2024(12)LCX0305(AAR)

Danisco (India) Pvt Ltd

decided on 30-12-2024

CUSTOMS AUTHORITY FOR ADVANCE RULINGS
O/o THE CHIEF COMMISSIONER OF CUSTOMS
NEW CUSTOM HOUSE, NEAR IGI AIRPORT, NEW DELHI-110037

[Email:cus-advrulinqs.del@gov.in]
DIN: 20241274OR000000FBAC
Present

Samar Nanda (Customs Authority for Advance Rulings, New Delhi)

F. No. VIII/CAAR/Delhi/ Danisco India/142/2024

The day of 30^th December 2024

Ruling No. CAAR/Del/ Danisco/120/2024 /2145 to 2151/30/12/2024

Application no: -125/2024 dated 24.09.2024

RULING

    Danisco India Pvt. Ltd. (hereinafter referred to as the "Applicant") is a private limited company incorporated in the year 1997 under the Companies Act, 1956. The Applicant is a leader in several sectors and also uses its research and development capabilities to serve the following markets:

i. Food and Beverage

ii. Home and Personal Care

iii. Health and Wellness

1.1. The Applicant is importing the products Grindsted SSL P 70 Veg' for the purpose of trading.

About the Subject Products

1.2 Grindsted SSL P 70 Veg (hereinafter referred to as 'subject product') is a food emulsifying agent An emulsifier enables the creation of uniformly blended products (emulsions) from ingredients which, because of fundamental differences in their physical and chemical properties are immiscible. The chemical name of the product is Sodium Stearoyl Lactylate.

1.3 The subject product offers the following benefits:

i. Improves emulsion stability, whitening effect, and mouthfeel when used with monoglycerides in coffee whiteners

ii. Increases stability against feathering in coffee whiteners

iii. Combines dough strengthening and crumb softening

1.4 The subject product is mainly composed of Sodium Stearoyl Lactylate. Palm oil is the raw material used for the manufacturing of the subject product. Palm oil contains different types of fatty acids (stearic acid) During the manufacturing process, Fatty acid (Stearic acid) is made to react with Lactic Acid in presence of Caustic Soda (NaOH) in an equilibrium esterification reaction that yields Sodium Stearoyl Lactylate.

1.5 The subject product may contain other constituents such as un-neutralized palmitoyl and stearoyl lactylic acid, free fatty acids, free lactic acid etc.

1.6 The physical processes of Distillation, Storage, Filtration, Tube chilling, magnet separation takes place after the chemical reactions are concluded, to get the subject product in its imported form.

1.7 The subject product i.e., Grindsted SSL P 70 Veg is food emulsifying agent made from palm oil,

1.8 E numbers: It is a system of codes used within the European Union (EU) to identify food additives. The “E’ stands for “Europe” and these numbers were established by the European Food Safety Authority (EFSA) and the European Commission. E400—E499 (thickeners, stabilisers. emulsifiers).

1.9 INS Number: It stands for “International Numbering System,” are used by the Codex Alimentarius Commission. The Codex Alimentarius is a joint program of the Food and Agriculture Organization (FAO) and the World Health Organization (WHO). established to develop food standards, guidelines, and related text. Food additives in India are labelled with INS numbers, and these numbers are regulated and approved by the Food Safety and Standards Authority of India (FSSAI). In the instant case INS number for the subject product is INS 481(i).

1.10 The subject product exhibits the following physical properties

1.11 The subject product will be imported in ready to sell packages of 25kg polyethylene/aluminium lined paper bags.

1.12 As per, 46th Joint FAO/WHO Expert Committee on Food Additive ("JECFA Report") report published in FNP 52 Add 4 (1996), which has analysed the subject product. JECFA report defines the subject product as

A mixture of sodium salts of stearoyl lactylic acids and minor proportions of other salts of related acids, formed by the esterification of commercial stearic acid with lactic acid and neutralized to the sodium salts: may contain unneutralized palmitoyl and stearoyl lactylic acid, free fatty acids (principally palmitic and stearic), free lactic acid and salts of fatty acid esters of lactic acid and polymerized lactic acid

1.13 The chemical structure of the subject product provided in the JECFA Report is given below:

1.14 The subject product contains more than one molecular species, viz., stearoyl lactylic acids, other salts of related acids, etc. For this reason, the subject product cannot be said to be a separate chemically defined compound given in Chapter Note 1 to Chapter 29. Additionally, there is not a fixed chemical formula of the Sodium Stearoyl-2-Lactylate, as "R" can either be C17H35 or C15H31 and "n" can range from 1-2.Hence, it is not removed from the ambit of Chapter 34.

1.15 Similar understanding can be developed from Scientific Opinion on the re-evaluation of sodium stearoyl-2-iactylate (E 481) and calcium stearoyl-2-lactylate (E 482) as food additives done on request of European Commission, Question No EFSA-Q-2011-00568 and No EFSA-Q-2011-00569, adopted on 13 March 2013. Determined that Sodium Stearoyl-2-Lactylate is waxy in consistency. Relevant portion of Report is extracted below

Other components present in the product may include sodium/calcium salts of fatty acids or free fatty acids (15-20 %), non-neutralised stearoyl lactylic acid, sodium/calcium lactate, free lactic acid or polymers of lactic acid. (Boutte and Skogerson, 2004; Burch et ai, 2007; Austen Business Solutions, 2010, unpublished report). In addition, the actual fatty acid profile of SSL and CSL will depend upon the source of the fatty acids. Commercial stearic acid contains variable range of stearic (C18) and palmitic acids (C16) (see section 2.3).

The subject product is waxy in character

1.16 As, per above mentioned Scientific Opinion Both SSL and CSL are normally white to pale yellow, ivory-coioured, waxy materials of a consistency determined by the fatty acids.

APPLICANT'S EL1G1BL1TY FOR ADVANCE RULING

1.17 In order to file an application before the Authority for Advance Ruling, the Applicant must satisfy the conditions prescribed under the Customs Act, 1962 (hereinafter referred to as 'Customs Act').

1.18 Provisions relating to Advance Ruling are prescribed under Chapter VB of the Customs Act. Clause (c) of Section 28E of the Customs Act defines an "Applicant" as:

In this chapter, unless the context otherwise requires,

         (c) "applicant" means-

(i) holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);

1.19 The Applicant herein has been granted a valid Importer-Exporter Code Number (IEC) under Section 7 of the Foreign Trade (Development and Regulation) Act, 1992. The same is 0599001730.

1.20 Clause (b) of Section 28E of the Customs Act defines 'advance ruling' as:

(b) 'advance ruling" means a written decision on any of the questions referred to in section 28H raised by the applicant in his application in respect of any goods prior to its importation or exportation;

1.21 The questions on which an application for an advance ruling can be made have been provided under Section 28H oi the Customs Act. As per the said Section 28H (2) of the Customs Act. an applicant may make an application for advance ruling in respect of questions relating to:

    (a) Classification of goods under the Customs Tariff Act, 1975;

1.22 The present application is being made by the Applicant to confirm classification of the subject product.

1.23 Therefore, it flows that in the present case, the Applicant is satisfying the following conditions required for filing the application for advance ruling, namely

a. have been granted a valid Importer-Exporter Code Number (IEC) under section 7 of the Foreign Trade (Development and Regulation) Act, 1992;

b. Application for advance ruling is in relation to clause (a) of Section 28H (2) of the Customs Act,1962.

Non-Applicability of Bar under Section 281

1.24 Section 28I of the Customs Act, 1962 is set out below:

"SECTION 28-1. Procedure on receipt of application. — (1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the [Principal Commissioner of Customs or Commissioner of Customs] and, if necessary, call upon him to furnish the relevant records;

Provided that where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the [Principal Commissioner of Customs or Commissioner of Customs].

(2) The Authority may, after examining the application and the records called for by order, either allow or reject the application :

Provided that the Authority shall not allow the application [ * *] where the question raised
in the application is -

(a) already pending in the applicant's case before any officer of customs, the Appellate Tribunal, or any Court;

(b) the same as in a matter already decided by the Appellate Tribunal or any Court; Provided further that no application shall be rejected under this sub-section unless an opportunity has been given to the applicant of being heard:

Provided also that where the application is rejected, reasons for such rejection shall be given in the order."

1.25 Thus, the conditions set out in Section 28I are satisfied as:

a. the question raised in the present application regarding the classification of GRINDSTED SSL P 70 VEG is not pending in the applicant's own case before any officer of customs, the Appellate Tribunal, or any Court;

b. the question raised in the present application regarding the classification of GRINDSTED SSL P 70 VEG is not a matter already decided by the Appellate Tribunal or any Court.

1 26 Therefore, it flows that in the present case, the Applicant satisfies all the criteria required for filing the application for advance ruling, namely:

(a) The Applicant has been granted a valid Importer-Exporter Code Number (IEC) under section 7 of the Foreign Trade (Development and Regulation) Act, 1992;

(b) The Applicant is filing the Application in respect of goods prior to their importation into India;

(c) The application for advance ruling is in relation to clause (a) of Section 28H (2) of the Custcms Act,
1962; and

(d) The application is not barred under Section 28I of the Customs Act, 1962.

1.27 Thus, the present application must be allowed to be proceeded with.

1. CLASSIFICATION OF GRINDSTED SSL P 70 VEG

2.1 The Tariff is aligned, up to the 6-digit level, with the Harmonized System of Nomenclature ( HSN") issued by the World Customs Organization ('WCO'). It has been held by the Hon'ble Supreme Court in the case of Collector of Customs, Bombay Vs. Business Forms - 2002 (142) ELT 18 that the HSN Explanatory Notes aid in the interpretation of the Headings of the Tariff and may be used as a safe guide for the same.

2.2 The classification of the goods imported into India is to be determined based on the General Rules of Interpretation (hereinafter referred to as the GRI") set out in the Tariff.

As per Rule 1 of the GRI, classification of the imported products 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 remaining Rules of the GRI.

2.3 Given that it has a wax character, it may be classified under Chapter 34, which covers, inter-alia, Artificial Waxes and Prepared Waxes. Under Chapter 34, the relevant customs tariff heading ("CTH") that is most relevant to the classification of the subject product is CTH 34.04, which concerns Artificial waxes and prepared waxes.

2.4 Before examining the classification of the subject product under CTH 3404, it is relevant to visit the Notes to Chapter 34.

2.5 As per Note 1 to Chapter 34 "separate chemically defined compounds" are excluded

(1) This Chapter does not cover
    (a) ****
    (b) Separate chemically defined compounds; or.
    (c) ****

2.6 Additionally, as per Note 5 to Chapter 34, "artificial waxes and prepared waxes" applies to:

(a) Chemically produced organic products of waxy character, whether or not water-soluble.
(b) ****
(c) ****

2.7 Further, the HSN Explanatory Notes to Heading 3404 provide for its applicability as under:

This heading covers artificial waxes (sometimes known in industry as "synthetic waxes") and prepared waxes, as defined in Note 5 to this Chapter, which consist of or contain relatively high molecular weight organic substances and which are not separate chemically defined compounds. These waxes are:

(A) Chemically produced organic products of a waxy character, whether or not water-soluble. Waxes of heading 27.12, produced synthetically or otherwise (eg., Fischer-Tropsch waxes consisting essentially of hydrocarbons) are however excluded. Water-soluble waxy products having surface-active properties are also excluded (heading 34.02).

(B) ****

(C) ****

The waxes of paragraphs (A), and (C) above must have

(1) a dropping point above 40 °C, and
(2) a viscosity, when measured by rotational viscometry, not exceeding 10 Pa.s (or 10,000 cP) at a temperature of 10 degrees C above their dropping point:'

2.8 On a combined reading of Note 5 (a), Note 1 (b) to Chapter 34 and the HSN Explanatory Notes to
heading 3404. the following essential requirements needs to be fulfilled in order to classify a product under the said heading:

a. The product must not be a separate chemically defined compound;
b. The product must be chemically produced organic product;
c. The product must not be covered within the scope of CTH 271;
d. The product must have waxy character;
e. The product must have a drop melt temperature of above 40°C;
f. The viscosity of the product must not exceed 10 Pa.s at 10'-'C above the drop meiting point.

We analyse the physical and chemical characteristics of the subject product against each of the above conditions, as below.

I. The subject product is not a separate chemically defined compound

2.9 The term separate chemically defined compounds has been defined in the Explanatory Notes to the Harmonized System of Nomenclature published by the World Customs Organization (hereinafter to be referred to as "Explanatory Notes") for Chapter 29 (Organic Chemicals). For ease of reference the relevant definition is reproduced below:

(A) Chemically defined compounds (Chapter Note 1)

A separate chemically defined compound is a substance which consists of one molecular Species (e.g., covalent or ionic) whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram. In a crystal lattice, the molecular species corresponds to the repeating unit cell.

2.10 As already mentioned, JECFA Report provides that the subject product is not a chemically defined compound due to the presence of residual mono- and diglycerides and glycerol.

//. The Subject product is waxy in nature

2.11 As per the scientific opinion referred, the subject product is waxy in character

///. The product must be chemically produced organic product

2.12 As per the manufacturing process of the subject product, it is manufactured by a chemical reaction of fatty acid (stearic acid) with lactic acid in the presence of caustic soda (NaOH) in an equilibrium esterification reaction. The resulting contains a carbon-hydrogen bond, which is characteristic of an organic product. Hence, the subject product is a chemically produced organic product.

IV. The product must not be covered within the scope of CTH 2712

2.13 CTH 2712 covers Petroleum Jelly, Paraffin Wax, Microcrystalline Petroleum Wax or other mineral waxes. A simple analysis shows that the subject product is not any of these waxes. Hence, the subject product is not covered within the scope of CTH 2712.

V. Other conditions

2.14 A mentioned above and on physical examination of the subject product shows that it has a waxy character.

2.15 The Applicant confirms that the subject product has a drop melt temperature of above 40°C. The Applicant also confirm that the subject product has a viscosity that does not exceed 10 Pa.s at 10°C above the drop melting point.

2.16 The fulfilment of above criteria by the subject products is discussed herein below

Classification of the subject product under CTH 3404

2.17 In view of the above, as the subject product fulfils all the conditions mentioned in Note 1(b), and Note 5 to the Chapter 34, hence the subject product merits classification under CTH 3404.

2.18 Now, coming to the 8-digit classification, reliance must be placed on GRI Rule 6 which states that "the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub-headings and any related sub-heading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires".

2.19 Therefore, upon application of GRI Rule 6 read with GRI Rule 1, the classification of subject products must be determined according to the terms of sub-headings. In view of the above, reference must be made to the description mentioned at sub-heading level.

2.20 It is also pertinent to mention that as per GRI, descriptions of the goods provided under "-"(single dash) are first to be considered for sub-classification under a heading first, before proceeding to further classify under"- -" (double dash). Articles whose description are preceded by a "—" (triple dash) or (quadruple dash) are sub-classifications of the immediately preceding single dash or double dash, as the case may be.

2.21 Therefore, the classification of the subject gooes must be first determined at the single-dash level.

2.22 The subject product is not made up of Polyethylene glycol (PEG). Accordingly, the subject product will be classified under the residuary entry, i.e., CTSH 3404 90 which reads as "Other".

2.23 Now, upon perusal of the single-dash entry- "Other". The entry is sub-divided into the following:

2.24 Basis the understanding of the facts and the analysis discussed so far, it is clear that 34049010 and 34049020 are excluded.

2.25 Now moving to the next — dash i.e. Artificial waxes (including water-soluble waxes) prepared waxes, not emulsified or containing solvents". The subject product is in the nature of artificial wax, not soluble in water. Further, the product in is as imported form is neither emulsified nor contains solvents. Accordingly, the subject product appears to fall within the scope of "Artificial waxes (including water-soluble waxes) prepared waxes, not emulsified or containing solvents".

2.26 The said entry is further sub-divided under:

2.27 The subject product has not undergone bromination or chlorination during its production. We understand that the subject product in its 'as imported' form contains neither bromine nor any chlorine. Thus, the subject product is not classifiable under CTIs 34049031, 34049032 or 34049033. Hence, the subject product merits classification under CTI 3404 90 39.

ISSUES REQUIRING ADVANCE RULING AND APPLICANT'S UNDERSTANDING

In light of the aforementioned submissions, the Applicant's interpretation of the questions raised will be as under:

a) Question: Whether the product in question in the present application is classifiable under Tariff Item 3404 90 39?

Applicant's Understanding: Yes.

b) Question: If the answer to the above question is in the negative, then what would be the correct classification of the product mentioned above under the Customs Tariff of India?

Applicant's Understanding: Not Applicable

Comments of the Port Commissionerate

1. The application was forwarded to Assessment Group in terms of section 28 I (1) of the Customs Act, 1962 for comments and relevant records.

In this regard, comments are as follows:

Point 3 i). Applicant is eligible in terms of section 28-E (c) of the Customs Act, 1962 to seek advance ruling.
Point 3 ii). As per available records in the assessment group, no other application on this subject is pending before any tribunal or Courts.
Point 3 iii). The claim of applicant regarding the nature of activity is that the importer is regularly importing the goods in question i.e. Grindsted SSL P 70 Veg.

The list of Bills of entry is as under:-
 

Point 3 iv). 1. As stated by the importer in their application the goods i.e. 'Grindsted SSL P 70 Veg' is a food emulsifying agent which enables the creation of uniformly blended products (emulsions) from ingredients which due to their differences in physical and chemical properties are immiscible.

2. The product is mainly composed of Sodium stearoyl lactylate (SSL), and appears to be an ester of stearic acid, which is covered under CTH 2915. However, as stated by the importer, the product not being a separate chemically defined compound, it is not classifiable under Chapter 29.

3 . It appears that the imported product may be classifiable under CTH 34.04 depending on whether it meets the character of artificial waxes or otherwise. The compliance of the imported product to the various explanatory notes to CTH 34.04 need to be examined.

Point 3 v). As per available records in the assessment group, the matter is not pending before any officer of Customs, the Appellate Tribunal or any Court.

Personal Hearing

3. The Personal hearing in the matter was conducted on 13.12.2024 wherein the authorized representative of the applicant attended the same and reiterated the same which were already submitted with the application of the applicant.

Additional Submissions

4.1 M/s Danisco India Pvt. Ltd. (hereinafter referred to as 'Applicant') inter alia deals in food preparations, additives, enzymes and other bioproducts.

4.2 The Applicant has filed an application for Advance Ruling dated 24.09.2024 (hereinafter referred to as the "AAR") proposing to import the product "Grindsted SSL P 70 Veg"; (here;nafter referred to as the
"subject product"). The applicant intends to market ana re-sell the subject product in its 'as-imported' condition for the purpose of trading.

4.3 The Applicant proposes to classify the subject product under Customs Tariff Item (hereinafter referred to as "CTI") 3404 90 39 of the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as "Customs Tariff") chargeable to Basic Customs Duty (hereinafter referred to as "BCD") @ 10%, Social Welfare Surcharge (hereinafter referred to as "SWS") @10% and Integrated Goods and Services Tax (hereinafter referred to as "IGST") @18% in terms of SI. No. 62 of Schedule III of IGST Notification No. 01/2017 - Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as "Notification No. 01/2017").

Comments by the Ld. Joint Commissioner of Customs, Gr. II (C-F). NS-l, JNCH. Nhava Sheva, Mumbai, Customs Zone-ll

4 4 Vide letter dated 02.12.2024, the Ld. Joint Commissioner of Customs, Gr. II (C-F), NS-l, JNCH, Nhava Sheva. Mumbai, Customs Zone-ll (hereinafter referred to as the "Ld. Jt. Commissioner"), has provided his comments on the AAR filed by the Applicant. In the said letter dated 02.12.2024, the Ld. Jt. Commissioner has stated that the subject product can be classified under CTH 3404 depending on whether it meets the character of artificial waxes or otherwise. Accordingly, the compliance of the subject product to the conditions set forth for classification under CTH 3404 needs to be examined.

Technical Details of the Subject Product

4.5 The present application pertains to a brand of food emulsifying agent. An emulsifier enables the creation of uniformly blended products from ingredients which, because of the fundamental differences between each other are immiscible without the presence of the said emulsifiers.

4.6 The subject product, which is used a food emulsifying agent, is pre-dominantly composed of 'Sodium Stearoyl Lactylate'. The Chemical Structure of the subject product is extracted below:

 

4.7 For ease of reference, the chemical composition and the physical property of the subject product is captured below:

Grindsted SSL P 70 Veg

Details of Manufacturing Process

4.8 To describe the entire process briefly, Palm Oil is the raw material used for the manufacture of Sodium Stearoy! Lactylate (E481). Palm Oil consists of different types of fatty acids (stearic acid). In a single-unit process, the said Fatty acid (Stearic acid) is made to react with Lactic Acid in the presence of Caustic Soda (NaOH) in an equilibrium esterification reaction that yields Sodium Stearoyl Lactylate. The subject product may contain other constituents such as un-neutralized palmitoyl and stearoyl lactylic acid, free fatty acid, free lactic acid, etc.

4.9 After the chemical process to the above extent is concluded, the product so obtained is subjected to physical processes of distillation, storage, filtration, tube chilling, spray drying and magnet separation to get the product in its 'as-imported' condition.

4.10 The subject product has a waxy character. Reliance for the same is placed on the Scientific Opinion prepared at 46th JECFA Report on the re-evaluation of sodium stearoyl-2-lactylate (E481) and calcium stearoyl-2-lactylate (E482), as food additives done on the request of the European Commission, Question No. EFSA-Q-2011-00568 and No. EFS—2011-00569, adopted on 13.03.2013 (hereinafter referred to as the EFSA Report"), which describes both, Sodium Stearoyl Lactyiate and Calcium Stearoyl Lactylate as "normally white to pale yellow, ivory-coloured, waxy material of a consistency determined by the fatty acid.

4.11 The subject product is pre-dominantly ccmposed of Sodium Stearoyl Lactylate and is proposed to be imported in ready-to-sell packages of polyethylene/aluminium lined paper bags of 25 kgs each. The said product will be used in the food industry as an emulsifying agent.

Classification of the Subject Product

4.12 The Applicant proposes to classify the subject product under CTI 3404 90 39 of the Customs Tariff. The relevant tariff entries are extracted below for ready reference:

4.13 The goods imported into India are classified under the Customs Tariff on the basis of General Rules of Interpretation (hereinafter referred to as ''GRI") set out in the Customs Tariff. As per Rule 1 of GRI, the classification of the products shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided that such headings or Notes do not otherwise require, according to the remaining rules of the GRI in sequential order.

4.14 Considering the subject product contains Sodium Stearoyl Lactylate and has a waxy appearance it shall be classified under Chapter 34, which covers, inter alia, "Artificial Waxes and Prepared Waxes" under Customs Tariff Heading (hereinafter referred to as "CTH") 3404.

4.15 Further, relevant Chapter Notes and Harmonised System of Nomenclature Explanatory Notes (hereinafter referred to as "HSN EN") which have been held to be a safe guide for the determination of the correct classification in a catena of judgments, are extracted below for ready reference:

"Chapter Note 1 This Chapter does not cover:

(a)....
(b) separate chemically defined compounds; or
(c)

"Chapter Note 5 In heading 3404. subject to the exclusions provided below,
the expression "artificial waxes and prepared waxes" applies only to:

(a) Chemically produced organic products of a waxy character, whether or not
water-soluble:
(b)...
(c) products of a waxy character with a basis of one or more waxes and containing fats, resins, mineral substances or other materials.

HSN EN to CTH 3404

This heading covers artificial waxes (sometimes known in industry as "synthetic waxes") and prepared waxes, as defined in Note 5 to this Chapter, which consist of or contain relatively high molecular weight organic substances and which are not separate chemically defined compounds. These waxes are:

(A) Chemically produced organic products of a waxy character, whether or not water-soluble. Waxes of heading 27.12, produced synthetically or otherwise (eg. Fischer-Tropsch waxes consisting essentially of hydrocarbons) are, however, excluded. Water-soluble waxy products having surface-active properties are also excluded (heading 34.02).

(B)

(C) Products of a waxy character with a basis of one or more waxes and containing fats, resins, mineral substances or other materials. Unmixed animal or vegetable waxes, whether or not refined or coloured, are, however, excluded (heading 15.21). Unmixed mineral v/axes or mixtures of mineral waxes, whether or not coloured are also excluded (heading 27.12)

The waxes of paragraphs (A), and (C) above must have:
(1) a dropping point above 40 °C: and
(2) a viscosity, when measured by rotational viscometry, not exceeding 10 Pa.s (or 10.000 cP) at a temperature of 10 degrees C above their dropping point.

Apart from the exclusions mentioned above, the heading does not cover

(f) Mixtures of mono-, di- and tri-, fatty acid esters of glycerol, not having the character of waxes (heading 38.24)."

4.16 From a combined perusal of the above-captured extracts, the following essential requirements are required to be fulfilled by a product to be classified under CTH 3404:

(a) The product must not be a separate chemically defined compound;
(b) The product must be chemically produced organic product;
(c) The product must not be covered within the scope of CTH 2712;
(d) The product must have waxy character;
(e) The product must have a drop melt temperature of above 40°C;
(f) The viscosity of the product must not exceed 10 Pa.s at 10°C above the drop melting point.

4.17 Each of the above-listed conditions are dealt with specifically as under:

4.18 In light of the above, it is submitted that the subject product fulfils all the conditions set forth by the combined reading of Chapter Note 1(b) and 5(a) to Chapter 34 and the HSN EN to be adequately covered under CTH 3404.

4.19 Further, upon a perusal of the relevant tariff entries extracted hereinabove, it is imperative to outline that out of the two 'single-dash' entries under CTH 3404, which are termed as "Of poly (oxyethylene) (polyethylene glycol)" and "other", the subject product merits classification under "other bearing Customs Tariff Sub-Heading (hereinafter referred to as "CTSH") 3404 90 as the subject product is not made up of Polyethylene glycol (PEG).

4.20 Further, it is submitted that at the"—" (triple dash) level under Customs Tariff Sub-Heading 3404 90, the subject product is most appropriately covered as "Artificial waxes (including water-soluble waxes) prepared waxes, not emulsified or containing solvents" as the subject product is in the nature of wax is neither emulsified nor does it contains solvents.

4.21 The said entry is further categorised in four"-—" quadruple dash entries which are as follows:

4.22 It is submitted that the subject product has not been subjected to bromination or chlorination during its manufacturing process and neither does the subject product contain bromine or chlorine in its 'as-imported' condition. The subject product is thus, not classifiable under CTI 3404 90 31. 3404 90 32, 3404 90 33 and is therefore, correctly classifiable under CTI 3404 90 39.

4.23 Examination of classification of the subject product under CTH 3824 vide the letter dated 02.12.2024. the Ld. Jt. Commissioner opined that the subject product may be classified under CTH 3404 provided that the subject product meets the requirement of 'waxy character' relying upon the relevant HSN EN.

4.24 It is, therefore, iterated that as outlined in the foregoing discussion, the subject product is palm oil-based Fatty acid (Stearic acid) which is subjected to an equilibrium esterification reaction, with Lactic Acid in the presence of Caustic Soda (NaOH) to obtain the final subject product in its 'as-imported'
condition.

Analysis and Conclusion

5. The Applicant is importing the products Grindsted SSL P 70 Veg’ for the purpose of trading. The product, Grindsted SSL P 70 Veg is a food emulsifying agent. An emulsifier enables the creation of uniformly blended products (emulsions) from ingredients which, because of fundamental differences in their physical and chemical properties are immiscible. The chemical name of the product is Sodium Stearoyl Lactylate. The subject product offers the following benefits:

i. Improves emulsion stability, whitening effect, and mouthfeel when used with monoglycerides in coffee whiteners; ii Increases stability against feathering in coffee whiteners; iii. Combines dough strengthening and crumb softening.

5.1 The subject product is mainly composed of Sodium Stearoyl Lactylate. Palm oil is the raw material used for the manufacturing of the subject product. Palm oil contains different types of fatty acids (stearic acid). During the manufacturing process, Fatty acid (Stearic acid) is made to react with Lactic Acid in presence of Caustic Soda (NaOH) in an equilibrium esterification reaction that yields Sodium Stearoyl Lactylate. The subject product may contain other constituents such as un-neutralized palmitoyl and stearoyl lactific acid, free fatty acids, free lactic acid etc.

5.2 The subject product i.e., Grindsted SSL P 70 Veg is food emulsifying agent made from palm oil. having a waxy character. The ingredient of the same is as under: –

5.2.1 E numbers: It is a system of codes used within the European Union (EU) to identify food additives. The “E’ stands for “Europe” and these numbers were established by the European Food Safety Authority (EFSA) and the European Commission. E400—E499 (thickeners, stabilisers. emulsifiers).

5.2.2 INS Number: It stands for “International Numbering System,” are used by the Codex Alimentarius Commission. The Codex Alimentarius is a joint program of the Food and Agriculture Organization (FAO) and the World Health Organization (WHO). established to develop food standards, guidelines, and related text. Food additives in India are labelled with INS numbers, and these numbers are regulated and approved by the Food Safety and Standards Authority of India (FSSAI). In the instant case INS number for the subject product is INS 481(i).

5.3 The subject product exhibits the following physical properties

5.4 As per, 46th Joint FAO/WHO Expert Committee on Food Additive (“JECFA Report”) report published in FNP 52 Add 4 (1996), which has analysed the subject product. JECFA report defines the subject product as:

A mixture of sodium salts of stearoyl lactific acids and minor proportions of other salts of related acids, formed by the esterification of commercial stearic acid with lactic acid and neutralized to the sodium salts; may contain unnaturalized palmitoyl and stearoyl lactific acid. free fatty acids (principally palmitic and stearic), free lactic acid and salts of fatty acid esters of lactic acid and polymerized lactic acid.

5.5 The subject product contains more than one molecular species, viz., stearoyl lactific acids, other salts of related acids, etc. For this reason, the subject product cannot be said to be a separate chemically defined compound given in Chapter Note 1 to Chapter 29. Additionally, there is not a fixed chemical formula of the Sodium Stearoyl-2-Lactylate, as “R” can either be C17H35 or C15H31 and “n” can range from 1-2.Hence, it is not removed from the ambit of Chapter 34.

5.6 Similar understanding can be developed from Scientific Opinion on the re-evaluation of sodium stearoyl-2-lactylate (E 481) and calcium stearoyl-2-lactylate (E 482) as food additives done on request of European Commission, Question No EFSA-Q-2011-00568 and No EFSA-Q-2011-00569, adopted on 13 March 2013. Determined that Sodium Stearoyl-2-Lactylate is waxy in consistency. Relevant portion of Report is extracted below:

Other components pre–sent in the product may include sodium/calcium salts of fatty acids or free fatty acids (15-20 %), non-neutralised stearoyl lactic acid, sodium/calcium lactate, free lactic acid or polymers of lactic acid. (Boutte and Somerson, 2004; Burch et al., 2007; Austen Business Solutions, 2010, unpublished report). In addition, the actual fatty acid profile of SSL and CSL will depend upon the source of the fatty acids. Commercial stearic acid contains variable range of stearic (C18) and palmitic acids (C16) (see section 2.3).

5.7 As, per above mentioned Scientific Opinion Both SSL and CSL are normally white to pale yellow, ivory-coloured, waxy materials of a consistency determined by the fatty acids.

5.8 Corning to find the classification of the product, the Tariff is aligned, up to the 6-digit level, with the Harmonized System of Nomenclature (“HSN”) issued by the World Customs Organization (`WC0′). It has been held by the Hon’ble Supreme Court in the case of Collector of Customs, Bombay Vs. Business Forms — 2002 (142) ELT 18 that the HSN Explanatory Notes aid in the interpretation of the Headings of the Tariff and may be used as a safe guide for the same. The classification of the goods imported into India is to be determined based on the General Rules of Interpretation (hereinafter referred to as the “GRI”) set out in the Tariff. As per Rule 1 of the GRI, classification of the imported products 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 remaining Rules of the GRI.

5.8.1 Given that it has a wax character, it may be classified under Chapter 34, which covers. inter-alia, Artificial Waxes and Prepared Waxes. Under Chapter the relevant customs tariff heading (“CTH”) that is most relevant to the classification of the subject product is CTH 34.04, which concerns Artificial waxes and prepared waxes.

5.8.1.1 For ease of reference, the chemical composition and the physical property of the subject product is captured below:

Grindsted SSL P 70 Veg

5.8.2 Before examining the classification of the subject product under CTH 3404, it is relevant to visit the Notes to Chapter 34. As per Note 1 to Chapter 34 separate chemically defined compounds” are excluded

(1) This Chapter does not cover

(a) “”

(b) Separate chemically defined compounds: or.

(c) ****

5.8.3 Additionally, as per Note 5 to Chapter 34, “artificial waxes and prepared waxes” applies to:

(a) Chemically produced organic products of waxy character, whether or not water-soluble.

(b) ***

(c) ***

5.8.4 Further, the HSN Explanatory Notes to Heading 3404 provide for its applicability as under:

This heading covers artificial waxes (sometimes known in industry as “synthetic waxes”) and prepared waxes, as defined in Note 5 to this Chapter, which consist of or contain relatively high molecular weight organic substances and which are not separate chemically defined compounds. These waxes are :

(A) Chemically produced organic products of a waxy character, whether or not water-soluble. Waxes of heading 27.12, produced synthetically or otherwise (eq., Fischer-Tropsch waxes consisting essentially of hydrocarbons) are however excluded. Water-soluble waxy products having surface-active properties are also excluded (heading 34.02).

(B) ***

(C) ***

……

The waxes of paragraphs (A), and (C) above must have:

(1) a dropping point above 40 °C; and

(2) a viscosity. when measured by rotational viscometry, not exceeding 10 Pa.s (or 10,000 cP) at a temperature of 10 degrees C above their dropping point.”

5.8.5 On a combined reading of Note 5 (a), Note 1 (b) to Chapter 34 and the HSN Explanatory Notes to heading 3404, the following essential requirements needs to be fulfilled in order to classify a product under the said heading:

a. The product must not be a separate chemically defined compound;

b. The product must be chemically produced organic product;

c. The product must not be covered within the scope of CTH 271:

d. The product must have waxy character;

e. The product must have a drop melt temperature of above 40°C,

f. The viscosity of the product must not exceed 10 Pa.s at 10°C above the drop melting point.

5.8.6 The physical and chemical characteristics of the subject product are analysed against each of the above conditions, as below:

    I. The subject product is not a separate chemically defined compound

5.8.6.1 The term separate chemically defined compounds has been defined in the Explanatory Notes to the Harmonized System of Nomenclature published by the World Customs Organization (hereinafter to be referred to as “Explanatory Notes”) for Chapter 29 (Organic Chemicals). For ease of reference the relevant definition is reproduced below:

(A) Chemically defined compounds.* (Chapter Note 1):

A separate chemically defined compound is a substance which consists of one molecular species (e.g., covalent or ionic) whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram. In a crystal lattice, the molecular species corresponds to the repeating unit cell.

As already mentioned, JECFA Report provides that the subject product is not a chemically defined compound due to the presence of residual mono- and diglycerides and glycerol.

II. The Subject product is waxy in nature

5.8.6.2 As per the scientific opinion referred, the subject product is waxy in character

III. The product must be chemically produced organic product

5.8.6.3 As per the manufacturing process of the subject product, it is manufactured by a chemical reaction of fatty acid (stearic acid) with lactic acid in the presence of caustic soda (NaOH) in an equilibrium esterification reaction. The resulting contains a carbon—hydrogen bond, which is characteristic of an organic product. Hence, the subject product is a chemically produced organic product.

IV. The product must not be covered within the scope of CTH 2712

5.8.6.4 CTH 2712 covers Petroleum Jelly, Paraffin Wax. Microcrystalline Petroleum Wax or other mineral waxes. A simple analysis shows that the subject product is not any of these waxes. Hence, the subject product is not covered within the scope of CTH 2712.

V. Other conditions

5.8.6.5 A mentioned above and on physical examination of the subject product shows that it has a waxy character.

5.8.7 The Applicant confirms that the subject product has a drop melt temperature of above 40°C. The Applicant also confirm that the subject product has a viscosity that does not exceed 10 Pa.s at 10°C above the drop melting point.

5.8.8. The fulfilment of above by the subject products is discussed herein below:

In view of the above, as the subject product fulfils all the conditions mentioned in Note 1(b), and Note 5 to the Chapter 34, hence the subject product merits classification under CTH, 3404.

5.8.9 Now, coming to the 8-digit classification, reliance must be placed on GRI Rule 6 which states that ''the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub-headings and any related sub-heading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires” Therefore. upon application of GRI Rule 6 read with GRI Rule 1, the classification of subject products must be determined according to the terms of sub-headings. In view of the above, reference must be made to the description mentioned at sub-heading level. ft is also pertinent to mention that as per GRI, descriptions of the goods provided under “-“(single dash) are first to be considered for sub-classification under a heading first, before proceeding to further classify under “- (double dash). Articles whose description are preceded by a “-­(triple dash) or “—-” (quadruple dash) are sub-classifications of the immediately preceding single dash or double dash, as the case may be.

5.8.10 Therefore. the classification of the subject goods must be first determined at the single-dash level. In This regard it is evident that CTH 3404, has been sub-divided into;

5.8.11 The subject product is not made up of Polyethylene glycol (PEG). Accordingly, the subject product will be classified under the residuary entry, i.e.. CTSH 3404 90 which reads as Other”. Now, upon perusal of the single-dash entry- “Other”. The entry is sub-divided into the following:

5.8.12 Basis the understanding of the facts and the analysis discussed so far, it is clear that 34049010 and 34049020 are excluded. Now moving to the next — dash i.e. Artificial waxes (including water-soluble waxes) prepared waxes, not emulsified or containing solvents”. The subject product is in the nature of artificial wax, not soluble in water. Further, the product in is as imported form is neither emulsified nor contains solvents. Accordingly, the subject product appears to fall within the scope of “Artificial waxes (including water-soluble waxes) prepared waxes, not emulsified or containing solvents”.

5.8.13 The said entry is further sub-divided under:

5.8.14 The subject product has not undergone bromination or chlorination during its production. We understand that the subject product in its ‘as imported’ form contains neither bromine nor any chlorine. Thus, the subject product is not classifiable under CTIs 34049031. 34049032 or 34049033. Hence, the subject product merits classification under CTI 3404 90 39.

5.8.15 As per the comments of the Port Commissionerate, the product is mainly composed of Sodium stearoyl lactylate (SSL), and appears to be an ester of stearic acid, which is covered under CTH 2915. However, as stated by the importer, the product not being a separate chemically defined compound, it is not classifiable under Chapter 29. It appears that the imported product may be classifiable under CTH 34.04 depending on whether it meets the character of artificial waxes or otherwise. The compliance of the imported product to the various explanatory notes to CTH 34.04 need to be examined.

5.8.16 The subject product has a waxy character. Reliance for the same is placed on the Scientific Opinion prepared at 46th JECFA Report on the re-evaluation of sodium stearoyi-2-lactylate (E481) and calcium stearoyl-2-lactylate (E482), as food additives done on the request of the European Commission, Question No. EFSA-Q-2011-00568 and No. EFS-2011-00569, adopted on 13.03.2013 (hereinafter referred to as the “EFSA Report”), which describes both, Sodium Stearoyl Lactylate and Calcium Stearoyl Lactylate as “normally white to pale yellow, ivory-coloured, waxy material of a consistency determined by the fatty acid.

5.8.17 Considering the subject product contains Sodium Stearoyl Lactylate and has a waxy appearance it shall be classified under Chapter 34, which covers, inter alia, “Artificial Waxes and Prepared Waxes” under Customs Tariff Heading (hereinafter referred to as “CTH”) 3404.

5.8.18 Further, relevant Chapter Notes and Harmonised System of Nomenclature Explanatory Notes (hereinafter referred to as “HSN EN”) which have been held to be a safe guide for the determination of the correct classification in a catena of judgments, are extracted below for ready reference:

“Chapter Note 1 This Chapter does not cover:

(a) ….
(b) separate chemically defined compounds; or
(c) …… “

''Chapter Note 5 In heading 3404, subject to the exclusions provided below, the expression “artificial waxes and prepared waxes” applies only to:

(a) Chemically produced organic products of a waxy character, whether or not water-soluble;
(b) ….
(c) products of a waxy character with a basis of one or more waxes and containing fats, resins, mineral substances or other materials…”

HSN EN to CTH 3404:

This heading covers artificial waxes (sometimes known in industry as “synthetic waxes”) and prepared waxes, as defined in Note 5 to this Chapter, which consist of or contain relatively high molecular weight organic substances and which are not separate chemically defined compounds. These waxes are :

(A) Chemically produced organic products of a waxy character, whether or not water-soluble. Waxes of heading 27.12. produced synthetically or otherwise (eq. Fischer-Tropsch waxes consisting essentially of hydrocarbons) are, however, excluded. Water-soluble waxy products having surface-active properties are also excluded (heading 34.02).

(B) …..

(C) Products of a waxy character with a basis of one or more waxes and containing fats, resins, mineral substances or other materials. Unmixed animal or vegetable waxes, whether or not refined or coloured, are, however, excluded (heading 15.21). Unmixed mineral waxes or mixtures of mineral waxes, whether or not coloured are also excluded (heading 27.12)
..

The waxes of paragraphs (A), and (C) above must have:

(3) a dropping point above 40 °C; and

(4) a viscosity, when measured by rotational viscometry, not exceeding 10 Pa.s (or 10 000 cP) at a temperature of 10 degrees C above their dropping point.

 Apart from the exclusions mentioned above, the heading does not cover :

(f) Mixtures of mono-, di- and tri-. fatty acid esters of glycerol. not having the character of waxes (heading 38.24).”

5.8.19 Each of the above-listed conditions are dealt with specifically as under:

5.9 In light of the above, it is submitted that the subject product fulfils all the conditions set forth by the combined reading of Chapter Note 1(b) and 5(a) to Chapter 34 and the HSN EN to be adequately covered under CTH 3404. The subject product is thus, not classifiable under CTI 3404 90 31, 3404 90 32, 3404 90 33 and is therefore, correctly classifiable under CTI 3404 90 39.

6.a. Question: Whether the products in question in the present application are classifiable under Tariff Item 3404 90 39?

    Answer: Yes.

b. Question: If the answer to the above question is in the negative, then what would be the correct classification of the products mentioned above under the Customs Tariff of India?

    Answer: Not Applicable

7. I, rule accordingly.

(Samar Nanda)
Customs Authority for Advance Rulings

F. No. Vill/CAAR/Delhi/ Danisco India /142/2024                 Dated: 30.12.2024

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

1. M/s. Danisco India Pvt. Ltd., 206, 2nd Floor, Neelkanth House, S-524 School Block, Shakarpur, East Delhi, Delhi- 110092

2. The Principal Commissioner of Customs, Nhava Sheva - I, JNCH, Nhava Sheva Tal: Uran, District: Raigad, Maharashtra-400707

3. The Customs Authority for Advance Rulings, Mumbai, New Custom House, Ballard Estate, Mumbai-400001.

4. The Chief Commissioner (AR), Customs Excise & Service Tax Appellate Tribunal (CESTAT) West Biock-2, Wing-2, R.K. Puram, New Delhi-110066.

5. The Principal Chief Commissioner of Customs, Delhi Customs Zone, New Custom House, IGI Airport Complex, New Delhi-110037.

6. Guard file.

7. Webmaster.

(Bharti Sharma)
Additional Commissioner & Secretary,
Customs Authority for Advance Rulings, New Delhi