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TMI Blog2024 (9) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific purpose as feed additives, which is also consistent with the goods described under CTH 29362100. Further, the presence of stabilizers, antioxidants, or solvents does not alter the vitamins character but ensures their preservation and efficacy as feed additives, which is in line with the guidelines that additives should not exceed the quantity required for preservation or transport and should not alter the essential character of the vitamins. In the instant case, it is seen that as per the Material Safety Data Sheets (MSDS) of its supplier Xiamen Kingdom way Vitamins Ltd clearly establishes that the impugned goods contain Vitamins to the tune of 53.2% and the remaining elements are various carriers, stabilizers, etc. In view of the above factual position, there are no reason to differ from the impugned order with regard to the classification of Vitamin AD3 in Chapter 2936. Demand of interest - HELD THAT:- It is noted that once the exigibility to tax is established, interest is payable, as per the statutory provision - in the case of Pratibha Processors v. Union of India [ 1996 (10) TMI 88 - SUPREME COURT] the Supreme Court held that Interest is compensatory in character and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matrix, preservative and Antioxidant, is render them suitable for the purpose of animal feeding alone. However, the department formed an opinion that the impugned goods are appropriately classifiable under CTH 29362100. Accordingly, a SCN dated 30.09.2020 was issued to the appellant demanding differential duty of Rs. 76,39,881/ along with interest as applicable. Thereafter, the matter was adjudicated by the Principal Commissioner of Customs vide Order-in-Original dated 24.03.2021 holding the classification under CTH 29362100 and confirming the said differential duty under section 28(1) of the Customs Act, 1962 and Penalty of Rs. 5,00,000/- under section 112(a)(iii). Aggrieved by the said order, the appellant is before us. 3. Learned Counsel for the appellant submitted that the issue of the correct classification of Vitamin AD3 has been determined in the following cases:- (i) Hima Dye Chem Corporation vs. Commissioner of Customs, Mumbai (2018 SCC Online CESTAT 4109); (ii) BV Bio Corp Pvt. Ltd. vs. Commissioner of Customs (Customs Appeal No. 85017 of 2018); (iii) Chokhani Pharma Vet vs. Commissioner of Customs, Mumbai (1999 SCC Online CEGAT 2522). In these cases, Vitamin AD3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tamin AD3 1000:200 for import as animal feed additives and supplements. Therefore, even governmental documents establish that the impugned goods are appropriate for use in animal feeding alone. 3.2 The Ld. Counsel submitted that the Principal Commissioner considered the CBEC Circular No. 188/22/96-CX dated 26.03.1996, and had incorrectly interpreted that the circular applied only to animal feeds that contain vitamins in micro quantities. He submitted that the circular does not require that the vitamins should be present in micro-quantities only. The Learned Counsel further submitted that the Material Safety Data Sheets (MSDS) of its supplier Xiamen Kingdom way Vitamins Ltd clearly establishes that the impugned goods contain Vitamins to the tune of 53.2% and the remaining elements are various carriers, stabilizers, etc. The MSDS specifically notes that the impugned goods are suitable for animal feeding only and nowhere does it state that the vitamins contained in the impugned goods retain their identity as independent chemicals. Therefore, the Ld. Counsel submitted that it is evident the impugned goods can only be used as feed additives and not as independent chemicals. Moreover, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at vitamins, whether or not chemically defined or intermixed, fall outside the scope of headings related to animal feed, especially when they do not alter the character of vitamins for general use. This distinction is crucial and supports the classification under Chapter 29, as the goods in question are vitamins with a specific use as feed additives, not general animal feed products. 4.2 Further, ld. AR submitted that the Chapter Heading 2309 is in the nature of a residuary heading as Chapter Note I to Chapter 23 says that the Heading 2309 includes products of a kind not elsewhere specified or included, whereas chapter sub-heading 2936 is a specific heading for vitamins and provitamins. As per the Rule 3(a) of General Interpretation Rules, the specific heading shall prevail over the general heading. In this regard, he relied upon the judgement of the Hon'ble Supreme Court in the case of Dunlop India Ltd. & Madras Rubber Factory Ltd. v. Union of India and Others reported in 2002-TIOL-647-SC-CUS-LB 1983 (13) E.L.T. 1566 (S.C.). He further submitted that the appellant has placed reliance on the order of the Larger Bench of the Hon'ble Tribunal in the case of Tetragon Chemie r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53.2% Vitamins and the remaining elements are various carriers, stabilizers, etc. We proceed to examine the two competing headings, which is reproduced hereinafter: "2309 PREPARATIONS OF A KIND USED IN ANIMAL FEEDING: 2309 10 00 - Dog or cat food, put up for retail sale - 2309 90 - Other: 2309 90 10 í--- Compounded animal feed 2309 90 20 --- Concentrates for compound animal feed --- Feeds for fish (prawn, etc.) : 2309 90 31 ---- Prawn and shrimps feed 2309 90 32 ---- Fish feed in powdered form 2309 90 39 ---- Other 2309 90 90 --- Other 2936 XI. --PROVITAMINS, VITAMINS AND HORMONES 2936 PROVITAMINS AND VITAMINS, NATURAL OR REPRODUCED BY SYNTHESIS (INCLUDING NATURAL CONCENTRATES), DERIVATIVES THEREOF USED PRIMARILY AS VITAMINS, AND INTERMIXTURES OF THE FOREGOING, WHETHER OR NOT IN ANY SOLVENT - Vitamins and their derivatives, unmixed: 2936 21 00 -- Vitamin A and their derivatives" 5.3 In order to arrive at the correct classification of a product, it is imperative to also refer to the relevant Chapter notes and HSN Explanatory notes. It is seen that Chapter 23 of the Customs Tariff covers used and waste from the food industries; prepared animal fodder. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.4 The Ld Counsel has contended that the Supreme Court's decision upholding the Tribunal's decision in the case of Tetragon Chemie squarely covers their product. We note that in the judgment in the case of Tetragon Chemie, the Tribunal held that pre-mixes including those containing mineral substances and vitamins or pro-vitamins are classifiable under CTH 23.09. In the instant case, we note that the product under question is not a pre-mix containing mineral substances/vitamins or pro vitamins, but is an admixture of Vitamin A & D3. We note that while Chapter 29 refers to separate chemically defined compounds, the Explanatory Notes to HSN includes pro-vitamins and vitamins which remain classified in chapter 29, even when they are not separate chemically defined compounds, whether or not in a solvent. We are of the opinion that even though vitamin products are intended to be used in animal feed preparations, they are not excluded from the ambit of Chapter 29 of Customs Tariff Act, 1975. Classification under specific entry under Chapter 29 is to be preferred over residuary classification under Chapter 23 in view of Rule 3A of General Interpretative Rules Accordingly, classification u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Objects and Reasons of the Bill leading to enactment of Central Excise Tariff Act, 1985, it was clearly stated that the pattern of tariff classification is broadly based on the system of classification derived from the International Convention on the Harmonised Commodity Description and Coding System (Harmonised System) with such contraction or modification thereto as are necessary, to fall within the scope of the levy of Central Excise duty. The tariff so suggested for the levy under the Indian Tariff Act is based on an internationally accepted nomenclature, in the formulation of which, all considerations, technical and legal, have been taken into account. This was done to reduce avoidable disputes on tariff classification. Besides, the tariff would be on the lines of the harmonized system. It was also borne in mind that the tariff on the lines of the harmonized system would bring about considerable alignment, between the Customs and Central Excise Tariffs, which in turn, would facilitate charging of additional customs duty on imports, equivalent of excise duty. It was therefore expressly stated in the Statement of Objects and Reasons that the Central Excise Tariff are based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning which is expressly given to it in the HSN when there is no indication in the Indian tariff of a different intention." 7. Commenting on the importance of taking guidance from HSN Classification and how a taxing statute should be construed in consonance with their commonly accepted meanings in the trade and popular sense, Justice Sanjiv Khanna in D.L. Steels (supra) also so correctly observed as follows :- "9. The Harmonised System of Nomenclature, developed by the World Customs Organisation, has been adopted in India by way of the Customs Tariff Act, 1975, though there are certain entries in the Schedules to this Act which have not been assigned HSN codes. The Harmonised System is governed by the International Convention on Harmonised Commodity Description and Coding System, which was adopted in 1983, and enforced in January, 1988. This multipurpose international product nomenclature harmonises description, classification, and coding of goods. While the primary objective of the HSN is to facilitate and aid trade, the Code is also extensively used by governments, international organisations, and the private sector for other diverse purposes like internal taxes, monitoring i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court has reiterated the view that the HSN code is the bedrock of custom controls and procedures. It has also been held that as per the HSN, classification is done by placing the goods under the most apt and fitting sub-heading. Accordingly, in our view the impugned product is appropriately classifiable under CTH 2936. 5.7 We also take note of the fact that the chemical composition of the impugned goods is synthetic and the product is not derived out of processing of vegetable or animal material, in order to render its classification in Chapter 23. Further, it is seen that they serve a specific purpose as feed additives, which is also consistent with the goods described under CTH 29362100. Further, the presence of stabilizers, antioxidants, or solvents does not alter the vitamins' character but ensures their preservation and efficacy as feed additives, which is in line with the guidelines that additives should not exceed the quantity required for preservation or transport and should not alter the essential character of the vitamins. 5.8 It has also been submitted before us that in trade parlance and Industry, these items are regarded as animal feed. While trade parlance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eized shows that deliberately, knowingly and intentionally, it was imported as vitamin-E and sent to various industries for preparation of 'animal feed supplement' which has been virtually admitted by the witnesses. 128. It has been admitted by the respondent's counsel that vitamin-E supplied by the respondent M/s. Sonam International, is used for making broiler premix, layer premix, SK bed, SK Mix, ABDK, etc. In case the goods in question for preparation would have been directly imported for use as animal feed supplement, then things would have been different and it could have been treated as HSN Code 2309. The Tribunal seems to be impressed by the word, "includes", under Chapter 23 of CETA. With regard to scope of heading 2302, by using the word, "includes", does not mean that language or words, used in heading 2936 may be given go-bye. Virtually by using the word, "includes", undoubtedly, the legislature provided in addition to preparation mentioned in heading 2302 products of a kind, used in animal feeding and processing may be included. Inclusion does not mean that a product or goods because of overwhelming presence of an ingredients having independent existence, shall lose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l feeding not elsewhere specified or included, obtained by processing vegetables or animal material to such extent that they have lost the essential characteristics of the original material, other than vegetable wastes, vegetables residues and by-product of such processing. Thus, note under Chapter 23 itself provides that the product under heading 2309 contains the preparation under heading 2309 which has lost their original identity or essential characteristics after mixed with other products while preparing animal feed supplement. The extent of 45-50% of vitamin speaks volume. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 133. The aforesaid proposition seems to be supported by Apex Court judgment relied upon by the respondent reported in 2001 (132) E.L.T. 525 (S.C.): Collector of Central Excise, Bangalore Vs. Tetragon Chemie P. Ltd. (supra), whereby, the Tribunal's judgment was affirmed by Hon'ble Supreme Court. Their lordships while dismissing the appeal of Customs Department, affirming Tetragon Chemie's case (supra), observed that animal feed supplement were included in tariff item 2302 being preparation of a kind used in animal feeding including dogs and cats. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the statutory provision. We note that the ld counsel has submitted that interest is not liable to be paid as the duty was not liable to be paid. We do not agree with this contention. We note that in the case of Pratibha Processors v. Union of India 1996 (88) E.L.T. 12 (S.C.)- the Supreme Court held that "Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable'. Accordingly, we hold that as the differential duty demand is upheld, the demand of interest in the impugned order is correct. 8. We now address the issue relating to imposition of Rs 5,00,000/ as penalty. We hold that as there were several contrary decisions with regard to the classification of the said product Vitamin AD3 during the relevant time, there was confusion amongst the importers. Consequently, we hold that the imposition of penalty in not warranted in the instant case. 9. In view of the above discussions, we uphold the classification of Vitamin AD3 under CTH 2936 and uphold the demand along with interest confirmed in the impugned order. However, we set aside the penalty imposed on the appellant. Accordingly, we partially mod ..... X X X X Extracts X X X X X X X X Extracts X X X X
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