2022 (7) TMI 1435 - AAR - Customs

Classification of goods intended to be imported - 17 enzyme products - to be classifiable under heading 3507 or under heading 2309? - HELD THAT - The impugned products are a combination of active ingredients and inactive ingredients such as antioxidants, minerals and stabilisers - These goods consist of active ingredients, preservatives, stabilisers and carriers. As per HSN explanatory notes, active ingredients with a suitable carrier along with additives required for preservation and transport is a premix, which is added to the complete animal feed or supplementary animal feed. The Hon'ble Tribunal in RECKITT AND COLMAN OF INDIA LTD., CALCUTTA VERSUS COLLECTOR OF CENTRAL EXCISE, CALCUTTA 1985 (4) TMI 306 - CEGAT NEW DELHI has held that to qualms as a preparation the said product should be prepared by addition, mixing or such other similar process to the original commodity in order to derive a new commodity. From the above, it is clear that the products under consideration are preparations, also known as premixes. It is observed that heading 2309 is an end-use-based heading. In this regard, reliance may be placed on the decision of Hon'ble in the case of TETRAGON CHEMIE (P) LTD. VERSUS COLLECTOR OF C. EX., BANGALORE 1998 (9) TMI 390 - CEGAT, NEW DELHI , wherein it was held that end-use assumes importance in determining the classification of goods under heading 2302 of CETA, 1985. The same is because the description of the goods under heading 2302 reads as 'Preparations of a kind used for animal feeding including cat and dog food'. The heading specifically states that the preparations must be used for animal feeding. Therefore, heading 2302 is an end-use-based heading. It must be noted that heading 2302 of CETA, 1985 is akin to Heading 2309 of the Customs Tariff Act, 1975. As per the HSN explanatory note, the heading 2309 excludes protein substances of Chapter 35. However, the impugned products contain these protein substances, i.e. enzymes in very small quantities. They can't be considered as protein only product, rather they are products containing enzymes among other substances like stabilisers, solvents, preservatives and carriers. Therefore, the impugned goods do not appear to be hit by the above-mentioned exclusion clause. It is to be noted that the active ingredient present in the impugned goods is in the range of 1.2% to 17%. The products, apart from enzymes, also include stabilisers, solvents, preservatives and carriers. The inclusion of such additives makes the impugned products suitable for specific use. Therefore, while classifying the product as a whole need to be considered rather than only the active ingredient present in the specific product. The products, are specifically used to enhance nutrient digestibility and help in enhancing the nutritive value of the animal feed. Therefore, the said products do not merit classification under heading 3507. The 17 products listed in Table 1 are classifiable under heading 2309 and more specifically, under subheading 23099090 of the first schedule to the Customs Tariff Act, 1975.

Summary

Issues Involved: Classification of enzyme-based products for animal feed.

Issue-wise Detailed Analysis:

1. Background and Application:
M/s BASF India Limited filed an application for advance rulings on the classification of 17 enzyme-based products used in animal feed. The applicant is involved in trading and manufacturing chemicals and animal feed, and imports these products from BASF Germany and other third parties.

2. Applicant's Submissions on Classification:
The applicant argues that the products should be classified under heading 2309 of the Customs Tariff Act, 1975, as they are used specifically for animal feed and not for any general use. They reference Circular No. 80/54/2018-GST and Circular No. 188/22/95-CX to support their claim that these products, which are used as food supplements for animals, should be classified under heading 2309.

3. Alternative Classification Suggested by Applicant:
Alternatively, the applicant suggests that the products could be classified under subheading 35079099 as 'Enzymes; prepared enzymes not elsewhere specified or included; Other; Other', similar to the global classification adopted by BASF.

4. Hearing and Submissions:
During the hearing, the applicant provided detailed technical and safety data sheets, manufacturing processes, composition certificates, and product labels. They also submitted a compilation of notifications, circulars, cross-rulings, and case laws. An excel sheet detailing the end-use of the products and their inactive ingredients was also submitted.

5. Analysis of the Products:
The products in question contain enzymes derived from Aspergillus Niger and Thermothelomyces thermophilus and are used as premixes in animal feed. These enzymes, such as phytases and non-starch polysaccharides (NSP), enhance nutrient digestibility and improve the nutritive value of animal feed.

6. Relevant Headings for Classification:
The relevant headings for classification are:
- 2309: Preparations of a kind used in animal feeding.
- 3507: Enzymes; prepared enzymes not elsewhere specified or included.

7. GRI 1 and HSN Explanatory Notes:
According to GRI 1, classification should be determined by the terms of the headings and any relative section or chapter notes. Heading 2309 includes products used in animal feeding, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material.

8. HSN Explanatory Notes on Premixes:
The HSN explanatory notes to heading 2309 cover premixes, which are compound compositions consisting of active ingredients, preservatives, stabilizers, and carriers. These premixes are used in making complete or supplementary animal feeds.

9. Supporting Documents:
The applicant submitted certificates from the German Government's certifying agency and test reports from Doctors Analytical Laboratories Pvt. Ltd., confirming that the products are feed supplements of animal grade.

10. Board's Circulars:
Board's Circular No. 188/22/95-CX and Circular No. 80/54/2018-GST clarify that preparations containing active ingredients used for animal feeding are classifiable under heading 2309.

11. End-Use Based Heading:
Heading 2309 is an end-use-based heading, as established in the case of Tetragon Chemie (P) Ltd vs. Commissioner of Central Excise, Bangalore. The products in question are used specifically for animal feed, justifying their classification under heading 2309.

12. Exclusion from Heading 3507:
The products contain enzymes in small quantities along with other substances like stabilizers, solvents, preservatives, and carriers. Therefore, they do not merit classification under heading 3507, which covers enzymes and prepared enzymes not elsewhere specified or included.

Ruling:
The 17 enzyme-based products listed in Table 1 are classifiable under heading 2309 and more specifically, under subheading 23099090 of the first schedule to the Customs Tariff Act, 1975.