under appropriate heading 8401 to 8424 and not under heading 8425 to 8480. Further, as per HSN explanatory note to Chapter Heading 84.34, that machines for processing milk dependent essentially on the principle of heat exchange (heading 84.19) are excluded from coverage under chapter heading 84.34. The heading also excludes refrigerating appliance (whether or not specially designed for cooling or keeping milk and milk cooling vats incorporating evaporator of a refrigerating unit (heading 84.18) from Chapter Heading 84.34. Thus any machinery which answers to a description under headings 8418 or 8419 cannot be classified under heading 8434. This principle was upheld by Hon’ble Supreme Court in case of HMT Limited [2007 (214) E.L.T. 10(S.C.)] where milk/cream chillers and chilling plants were under consideration amongst other equipments for classification and classification under 84.34 rejected.
As far as classification under CETH 8418 is concerned, HSN notes for the heading provides that – “The refrigerators and refrigerating equipment of this heading are in the main machines or assemblies of apparatus for production, in a continuous cycle of operations, of low temperatures (in the region of 0 degree centigrade or less) at the active cooling element, by the absorption of the latent heat of evaporation of liquefied gases (e.g. ammonia, halogenated hydrocarbons), of volatile liquids or, in case of certain marine types, of water.” In case of M/s Praj Industries [2009(242)ELT 430], Hon’ble Tribunal decided classification of Bulk Milk Cooling Tank having following items viz. (i) Milk Vessel (ii) Ice Water Vessel, (iii) Cooling Coil, (iv) Condensing Unit etc. relying on the HSN notes decided the classification of goods under CETH 8418. Hon’ble Tribunal recorded the following argument as justification for classification of the equipment under the heading 8418 – “as per the explanatory note to CH. 8418, the temperature at the active cooling element is what is important and not the temperature of the refrigerated product. The cooling coil immersed in water generates ice of 38 mm diameter around it, thus producing cryogenic temperature.
“For scope of classification under heading 8419, two case laws were examined. In case of M/s Universal Heat Exchangers [2000 (122) ELT 770], Hon’ble Tribunal noted that Ammonia condenser, used by appellant in chilling of water is able to achieve cooling only up to 8OC and not freezing temperature which is around zero or sub-zero degree, hence it is not classifiable as refrigerating equipment . In case of Pan Asia Corporation [1999 (107) ELT 306] the distinction between the two headings 8418 and 8419 was explained by the tribunal to say that – A distinction is to be made between Tariff Heading 84.18 and 84.19. Cooling is no doubt affected by machineries and appliances falling under Tariff Heading 84.18 but the cooling should be of the range which a refrigerator or refrigerating machines achieves i.e. around zero or sub-zero temperatures. In the present case it is not disputed that the cooling effect is from 45oC to 6oC. Further it is also clear that it is not based on the refrigerating system. The lower appellate authority’s finding that the goods would be rightly classifiable under Tariff Heading 84.19 is correct.”
The conference noted that the Bulk Milk Cooler under discussion apparently achieves a cooling up to 4 degree centigrade in three hours. The information regarding whether the machine under discussion is a refrigeration machine and achieves zero and sub-zero temperatures around the cooling coil is not available in the reference, but if these two conditions are satisfied, then the Bulk Milk Cooler under discussion would be covered by the judgment in case of Praj Industries (supra) and the equipment would be prima-facie classified under 8418. However, the sponsoring Zone may verify the facts of the case and scope of the headings explained in the foregoing paragraphs and decide the classification