2024(12)LCX0317(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-advrulings.del@gov.in]
DIN: 20241274OR0000116941
Present

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

F. No. VIII/CAAR/Delhi/ Danisco India/141/2024

The day of 30^th December 2024

Ruling No. CAAR/Del/ Danisco/119/2024 /2138 to 2144/30/12/2024

Application no: -124/2024 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 PGMS 86  for the purpose of trading.

About the Subject Products

1.2 GRINDSTED PGMS 86  (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.

Details of Manufacturing Process

1.3. Palm oil is the raw material used for the manufacturing of the subject product. Palm oil contains different types of fatty acids. These fatty acids (stearic acid) react with propylene glycol in an esterification reaction. The subject product contains residual mono and di glycerides and glycerol entities.
 

Addition of other constituents

1.4. Thereafter Silicium dioxide, Alpha-tocopherol, and Citric acid are further added for their properties of anticaking, anti-oxidant, acidity regulator and sequestrant.

Final Processing

1.5. 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.

Composition of Subject Products

    The composition of subject products is as follows:

1.6 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).

1.7 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 i. e. E47/ INS 477.

Physical properties of subject product

Form of packaging

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

Subject product is not a separately defined chemical compound

1.9. For a better understanding of the product, reference is invited to 49th Joint FAO/WHO Expert Committee on Food Additive ("JECFA Report") published in FNP 52 Add 5 (1997) has analysed Propane- 1,2-diol esters of fatty acids INS No. 477. JECFA report defines the subject product as:

Definition:

Propylene glycol esters of fatty acids are mixtures of propylene glycol mono- and diesters of saturated and unsaturated fatty acids derived from edible oils and fats.The products are produced either by direct esterification of propylene glycol with fatty acids or by transesterification of propylene glycol with oils or fats. When prepared by transesterification, the product may contain residual mono- and diglycerides and glycerol The process may be followed by molecular distillation to separate the monoesters.

Structure:

    Structural formula
 

where RT and R2 represent one fatty acid moiety and hydrogen in the case of mono-esters and two fatty acid moieties in the case of di-esters

1.10. Propylene Glycol Ester is not a chemically defined compound due to the presence of residual mono- and diglycerides and glycerol. Additionally, there is not a fixed chemical structure of the Propylene Glycol Ester, as "R1 and R2" can be one fatty acid moiety and hydrogen in case of mono-ester and two fatty acid moieties in the case of di-esters.

Subject product is waxy in nature

1.11. As per, the JECFA report, Propylene glycol ester of fatty acids is waxy in appearance. Relevant portion of report has been provided below:-

Description: White or cream coloured solids of waxy appearance, plastic products or viscous liquids

APPLICANT'S ELIGIBILITY FOR ADVANCE RULING

1.12. 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').

1.13. 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 othenA/ise 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);

... (Emphasis Supplied)

1.14. 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

1.15. 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;

... (Emphasis Supplied)

1.16. 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;

... (Emphasis Supplied)

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

1.18. 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 281

1.19 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."

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

a. the question raised in the present application regarding the classification of GRINDSTED PGMS 86 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 PGMS 86 is not a matter already decided by the Appellate Tribunal or any Court.

1 21 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 Customs Act, 1962; and

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

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

     CLASSIFICATION OF GRINDSTED PGMS 86

1.22 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.

1.23 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.

1.24 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.

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

1.26 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) ****

1.27 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) ****

1.28 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) 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

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:'

(Emphasis supplied)

1.29 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.

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

1.30 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.

1.31 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

1.32. Additionally the JCEFA Report also provides that the subject product is waxy in character

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

1.33. As per the manufacturing process of the subject product, it is manufactured by a chemical reaction of fatty acid (stearic acid) with propylene glycol in an esterification reaction. The resultant product 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

1.34 CTH 2712 covers Petroleum Jelly, Paraffin Wax, Microcrystalline Petroleum Wax or other mineral waxes.

1.35 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

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

1.37 The Applicant confirms that the subject product has a drop melt temperature of above 40°C.

1.38 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.

1.39The fulfilment of above criteria by the subject products is discussed herein below

Classification of the subject product under CTH 3404

1.41 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.

1.42 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".

1.43 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.

1.44 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.

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

1.46 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".

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

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

1.49 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".

1.50 The said entry is further sub-divided under:

1.51 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

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 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 PGMS 86
 

Point 3 iv). 1. As stated by the importer in their application the goods i.e. ''Grindsted PGMS 86'  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.The goods appear to be classifiable under Chapter 38.

The HSN explanatory notes to 38.24 are reproduced below:

Subject to the above conditions, the preparations and chemical products falling here include:
(11) Mixtures of mono-, di- and tri-, fatty acid esters of glycerol, used as emulsifiers for fats.
Those which have the character of artificial waxes are, however excluded (heading 34.04).

It appears that the imported product may be either classifiable under CTH

38.24 or 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 PGMS 86" (hereinafter 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 'Propylene  Glycol Ester'. 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 Propylene Glycol Ester (E477).2 Palm ()i u insists of different types of fatty acids (stearic acid). In a single-unit process, the said Fatty acid (Stearic, .acid) is made to react with Propylene Glycol in an esterification reaction. Thereafter, Silicium Dioxide, A.pha-tocopherol and Citric Acid are added for their properties of anticaking, anti-oxidant, acidity regulator snd sequestrant.

4.9. The product so obtained after the; afore-mentioned reactions is then subjected to the processes of distillation, storage, filtration, tube chillirg, magnet separation to get the product in its 'as-imported' condition. The subject product contains residual mono- and diglycerides and glycerol entities.

4.10. Reference is invited to 49th Joint FAO/WHO Expert Committee on Food Additive (hereinafter referred to as the "JECFA Report") published in FNP 52 Add 5 (1997) has analysed Propane-1,2-diol esters of fatty acids INS No. 477. The said report defines the subject product as:

Propylene glycol esters of fatty acids are mixtures or propylene glycol mono-and diesters of saturated and unsaturated fatty acids derived from edible oils and fats. The products are produced either by direct esterification of propylene glycol with fatty acids or by transesterification of propylene glycol with oils or fats. When prepared by transesterification. the product may contain residual mono- and diglycerides and glycerol. The process may be followed by molecular distillation to separate the monoesters

4.11. The subject product is pre-dominantly composed of Propylene Glycol Ester 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 -dominantly composed of Propylene Glycol Ester and has a waxy nature 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 product under consideration i.e. GRINDSTED PGMS 86 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. Palm oil is the raw material used for the manufacturing of the subject product. Palm oil contains different types of fatty acids. These fatty acids (stearic acid) react with propylene glycol in an esterification reaction. The subject product contains residual mono and di glycerides and glycerol entities. Thereafter Silicium dioxide, Alpha-tocopherol, and Citric acid are further added for their properties of anticaking, anti-oxidant, acidity regulator and sequestrant. 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.

5.1 The composition of subject products is as follows:

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).

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.

5.1.1 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 both E number and INS number are same for the prominent ingredient of the product i.e. E47/INS 477. The subject product, which is used a food emulsifying agent, is pre-dominantly composed of a 'Propylene Glycol Ester'. The chemical composition and the physical property of the subject product is captured below:

Grindsted SSL P 70 Veg

5.2.2 Subject product is not a separately defined chemical compound: For a better understanding of the product, reference is invited to 49th Joint FAO/WHO Expert Committee on Food Additive ("JECFA Report") published in FNP 52 Add 5 (1997) has analysed Propane-1,2-diol esters of fatty acids INS No. 477. JECFA report defines the subject product as:

Definition: Propylene glycol esters of fatty acids are mixtures of propylene glycol mono- and diesters of saturated and unsaturated fatty acids derived from edible oils and fats. The products are produced either by direct esterification of propylene glycol with fatty acids or by transesterification of propylene glycol with oils or fats. When prepared by transesterification. the product may contain residual mono- and diglycerides and glycerol. The process may be followed by molecular distillation to separate the monoesters.

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.

5.4 Given that it has a waxy nature, 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. Before examining the classification of the subject product under CTH 3404, it is relevant to visit the Notes to Chapter 34.

5.4.1 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) ****

5.4.2 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..5 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) 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

……

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.”

5.6 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.

5.6.1 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

5.6.2 Additionally the JCEFA Report also provides that the subject product is waxy in character

III. The product must be chemically produced organic product

5.6.3 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

5.6.4 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

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

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

Classification of the subject product under CTH 3404

5.8 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, the subject product merits classification under CTH 3404. 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". 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. 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.

5.8.1 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:

5.8.2 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

5.8.3 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”. The said entry is further sub-divided under:

5.8.4 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.

5.9 Vide letter dated 02.12.2024, the Port Commissionerate has stated that the subject product can either be classified under CTH 3404 or CTH 3824 depending on whether it meets the character of artificial waxes or otherwise and that accordingly, the compliance of the subject product to various conditions set forth for classification under CTH 3404 needs to be examined.

5.10 Considering the subject product is pre-dominantly composed of Propylene Glycol Ester and has a waxy nature 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. 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:

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 and merits classification 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 /141/2024                 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