2022 (4) TMI 1495 - AAR - Customs

Classification of imported goods - Light Feed Oil or Distilled Fatty Acid (LFO) - Heavy Feed Oil or Fatty Substance Mixture (HFO) - import from Harting SA, Chile - to be classified under Customs Tariff Headings 3824 for HFO and 3823 for LFO or not - Eligibility for exemption under a notification issued under Section 25(1) of Customs Act, 1962. LFO - HELD THAT - Due consideration given to the proposal of the applicant that the proposed classification for LFO would be Heading 3823. Chapter 38 deals with Miscellaneous chemicals products . The title itself denotes that it is a grouping of residuary headings for those goods which cannot be more appropriately classified elsewhere. Further, Heading 3823 deals with Industrial monocarboxylic fatty acids; and oils from refining; industrial fatty alcohols. The product LFO which is derived from fish oil does not appear merit classification under this heading because of the available specific classification Entry 1504 20 and there is nothing in the relevant mandate of the said chapter or section notes of Chapter 15 entries to take it out of the purview of Chapter 15 and classify it under a miscellaneous entry. HFO - applicant has proposed classification under Tariff Entry 3824 for this product - HELD THAT - Heading 1516 deals with Animal or vegetable fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or elaidinised, whether or not refined, but not further prepared. In the matter before me, HFO or fatty substance mixture, is a by-product of the process of refining of fish oil which has undergone processes of trans-esterification and distillation but not processed further. Therefore, HFO or fatty substance mixture merits classification under Heading 1516 and specifically under sub-heading 1516 10 00 as has been provided from in the notes to HSN - the proposed classification of this product under Heading 3824 by the applicant does not appear to be correct. As already stated, Chapter 38 deals with Miscellaneous Chemical products . The residuary chapter is meant for those goods which cannot be classified elsewhere. Heading 3824 deals with Prepared binders for foundry moulds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included. The product HFO which is derived from fish oil does not appear to merit classification under this chapter heading. Eligibility for exemption under a notification issued under Section 25(1) of Customs Act, 1962 - HELD THAT - It appears that Light Feed Oil classifiable under sub-heading 1504 20 90 is not covered under any such notification. However, Heavy Feed Oil, classifiable under sub-heading 1516 10 00 is covered under Sr. No. 75 of the table appended to the Notification No. 50/2017-Cus., dated 30-6-2017.

Issues Involved:
1. Classification of Light Feed Oil (LFO) or Distilled Fatty Acid under the Customs Tariff.
2. Classification of Heavy Feed Oil (HFO) or Fatty Substance Mixture under the Customs Tariff.
3. Applicability of notifications under Section 25(1) of the Customs Act, 1962 for concessional duty rates.

Detailed Analysis:

1. Classification of Light Feed Oil (LFO) or Distilled Fatty Acid:

The applicant proposed that LFO, a by-product from the Omega 3 oil industry, should be classified under Customs Tariff Heading 3823. However, upon examination, it was determined that LFO is primarily composed of monocarboxylic fatty acids, obtained through the hydrolysis and distillation of fish oil. The relevant classification principles are governed by the General Rules of Interpretation (GIR).

The judgment referred to Chapter 15 of the Customs Tariff Act, 1975, which deals with animal or vegetable fats and oils and their cleavage products. The notes to Heading 1504 specify that fats and oils derived from fish or marine mammals remain classified under this heading unless chemically modified. Since LFO is a by-product of fish oil distillation and has not been chemically modified, it was ruled that LFO merits classification under sub-heading 1504 20 90 as "Others."

The applicant's proposal to classify LFO under Heading 3823 was rejected because Chapter 38 is a residuary heading for miscellaneous chemical products not classified elsewhere. Given the specific classification available under Chapter 15, LFO does not fit under Heading 3823.

2. Classification of Heavy Feed Oil (HFO) or Fatty Substance Mixture:

The applicant suggested that HFO should be classified under Tariff Entry 3824. HFO is produced as a by-product residue from the trans-esterification and distillation process of fish oil/tallow oil, resulting in Omega 3 concentrates.

The judgment again referred to Chapter 15, which includes products derived from fats or oils and residues from the treatment of fatty substances. Specifically, it was noted that fats and oils derived from fish oil that undergo esterification should be classified under Heading 1516, which deals with animal or vegetable fats and oils and their fractions that are partly or wholly hydrogenated, inter-esterified, re-esterified, or elaidinised.

Since HFO is a by-product of the trans-esterification and distillation process and has not been processed further, it was ruled that HFO merits classification under sub-heading 1516 10 00.

The applicant's proposal to classify HFO under Heading 3824 was also rejected, as Chapter 38 is intended for miscellaneous chemical products not specified elsewhere. Given the specific classification under Chapter 15, HFO does not fit under Heading 3824.

3. Applicability of Notifications under Section 25(1) of the Customs Act, 1962:

The judgment examined the eligibility for exemption under notifications issued under Section 25(1) of the Customs Act, 1962. It was determined that Light Feed Oil (LFO) classifiable under sub-heading 1504 20 90 is not covered under any such notification. However, Heavy Feed Oil (HFO) classifiable under sub-heading 1516 10 00 is covered under Sr. No. 75 of the table appended to Notification No. 50/2017-Cus., dated 30-6-2017, making it eligible for a concessional duty rate of 30% ad valorem.

Summary:

The judgment concluded that Light Feed Oil (LFO) or Distilled Fatty Acid and Heavy Feed Oil (HFO) or Fatty Substance Mixture merit classification under sub-headings 1504 20 90 and 1516 10 00, respectively, of the First Schedule to the Customs Tariff Act, 1975. HFO, falling under sub-heading 1516 10 00, is eligible for a concessional rate of duty at 30% ad valorem, as covered under Sr. No. 75 of the table appended to Notification No. 50/2017-Cus., dated 30-6-2017.

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