TaxTMI 
TaxTMI 
2023 (3) TMI 902
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....xclusion of all other micro organism'. The report did not mention the presence of any other ingredient. The Department was of the view that the goods are rightly classifiable as yeast under chapter 21 and not under CTH 29183090 as 'Carboxylic acid'. Yeast, active or inactive is specifically mentioned under CTH 2102. The 'Saccharomyces Boulardii' being yeast falls under CTH 21021090. Show Cause Notice was issued proposing to re-determine the classification of the goods and for demand of differential duty along with interest. After due process of law the original authority confirmed the classification under 21021090 and also confirmed the demand of the differential duty of Rs.13,57,549/- along with interest. On appeal, the Commissioner (Appeals) vide order impugned herein upheld the same. Hence this appeal. 2. On behalf of the appellant the learned counsel Shri. P.R. Renganath appeared and argued. It is submitted that the goods imported are 'Lyophilized Saccharomyces Boulardii' which is Saccharomyces Boulardii cells and 13% of lactose. The authorities below erred in observing that the test report issued by supplier did not mention the presence of any other ingredient. A mere perus....
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....medicine in pharmacies. The product is to be consumed as per the dosage prescribed by a Physician. Further, that the imported goods are drug within the meaning of Section 3(b) of the Drugs and Cosmetics Act, 1940. The appellant holds necessary permission under the Drugs and Cosmetics Act & Rules to import Saccharomyces Boulardii. In the Analysis Certificate issued by the supplier it is stated that it has expiry period which is 3 years. This itself would indicate that it is a medicine, rather than an edible preparation under chapter 21 which products have usually shorter shelf-life. 5. To support the argument that the goods are medicaments, the learned counsel relied on various literature which are as under: (i) (Textbook) Gut Microflora-Digestive Physiology and Pathology-John Libbey Eurotext, Paris. "Lyophilised Saccharomyces boulardii is produced by freeze-drying in the presence of lactose, a method which preserves the yeast's viability and stability. Analysis of the pharmacodynamis properties of Saccharomyces boulardii has shown that its activities are largely dependent upon its ability to survive. As with all yeasts, Saccharomyces boulardii is naturally resistant ....
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....patients with congenital sucrose isomatase deficiency, an effect, which can be used in the prevention of diarrhoea in this syndrome. In addition, the immune system is probably supported by an enganced release of secretoy lgA into the intestinal lumen. Due to these specific effects of S.b. on the intestinal flora and in view of the mentioned immunopathogenic concepts concerning the etiology of Crohn's disease, there was good reason to investigate also the effects of S.b. in patients suffering from Crohn's disease." (iv) Journal Correspondence-Clinical infectious Diseases-February 1996- " However, S. boulardii is a completely different species of yeast from baker's, brewer's, or wine yeast, and thus the results of S. boulardii therapy in the cited clinical studies are not applicable to S. cerevisiae therapy or to the four case descriptions. S. boulardii has been shown to be a separate species of Saccharomyces on the basis of several taxonomic, metabolic, and molecular parameters. S. boullardi is a wild Saccharomyces strain that does not produce ascospores or use galactose as a carbon source (as do wild S. cerevisiae strains). This strain is also given a separate designati....
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....ontend that the onus lies on the Revenue to establish that the product is not a medicament. The learned counsel prayed that the appeal may be allowed. 10. The learned AR G. Anandalakshmi Ganeshram supported the findings in the impugned order. The chapter heading in Chapter 21 was referred by the learned AR to explain that "Yeast (active or inactive); other single cell micro-organisms, dead (but not including Vaccines of heading 30.02); prepared baking powders" come under this heading. In ordinary parlance the impugned goods are known as yeasts'. The goods are not medicaments so as to merit classification under 3003 or 3004. The main argument of the appellant is that the imported goods contain one other ingredient viz; lactose which is added for its pharmacological function. The said argument is incorrect. As per the Analysis report issued by the supplier the goods are described as "Ovoid Yeasts to the exclusion of all other micro-organisms". The presence of lactose in small quantity is only for the purpose of stabilization i.e; lyophilization. This not take away the essential nature of the goods which is nothing but active micro organism- yeast. The learned AR referred to Part (....
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.... . . . . . . . . . kg. 30% - 21021090 --- Other kg. 30% - 21022000 --- Inactive yeasts, other single-cell micro-Organisms, dead . . . . . . . . . . . . . . . . . . kg. 30% - 21023000 - Prepared baking powders . . . . . . . . . . . . . . . kg. 30% - "Chapter 21 Miscellaneous edible preparations: 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, fish or crustaceans, mollusks or other aquatic invertebrates, or any combination thereof (Chapter 16); (f) Yeast put up as a medicament or other products of heading 30.3 or 30.04; or (g) prepared enzymes of heading 3507." " (A)Yeasts The yeasts of this heading may be in the active or inactive state. Activ....
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....ENATED, SULPHONATED, NITRATED OR NITROSATED DERIVATICES -Carboxylic acids with alcohol function, but without other oxygen function, their anhydrides, halides, peroxides, peroxyacids and their derivatives: 2918 30 Carboxylic acids with aldehyde or ketone function but without other oxygen function, their anhydrides, halides, peroxides 2918 30 90 Other Kg. 10% - "12. Chapter 29 Notes.1.- Except where the context otherwise requires, the headings of this Chapter apply only to: a. Separate chemically defined organic compounds, whether or not containing impurities; b. Mixtures of two or more isomers of the same organic compound (whether or ot containing impurities), except mixtures of acyclic hydrocarbon isomers (other than stereo isomers), whether or not saturated (Chapter 27);" 15. From the above, it is very much clear that the goods do not merit classification under Chapter 29. The appellant though classified the goods under Chapter 29, now contends that the classification determined by department is incorrect for the reason that Chapter 21 excludes yeast....
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....y evaporating natural mineral water." 16. The foreign supplier has furnished an Analysis Certificate along with the goods. As rightly pointed out by the learned AR the goods are described in the said certificate as below:- "Ovoid yeasts to the exclusion of all other micro organisms" The learned counsel has been at pains to contend that along with yeast there is another ingredient which is lactose and therefore the goods cannot be considered as yeasts. 17. The 'safety data sheet' issued by the supplier describes the goods as under: "Lyophilized Saccharromyces boulardii is manufactured from yeast cells to which is added a small quantity of lactose as auxiliary of lyophilization." 18. From the Safety Data Sheet itself it is clear that lactose is added as auxiliary for lyophilization. It is not an ingredient added to make it a medicine. Lyophilization is nothing but freeze drying. It is just a stabilizing process to preserve a perishable product for the convenience of transport. On the samples placed before us it is mentioned as "Saccharromyces Boulardii" and does not mention the ingredient of lactose, so as to consider it as an ingredient added to make it....
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....ts its "Florastor" as dietary supplement only and not as a drug. Food and Drug Administration (FDA), USA classifies the "Econorm" manufactured by DrReddy's as "Dietary Supplement" only along with "Florastor" and other products based on "Saccharomyces Boulardii" (d) Department of Health and Human Services, FDA "decided to regulate S. boulardii as a biological product, S. boulardii is not eligible for consideration to be included in an OTC (Over The Counter) drug monograph." 21. The conclusions arrived by the adjudicating authority after appreciation of the facts and evidence are worth reproducing and reads as under: "16.5. From the above, the following conclusion may be drawn: (i) The imported "Saccharomyces Boulardii" is found to be "Yeast" a "living microorganism". (ii) It does not fall under chapter 29 as it is not an "organic compound" like carboxylic acid in view of its character and the sense of the chapter. (iii) It is also not a "culture media" to be classified under 3821. (iv) It did not attain the form required to be classified under 3003 or 3004. (v) It is specifically covered as "Yeast" whether active or i....
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....ng to inactive yeast, it is stated, "Inactive yeasts obtained by drying, are generally brewery, distillery or bakers' yeasts which have become insufficiently active for further use in those industries. They are used for human consumption (source of vitamin B) or for feeding animals. It should, however, be noted that, owing to their growing importance, these dried yeasts are to an increasing extent being produced directly from specially prepared active yeasts. The heading also covers other types of dried yeasts e.g.Candidalipolytica or tropicalia, candida maltosa) developed from the yeast not belonging to Saccharomyces. They are obtained by drying the yeasts which have been cultivated on substrates containing hydrocarbons (such as gas-oils or n-paraffins) or carbohydrates. These dried yeasts are particularly rich in protein and are used in animal feeding. They are commonly known as petroproteins or yeast bioproteins". It will be apparent from the above Explanatory Note that what the respondents manufacture are inactive yeasts in dried form, basing on carbohydrates. The same are not used as medicine and there is no evidence that they are used as medicines though respondents ....
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....ported goods are raw-material. 23. In the case of M/s. Zymonutrients Pvt. Ltd. Vs. Commissioner of Customs vide Final Order No.41574/41580/2019 dated 26.11.2019, the Tribunal followed the decision in the case of Kasturi Foods and Chemicals to hold that the goods imported are to be classified under Chapter 21 as determined by the Department. The discussion of the Tribunal reads as under: "10. Going by the test reports of CRCL, impugned goods are inactive yeast; in view of the explanatory notes to chapter 21 dried yeast is also known as inactive yeast and for that reason inactive yeast is to be considered as dried yeast. We find that appellants have tried to argue that the impugned goods are not fit for human consumption on the basis of CFTRI report and hence do not fall under 2102. However, we find that under chapter sub heading 2102, there is no condition stating that it should be fit for human consumption. Either under 2102 or 21022000, one single dash covers yeasts; other single micro-organisms, dead; prepared baking powders; inactive yeast, other single cell micro organisms, dead. We find that there is no exclusion for yeast which are declared not to fit for human co....