2022 (8) TMI 111 - AAR - Customs

Classification of imported goods - I-MAS POs, which is Nickel Hydroxide compound (containing 78% to 80% of Nickel Hydroxide, 2 to 2.5% of Cobalt Hydroxide balance Graphite) - to be classified under the Tariff Entry 2825 40 00 or not - N/N. 50/2017-Customs, dated 30-6-2017 (Sr. No. 180) - HELD THAT - Classification of imported goods is governed by the principles set forth in the General Rules of Interpretation (GIR). Rule 1 of GIR provides that for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions that is, GIRs 2 to 6 . This is the first Rule to be considered in classifying any product. In other words, if the goods to be classified are covered by the words in a heading and the Section and Chapter Notes do not exclude classification in that heading, the heading would apply to the said goods. As required under Rule 1 of GIRs, the classification of the compound of Nickel Hydroxide is determinable according to the terms of heading and relative Chapter Note of Chapter 28 and these headings or Notes do not leave any ambiguity that proposed goods, which is a separately defined chemical compound, is aptly classifiable under HSN Code 2825 40 00 of Heading 28. As per the chapter notes to Chapter 28, separately defined chemical compounds would remain classified under Chapter 28, whether or not containing impurities. The Nickel Hydroxide, though containing cobalt and graphite in minor quantities, remains suitable for general use in manufacture of Nickel Cadmium batteries. The presence of cobalt and graphite does not render the product suitable for any different use or for a specific use - The additives are minor and do not change the nature or function of the compound; they enhance the performance and life cycle of the Nickel electrode. The formation of the electrically conductive network favourably impacts the utilization of the active material, which is Nickel Hydroxide. Thus, it is in terms of the Chapter Note 1 of Chapter 28 read with Rules 1, 2 and 3(a) of the GIR, the goods proposed to be imported i.e. I-MAS POS, consisting of Nickle Hydroxide (78-80%), Cobalt Hydroxide (2-2.5%), Graphite (12-18%) and moisture (2.8%) is classifiable under sub-heading 2825 40 00. The applicant has claimed that consequent to the classification of the impugned under sub-heading 2825 40 00 of the First Schedule to the Customs Tariff Act, 1975, the Nickle Hydroxide compound is also eligible to avail the benefit of Notification No. 50/2017, dated 30-6-2017 Entry Sr. No. 180 which covers Nickel oxide and hydroxide classified under 2825 40 00 at nil rate of duty.

Summary

Issues Involved:

1. Classification of Nickel Hydroxide Compound under the Customs Tariff.
2. Eligibility for benefit under Notification No. 50/2017-Customs.

Issue-wise Detailed Analysis:

1. Classification of Nickel Hydroxide Compound:

The applicant, M/s. Smartage Projects Pvt. Ltd., intends to import I-MAS POs, a Nickel Hydroxide compound containing 78-80% Nickel Hydroxide, 2-2.5% Cobalt Hydroxide, and balance Graphite. They proposed classification under Tariff Entry 2825 40 00.

The applicant argued that Nickel Hydroxide is the primary component used in Nickel-Cadmium batteries, with Cobalt Hydroxide and Graphite added to enhance conductivity and performance. They cited the General Rules of Interpretation and a Tribunal decision to support their classification.

The jurisdictional Commissionerate countered that Chapter 28 is limited to separate chemical elements and defined compounds, and the imported material, being a mixture, should be classified under Tariff Entry 2853 90 00 as "Other Inorganic Compounds." They also referenced a US Customs ruling classifying similar goods under Heading 2853.

During the personal hearing, the Commissionerate suggested alternative classification under Chapter 38 but ultimately reiterated their stance on Heading 2853. The applicant rebutted, emphasizing that the product is a single chemical compound and should be classified under 2825 40 00.

The Authority examined the Chapter Notes and Explanatory Notes to Chapter 28, which define separate chemically defined compounds and allow for impurities or minor additions that do not alter the product's general use. The Authority concluded that the additions of Cobalt Hydroxide and Graphite improve Nickel Hydroxide's performance without changing its essential character, thus fitting within the scope of Heading 2825.

The Authority also noted the principles of the General Rules of Interpretation, particularly Rule 1, which emphasizes classification based on the terms of the headings and relevant notes. Given that Nickel Hydroxide remains suitable for general use in Nickel-Cadmium batteries, the Authority found it appropriately classifiable under Tariff Entry 2825 40 00.

2. Eligibility for Benefit under Notification No. 50/2017-Customs:

The applicant claimed that upon classification under Tariff Entry 2825 40 00, the Nickel Hydroxide compound would be eligible for the benefit of Notification No. 50/2017-Customs, which allows a nil rate of duty for "Nickel Oxide and Hydroxide" under Sr. No. 180.

The Authority confirmed that the classification under sub-heading 2825 40 00 aligns the product with the eligibility criteria of the said notification, thereby entitling the applicant to avail the benefit of nil duty rate as specified.

Conclusion:

The Authority ruled that the Nickel Hydroxide compound, containing 78-80% Nickel Hydroxide, 2-2.5% Cobalt Hydroxide, and balance Graphite, is classifiable under sub-heading 2825 40 00. Consequently, the product is eligible for the benefit of Notification No. 50/2017-Customs, dated 30-6-2017, under Sr. No. 180, allowing a nil rate of duty.