2023 (2) TMI 675 - AAR - Customs

Classification of import goods - Luprosil Salt Calcium - intent to import the said goods through the entry points of seaports/airports at Nhava-Sheva Mumbai (Air Cargo Complex) Chennai (preventive Commissionerate) and Kolkata - to be classified under Heading 23.09 of the Customs Tariff as premix for animal feed or not - Heading 2915 which is adopted by the global desk of the applicant is the competing classification entry. HELD THAT - In the present case the starting material in the product brochure is propionic acid. Luprosil salt based on propionic acid does not appear to have any impurity. The 2% unexplained component in Luprosil salt could have resulted from the manufacturing process having no stated specific utility. Therefore the product can be classifiable under Chapter 29 and specifically under Heading 2915 - Heading 2309 is in the nature of a residuary heading as Note I to Chapter 23 says that the Heading 2309 includes products of a kind not elsewhere specified or included whereas sub-heading 2915 50 00 is a specific heading for propionic acid its salts and esters. As per the Rule 3(a) of General Interpretation Rules a specific heading shall prevail over the general heading. The Hon ble High Court of Allahabad in the case of COMMISSIONER OF CUSTOMS CGO. VERSUS SONAM INTERNATIONAL SHOP NO. 9 2010 (10) TMI 120 - ALLAHABAD HIGH COURT held that vitamins of high concentration used for manufacture of animal feed will be classified under 2936. Admittedly the product in this case has a very high concentration to the tune of 98%. Even though the applicant in their application has stated that the product which they propose to import is going to be used in the manufacture of animal feed as discussed in the preceding paragraphs propionic acid and its salts are not excluded from the ambit of the Chapter 29 - On the contrary there is a very specific tariff entry for this very product. Therefore when confronted with a specific classification entry vis- -vis a residuary classification entry one must favour the specific entry. In fact as per the mandate of Rule 3A of the General Rules of Interpretation of Customs Tariff the specific heading prevails over the general heading. Thus the Luprosil salt is classifiable under Heading 2915 and more specifically under sub-heading 2915 50 00 of the First Schedule to the Customs Tariff Act 1975.

Summary

Issues Involved: Classification of Luprosil Salt Calcium under the Customs Tariff Act; whether it should be classified under Heading 23.09 (preparations of a kind used in animal feeding) or Heading 29.15 (organic acids).

Issue-wise Detailed Analysis:

1. Classification under Heading 23.09 vs. Heading 29.15:

The applicant, M/s. BASF India Ltd., sought an advance ruling on the classification of Luprosil Salt Calcium, a product with 98% calcium propionate, used as a feed preservative. The applicant's global desk classified the product under HS Code 29.15 (organic acids), while the domestic industry classified similar products under Heading 23.09 (preparations of a kind used in animal feeding).

2. End Use and Trade Classification:

The applicant argued that the product is solely used in animal feed preparations and is marketed as such. This was supported by clarifications from the Department of Animal Husbandry, Dairying, and Fisheries.

3. Comments from Customs Authorities:

The Chennai Customs Preventive Commissionerate stated that Luprosil Salt, being chemically defined as calcium propionate, should be classified under sub-heading 2915 50 00. They noted that Chapter 23.09 includes products used in animal feeding obtained by processing vegetable or animal materials, which Luprosil Salt is not. They also highlighted that the product does not form a complete animal feed as it lacks a mixture of substances like vitamins, minerals, and stabilizers required for classification under Heading 23.09.

4. Personal Hearing and Additional Submissions:

During the personal hearing, the applicant's representatives explained the product's technical data, manufacturing process, and composition. They submitted additional documents, including case laws and circulars, to support their classification under Heading 23.09. The applicant emphasized that the product is used to preserve feedstuff, preventing spoilage and nutrient losses.

5. Analysis of Product Composition and HSN Explanatory Notes:

The Authority analyzed the product's composition, noting it contains 98% calcium propionate. According to HSN explanatory notes, Heading 23.09 covers complete feed, supplementary feed, and premixes. Luprosil Salt lacks the composition of energy nutrients, protein-rich nutrients, and function nutrients required for complete or supplementary feed. As a premix, it should contain nutrient, preservative, and carrier substances, which Luprosil Salt does not.

6. Specific vs. Residuary Heading:

The Authority noted that Heading 2915 specifically covers propionic acid, its salts, and esters. Chapter 29 includes separate chemically defined organic compounds. Luprosil Salt, being a separate chemically defined compound, fits under Heading 2915. The Authority cited Rule 3(a) of the General Interpretation Rules, which states that a specific heading prevails over a general heading. The Supreme Court's judgment in Dunlop India Ltd. supported this principle.

7. Precedents and Case Laws:

The Authority distinguished the present case from previous rulings like Tetragon Chemie, where the products were premixes of vitamins. The product in question has a high concentration of propionic acid, similar to the case of Sonam International, where high-concentration vitamins were classified under Chapter 29.

8. Final Ruling:

Considering the product's composition, its classification under a specific heading, and relevant legal precedents, the Authority ruled that Luprosil Salt is classifiable under Heading 2915 and more specifically, under sub-heading 2915 50 00 of the First Schedule to the Customs Tariff Act, 1975.

Conclusion:

The ruling emphasized the importance of specific classification entries over general or residuary entries, adhering to the principles of the General Rules of Interpretation of the Customs Tariff and relevant case laws.