TaxTMI 
TaxTMI 
2023 (9) TMI 419
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....missioner (Appeals) changed the classification for impugned goods as detailed in Table below: Summary of classification dispute S.No. Product Name Department's Classification Appellant's Classification 1. BSN Syntha 6 Chocolate 21061000 18069040 2. BSN Truemass 1200 Chocolate 21061000 18069040 3. Isopure Low Carb - Chocolate 21061000 18069040 4. Isopure Zero Carb - Chocolate Mint 21061000 18069040 5. Optimum Nutrition 100% Casein-Chocolate Supreme 21061000 18069040 6. Optimum Nutrition 100% Whey Gold Standard- Chocolate 21061000 18069040 7. Optimum Nutrition 100% Whey Gold Standard- Chocolate Hazelnut 21061000 18069040 8. Optimum Nutrition 100% Whey Gold Standard- Chocolate Malt 21061000 18069040 9. Optimum Nutrition 100% Whey Gold Standard- Chocolate Mint 21061000 18069040 10. Optimum Nutrition 100% Whey Gold Standard- Chocolate Peanut Butter 21061000 18069040 11. Optimum Nutrition 100% Whey Gold Standard- Cookies and Cream 21061000 18069040 12. Optimum Nutrition 100% Whey Gold Standard- Double Rich Chocolate 21061000 18069040 13. Optimum Nutrition 100% Whey Gold Standard Isolate - Chocolate 21061000 18069040 1....
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....als)upheld the classification concluded by Learned AC vide a common impugned order. Learned counsel for the appellant pointed out that the primary reasons for finding against the Appellant are provided below: * Predominant ingredient: Impugned goods contain 72% protein with 'Whey Protein Isolate' and 'Whey Protein Concentrate' being the main ingredients. * Common Parlance: In common parlance the impugned goods are known as nutritional supplements consisting of whey protein concentrates. * Note 5 to Chapter 21 of Customs Tariff includes Protein Concentrates and suggests classification under CTH 2106. * Cocoa is not the main ingredient in the impugned goods. 5. Learned counsel for the appellant argued that without considering the submissions made by the Appellant, the classification mentioned in Column-3 to Table above was upheld by Ld. Commissioner (Appeals).Ld counsel for the appellant pointed out that aggrieved by the classification of impugned goods concluded vide the impugned order, Appellant filed 29 individual appeals before the Tribunal stated to be involving same issue. 6. Learned counsel for the appellant argued that the products mentioned in Table above, include ....
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.... that a product is to be classified basis the condition in which such goods are presented for clearance to the Customs Authorities. He relied on the following decisions (i) Dunlop India Ltd. v. UOI 1983 (13) E.L.T. 1566 (SC); (ii) Commissioner v. Sony India Ltd. 2008 (231) E.L.T. 385 (S.C.)]. He further argued that the appropriate classification of goods is determined by following the General Rules for the Interpretation of Import Tariff ("GIR"). He argued that for the purposes of present submission, it is important to consider GIR Rule 1, 3(a) and 6, which must be applied sequentially. He relied on the following (i) Taj Sats Air Catering Ltd. v. CC Ex., Delhi-II, 2016 (334) E.L.T. 680 (Tri-Del.); (ii) Circular 36/2013-Cus. Dated 05.09.2013 He argued that as per the GIR Rule 1, the classification of goods must be done in accordance with the Chapter Heading (CTH) and any relevant Section and Chapter Notes. These Notes provide detailed explanation as to the scope and ambit of the respective Sections and Chapters under Customs Tariff. He relied on the following decisions (i) Saurashtra Chemical, Porbandar vs. Collector of Customs, 1986 (23) ELT 283 (Tri-LB) [upheld in1997....
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.... 1806 90 10 --- Chocolate and chocolate products 30% 1806 90 20 --- Sugar confectionary containing cocoa 30% 1806 90 30 ---- Spreads containing cocoa 30% 1806 90 40 ---- Preparations containing cocoa for making beverages 30% 1806 90 90 ---- Other Kg. He argued that the phrase "food preparation" have not been defined in the Customs Tariff Act or Explanatory Notes. Hence, emphasis must be laid on the plain meaning of the phrase and its use in general parlance. He argued that the term 'preparation' has been defined in Kothari Chemicals v. UOI, 1996 (86) E.L.T. and Reckitt and Colman of India Ltd., Calcutta v. CCE, Calcutta, 1985 (22) ELT 216 (Tribunal) as products made from separate components. Thus, a product can be categorized as 'food preparation' when there is a process undertaken to give rise to a 'prepared food' that is different from its ingredients. He argued that all the CTHs under consideration deal with "food preparation". 10. He argued that GIR Rule 1 provides that the classification of products must also be in terms of relative Section and Chapter Notes. In thi....
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.... Note to Chapter 18, HSN Explanatory Note to CTH 1901, and HSN Explanatory Notes to CTH 2106 which provides that food preparations of CTH 0401 to CTH 0404 containing less than 5% cocoa (by weight) are instead covered under CTH 1901. He argued that if the product under consideration does not satisfy the dual condition as summarised in Para above, such goods irrespective of their cocoa content are classifiable under CTH 1806 of Customs Tariff. He relied on HSN Explanatory Notes to CTH 2106 and HSN Explanatory Notes to CTH 1806. 11. He argued that CTH 2106, covers "Food preparations not elsewhere specified or included". In other words, for classification under CTH 2106 of Customs Tariff requires two conditions to be satisfied, namely: a. It must a food preparation; b. It must not be specified or included elsewhere. He argued that similar interpretation has also been provided under HSN Explanatory Note to CTH 2106 which specifically mentions that CTH 2106 only covers those goods which are not covered under any other heading of the Nomenclature. He argued that the point of distinction as per HSN Explanatory Notes read with Customs Tariff in respect of CTH 1806, CTH 1901 and CTH 21....
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....ending GIR Rule 6 read with GIR Rule 1 to sixth and eight-digit level, the impugned goods are appropriately classifiable under CTI 1806 90 40 of Customs Tariff, which reads as "Chocolate and other food preparations containing cocoa: Other: Preparations containing cocoa for making beverages". 14. He further argued that the issue in respect of "Cookies & Cream" flavoured whey protein powder came up for discussion before the 68th WCO's Harmonized System Committee of September 2021. He argued that this decision, having Doc. NC2855Eb/K/6, WCO's HS Committee concluded that "Cookies & Cream" flavoured whey protein powder containing cocoa (along with processed alkali) of~1%are appropriately classifiable under CTSH 1806 90. He argued that the product at S. No. 11 of Table above are similar to the goods under consideration before WCO's HS Committee. Hence, the WCO's HS Committee decision applies to the present case. 15. He argued that in the light of the foregoing submissions, the classification undertaken by the Appellant and appearing in Column (4) of Table (above) is correct. Thus, the duty incidence in respect of impugned goods have been correctly discharged by the Appellant. 16. Ld C....
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....shall use all the headings and subheadings of the Harmonised System without addition or modification, together with their related numerical codes; (ii) it shall apply the General Rules for the interpretation of the Harmonised System and all the Section, Chapter and Subheading Notes, and shall not modify the scope of the Sections, Chapters, headings or subheadings of the Harmonised System; and (iii) it shall follow the numerical sequence of the Harmonised System." (Emphasis Supplied) Learned Counsel argued that the HSN acts as the basis for the classification of the goods across the world. He submitted that the Indian Courts must also march hand-in-hand with the decisions rendered by the foreign counterparts in interpreting the treaties to which India is signatory relating to classification of goods. Reliance in this regard was placed on the decision of the Hon'ble Supreme Court in CC v. G.M. Exports, 2015 (324) ELT 209 (SC). Similarly, reliance was also be placed on the decision of CC v. C-Net Communication (I) Pvt. Ltd., 2007 (216) E.L.T. wherein the Hon'ble Supreme Court relied upon the decision of Canadian Customs Tribunal. 19. Learned Counsel argued that globally the imp....
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....conclusion is also supported by virtue of specific exclusion provided under HSN Explanatory Notes of 2022 for CTH 2106. Here, it is relevant to note that under HSN Explanatory Notes of 2022 of CTH 2106, food preparations containing cocoa have been specifically excluded from falling under CTH 2106. Relevant extract reproduced hereinunder: "[...] This heading further excludes (a) Preparations containing cocoa, put up as food supplements for human consumption (heading 18.06)" Learned Counsel argued that impugned goods are correctly classifiable under CTH 1806 and therefore they are ipso facto excluded from the scope of CTH 2106 of Customs Tariff. 24. Learned Counsel argued that as per GIR Rule 3(a), the heading that provides the most specific description of the goods shall be preferred to headings providing a more general description. It is pertinent to note that GIR Rule 3(a) envisages comparison at the CTH level only. Ld Counsel argued that a bare perusal of CTH 1806 which covers 'Chocolate and other food preparations containing cocoa' and CTH 2106 which covers 'Food preparations not elsewhere specified or included', it is evident that impugned goods are covered more specific....
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....inition must be preferred, and doctrine of commercial nomenclature must not be applied. Ld Counsel argued that similar observations have also been made by the Hon'ble High Court of Mumbai in the case of Kulkarni Black & Decker Ltd. v. UOI, 1992 (57) E.L.T. 401 (Bom). The relevant extract from Kulkarni (Supra)summarizing the legal position has been extracted herein under for ease of reference: "It is now settled by catena of decisions of the Supreme Court and this Court that it is not permissible to take into consideration the trade meaning or commercial nomenclature when the definition provided in the statute is extremely clear and does not suffer from any ambiguity. In case where the application of commercial meaning or trade nomenclature runs counter to the statutory context in which the word is used in the Tariff Item, then the trade meaning or commercial nomenclature should be ignored." (Emphasis Supplied) Learned Counsel argued that the trade/ commercial parlance is to be examined only if the tariff entry is ambiguous. Reliance in this regard is being placed on Nirlon Synthetic Fibres v. UOI, (1999) 110 E.L.T. 445 (Bom) (DB) and Panama Chemical Works v. UOI, 1992 (2) E.L.....
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....e product name. 30. Learned Counsel argued that the impugned goods are more appropriately classifiable under CTH 1806 of Customs Tariff and on account of failure of revenue to justify classification under the CTH 2106 of Customs Tariff, the entire proceedings initiated by the Department is unsustainable. He placed reliance on the decision of L&T v. CC, Mundra, 2021-VIL-224-CESTAT-AHM-CUwherein this Hon'ble Tribunal whilst relying on the dictum of Hindustan Ferrodo Ltd. v. Collector of Central Excise, Bombay, 997 (89) E.L.T. 16 (S.C.), HP Chemicals Ltd. v. CCEx., Chandigarh, 2006 (197) E.L.T. 324 (S.C.), Pepsico Holding Pvt. Ltd. v. CCEx, Pune-III, 2019 (25) G.S.T.L. 271 (Tri. - Mum) and Warner Hindustan Ltd. v. Collector of CE, Hyderabad, 1999 (113) E.L.T. 24 (SC) held as follows: "10. In view of the above settled law, irrespective whether the classification claimed by the Appellant is correct or not since the classification proposed by the Revenue is absolutely incorrect, the entire case of the Revenue will not sustain. Therefore, we are not addressing the issue that whether the Appellant's classification was correct or otherwise. The Appellant also made an alternate submis....
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.... Collector of Central Excise, Patna, 1998 (102) E.L.T. 660 (Tri), where the Tribunal held that issues of classification cannot be separated from the question of valuation. Thus, provisional assessment remains provisional in respect of all issues, which must be adjudicated together and not in a piecemeal manner. Accordingly, the Tribunal remanded the matter back for fresh adjudication including all the issues involved therein [In Re: Castrol India Ltd., 2001 (138) E.L.T. 979 (Commr. Appls)]. He also relied on the case of Nitco Tiles Ltd. v. CC (Export Promotion), Mumbai, in Order No. S/491 to 497/08/CSTB/C-II and A/485 to 491/08/CSTB/C-II dated 20.08.2008 [Compilation, p. 150] where taking note of the above-mentioned decision, remanded the case for fresh adjudication citing finalisation of provisional assessment in piecemeal manner. Ld Counsel argued that the impugned order results in multiplicity of proceedings and challenges the grund norm as envisaged under the Customs Act. Ld Counsel submitted that in order to conclude the classification dispute Tribunal may pass orders on the classification of the impugned goods determinatively. 31. Learned AR pointed out that the goods import....
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....of all the products produced by the appellant clearly mention that the main ingredients of the imported goods are "Whey Protein Isolate (WPI) and Whey Protein Concentrate (WPC)". For example, the actual description of the import goods as declared in Bill of Entry No. 3139731 dated 07-052019 and their protein content per 100 grams as appearing in the label produced by the appellant, are given below:- TABLE-A Sl.No. Description of the import goods Unit Qty. in grams Protein content in the import goods per 100 grams 1 On Ind 100% WGS AF/GF DBL Rich Choc 5 LB 100 78.90 2 On Ind 100% WGS AF Cookies & Cream 5 LB 100 72.70 3 BSN India True Mass Chocolate 5.82 LB 100 28.00 4 On Ind 100% WGS AF Cookies & Cream 5 LB 100 72.70 5 On Ind 100% WGS AF/GF DBL Rich Choc 5 LB 100 78.90 6 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 7 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 8 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 9 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90 10 On Ind 100% WGS AF/GF Rocky Road 5 LB 100 76.00 11 On Ind 100% WGS AF/GF Mocha Capp 5 LB 100 75.00 Learned AR pointed out that from above table, it is evident th....
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....e products are known in the market and by the public as "Nutrition Supplements". There is no dispute that the appellants have also declared these products as "Nutrition Supplements" in the Bill of Entries. He pointed out that these products are marketed in different flavours such as vanilla, strawberry, chocolate/cocoa, double rich chocolate, etc. Ld AR argued that the appellants have claimed classification of these products under CTH No. 18069040 as "Preparations containing cocoa for making beverages" under Chapter - 18 of the Customs Tariff Act, 1975 which covers "Cocoa and Cocoa Preparations".Ld AR argued that the products made from whey such as Whey Protein Concentrates and Whey Protein Isolates are not covered under chapter 18. The adjudicating authority clearly held that none of the labels of the import products mention Cocoa as the main ingredient of the import items for which classification has been claimed as falling under Chapter-18. Ld AR pointed out that merely because cocoa is added as a flavoring agent does not change the content, composition and character of these products and they do not become cocoa and cocoa preparations. 37. He argued that as per Supplementary N....
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....-Kat coated with chocolate in the case Nestle (India) Ltd Vs. CCE, Mumbai - 2000 (124) ELT 898 held that "13. It might have been necessary, in view of the presence of chocolate, to refrigerate the product to prevent its melting or spoiling. That alone cannot justify the view that the product's essential character of the product has been conferred upon it by chocolate. There is nothing to show that the buyers of the goods bought as chocolate, not as a combination of chocolate and biscuits; that it was the presence of the chocolate alone as distinct from the chocolate and biscuits which length of the product is appeal to customers. On the other hand, the market advertising brief produced by the appellant refers to the presence of the biscuit market as well as the chocolate market and it talks of the products as wafer covered with crisp chocolate and say that the product creates niche for itself, drawing from both the biscuit market as well as the chocolate market." This judgement in the case of Nestle (India) Ltd is also followed by the in the case of Little Star Foods Pvt. Ltd Vs. Commissioner of Central Excise, Hyderabad reported at 2006 (199) ELT 451 (Tri.-Bang.). In the case o....
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....ng the ground of assessment being provisional and piecemeal finalisation of assessment the appellants have given up this issue. The Ld counsel has sought that the issue of classification may be finalised by the tribunal as is apparent from the submissions recorded in para 30 above. The submission in this regard is reproduced below: "Having said the foregoing, in order to conclude the classification dispute, it is most respectfully prayed before this Hon'ble Tribunal to pass orders on the classification of the impugned goods determinatively." In view of above, we proceed to decide the classification issue despite the assessment being provisional on account of Valuation. 44. The following table contains the classification sought by the appellant and the classification adjudicated by the Revenue. S.No. Product Name Department's Classification Appellant's Classification 1. BSN Syntha 6 Chocolate 21061000 18069040 2. BSN Truemass 1200 Chocolate 21061000 18069040 3. Isopure Low Carb - Chocolate 21061000 18069040 4. Isopure Zero Carb - Chocolate Mint 21061000 18069040 5. Optimum Nutrition 100% Casein-Chocolate Supreme 21061000 18069040 6. Optimum Nutriti....
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....s do not satisfy the condition of classification under CTH 1901 of Customs Tariff. Furthermore, cocoa used in the food preparation is not defatted cocoa." They have themselves argued that the impugned goods are food preparations having constituent ingredients from CTH 3502 and CTH 3504 and are not food preparations of CTH 0401 to CTH 0404. They have also argued that the impugned goods do not satisfy the condition of classification under CTH 1901 of the Customs Tariff Act. They have also argued that the coco used by them in the food preparation is not defatted coco as required for classification under heading 1901. In view of the above, the only contesting classification that remain are CTH 1806 and CTH 2106. 46 In this regard the competing heading in the schedule to Custom Tariff Act 1975 in the instant case are reproduced below: 1806 CHOCOLATE AND OTHER FOOD PREPARATIONS CONTAINING COCOA 18061000 - Cocoa powder, containing added sugar or other sweetening matter kg. 30% - 18062000 - Other preparations in blocks, slabs or bars weighing more than 2 kg. or in liquid, paste, powder, granular or other bulk form in containers or immediate ....
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....Chapter 21 distinguish the Chapter 21 of Customs Tariff from the Chapter 21 of the HSN (para 49 below). It is seen that in the entire appeal as well as written submissions the appellant has not dealt with the Supplementary Notes to Chapter 21. The argument of the appellants that while other 'Protein Concentrates' imported by them are classifiable under Customs Tariff Heading 2106 (Sub Heading 2106 1000), the 'Protein Concentrates containing Cocoa' are classifiable under Customs Tariff Heading 1806 (Sub Heading 1806 9040). This claim is solely based on the HSN ignoring the Supplementary Notes to Chapter 21. The competing subheadings are as follows 1806 CHOCOLATE AND OTHER FOOD PREPARATIONS CONTIANING COCOA Kg. 30% - 1806 90 40 --- Preparations containing coca for making beverages 2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED Kg. 40% - 2106 1000 - Protein concentrates and textured protein substances The heading 2106 is qualified by the Supplementary notes to Chapter 21. Therefore the Heading 2106 needs to be read with Supplementary Note 5(a) in terms of rule 1 of the Rules of Interpretation ....
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....taining 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, blood, fish or crustaceans, molluscs or other aquatic invertebrates, or any combination thereof (Chapter 16); (f) Yeast put up as a medicament or other products of heading 3003 or 3004; or (g) Prepared enzymes of heading 3507. 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, blood, fish or crustaceans, molluscs or other aquatic invertebrates, or any combination thereof (Chapter 16); (f) Yeast put up as a medicament or other products of heading 3003 or 3004; or (g) Prepared enzymes of heading 3507. 2.- Extracts of the substitutes referred to in Note 1 (....
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.... coloured syrup, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juice and intended for use in the manufacture of aerated water, such as in automatic vending machines. 5. Heading 2106 (except tariff items 2106 90 20 and 2106 90 30), inter alia, includes: (a) protein concentrates and textured protein substances; (b) preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption; (c) preparations consisting wholly or partly of foodstuffs, used in the making of beverages of food preparations for human consumption; (d) powders for table creams, jellies, ice-creams and similar preparations, whether or not sweetened; (e) flavouring powders for making beverages, whether or not sweetened; (f) preparations consisting of tea or coffee and milk powder, sugar and any other added ingredients; (g) preparations (for example, tablets) consisting of saccharin and foodstuff, such as lactose, used for sweetening purposes; (h) pre-cooked rice, cooked either fully or partially and their dehydrates; and (i) preparations for lemonades or other beverages, consisting, for exam....
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.... 50. The dispute in the instant case relates to classification. For the purpose of classification, the Custom Tariff Act prescribes the general rules of interpretation. Rule 1, 2 and 3 of the said Rules are reproduced below: "Classification of goods in the Nomenclature shall be governed by the following principles: 1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only, for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions: 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule). presented unassembled or disassembled. (b) Any reference in a heading to a material or substance shall be taken to include ....
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....sification cannot be made by following rule 1 or 2 can a recourse to rule 3 be made, and so on.We also find support for this proposition in the following decisions (i) In the case of CCE Nagpur vs Simplex Mills Co Ltd. 2005 (181) ELT 345 SC Hon'ble Apex Court has observed as follows: "11. The rules for the interpretation of the Schedule to the Central Excise Tariff Act, 1985 have been framed pursuant to the powers under Section 2 of that Act. According to Rule 1 titles of Sections and Chapters in the Schedule are provided for ease of reference only. But for legal purposes, classification "shall be determined according to the terms of the headings and any relevant section or Chapter Notes". If neither the heading nor the notes suffice to clarify the scope of a heading, then it must be construed according to the other following provisions contained in the Rules. Rule-I gives primacy to the Section and Chapter Notes along with terms of the headings. They should be first applied. If no clear picture emerges then only can one resort to the subsequent rules. The appellants have relied upon Rule 3. Rule 3 must be understood only in the context of sub-rule (b) of Rule 2 which says inte....
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....fication. Classification is to be effected : (a) according to the terms of the Headings and any relative Section or Chapter Notes; and, (b) provided the Headings or Chapter Notes do not otherwise require according to the provisions thereinafter contained, viz., GRIs 2 to 6. Thus, it is clear from the above that : (i) the Headings, and, (ii) the relative Section or Chapter Notes must be considered before classification is done. Only after this exercise is done, if a conflict in classification still persists, the subsequent GRIs are to be resorted to. GRI-2 is not germane to the present case and therefore, we make no reference to it. GRI-3 provides for classification in the event when the goods are classifiable under two or more Headings. As per GRI-3, when by application of GRI-2(b) or for any other reason, the goods are, prima facie, classifiable under more than one Heading, then; (a) the 'most specific description' is preferred, (b) a mixture of different goods will be classified as that good which gives the mixture its 'essential characteristic', and (c) when goods cannot be classified with reference to (a) or (b), they should be classified under the Heading which o....
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....is a difference between the chapter notes and Section notes of the Customs Tariff and the chapter notes and Section notes appearing in HSN, then those appearing in the Customs Tariff take precedence over those appearing in the HSN. In other words HSN can be relied for the purposes of classification under Customs Tariff only if the HSN is harmonised with the Customs Tariff. (i) We find that Hon'ble Apex Court in the case of Global Healthcare Products 2015 (322) ELT 365 (SC) has observed as follows: "10. The Commissioner, thus, noted that in the HSN Notes, sub-heading 3306.10 deals with dentifrices. The Commissioner noted that the meaning of dentifrices as per the Concise Oxford Dictionary is 'a paste or powder for cleaning of teeth'. On that basis, he concluded that the product in question was paste, namely, the toothpaste for cleaning the teeth and, therefore, would fall under subheading 3306.10. En passe, the Commissioner also observed that there is no major difference in these products, namely, Close-Up Whitening and Close-Up Red/Blue/Green, except one ingredient used in the manufacture of Close-Up Whitening and the addition of that ingredient does not change the purpose, nat....
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....at there was material difference in the sub-heading 3306.10 in the Indian statute when contrasted with Harmonized Commodity Description and Coding System. Whereas, as per the Tariff Entry 3306.10 in the Excise Act, it is 'tooth powder' and 'toothpaste', under the Harmonized Commodity Description and Coding System, what is mentioned is 'dentifrices'. It is further noticed by the Tribunal that dentifrices was more generic in nature as it recognized all three types of products, namely, (i) toothpaste, (ii) other preparations for teeth and (iii) denture cleaners, than tooth powders and toothpaste. Thus, when under Indian statutory regime there is a restricted sub-heading under 3306.10, namely, tooth powder and toothpaste only, the approach of the Commissioner in taking aid of HSN Notes was erroneous. Discussion on this aspect runs as follows: "A perusal of the HSN notes would indicate that all three types of 'Dentifrices' are recognized as (i) 'Toothpaste', (ii) Other preparations for teeth, and (iii) 'Denture cleaners'. The Note further explains that "Dentifrices" to include 'toothpaste' and "other preparations for teeth" whether for cleaning or polishing the assessable surface of t....
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....e Apex Court in the case of Camlin 2008 (230) ELT 193 (SC) has observed as follows: "26. In our considered view, the Tribunal erred in relying upon the HSN for the purpose of marker inks in classifying them under Chapter Sub-Heading 3215.90 of the said Tariff. The Tribunal failed to appreciate that the entries under the HSN and the entries under the said Tariff are completely different. As mentioned above, it is settled law that when the entries in the HSN and the said Tariff are not aligned, reliance cannot be placed upon HSN for the purpose of classification of goods under the said Tariff. One of the factors on which the Tribunal based its conclusion is the entries in the HSN. The said conclusion in the Order of the Tribunal is, therefore, vitiated and, accordingly, set aside. We agree with the findings recorded by the Commissioner (Appeals)." (iii) From the above decisions of Hon'ble Apex Court, it is apparent that reliance on the HSN Section Notes, Chapter Notes and Explanatory Notes can be placed only when the Customs Tariff is harmonized with HSN. Wherever there is a difference between the Customs Tariff and HSN reliance cannot be placed on HSN Section Notes, Chapter Note....
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....taining more than 20% by weight of sausage, meat, meat offal, blood, fish or crustaceans, molluses or other aquatic invertebrates, or any combination thereof (Chapter 16); (f) Yeast put up as a medicament or other products of heading 30.03 or 30.04; or (g) Prepared enzymes of heading 35.07. 2- Extracts of the substitutes referred to in Note 1 (b) above are to be classified in heading 21.01. 3- For the purposes of heading 21.04, the expression" homogenised composite food preparations" means preparations consisting of a finely homogenised mixture of two or more basic ingredients such as meat, fish, vegetables or fruit, put up for retail sale as infant food or for dietetic purposes, in containers of a net weight content not exceeding 250 g. For the application of this definition, no account is to be taken of small quantities of any ingredients which may be added to the mixture for seasoning. preservation or other purposes. Such preparations may contain a small quantity of visible pieces of ingredients." In the Custom Tariff Act, notes apart from three chapter notes there are additional 'Supplementary Notes' which reads as follows: "SUPPLEMENTRY NOTES : 1. In this Chapter,....
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....s" or "Mithai" or called by any other name. They also include products commonly known as "Namkeens", "mixtures", "Bhujia", "Chabena" or called by any other name. Such products remain classified in these sub-headings irrespective of the nature of their ingredients." These supplementary notes appearing in Custom Tariff are not part of the HSN. In this background it is seen that the Customs Tariff Act is not aligned to the HSN (Harmonized System of Nomenclature) on account of the text contained in supplementary notes to Chapter 21. Thus it is seen that Government of India has deliberately chosen to deviate from the Harmonised System of Nomenclature (HSN).By this Supplementary note the Government of India has chosen to enlarge the scope of the Heading 2106 by specifically including in it the various items listed in Supplementary note. In view of deliberate changes made in the Customs Tariff the HSN notes lose their relevance. 53. The Supplementary notes of Chapter 21 of the Schedule to the Custom Tariff Act prescribes at S.No. 5(a) that 'Protein Concentrate and Textured Protein Substances' would fall under heading 2106. The heading 2106 of the Custom Tariff Act reads as follows: 210....
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....r interpretation would make the said note 5(a) redundant since these goods are as it is covered under sub heading 2106 1000 in the tariff itself. In other words there was no need of the Supplementary Note 5(a) if the goods are already covered under sub heading 2106 1000. Hon'ble Supreme Court in the case of Oswal Agro Mills Ltd. 1993 (66) ELT 37 (SC) has observed as follows: 3. The provisions of the Tariff do not determine the relevant entity of the goods. They deal whether and under what entry, the identified entity attracts duty. The goods are to be identified and then to find the appropriate heading, sub-heading under which the identified goods/products would be classified. To find the appropriate classification description employed in the tariff nomenclature should be appreciated having regard to the terms of the headings read with the relevant provisions or statutory rules of interpretation put up thereon. For exigibility to excise duty the entity must be specified in positive terms under a particular tariff entry. In its absence be deduced from a proper construction of the tariff entry. There is neither intendment nor equity in a taxing statute. Nothing is implied. Neither ....
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....eld as follows : "The ordinary rule of construction is the provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent manifest intention of the legislature from being carried out." Hon'ble Apex Court in the case of Calcutta Jute Manufacturing Co. 1997 (93) ELT 657 has observed as follows: "10. The State is empowered by the legislature to raise revenue through the mode prescribed in the Act so the State should not be the sufferer on account of the delay caused by the tax payer in payment of the tax due. The provision for charging interest would have been introduced in order to compensate the State (or the Revenue) for the loss occasioned due to delay in paying the tax [vide Commissioner of Income Tax (A.P.) v. M. Chandra Sekhar - 1985 (1) SCC 283 and Central Provinces Manganese Ore Co. Ltd. v. Commissioner of Income Tax - 1986 (3) SCC 461]. When interpreting such a provision in a taxing statue a construction which would preserve the purpose of the provision must be adopted. It is well-settled that in interpreting a taxing stat....
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....erwise require, according to the following provisions: It is seen that it clearly states that 'for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes'. In the instant case Supplementary Note 5(a) clearly provides that Protein Concentrate and Textured Substances would be classified under "Heading 2106". In view of above in terms of interpretative Rule-1, the goods imported by the appellant would be classified under Heading 2106 in terms of Supplementary Note 5(a). Any other interpretation would make Supplementary Note 5(a) otiose. Since the goods are specifically classified under heading 2106 by virtue of Supplementary Note 5(a), there is no need to further go into interpretative Rule 2 to 6. 55. The appellants have relied on various international decisions. The said decisions are examined as under:- (I) In the decisions given by Thomas J Russo, in US Cross Ruling N204559 dated 02.03.2012, following has been observed: "Ingredients breakdowns accompanied your November letter. Additional information was provided with your February letter and an email transmission dated February 29, 2012. Whey Protein....
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....ns regarding the ruling, contact National Import Specialist Bruce N. Hadley, Jr. at (646) 733-3029." From the above decision it is apparent that the said authority has held that: (i) Vanilla Whey protein will be classifiable under heading 2106.90.8200 of HTSUS; (ii) The chocolate whey protein powder will be classifiable under 1806 90.9090 HTSUS (Harmonized Tariff Schedule of United States); (iii) Whey proteins of this kind will not be classified under heading 0404.10.0500 HTSUS. (II) Similar conclusion has been reached in ruling No. 025135 dated 15.04.2008 given by Robert B. Swierupski Director National Commodity Special Division wherein he has clarified as follows: "The subject merchandise is described as 100% Whey Classic - Chocolate and 100% Whey Gold Standard-Chocolate. The main ingredients in 100% Whey Classic-Chocolate are Protein Blend (Whey Protein Isolate, Whey Protein Concentrate and Whey Peptides), Cocoa (processed with alkali), Artificial Flavor, Lecithin and Acesulfame Potassium. The main ingredients in 100% Whey Gold Standard-Chocolate are Protein Blend (Whey Protein Isolate, Whey Protein, Concentrate and Whey Peptides), Cocoa (processed with alkali), Artifi....
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....rnational rulings are based on harmonized system of nomenclature and have ruled that the "Protein Concentrates" of the kind imported by the appellant are to be classified under heading 21061000 if the same do not contain cocoa. However same product, "Protein Concentrates", if containing coco would be classifiable under 1806.90.90 of HTSUS. This conclusion is based on the reading of HSN and its chapter and section notes. In most cases the HSN has been totally adopted in the Schedule to the Customs Tariff Act, 1975. However, in some cases, like in case of heading 2106, the government has chosen to deviate from the language and prescription of the HSN by introducing Supplementary Notes to Chapter 21. Since all international rulings are based on the HSN, which is different from the Customs Tariff in respect of Chapter Heading 2106, no reliance can be placed on these decisions. 56. Ld counsel has also relied on the fact that the Explanatory Notes to the HSN were amended by the HSN Committee in its 64th Session in September 2019 to introduce a specific exclusion for Chapter heading 2106 ("Amendment to Chapter heading 2106"). The amendments were made applicable from 1st December 2019. Th....
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....Indian legislature, while being a signatory to the Customs Cooperation Council (which as an organization is now called World Customs Organization). The HSN is one of the most significant instrument, derived as an outcome of cooperative efforts of the comity of nations in international trade that aims at bringing out not only uniformity of nomenclature for goods, but also the trade data and statistics compilation. All this to make the economic policy making of the member nations, reliable as well as conducive to comparison for the purpose of International Trade. Much later, after creation of HSN, the statistical data assumed importance when under aegis of World Trade organization, exceptional measures to liberalized tariff like Anti-Dumping, Safeguard and Countervailing duty, came to be implemented. 60. I would like to briefly dwell upon the evolution of public international law in Indian context and how entering into various international treaties did not circumscribe the sovereignty of member states including India. Whenever International Treaties were sought to be implemented by the sovereign states in their capacity as members of such treaties, reservations were either permitte....
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....ament. Comity of Nations or no, Municipal Law must prevail in case of conflict. National Courts cannot say yes if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National Courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid conformation with the comity of Nations or the well-established principles of International law. But if conflict is inevitable, the latter must yield." Therefore, it is brought out that sovereign states can not only bring about reservations in treaties, wherever allowed but also in case of any provision not being in tune with treaty provisions, it will be municipal law which shall prevail." 64. Now coming to specific provisions about HSN, the following are the relevant extracts as derived from HS Classification Handbook of World Custom Organization November-2013 Edition part II/1 following has been stated as object of bringing in world product nomenc....
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....a series of preliminary provisions codifying the principles on which the System is based and laying down general rules to ensure uniform legal interpretation. There are six of these rules, known as the General Rules for the Interpretation, which are applied in hierarchical fashion, i.e., Rule 1 takes precedence over Rule 2, Rule 2 over Rule 3, etc. The General Interpretative Rules are explained at the beginning of Volume 1 of the Explanatory Notes to the Harmonized System. General Interpretative Rule 1 provides that, for legal purposes, classification is determined by the terms of the headings and of the Section or Chapter Notes. There are, however, cases where the texts of the readings and of these Notes cannot, of themselves, determine the appropriate heading with certainty. Classification is then effected by application of the other Interpretative Rules. The first part of Rule 2 (a) extends the scope of any heading which refers to a particular article to cover not only the complete article but also that article incomplete or unfinished, provided that, as presented, it has the essential character of the complete or finished article. The second part of Rule 2 (a) provides th....
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....r appropriate in this area. Finally, Rule 6 provides that classification in the subheadings of a heading must be determined, mutatis mutandis, with reference to the principles applicable to classification in the 4 digit headings; in any event, the terms of the subheadings or Subheadings Notes must be given precedence. This Rule also specifies that, for classification purposes, only subheadings of the same level are comparable; this means that, within a single heading, the choice of a l-dash subheading may be made only on the basis of the texts of the competing 1-dash subheadings; similarly, selection of the appropriate 2-dash subheading, where necessary, may be made only on the basis of the texts of the subdivisions within the applicable 1-dash subheading. The Interpretative Rules thus establish classification principles which are applicable throughout the Harmonized System Nomenclature. Moreover, the Interpretative Rules clearly provide a step-bystep basis for the classification of goods within the Harmonized System so that, in every case, a product must first be classified in its appropriate 4-digit heading, then to its appropriate 1-dash subdivision within that heading and....
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....ires. This is the case, for example, with Note 4 (b) to Chapter 71 (definition of the term "platinum"), which cannot apply to subheadings 7110.11 and 7110.19, for which the term "platinum" is more restrictively defined by Subheading Note 2 to Chapter 71. It would no doubt have been possible, at least in certain cases, to incorporate the substance of these Notes in the text of the headings or subheadings themselves. But this would have greatly lengthened these texts, making them difficult to understand, and would have involved a great deal of repetition. The Notes thus made it possible to draft the headings in concise form while at the same time safeguarding the precision and exactness of interpretation that are essential to avoid doubts and disputes in classification. To distinguish these Section, Chapter or Subheading Notes from the Explanatory Notes, which are not legally binding under the Convention, they are normally referred to as "Legal Notes". Additional Notes (or supplementary Notes) may be included at the national level by an administration for its own national use and are national in scope. They may be binding at the national level only. To complement the legal co....
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....f India. Similar changes have also been made by not only India but various other Countries beyond Chapter 97 which were originally not part of the HSN. Chapter 98 is again outcome of India's need, as is manifested in its own Custom Tariff. 66. As observed above, the Custom Cooperation Council while permitting member countries to de-align from HSN to serve their own needs has mandated a particular requirement that the same should not be made in a manner the General Interpreted Rules cannot be pressed into service for interpretation. 67. In short, heading 2106 under Chapter 21 as well as supplementary notes to chapter 21 have been specifically carved out in the Indian Custom Tariff. The relative chapter notes including supplementary notes as well as headings and sub-headings, therefore, will have to be construed differently from HSN, albeit, with the help of general interpretive notes is the requirement of Customs Cooperation Council. Learned Brother has dealt at length and correctly so, to indicate that chapter note 5 of supplementary notes which reads as follows "Heading 2106 (except tariff item 2106 9020 and 2106 9030), interalia, includes: "(a) Protein Concentrates and Textur....
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....r subheadings themselves. But this would have greatly lengthened these texts, making them difficult to understand, and would have involved a great deal of repetition. The Notes thus made it possible to draft the headings in concise form while at the same time safeguarding the precision and exactness of interpretation that are essential to avoid doubts and disputes in classification." Above interpretation also gets fortified from the directive of the Customs Cooperation Council which requires minimal disturbances to be done by the Member States so as to maintain the statistical and data collection similarity between Member States. Learned brother is thus correct in pointing out that in view of the special circumstances of Chapter 21 and heading 2106 in Indian Custom Tariff, the inclusion of 'Protein Concentrates and Textured Protein Substances' is clearly specific and that too in tariff heading 2106. The net effect of supplementary note 5 in TH 2106 in Indian Custom Tariff Act is that the heading description 2106 i.e. "Food preparation not elsewhere specified or included" ceases to be a residuary head, in relation to those products which are included in heading 2106, specifically (....
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..... In such a situation, heading 2106 read with Supplementary Note5 having become more specific for "Protein Concentrates and Textured Protein Substances" (known to market as 'whey protein') clearly becomes the preferred head as the product has the predominance of Protein. Again we find that Chapter 18 only excludes preparations of heading 0403, 1901, 1902, 1904, 1905, 2106, 2202, 2208, 3003 or 3004. In chapter note 3 to heading 1904, it has been mentioned that heading 1904 does not cover preparations containing more than 6% by weight of cocoa calculated on a totally defatted basis or completely quoted with chocolate or other food preparation containing cocoa of heading 1806. 82. Above chapter note has been pointed out by way of example that wherever weight percentage other than the pre-dominance is to be considered, the chapter notes have gone on to specifically mention the percentage of weight. Similar is the situation with heading 1901. HS Code Item Description 1901 Malt extract; food preparations of flour, groats, meal starch or malt extract, not containing cocoa or containing < 40% by weight of cocoa calculated on a totally defatted basis. Not elsewhere specified or include....
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....ngs, where the percentage of cocoa has been mentioned the heading 1806 does not speak of percentage of cocoa. Therefore, it is clear that even GI Rule - 3 would have made TH 2106 only as more specific heading for the impugned product. 86. Learned advocate during arguments had taken resort to HSN explanatory notes to justify lower percentage of Cocoa to term products still as `preparation of Cocoa'. But in doing so, the argument has sidetracked the reality of Indian tariff being different and capable of providing answer through its own existing statutory clauses by way of supplementary notes, as discussed above. 87. While arriving at the above conclusion, support is also drawn from the decision in the matter of Collector of Central Excise vs. Frozen Food P.L. reported in 1992 (59) ELT 279 (Tri.) which was the decision under HSN based Central Excise Tariff (which also had similar head and supplementary notes de-aligned from HSN- though numbered differently) in relation to the additive supplement "surje", following observations are relevant: "42. As for the argument that protein concentrates mentioned in HSN Chapter Note 5(a) of Chapter 21 would refer to protein concentrated from ....