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TMI Blog2023 (11) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... ink industries. There is no dispute and it is an admitted fact that the impugned products cannot be directly used by the end users or consumers in any food/food preparation and they are used as industrial raw materials and mixed with other ingredients to manufacture their final product Dry Mixed Seasoning . Dry Mixed Seasoning is used by their customers as raw material in manufacture of the customers finished products. Impugned goods are not directly edible and meant to be used to impart flavour / olfactory characteristics to the products in which it is used. To be classified under CTH 2106, the product should be used as food or beverages either as such or after a minimum processing such as dissolving, boiling in water / milk or other liquids for home consumption. What is imported are not edible but merely used to impart cheese flavour. As such what is imported may be of animal origin i.e., Cheese, but, having components of synthetic aromatics, their appropriate classification is under CTH 3302 of the CTA, 1975. The impugned goods are classifiable under CTH 3302 1090 of the Customs Tariff Act and there is no merit in the appeal filed by the Department. Accordingly, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the heading 3302 in view of the Chapter Notes 2 to Chapter 33 of Customs Tariff Act, 1975. 2.4 Consequently, a Show Cause Notice No. 22/2015-SIIB dated 11.07.2017 was issued proposing to reject the classification of the imported goods under CTH 3302 basing on the interpretation of the description of the entry in the heading 3302 read with 3301 on the Chapter Notes 2 to Chapter 33. The Department s proposal is for classification of the imported goods under CTH 2106 9060 on the ground that the imported goods are a preparation based on flavouring substances derived from cheese and used as a flavouring ingredient in food. The larger period of limitation was invoked for the past imports on the ground that despite knowing the composition of the goods, their origin, and scope of the heading 3302, the noticee wilfully classified the goods under the heading 3302 suppressing the fact of the animal origin of the goods. Duty of Rs. 5,49,77,838/- was demanded in the Show Cause Notice under Section 28 (4) of the Customs Act, 1962. Live consignments valued at Rs. 49,56,315/- were proposed to be confiscated under Section 111 (m) of the Customs Act, 1962. It was also proposed that the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation of flavour manufacturers and represents the vast majority of flavour companies. The members of FEMA also include the suppliers of those ingredients and they create flavours for use in a wide variety of food and beverage products. m. Generally Recognised as Safe (GRAS) status may be achieved through FDA's voluntary GRAS notification program (FDA 1997) or through a properly conducted GRAS determination made by a private party. The expert panel of FEMA is the primary body for the safety evaluation of food flavouring for the flavour industry and the public as generally recognized as safe assessment of flavouring substances and they are the most widely recognized GRAS assessment program. n. All the essential ingredients present in the products in question have a flavour Profile given by FEMA and CFR reference number given under the FDA. o. It could be seen from the Book Titled Perfume and Flavour Chemicals (Aroma Chemicals) by Stephen Arctander (Consultants Lecturer: Rutgers University, The State University of New Jersey, University Extension Division, Newark NN. USA) which provides GRAS FEMA reference that each flavour / aroma ingredient has a distinct fla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial oils. It is not the claim of the noticee that the subject products are mixture of essential oils. They are a mixture of organic acids as accepted in the show cause notice itself. The show cause notice does not state that they are not mixtures of synthetic aromatics. Therefore, the proposal to deny classification under CTH 3302 for the reason that it is not of vegetable origin is not right. aa. As to the proposal for classification of the goods under the heading 2106, the said heading covers two categories of food preparations. From the examples given in the HSN Explanatory Notes indicate that they should be used as food or beverages either as such or after a minimum processing such as dilution, cooking, etc. bb. Moreover, the heading 2106 is a residuary heading. cc. The subject preparations are a mixture of synthetic aromatic compound and therefore finds a specific coverage under the heading 3302. They are not meant for direct consumption by humans at all but a raw material for use in the manufacture of a flavouring preparation that in turn will be used in the food products to add to the distinct flavour to the food preparations. dd. Once the classifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... synthetic aromatics. ii) Manager-QA of M/s. International Flavours Fragrances India P Limited, Dr. Ramesh Babu, in his statement dated 11.04.2016 stated that the flavouring preparations were obtained by an enzymatic process, but in Para 2(b) it is observed and recorded that the noticee had claimed the products in question to be not Enzyme Modified Cheese and in Para 2(d) of the order the noticee themselves stated that the impugned goods contain ingredients that have pleasant aromas are synthesised through a process of enzyme modification of cheese from which it can be inferred that the base product for obtaining the flavours is a food material and that the flavours are not synthesised artificially solely out of any organic acids/compounds or fatty acids/compounds which is further confirmed by the suppliers letter dated 09/04/2016 inferring that flavouring material is not synthetic aroma as claimed by the noticee. The above facts have not been considered by the adjudicating authority. iii) The suppliers vide their letter dated 22/02/2016 had clarified that as per the European Regulation the flavouring preparations as shall mean a product, other than a flavouring subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour material to preserve the flavour materials. By the above process it appears that the imported goods which are only a food preparation with 21% flavouring material and 75% maltodextrin used as carrier, necessitates them to be appropriately classified under the heading 2106 as food preparations not specified elsewhere as per the Explanatory Notes to the Heading 2106 specifically covers the flavouring materials. vi) To sum up, the Adjudicating Authority failed to consider the following while passing the present order:- The imported goods namely Cheese Polvaromas (Semi Finished Flavour Compound) is a preparation based on ingredients derived through enzymatic process of Cheddar Cheese Paste with maltodextrin as carrier and gum Arabic as additive and are not of vegetable origin. The active ingredient in the imported item is a mixture of acids and ketones with acids as the major components. As they are a preparation based on flavouring substances derive from Cheese and used as flavouring ingredient in food, they are rightly classifiable under the heading 2106 and more specifically under the Tariff Item 21069060 as Food flavouring material as against the heading 3302 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are contained in cheese. These flavours / materials are extracted from cheese separately by an enzymatic process and are compounded together on a carrier (maltodextrin) which does not change the design of the flavours. 4.1.3 The impugned products cannot be directly used by end users or consumers in their food preparations. This is used as industrial raw material with a dosage of 0.5 to 2.5% and mixed with other ingredients to manufacture dry mix seasoning product by the Respondent. 4.1.4 This Dry Mix Seasoning is used by the customers of the Respondent in their end products at a dosage level of 1.0 to 4.0%. For e.g., the mixed seasoning powder manufactured by the Respondent using the impugned goods is purchased by M/s. Pepsico and used in their end product Fritto Lays Chips. The impugned products are strong and have a very high organoleptic profile. 4.1.5 Being a mixture of odoriferous substances which are of a kind used as raw material in food industry, the Respondent has rightly classified them under Tariff Heading 3302 1090. 4.2.1 The Respondent in their cross objections filed has submitted that the subject goods are mixtures of synthetic aromatics and so classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H 2106. 4.2.8 Ld. Consultant has submitted that the subject goods cannot be directly used by end-users or consumers even as flavouring in food preparations. The subject goods are used as an industrial raw material and mixed with other ingredients to manufacture Dry Mix Seasoning product by the Respondent. The Dry Mix Seasoning is thereafter used by the Respondent's customers as another industrial raw material in manufacture of the consumer products. Further, the Dry Mix seasoning which is manufactured using the impugned goods as raw material itself is classified under CTH 2103 as mixed condiment or mixed seasoning. Thus, when the final product itself is classified under CTH 2103 as a seasoning, Department's case that the raw materials used in the manufacture of the same is a food preparation classifiable under CTH 2106 is unsustainable. 4.2.9 Further, he has put forth that the stand of the Department is against the principles of classification and contrary to the ratio laid down by the Supreme Court on the classification of goods under residuary headings in Commissioner of Central Excise vs. Wockhardt Life Sciences Limited [2012 (277) ELT 299 (SC)] wherein the Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2106 10 00 - Protein concentrates and textures protein substances kg. 30% - 2106 90 - Other : --- Soft drink concentrates : 2106 90 11 ---- Sharbat kg. 150% - 2106 90 19 ---- Other kg. 150% - 2106 90 20 --- Pan masala kg. 150% - 2106 90 30 --- Betel nut product known as Supari kg. 150% - 2106 90 40 --- Sug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overs : (A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk, etc.), for human consumption. (B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption. The heading includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.), for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.) (see the General Explanatory Note to Chapter 38). However, the heading does not cover enzymatic preparations containing foodstuffs (e.g., meat tenderisers consisting of a proteolytic enzyme with added dextrose or other foodstuffs). Such preparations fall in heading 35.07 provided that they are not covered by a more specific heading in the Nomenclature. . . This heading excludes preparations of a kind used for the manufacture of beverages, based on one or more odoriferous substances (heading 33.02). (Emphasis supplied) 6.6 Similarly, the Chapter Note 2 to Chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstances, which can be either natural or synthetic or mixed or both, which are used as raw materials in the perfumery, food or drink industries. 6.9 We note that the Respondent s submission is that the subject goods -consist of various odoriferous substances and are of synthetic origin, which make them classifiable under CTH 3302 1090. Whereas, the Department has relied on Chapter Note 2 to Chapter 33 of the Customs Tariff Act, 1975, which states that odoriferous substances in Chapter Heading 3302 refers only to substances of Chapter Heading 3301 to odoriferous constituents isolated from those substances or to synthetic aromatics, and also referred to the HSN, which states that the goods which qualify for classification under Chapter Heading 3302 should be mixtures, whether or not combined with a diluent or carrier or containing alcohol, of products of other Chapters (e.g., spices) with one or more odoriferous substances (essential oils, resinoids, extracted oleoresins or synthetic aromatics), provided these substances form the basis of the mixture. But, in this case, the odoriferous substances can be of synthetic origin. 6.10 We find that there is no dispute and it is an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tic aromatics, the appropriate classification of the impugned goods would be falling under CTH 3302 as determined by the Original Adjudicating Authority vide order dated 28.02.2018. Relevant findings are extracted below:- 11. Thus from the above, it becomes clear that the impugned product is a mixture of synthetic aroma compounds and are combined with the carrier namely maltodextrin and that they are used in the food stuffs. 12. Having known the nature of the impugned products it has now to be seen the appropriate classification. The rival headings are 3302 and 2106. 13. The chapter 33 covers essential oils and resinoids; perfumery, cosmetic or toilet preparations . The entry against the heading 3302 reads as follows:: Mixtures of odoriferous substances and mixtures (including alcoholic solutions) with a basis of one or more of these substances, of a kind used as raw materials in industry; other preparations based on odoriferous substances, of a kind used for the manufacture of beverages. This heading has got two single dash sub headings. One is 3302 10 (of a kind used in the food or drink industries) and the second one 3302.90 (other). It has been seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e noticee at the rate as against the CTH 3302 10 90 should be taken as appropriate duty. In this regard, reference is drawn to the Classification Decisions Taken By the Harmonized System Committee from the 1st to 26th Sessions (1988- 2000) 2002 in Sl. No. 168(relevant document 35.700 E/4 35 100 F/1 34.732 and decision (HSC/4) has decided that beverage bases- mixtures of esters (ethyl acetate, amylacetage, ethyl butyrate, isoamylbutyrate and others) as flavours and artificial colour in ethanol (52% v/v) and higher alcohol under the heading 33.02 treating them as a product described in the latter part of heading 33.02 which specially referred to mixtures with a basis of odoriferous substances of a kind used as a raw materials in industry. 16. Having held that the CTH 3302 1090 is appropriate for the impugned goods, it obviates the necessity to find out the applicability of the heading 21.06 as contended in the show cause notice. However, the same is also being taken up for a discussion. 17. The entry against the heading 21.06 reads as food preparations not elsewhere specified or included . The entries under this heading are extracted below: 2106 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever. The noticee has stated that the product in question is a raw material and is not meant for direct consumption and having a high organoleptic profile and therefore the recommended level is 0.01% to 0.06% in the customer's product. In fact the description states that the impugned flavours are semi finished and the show cause notice has not disputed the same. Whereas the heading 2106 covers ready to use items only. The show cause notice has also not made any case to the effect that the impugned preparations can be consumed directly. In such circumstances, the impugned product cannot be brought under the scope of the heading 2106. Without prejudice to the discussions above on the merit of the classification of the goods under the heading 3302, it is seen that the inapplicability of the heading proposed in the show cause notice (i.e. 2106) for the impugned goods, the alternative heading 3302 gets deemed as the appropriate heading by default. 8. In view of the above discussions, we hold that the impugned goods are classifiable under CTH 3302 1090 of the Customs Tariff Act and there is no merit in the appeal filed by the Department. Accordingly, the appeal is rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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