2024(12)LCX0312(AAR)

Danisco (India) Pvt Ltd

decided on 27-12-2024

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

[Email:cus-advrulings.del@gov.in]
DIN: 20241274OR000000D844

Present

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

F. No. VIII/CAAR/Delhi/ Danisco/140/2024

The day of 27^th December 2024

Ruling No. CAAR/Del/ Danisco/117/2024/2124 to 2130

Application no: -123/2024 dated

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 PS 101-M for the purpose of trading.

About the Subject Products

1.2 GRINDSTED PS 101-M (hereinafter referred to as "subject product") is used in food industry as emulsifiers. 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

Details of Manufacturing Process

1.3 The subject product is made from converting edible fully hydrogenated palm oil into beads form. Hydrogenation is done by using nickel as the catalyst. The physical processes of filtration, spray cooling, magnet separation takes place to get the subject product in its imported form.

Composition of Subject Products

1.4  The subject product is made of triglycerides.

Properties of subject product

1.5 The subject product  showcase the following properties

Form of packaging

1.6 The subject product will be imported in ready to sell packages of 25kgs.

APPLICANT'S ELIGIBLITY FOR ADVANCE RULING

1.7 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').

1.8 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);

1.9 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 0599001780.

1.10 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;

1.11 The questions on which an application for an advance ruling can be made have been provided under Section 28H of 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;

1.12 The present application is being made by the Applicant to confirm classification of the subject products.

1.13 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. Applicant 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 28I

1.14 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."

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

a. the question raised in the present application regarding classification of GRINDSTED PS 101-M 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 classification of GRINDSTED PS 101-M is not a matter already decided by the Appellate Tribunal or any Court

1.16 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 its importation into India;

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

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

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

CLASSIFICATION OF THE SUBJECT PRODUCTS

1.18 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.

1.19 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.

1.20 As per GIR 1, the goods under consideration should be classified following the terms of the chapter headings (4-digit codes followed with description) and the relevant Section or Chapter Notes. It further states that in the event the goods cannot be classified solely based on said Rule 1, and if the headings and legal notes do not otherwise require, the subsequent Rules 2 to 6 may be applied in sequential order. The text of Rule 1 reads as follows:

"The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, 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."

1.21 In this regard, considering the product is made of tri-glycerides, the Chapter 15 first schedule of the Customs Tariff Act becomes relevant.

1.22 Chapter Notes from Chapter 15 of the Customs Tariff becomes relevant on application of GRI 1. The same has been reproduced hereinunder.

(A) This Chapter covers

(1) Animal, vegetable or microbial fats and oils, whether crude, purified or refined or treated in certain way (e.g., boiled, sulphurised or hydrogentated)
(2)
(3) ****

1.23 Further. General Explanatory Notes to heading 1516 covers "animal, vegetable or microbial fats and oils, which have undergone a specific transformation of a kind below, but not been further prepared".

1.24 In regards to "specific transformation". General Explanatory Notes to heading 1516 provides following processes

(A) Hydrogenated fats and oils

Hydrogenation. which is effected by bringing the products into contact with pure hydrogen at a suitable temperature and pressure in the presence of a catalyst (usually finely divided nickel), raises the melting points of fats and increase the consistency of oils by transformation unsaturated glycerides (e.g.. of oleic, linoleic. etc.. acids) into saturated glycerides of higher melting points (e.g.. of palmitic, stearic, etc.. acids). The degree of hydrogenation and the final consistency of the product depend on the conditions employed in the process and the length of treatment. The heading covers such products whether they have been :

(1) Partly hydrogenated (even if these products tend to separate into pasty and liquid layers). This also has effect of converting the cis-form of the unsaturated fatty acids into trans-form in order to raise melting point.

(2) Wholly hydroqenated (e.g., oil converted into pasty orsoild fats).

The products most commonly hydrogenated are oils offish or marine mammals and certain vegetable oils (cotton-seeds oil, sesame oil, ground-nut oil, colza oil, soya-bean oil, maize (corn) oil, etc.). Wholly or partly hydrogenated oils of this type are frequently used not only increases their consistency but also makes them less liable to deterioration by atmospheric oxidation, and improves their taste and odour, and, by bleaching them gives them better appearance.

(B)****

1.25 In light of the above, it can be understood that since the subject product is "fully hydrogenated, vegetable triglycerides in beaded form". Further, as elaborated in the manufacturing process, no further chemical transformation is done with respect to the subject product. Hence, the subject product merits classification under heading 1516.

1.26 Now, coming to the 6 digit and 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".

1.27 Therefore, upon application of GRI Rule 6 read with GRI Rule 1, the classification of the subject product 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.

1.28 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.

1.29 Therefore, the classification of the subject product must be first determined at the single-dash level. In this regard, it is evident that CTH 1516, has been sub-divided into:

1.30 Considering the nature of subject product, it is not made up of Animal and Microbial fats and oils and their fractions, but vegetable fats and oils and their fractions. Accordingly, the subject product will be classified under the entry, i.e., CTSH 1516 20 which reads as "Vegetable fats and oils and their fractions".

1.31 Now, upon perusal of the single-dash entry " Vegetable fats and oils and their fractions". The entry is sub-divided into the following:

1.32 As the subject product is made of palm oil, the subject product will fall under the residuary entry reading "Other".

1.33 Now moving to the next''----'' dash i.e.

1.34 In this regards reference is made to Circular bearing F. No. 528/27/97-Cus. (TU) (Circular No. 29/97) dated 31-7-1997 issued by the Ministry of Finance, Department of Revenue, (Tariff Unit), New Delhi, clarified that the term 'vegetable oil of edible grade'. Relevant portion of Circular is produced below:

2. A doubt has arisen regarding scope of the term 'Vegetable oils of edible grade' appearing in the said notification i.e. as to whether this term will cover only those vegetable oils which are fit for human consumption as it is imported or it will also include the vegetable oils which are not fit for human consumption at the time of import but will be fit for human consumption at the time of import but will be fit for human consumption after further processing.

3. The matter has since been examined in consultation with the Ministry of Food, Department of Food, Directorate of Vanaspati, Vegetable Oils and Fast. Ministry of Civil Supplies, Consumers Affairs and Public Distribution and Department of Economic Affairs. It is clarified that the term 'vegetable oils of edible grade' will cover vegetable oils which are fit for human consumption after further processing. The benefit of duty exemption is admissible so long as the oils imported is used for edible purposes, even after refining. Pending cases of assessment may be finalized on the basis of above clarification

1.35 The subject product is of edible grade, as it is intended use is in the food industry as an emulsifier. Hence, merits classification under CTI 1516.20.91

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 subject product in question in the present application is classifiable under Tariff Item 1516 20 91?

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 products mentioned above under the Customs Tariff of India?

Comments of the Port Commissionerate

2. 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 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 PS 101-M. The list of Bills of entry is detailed below for kind reference in Annexure-A.

Annexure - A

Point 3 iv). As stated by the importer in their application that the goods i.e. 'Grindsted PS 101-M' is used in food industry as emulsifiers. An emulsifier enables the creation of uniformity blended products (emulsions) from ingredients which, because of fundamental differences in their physical and chemical properties, are immiscible.

The goods appear to be classifiable under Chapter 21. The HSN explanatory notes to 21.06 are reproduced below:

(16) Preparations, often referred to as food supplements or dietary supplements, consisting of, or based on. one or more vitamins, minerals, amino acids, concentrates, extracts, isolates or the like of substances found within foods, or synthetic versions of such substances, put up as a supplement to the normal diet. It includes such products whether or not also containing sweeteners, colours, flavours, odoriferous substances, carriers, fillers, stabilisers or other technical aids. Such products are often put up in packaging with indications that they maintain general health or well-being, improve athletic performance, prevent possible nutritional deficiencies or correct sub-optimal levels of nutrients."

(17) As per Explanatory note (16) of heading 2106, food supplements or dietary supplements consisting of or based on extracts put up as a supplement to the normal diet fall under the heading 2106. Further, from the note (14) of heading 2106, it may be observed that products which consist of plants or its parts such as seeds and mixed with other substances such as other plant extracts, which are not consumed as such, but which are claimed to offer relief from ailments or contribute to general health and well-being falls under the heading CTH 2106.

Hence, it is apparent that the products are rightly classifiable under heading 2106.

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 17.12.2024 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 Submission

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 Application") proposing to import the product "Grindsted PS 101-M"; (hereinafter referred to as the "subject product"). The applicant intends to market and 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") 1516 20 91 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") @100%, Social Welfare Surcharge (hereinafter referred to as "SWS") @10% and Integrated Goods and Services Tax (hereinafter referred to as "IGST") @5% in terms of SI. No. 8 of Schedule I of IGST Notification No. 01/2017 - Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as "Notification No. 01/2017").

4.4. The Applicant intends to claim the benefit of concessional rate of BCD @45% in terms of SI. No. 77 of Notification No. 50/2017 dated 30.06.2017 which prescribes such concessional rate for "All goods of edible grade" classifiable under CTSH 1516 20 and CTI 1516 30 00

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

4.5. Vide letter dated 10.12.2024, the Ld. Deputy Commissioner, (AC)GRP-2-2AB-CUS-MUM-NS1,Group 2&2(A-B) - O/o Commissioner of Customs, JNCH, Nhava Sheva-I. Mumbai, (hereinafter referred to as the "Ld. Dy. Commissioner"), has provided his comments on the AAR Application filed by the Applicant. In the said letter dated 10.12.2024, the Ld. Dy. Commissioner has stated that the subject product is correctly classifiable under Customs Tariff Heading (hereinafter referred to as "CTH") 2106 by placing reliance on the HSN EN to CTH 2106. Accordingly, the compliance of the subject product to the conditions set forth for classification under CTH 3404 shall be examined in the following paras.

Technical Details of the Subject Product

4.6. 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.

4.7. The subject product, which is used a food emulsifying agent, is pre-dominantly composed of 'Fully Hydrogenated Palm-based Triglycerides'. The subject product prevents oiling out in fat containing products, e.g. peanut butter, margarine, spreads etc. The subject product has high oil-binding capacity and is delivered in beads form.

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

Details of Manufacturing Process

4.9. To describe the entire process briefly. Palm Oil which is in the nature of a triglyceride, is the raw material used for the manufacture of the subject product. Palm Oil is subjected to Full Hydrogenation and is then converted into edible grade beads form. The product so obtained is subjected to physical processes of filtration, spray cooling, magnet separation to get the product in its 'as-imported' condition and can be termed "Fully Hydrogenated Palm-based Triglycerides".

4.10. The subject product is pre-dominantly composed of triglycerides 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 under CTI 1516 20 91

4.11. The Applicant proposes to classify the subject product under CTI 1516 20 91 of the Customs Tariff. The relevant tariff entries are extracted below for ready reference:

4.12. 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.

4.13. The subject product is a vegetable-based fat, which is fully hydrogenated and not further prepared and is thus squarely covered under Chapter 15 which inter alia covers "Animal. Vegetable Or Microbial Fats And Oils And Their Cleavage Products; Prepared Edible Fats: Animal Or Vegetable Waxes" and more specifically under Customs Tariff Heading (hereinafter referred to as "CTH") 1516 which covers "Animal, Vegetable Or Microbial Fats And Oils And Their Fractions, Partly Or Wholly Hydrogenated, Inter-Esterified, Re-Esterified Or Elaidinised, Whether Or Not Refined. But Not Further Prepared'.

4.14 Further, relevant 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:

HSN EN to Chapter 15

    GENERAL:

    (A) This Chapter covers:

1. Animal, vegetable or microbial fats and oils, whether crude, purified or refined or treated in certain ways (eg. boiled, sulpharised or hydrogenated)

HSN EN to CTH 1516:

This heading covers animal, vegetable or microbial fats and oils, which have undergone a specific chemical transformation of a kind mentioned below, but have not been further prepared. The heading also covers similarly treated fractions of animal, vegetable or microbial fats and oils.

A. Hydrogenated fats and oils.

Hydrogenation, which is effected by bringing products into contact with pure hydrogen at a suitable temperature and pressure in the presence of a catalyst (usually finely divided nickel), raises the melting points of fats and increases the consistency of oils by transforming unsaturated glycerides (e.g., of oleic, linoleic, etc., acids) into saturated glycerides of higher melting points (e.g.. of palmitic, stearic, etc., acids)._The degree of hydrogenation and the final consistency of the products depend on the conditions employed in the process and the length of treatment. The heading covers such products whether they have been:

1. Partly hydrogenated (even if these products tend to separate into pasty and liquid layers). This also has the effect of converting the cis-form of the unsaturated fatty acids into the trans-form in order to raise the melting point.

2. Wholly hydrogenated (e.g. Oils converted into pasty or solid fats).

The products most commonly hydrogenated are oils offish or marine mammals and certain vegetable oils (cotton-seed, sesame oil, ground-nut oil, colza oil, soya-bean oil, maize (corn) oil, etc.) Wholly or partly hydrogenated oils of this type are frequently used as constituents in the preparation of edible fats of heading 1517 since the hydrogenation not only increases their consistency but also makes them less liable to deterioration by atmospheric oxidation, and improves their taste and odour, and, by bleaching them, gives them a better appearance.

The heading includes the products as described above, even if they have a waxy character and even if they have been subsequently deodorised or subjected to similar refining processes, and whether or not they can be used directly as food. But it excludes hydrogenated. Etc., fats and oils and their fractions which have undergone such further preparation for food purposes as texturation (modification of the texture or crystalline structure) (heading 1517). The heading further excludes hydrogenated, inter-esterified, re-esterified or elaidinised fats and oils or their fractions, where modification involves more than one fat or oil (heading 1517 or 1518)."

4.15. From a combined perusal of the foregoing discussion and extracts, the conditions which are outlined for a product to be classifiable under CTH 1516 is that

(a) the product should be an 'animal, vegetable or microbial fat or oil'; and
(b) can either be crude, purified or refined or treated in certain ways (eg. boiled, sulpharised, inter-esterified, re-esterified, elaidinised or hydrogenated); and
(c) the subject product should involve only one fat/oil; and
(d) should not be worked further than the processes outlined in the HSN EN.

4.16. In light of the above, it is submitted that the subject product fulfils all the conditions set forth by the combined reading of the terminology of Chapter 15, CTH 1516, and the HSN EN to CTH 1516 tobe adequately covered under CTH 1516 in the following manner:

4.17. In light of the above, it is submitted that the subject product fulfils all the conditions set forth by the combined reading of Chapter Notes to Chapter 15 and HSN EN to CTH 1516.

4.18. Further, upon a perusal of the relevant tariff entries extracted hereinabove, it is imperative to outline that out of the three 'single-dash' entries under CTH 1516, which are termed as "Animal fats and oils and their fractions", "Vegetable fats and oils and their fractions" and "Microbial fats and oils and their fractions", the subject product merits classification under "Vegetable fats and oils and their fractions" bearing Customs Tariff Sub-Heading (hereinafter referred to as "CTSH") 1516 20 as the subject product made up of triglycerides of 'Palm' base which falls under the category of "vegetables" out of the three 'single-dash' entries.

4.19. For determination of further classification under CTSH 1516 20 at the "—" (triple dash) and four "----" (quadruple dash) level, the relevant tariff entries are extracted below for ready reference:

4.20. Further, it is submitted that under the CTSH 1516 20, the subject product is most appropriately covered under the 'triple-dash' entry bearing the term "Other:" as the subject product is not in the nature of ''Cotton Seed oil'', "Groundnut oil , 'Hydrogenated castor oil (opal-wax)'.

4.21. The said entry is further categorised in two"—" (quadruple dash) entries which cover the products, namely, "Edible Grade" and "Other". It is submitted that the subject product is correctly covered under the "Edible Grade" entry. Reliance for the same is placed on Circular bearing F. No. 528/27/97-Cus. (TU) (Circular No. 29/97) dated 31.07.1997 issued by the Ministry of Finance, Department of Revenue  (Tariff Unit), New Delhi, clarified that the term 'vegetable oil of edible grade' shall not only contain those vegetable oils which are fit for human consumption 'as-imported', and will also include those vegetable oils which will be fit for human consumption after further processing. Relevant portion of the circular is extracted of the AAR Application.

Classification of the Subject Product under CTH 2106

4.22. Vide the letter dated 10.12.2024, the Ld. Dy. Commissioner opined that the subject product is
correctly classifiable under CTH 2106 by placing reliance upon Explanatory Note No. 16 of the HSN EN to CTH 2106. HSN EN No. 16 to CTH 2106 is extracted below for ready reference:

HSN EN to CTH 2106:

        "(16) Preparations, often referred to as food supplements or dietary supplements, consisting of, or based on, one or more vitamins, minerals, amino acids, concentrates, extracts, isolates or the like of substances found within foods, or synthetic versions of such substances, put up as a supplement to the normal diet. It includes such products whether or not also containing sweeteners, colours, flavours, odoriferous substances, carriers, fillers, stabilisers or other technical aids. Such products are often put up in packaging with indications that they maintain general health or well-being, improve athletic performance, prevent possible nutritional deficiencies or correct sub-optimal levels of nutrients."

4.23. Placing reliance upon the same, the Ld. Dy Commissioner has provided justification for opining classification of the subject product under CTH 2106, that food or dietary supplements consisting of or based on extracts put up as a supplement to the normal diet fall under CTH 2106.

4.24. Further, placing reliance on the HSN EN No. 14 to CTH 2106, the Ld. Dy. Commissioner opined that products which consist of plants or its parts such as seeds, and are then mixed with other substances such as other plant extracts, which are not consumed as such, but which are claimed to offer relief from ailments or contribute to general health and well-being falls under the heading CTH 2106.

4.25. HSN EN No. 14 to CTH 2106 is extracted herein below:

"Products consisting of a mixture of plants or parts of plants (including seeds or fruits) of different species or consisting of plants or parts of plants (including seeds or fruits) of a single or of different species mixed with other substances such as one or more plant extracts, which are not consumed as such, but which are of a kind used for making herbal infusions or herbal "teas", (e.g., those having laxative, purgative, diuretic or carminative properties), including products which are claimed to offer relief from ailments or contribute to general health and well-being. "

4.26. It is submitted in this regard that even upon a bare perusal of the HSN EN to CTH 2106 and GRIs,it is apparent that the subject product is not covered under the scope of CTH 2106. The very first HSN EN to CTH 2106 prescribes that "provided that they are not covered by any other heading of the Nomenclature, this heading covers: ....". It is submitted in this regard that the subject product is more specifically covered under CTH 1516 as "vegetable fat/oil, wholly hydrogenated and not further prepared of edible grade". It is trite law that the heading which provides a more specific description of the product shall be preferred over the heading which provides a more general description of the product.

4.27. Further, the said principle also finds statutory backing in GRI 3(a) which is extracted below for ready reference:

3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected 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.

4.28. In light of the above, it is submitted that the subject product merits classification under CTH 1516 and more specifically under CTI 1516 20 91 as the said heading covers the subject product more adequately, both at the CTH and the CTI level as compared to CTH 2106. The same is also apparent from a bare perusal of the terminology of CTH 2106 which covers "Food Preparations Not Elsewhere Specified or Included". It is submitted that CTH 2106 is a residual heading and the subject product does not merit classification under the said CTH.

4.29. Reliance for the same is placed on the following case-laws:

• Commissioner of Central Excise, New Delhi vs. Connaught Plaza Restaurant Pvt. Ltd. - 2012, (286) E.L.T. 321 (S.C.)
• Speedway Rubber Co. vs. Commissioner of Central Excise, Chandigarh - 2002 (143) E.L.T. 8 (S.C.)

4.30. It is submitted that the subject product is not classifiable under CTH 2106 at the CTH (four-digit) level itself basis GRI 3(a) and the above-captured principle of classification and accordingly, further examination of the entries under CTH 2106 and of the HSN EN to CTH 2106 would merely be a futile 0 exercise

4.31. It is, therefore, iterated that as outlined in the foregoing discussion, the subject product is a fully hydrogenated palm-based triglyceride which is in its as-imported' condition and merits classification under CTH 1516. more specifically under CTI 1516 20 91.

Analysis and Conclusion

5. The present application pertains to a brand of food emulsifying agent, namely GRINDSTED PS 101-M. 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. The subject product, which is used a food emulsifying agent, is pre-dominantly composed of 'Fully Hydrogenated Palm-based Triglycerides'. The physical processes of filtration, spray cooling, magnet separation takes place to get the subject product in its imported form. The subject product prevents oiling out in fat containing products, e.g. peanut butter, margarine, spreads etc. The subject product has high oil-binding capacity and is delivered in beads form. For ease of reference, the chemical composition and the physical property of the subject product is captured below:

5.2 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.

5.3 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. As per GIR 1, the goods under consideration should be classified following the terms of the chapter headings (4-digit codes followed with description) and the relevant Section or Chapter Notes. It further states that in the event the goods cannot be classified solely based on said Rule 1, and if the headings and legal notes do not otherwise require, the subsequent Rules 2 to 6 may be applied in sequential order. The text of Rule 1 reads as follows:

"The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, 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."

5.3.1 Now, coming to the 6 digit and 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".

5.3.2 Therefore, upon application of GRI Rule 6 read with GRI Rule 1, the classification of the subject product 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. 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.

5.4 Chapter Notes from Chapter 15 of the Customs Tariff becomes relevant on application of GRI 1. The same has been reproduced hereinunder.

(A) This Chapter covers

(1) Animal, vegetable or microbial fats and oils, whether crude, purified or refined or treated in certain way (e.g., boiled, sulphurised or hvdrogentated)
(2) ****
(3) ****

5.4.1 Further, General Explanatory Notes to heading 1516 covers "animal, vegetable or microbial fats and oils, which have undergone a specific transformation of a kind below, but not been further prepared''. In regards to "specific transformation". General Explanatory Notes to heading 1516 provides following processes.

(A) Hydrogenated fats and oils

Hydropenation. which is effected by bringing the products into contact with pure hydrogen at a suitable temperature and pressure in the presence of a catalyst (usually finely divided nickel) raises the melting points of fats and increase the consistency of oils by transformation unsaturated glycerides (e.g., of oleic, linoleic. etc.. acids) into saturated glycerides of higher melting points (e.g., of palmitic, stearic, etc.. acids). The degree of hydrogenation and the final consistency of the product depend on the conditions employed in the process and the length of treatment. The heading covers such products whether they have been :

(1) Partly hydrogenated (even if these products tend to separate into pasty and liquid layers). This also has effect of converting the cis-form of the unsaturated fatty acids into trans-form in order to raise melting point.

(2) Wholly hydrogenated (e.g., oil converted into pasty orsoild fats).

The products most commonly hydrogenated are oils offish or marine mammals and certain vegetable oils (cotton-seeds oil, sesame oil, ground-nut oil, colza oil, soya-bean oil, maize (corn) oil, etc.). Wholly or partly hydrogenated oils of this type are frequently used not only increases their consistency but also makes them less liable to deterioration by atmospheric oxidation, and improves their taste and odour, and, by bleaching them gives them better appearance.
(B) *****

5.4.2 Therefore, the classification of the subject product must be first determined at the single-dash level. In this regard, it is evident that CTH 1516, has been sub-divided into:

5.4.3 Considering the nature of subject product, it is not made up of Animal and Microbial fats and oils and their fractions, but vegetable fats and oils and their fractions. Accordingly, the subject product will be classified under the entry, i.e., CTSH 1516 20 which reads as "Vegetable fats and oils and their fractions". Now, upon perusal of the single-dash entry "Vegetable fats and oils and their fractions". The entry is sub¬divided into the following:

5.4.4 Further, it is submitted that under the CTSH 1516 20, the subject product is most appropriately covered under the 'triple-dash' entry bearing the term "Other:" as the subject product is not in the nature of "Cotton Seed oil", "Groundnut oil", "Hydrogenated castor oil (opal-wax)".

5.4.5 As the subject product is made of palm oii, the subject product will fall under the residuary entry reading "Other". Now moving to the next"—" dash i.e.

5.4.6 The said entry is further categorised in two"—" (quadruple dash) entries which cover the products, namely, "Edible Grade" and "Other'. It is submitted that the subject product is correctly covered under the Edible Grade' entry Reliance for the same is placed on Circular bearing F. No. 528/27/97-Cus. (TU) (Circular No. 29/97) dated 31.07.1997 issued by the Ministry of Finance, Department of Revenue (Tariff Unit), New Delhi, clarified that the term 'vegetable oil of edible grade' shall not only contain those vegetable oils which are fit for human consumption 'as-imported', and will also include those vegetable oils which will be fit for human consumption after further processing.

5.5 In this regards reference is made to Circular bearing F. No. 528/27/97-Cus. (TU) (Circular No.
29/97) dated 31-7-1997 issued by the Ministry of Finance, Department of Revenue, (Tariff Unit), New Delhi, clarified that the term 'vegetable oil of edible grade'. Relevant portion of Circular is produced below:

2. A doubt has arisen regarding scope of the term 'Vegetable oils of edible grade' appearing in the said notification i.e. as to whether this term will cover only those vegetable oils which are fit for human consumption as it is imported or it will also include the vegetable oils which are not fit for human consumption at the time of import but will be fit for human consumption at the time of import but will be fit for human consumption after further processing.

3. The matter has since been examined in consultation with the Ministry of Food, Department of Food, Directorate of Vanaspati, Vegetable Oils and Fast, Ministry of Civil Supplies, Consumers Affairs and Public Distribution and Department of Economic Affairs. It is clarified that the term 'vegetable oils of edible grade' will cover vegetable oils which are fit for human consumption after further processing. The benefit of duty exemption is admissible so long as the oils imported is used for edible purposes, even after refining. Pending cases of assessment may be finalized on the basis of above clarification.

5.6 The subject product is of edible grade, as it is intended use is in the food industry as an emulsifier, merits classification under CTI 1516.20.91

Classification of the Subject Product under CTH 2106

5.7 Vide the letter dated 10.12.2024, the Port Commissionerate has opined that the subject product is correctly classifiable under CTH 2106 by placing reliance upon Explanatory Note No. 16 of the HSN EN to CTH 2106. HSN EN No. 16 to CTH 2106 is extracted below for ready reference:

HSN EN to CTH 2106:

"(16) Preparations, often referred to as food supplements or dietary supplements, consisting of, or based on, one or more vitamins, minerals, amino acids, concentrates, extracts, isolates or the like of substances found within foods, or synthetic versions of such substances, put up as a supplement to the normal diet It includes such products whether or not also containing sweeteners, colours, flavours, odoriferous substances, carriers, fillers, stabilisers or other technical aids Such products are often put up in packaging with indications that they maintain general health or well-being, improve athletic performance, prevent possible nutritional deficiencies or correct sub-optimal levels of nutrients.

5.7.1 As per Explanatory note (16) of heading 2106, food supplements or dietary supplements consisting of or based on extracts put up as a supplement to the normal diet fall under the heading 2106. Further, from the note (14) of heading 2106, it may be observed that products which consist of plants or its parts such as seeds and mixed with other substances such as other plant extracts, which are not consumed as such, but which are claimed to offer relief from ailments or contribute to general health and well-being falls under the heading CTH 2106.

5.7.2 Further, placing reliance on the HSN EN No. 14 to CTH 2106, it was opined that products which
consist of plants or its parts such as seeds, and are then mixed with other substances such as other plant
extracts, which are not consumed as such, but which are claimed to offer relief from ailments or contribute to genera! health and well-being falls under the heading CTH 2106. HSN EN No. 14 to CTH 2106 is extracted herein below:

"Products consisting of a mixture of plants or parts of plants (including seeds or fruits) of different species or consisting of plants or parts of plants (including seeds or fruits) of a single or of different species mixed with other substances such as one or more plant extracts, which are not consumed as such, but which are of a kind used for making herbal infusions or herbal "teas", (e.g., those having laxative, purgative, diuretic or carminative properties), including products which are claimed to offer relief from ailments or contribute to general health and well-being."

5.7.3 It could be seen in this regard that even upon a bare perusal of the HSN EN to CTH 2106 and GRIs, it is apparent that the subject product is not covered under the scope of CTH 2106. The very first HSN EN to CTH 2106 prescribes that "provided that they are not covered by any other heading of the Nomenclature, this heading covers:... ". It is submitted in this regard that the subject product is more specifically covered under CTH 1516 as "vegetable fat/oil, wholly hydrogenated and not further prepared of edible grade". It is trite law that the heading which provides a more specific description of the product shall be preferred over the heading which provides a more general description of the product.

5.7.4 Further, the said principle also finds statutory backing in GRI 3(a) which is extracted below for ready reference:

3. When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected 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.

5.8 Coming to analyse the HSN Explanatory Notes to Chapter 15 as given below:

GENERAL:

(B) This Chapter covers:

2. Animal, vegetable or microbial fats and oils, whether crude, purified or refined or treated in certain ways (eg. boiled, sulpharised or hydrogenated)

HSN EN to CTH 1516:

This heading covers animal, vegetable or microbial fats and oils, which have undergone a specific chemical transformation of a kind mentioned below, but have not been further prepared. The heading also covers similarly treated fractions of animal, vegetable or microbial fats and oils.

B. Hvdrogenated fats and oils: Hydrogenation, which is effected by bringing products into contact with pure hydrogen at a suitable temperature and pressure in the presence of a catalyst (usually finely divided nickel), raises the melting points of fats and increases the consistency of oils by transforming unsaturated glycerides (e.g., of oleic, linoleic, etc., acids) into saturated glycerides of higher melting points (e.g., of palmitic, stearic, etc., acids). _The degree of hydrogenation and the final consistency of the products depend on the conditions employed in the process and the length of treatment. The heading covers such products whether they have been:

3. Partly hydrogenated (even if these products tend to separate into pasty and liquid layers). This also has the effect of converting the cis-form of the unsaturated fatty acids into the trans-form in order to raise the melting point.

4. Wholly hydrogenated (oils converted into pasty or solid fats)

The products most commonly hydrogenated are oils of fish or marine mammals and certain vegetable oils (cottonseed, sesame oil. ground-nut oil, colza oil, soya-bean oil, maize (corn) oil. etc.) Wholly or partly hydrogenated oils of this type are frequently used as constituents in the preparation of edible fats of heading 1517 since the hydrogenation not only increases their consistency but also makes them less liable to deterioration by atmospheric oxidation, and improves their taste and odour, and. by bleaching them, gives them a better appearance.

The heading includes the products as described above, even if they have a waxy character and even if they have been subsequently deodorised or subjected to similar refining processes, and whether or not they can be used directly as food. But it excludes hydrogenated. Etc., fats and oils and their fractions which have undergone such further preparation for food purposes as texturation (modification of the texture or crystalline structure) (heading 1517). The heading further excludes hydrogenated,. inter-esterified, re-esterified or elaidinised fats and oils or their fractions, where modification involves more than one fat or oil (heading 1517 or 1518)."

5.8.1 From a combined perusal of the foregoing discussion and extracts, the conditions which are outlined for a product to be classifiable under CTH 1516 is that

(a) the product should be an 'animal, vegetable or microbial fat or oil': and
(b) can either be crude, purified or refined or treated in certain ways (eg. boiled, sulpharised, inter-esterified, re-esterified, elaidinised or hvdrogenated): and
(c) the subject product should involve only one fat/oil; and
(d) should not be worked further than the processes outlined in the HSN EN.

5.8.2 In light of the above, it is submitted that the subject product fulfils all the conditions set forth by the combined reading of the terminology of Chapter 15, CTH 1516, and the HSN EN to CTH 1516 to be adequately covered under CTH 1516 in the following manner:

5.9 In light of the above, it can be concluded that the subject product merits classification under CTH 1516 and more specifically under CTI 1516 20 91 as the said heading covers the subject product more adequately, both at the CTH and the CTI level as compared to CTH 2106. The same is also apparent from a bare perusal of the terminology of CTH 2106 which covers "Food Preparations Not Elsewhere Specified or Included". It is also a fact that CTH 2106 is a residual heading and the subject product does not merit classification under the said CTH. Further, it is also submitted that the subject product is not classifiable under CTH 2106 at the CTH (four-digit) level itself basis GRI 3(a) and the above-captured principle of classification and accordingly, further examination of the entries under CTH 2106 and of the HSN EN to CTH 2106 would merely be a futile exercise.

6. In light of the aforementioned submissions, the answers to the questions raised will be as under:

a) Question: Whether the subject product in question in the present application is classifiable under Tariff Item 1516 20 91?

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. VIII/CAAR/Delhi/ Danisco/140/2024  Dated: 27.12.2024