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TMI Blog2024 (7) TMI 1530X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Rule 23 of the Customs Excise Service Tax Appellate Tribunal (Procedure) Rules, 1982 states that the parties to the appeal shall not be entitled to produce any additional evidence, either oral or documentary, before the Tribunal. Thus, the general principle is that the appellate court should not travel outside the record of the Original Authority, unless the Tribunal itself feels the need to do so. No application was filed and prayer made by the Appellant to produce additional evidence. Had it been done it would have given the respondent a chance to file additional grounds / evidence as a rebuttal and to test whether the evidence was of an unimpeachable character. The power to allow additional evidence at the Tribunal level, whether on fact or law, oral or documentary is discretionary in nature. The parties are not entitled, as of right, to the admission of such evidence. The classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the imported goods under a particular category different from that claimed by the assessee, the Department has to adduce proper evidence and discharge th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rao, Authorized Representative and Shri Harendra Singh Pal, Authorized Representative. For the Respondent : Shri Jaydeep Patel, Advocate, Shri Vishnu Mohan, Advocate and Shri Ashutosh Kumar, Advocate. ORDER PER M. AJIT KUMAR, This appeal is filed by the appellant-department against Order in Appeal C. Cus. I No. 18/2018 dated 7.2.2018 passed by the Commissioner of Customs (Appeals - I), Chennai. (impugned order) 2. Brief facts of the case are that the respondent M/s. Vasta Biotech Pvt. Ltd. had filed Bill of Entry dated 28.1.2009 for the clearance of the goods declared as "Martech DHA" which as stated by them are unsaturated acylic monocarboxylic acids being a derivative of linolenic acid, under CTH 29161590. The respondents were earlier classifying the goods under CTH 130219 and consequent to a legal opinion they felt that the product was more appropriately classifiable under CTH 29161590 as the Chapter covers linolenic acids. The original authority vide Order in Original dated 24.2.2009 reclassified the goods under CTH 13021990 based on the Chapter notes on the reasoning that it is an extract from marine algae, that CTH 13091990 specifically classifies vegetables saps and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order merits to be set aside. He referred to the ratio laid down by the Larger Bench of the Tribunal in the case of Commissioner of C. Ex, Raipur Vs Monnet Ispat & Energy Ltd [2010 (257) ELT 239 (TRI - LB)], which was upheld by the Hon'ble Supreme Court in Commissioner Central Delhi Vs Kap Cones [2015 (322) ELT 142 (SC)], in support of his stand. On merits, he stated that the imported item Martek DHA Algal oil is not a separate chemically defined organic compound as per note 1(a) to Chapter 29 of CTA, 1975, as it is in the form of micro encapsulated oil in powder form with DHA % at 10-17 only. Therefore, the product is not DHA per se, but is a product containing DHA and can't be considered as defined chemical compounds in terms of chapter 29. He drew the analogy of the classification of camphor a chemically defined organic compound under CTH 2914 2110 and 2914 2120, whereas camphor oil is classified under CTH 3301 2941 as discussed at para 22.14 of the OIO. The Ld. AR referred to the definition of 'food' as per section 3(j) of FSAS Act, 2006 and Regulation 6 of FSSAI wherein health supplements are stated to contain concentrated source of plants or botanicals nutrients among ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate chemically defined organic compound. DHA plays an important role in brain function and eye function. It is an intermediate added industrially in microscopic quantities to fortify foods and supplements intended for infants and pregnant and lactating mothers. The DHA as imported contains various other substances which are in the nature of impurities, and which are originally contained in the marine algae, and which cannot be separated. The DHA extracted thereby is highly susceptible to oxidation, and therefore requires stabilization, which is achieved by the addition of stabilizers. Further, the extracted DHA may also be converted to powder through microencapsulation for ease of storage and transportation. As per note 1(a) of chapter 29 of the Customs Tariff, the headings of the said chapter apply to separate chemically defined organic compounds, whether or not containing impurities. In addition, as per the HSN Explanatory Notes for chapter 29 and chapter 28, a product falling under one of these chapters may contain impurities, i.e. substances whose presence in the product results solely and directly from the production process and which may be unconverted starting materials o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the said Act would include the period availed by the review committee in terms of Section 35E(1) or 35E(2) of the said Act. As regards the appeals by the Department in terms of Section 35E(4), the same should be filed within one month from the date of communication of the order under sub-section (1) or subsection (2) of the said section but not beyond four months from the date of communication of order of the adjudicating authority to the review committee. In case there is any delay in this regard, the same can be condoned in exercise of powers under Section 35B(5), on being satisfied about sufficient cause for such delay and power to condone the delay would include the period availed under Section 35E(1) or (2) by the reviewing committee to decide about filing of the appeal." 28. In our considered opinion, the analysis made by the Full Bench is correct in view of the opinion expressed by us in the preceding paragraph and accordingly we hold the said view to the correct." (emphasis added) In the light of the said judgement, we find that the appeal filed by revenue before the Commissioner (Appeals) was not time barred and that the matter related to classification needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in Hewlett Packard India Sales Pvt. Ltd. Vs Commissioner of Customs (Import), Nhava Sheva [CIVIL APPEAL NO 5373 OF 2019, Dated 17/01/2023] cautioned against the use of internet material as under; 14. At the outset, we must note that the adjudicating authorities while coming to their respective conclusions, especially the Commissioner of Customs (Appeal) have extensively referred to online sources such as Wikipedia to support their conclusion. While we expressly acknowledge the utility of these platforms which provide free access to knowledge across the globe, but we must also sound a note of caution against using such sources for legal dispute resolution. We say so for the reason that these sources, despite being a treasure trove of knowledge, are based on a crowdsourced and user generated editing model that is not completely dependable in terms of academic veracity and can promote misleading information as has been noted by this court on previous occasions also. The courts and adjudicating authorities should rather make an endeavor to persuade the counsels to place reliance on more reliable and authentic sources. (emphasis added) We hence disregard the internet-bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eurized millstone 2106 90 99 ---- Other 9. We now examine the issue of classification. Revenue has contended that since DHA is used to fortify human food and is used in food supplements, it has the characteristics of a "food preparation" and must be classified under CTH 2106 as "Food preparations not elsewhere specified or included". They have relied on the HSN Explanatory Notes for CTH 2106, which states; "Preparations often referred to as food supplements, based on extracts from plants, fruit concentrates, honey, fructose, etc and containing added vitamins and sometimes minute quantities of iron compounds. These preparations are often put up in packing with indications that they maintain general health or well-being." They are of the opinion that the note clearly clarifies that the impugned goods which are manufactured from the extract of algae, which is undoubtedly a plant source are specifically covered under the CTH 2106. The respondent has stated that there is a fundamental difference between a "food preparation" which is marketed and consumed as such, and a product which is used in microscopic quantities in the manufacture of a "food preparation", as in their case. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haracter of a product. While none of those tests are accorded preeminence, it is ultimately for the authorities to ascertain which of those rules would merit adoption and represent an accurate understanding of the nature of the product." (emphasis added) Hence it would be essential to cull out the nature of the product, before arriving at the proper classification of the impugned goods. 13. Revenue has drawn attention to various legal provisions / Acts / Reports and also to foreign sources to arrive at the nature of the impugned goods. It is to be stated that the primary method for the classification of imported goods under the Customs Tariff is by referring to the General Rules of Interpretation of the Tariff and in case of doubt to take assistance from the HSN. In case the matter is not resolved by this process, aid can be taken from external judgments, references etc. Even so the in Hari Khemu Gawali Vs Deputy Commissioner of Police, Bombay and another [AIR 1956 SC 559], a Constitution Bench of the Apex Court has cautioned as under: "It has been repeatedly said by this Court that it is not safe to pronounce on the provisions of one Act with reference to decisions deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole. (emphasis added) It would hence be profitable to examine the issue primarily as per the provisions of the Customs Tariff, with reference to the HSN wherever required, and only if the issue is not resolved would it be required to take the help of extrinsic aid in construction of the statute. 15. It is the departments stand that the impugned goods 'MARTEK DHA KSF 35', - Docosahexaenoic Acid, as imported is manufactured from Oil extract of Marine Algae which is a plant source and is micro encapsulated in powder form. It is not a defined chemical to be classified under CTH 2916 as % of DHA is in the range of 10-17 only as per the web site of the supplier and are used in infant food preparations. As per trade parlance, explanatory notes to HSN for 2106 and TRU's clarification letter dated 27/07/2017, the goods are rightly classifiable under 2106 as food supplement/ ingredients. Para 2.15 of the Grounds of Appeal which reproduces Board's letter dated 04/09/2017 and encapsulates the views of Revenue is reproduced below. 2.15 Further, the Tariff Unit, CBEC, New Delhi vide letter in file F. No. 521/07/2017-STO (TU) dated 27.7.2017 has clarified about the classification issue of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actured product used to supplement human food for promoting health and wellness and has acquired the characteristics of food preparation covered under chapter 2106. 17. As per the respondent DHA is an Unsaturated Acyclic Monocarboxylic Acid and is defined by the Molecular Formula C22H32O2 and is therefore represented by a definitive structural diagram. They rely upon the Technical Opinion dated 3-10-2016 given by the Department of Biotechnology, IIT Madras. They also rely upon the decision of this Tribunal in Vipor Chemicals Pvt. Ltd. v. CC [2003 (156) ELT 420] which holds that a technical opinion stating that a product is a separate chemically defined organic compound is conclusive for classification under Chapter 29. Further Unsaturated Acyclic Monocarboxylic Acids are specified in CTH 2916 and Linolenic Acid and its Derivatives are specified in CTSH 291615. Revenue's argument that the goods cannot be classified under CTH 291615 since there is no mention of linolenic acid in the Bill of Entry is totally misconceived since what is required to be stated in a Bill of Entry is the description of the goods and not what the goods are a derivative of. Once the goods are described as DH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue, on whom lies the burden of proving the classification of goods, has not demonstrated that the additional ingredients in the impugned goods are not/ are not only impurities and stabilizers but include other ingredients giving DHA the characteristic of food preparation. 21. We find that the Commissioner (Appeals) in his order at para 5.5 has stated that the goods are "highly unstable, subject to rapid oxidation and carry a typical algal odour, making it totally inappropriate to call them food or food preparation or food supplement" and the goods are "not understood in common parlance as food or food preparation." has not been directly disputed. 22. As discussed above, revenue itself has alleged that the impugned goods are used in a host of industries like food, beverage, dietary supplement, pharmaceutical and allied industries. However, it has not been shown as to why "Martech DHA" has acquired the characteristics of food preparation alone and is not for example an ingredient of the pharma or allied industry when the goods are supplied to the said industries. The problem of trying to classify goods as per their perceived end use without first examining that the other ingredie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il" as per the respondent, which has also been accepted by revenue at para 2.1 of their appeal and in Boards letter mentioned above. (ii) the goods have been imported in bulk form and are known in the trade as DHA. (iii) as per the technical opinion given by IIT, which was reproduced at para 22.5 of the OIO, the impugned goods, in oil and powder form, is a separate chemically defined organic compound (DHA) that is an unsaturated acyclic monocarboxylic omega-3 fatty acid and a derivative of linolenic/ alpha linolenic acid, present with impurities and additives that are intended solely for stabilization and transport. (iv) the impugned goods are used in a host of industries like food, beverage, dietary supplement, pharmaceutical and allied industries. (v) as per Note 1(a) of Chapter 29 of the Customs Tariff, the headings of the said Chapter apply to separate chemically defined organic compounds, 'whether or not containing impurities'. (vi) as per Note 1(f) of Chapter 29, the products mentioned in Note 1(a) may contain added stabilizers (including anti-caking agent) for their preservation or transport. (vii) it has not been shown by revenue as to why "Martech DHA" has acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in the case of Union of India & Anr. Vs Major Bahadur Singh [2006) 1 SCC 368], held that each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases. Similarly in the case of K-Link Healthcare (supra) the goods are marketed as a Nutritional Health Drink made from plant extract. In the case of Ajinomoto India Pvt Ltd the issue was whether Ajitide I + G [Disodium ribonucleotide), was a flavouring material as per a specific heading found in the Customs Tariff or a chemical mixture when its sole use was stated to be that of a taste enhancer. The facts are distinguished as in the present case the specific heading favours the appellant, as the goods are in their pure form and are not a single end use ingredient. Hence the judgments do not come to the help of revenue. 26. We find that while revenue has not been able to prove its case, the respondent has demonstrated that the correct classification of "Martech DHA" a derivative of linolenic acid, which is a separate chemically defined organic compound (DHA), is under Tariff Heading 2916 1590 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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