2001(05)LCX0005

IN THE CEGAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri S.L. Peeran, Member (J) and Jeet Ram Kait, Member (T)

INDO NISSIN FOODS LTD.

Versus

COMMISSIONER OF CUSTOMS, CHENNAI

Final Order No. 718/2001, dated 22-5-2001 in Appeal No. C/R-158/97

CASE CITED

Harpreet International v. Commissioner — 2000(07)LCX0167 Eq 2000 (120) ELT 0529 (Tribunal-LB) — Relied on [Paras 3, 5]

Advocated By :   S/Shri R. Raghavan, Advocate, for the Appellant.

Shri S. Arumugam, DR, for the Respondent.

[Order per : S.L. Peeran, Member (J)]. - This appeal arises from Order-in-Original No. 218/96 dated 27-6-1996 by which the Commissioner has noted that the item imported by the appellants and declared in the Bill of Entry as “Food Additives/Ribotide (100 x 10 Kgs. carton boxes) was classified at the time of assessment under Heading 3824.90. Later, the department found that the item for the purpose of Import & Export Policy was classifiable under Customs Tariff sub-heading 38249029.80 which required a licence if they are of a kind classified as consumer goods. He has analysed the literature furnished by party and noted that even as per the literature the item, declared as food additives by the appellants, is having a composition 50:50 mixture of Nycleotide 5’ - Inosinate (IMP) & 5’ - Guanylate (GMP) - The two compounds with strong flavour enhancing properties. Therefore, he held that they were rightly classifiable under 3824.90 and not under CTH 29.42 for the purpose of clearance under OGL benefit without a licence, overruling the reason that under Tariff Heading 29.42, the item has to be “separate chemically defined organic compound not classified elsewhere”. The item imported was flavour enhances/potentiators and are food additive that brings out the taste of a food product without contributing any taste of its own. Thus, they are considered as consumer goods, requiring licence as per para-156 of Chapter XV of Export-Import Policy 1992-97. The Commissioner after thoroughly examining the entire literature and material on record overruled the classification under CTH 29.34 or under 29.42 and hence held it to be a restricted item for the purpose of licence. Hence, he held the said item to be confiscable under Sec. 111(d) read with 3(3) of the Foreign Trade (Development & Regulation) Act, 1992. However, he gave option to redeem the goods on payment of fine of Rs. 3 lakhs and imposed a personal penalty of Rs. 30,000/- under Section 112(a).

2. Arguing for the appellants, ld. Advocate Shri R. Raghavan submitted that the item is a compound obtained from Glucose plus other materials. The base material is glucose. Glucose plus 5 - Ribonucleotide is producing Bacteria after fermentation and further process results in Ribotides. Ribotide consists of 50% IMP and 50% GMP. He submits that there is no mixture of IMP plus GMP in 50 : 50 preparation to obtain Ribotide. He submits that Ribotide is a flavour enhancer and food additives and not food by itself and hence cannot be considered as a consumer item. He submits that the said item was being cleared under OGL as a practice. Therefore, the subsequent change of opinion cannot be accepted. He submits that although, they accepted the classification for the purpose of Customs Act under 38 but for the ITC (HS) classification, for the purpose of licence, it has to be treated as having cleared under 29 as single chemical compound. He submits that Chapter 29 includes preparation of mixtures and therefore item being mixture, cannot be overruled from Chapter 29 and hence no licence is required. Therefore, he seeks for setting aside the order of confiscation and imposition of penalty. He referred to technical bulletin and literature and also other materials on record to buttress his argument.

3. Ld. DR Shri Arumugam pointed out that appellants have clearly admitted the item as food additives. He submits that the literature itself clearly indicates that it is a directly consumable item and not a single chemical compound for the purpose of classification under chapter Heading 29. He submits that in terms of tariff notes, the item can be classified under chapter 29 only if it has got ‘separate chemically defined organic compound not classified elsewhere’. Appellants’ claim that it is not a consumer item is not acceptable as it is marketed and declared as food additive and consumable product and admittedly even as per the literature it is a composition of more than one compound and in terms of tariff notes to Chapter 29, more than one compound are excluded from Chapter 29. He submits that when ITC (HS) classification is aligned with customs tariff and appellants not having challenged the customs classification under Chapter 38, therefore items required licence and the fine imposed is very minimum and same cannot be challenged. He submits that larger bench judgment in the case of Harpreet International upheld the confiscation of 85% of the CIF value as redemption fine and penalty in an import of poppy seeds which is consumer item without licence as reported in 2000 (120) ELT 529. He points out that in the present case the fine is much lesser 25% which is a fair lesser amount in terms of law laid down by Larger Bench. He submits that the item in any case cannot be classified under Chapter 29 even in terms of literature produced by the appellants.

4. On careful consideration of the submissions made by both sides, we are satisfied that there is no infirmity in the impugned order and appeal does not have any merit and requires to be rejected. Appellant clearly declared in the Bill of Entry the item to be food additives and accepted the classification for payment of customs duty under Chapter 3823.00. Therefore, they have not challenged the classification and the clearances made in the Bill of Entry. Therefore the proceedings initiated for confiscation for the purpose of ITC is a justified action. For the purpose of import of any items in terms of Export & Import Policy, the party has to obtain a licence. In this connection, party claimed clearances under OGL. Assessees have submitted that under Chapter 29, the item is importable as OGL item and they are not consumable. In the present case, the item is directly used as food additives and it is a consumable item in terms of literature and various documents produced by the appellants. Be that as it may, the classification sought under CTH 29 cannot be accepted for the reason that appellants themselves have accepted the classification under Chapter 38 under the Customs Tariff Act at the time of clearances of Bill of Entry and the said classification has not been challenged. The second reason is that for the purpose of classifying it under Chapter 29 in terms of chapter note, the item has to be a ‘separate chemically defined organic compound not classified elsewhere’. Admittedly, in terms of tariff notes, literatures, it is a composition of more than two compounds. It does not have a chemically defined formula. On being specifically confronted to the ld. Counsel, to show as to whether they have any evidence to demonstrate that it is a single separate chemically defined organic compound, the Counsel could not satisfy the Bench. In terms of the literature examined by the Commissioner, the item does not fall within the chapter Heading 29.42 of CTH as separate chemically defined organic compound. Therefore, the classification adopted under chapter Heading 382490 29.80 for ITC purpose as “other residual products of the chemical and allied products industry of a kind classified as consumer goods” the restricted item required a licence. Therefore, the order passed by the Commissioner ordering for confiscation of the items, as appellants not having obtained a licence, is a correct order and requires to be confirmed.

5. The second plea of the Counsel is that early consignments were cleared and said practice should be continued cannot be accepted. When the item is a consumable one requiring licence under Import Export Policy, then in that event the production of licence is essential for clearance of goods. As regards the quantum of redemption fine and penalty, we notice that Commissioner has only fixed around 25% of RF on the value of goods. The Larger Bench decision in the case of Harpreet International has upheld the imposition of 85% of CIF value as RF on consumer item being cleared without a licence. In that view of the matter, the redemption fine and penalty imposed is quite justified and the commissioner has taken a lenient view. There is no merit in the appeal and hence it is dismissed.

Equivalent 2001 (133) ELT 0413 (Tri. - Chennai)

Equivalent 2001 (045) RLT 1040