2025(01)LCX0247(AAR)

Detergeo Chem Private Limited

decided on 30-01-2025

Customs Authority for Advance Rulings
New Custom House, Ballard Estate, Mumbai - 400 001
E-MAIL: cus-advrulings.mum@gov.in

F.No. CAAR/CUS/APPL/87/2024 - O/o Commr-CAAR-Mumbai                            Date :30.01.2025

N.B.:

A copy of this order made under sub-section (2) of Section 281 of the Customs Act, 1962 is granted to the concerned free of charge.

Any officer authorised by the Board, by notification or the applicant may file an appeal before the High Court of concerned jurisdiction against any ruling or order passed by the Authority, within 60 days from the date of the communication of such ruling or order.

The Principal Commissioner or Commissioner shall be authorised to file appeal against the advance ruling in terms of sub-section (1) of section 28KA.

The advance ruling pronounced by the Authority under Section 28 - I shall remain valid for three years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced, whichever is earlier.

Where the Authority finds that the advance ruling was obtained by the applicant by fraud or misrepresentation of facts, the same shall be declared void ab initio.

Advance Ruling

1. Delergeo Chem Private Limited (IEC No. AAGCD3799J) (hereinafter referred as "The Applicant") filed an application for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling, Mumbai. The said application was received in the secretariat of the CAAR, Mumbai on 11.07.2024, along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the 'Act'). The applicant is seeking advance ruling regarding classification of Fatty Alcohol Ethoxylates ('FAE') having 3 or .more moles of Ethylene Oxide (''EO") and applicability of notification no. 46/2011 Sr. No. 399 issued under sub-section (1) of section 25 of the Customs Act, 1962. having a bearing on the rate of duty.

2. Submission by the Applicant:

2.1 Detergeo Chem Private Limited (hereinafter referred to as the "Applicant") is a private limited Company duly incorporated under the provisions of the Companies Act, 1956, having its plant located at F-52, SIPCOT Industrial Complex, Gummidipoondi Industrial Area, Chennai, Tamil Nadu - 601 201 and registered office at A29 Block Bl Extension Mohan Cooperative Industrial Estate, New Delhi - 110044. The Applicant is the leading manufacturer of Sodium Lauryl Ether Sulphate (SEES) and Linear alkyl benzene sulphonic acid (LABSA) in India since 2021. In this respect, the Applicant imports raw materials from foreign suppliers. The Applicant is a part of the renowned New India Group. The Applicant is now proposing to import the product Fatty Alcohol Ethoxylates ('FAE') having 3 or more moles of Ethylene Oxide ('EO').

2.2 Current Imports of FAE of 1 and 2 moles of EO: The Applicant stated that they have already been importing goods namely, 'Fatty Alcohol Ethoxylales' having one mole and two moles of Ethylene Oxide and classifying the same under Heading 38.24 as these goods do not satisfy the twin-test provided for "organic surface-active agent' ('OSAA') under Note 3 of Heading 34.02. They further stated that the classification declared under Heading 38.24 for FAE having one or two moles of EO has been disputed by the Customs department on the basis that these goods fall under Heading 34.02. The Applicant further stated that they have been issued with a Show Cause Notice No. 45/2023 dated 09.05.23 by the Commissioner of Customs, Chennai-II, No. 60, Rajaji Salai, Chennai and the same is currently pending with adjudication authority. Thus, classification of FAE having 1 and 2 moles of EO is currently under litigation / dispute. The Applicant further stated that in the present application, they are not seeking ruling for FAE of 1 & 2 moles of EO as it is currently under litigation / dispute.

2.3 Proposed Imports of 'FAE having 3 or more EO' for which the present application is being filed : The Applicant stated that they are proposing to import Fatty Alcohol Ethoxylates having 3 or more moles of ethylene oxide, more particularly Fatty Alcohol Ethoxylates having 3 moles, 7 moles and 9 moles of ethylene oxide. The aforesaid goods are collectively referred to as "FAE having 3 or more EO moles". The products are used as a thickener in cosmetic surfactant preparations such as shampoos, shower preparations, hand cleaner, dish wash detergent and foam baths, etc. The applicant further stated that there are many suppliers of FAE having 3 or more EO moles located in Singapore, Malaysia, Thailand and these goods arc being exported with different brand names. Illustrative list of suppliers along with country of origin and brand names is mentioned in table here in below: ..

TABLE-1

2.4 The Applicants further stated that as per their understanding, the suppliers are classifying FAB having 3 or more EO moles under Heading 34.02 as 'non-ionic surfactant'. Further, currently, no dispute whatsoever has been raised on classification or exemption with respect to FAE having 3 or more moles of ethylene oxide.

2.5 Specifications / Grades of the products in question: Physical/Chemical properties of the products in question available for few of the suppliers on their respective website, are mentioned in table below:

TABLE-2

2.6. The Applicant further submitted that they have been provided with information by Thai Ethoxylates Company Limited, Thailand for 'Dehydol LS 3 TH (MB)'. The applicant enclosed the copy of Product Catalogue, Material Safety Data Sheet, Certificate of analysis, Supplier's invoice, Test Report confirming OSAA specification for Fatly Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide with the application. The above documents mention product name as 'Dehydol LS 3 TH (MB)' and CAS Number as 68439-50-9. and chemical nature has been mentioned as "Alcohols, CI 2-14, ethoxylated" with approx. 3 moles of ethylene oxide. Further, Test Report dated 03/03/2017 issued by Thai-French Innovation Institute for 'Dchydol LS3 TH' confirms that it contains 2.83 moles of Ethylene Oxide. As per the results of this test / analysis report, the above-mentioned product meets both the criteria as specified under Note 3 of Chapter 34. Thus, it satisfies the OSAA test laid down under Note 3 of Chapter 34.

3. Applicants Interpretation of Law/Facts:

3.1 The products in question satisfy the OSAA test. Accordingly, they are classifiable under heading 34.02 of the Customs Tariff: The Applicant submits that 'Fatly Alcohol Ethoxylates of having 3 or more moles of Ethylene Oxide' are classifiable under Heading 34.02 of the Customs Tariff as 'Organic Surface-active Agents' as the Heading 34.02 covers 'organic surface-active agents (other than soap), surface-active preparations, washing preparations (including auxiliary washing preparations) and cleaning preparations, whether or not containing soap, other than those of Heading 34.01. The Applicant submits that the most important parameter to determine whether a product falls under Heading 34.02 is whether the same satisfies the criteria under Note 3 of Chapter 34 i.e., the OSAA test. Note 3 to Chapter 34 defines 'organic surface-active agent' as under:

"3. For the purpose of heading 3402, "organic surface-active agents " are products which when mixed with water at a concentration of 0.5% at 20° C and left to stand for one hour at the same temperature:

a) give a transparent or translucent liquid or stable emulsion without separation of insoluble matter; and

b) reduce the surface tension of water to 45 X 10~2 N/m (45 dyne/cm) or less.''

    Clause (a) of Chapter Note 3 contains three distinct parts, namely 'transparent', 'translucent'. and 'stable emulsion', without separation of insoluble matter. These terminologies indicate that in order to fall under Heading 34.02, the goods should be "water soluble". HSN Explanatory Notes (I) to Heading 34.02 for 'Organic Surface-Active Agents (Other than soap)' defines non-ionic organic surface-active agents as under:

"(3) Non-ionic, in which case they do not produce ions in an aqueous solution. Their solubility in water is due to the presence in the molecules of functional groups which have a strong affinity for water. Examples are : products of the condensation of fatty alcohols, fatty or alkylphenols with ethylene oxide; ethoxylates of fatty acid amides. "

3.2 Alcohol elhoxylates is a non-ionic surfactant in technical and commercial understating. However, its solubility is dependent on number of ethylene oxide units in the molecule since ethylene oxide forms part of hydrophilic group. Thus, the surface tension of Alcohol ethoxylates solution increases with an increase in EO group units, and vice-a-versa, decreases with a decrease in EO units. The solubility is important test for classification under Heading 34.02. Relevant extract from 'Chemical Formulation: An Overview of Surfactant-based Preparations Used in Everyday Life' by Anthony Edward Hargreaves, Tony Hargreaves, published by RSC Paperbacks, explains non-ionic surfactants in chapter 2 at page 68, as under:

"Non-ionic surfactants

...Non-ionic surfactants can be manufactured from a wide range of raw materials amongst which many are plant based and therefore have the advantage of using renewable resources. In the examples that follow the lipophile is the hydrocarbon chain, just as with the ionic surfactants. Ost of non-ionics have as their hydrophile a series of ethylene oxide groups in the forms of an ethoxylate chain. The more ethylene oxide group arc present, the more hydrophilic the molecule, the greater its solubility in water. An ethoxylate with only two ethylene oxide groups will have virtually no water solubility but instead will be oil soluble whereas one with twenty such groups will have good water solubility but poor oil solubility."

3.3 In view of above, more than 2 moles of ethylene oxide in FAE gives water solubility to the product. 2 or less moles of ethylene oxide will make FAE water insoluble. The products in question i.e., FAE have 3 or more moles of EO, thereby making them water soluble. Accordingly, they satisfy the requirement under Note 3(a) of Chapter 34.

3.4 The Applicant further submits that both the conditions laid down under Note 3 of Chapter 34 are required to be met concurrently in order to classify a product as 'organic surface-active agent'. Clause (b) of Note 3 requires that for a product to be a surfactant, it should reduce the surface tension of water to 4.5 x 10—2 N/m (45 dyne/cm) or less when mixed with water. It can be seen from the statutory definition that both the conditions are required to be met cumulatively and simultaneously. The test report dated 03/03/2017 states that when the sample was mixed with water at a concentration of 0.5% at 20 Degree Celsius and left to stand for one hour at the same temperature, it was a stable emulsion without separation of insoluble matter. The report further states that the tested product which is an FAE with 3 moles has surface tension of 29.364±0.268 dynes/cm. Therefore, the test / analysis report provided by the supplier clearly establishes that the FAE having 3 or more moles of EO satisfy both the criteria specified under Note 3 of Chapter 34.

3.5 Therefore, the products in consideration under the present application satisfy the OSAA test under Note 3 of Chapter 34 and are classifiable under Heading 34.02. Further, as they are non-ionic, they are correctly classifiable under Tariff Item 3402 42 00 which covers 'non-ionic organic surface-active agents'.

3.6 Globally also these products are classified under Heading 34.02. Below are the various U.S. Customs Cross Rulings classifying similar products under Heading 34.02 :

a. N300799 dated 18.10.2018;

b. N274866 dated 10.05.2016;

c. N274197 dated 20.04.2016;

d. N249254 dated 06.02.2014;

e. N247522 dated 29.11.2013;

f N237960 dated 16.04.2013.

3.7 The products in question are eligible for exemption benefit under Sr. No. 399 of Notification No. 46/11-cus., dated 01.06.11: For giving effect to the ASEAN India Free Trade Agreement, the Government of India issued the Notification No. 46/201 1-Cus, whereby preferential treatment was to be given to certain goods imported from the ASEAN Countries (of which Singapore, Thailand and Malaysia are also a member). Sr. No. 399 of Notification No. 46/11-Cus., dated 01.06.11 grants concessional rate of basic customs duty @5% to all goods falling under sub-Heading 340241 to 3402.42 when imported from countries listed in Appendix-I & II of the Notification. Relevant portion of the Notification is as under:

3.8 The Applicant is proposing to import non-ionic FAE having 3 or more moles'of EO classifiable under Tariff Item 3402 42 00 from Thailand, Singapore and Malaysia. These countries arc covered by Appendix-I of the Notification No. 46/11-Cus., dated 01.06.11, as amended. Therefore, these products are eligible for concessional rate of duty in terms of Sr. No. 399 of Notification No. 46/11-Cus., dated 01.06.11. as amended. The Applicants submit that they shall duly comply with the Country of Origin Rules on import and each import will be accompanied with a Country of Origin Certificate in the prescribed format issued by the specified authority.

4. Port of Import and reply from Jurisdictional Commissionerate

4.1 The applicant in their CAAR-1 indicated that they intend to import the subject goods i.e. Fatty Alcohol Ethoxylates (FAE) with 3 or more moles of Ethylene Oxide (EO) at the jurisdiction of office of Commissioner of Customs. Chennai-II (Import), Custom House, 60. Rajaji Salai, Chennai - 600 001. In terms of Provisions of the Section 28-1(1) of the Customs Act, 1962 read with the Sub-regulation No. (7) of the Regulation No. 8 of the Customs Authority for Advance Rulings Regulations, 2021. the application was forwarded to the office of Commissioner of Customs, Chennai-ll (Import), Custom House, 60, Rajaji Salai, Chennai - 600 001 on 16.07.2024 as indicated by the applicant at Sr. No. 13 of their CAAR-1 Forms calling upon them to furnish the relevant records with comments, if any, in respect of the said application.

    The Chennai-IJ (Import) Commissionerate vide letter F. No. CUS/APR/MISC/6756/2024-GR 2 dated 05.11.2024 submitted that note 3 of Chapter 34 stipulates conditions for classification of goods under Heading 3402. It was further stated that as per the Chapter Note 3 to Chapter 34, the goods are to be tested to find out whether the goods after being mixed with water and allowed to stand for one hour at 20° C, gives transparent or translucent liquid or stable emulsion without separation of insoluble matter and reduce the surface tension of water.

    It was further informed that a Show Cause Notice No.45/2023 was issued to the importer vide F.NO.CUS/APR/SCN/29/2023-GR-2 dated 09.05.2023 for misclassification under CTH 3824 instead of3402 and wrongful availment of benefit under SI. No. 449(1) of Notification No. 46/2011-Cus, vide No.45/2023 by the Commissioner of Customs, Chennai-II (Import).

    It was further opined that the classification of the goods can be decided only on testing the goods upon importation. It was further slated that as per the Literature / Material supplied by the Importer and the supplier website it appears that the goods merit classification as Organic Surface-Active Agent under CTH 3402. However, since there is a dispute regarding FAE with 2 moles and that the importer is stating that FAE with 2 moles is less water soluble and that with 3 or moles is more water soluble, the same is to be tested.

    Regarding applicability of Sl.No.399 of Notification No.46/2011 Cus, it is informed that if the goods merit classification under 34024100 or 34024200, there is no dispute, as long as the goods are imported from countries mentioned in the Schedule to the Notification.

    It was further stated that any Advance Ruling on the classification is not warranted at this juncture, especially in the absence of any chemical test to prove whether the goods satisfy the criteria as stipulated under Chapter Notes 3 to Chapter 34 or not. Therefore, it was opined that as per the provisions of Section 28E (c) (iii) of the Customs Act, 1962, there is no justifiable cause to seek any Advance Ruling on classification of the subject goods proposed to be imported.

5. Records of Personal Hearing:

5.1 A personal hearing was held on 06.01.2024 at 3:00 PM in the office of the CAAR, Mumbai. Ms. Apoorva Parihar, Advocate appeared for the online hearing on behalf of the applicant and reiterated the contention of the applicant filed with the application. She submitted that the proposed import product "Fatty Alcohol Ethoxylates" having 3 or more moles of Ethylene Oxide merit classification under CT1 3402 42 00 of the Customs Tariff Act, 1975. She mostly relied upon Note 3 to Chapter 34 which defines Organic Surface-Active Agents. She relied upon six US Cross Rulings in support of their contention that similar products are globally classified under CTH 3402. She also contended that these products are eligible for concessional rate of duty in terms of Sr. No. 399 of Notification No. 46/2011 dated 01.06.2011. She also contended that issue in this application does not pertain to any dispute with the department as far as import of FAE having 3 or more moles of EO is concerned. She further submitted that their application is warranted for ruling and that there is no any objection if the ruling is decided subject to testing condition.

Nobody appeared from the department for the PH.

6. Additional Submissions by the Applicant:

6.1 The applicant vides its email dated 13.01.2024 further submitted a synopsis capturing in brief the submissions made during the hearing on 06.01.2024. The applicant submitted that they have been importing goods namely, 'Fatty Alcohol Ethoxylates' having one mole and two moles of EO and lave been classifying the same under Heading 38.24 as these goods do not satisfy the twin-test provided for 'organic surface-active agent' ('OSAA') under Note 3 of Heading 34.02. They further submitted that the above classification declared under Heading 38.24 for 'Fatty Alcohol Ethoxylates' having one mole and two moles of EO has been disputed by the Customs department on the basis that these goods fall under Heading 34.02. The Applicant has been issued with a Show Cause Notice No. 45/2023 dated 09.05.23 by the Commissioner of Customs, Chennai-II, No. 60, Rajaji Salai, Chennai and the same is pending adjudication. Thus, classification of FAE having 1 and 2 moles of EO is currently under litigation / dispute. However, in the present application, the Applicant is not seeking ruling for FAE of 1 & 2 moles of EO. They further submitted that they already have made the complete disclosure about this dispute in the Application filed. Further, the comments received from Port authorities also confirmed that those items in SCN was different from the items for which ruling has been sought in the present application.

6.2 The Applicants submitted that they would be importing FAE having 3 or more EO moles from various suppliers. The prospective suppliers arc classifying these goods under Heading 34.02 as 'non-ionic surfactant' when the same are supplied by them to other importers. They further submitted that Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide are classifiable under Heading 34.02 of the Customs Tariff as 'Organic Surface-active Agents'. It was submitted that the most important parameter to determine whether a product falls under Heading 34.02 is whether the same satisfies the criteria under Note 3 of Chapter 34 i.e., the OSAA test. Note 3 to Chapter 34 defines organic surface-active agent' as under

"3. For the purpose of heading 3402, "organic surface-active agents " are products which when mixed with water at a concentration of 0.5% at 20o C and left to stand for one hour at the same temperature:

a) give a transparent or translucent liquid or stable emulsion without separation of insoluble matter; and

b) reduce the surface tension of water to 45 X10-2 N/m (45 dyne/cm) or less.''

6.3 They further submitted that Clause (a) of Chapter Note 3 contains three distinct parts, namely 'transparent', "translucent", and 'stable emulsion', without separation of insoluble matter.. These terminologies indicate that in order to fall under Heading 34.02, the goods should be "water soluble". Further, HSN Explanatory Notes (I) to Heading 34.02 for "Organic Surface-Active Agents (Other than soap)' defines non-ionic organic surface-active agents as under :

"(3) Non-ionic, in which case they do not produce ions in an aqueous solution. Their solubility in water is due to the presence in the molecules of functional groups which have a strong affinity for water. Examples are : products of the condensation of fatty alcohols, fatty or alkylphenots with ethylene oxide; ethoxylates of fatty acid amides. "

6.4 They submitted that alcohol ethoxylate is a non-ionic surfactant in technical and commercial understating. However, its solubility is dependent on number of ethylene oxide units in the molecule since ethylene oxide forms part of hydrophilic group. Thus, the surface tension of Alcohol ethoxylate solution increases with an increase in EO group units, and vice-a-versa, decreases with a decrease in EO units. The solubility is important test for classification under Heading 34.02. Relevant extract from 'Chemical Formulation; An Overview of Surfactant-based Preparations Used in Everyday Life' by Anthony Edward Hargreaves, Tony Hargreaves, published by RSC Paperbacks, explains non-ionic surfactants in chapter 2 at page 68, as under:

"Non-ionic surfactants

...Non-ionic surfactants can be manufactured from a wide range of raw materials amongst which many are plant based and therefore have the advantage of using renewable resources. In the examples that follow the lipophile is the hydrocarbon chain, just as with the ionic surfactants. Ost of non-ionics have as their hydrophile a series of ethylene oxide groups in (he forms of an ethoxylate chain. The more ethylene oxide group are present, the more hydrophilic the molecule, the greater its solubility in water. An ethoxylate with only two ethylene oxide groups will have virtually no water solubility but instead will be oil soluble whereas one with twenty such groups will have good Mater solubility but poor oil solubility.

6.5 They further submitted that in view of the above, more than 2 moles of ethylene oxide in FAE gives water solubility to the product whereas 2 or less moles of ethylene oxide will make FAE water insoluble. The products in question have 3 or more moles of ethylene oxide. Therefore, they arc water soluble and accordingly satisfy' the first requirement under Note 3(a) of Chapter 34. Further, Clause (b) of Note 3 requires that for a product to be a surfactant, it should reduce the surface tension of water to 4.5 x 10—2 N/m (45 dyne/cm) or less when mixed with water. It can be seen from the statutory definition that both the conditions are required to be met cumulatively and simultaneously.

6.6 They submitted that as per the Test Report dated 03/03/2017 issued by Thai-French Innovation Institute for 'Dehydol LS3 TH' confirms that it contains 2.83 moles of Ethylene Oxide. It states that when the sample was mixed with water at a concentration of 0.5% at 20° C and left to stand for one hour at the same temperature, it was a stable emulsion without separation of insoluble matter. The report further states that the tested product which is an FAE with 3 moles has surface tension of 29.364i0.268 dynes/cm. As per the results of this test / analysis report, the above-mentioned product meets both the criteria as specified under Note 3 of Chapter 34. Thus, it satisfies the OSAA test laid down under Note 3 of Chapter 34 and are classifiable under Heading 34.02. Further, as they are non-ionic, they are correctly classifiable under Tariff Item 3402 42 00 which covers 'non-ionic organic surface-active agents'.

6.7 They further submitted that SI. No. 399 of Notification No. 46/2011-Cus., dated 01.06.11 grants concessional rate of basic customs duty @5% to all goods falling under sub-Heading 340241 to 3402.42 when imported from countries listed in Appendix-I & II of the Notification. Accordingly, as the Applicant is proposing to import non-ionic FAE having 3 or more moles of EO classifiable under Tariff Item 3402 42 00 from Thailand, Singapore and Malaysia, the exemption shall be available.

6.8 They further submitted that the Customs department vide their letter dated 05.11.24 have given their comments regarding the captioned application. Vide this letter, the Customs department has not disputed the fact that the subject goods are classifiable under Heading 34.02. Further, as per the Customs department, there is no dispute regarding classification. The only point agitated by the Customs department is that in absence of any chemical test to prove that goods satisfy the criteria under Note 3 to Chapter 34, advance ruling is unwarranted. In this regard, it is submitted that test report was duly provided along with the application. Further, the Customs department is always at liberty to test the goods on import to confirm whether Note 3 is satisfied or not. However, this reason cannot preclude ruling on classification of these items. If such reason is accepted, then, no ruling can be issued on classification. Therefore, reasoning of the Customs department in this regard is completely incorrect.

6.9 They further invited attention to CAAR Ruling issued in the case of Suraj Constructions & Chandrakala Associates (submitted vide email dated 06.01.25) wherein Ruling was issued in favour of the applicant with a rider that in each case of import, the applicant would have to produce evidence before the customs officer. In view of the above submissions, they submitted that FAE having 3 or more EO moles are correctly classifiable under Heading 34.02.

7. Discussions and Findings

7.1 I have considered all the materials placed before me in respect of the classification of subject goods. I have gone through the submissions made by the applicant during the persona! hearing as well as the response received from the Jurisdictional Customs Commissionerate. Therefore, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework.

7.2 The applicant has sought advance ruling in respect of the following questions:

(a) Question: Whether the products in question namely 'Fatty Alcohol Ethoxylates having 3 or ihore moles of Ethylene Oxide' in the present application are classifiable under Tariff Item 3402 42 00 of the First Schedule to the Customs Tariff Act, 1975 (Tariff)?

(b) Question: If the answer to the above question is in the negative, then what would be the correct classification of 'Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide' under the Customs Tariff of India?

(c) Question: Whether the products in question 'Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide' in the present application are eligible for exemption under Sr. No. 399 of Notification No.46/2011-Cus., dated 01.06.2011 (ASEAN) as amended basis their origin from specified countries namely Thailand, Singapore, Malaysia?

7.3 The applicant submitted that the product in this application is Fatty Alcohol Ethoxylate (FAE) having 3/7/9 moles of Ethylene Oxide (EO) and it would be used as a thickener in cosmetic surfactant preparations such as shampoos, shower preparations, hand cleaner, dish wash detergent and foam baths, etc. The applicant further submitted that they have already been importing Fatty Alcohol Evthoxylates having one or two moles of Ethylene Oxides and have been classifying the same under CTH 3824. The applicant further submitted that this classification has been disputed by the Customs department and they have been issued a Show Cause Notice No. 45/2023 dated 09.05.2023 by the Chennai-II Commissionerate and the same is currently pending for adjudication.

7.4 At At the outset, I find that the issue raised at the Sr. No. 08 in the CAAR-1 form is squarely covered under Section 28H(2) of the Customs Act, 1962 being a matter related to the classification of goods applicability of a notification issued under sub-section (1) of section 25 of the Customs Act, 1962, having a bearing on the rate of duty.

    Further, I find that Section 28E (c) defines the 'Applicant' as any person holding a valid Importer-exporter Code Number granted under section 7 of the Foreign Trade (Development and Regulation) Act, 1992; or exporting any goods to India: or with a justifiable cause to the satisfaction of the Authority, who makes an application for advance ruling under Section 2.8H. In this matter, the applicant holds a valid Importer-exporter Code Number and satisfies one of the criterions mentioned under the definition of the Applicant under Section 28E and therefore, is a valid applicant for filing application under Section 28H of the Customs Act, 1962.

    Further. I find that the product i.e. FAE with more than 3 moles of EO is different from the product i.e. FAE with 1 or 2 moles and therefore, no cause arise for rejection of the application under proviso of Section 281 (2) as the questions raised in the application are not currently pending in the applicant's case before any officer of customs, the Appellate Tribunal or any Court; nor the same as in a matter already decided by the Appellate Tribunal or any Court.

In view of the above, I now take up the issue of classification of FAE with more than 3 moles of EO and applicability of Notification 46/2011 Sr. No. 399 on the rate of duty of the product.

7.5 Before deciding on the issue, let me deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/Section notes along with HSN explanatory notes. Classification of goods in the Harmonized System of Nomenclature (HSN) is governed by the General Rules for the interpretations. Rule 1 of the General Rules for the Interpretation of the Import Tariff to the Customs Tariff Act, 1975 stipulate that for legal purposes, the classification of the import item shall be determined according to the terms of the headings and any relative Section or Chapter Notes.

7.6 Based on the function, usage and literature provided and argument advanced by the applicant and the contention of department, it is observed that both the applicant and the department are of the opinion that the product i.e. FAE with more than 3 moles of EO merits classification under Heading 3402 as an Organic Surface-Active Agent. However, the department has further opined that the actual classification of the product cannot be decided without testing of the goods at the time of Import.

7.7 Let me first examine the relevant Section Notes, Chapter Notes and Heading Text for Heading 3402. The relevant portion of CTH 3402 is reproduced below:

7.8 From the above, it is seen that following two categories of products can be classified under
Heading 3402.

i. Organic Surface-Active Agents (Other than Soap)

ii. Surface-Active Preparations, Washing Preparations and Cleaning Preparations

    The applicant has submitted that, the product FAB with 3 or more mole of EO is an organic surface active agent (other than soap) and that it would be used as a thickener in cosmetic surfactant preparations. Therefore, it does not fall into second category of product.

7.9 For deciding whether the product falls under Heading 3402 or not as an Organic Surface- Active Agent, Chapter note 3 to Chapter 34 plays a vital role as it describes the condition needed to be fulfilled before classification of any product as Organic Surface-Active Agent. The same is reproduced below for ease of reference:

3. For the purposes of heading 3402, "organic surface-active agents" are products which when mixed with water at a concentration of 0.5% at 20°C and left to stand for one hour at the same temperature: (a) give a transparent or translucent liquid or stable emulsion without separation of insoluble matter; and (b) reduce the surface tension of water 4.5 X 10^-2 N/m (45 dyne/Cm) or less.

7.10 The Chapter Note 3 to Heading 3402 clearly lays down the condition that for any product to be classified as Organic Surface-Active Agent, it needs lo fulfil these two conditions i.e. the product should give a transparent or translucent liquid or stable emulsion and reduce the surface tension of water to 4.5 X 10"2 N/m or less when mixed with water at a concentration of 0.5% at 20° C and left to stand for one hour at the same temperature. Both the conditions need to be fulfilled by the product for its classification ns an Organic Surface-Active Agent.

7.11 Further, the HSN Explanatory notes for heading 3402 describes the Organic Surface-Active Agents as chemical compounds, not chemically defined, which contain one or more hydrophilic or hydrophobic functional groups and satisfies the conditions mentioned in the Note 3 to Chapter 34. It further clarifies that an emulsion should not be considered as having a stable character if, after being left to stand for one hour at 20°C, solid particles are visible to naked eye or it has separated into visually distinguishable phases or it has separated into a transparent part and a translucent part visible to the naked eye i.e. there should not be any visual separation of the emulsion visible to naked eye. Relevant HSN Explanatory notes for Heading 3402 are reproduced below:

(I) ORGANIC SURFACE-ACTIVE AGENTS
(OTHER THAN SOAP)

The organic surface-active agents of this heading are chemical compounds, not chemically defined, which contain one or more hydrophilic or hydrophobic functional groups in such a proportion that, when mixed with water at a concentration of 0.5 % at 20 °C and left to stand for one hour at the same temperature, they give a transparent or translucent liquid or stable emulsion without separation of insoluble matter (see Note 3 (a) to this Chapter). For the purposes of this heading, an emulsion should not be considered as having a static character if, after being left to stand for one hour at 20 °C, (1) solid particles are visible to the naked eye, (2) it has separated into visually distinguishable phases or (3) it has separated into a transparent part and a translucent part, visible to the naked eye.

Organic surface-active agents are capable of adsorption at an interface; in this state they display a number of physico-chemical properties, particularly surface activity (e.g., reduction of surface tension, foaming, emulsifying, wetting), which is why they arc usually Known as "surfactants".

However, products which are not capable of reducing the surface tension of distilled water to 4.5 x 10'2 N/m (45 dyne/cm) or less at a concentration of 0.5 % at 20 °C are not regarded as surface-active agents and are therefore excluded from this heading.

7.12 From the above, I observe that for a product to be classified as an Organic Surface-Active Agent, it should produce a stable homogenised either transparent or translucent solution or emulsion when mixed with water at a concentration of 0.5% at 20°C and it should not have any visual separation visible to naked eye when allowed to stand for one hour at 20°C. Also, at the same time, it should reduce the surface tension of distilled water to 4.5 X 10"2 N/m or less.

7.13 Before delving onto the issue at hand i.e. whether the product satisfies the conditions mentioned in the Chapter Note 3 or not, let me examine the answer to following questions.

i. What is Fatty Alcohol Ethoxylates?

ii. How the presence of moles of Ethylene Oxides affects their water solubility?

7.13.1 I observe that, fatty alcohol ethoxylates are a group of non-ionic surfactant derived from fatty alcohol. The ethoxylation process involves adding ethylene oxide molecule to the fatty alcohol resulting in a compound with water attracting (Hydrophilic) and oil attracting (lipophilic) properties. The general structure of fatty alcohol ethoxylates is a fatty alcohol backbone (usually C-10 to C-18 carbon chain) with polyoxyethylene chain.(-CH2CH20-) attached to it. These compounds are widely used for their emulsifying, cleaning, wetting and foaming properties. The properties of fatty alcohol ethoxylates depend on the chain length of the fatty alcohol and the number of ethoxy groups.

7.13.2 Ethylene Oxide (EO) units are water-attracting (hydrophilic) segments added to the water-repelling (hydrophobic) fatty alcohol chain. Each ethoxy group (-CH2CH20-) increases the compound's affinity for water. Longer hydrocarbon chains reduce overall solubility whereas greater EO units improve water solubility by increasing the hydrophilic fraction of the molecule.

7.14 I have gone through a reference copy of the Product Catalogue, Material Safety Data Sheet, Certificate of Analysis, Supplier's Invoice and Test report submitted by the Applicant for one of the products 'Dehydol LS 3 TH (MB)'. From the document submitted, it is observed that the chemical name of the product is Polyoxyethylene (3) Lauryl ether. Further, from the Analysis report of the product carried out by InS Thai limited; it is observed that the product i.e. Dehydol LS 3 TH satisfies both the conditions mentioned in the Chapter Note 3 of the Chapter 34 as it decreased the surface tension of the water to 29.3654±0.268 and gives a stable emulsion without separation of insoluble matter. Reports submitted are as under:

I. Surface tension of Dehydol LS3 TH (Batch no. Z161030634)

    Table 2 summarized surface tension results of sample, the sample showed the surface tension of 29.364±0.268 dynes/cm.

Table 2: Surface tension results of sample.

2. Appearance testing of Dehydol LS3 111 (Botch no. Z161030634)

    Figure I presented the appearance of sample at 20 °C. The stable emulsion without separation of insoluble mailer was visually observed on the sample after 1 h.

7.15 Further. 1 have gone through the information available on the websites of the suppliers and on open source for product, brand names and suppliers mentioned in Table 1 in Para 2.3 above. From the same, I observe that the product name is mentioned as Alpha Ethoxylate which is different from Fatly Alcohol Ethoxylates as Alpha Ethoxylates are derived from Alpha-olefins. which are linear hydrocarbons with a double bond at the first carbon atom, typically sourced from petroleum or gas whereas Fatly Alcohol Ethoxylates are derived from fatty alcohols, which are long-chain alcohols obtained from natural fats and oils (e.g., coconut oil, palm oil) or synthesized chemically. Further. Alpha Ethoxyiales exhibits higher hydropbobicily compared to Fatty Alcohol Ethoxylales.

It has also observed that although the product name is mentioned as Alpha Ethoxylate, the brand names mentioned refers to Fatty Aicohol Ethoxylates. Therefore, this ruling is only in respect of Fatty Alcohol Ethoxylates, and specifically for the brand names mentioned in the 'fable I in Para 2.3 above.

The information gathered from the product data sheet downloaded from the website of Thai Ethoxylate Company limited for Dehydol LS 3 TH, Dehydol LS 7 TH and Dehydoi LS 9 TH is as under:

    The CAS no. was checked on https://commonchemistry.cas.org/. The chemical registered against this number is Alcohols, C12-14, ethoxylaled that is FAE. The chemical is also known as Polyoxyethylene lauryl ether, Laureth, non-ionic surfactant etc. It has further been observed I hat these FAEs are an alkyl polyglycol ether of lauryl alcohol, chemically defined as an alcohol ethoxylalc having an average alkyl chain of 12-14 carbon atoms and an ethylene oxide chain of 3 / 7 / 9 ethylene oxide units and these are generally used as a surfactant.

7.16 From the data submitted by the applicant as well as information available on the websites of the suppliers, I observe that the products are non-ionic surfactants as per the description provided by the applicant and information available on open source. Non-ionic surfactants are a type of surface-active agents that have no net electrical charge in their formulations. That means the molecule does not undergo any ionization when it is dissolved in water. Accordingly, the product under consideration would merit classification under CT1 34024200 as a non-ionic organic surface-active agent. It is pertinent to mention that classification of any product is governed by General Rules of Interpretations as applicable. Rule I of GRI gives foremost importance to the Heading Text, Section Notes and Chapter Notes. Since there is a specific heading for Organic Surface-Active Agents under CTH 3402, therefore, the product i.e. FAE which is essentially an Organic Surface-Active Agent, merits classification under CTH 3402 and specifically under Heading 34024200 as it is a non-ionic Organic Surface-Active Agent.

7.17 Further, in the matter of VVF (India) Limited, in Ruling No. CAAR/Mum/ARC/92/2021, this authority has also earlier held that the goods "Fatty Alcohol Ethoxylate (1 -mole,.2.-moles. 7-moles)" are non-ionic organic surface-active agents and merit classification under subheading 34021300 of Customs Tariff Act, 1975, subject to prescribed conditions under note 3 to Chapter 34.

7.18 Since the products have not yet imported into the country, the ruling in this case has to rely upon the information submitted by the applicant, product description and relevant information available in the public domain. In view of above information, facts of the case and arrangement of the Customs Tariff, the product appears to be appropriately classifiable under CTI 3402 4200. However, it is contingent upon the testing of the products at the time of actual import of subject goods.

7.19 Further, with regards to the applicability of Notification No. 46/2011 Sr. No. 399 as amended, I find that if the goods are imported from the ASEAN countries as listed in Appendix-I and II of the notification, and each import is accompanied with a Country of Origin Certificate in the prescribed format issued by an ASEAN country as listed in Appendix-I and II, and importer complies with the CAROTAR (Customs Administration of Rules of Origin under Trade Agreement Rules), 2022, then these products are eligible for concessional rate of duty in terms of Sr. No. 399 of Notification No. 46/2011 dated 01.06.2011 as amended.

8. In light of the above facts, discussions and observations, my findings on the questions raised by the applicant are as under:

a) Question: Whether the products in question namely 'Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide' in the present application are classifiable under Tariff Item 3402 42 00 of the First Schedule to the Customs Tariff Act, 1975?

Ans. Yes, the products i.e. Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide are classifiable under Tariff Item 3402 42 00 of the First Schedule to the Customs Tariff Act, 1975. However, the same is contingent upon the testing of the product at the time of import to verify that the products satisfy the conditions mentioned in Note 3 of the Chapter 34.

b) Question: If the answer to the above question is in the negative, then what would be the correct classification of 'Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide' under the Customs Tariff of India?

Ans. Not Applicable

c) Question: Whether the products in question 'Fatty Alcohol Ethoxylates having 3 or more moles of Ethylene Oxide' in the present application are eligible for exemption under Sr. No. 399 of Notification No.46/2011-Cus., dated 01.06.2011 (ASEAN) as amended basis their origin from specified countries namely Thailand, Singapore, Malaysia?

Ans. If the products, upon testing, satisfies the conditions mentioned in Chapter Note 3 to Chapter 34 and are imported from ASEAN countries as listed in the Appendix I and II to the Notification 46/2011 dated 01.06.2011, then the exemption under Sr. No. 399 of Notification No. 46/2011-Cus. dated 01.06.2011 would be available to the applicant subject to the presentation of Country of Origin Certificate for each consignment and further following of rules and procedures as set out in the CAROTAR rules, 2022.

9. I rule accordingly.

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

 

F. No. CAAR/CUS/APPL/87/2024-O/o Commr-CAAR-Mumbai            Dated:30-01-2025

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

1. Detergeo Chem Private Limited
A-29, Block B-I Extension, Mohan Co-operative Ind. Estate,
New Delhi, South Delhi, Delhi - 110044
Email- dhruv@newindiachem.com

2. The Commissioner of Customs, Chennai-II (Import),
Customs House, 60, Rajaji Salai, Chennai- 600001
Email- chennai-importoffice@aov.in
commr2-cuschn@gov.in

3. The Customs Authority for Advance Rulings,
Room No. 24, New Customs House,
Near 1GI Airport, New Delhi-110037.
Email: eus-advrulings.del@gov.in

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

5. The Commissioner (Legal), CB1C Offices,
Legal/CX.SA, Cell, 5^th floor, Hudco Vishala Building,
C-Wing. Bhikaji Cama Place, R. K. Puram, New Delhi - 110066.
 Email: commr.legal-cbec@nic.in

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

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

8. Guard file

(Vivek Dwivedi)           
Dy. Commissioner & Secretary
Customs Authority for Advance Rulings.
 Mumbai.