Central Excise - Classification of Di-Calcium Phosphate of Animal Feed Grade - Regarding - Central Excise - Order No. 47/1/97-CX.

Order No. 47/1/97-CX. Dated 3-3-1997 [From F. No. 120/1/96-CX.-3] Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Central Excise - Classification of Di-Calcium Phosphate of Animal Feed Grade - Regarding. It has been represented by the trade that there is no uniformity in the classification of Di-Calcium Phosphate of animal feed grade (henceforth referred to as DCP) for the purpose of levy of central excise duty in the Schedule to the Central Excise Tariff Act, 1985 (henceforth referred to as Tariff). It has been represented that in some Commissionerates the goods are classified under Heading 23.02 whereas in some other Commissionerate under Heading 28.35 of the Tariff. Lack of uniform classification of the goods have brought in disparity in the incidence of central excise duty on the said goods. 2. DCP is manufactured from animal bone and consumed by animal and poultry industries as calcium and phosphorous supplement. The ISI specification for DCP of animal feed grade, i.e., IS : 5470-1969 states that DCP is one of the important mineral ingredients used for compounding mineral mixtures for feeding livestock. The Chief Chemist, CRCL, New Delhi who was consulted in the matter has opined that DCP cannot be used directly as an animal feed. The identification of di-calcium phosphate dihydrate as of animal feed grade would rest upon the fluorine content of the material being more than 0.01% but not more than 0.1%. The level of fluorine content is kept low in order to prevent it from being toxic to livestock. 3. The Central Board of Excise and Customs (henceforth referred to as the 'Board') has examined the classification of DCP. DCP is a separate chemically defined compound i.e., Calcium Hydrogenorthophosphate (Ca.HP04.2H20). Chapter sub-heading 2302.00 applies to products of a kind used in animal feeding including dog and cat food. As per the chapter note to Chapter 23, Heading 23.02 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing. Heading 23.02 of CET corresponds to Heading 23.09 of the HSN (Page 175). As per notes given below Heading 23.09 of HSN Notes this heading covers sweetened forage and prepared animal feeding stuffs consisting of a mixture of several nutrients designed : (i) to provide the animal with a rational and balanced daily diet (complete feed); (ii) to achieve a suitable daily diet by supplementing the basic farm-produced feed with organic or inorganic substances (supplementary feed); or (iii) for use in making complete or supplementary feeds. 4. As per Chapter Note i(a) to Chapter 28 the headings of this chapter apply to separate chemical elements and separate chemically defined compounds. As already mentioned, DCP is a separate chemically defined compound i.e. calcium hydrogenorthophosphate and covered under sub-heading No. 2835.00 of the Tariff as "Phosphates". Heading 28.35 of the Tariff is aligned with Heading 28.35 of HSN. In the Note (C)(4)(1) below Heading 28.35 of the HSN, DCP used as a mineral supplement to animal fodder has been specifically mentioned and covered under sub-heading 2835.25 of the HSN. 5. As per Chapter Note 1(b) to Chapter 31 of the Tariff this chapter does not cover separate chemically defined compounds other than those answering to the description in Notes 2(A), 3(A) etc. As per Chapter Note 3(A)(iv) to Chapter 31 of the CET Heading No. 31.03 applies to calcium hydrogenorthophosphate (dicalcium phosphate) containing not less than 0.2 percent by weight of fluorine calculated on the dry anhydrous product. Heading 31.03 of the Tariff is aligned with Heading 31.03 of the HSN which has similar provisions. 6. Therefore, from the above provisions it is clear that : (a) DCP with fluorine content to 0.2% or more would fall under sub-heading 3103.00 by virtue of Chapter Notes 1(b) and 3(A)(iv) to Chapter 31 of the Tariff. (b) DCP of animal feed grade which contains maximum of 0.1% fluorine as per ISI Specification is outside the scope of Heading 31.03 of the Tariff. (c) Heading 23.02 does not apply to DCP of animal feed grade for the following reasons : (i) DCP is not a preparation as contemplated by the chapter note to Chapter 23. (ii) DCP is not an item of animal feeding as contemplated by the chapter note to Chapter 23 as it is only an ingredient used in animal feed supplements and cannot be fed directly to animals. (iii) As per the chapter note to Chapter 23, heading 23.02 includes products used in animal feeding not elsewhere specified or included. However, DCP used as a mineral supplement to animal fodder has been specifically included under sub-heading 2835.25 of the HSN by virtue of HSN Note (C)(4)(a) below Heading 28.35. Therefore, DCP of animal feed grade being separate chemically defined compound is appropriately classifiable under sub-heading 2835.00 of the Tariff in view of Chapter Note 1(a) to Chapter 28 of the Tariff and HSN Note (C)(4)(a) below Heading 28.35. (d) The exclusion note below Heading 28.35 of HSN excludes natural calcium phosphate, apatite and natural aluminium calcium phosphate of Heading 25.10 from Heading 28.35. However, this exclusion is not relevant as DCP in question is not naturally occurring. (e) The DCP in question is obtained from animal bone whereas HSN Note (C)(4)(a) below Heading 28.35 mentions that DCP is obtained by the action of an acidulated calcium chloride solution on disodium hydrogenorthophosphate. The method given in the HSN Note mentioned above is only one of the methods to obtain DCP. However, in any case the end product remains DCP. Moreover, the chapter note to Chapter 28 does not exclude DCP obtained from bone. As regards the process of manufacture to determine the classification of goods, it is mentioned that unless the context of the heading requires otherwise, process of manufacture would not change the classification of a product. However, even if it is presumed that DCP of animal feed grade merits equal consideration under sub-heading 2302.00 and 2835.00, then in terms of the rules for interpretation of the Tariff it would be classified under the heading which occurs last in the numerical order i.e. Heading 2835.00. Hence, DCP in question is appropriately classifiable under sub-heading 2835.00 of the Tariff. 7. The matter was also referred to the Chief Chemist, CRCL, New Delhi for his opinion in the matter. The Chief Chemist has opined (copy enclosed) that Dicalcium Phosphate is a separate chemically defined compound having specific molecular formula and molecular weight. Moreover, there is a specific mention of "Dicalcium Phosphate" under sub-heading 2835.25 of HSN. Heading 28.35 of CETA is aligned to HSN heading and it also covers all phosphates, provided they are separate chemically defined compounds whether or not containing impurities. In view of the above and the fact that the Chapter notes of Chapter 23 are very general and do not include separate chemically defined compounds, dicalcium phosphate animal feed grade conforming to the specifications of IS : 5470-1969 and being a separate chemically defined compound and not a preparation would more appropriately, in his opinion, be classified under Heading 28.35 of CETA. 8. The Circular F. No. 114/18/86-CX. 3, dated 24-3-1986 clarifying that in the light of Chapter Note 1 to Chapter 31, correct classification of DCP used as animal feed would be under sub-heading 3103.00 and the judgments of CEGAT in the case of M/s. Punjab Bone Mills and M/s. Proteinkem holding that the product DCP of animal feed grade is correctly classifiable under sub-heading 2302.00 and not under 3103.00 of the Tariff are not applicable for the following reasons : (i) During the 1987 Budget Chapter 31 was aligned with HSN and accordingly the Chapter Note 1 was replaced by the new note. Consequently, the question of classifying DCP of animal feed grade under Chapter 31 in view of the earlier chapter note lost its relevance. (ii) The CEGAT judgments supra are not applicable since the scope of discussion before the Tribunal was limited to correct classification of DCP under Chapter 23 vis-a-vis Chapter 31 of the Tariff. The question whether DCP can be classified under Chapter 28 of the Tariff was not considered by the Tribunal. 8. Now, therefore, in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944 (henceforth referred to as the Act), and for the purpose of ensuring uniformity in the classification of the goods in question, the Board hereby orders that DCP of animal feed grade (IS : 5470-1969) shall be classifiable under sub-heading No. 2835.00 of the Tariff. The Board further directs that a copy of this Order be sent to all the Chief Commissioners and Commissioners of Central Excise for being observed and for being made available as required to all other persons employed in the execution of the Act and for issue of Trade Notices.