2019 (2) TMI 1236 - AT - Central Excise

Change of classification of he product - 12 Hydroxy Stearic Acid - Ricinoleic Acid - change of classification from Chapter heading 2915 and 2916 to Chapter heading 3823 - Held that - The classification of products depend on the purity. For classification under Chapter heading 29, the product has to be separate chemically defined organic compound . The perusal of the test report shows that the sample consists of Ricinoleic Acid (by GC) 85.70%, Linoleic Acid (by GC) 4.39%, Oleic Acid (by GC) 3.00%, Palmitic Acid (by GC) 1.10% and Stearic Acid(by GC) 1.66%. Thus the samples contain total of 95.85% fatty acid. Similarly the other sample consists of 12-Hydroxy Stearic Acid(by GC) 85.20%, 12-Keto Stearic Acid (by GC) 1.48%, Stearic Acid (by GC) 10.40% and Palmitic Acid (by GC) 1.20% i.e. it contains of total of 98.28% of fatty acid - reliance is placed on Chapter note 1(a) which clearly holds that separately defined organic compounds are to be decided in Chapter 29 even if they contains impurities. The treatment to be given to mixtures of isomers is clarified in Chapter note 1(b). In the instant case, the mixtures is not as isomers and are different acids and not isomers. In these circumstances, the criteria for classification would be the percentage of Ricinoleic Acid and 12-Hydroxy Stearic Acid - If we apply the exclusion clause to Chapter heading 2915 and 2916 to the above facts, it transpires that the product containing less than 90% of Ricinoleic Acid or 12-Hydroxy Stearic Acid would be classifiable under Chapter 3823 and not under Chapter 2915 or 2916. Thus, if the concentration of 12-Hydroxy Stearic Acid is above 90%, the product will be classifiable under Chapter 29, otherwise not - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of products under Chapter headings 2915, 2916, and 3823 based on purity.

Analysis:
The appeal involved a dispute regarding the classification of products, namely "12 Hydroxy Stearic Acid" and "Ricinoleic Acid," by M/s. Jayant Agro Organics Limited. The appellants were initially classifying these products under Chapter headings 2915 and 2916. However, the Customs sought to change the classification to Chapter heading 3823, arguing that the purity of the fatty acids was less than 90%. The appellant contended that the chemical examiner's classification was incorrect and that the products should be classified under heading 3823 due to their purity level. The key issue revolved around the correct classification based on the purity of the products.

The appellant's counsel pointed out that the HSN explanatory notes exclude fatty acids with purity less than 90% from Chapter headings 2915 and 2916, making them classifiable under heading 3823. The chemical examiner's report indicated the purity levels of the products, which were below 90%. The appellant argued that the examiner was not competent to classify the products and that prior to June 2014, they were correctly classified under headings 2915 and 2916. The Customs' testing at the time of export led to the proposed change in classification to Chapter 3823, which the appellant contested.

The AR relied on the specific heading 29157040, which included "12 Hydroxy Stearic Acid," to support the classification under Chapter 2915. It was argued that the HSN was irrelevant in the absence of classification doubts. The appellant, in response, emphasized that the purity of the specific fatty acids should determine the classification under Chapter headings 2915, 2916, and 3823.

The tribunal analyzed the purity levels of the products based on the chemical examiner's report. It noted that the samples contained fatty acids with purity levels below 90%. Referring to the exclusion clauses and Chapter notes, the tribunal highlighted the importance of purity in classification. It concluded that products containing less than 90% of specific fatty acids should be classified under Chapter 3823, not under headings 2915 or 2916. The tribunal also addressed the argument regarding the specific inclusion of "12-Hydroxy Stearic Acid" in heading 29157040, emphasizing that purity levels determined the correct classification.

In light of the above analysis, the tribunal found merit in the appeal and allowed it, emphasizing the significance of purity levels in determining the appropriate classification under the relevant Chapter headings.