TaxTMI 
TaxTMI 
2024 (3) TMI 1436
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....by letter dated 3-11-2023 along with its enclosures in terms of Section 28H(1) of the Customs Act, 1962 (hereinafter referred to as the 'Act' also). The applicant is seeking advance ruling on the classification of imported pet foods in bulk bags and the rate of custom duty applicable on the imported goods. 2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 application : 2.1 The applicant is a subsidiary of Royal Canin SAS, France ('RC France'), engaged in import and sale of pet food i.e., dog and cat food in India (hereinafter referred to as 'product' or 'pet food'). The Company imports pet food from its overseas related entities i.e., Royal Canin South Africa, Royal Canin France, Royal Canin South Korea and Mars Austria (collectively referred to as 'overseas suppliers'). Description of the product : 2.1.1 The pet food imported by the Company from its overseas related entities is imported in retail packages of 1 kilogram (kg.), 2 kgs., 4 kgs. and so on up to 20 kgs. The imported goods are intended for 'as is' sale to customers in India. The retail packages imported by the Company ar....
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....gs and cats and to make Company products more accessible and affordable in the market, it sees that smaller pack size across value chain is much more acceptable in the market. However, currently the Company faces various supply chain issues like supply constraints from overseas factories, import lead times, storage, quality and shelf-life issues to make available right pack size to consumers as per market/seasonal trends and is not able to cater to the demand in the market. 2.1.7 The bulk packages proposed to be imported by the Company will be in bags/packing starting from 15 kgs. which can go up to 700 kgs. etc. The pet food to be imported in bulk are not covered under or subject to the provisions applicable to packages intended for retail sale under LM Rules. The bulk bags will thus not have any requisite labelling, information, MRP etc. printed on the packages that are required for retail packages under the LM Rules and cannot be sold in the market as it is without repacking and labelling, i.e., the imported goods shall not be marketable to ultimate consumers. 2.1.8 The bulk packages will be unloaded in a bonded warehouse on filing of an inbond BOE. The imported products w....
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....nbsp; 2309 10 00 Dog or cat food, put up for retail sale 20% 2309 90 90 Others: Other 15% 3. Applicant's Interpretation :- 3.1 The Applicant is engaged in the business of import and sale of pet food in India and offers variety of wet and dry nutritious foods for dogs and cats of all ages, sizes, breeds and sensitivities. 3.2 In order to efficiently cater to the demand and effectively tap market opportunities, the Applicant, going forward, proposes to also import pet food in bulk bags from its overseas related entities. The pet food imported in bulk will be imported in plain white bags with no branding or MRP stickering. The bulk bags imported cannot be sold as such to the ultimate consumers/customers in India. 3.3 The Applicant is establishing a repacking center in India, whereby post importation of the pet food in bulk, the Applicant will undertake repacking of imported bulk bags into smaller unit packages (retail packs) with requisite information as required under LM Act and LM Rules for further sale in India. 3.4 The repacking activity will involve packing the imported pet food in bulk into smaller units for sale to customers in India (for exampl....
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....products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing." The Applicant is engaged in trading of processed cat and dog food with tailored nutrition for pets of varied age groups and special needs to sustain the animal's health. The manufacturing of the product includes ingredients such as meat and fish (i.e., animal material) and vegetables. The raw material is modified and processed to manufacture the pet food (as an end product) traded by the Applicant. Currently, the processed pet food is imported by the Applicant pre-packaged in retail unit packages. The imported goods are moved to a custom bonded warehouse and the requisite information as required under the LM Rules in India (including MRP) is affixed on them vide a label sticker Post the aforesaid, the retail packages are suitable for direct sale to the customers, without any further processing, repacking etc. upon clearance of goods for home consumption. Accordingly, ....
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....or precise description of the goods. (d) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (e) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Specific heading to be preferred over general headings. Variance in classification of pet food imported in retail packages and in bulk packages as defined under the Legal Metrology Act and Rules The term retail package or retail sale is not defined under the Customs Act. The packaging and labelling of pre-packaged commodity meant for retail sale is governed by the provisions of the LM Act and shall bear the relevant declarations as provided for under the LM Rules. Accordingly, the definition and scope of these terms shall thus be derived from the LM Act and LM Rules. The LM Rule....
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....r or importer is not the packer, of the packer; (b) the identity of the commodity contained in the package; and (c) the total number of retail package contained in such wholesale package or the net quantity in terms of standard units of weights, measures or number of the commodity contained in wholesale package;" Thus, there is no requirement under the LM Rules for declaration of 'Maximum Retail Price' (MRP) on wholesale packages. In the present case, the Applicant is currently importing retail packages of pet food intended for further sale to the consumers via distributors. The retail packages imported are of quantity 1 kg., 2 kg., 5 kg., 10 kg. etc. and are affixed with all relevant declarations and labels (including MRP) as is required under the LM provisions at the custom bonded warehouse. The 8-digit CTH 2309 10 00 having description 'dog and cat food, put up for retail sale' thus specifically covers the pet food imported by the Applicant currently in retail package meant for retail sale. Further to the above, from the provisions of the LM Rules, it is hereby inferred that packages meant for wholesal....
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....ich will be sold even in wholesale in much smaller packings than 25 kg. Therefore, it needs to be seen if there is sufficient evidence on record to suggest that the goods which were imported were in retail packings. We do not find sufficient evidence to hold so, if we exclude the survey on internet and e-commerce websites conducted by the Commissioner after concluding the hearing and before passing the impugned order which we already have found cannot be used against the appellant." Thus, under the proposed business model, the Applicant shall import bulk packages/bags of pet food in quantities starting from 15 kgs. which can go up to 700 kgs. etc., and the same shall not qualify as retail packages or packages meant for retail sale. The bulk packages imported shall also bear the declaration "not for retail sale". The imported bulk bags will be construed as import of goods in wholesale. Therefore, the bulk packages imported by the Applicant shall not be required to bear the labels, declarations, MRP etc. as is mandated under the provisions of LM Rules applicable to packages meant for retail sale. Given the above, there appears to be a clear differentiation of the packaged commo....
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....ckaging for retail sale or for use in hospitals, it would be appropriately classifiable under Chapter 3003 of the Central Excise Tariff. Thus, basis the above circular issued by the Government, it is clarified that in principal where the products are well defined and are packaged for retail sale or used for defined purpose, the goods shall merit classification under the specific entry. However, in case of bulk product not put up in packaging for retail sale, the bulk product shall be classified under the residual entry. Thus, since the pet food proposed to be imported in bulk bags by the Applicant is not fit for direct sale to customers in India and do not have the relevant labels and information to be sold to customers, the same cannot be considered as being 'put up for retail sale'. Hence, the same shall not be classified under the specific entry 2309 10 00. The pet food imported in bulk bags by the Applicant merits classification under the residual CTH of 2309 90 90 Rule 3(c) of the GRI provides that further clarifies that when goods cannot be classified by reference to Rule 3(a) or (b) they shall be classified under the heading which occurs last in the numerical ord....
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....rm manufactured by the respondent are classifiable under HSN 3808, which deals with chemical compounds viz., insecticides, pesticides etc. with all its formulations and not under the HSN Chapters 28 and 29 occurring earlier which are general provisions relating to separate chemical compounds. From the ruling discussed supra, it is thus inferred that in cases where a product can be classified under two probable CTHs then the product shall be classified under the CTH occurring subsequently in the tariff. Thus, in this regard, the Applicant is of the belief that the pet food - i.e., dog and cat food imported by the Applicant in bulk bags, shall be classified under the residual entry of Chapter Heading 2309 which includes the formulations for preparations of a kind used in animal feeding, i.e., CTH 2309 90 90 occurring subsequently in the tariff. Global classification of the product in bulk packages The Applicant is part of the Group which has presence in multiple countries. Similar model of import of pet food in bulk packages is also implemented in Japan. The overseas entities in Japan are classifying the pet food, i.e., dog and cat foods in bulk packages under HSN 2309....
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....under consideration is imported without any labelling, information, MRP etc. printed on the packages that are required for retail packages defined under rule 2(k) of LM(PC) Rules, 2011, as to ensure that goods being imported are in such a condition that it cannot be sold directly in retail market else it will become an easy tool for importer to circumvent the provisions of customs tariff act by classifying the said goods under CTH 2309 90 90 and getting them cleared at nil rate of IGST and 15% rate of Basic Customs Duty instead of correct classification of said goods if put up for retail sale, under CTH 2309 10 00 where Basic Customs Duty and IGST rates are 20% & 18% respectively. 4.4 Concerned GST authority may also verify the claim of importer that goods will be put up for retail sale only after re-labelling and re-packing of the same into smaller unit packages suitable for retail sale as per the market requirement and demands in compliance with the rule 3 of LM (PC) Rules, 2011 for packaging of goods intended for retail sale. In view of the reasons as mentioned above the Bulk Pet Food is classifiable in heading 23099090." 5. A personal hearing in the matter ....
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....etail sale as per the market requirements and demand Post repacking and labelling of the packages, the goods will be supplied to the distributors and retailers for further sale. For undertaking the retail packaging of the pet food imported in bulk bags, the Company shall also import packing material from third party vendors located in Italy and Vietnam. It is seen that under CTH 2309 of the Customs Tariff Act, 1975, there are two possible entries at 8-digit level wherein the pet food bulk bags can be classified, i.e., 2309 10 00 and 2309 90 90, i.e. the residual entry. The CTI 2309.10.00, clearly and specifically covers the cat and dog food 'put up for retail sale'. Therefore, where the product under consideration is not meant for retail sale, the same shall not get covered under the specific CTI 2309.10.00. It is seen that the products under consideration are to be imported without any labelling, information, MRP etc. printed on the packages that are required for retail packages defined under Rule 2(k) of LM(PC) Rules, 2011. In fact, it cannot be sold directly in retail market considering inasmuch as the nature of the bulk import and the obligation of the applicant to follow....