TaxTMI 
TaxTMI 
2023 (11) TMI 483
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 2.1 Brief facts are that the Respondent, M/s. International Flavours & Fragrances India Pvt. Ltd. (the importer) is engaged in the manufacture of various flavours and fragrances which are used in the food and cosmetics industry. The Respondent imports various raw materials and semi-finished goods which are used in their factory in the manufacture of flavours and fragrances. 2.2 The Respondent, M/s. International Flavours and Fragrances India Pvt. Ltd. have filed Bills of Entry Nos. 3685255, 3685345 and 3685451 all dated 22.12.2015 for clearance of goods declared as Cheese Polvaromas / Cheese Parmesan Polvaromas / Butter Cream Polvaromas which were self-assessed. The goods were classified by the Respondent under CTH 33021090. 2.3 Not accepting the classification of the imported goods, an investigation has been initiated and representative samples were drawn and tested vide test report No. 1 to 3 / DSM / 2204.2016 dated 13.06.2016 issued by the Customs lab which stated that the sample is in the form of off - white powder having pleasant odour, that it is composed of complex organic compounds including the cellulose, carbohydrate and reducing sugar and that the presence of organi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and hence should be treated as synthetic aromatics. e. The term "synthetic aromatics" used in the context of "odoriferous substances" should refer to only products having a distinct, Strong smell or odour. It is not the contention of the department that the products does not have any odour f. The show cause notice has accepted the Custom House Laboratory report in as much it has placed reliance on the same. g. The products in question should be classified in accordance with the "terms of the heading" or the relevant 'Section or Chapter Notes'. h. They classified the subject goods under the heading 3302 on the basis that they are a mixture of synthetic aromatics in terms of Note 2 to Chapter 33. i. The HSN Explanatory Notes to the heading 3302 covers mixtures of synthetic aromatics provided they are of a kind used as raw materials in the perfumery, food or drink industries, food or drink flavourings or in the industries (e.g., soap making). j. The show cause notice has acknowledged on the basis of test reports submitted that they contained mixture of synthetic aromatic compounds. k. The 21%, flavouring material present in the product is nothing but organic acids presen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any food product, the product in question may not be considered as an edible preparation. s. There is a distinction between cheese and EMC and the cheese polvaroma. t. It can be seen in various patents mixture of acids and ketones are used for preparing nature identical cheese flavourings. EM Care used as a starting material for the products of cheese flavouring mixtures. u. The cheese flavouring mixtures contain a mix of free fatty acids and ketones possessing 'strong aroma'. The synthetic cheese flavouring compositions can thus be prepared from the aromatic free fatty acids, ketones, esters, amines and other organic compounds. v. These acids and ketones have pleasant odour and therefore are to be treated as synthetic aromatics. w. There is no requirement under the HSN classification that the products have to be of vegetable origin to merit classification under CTG 3302. x. Mixture of synthetic aromatics are given as one of the examples under the HSN Explanatory notes to the heading 3302. y. Essential oils and extracted oleo resins of heading 3301 are all extracted from plant materials and mixtures of essential oils are also covered under the said heading viz....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f misrepresentation and suppression of information is not correct. Extended period cannot be invoked in cases of different interpretation on classification of a particular product. gg. Demand itself is not sustainable thus ruling out the question of interest. hh. Impugned goods are not liable for confiscation in absence of any intentional or deliberate wrong declaration or mis declaration. Similarly, penalty either under Section 112a / 114A of the Customs Act, 1962 cannot be imposed. Penalty cannot be imposed on cases involving classification. 2.6 On adjudication, the Commissioner of Customs (Imports) has dropped the proceedings, initiated by the above Show Cause Notice which has been reviewed by the Department on the following grounds:- i) To be classified under CTH 3302 the subject goods namely Cheese Polvaromas should be mixtures of odoriferous substances and mixtures with a basis of one or more of these substances whereas from the description of the impugned goods declared by the importer as "Semi Finished Flavour Compound" the subject goods can be understood that they are compounds in nature and are obtained from food. Hence, the goods under import cannot be treated as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sified under CTH 3302. The Adjudicating authority did not take into account the above facts while passing the present order in original while arriving at the conclusion that they are classifiable under CTH 3302. iv) Further as per Note 2 of Chapter 33, the expression "odoriferous substances" in heading 3302 refers only to the substances of heading 3301 to odoriferous constituents isolated from those substances or to the synthetic aromatics. Since, imported goods are a preparation based on Cheddar Cheese Paste and not synthetic aromas, it cannot be classifiable under the CTH 3302 Explanatory Note to the Heading 2106 specifically covers the flavouring materials and the Tariff Item 21069060 specifically covers the goods of description "Food flavouring material". As the imported goods are derived from Cheddar Cheese paste are rightly classifiable under the heading 2106 as food preparations not specified elsewhere. v) Further, from the statements by the Manager -QA and the technical documents and the material available in the supplier's website, it may be seen that the imported goods are made from Cheddar Cheese paste which is subjected to enzymatic action; that this enzyme mo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2106 as "Food preparations not elsewhere specified". 4.1.1 The Ld. Advocate Shri R. Srinivasan, Consultant representing the Respondent has stated that the subject goods are imported to be used in the manufacture of their final product viz., "Dry Mix Seasoning" and the impugned product contains various aroma components that have pleasant odour as detailed below:- Component Flavour profile FEMA * No. Butanoic acid Butter, cheese, sour 2221 2 heptonanone Blue cheese, fruit, green nut, spice 2544 Hexanoic acid Cheese oil, pungent, sour 2599 Heptanoic acid Apricot, floral, sour 3348 2 nonanone Fragrant, fruit, green, hot milk 2785 Octanoic acid Cheese, fat, grass, oil 2799 Decanoic acid Dust, fat, grass 2364 4.1.2 It is submitted by the Ld. Consultant that these components are nothing but fatty acids / ketones which are contained in cheese. These flavours / materials are extracted from cheese separately by an enzymatic process and are compounded together on a carrier (maltodextrin) which does not change the design of the flavours. 4.1.3 The impugned products cannot be directly used by end users or consumers in their food preparations. This is use....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the subject goods are not classifiable under CTH 2106. Heading 2106 covers Food preparations "not elsewhere specified or included". As such, it is a residuary entry. 4.2.7 From a perusal of the HSN Explanatory Notes to CTH 2106 it is seen that the nature of food preparations covered under this Heading are such preparations which are used as food or beverages either as such or after a minimum processing such as dilution or cooking etc. The 'Food Preparation' to be classified under 2106 should satisfy two conditions namely (a) capable of being consumed either directly or after some processing by humans and (b) preparation consisting of foods stuffs either for making beverages or making foods preparations for human consumption. The impugned product does not satisfy any of the above conditions to merit classification under CTH 2106. 4.2.8 Ld. Consultant has submitted that the subject goods cannot be directly used by end-users or consumers even as flavouring in food preparations. The subject goods are used as an industrial raw material and mixed with other ingredients to manufacture Dry Mix Seasoning product by the Respondent. The Dry Mix Seasoning is thereafter used by the Respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d for demand of differential duty and confusability of the impugned goods besides imposition of penalties. 6.2 We note that the present appeal filed by the Department is directed against the impugned order No. 62031/2018 dated 28.02.2018 passed by Commissioner of Customs (Imports), Chennai holding the classification of subject goods under CTH 3302 1090 and for rejecting the proposal to reclassify the same under CTH 2106 9060. So, it is important to examine relevant Chapter Headings, Chapter Notes and HSN Explanatory Notes. 6.3 For ease of reference, the Chapter Headings 2106 and 3302, are extracted below: - 2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED 2106 10 00 - Protein concentrates and textures protein substances kg. 30% - 2106 90 - Other : --- Soft drink concentrates : 2106 90 11 ---- Sharbat kg. 150% - 2106 90 19 ---- Other kg. 150% - 2106 90 20 --- Pan masala kg. 150% - 2106 90 30 --- Betel nut product known as "Supari" kg. 150% - 2106 90 40 --- Sugar-syrups containing added flavouring or colouri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g of a proteolytic enzyme with added dextrose or other foodstuffs). Such preparations fall in heading 35.07 provided that they are not covered by a more specific heading in the Nomenclature. . . This heading excludes preparations of a kind used for the manufacture of beverages, based on one or more odoriferous substances (heading 33.02)." (Emphasis supplied) 6.6 Similarly, the Chapter Note 2 to Chapter 33 states that: - "The expression "odoriferous substances" in heading 3302 refers only to the substances of heading 3301, to odoriferous constituents isolated from those substances or to synthetic aromatics." (Emphasis supplied) 6.7 The HSN Explanatory Note to Chapter Heading 3302 reads as follows: - "33.02 - MIXTURES OF ODORIFEROUS SUBSTANCES AND MIXTURES (INCLUDING ALCOHOLIC SOLUTIONS) WITH A BASIS OF ONE OR MORE OF THESE SUBSTANCES, OF A KIND USED AS RAW MATERIALS IN INDUSTRY; OTHER PREPARATIONS BASED ON ODORIFEROUS SUBSTANCES, OF A KIND USED FOR THE MANUFACTURE OF BEVERAGES. 3302.10 - Of a Kind used in the food or drink industries 3302.90 - Other This heading covers the following mixtures provided they are of a kind used as raw materials in the perfumery, food ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....containing alcohol, of products of other Chapters (e.g., spices) with one or more odoriferous substances (essential oils, resinoids, extracted oleoresins or synthetic aromatics), provided these substances form the basis of the mixture. But, in this case, the odoriferous substances can be of synthetic origin. 6.10 We find that there is no dispute and it is an admitted fact that the impugned products cannot be directly used by the end users or consumers in any food/food preparation and they are used as industrial raw materials and mixed with other ingredients to manufacture their final product 'Dry Mixed Seasoning'. Dry Mixed Seasoning is used by their customers as raw material in manufacture of the customers' finished products. Impugned goods are not directly edible and meant to be used to impart flavour / olfactory characteristics to the products in which it is used. To be classified under CTH 2106, the product should be used as food or beverages either as such or after a minimum processing such as dissolving, boiling in water / milk or other liquids for home consumption. What is imported are not edible but merely used to impart cheese flavour. 6.11 We note that impugned goods we....
X X X X Extracts X X X X
X X X X Extracts X X X X
....substances, of a kind used as raw materials in industry; other preparations based on odoriferous substances, of a kind used for the manufacture of beverages." This heading has got two single dash sub headings. One is 3302 10 (of a kind used in the food or drink industries) and the second one 3302.90 (other). It has been seen above that the impugned products are a mixture of synthetic aroma compounds and are for use in the food industry. The HSN Explanatory Notes to the heading 33.02 while listing out the items that shall be covered under that heading has mentioned "mixtures of synthetic aromatics" in serial No. 4. 14. The objection raised in the show cause notice is that the subject goods are of animal origin and not of plant origin and thus it does not fulfill the condition laid down in the Note 2 to Chapter 33. The said Notes is extracted below: "2. The expression "odoriferous substances in heading 33:02 refers only to the substances of heading 33.01, to odoriferous constituents isolated from those substances or to synthetic aromatics" According to the above notes, odoriferous substances refers to three types of categories. They are:: a. Substances of heading 33.01 b.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ading 21.06 as contended in the show cause notice. However, the same is also being taken up for a discussion. 17. The entry against the heading 21.06 reads as "food preparations not elsewhere specified or included". The entries under this heading are extracted below: 2106 10 00 - Protein concentrates and textures protein substances 2106 90 - Other : --- Soft drink concentrates : 2106 90 11 ---- Sharbat 2106 90 19 ---- Other 2106 90 20 --- Pan masala 2106 90 30 --- Betel nut product known as "Supari" 2106 90 40 --- Sugar-syrups containing added flavouring or colouring matter, not elsewhere specified or included; lactose syrup; glucose syrup and malto dextrine syrup 2106 90 50 --- Compound preparations for making non-alcoholic beverages 2106 90 60 --- Food flavouring material 2106 90 70 --- Churna for pan 2106 90 80 --- Custard powder --- Other : 2106 90 91 ---- Diabetic foods 2106 90 92 ---- Sterilized or pasteurized millstone 2106 90 99 ---- Other The two conditions required for coverage under this heading is that the subject item should not find any place elsewhere in th....