2017 (10) TMI 919 - AT - Customs

Classification of imported goods - Yeast Cell - whether the product declared as Yeast Cell Wall is in the nature of Autolysed Yeast which would merit classification as Aytolysed Yeast under CTH 2106 or whether the classification under CTH 2102 declared by the appellant is more appropriate? - Held that - no contradictory evidence has been adduced by the department to show that the Yeast Cell Wall is autolysed and undergone change in any such autolysation - during the process of autolysis, the cells get destructed and the outer covering would also not remain integrated. Having made such an observation, we are not able to fathom how lower appellate authority finds that the impugned goods are autolysed yeast, in spite of his confusion. Once it is evident that in the process of autolysation merely results in enzymatic digestion of the cell by enzymes and their destruction, the resultant degenerated cell per se would possibly merit classification as Autolysed Yeast under CTH 2106. However, when the Yeast Cell Wall on its own does not get autolysed or undergoes any change, the same would only be classifiable as yeast under CTH 2102. Appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of imported Yeast Cell Wall under CTH 2106 or CTH 2102, eligibility for exemption under Notification No.3/2006-Cus.

Issue 1: Classification of Yeast Cell Wall

The dispute revolves around whether the imported "Yeast Cell Wall" should be classified as "Autolysed Yeast" under CTH 2106 or under CTH 2102 as declared by the appellant. The appellant argued that the yeast cell wall, constituting a significant portion of the cell's dry weight, does not undergo autolysis and is separated by centrifugation and spray drying. The appellant contended that the yeast cell wall, not undergoing autolysis, should be classified under CTH 2102, not CTH 2106. The lower adjudicating authority concurred, stating that since the yeast cell wall does not undergo autolysis, it should be classified under CTH 2102. The appellate tribunal agreed with this assessment, noting the lack of contradictory evidence from the department proving autolysis of the yeast cell wall.

Issue 2: Interpretation of HSN and HSN Explanatory Notes

The tribunal analyzed the Harmonized System of Nomenclature (HSN) to understand the classification criteria for yeasts under CTH 2102 and Autolysed Yeast under CTH 2106. The HSN notes to CTH 2106 specify that Autolysed Yeast and other yeast extracts fall under this classification. The tribunal examined the literature provided by the appellant, emphasizing that autolysis is a self-digestion process of inner constituents of yeast cells, while the yeast cell wall remains unaffected. The tribunal found that the yeast cell wall, not undergoing autolysis, should be classified under CTH 2102 based on the information provided by the importer/appellant.

Issue 3: Lack of Evidence Supporting Autolysis of Yeast Cell Wall

The tribunal highlighted the absence of evidence from the department demonstrating that the yeast cell wall undergoes autolysis or any change qualifying it as Autolysed Yeast under CTH 2106. Despite references to autolysis in the department's appeal, no detailed explanation was provided as to why the yeast cell wall should be considered a preparation under CTH 2106. The tribunal noted that the lower appellate authority's confusion regarding the autolysis process and the lack of integration of the outer covering during autolysis further supported the classification of the yeast cell wall under CTH 2102.

In conclusion, the appellate tribunal set aside the impugned order, thereby upholding the classification of the imported Yeast Cell Wall under CTH 2102 and granting consequential benefits to the appellant. The decision was based on the lack of evidence supporting autolysis of the yeast cell wall, leading to its classification under CTH 2102 rather than CTH 2106.