2024(03)LCX0116(AAR)

Royal Canin India Private Limited

decided on 05-03-2024

CUSTOMS AUTHORITY FOR ADVANCE RULINGS

NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAI - 400001

E-MAIL : cus-advrulings.mum@gov.in

The 05th day of March, 2024

Ruling Nos. CAAR/Mum/ARC/35,36/2024

in

Application No. CAAR/CUS/APPL/133,143/2023 - O/o Commr - CAAR- MUMBAI

Ruling

M/s. Royal Canin India Private Limited (having IEC No. 0306078074 and hereinafter referred to as ‘the applicant’, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application having Commissioner of Customs, Mumbai-III(Import), ACC, Sahar, Andheri (East), as jurisdictional address was received in the secretariat of the CAAR, Mumbai on 08.11.2023 and the other application was received on 25.10.2023 in which jurisdictional address was not correct. The said deficiency was removed and correct address of jurisdictional commissionerate was sent by letter dated 03.11.2023 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also). The applicant is seeking advance ruling on the classification of imported pet foods in bulk bags and the rate of custom duty applicable on the imported goods.

2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 application:

2.1. The applicant is a subsidiary of Royal Canin SAS, France (‘RC France’), engaged in import and sale of pet food i.e, dog and cat food in India (hereinafter referred to as ‘product’ or ‘pet food’). The Company imports pet food from its overseas related entities i.e., Royal Canin South Africa, Royal Canin France, Royal Canin South Korea and Mars Austria (collectively referred to as ‘overseas suppliers’).

DESCRIPTION OF THE PRODUCT:

2.1.1 The pet food imported by the Company from its overseas related entities is imported in retail packages of 1 kilogram (kg), 2 kgs, 4 kgs and so on up to 20 kgs. The imported goods are intended for ‘as is’ sale to customers in India. The retail packages imported by the Company are considered as pre-packaged commodity under the Legal Metrology Act (LM Act) and are subject to the provisions of the Legal Metrology Rules (LM Rules).

2.1.2 The packages are pre-printed with information such as the ingredients, nutritional information, quantity, best before date, batch number etc. The imported goods are then moved to a bonded warehouse, wherein the labelling as per the requirements under the Legal Metrology Act, 2009 (LM Act) and Legal Metrology (Packaged Commodities) Rules, 2011 (LM Rules). Post clearance of the goods for home consumption, the retail packages are sold in the Indian market.

2.1.3 The pet food imported by the Company are classified under Chapter 23 of the First schedule to the Customs Tariff Act, 1975 having chapter heading ‘Residues and waste from the food industries; prepared animal fodder’.

2.1.4 The Company classifies the imported retail packages under customs tariff heading (`CTH’) 23091000 of the Customs Tariff Act, 1975 at 8 digit level, which is specifically in relation to dog and cat food, put up for retail sale and accordingly, discharges basic custom duty (BCD’) @ 20%, Social Welfare Surcharge (`SWS’) @10% and Integrated Goods and Services Tax (`IGST’) @18%.

The Custom Tariff description along with the BCD and IGST rate as per First Schedule of the Custom Tariff Act, 1975 is as below -        

2.1.5 The retail packages of pet food are imported at the JNPT Nhava Sheva and occasionally at Sahar Air Cargo. The packages are cleared for home consumption upon filing of bill of entry (`BOE’) and payment of relevant custom duty. The packages are thereafter supplied to distributors and retailers. The distributors and retailers further supply the goods to the customers.

2.1.6 The Company is pioneer in the area of pets’ health and caters the market through tailored nutritional solutions for each cat and dog by innovative health services in partnership with leading pet experts. As per the experience gained by the Company in this industry, to have better penetration in the market, to onboard new pet parents onto Company products with more ease, to cater to the feeding patterns generally seen in the dogs and cats and to make Company products more accessible and affordable in the market, it sees that smaller pack size across value chain is much more acceptable in the market. However, currently the Company faces various supply chain issues like supply constraints from overseas factories, import lead times, storage, quality and shelf-life issues to make available right pack size to consumers as per market / seasonal trends and is not able to cater to the demand in the market.

2.1.7 The bulk packages proposed to be imported by the Company will be in bags/packing starting from 15 kgs which can go up to 700 kgs etc. The pet food to be imported in bulk are not covered under or subject to the provisions applicable to packages intended for retail sale under LM Rules. The bulk bags will thus not have any requisite labelling, information, MRP etc. printed on the packages that are required for retail packages under the LM Rules and cannot be sold in the market as it is without repacking and labelling, i.e., the imported goods shall not be marketable to ultimate consumers.

2.1.8 The bulk packages will be unloaded in a bonded warehouse on filing of an in-bond BOE. The imported products will be stored in the bonded warehouse and shall be cleared for home consumption on regular basis, upon filing of ex-bond BOE and payment of applicable custom duty.

2.1.9 Post clearance of the goods for home consumption, the imported products shall be transported to the Company’s repacking centre where the activity of repacking of the pet food into smaller unit packages suitable for retail sale as per the market requirements and demand such as 200 grams, 400 grams, 1 kg, 5 kgs packages etc.

2.1.10 Post repacking and labelling of the packages, the goods will be supplied to the distributors and retailers for further sale.

2.1.11 For undertaking the retail packaging of the pet food imported in bulk bags, the Company shall also import packing material from third party vendors located in Italy and Vietnam.

2.1.12 The Company understand that given the above and the change in the form by value addition in the form of repackaging in which the products will be imported into India, will thus lead to redetermination of the customs classification under the Customs Tariff Act, 1975 of the goods proposed to be imported.

2.1.13 The Company submits that the goods imported by the Company, i.e. processed dog and cat food/pet food shall remain the same. However, the form in which pet food will be imported will undergo a change. It is submitted that the Chapter Notes to Chapter 23 state that heading 2309 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing. Accordingly, since the Company shall continue to import processed pet food, the goods shall continue to be classified under CTH 2309 of the Customs Tariff Act, 1975, at 4 digit level, having a tariff description ‘Preparations of a kind used in animal feeding’.

2.1.14 Under CTH 2309 of the Customs Tariff Act, 1975, there are two possible entries at 8 digit level wherein the pet food bulk bags can be classified, i.e., 23091000 (currently used for classifying the imported dog and cat food, put up for retail sale) and 23099090, i.e. the residual entry.         

3. Applicant’s Interpretation:-

3.1 The Applicant is engaged in the business of import and sale of pet food in India and offers variety of wet and dry nutritious foods for dogs and cats of all ages, sizes, breeds and sensitivities.

3.2 In order to efficiently cater to the demand and effectively tap market opportunities, the Applicant, going forward, proposes to also import pet food in bulk bags from its overseas related entities. The pet food imported in bulk will be imported in plain white bags with no branding or MRP stickering. The bulk bags imported cannot be sold as such to the ultimate consumers/customers in India.

3.3 The Applicant is establishing a repacking center in India, whereby post importation of the pet food in bulk, the Applicant will undertake repacking of imported bulk bags into smaller unit packages (retail packs) with requisite information as required under LM Act and LM Rules for further sale in India.

3.4 The repacking activity will involve packing the imported pet food in bulk into smaller units for sale to customers in India (for example in packages of 200 g, 1 KG or 4 KG etc.). The smaller units shall be packed in packing material having fixed mandatory details required under LM Act and LM Rules.

3.5 Classification of pet food imported in bulk under Chapter 23 and chapter heading 2309

India’s Customs Tariff has a set of General Rules of Interpretation (referred to as ‘GRI’) and General Explanatory Notes along the lines of HSN, which aid in determining the appropriate classification of goods. The Rules have to be applied sequentially.

Rule 1 and 2 of the GRI gives precedence to section notes/chapter notes while classifying a product and provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions:

a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.

b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule

Given the above and the principals in Rule 2(a) for classification of goods, the Chapter heading in reference to an article shall include the complete and incomplete form of that article provided that the incomplete/unfinished article has the same characteristics as that of the complete article the Chapter/heading refers to.

Chapter 23 of Schedule I of the Customs Tariff Act 1875 covers ‘residues and waste from the food industries; prepared animal fodder’. The Chapter Notes to Chapter 23 further clarify as below -

“Heading 2309 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing.”

The Applicant is engaged in trading of processed cat and dog food with tailored nutrition for pets of varied age groups and special needs to sustain the animal’s health. The manufacturing of the product includes ingredients such as meat and fish (i.e., animal material) and vegetables. The raw material is modified and processed to manufacture the pet food (as an end product) traded by the Applicant.

Currently, the processed pet food is imported by the Applicant pre-packaged in retail unit packages. The imported goods are moved to a custom bonded warehouse and the requisite information as required under the LM Rules in India (including MRP) is affixed on them vide a label sticker. Post the aforesaid, the retail packages are suitable for direct sale to the customers, without any further processing, repacking etc. upon clearance of goods for home consumption.

Accordingly, the products are currently, classified under the Chapter heading 2309 having description ‘Preparations of a kind used in animal feeding’ as discussed hereinabove. The said classification has been duly accepted by the customs authorities and there is no dispute till date on the said classification.

Further, the packages proposed to be imported by the Applicant in bulk shall consist of pet food to be the final manufactured product as also currently imported in retail unit packages. Only the form in which the product is imported will be changed from retail unit packages to bulk bags.

Accordingly, in view of the principals enshrined in GRI, and the considering that the pet food to be imported in bulk bags by the Applicant (unfinished article) has the essential character of the complete or finished article. i.e., the pet food imported currently in retail packs. Also, the as per the descriptions and chapter notes provided for CTH 2309, the pet food in bulk bags can be very conveniently classified under the same CTH of 2309 having description ‘Preparations of a kind used in animal feeding’.

Furthermore, the 8 digit CTH of the bulk bags intended to be imported by the Applicant is not possible to be determined in view of the chapter titles and notes as the bulk bags imported by the Applicant can be classified under the 8 digit CTH 23091000 and 23099090 having descriptions as below -          

The classification shall thus be determined as per Rule 3 of the general rules for interpretation of the harmonized system classification of goods to be applied sequentially.

Rule 3 of the GRI, provides for classification of products that are, prima facie, classifiable under two or more different HS heading as follows -

c) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

d) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

e) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Specific heading to be preferred over general headings.

Variance in classification of pet food imported in retail packages and in bulk packages as defined under the Legal Metrology Act and Rules

The term retail package or retail sale is not defined under the Customs Act. The packaging and labelling of pre-packaged commodity meant for retail sale is governed by the provisions of the LM Act and shall bear the relevant declarations as provided for under the LM Rules. Accordingly, the definition and scope of these terms shall thus be derived from the LM Act and LM Rules.

The LM Rules define the scope of the term retail package and retail sale for understanding the applicability of the concerned rules to the pre-packaged commodities.

The term ‘retail package’ is defined under Rule 2(k) of LM Rules to mean -

“Packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes imported packages.

Provided that for the purpose of this clause, the term ‘ultimate consumer’ shall not include industrial or institutional consumers”

Rule 2(1) of the LM Rules further defines the term ‘retail sale’ as below -

“2(1) ‘retail sale’, in relation to a commodity, means the sale, distribution and delivery of such commodity through retail sale shops, agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer”

Given the above, it is evident that the retail package shall refer to the pre-packaged commodity meant for retail sale, i.e., direct sale to consumers including through intermediaries/distributors, provided the retail packages are labelled as required under the provisions of the LM Rules.

Further, Rule 2(q) of the LM Rules defines “wholesale package’ to mean a package containing-

“(i) a number of retail packages, where such first mentioned package is intended for sale, distribution or delivery to an intermediary and is not intended for sale direct to a single consumer; or

(ii) a commodity sold to an intermediary in bulk to enable such intermediary to sell, distribute or deliver such commodity to the consumer in smaller quantities; (iii) ten or more than ten retail packages provided that the retail packages are labeled as required under the rules.”

        Retail packages and wholesale packages are covered under different chapters of the LM Rules namely, “Chapter II- Provisions Applicable to Packages Intended for Retail Sale” and “Chapter III - Provisions Applicable to Wholesale Packages”, respectively.

    The labelling requirements of wholesale packages are entirely different from those of retail packages. As per Rule 24 of the LM Rules, the only declarations required on a wholesale package are as below:

“(a) The name and address of the manufacturer or importer or where the manufacturer or importer is not the packer, of the packer;

“(b) the identity of the commodity contained in the package,’ and

(c) the total number of retail package contained in such wholesale package or the net quantity in terms of standard units of weights, measures or number of the commodity contained in wholesale package;”

Thus, there is no requirement under the LM Rules for declaration of ‘Maximum Retail Price’ (MRP) on wholesale packages.

    In the present case, the Applicant is currently importing retail packages of pet food intended for further sale to the consumers via distributors. The retail packages imported are of quantity 1kg, 2kg, 5kg, 10kg etc. and are affixed with all relevant declarations and labels (including MRP) as is required under the LM provisions at the custom bonded warehouse.

    The 8-digit CTH 23091000 having description ‘dog and cat food, put up for retail sale’ thus specifically covers the pet food imported by the Applicant currently in retail package meant for retail sale.

    Further to the above, from the provisions of the LM Rules, it is hereby inferred that packages meant for wholesale shall not be construed as retail packages/pre-packaged commodity meant for retail sale.

    In view of the above, CESTAT New Delhi while deciding the matters in relation to classification of goods described as “0.1 percent natural brassinolide fertiliser” in the case of M/s Midas Fertchem Impex Pvt Ltd., Ms. Rashmi Jain, Director, Shri Manish Jain, Director, M/S Midas Import Corporation, Versus Principal Commissioner of Customs, Air Cargo Complex (Import) New Delhi 12023 (1) TM1 998 - CESTAT, NEW DELHI] discussed the scope of ‘retail packages’.

    In the matter under concern, the appellant and revenue/respondent were referring to different Rules of the Legal Metrology Rules to interpret the term, The appellant contended that goods were not in packings meant for consumer and hence were not retail packings defined in terms of Rule 2(k) of the Legal Metrology Rules. Whereas the respondent said that since only packages of more than 25 kg or 25 litres are excluded as per Rule 3 of the Legal Metrology Rules, the packages in question imported by the appellant, being of up to 25 kg, do qualify as consumer packings as per Rule 3 of the Legal metrology Rules.

    The CESTAT New Delhi observed that ‘retail packing’ is not defined in the customs tariff and thus, Legal Metrology Rules shall be referred to interpret the term.

The relevant extract of the ruling with regard to scope of ‘retail packages’ is as below

“29. Both sides agree that ‘retail packing’ is not defined in the tariff. Both sides refer to different Rules of the Legal Metrology Rules to interpret the term. According to the learned counsel for the appellant, the goods were not in packings meant for consumer and hence were not retail packings in terms of Rule 2(k) of the Legal Metrology Rules. According to the learned authorised representative for the Revenue, since only packages of more than 25 kg or 25 litres are excluded as per Rule 3 of the Legal Metrology Rules, the packages in question, being of up to 25 kg do qualify as consumer packings. We find that while it is true that all packings over 25 kg are clearly excluded from the Legal Metrology Rules, it does not necessarily mean that all packings up to 25 kg are included for them and further that all such goods get covered by the definition of retail packings. There could be substances of much higher value, such as saffron or spices which will be sold even in wholesale in much smaller packings than 25 kg. Therefore, it needs to be seen if there is sufficient evidence on record to suggest that the goods which were imported were in retail packings. We do not find sufficient evidence to hold so, if we exclude the survey on internet and e-commerce websites conducted by the Commissioner after concluding the hearing and before passing the impugned order which we already have found cannot be used against the appellant.”

    Thus, under the proposed business model, the Applicant shall import bulk packages/bags of pet food in quantities starting from 15 kgs which can go up to 700 kgs etc., and the same shall not qualify as retail packages or packages meant for retail sale. The bulk packages imported shall also bear the declaration “not for retail sale”. The imported bulk bags will be construed as import of goods in wholesale. Therefore, the bulk packages imported by the Applicant shall not be required to bear the labels, declarations, MRP etc. as is mandated under the provisions of LM Rules applicable to packages meant for retail sale.

    Given the above, there appears to be a clear differentiation of the packaged commodities to be considered as retail packages meant for retail sale and wholesale / bulk packages.

The 8-digit CTH 23091000, clearly and specifically includes the cat and dog food ‘put up for retail sale’. Therefore, where the product under consideration is not meant for retail sale, the same shall not get covered under the specific 8-digit CTH 23091000.

    Therefore, the proposed transaction of import of bulk packages of pet food by the Applicant cannot be classified under the CTH 23091000 as the heading is specifically for products meant for retail sale.

Pet food imported in bulk does not get covered under the specific CTH 23091000 being for retail sale

Rule 3(a) of the GRI provides that product shall be classified under the heading which provides the most specific description of the product. The specific description of the pet food imported by the Applicant is provided under HSN 23091000 which covers ‘dog and cat food, put up for retail sale’.

The 8 digit CTH 23091000 specifically provides for cat and dog food as dealt in by the Applicant, however the same is restricted to the products ‘put up for retail sale’.

The term ‘retail sale’ is not defined under the Customs Act, 1962 and thus the definition of the term is considered as provided under the LM Rules to mean “the sale, distribution or delivery of that commodity through retail sale shops, agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer”.

    In this regard, reference is drawn to Circular No. 7/88-CX.3 dated 5 April 1988 issued under Central Excise with respect to classification of Liquid Paraffin I.P. in bulk form under Chapter 27 or Chapter 30.

    Chapter 2710 of the Central Excise Tariff cover Petroleum oils and oils obtained from bituminous materials, other than crude; preparations not elsewhere specified or included; containing by weight 70% or more of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations.

    Whereas Chapter 3003 is a specific entry which provides Medicaments (including veterinary medicaments).

    The Circular clarified that Liquid Paraffin I.P. in bulk form was not a well-defined compound and hence shall fall under HSN 271099, i.e. the residual entry. Subsequently, when the bulk product is put up in measured doses or in packaging for retail sale or for use in hospitals, it would be appropriately classifiable under Chapter 3003 of the Central Excise Tariff.

     Thus, basis the above circular issued by the Government, it is clarified that in principal where the products are well defined and are packaged for retail sale or used for defined purpose, the goods shall merit classification under the specific entry. However, in case of bulk product not put up in packaging for retail sale, the bulk product shall be classified under the residual entry.

    Thus, since the pet food proposed to be imported in bulk bags by the Applicant is not fit for direct sale to customers in India and do not have the relevant labels and information to be sold to customers, the same cannot be considered as being ‘put up for retail sale’. Hence, the same shall not be classified under the specific entry 23091000.

The pet food imported in bulk bags by the Applicant merits classification under the residual CTH of 23099090

Rule 3(c) of the GRI provides that further clarifies that when goods cannot be classified by reference to Rule 3(a) or (b) they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration.

The residuary entry of Chapter Heading 2309 includes a residuary entry for classification of preparations of a kind used in animal feeding which cannot be classified under the specific entry, i.e. CTH 23099090.

As discussed hereinabove, since the pet food imported in bulk bags by the Applicant cannot be put up for retail sale as it is, the same cannot be classified under specific CTH 23091000. Thus, in view of the principals and rules of interpretation, the bulk bags shall be classified under the residual entry of 23099090.

    Further, in view of the applicability of the abovesaid provisions of Rule 3(c) of the General Rules of Interpretation of HSN, the Supreme Court in the matter of Union Of India Versus Pesticides Mfg. & Formulators Association Of India in Civil Appeal No. 3876 of 1999 [2002 (10) TM/ 95 - SUPREME COURT] ruled on classification of technical grade of pesticides, insecticides etc. under Chapters 28 and 29 of the Schedule to the Central Excise Tariff Act, 1985 instead of Chapter 3808 of the Schedule.

The tariff description of the highlighted chapters is as below -      

    The respondents in the matter were an association of manufacturers of technical grade pesticides (TGP) and insecticides in bulk form and contended that the bulk formations of the product shall be classified under CTH 3808 which specifically covers products insecticides and pesticides in line with the general rules of interpretation.

    The Court observed that the rules of interpretation direct that the goods to be classified under a HSN would include its formulations and that the more specific heading should be preferred. If there are two such specific headings to which a product can be referred, the one occurring subsequently would prevail.

    Accordingly, the Hon’ble Supreme Court held that TGP, insecticides etc. in bulk form manufactured by the respondent are classifiable under HSN 3808, which deals with chemical compounds viz., insecticides, pesticides etc. with all its formulations and not under the HSN chapters 28 and 29 occurring earlier which are general provisions relating to separate chemical compounds.

    From the ruling discussed supra, it is thus inferred that in cases where a product can be classified under two probable CTHs then the product shall be classified under the CTH occurring subsequently in the tariff.

    Thus, in this regard, the Applicant is of the belief that the pet food - i.e., dog and cat food imported by the Applicant in bulk bags, shall be classified under the residual entry of Chapter Heading 2309 which includes the formulations for preparations of a kind used in animal feeding, i.e., CTH 23099090 occurring subsequently in the tariff.

Global classification of the product in bulk packages

The Applicant is part of the Group which has presence in multiple countries. Similar model of import of pet food in bulk packages is also implemented in Japan.

The overseas entities in Japan are classifying the pet food, i.e., dog and cat foods in bulk packages under HSN 230990299 as per the country specific requirements. The extract of Japan’s custom tariff schedule is as below -

 Given the above custom tariff schedule for Japan and the description/chapter heading under which the pet food is imported in bulk packages relates to the ‘residual entry’ having description ‘Other’.

    Therefore, pet food in bulk packages is classified (at 6-digit custom tariff classification) by the overseas entity in Japan under 2309.90.

    Considering the global classification of the bulk packages in other countries as well, the Applicant is of the belief that the pet food in bulk packages proposed to be implemented by the Applicant merits classification under the residual CTH 23099090.

4. No comments has been received from jurisdictional commissionerate of Mumbai III (Import), ACC, Mumbai. Office of the Commissioner of Customs (NS-I), Mumbai Zone-II, JNCH, Nhava Sheva, Dist- Raigad, Maharashtra- 400707 which is the other jurisdictional Customs Commissionerate has responded to the subject application vide letter dated 27.12.2023 and the same is reproduced as under:

“4.1 The applicant wish to import pet food in bulk (without MRP, Labelling etc). and post importation, they will undertake the activity of re-packing the bulk packages into retails packs.

4.2 The said goods can not be classified under CTH 23091000 as the product under consideration is not meant for retail sale and is not fit for direct sale to customers in India and does not have the relevant labels and information to be sold to customers, that is why the same can not be considered as being “put up for retails sale’, Further, Heading 230990 is for “other, preparations of a kind used in animal feeding other than Dog or Cat food, put up for retails sale”. Further, the fact that the ultimate consumer will purchase a smaller quantity of the dog treats at the time of sale not affect the classification of the merchandise when imported and should be classified in subheading 23099090.

4.3 It may be ensured that the product under consideration is imported without any labelling, information, MRP etc. printed on the packages that are required for retail packages defined under rule 2(k) of LM(PC) Rules, 2011, as to ensure that goods being imported are in such a condition that it can not be sold directly in retail market else it will become an easy tool for importer to circumvent the provisions of customs tariff act by classifying the said goods under CTH 23099090 and getting them cleared at nil rate of IGST and 15% rate of Basic Customs Duty instead of correct classification of said goods if put up for retail sale, under CTH 23091000where Basic Customs Duty and IGST rates are 20% & 18% respectively.

4.4 Concerned GST authority may also verify the claim of importer that goods will be put up for retail sale only after re-labelling and re-packing of the same into smaller unit packages suitable for retail sale as per the market requirement and demands in compliance with the rule 3 of LM (PC) rules, 2011 for packaging of goods intended for retail sale.

In view of the reasons, as mentioned above the Bulk Pet Food is classifiable in heading 23099090.”

5. A personal hearing in the matter was conducted on 30.01.2024 in office of the CAAR, Mumbai. During the personal hearing the authorized representatives of M/s. Royal Canin India Pvt Ltd., Shri Gautam Khattar (authorized representative) reiterated their earlier submissions made in the applications to CAAR, Mumbai. They mainly argued that their subject import goods i.e. pet food for dogs/cat to be imported and cleared in bulk bags merit classification under CTH: 23099090. They relied upon GIR 3(c) and the Supreme Court case law Union of India vs Pesticide Ma,aufaatute,24.2. (10) TMI 95. SC. They also relied upon the contention of Jurisdictional Commissionerate, NS-I dated 27.12.2023. No one appeared from department side for Personal hearing either in person or through e-hearing.

6. I have considered all the materials placed before me in respect of the subject goods. I have gone through the submissions made by the applicant during the personal hearing as well as the response received from the Jurisdictional Customs Commissionerate. Therefore, I proceed to pronounce the ruling on the basis of information available on record as well as existing legal framework. The issue before me is the classification of the goods i.e. pet food for dogs/cat to be imported and cleared in bulk bags.

    Applicant has submitted that the bulk packages proposed to be imported by them will be in bags/packing starting from 15 kgs which can go up to 700 kgs etc. The pet food to be imported in bulk are not covered under or subject to the provisions applicable to packages intended for retail sale under LM Rules. The bulk bags will thus not have any requisite labelling, information, MRP etc. printed on the packages that are required for retail packages under the LM Rules and cannot be sold in the market as it is without repacking and labelling, i.e., the imported goods shall not be marketable to ultimate consumers. The bulk packages will be unloaded in a bonded warehouse on filing of an in-bond Bill of Entry. The imported products will be stored in the bonded warehouse and shall be cleared for home consumption on regular basis, upon filing of ex-bond Bills of Entry and payment of applicable custom duty. Post clearance of the goods for home consumption, the imported products shall be transported to the Company’s repacking centre where the activity of repacking of the pet food into smaller unit packages suitable for retail sale as per the market requirements and demand Post repacking and labelling of the packages, the goods will be supplied to the distributors and retailers for further sale. For undertaking the retail packaging of the pet food imported in bulk bags, the Company shall also import packing material from third party vendors located in Italy and Vietnam.

    It is seen that under CTH 2309 of the Customs Tariff Act, 1975, there are two possible entries at 8-digit level wherein the pet food bulk bags can be classified, i.e., 23091000 and 23099090, i.e. the residual entry.

    The CTI 2309.10.00, clearly and specifically covers the cat and dog food ‘put up for retail sale’. Therefore, where the product under consideration is not meant for retail sale, the same shall not get covered under the specific CTI 2309.10.00. It is seen that the products under consideration are to be imported without any labelling, information, MRP etc. printed on the packages that are required for retail packages defined under rule 2(k) of LM(PC) Rules, 2011. In fact, it cannot be sold directly in retail market considering inasmuch as the nature of the bulk import and the obligation of the applicant to follow the provisions of LM Rules. Hence the said goods cannot be classified under CTI 23091000. Instead, the proposed pet food imported in bulk packages by the Applicant should be classified separately from the classification provided for packages for retail sale. The other possible classification for the subject goods thus can be CTI 2309 9090 i.e. “Other preparation of a kind used in animal feeding” under the same heading.

    Further, Rule 3 of the GRI, provides for classification of products that are, prima facie, classifiable under two or more different HS headings. The relevant extract of Rule 3 of GRI is as follows -

“…

a. The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

b. Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

c. When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.”

    In view of the principals enshrined in GRI, as per Rule 3(c) of the GRI, CTI 2309.90.90 shall be given preference over CTI 2309.10.00 as CTI 2309.90.90 occurs last in the numerical order among those which equally merit consideration.

    The classification of the product should be determined based on the form in which it is imported and not based on the end use of the product., the bulk packages imported by the Company cannot be considered as being ‘put up for retail sale’. Hon’ble Supreme Court of India in the case of Commissioner of Central Excise, Delhi vs. Carrier Aircon Ltd. [2006 (199) E.L.T.577 (S.C.)] ruled that end use to which the product manufactured is put to, cannot determine the classification of the product when the product manufactured falls under a specific heading. The contention of the applicant is also backed by the Hon’ble CESTAT order in the case of of M/s Midas Fertchem Impex Pvt Ltd. and others Versus Principal Commissioner of Customs, Air Cargo Complex (Import) New Delhi [2023 (1) TM/ 998 - CESTAT, New delhil] cited supra. It is further observed that the ratio of the judgement passed in the case of U01 vs Pesticides Mfg. & Formulators Association of India in Civil Appeal No. 3876 of 1999 [2002 (10) TM195 (SC) cites supra, is also applicable to this case.

    Thus, in view of the above facts, provision of law and the ratio of the judgements cited above, it can be said that the pet food i.e. cat and dog food, imported in bulk merit classification under CTI 2309.90.90 of the First Schedule of the Customs Tariff Act, 1975.

    Jurisdictional Customs Commissionerate, (NS-I), Mumbai Zone-II, JNCH, Nhava Sheva have also suggested the classification of subject goods under CTI 23099090 in their comments dated 27.12.2023, which is also concurred.

I rule accordingly.

(P K Rameshwaram)
Customs Authority for Advance Rulings,
Mumbai.

F. No. CAAR/CUS/APPL/133, 143/2023-O/o Commr-CAAR-Mumbai

This copy is certified to be a true copy of the ruling and is sent to- -

1. M/s. Royal Canin India Private Limited, 14^th Floor, 1401 and 1402, F-Wing, Lotus Corporate Park, CTS Nos 185/A, Graham Firth Compound, Western Express Highway. Goregaon East, Mumbai, Maharashtra-400063.

2. The Commissioner of Customs, Nhava Sheva, NS-1, „JNCH, Tal- Uran, Dist-Raigad, Maharashtra- 4007007
Email: commr-ns1@gov.in

3. The Commissioner of Customs, Mumbai-Ill (Import), Air Cargo Complex, Sahar, Andheri (East). Mumbai- 400099.

4. The Customs Authority for Advance Rulings, 5th Floor, NDMC Building, Yashwant Place, Satya Marg, Chanakyapuri, New Delhi-110021.
Email: cus-advrulings.@gov.in

5. The Principal Chief Commissioner of Customs, Mumbai Customs Zone 1. Ballard Estate, Mumbai-400001.
Email: ccu-cusmum1@nic.in

6. The Commissioner (Legal), CBIC Offices. Legal/CX.8A, Cell. 51h floor, Hudco Vishala Building, C-Wing, Bhikaji Cama Place, R. K. Puram, New Delhi —110066_
Email: anishgupta.irs@gov.in, commr.legal-cbec@nic.in

7_ The Member (Customs), Central Boards of Indirect Taxes & Customs, North Block, New Delhi-110001.
Email: mem.cus-cbec@nic.in

8. The Webmaster. Central Boards of Indirect Taxes & Customs, Email: webmaster.cbec@icegate.gov.in

9. Guard file.
 

(V.M. Sobhan Sindhu)              
Asstt. Commissioner of Customs & Secretary
Customs Authority for Advance Rulings,
Mumbai