9911796707
TMI Blog2023 (9) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... classified under CTH 21061000 as claimed by Revenue or under CTH 18069040 as claimed by appellant? AS PER RAJU, MEMBER (TECHNICAL) HELD THAT:- There is no argument made in the appeal memorandum or in the written submissions of the appellant as to why the Supplementary Note 5(a) should not be followed in the instant case. It is apparent from the above reading of supplementary note 5(a) to Chapter 21 and that the Protein Concentrate and Textured Protein Substances would fall under the heading 2106 . It is seen that the sub heading 21061000 of Customs Tariff (just like HSN) specifically covers Protein Concentrates and Textured Protein Substances , still a chapter supplementary note was introduced to place the Protein Concentrate and Textured Protein Substances under heading 2106 - It is seen that it clearly states that for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes . In the instant case Supplementary Note 5(a) clearly provides that Protein Concentrate and Textured Substances would be classified under Heading 2106 . In view of above in terms of interpretative Rule 1, the goods imported by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Indian Constitution as well as he structural provisions of HSN. - This has been aptly pointed out by learned brother in course of the decision on chapter 21 of India Custom Tarff Act, 1975 (specially the heading 2106) with related supplementary notes. These supplementary notes have been in existence since inception of HSN based Custom Tariff of India. Similar changes have also been made by not only India but various other Countries beyond Chapter 97 which were originally not part of the HSN. Chapter 98 is again outcome of India s need, as is manifested in its own Custom Tariff. Chapter note, which is by way of supplementary note 5 seeks to define the scope and limits of heading 2106. It is thus clear that the expression Food preparation not elsewhere specified or included figuring in tariff heading 2106 when expanded by virtue of chapter note 5 (supplementary note) makes heading 2106 to specifically include Protein Concentrates and Textured Protein Substances therefore the legislature has clearly expanded the scope of tariff heading 2106 by virtue of supplementary notes 5 as brought out above. All this exercise makes even Heading 2106 also as specific in relation to Protein Conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) changed the classification for impugned goods as detailed in Table below: Summary of classification dispute S.No. Product Name Department's Classification Appellant's Classification 1. BSN Syntha 6 Chocolate 21061000 18069040 2. BSN Truemass 1200 Chocolate 21061000 18069040 3. Isopure Low Carb - Chocolate 21061000 18069040 4. Isopure Zero Carb - Chocolate Mint 21061000 18069040 5. Optimum Nutrition 100% Casein-Chocolate Supreme 21061000 18069040 6. Optimum Nutrition 100% Whey Gold Standard- Chocolate 21061000 18069040 7. Optimum Nutrition 100% Whey Gold Standard- Chocolate Hazelnut 21061000 18069040 8. Optimum Nutrition 100% Whey Gold Standard- Chocolate Malt 21061000 18069040 9. Optimum Nutrition 100% Whey Gold Standard- Chocolate Mint 21061000 18069040 10. Optimum Nutrition 100% Whey Gold Standard- Chocolate Peanut Butter 21061000 18069040 11. Optimum Nutrition 100% Whey Gold Standard- Cookies and Cream 21061000 18069040 12. Optimum Nutrition 100% Whey Gold Standard- Double Rich Chocolate 21061000 18069040 13. Optimum Nutrition 100% Whey Gold Standard Isolate - Chocolate 21061000 18069040 14. Optimum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he classification concluded by Learned AC vide a common impugned order. Learned counsel for the appellant pointed out that the primary reasons for finding against the Appellant are provided below: * Predominant ingredient: Impugned goods contain 72% protein with 'Whey Protein Isolate' and 'Whey Protein Concentrate' being the main ingredients. * Common Parlance: In common parlance the impugned goods are known as nutritional supplements consisting of whey protein concentrates. * Note 5 to Chapter 21 of Customs Tariff includes Protein Concentrates and suggests classification under CTH 2106. * Cocoa is not the main ingredient in the impugned goods. 5. Learned counsel for the appellant argued that without considering the submissions made by the Appellant, the classification mentioned in Column-3 to Table above was upheld by Ld. Commissioner (Appeals).Ld counsel for the appellant pointed out that aggrieved by the classification of impugned goods concluded vide the impugned order, Appellant filed 29 individual appeals before the Tribunal stated to be involving same issue. 6. Learned counsel for the appellant argued that the products mentioned in Table above, include nutritional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct is to be classified basis the condition in which such goods are presented for clearance to the Customs Authorities. He relied on the following decisions (i) Dunlop India Ltd. v. UOI 1983 (13) E.L.T. 1566 (SC); (ii) Commissioner v. Sony India Ltd. 2008 (231) E.L.T. 385 (S.C.)]. He further argued that the appropriate classification of goods is determined by following the General Rules for the Interpretation of Import Tariff ("GIR"). He argued that for the purposes of present submission, it is important to consider GIR Rule 1, 3(a) and 6, which must be applied sequentially. He relied on the following (i) Taj Sats Air Catering Ltd. v. CC Ex., Delhi-II, 2016 (334) E.L.T. 680 (Tri-Del.); (ii) Circular 36/2013-Cus. Dated 05.09.2013 He argued that as per the GIR Rule 1, the classification of goods must be done in accordance with the Chapter Heading (CTH) and any relevant Section and Chapter Notes. These Notes provide detailed explanation as to the scope and ambit of the respective Sections and Chapters under Customs Tariff. He relied on the following decisions (i) Saurashtra Chemical, Porbandar vs. Collector of Customs, 1986 (23) ELT 283 (Tri-LB) [upheld in1997 (95) ELT 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and chocolate products 30% 1806 90 20 --- Sugar confectionary containing cocoa 30% 1806 90 30 ---- Spreads containing cocoa 30% 1806 90 40 ---- Preparations containing cocoa for making beverages 30% 1806 90 90 ---- Other Kg. He argued that the phrase "food preparation" have not been defined in the Customs Tariff Act or Explanatory Notes. Hence, emphasis must be laid on the plain meaning of the phrase and its use in general parlance. He argued that the term 'preparation' has been defined in Kothari Chemicals v. UOI, 1996 (86) E.L.T. and Reckitt and Colman of India Ltd., Calcutta v. CCE, Calcutta, 1985 (22) ELT 216 (Tribunal) as products made from separate components. Thus, a product can be categorized as 'food preparation' when there is a process undertaken to give rise to a 'prepared food' that is different from its ingredients. He argued that all the CTHs under consideration deal with "food preparation". 10. He argued that GIR Rule 1 provides that the classification of products must also be in terms of relative Section and Chapter Notes. In this regard, Chapter Note to Chapter 18 of Customs Tariff provides the following: "This Chapter does not cover the preparati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations of CTH 0401 to CTH 0404 containing less than 5% cocoa (by weight) are instead covered under CTH 1901. He argued that if the product under consideration does not satisfy the dual condition as summarised in Para above, such goods irrespective of their cocoa content are classifiable under CTH 1806 of Customs Tariff. He relied on HSN Explanatory Notes to CTH 2106 and HSN Explanatory Notes to CTH 1806. 11. He argued that CTH 2106, covers "Food preparations not elsewhere specified or included". In other words, for classification under CTH 2106 of Customs Tariff requires two conditions to be satisfied, namely: a. It must a food preparation; b. It must not be specified or included elsewhere. He argued that similar interpretation has also been provided under HSN Explanatory Note to CTH 2106 which specifically mentions that CTH 2106 only covers those goods which are not covered under any other heading of the Nomenclature. He argued that the point of distinction as per HSN Explanatory Notes read with Customs Tariff in respect of CTH 1806, CTH 1901 and CTH 2106 is as follows: (i) If a food preparation contains cocoa (other than defatted cocoa) in any proportion, then it is clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der CTI 1806 90 40 of Customs Tariff, which reads as "Chocolate and other food preparations containing cocoa: Other: Preparations containing cocoa for making beverages". 14. He further argued that the issue in respect of "Cookies & Cream" flavoured whey protein powder came up for discussion before the 68th WCO's Harmonized System Committee of September 2021. He argued that this decision, having Doc. NC2855Eb/K/6, WCO's HS Committee concluded that "Cookies & Cream" flavoured whey protein powder containing cocoa (along with processed alkali) of~1%are appropriately classifiable under CTSH 1806 90. He argued that the product at S. No. 11 of Table above are similar to the goods under consideration before WCO's HS Committee. Hence, the WCO's HS Committee decision applies to the present case. 15. He argued that in the light of the foregoing submissions, the classification undertaken by the Appellant and appearing in Column (4) of Table (above) is correct. Thus, the duty incidence in respect of impugned goods have been correctly discharged by the Appellant. 16. Ld Counsel relied on the WCO's HS Committee decision, and other international rulings passed by the National Commodity Speciali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated numerical codes; (ii) it shall apply the General Rules for the interpretation of the Harmonised System and all the Section, Chapter and Subheading Notes, and shall not modify the scope of the Sections, Chapters, headings or subheadings of the Harmonised System; and (iii) it shall follow the numerical sequence of the Harmonised System." (Emphasis Supplied) Learned Counsel argued that the HSN acts as the basis for the classification of the goods across the world. He submitted that the Indian Courts must also march hand-in-hand with the decisions rendered by the foreign counterparts in interpreting the treaties to which India is signatory relating to classification of goods. Reliance in this regard was placed on the decision of the Hon'ble Supreme Court in CC v. G.M. Exports, 2015 (324) ELT 209 (SC). Similarly, reliance was also be placed on the decision of CC v. C-Net Communication (I) Pvt. Ltd., 2007 (216) E.L.T. wherein the Hon'ble Supreme Court relied upon the decision of Canadian Customs Tribunal. 19. Learned Counsel argued that globally the impugned goods are classified under CTH 1806 only. Reliance in this regard is placed on sample import documents on import of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2106. Here, it is relevant to note that under HSN Explanatory Notes of 2022 of CTH 2106, food preparations containing cocoa have been specifically excluded from falling under CTH 2106. Relevant extract reproduced hereinunder: "[…] This heading further excludes (a) Preparations containing cocoa, put up as food supplements for human consumption (heading 18.06)" Learned Counsel argued that impugned goods are correctly classifiable under CTH 1806 and therefore they are ipso facto excluded from the scope of CTH 2106 of Customs Tariff. 24. Learned Counsel argued that as per GIR Rule 3(a), the heading that provides the most specific description of the goods shall be preferred to headings providing a more general description. It is pertinent to note that GIR Rule 3(a) envisages comparison at the CTH level only. Ld Counsel argued that a bare perusal of CTH 1806 which covers 'Chocolate and other food preparations containing cocoa' and CTH 2106 which covers 'Food preparations not elsewhere specified or included', it is evident that impugned goods are covered more specifically under CTH 1806 or CTH 1901. Thus, on application of GIR Rule 3(a), the impugned goods are rightly class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at similar observations have also been made by the Hon'ble High Court of Mumbai in the case of Kulkarni Black & Decker Ltd. v. UOI, 1992 (57) E.L.T. 401 (Bom). The relevant extract from Kulkarni (Supra)summarizing the legal position has been extracted herein under for ease of reference: "It is now settled by catena of decisions of the Supreme Court and this Court that it is not permissible to take into consideration the trade meaning or commercial nomenclature when the definition provided in the statute is extremely clear and does not suffer from any ambiguity. In case where the application of commercial meaning or trade nomenclature runs counter to the statutory context in which the word is used in the Tariff Item, then the trade meaning or commercial nomenclature should be ignored." (Emphasis Supplied) Learned Counsel argued that the trade/ commercial parlance is to be examined only if the tariff entry is ambiguous. Reliance in this regard is being placed on Nirlon Synthetic Fibres v. UOI, (1999) 110 E.L.T. 445 (Bom) (DB) and Panama Chemical Works v. UOI, 1992 (2) E.L.T. 241 (M.P). Ld Counsel argued that in the present case, cocoa products have been defined under the HSN Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r CTH 1806 of Customs Tariff and on account of failure of revenue to justify classification under the CTH 2106 of Customs Tariff, the entire proceedings initiated by the Department is unsustainable. He placed reliance on the decision of L&T v. CC, Mundra, 2021-VIL-224-CESTAT-AHM-CUwherein this Hon'ble Tribunal whilst relying on the dictum of Hindustan Ferrodo Ltd. v. Collector of Central Excise, Bombay, 997 (89) E.L.T. 16 (S.C.), HP Chemicals Ltd. v. CCEx., Chandigarh, 2006 (197) E.L.T. 324 (S.C.), Pepsico Holding Pvt. Ltd. v. CCEx, Pune-III, 2019 (25) G.S.T.L. 271 (Tri. - Mum) and Warner Hindustan Ltd. v. Collector of CE, Hyderabad, 1999 (113) E.L.T. 24 (SC) held as follows: "10. In view of the above settled law, irrespective whether the classification claimed by the Appellant is correct or not since the classification proposed by the Revenue is absolutely incorrect, the entire case of the Revenue will not sustain. Therefore, we are not addressing the issue that whether the Appellant's classification was correct or otherwise. The Appellant also made an alternate submission that even if the classification declared by them under CTH 8306 2110 is incorrect the goods are otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssification cannot be separated from the question of valuation. Thus, provisional assessment remains provisional in respect of all issues, which must be adjudicated together and not in a piecemeal manner. Accordingly, the Tribunal remanded the matter back for fresh adjudication including all the issues involved therein [In Re: Castrol India Ltd., 2001 (138) E.L.T. 979 (Commr. Appls)]. He also relied on the case of Nitco Tiles Ltd. v. CC (Export Promotion), Mumbai, in Order No. S/491 to 497/08/CSTB/C-II and A/485 to 491/08/CSTB/C-II dated 20.08.2008 [Compilation, p. 150] where taking note of the above-mentioned decision, remanded the case for fresh adjudication citing finalisation of provisional assessment in piecemeal manner. Ld Counsel argued that the impugned order results in multiplicity of proceedings and challenges the grund norm as envisaged under the Customs Act. Ld Counsel submitted that in order to conclude the classification dispute Tribunal may pass orders on the classification of the impugned goods determinatively. 31. Learned AR pointed out that the goods imported and classification claimed by the appellant are as follows:- Sl.No. Name of product CTH as per importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are "Whey Protein Isolate (WPI) and Whey Protein Concentrate (WPC)". For example, the actual description of the import goods as declared in Bill of Entry No. 3139731 dated 07-052019 and their protein content per 100 grams as appearing in the label produced by the appellant, are given below:- TABLE-A Sl.No. Description of the import goods Unit Qty. in grams Protein content in the import goods per 100 grams 1 On Ind 100% WGS AF/GF DBL Rich Choc 5 LB 100 78.90 2 On Ind 100% WGS AF Cookies & Cream 5 LB 100 72.70 3 BSN India True Mass Chocolate 5.82 LB 100 28.00 4 On Ind 100% WGS AF Cookies & Cream 5 LB 100 72.70 5 On Ind 100% WGS AF/GF DBL Rich Choc 5 LB 100 78.90 6 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 7 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 8 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 9 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 10 On Ind 100% WGS AF/GF Rocky Road 5 LB 100 76.00 11 On Ind 100% WGS AF/GF Mocha Capp 5 LB 100 75.00 Learned AR pointed out that from above table, it is evident that all the import items except item mentioned at Sl. No. 3 contain more than 72% protein in all the import g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants have also declared these products as "Nutrition Supplements" in the Bill of Entries. He pointed out that these products are marketed in different flavours such as vanilla, strawberry, chocolate/cocoa, double rich chocolate, etc. Ld AR argued that the appellants have claimed classification of these products under CTH No. 18069040 as "Preparations containing cocoa for making beverages" under Chapter - 18 of the Customs Tariff Act, 1975 which covers "Cocoa and Cocoa Preparations".Ld AR argued that the products made from whey such as Whey Protein Concentrates and Whey Protein Isolates are not covered under chapter 18. The adjudicating authority clearly held that none of the labels of the import products mention Cocoa as the main ingredient of the import items for which classification has been claimed as falling under Chapter-18. Ld AR pointed out that merely because cocoa is added as a flavoring agent does not change the content, composition and character of these products and they do not become cocoa and cocoa preparations. 37. He argued that as per Supplementary Note - 5(a), protein concentrates and textured protein substances are covered under CTH 2106. The appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. It might have been necessary, in view of the presence of chocolate, to refrigerate the product to prevent its melting or spoiling. That alone cannot justify the view that the product's essential character of the product has been conferred upon it by chocolate. There is nothing to show that the buyers of the goods bought as chocolate, not as a combination of chocolate and biscuits; that it was the presence of the chocolate alone as distinct from the chocolate and biscuits which length of the product is appeal to customers. On the other hand, the market advertising brief produced by the appellant refers to the presence of the biscuit market as well as the chocolate market and it talks of the products as wafer covered with crisp chocolate and say that the product creates niche for itself, drawing from both the biscuit market as well as the chocolate market." This judgement in the case of Nestle (India) Ltd is also followed by the in the case of Little Star Foods Pvt. Ltd Vs. Commissioner of Central Excise, Hyderabad reported at 2006 (199) ELT 451 (Tri.-Bang.). In the case of Dhariwal Industries Ltd Vs. Commissioner of Central Excise, Pune-III reported at 2014 (304) ELT 585 (Tri.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave given up this issue. The Ld counsel has sought that the issue of classification may be finalised by the tribunal as is apparent from the submissions recorded in para 30 above. The submission in this regard is reproduced below: "Having said the foregoing, in order to conclude the classification dispute, it is most respectfully prayed before this Hon'ble Tribunal to pass orders on the classification of the impugned goods determinatively." In view of above, we proceed to decide the classification issue despite the assessment being provisional on account of Valuation. 44. The following table contains the classification sought by the appellant and the classification adjudicated by the Revenue. S.No. Product Name Department's Classification Appellant's Classification 1. BSN Syntha 6 Chocolate 21061000 18069040 2. BSN Truemass 1200 Chocolate 21061000 18069040 3. Isopure Low Carb - Chocolate 21061000 18069040 4. Isopure Zero Carb - Chocolate Mint 21061000 18069040 5. Optimum Nutrition 100% Casein-Chocolate Supreme 21061000 18069040 6. Optimum Nutrition 100% Whey Gold Standard- Chocolate 21061000 18069040 7. Optimum Nutrition 100% Whey Gold Standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the food preparation is not defatted cocoa." They have themselves argued that the impugned goods are food preparations having constituent ingredients from CTH 3502 and CTH 3504 and are not food preparations of CTH 0401 to CTH 0404. They have also argued that the impugned goods do not satisfy the condition of classification under CTH 1901 of the Customs Tariff Act. They have also argued that the coco used by them in the food preparation is not defatted coco as required for classification under heading 1901. In view of the above, the only contesting classification that remain are CTH 1806 and CTH 2106. 46 In this regard the competing heading in the schedule to Custom Tariff Act 1975 in the instant case are reproduced below: 1806 CHOCOLATE AND OTHER FOOD PREPARATIONS CONTAINING COCOA 18061000 - Cocoa powder, containing added sugar or other sweetening matter kg. 30% - 18062000 - Other preparations in blocks, slabs or bars weighing more than 2 kg. or in liquid, paste, powder, granular or other bulk form in containers or immediate packings, of a content exceeding 2 kg. kg. 30% - - Other, in blocks, slabs or bars : 18063100 -- Filled kg. 30% - 18063200 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under Customs Tariff Heading 2106 (Sub Heading 2106 1000), the 'Protein Concentrates containing Cocoa' are classifiable under Customs Tariff Heading 1806 (Sub Heading 1806 9040). This claim is solely based on the HSN ignoring the Supplementary Notes to Chapter 21. The competing subheadings are as follows 1806 CHOCOLATE AND OTHER FOOD PREPARATIONS CONTIANING COCOA Kg. 30% - 1806 90 40 --- Preparations containing coca for making beverages 2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED Kg. 40% - 2106 1000 - Protein concentrates and textured protein substances The heading 2106 is qualified by the Supplementary notes to Chapter 21. Therefore the Heading 2106 needs to be read with Supplementary Note 5(a) in terms of rule 1 of the Rules of Interpretation of Customs Tariff as discussed in para 49 onwards below.. 47. Whey proteins are available in different flavours like Double Rich Chocolate, Chocolate Bliss, Cream Vanilla, Delicious Strawberry, Vanilla Ice-Cream, Mocha Cappuccino etc. The appellant has described the goods in the appeal memorandum as follows: "The appellant is primarily engaged in the business of importing and selling nutritional supplem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put up as a medicament or other products of heading 3003 or 3004; or (g) Prepared enzymes of heading 3507. 1.- This Chapter does not cover : (a)Mixed vegetables of heading 0712; (b) Roasted coffee substitutes containing coffee in any proportion (heading 0901); (c) Flavoured tea (heading 0902); (d) Spices or other products of headings 0904 to 0910; (e) Food preparations, other than the products described in heading 2103 or 2104, containing more than 20 % by weight of sausage, meat, meat offal, blood, fish or crustaceans, molluscs or other aquatic invertebrates, or any combination thereof (Chapter 16); (f) Yeast put up as a medicament or other products of heading 3003 or 3004; or (g) Prepared enzymes of heading 3507. 2.- Extracts of the substitutes referred to in Note 1 (b) above are to be classified in heading 2101. 2.- Extracts of the substitutes referred to in Note 1 (b) above are to be classified in heading 2101. 3.- For the purposes of heading 21.04, the expression "homogenised composite food preparations" means preparations consisting of a finely homogenised mixture of two or more basic ingredients such as meat, fish, vegetables or fruit, put up for retail sale as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption; (c) preparations consisting wholly or partly of foodstuffs, used in the making of beverages of food preparations for human consumption; (d) powders for table creams, jellies, ice-creams and similar preparations, whether or not sweetened; (e) flavouring powders for making beverages, whether or not sweetened; (f) preparations consisting of tea or coffee and milk powder, sugar and any other added ingredients; (g) preparations (for example, tablets) consisting of saccharin and foodstuff, such as lactose, used for sweetening purposes; (h) pre-cooked rice, cooked either fully or partially and their dehydrates; and (i) preparations for lemonades or other beverages, consisting, for example, of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juice with added ingredients. 6. Tariff item 2106 90 99 includes sweet meats commonly known as "Misthans" or "Mithai" or called by any other name. They also include products commonly known as "Namkeens", "mixtures", "Bhujia", "Chabena" or called by any other na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only, 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: 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule). presented unassembled or disassembled. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the powers under Section 2 of that Act. According to Rule 1 titles of Sections and Chapters in the Schedule are provided for ease of reference only. But for legal purposes, classification "shall be determined according to the terms of the headings and any relevant section or Chapter Notes". If neither the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied. If no clear picture emerges then only can one resort to the subsequent rules. The appellants have relied upon Rule 3. Rule 3 must be understood only in the context of sub-rule (b) of Rule 2 which says inter alia that the classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. Therefore when goods are prima facie, classifiable under two or more headings, classification shall be effected according to sub-rules (a), (b) and (c) of Rule 3 and in that order. The sub-rules are quoted :- "(a) The heading which provides the most specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red before classification is done. Only after this exercise is done, if a conflict in classification still persists, the subsequent GRIs are to be resorted to. GRI-2 is not germane to the present case and therefore, we make no reference to it. GRI-3 provides for classification in the event when the goods are classifiable under two or more Headings. As per GRI-3, when by application of GRI-2(b) or for any other reason, the goods are, prima facie, classifiable under more than one Heading, then; (a) the 'most specific description' is preferred, (b) a mixture of different goods will be classified as that good which gives the mixture its 'essential characteristic', and (c) when goods cannot be classified with reference to (a) or (b), they should be classified under the Heading which occurs last in the numerical order. The order of priority therefore is; (a) specific description, (b) essential character, and (c) the Heading which occurs last in numerical order. However, GRI-3 can only take effect provided the terms of the Heading or Section or Chapter Notes do not otherwise require. GRI-4 states that when the goods cannot be classified in accordance with the aforementioned rules, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Global Healthcare Products 2015 (322) ELT 365 (SC) has observed as follows: "10. The Commissioner, thus, noted that in the HSN Notes, sub-heading 3306.10 deals with dentifrices. The Commissioner noted that the meaning of dentifrices as per the Concise Oxford Dictionary is 'a paste or powder for cleaning of teeth'. On that basis, he concluded that the product in question was paste, namely, the toothpaste for cleaning the teeth and, therefore, would fall under subheading 3306.10. En passe, the Commissioner also observed that there is no major difference in these products, namely, Close-Up Whitening and Close-Up Red/Blue/Green, except one ingredient used in the manufacture of Close-Up Whitening and the addition of that ingredient does not change the purpose, nature as well as definition of the product in a common market parlance. He observed that in the market the product was known as toothpaste. He also observed that it is treated as toothpaste as per the product manual issued by the Dental Invocation Centre, Mumbai. Discussion is summed up in para 32 of the order passed by the Commissioner, which reads as under : "32. As narrated in the SCN that the tooth p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was more generic in nature as it recognized all three types of products, namely, (i) toothpaste, (ii) other preparations for teeth and (iii) denture cleaners, than tooth powders and toothpaste. Thus, when under Indian statutory regime there is a restricted sub-heading under 3306.10, namely, tooth powder and toothpaste only, the approach of the Commissioner in taking aid of HSN Notes was erroneous. Discussion on this aspect runs as follows: "A perusal of the HSN notes would indicate that all three types of 'Dentifrices' are recognized as (i) 'Toothpaste', (ii) Other preparations for teeth, and (iii) 'Denture cleaners'. The Note further explains that "Dentifrices" to include 'toothpaste' and "other preparations for teeth" whether for cleaning or polishing the assessable surface of teeth or for other purposes such an Anticaries prophylactic treatment. The Note also enumerates that 'toothpaste' and 'other preparations for teeth' remains classified under Heading 3306 whether or not they contain abrasives and whether or not they are used by dentist. The correct scope of the heading as per the submission of the appellants is that when one refers to HSN Item 3306 and the bifurcations as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, it is settled law that when the entries in the HSN and the said Tariff are not aligned, reliance cannot be placed upon HSN for the purpose of classification of goods under the said Tariff. One of the factors on which the Tribunal based its conclusion is the entries in the HSN. The said conclusion in the Order of the Tribunal is, therefore, vitiated and, accordingly, set aside. We agree with the findings recorded by the Commissioner (Appeals)." (iii) From the above decisions of Hon'ble Apex Court, it is apparent that reliance on the HSN Section Notes, Chapter Notes and Explanatory Notes can be placed only when the Customs Tariff is harmonized with HSN. Wherever there is a difference between the Customs Tariff and HSN reliance cannot be placed on HSN Section Notes, Chapter Notes and Explanatory Notes for the purpose of classification. In such cases reliance is to be placed on the Chapter Notes and Section Notes appearing in the Customs Tariff. The appellants have also relied on the decision of Tribunal in the case of Anutham Exim P. Ltd. 2021 (378) ELT 611 (T-Kol.). In the said decision also in para 13 following has been observed: "13. The Schedule to the Customs Tariff Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purposes of heading 21.04, the expression" homogenised composite food preparations" means preparations consisting of a finely homogenised mixture of two or more basic ingredients such as meat, fish, vegetables or fruit, put up for retail sale as infant food or for dietetic purposes, in containers of a net weight content not exceeding 250 g. For the application of this definition, no account is to be taken of small quantities of any ingredients which may be added to the mixture for seasoning. preservation or other purposes. Such preparations may contain a small quantity of visible pieces of ingredients." In the Custom Tariff Act, notes apart from three chapter notes there are additional 'Supplementary Notes' which reads as follows: "SUPPLEMENTRY NOTES : 1. In this Chapter, "Pan masala" means any preparation containing betel nuts and any one or more of the following ingredients, namely: lime, katha (catechu) and tobacco whether or not containing any other ingredient, such as cardamom, copra or menthol. 2. In this Chapter "betel nut product known as Supari" means any preparation containing betel nuts, but not containing any one or more of the following ingredien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Act is not aligned to the HSN (Harmonized System of Nomenclature) on account of the text contained in supplementary notes to Chapter 21. Thus it is seen that Government of India has deliberately chosen to deviate from the Harmonised System of Nomenclature (HSN).By this Supplementary note the Government of India has chosen to enlarge the scope of the Heading 2106 by specifically including in it the various items listed in Supplementary note. In view of deliberate changes made in the Customs Tariff the HSN notes lose their relevance. 53. The Supplementary notes of Chapter 21 of the Schedule to the Custom Tariff Act prescribes at S.No. 5(a) that 'Protein Concentrate and Textured Protein Substances' would fall under heading 2106. The heading 2106 of the Custom Tariff Act reads as follows: 2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED 21061000 - Protein concentrates and textured protein substances kg. 40% - 210690 - Other : --- Soft drink concentrates : 21069011 ---- Sharbat kg. 150% - 21069019 ---- Other kg. 150% - 21069020 --- Pan masala kg. 150% - 21069030 --- Betel nut product known as "Supari" kg. 150% - 21069040 --- Sugar-syr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s duty. The goods are to be identified and then to find the appropriate heading, sub-heading under which the identified goods/products would be classified. To find the appropriate classification description employed in the tariff nomenclature should be appreciated having regard to the terms of the headings read with the relevant provisions or statutory rules of interpretation put up thereon. For exigibility to excise duty the entity must be specified in positive terms under a particular tariff entry. In its absence be deduced from a proper construction of the tariff entry. There is neither intendment nor equity in a taxing statute. Nothing is implied. Neither can we insert nor anything can we delete but it should be interpreted and construed as per the words the legislature has chosen to employ in the Act or Rules. There is no room for assumption or presumptions. The object of the Parliament has to be gathered from the language used in the statute. The contention that toilet soap is commercially different from household and laundry soaps, as could be seen from the opening words of Entry 15, needs careful analysis. It is well, at the outset, to guard against confusion between the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed in the Act so the State should not be the sufferer on account of the delay caused by the tax payer in payment of the tax due. The provision for charging interest would have been introduced in order to compensate the State (or the Revenue) for the loss occasioned due to delay in paying the tax [vide Commissioner of Income Tax (A.P.) v. M. Chandra Sekhar - 1985 (1) SCC 283 and Central Provinces Manganese Ore Co. Ltd. v. Commissioner of Income Tax - 1986 (3) SCC 461]. When interpreting such a provision in a taxing statue a construction which would preserve the purpose of the provision must be adopted. It is well-settled that in interpreting a taxing statute normally, there is no scope for consideration of principles of equity. It was so said by Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921 (1) KB 64 at page 71] : "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." The above observation has been quoted with approval by a Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entary Note 5(a). Any other interpretation would make Supplementary Note 5(a) otiose. Since the goods are specifically classified under heading 2106 by virtue of Supplementary Note 5(a), there is no need to further go into interpretative Rule 2 to 6. 55. The appellants have relied on various international decisions. The said decisions are examined as under:- (I) In the decisions given by Thomas J Russo, in US Cross Ruling N204559 dated 02.03.2012, following has been observed: "Ingredients breakdowns accompanied your November letter. Additional information was provided with your February letter and an email transmission dated February 29, 2012. Whey Protein Powder will be offered in two flavors-chocolate and vanilla. Ingredients common to both products are approximately 37-38 percent whey protein isolate, 34-36 percent whey protein concentrate, 12-13 percent fructose, 6 percent l-glutamine, 2-3 percent chicory root extract (inulin), one percent erythritol, and less than one percent, cach, colloid gum powder, sodium chloride, aminogen (plant enzyme), cream flavor, red orange extract, ascorbic acid and stevia- rebiana. Other ingredients, depending on the flavor, include about 2 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been reached in ruling No. 025135 dated 15.04.2008 given by Robert B. Swierupski Director National Commodity Special Division wherein he has clarified as follows: "The subject merchandise is described as 100% Whey Classic - Chocolate and 100% Whey Gold Standard-Chocolate. The main ingredients in 100% Whey Classic-Chocolate are Protein Blend (Whey Protein Isolate, Whey Protein Concentrate and Whey Peptides), Cocoa (processed with alkali), Artificial Flavor, Lecithin and Acesulfame Potassium. The main ingredients in 100% Whey Gold Standard-Chocolate are Protein Blend (Whey Protein Isolate, Whey Protein, Concentrate and Whey Peptides), Cocoa (processed with alkali), Artificial Flavor, Lecithin and Acesulfame Potassium. All products are in powder form, put up for retail sale in plastic containers. The 100% Whey Classic-Chocolate comes in sizes weighing either 2 pounds or 5 pounds. The 100% Whey Gold Standard - Chocolate comes in sizes weighing 1 pound, 2 pounds, 5 pounds or 10 pounds. The product is mixed with water, milk or other beverages to make a dietary supplement. The applicable subheading for the 100% Whey Classic - Chocolate and 100% Whey Gold Standard-Chocolate will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tariff Act, 1975. However, in some cases, like in case of heading 2106, the government has chosen to deviate from the language and prescription of the HSN by introducing Supplementary Notes to Chapter 21. Since all international rulings are based on the HSN, which is different from the Customs Tariff in respect of Chapter Heading 2106, no reliance can be placed on these decisions. 56. Ld counsel has also relied on the fact that the Explanatory Notes to the HSN were amended by the HSN Committee in its 64th Session in September 2019 to introduce a specific exclusion for Chapter heading 2106 ("Amendment to Chapter heading 2106"). The amendments were made applicable from 1st December 2019. The relevant extract of the Amendment to Chapter heading 2106 is reproduced below for ease of reference- .. CHAPTER 21 Heading 21.06 Page IV-2106-3. Item (16) …. Insert a new exclusion note (c): (c) Preparations containing cocoa, put up as food supplements for human consumption (heading 18.06). While such amendments would have relevance if the Customs Tariff is aligned with the HSN, such changes have no relevance when Government of India has chosen to deviate from the HSN by spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as conducive to comparison for the purpose of International Trade. Much later, after creation of HSN, the statistical data assumed importance when under aegis of World Trade organization, exceptional measures to liberalized tariff like Anti-Dumping, Safeguard and Countervailing duty, came to be implemented. 60. I would like to briefly dwell upon the evolution of public international law in Indian context and how entering into various international treaties did not circumscribe the sovereignty of member states including India. Whenever International Treaties were sought to be implemented by the sovereign states in their capacity as members of such treaties, reservations were either permitted by the treaties or were brought in for approval by member states to safeguard their own national interests. 61. As far as the Constitution of India is concerned which acts as a grundnorm, for all laws made by Indian Legislature. Validity of enactments by legislature is derived from Article 73 of the Constitution of India delineates the extent of executive power of the union which extends for all matters with respect to which the Parliament has a right to make laws and it extends to the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpret the Municipal Statute as to avoid conformation with the comity of Nations or the well-established principles of International law. But if conflict is inevitable, the latter must yield." Therefore, it is brought out that sovereign states can not only bring about reservations in treaties, wherever allowed but also in case of any provision not being in tune with treaty provisions, it will be municipal law which shall prevail." 64. Now coming to specific provisions about HSN, the following are the relevant extracts as derived from HS Classification Handbook of World Custom Organization November-2013 Edition part II/1 following has been stated as object of bringing in world product nomenclature: "At its 1976 Sessions, the United Nations Statistical Commission took a policy decision that UN economic classifications should be harmonized by using HS subheadings as building blocks. The Standard International Trade Classification (SITC, Rev. 3), the International Standard Industrial Classification of all economic activities (ISIC) and the Central Products Classification (CPC) have been prepared on the basis of this decision. As regards the application of the Harmonized System ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Interpretative Rule 1 provides that, for legal purposes, classification is determined by the terms of the headings and of the Section or Chapter Notes. There are, however, cases where the texts of the readings and of these Notes cannot, of themselves, determine the appropriate heading with certainty. Classification is then effected by application of the other Interpretative Rules. The first part of Rule 2 (a) extends the scope of any heading which refers to a particular article to cover not only the complete article but also that article incomplete or unfinished, provided that, as presented, it has the essential character of the complete or finished article. The second part of Rule 2 (a) provides that complete or finished articles presented unassembled or disassembled, usually for reasons such as the requirements or convenience of packing, handling or transport, are to be classified in the same heading as the assembled article. Rule 2 (b) extends the scope of any heading referring to a material or substance or articles made therefrom. Under this Rule, goods consisting of more than one material or substance must, unless another heading refers to them in their mixed or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of a l-dash subheading may be made only on the basis of the texts of the competing 1-dash subheadings; similarly, selection of the appropriate 2-dash subheading, where necessary, may be made only on the basis of the texts of the subdivisions within the applicable 1-dash subheading. The Interpretative Rules thus establish classification principles which are applicable throughout the Harmonized System Nomenclature. Moreover, the Interpretative Rules clearly provide a step-bystep basis for the classification of goods within the Harmonized System so that, in every case, a product must first be classified in its appropriate 4-digit heading, then to its appropriate 1-dash subdivision within that heading and only thereafter to its appropriate 2-dash subheading within the predetermined 1 dash subdivision. It should be emphasized that at each step in the process, no account is taken of the terms of any lower-level subdivisions. This principle applies without exception throughout the Harmonized System. (Emphasis supplied) (b) Section and Chapter Notes, including subheading Notes Certain Sections and Chapters are preceded by Notes which, like the Interpretative Rules form an integra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut this would have greatly lengthened these texts, making them difficult to understand, and would have involved a great deal of repetition. The Notes thus made it possible to draft the headings in concise form while at the same time safeguarding the precision and exactness of interpretation that are essential to avoid doubts and disputes in classification. To distinguish these Section, Chapter or Subheading Notes from the Explanatory Notes, which are not legally binding under the Convention, they are normally referred to as "Legal Notes". Additional Notes (or supplementary Notes) may be included at the national level by an administration for its own national use and are national in scope. They may be binding at the national level only. To complement the legal core, there are Explanatory Notes to the HS published separately by the WCO. While these notes do not form part of the legal provisions of the HS, it is important that they be consulted during the classification process." (Emphasis supplied) Whatever the obligations and expectations from the Member States while implementing HSN has been brought out in Chapter 4 titled 'The Harmonized System and National Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same should not be made in a manner the General Interpreted Rules cannot be pressed into service for interpretation. 67. In short, heading 2106 under Chapter 21 as well as supplementary notes to chapter 21 have been specifically carved out in the Indian Custom Tariff. The relative chapter notes including supplementary notes as well as headings and sub-headings, therefore, will have to be construed differently from HSN, albeit, with the help of general interpretive notes is the requirement of Customs Cooperation Council. Learned Brother has dealt at length and correctly so, to indicate that chapter note 5 of supplementary notes which reads as follows "Heading 2106 (except tariff item 2106 9020 and 2106 9030), interalia, includes: "(a) Protein Concentrates and Textured Protein Substances" which is found that in sub-heading Protein Concentrates and Textured Protein Substances are mentioned as 2106 1000. 68. It is to be noted that the supplementary note 5 specifically provided in Chapter 21 of the Indian Customs Tariff,is not sub-heading note but the supplementary Chapter Note to TH 2106, therefore it seeks enlarge the scope of Tariff heading, specifically. Note3, 4 and 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o gets fortified from the directive of the Customs Cooperation Council which requires minimal disturbances to be done by the Member States so as to maintain the statistical and data collection similarity between Member States. Learned brother is thus correct in pointing out that in view of the special circumstances of Chapter 21 and heading 2106 in Indian Custom Tariff, the inclusion of 'Protein Concentrates and Textured Protein Substances' is clearly specific and that too in tariff heading 2106. The net effect of supplementary note 5 in TH 2106 in Indian Custom Tariff Act is that the heading description 2106 i.e. "Food preparation not elsewhere specified or included" ceases to be a residuary head, in relation to those products which are included in heading 2106, specifically (even if by virtue of any supplementary note). Given above, it is clear that till the product has dominance of Protein Concentrates and Textured Protein Substances (sold as whey protein in the present instance) ,which is undisputed in this case as other similar Whey Protein with different flavours, have been included by the party itself in this head. 70. From the foregoing it is also clear that Chapter 21 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1905, 2106, 2202, 2208, 3003 or 3004. In chapter note 3 to heading 1904, it has been mentioned that heading 1904 does not cover preparations containing more than 6% by weight of cocoa calculated on a totally defatted basis or completely quoted with chocolate or other food preparation containing cocoa of heading 1806. 82. Above chapter note has been pointed out by way of example that wherever weight percentage other than the pre-dominance is to be considered, the chapter notes have gone on to specifically mention the percentage of weight. Similar is the situation with heading 1901. HS Code Item Description 1901 Malt extract; food preparations of flour, groats, meal starch or malt extract, not containing cocoa or containing < 40% by weight of cocoa calculated on a totally defatted basis. Not elsewhere specified or included; food preparations of goods of headings 04.01 to 04.04, not Containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted Basis, not elsewhere specified or included. Even Chapter note 5 to Chapter 71 dealing with alloys of precious metals has specifically given prescription of 2% or more by weight of gold, platinum and even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts still as `preparation of Cocoa'. But in doing so, the argument has sidetracked the reality of Indian tariff being different and capable of providing answer through its own existing statutory clauses by way of supplementary notes, as discussed above. 87. While arriving at the above conclusion, support is also drawn from the decision in the matter of Collector of Central Excise vs. Frozen Food P.L. reported in 1992 (59) ELT 279 (Tri.) which was the decision under HSN based Central Excise Tariff (which also had similar head and supplementary notes de-aligned from HSN- though numbered differently) in relation to the additive supplement "surje", following observations are relevant: "42. As for the argument that protein concentrates mentioned in HSN Chapter Note 5(a) of Chapter 21 would refer to protein concentrated from sources other than milk like Soya protein, groundnut, etc., there is no warrant for such a claim. The items which are covered under Chapter IV find specific mention in headings and sub-headings, of that Chapter. We do not find any mention of the expression "protein concentrates" in this Chapter and for this reason alone, protein concentrates would be covered u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
