Tariff classification of encapsulated vegetable oils turns on HSN criteria; repacking alone does not amount to manufacture.

Capsules containing vegetable oils were held not to fall under Chapter Heading 2108.99 as edible preparations because the tariff entry and HSN notes apply to preparations for direct human consumption or mixtures used in food or beverage preparations, which these products did not satisfy. Chapter 15 remained the more appropriate classification for fixed vegetable oils. Encapsulation and repacking did not create a new excisable product because the essential identity, use and commercial character of the oil remained unchanged, and manufacture requires a distinct commodity with a new commercial identity. The classification-based demand under Chapter 21 therefore failed, and consequential relief followed.

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Issues: (i) Whether the products marketed as capsules were classifiable under Chapter Heading 2108.99 as edible preparations or under Chapter Heading 1503.00 as fixed vegetable oils; (ii) Whether encapsulation of the vegetable oils resulted in manufacture of a new excisable product.

Issue (i): Whether the products marketed as capsules were classifiable under Chapter Heading 2108.99 as edible preparations or under Chapter Heading 1503.00 as fixed vegetable oils.

Analysis: The heading invoked by the department covers edible preparations not elsewhere specified or included, and the relevant HSN notes contemplate preparations for direct use or after processing for human consumption, or mixtures used in food or beverage preparations. The products did not answer those descriptions, did not fit the specific examples under Chapter 21, and the mere manner of marketing them as dietary supplements was insufficient to bring them within the residuary entry. The classification under Chapter 15, which covers fixed vegetable oils, remained the more appropriate description.

Conclusion: The classification under Chapter Heading 2108.99 was not sustainable, and the products were not classifiable under that heading.

Issue (ii): Whether encapsulation of the vegetable oils resulted in manufacture of a new excisable product.

Analysis: Encapsulation and repacking did not alter the essential identity, use, or character of the vegetable oils. The product remained the same commodity in a different presentation, and no new commercially distinct product emerged. The reasoning was consistent with the principle that manufacture requires emergence of a different commodity having a distinct commercial identity.

Conclusion: Encapsulation did not amount to manufacture of a new product.

Final Conclusion: The demand based on classification under Chapter 21 failed, and the appeals succeeded with consequential relief.

Ratio Decidendi: A product cannot be classified as a food supplement under Chapter 21 merely because it is marketed or packed in capsule form unless it satisfies the tariff description and the applicable HSN criteria, and mere repacking or encapsulation does not amount to manufacture absent a change in commercial identity.

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