TaxTMI 
TaxTMI 
2026 (2) TMI 50
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....erseas vendors. The appellant imported these ingredients on payment of customs duty. The Department issued show cause notice alleging that the appellant had mis-classified (a) Tendofit, (b) Mobilee, & (c) GG Orosoluble and was liable to pay differential duty along with interest thereon, and that the goods were liable to confiscation. The matter was adjudicated vide the impugned order dated 28.06.2021 wherein the demand of customs duty to the tune of Rs. 7.07.02.027/- along with interest was confirmed along with appropriate penalties. Aggrieved by the said order, the appellant has filed the present appeal. 3. Learned counsel for the appellant submitted that Tendofit was a key ingredient that goes into the manufacturing of nutraceutical products that support tendon health. Tendofit consists of 85% of Mucopolysaccharides (MPS) and Collagen of 15%. Further, MPS consists substantially Chondroitin Sulphate which provides the essential characteristic to MPS and, as a corollary, to Tendofit as well. Learned counsel submitted that as bovine extract and comprises Chondroitin Sulphate and as Tendofit derives its essential characteristics from Chondroitin Sulphate, the product can be said t....
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....e has clinical efficacy and tolerability of dosage of up to 6 billion cells per day and exceeding these limits may pose a risk of un-desired, un-noticed adverse events. Learned counsel submitted that the time of import, it has a concentration of 16 billion cells per gram and cannot be consumed as such without being formulated into permissible dosage concentration. (iii) Further, GG Orosoluble, being microorganism, was sensitive to temperature/moisture. To ensure stability as well as palatability (to mask the obnoxious smell and taste) it is accompanied by an excipient. During the transportation, exposure to temperature and moisture tends to affect composition of excipient in proportion to the strength microorganism and thus viability of the product. GG Orosoluble thus requires calibration of excipient before being consumed. Due to the possibility of affected composition of excipient, GG Orosoluble cannot be consumed as imported. 3.2 Learned counsel further submitted that the impugned order had failed to ascertain the inedible nature of the imported goods, and the findings to classify the import goods as 'Miscellaneous Edible Preparations' under Chapter 21 were misplaced....
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....ded that the illustrations provided under Note 6 are indicative of the items which are sought to be classified under tariff item 2106 9099, which includes, items such as "misthans", "mithal", "namkeens", "bhujia", etc. On the other hand, Tendofit, Mobilee and GG Orosoluble are known and used as nutraceutical supplement needed for support and improvement of health and not for the purpose of any food preparations or any food stuff.Rule 3(b) of the General Rules for Interpretation, is with reference to goods consisting of different materials or components, wherein the classification of such goods is to be based on the material or component which gives them its essential character. In the present case, "Tendofit" consists of MPS which constitutes about 85% of its overall composition, and MPS substantially consists of Chondroitin Sulphate which is a polymer by itself and provides the essential characteristics to Tendofit. Similarly, Mobilee was an extract consisting of Sodium hyaluronate, Polysaccharides and collagen. Sodium hyaluronate is a natural polymer by itself and constitutes 60-75% of the overall composition of Mobilee. As such, Sodium hyaluronate provided the essential characte....
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....cs possessed by them, whereas the impugned order classified the subject goods under residual Chapter heading 2106 as 'food preparation not elsewhere specified merely because these are to be consumed orally. The appellant had a bona fide belief that it has correctly classified Mobilee and Tendofit under Chapter 39 and GG Orosoluble under Chapter 30 and such belief was also supported by various judicial decisions holding ground during the relevant period such Commissioner of Customs (Import), Nhava Sheva vs. NDC Drug & Chemical P. Ltd. [2012 (284) E.L.T. 366 (Tri. Mumbai)] Further, there was no judicial precedent in contradiction with the appellant's belief in the present case. With respect to the imposition of interest, learned counsel submitted that it was a settled principle of law that, in cases where the original demand is not sustainable, interest cannot be imposed. In the present set of facts and circumstances, since the demand itself is unsustainable, the interest imposed on such demand is erroneous and is liable to be dropped. He prayed for setting aside the demand along with interest and penalties. 4. Learned authorized representative for the department submitted that Te....
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....d-as part of a diet or taken as supplements. Nutraceuticals help with improving health, delaying aging, preventing chronic diseases, increasing life expectancy, and supporting the body's structure or function. Learned authorized representative submitted that HSN explanatory Notes CTH 2106 says that "(16) preparations, often referred to as food supplements, based on extracts from plants, fruit concentrates, honey, fructose, etc. and containing added vitamins and sometimes minute quantities of iron compounds. These preparations are often put up in packaging with indications that they maintain general health or well-being." The impugned goods fall in CTH 2106. Both food supplements and nutraceuticals serve to improve the health and wellness of individuals. It is not prophylactic (done or used in order to prevent a disease), therapeutic (helping to cure an illness). 4.2 Learned authorized representative further contended that the drugs mainly used to treat diseases are referred to as "Pharmaceuticals" while the drugs which prevent diseases are called "Nutraceuticals". Nutraceuticals are classified under CTH 21069099 as a general practice. In this context, learned Authorized Represen....
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....be specified under the [Customs Tariff Act, 1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or exported from India" What is apparent from the above is that under the Customs Act, 1962 [the Act] the taxable event for customs duty occurs on import of the goods into India or export of goods. It is settled law that the fundamental principle while determining the classification under the Customs Tariff Act, 1975 is the condition of goods at the time of import, which is the taxable event. In this context, we draw support from the Supreme Court's decision in Commissioner of Customs (Imports) versus M/s Welkins Foods [Civil Appeal No. 5531 of 2025 dated 06.01.2026] wherein the Court held as follows:- "85. The twin factors mentioned should be regarded as fundamental principles while determining the classification of a product under the First Schedule of the Act, 1975. This is because, according to Section 12 of the Act, 1962, it is evident that the goods are taxable at the point of import. Therefore, as recognised by this Court in Dunlop India (supra), what is crucial is the condition of the goods at the time of import, which is the taxa....
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....r proteins. While classifying the said goods in CTH 2106, the impugned order has held as follows:- "8.4.3 ................. Tendoflt is a Bovine Cartilage Extract containing Mucopolysaccharides and Collagen to the extent of 84.6% and 15.4% respectively. The noticee has stated that Mucopolysaccharide is a natural polymer, in primary form und that it substantially consists of Chondroitin Sulphate which is a biological polymer that acts as the flexible connecting matrix between the protein filaments in cartilage. However, I observe that the submission made by the noticee is silent regarding the role of Collagen in the said impugned item. Collagen is a protein made up of various amino acids and is an important constituent of the impugned preparation. Since the said item 'Tendofit' is in a form of a preparation containing two ingredients Chondroitin Sulphate/Mucopolysaccharides and Collagen, therefore, it cannot be termed as "natural polymer" in primary form. I find that as the said item is in the form of a preparation, hence there is a need to look into for the appropriate classification as a whole and not splitting it into its constituents and classify them. The item in the m....
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....oduce the competing headings, which are reproduced below: "Chapter Heading 21 FOOD PREPARATIONS, NOT ELSEWHERE SPECIFIED OR INCLUDED 2106 10 00 - Protein concentrates and textured 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 maltodextrine 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 21069099 --- Other" 7.3 The relevant HSN Explanatory notes for the said CTH is as below: "21.06 - Food preparations not elsewhere specified or included. 2106.10 - Protein concentrates and textu....
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.... soya-bean flour, whether, or not fit for human consumption (heading 23.04) and protein isolates (heading 35.04). .................. ............... ............" 7.4 From a bare perusal of the CTH 2106 and the connected HSN notes, it is evident that the said CTH covers diverse range of products that do not fit into more specific categories of Chapter 1 to Chapter 20. The goods are liable to be classified under the said heading, if they meet one of the primary conditions as defined in the said HSN viz., (i) Preparations intended for direct human consumption or for consumption after simple processing such as cooking, dissolving of milk or water (ii) manufacturing inputs which are preparations consisting wholly or partly of foodstuffs used in making beverages or other food preparations. The impugned order has classified the said product under CTH 2106.90 in the other category which basically covers the following products:- * 2106 90: The "Other" category, which includes: ○ Soft Drink Concentrates/Sharbat: Bases for non-alcoholic beverages. ○ Pan Masala & Supari: Betel nut products known as "Supari" (2106 90 ....
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....n in case of multiple headings, which prefers (a) most specific description, (b) essential character for mixtures, or (c) last-in-number for equal specificity. Tendofit, being a composite product would then be classifiable as per 3(b) on the basis of the material which gives its essential character. In the instant case, it is the MPS/Chondroitin Sulphate which gives Tendofit its essential character. It is noted that the appellant has chosen to classify their product as 3913 as polysaccharide derivatives. In order to appreciate their contention, we reproduce the competing heading and the HSN notes hereinafter: Chapter Heading 39139092 3913 Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms 3913 10 - Alginic acid, its salts and esters: 3913 10 10 --- Sodium alginate 3913 10 90 --- Other 3913 90 --- Other --- Chemical derivatives of natural rubber 3913 9011 ---- Chlorinated rubber 3913 9019 --- Other 3913 90 2....
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....and have determined that the classification set forth in those rulings for CS imported in bulk is in error. xxxxxxxx xxxxxxxxx xxxxxxxx xxxxxxxxxxx FACTS: The substance CS imported in bulk form is a white powder "glycosaminoglycan that predominates in the ground substance of cartilage, bone, and blood vessels but also occurs in other connective tissues. It consists of repeating disaccharide units in specific linkage, each composed of a glucoronic acid residue linked to a sulfated N-acetylgalactosamine residue." Dorland's Medical Dictionary, 321 (28th Edition,W. B. Saunders Company, 1994). Furthermore, the Merck Index, §2270, 371 (12th Edition, Merck & Co., Inc., 1996) adds that "these biological polymers act as the flexible connecting matrix between the tough protein filaments in cartilage to form a polymeric system similar to reinforced rubber." Id. The CAS registry number assigned to CS is 12678-07-8 and it is not listed in the Chemical or Pharmaceutical Appendixes to the HTSUS. We note that there are varying grades and types of CS. All are produced using three basic steps: extraction from animal cartilage, drying, and milling into a fine powder....
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....in the same manner as merchandise which defines the class (6) the economic practicality of so using the import, and (7) the recognition in the trade of this use....................... Applying these factors, we find that they weigh overwhelmingly in favor of finding that CS is not prepared principally for use in the U.S. for therapy or prophylaxis. Our analysis follows thus: The general physical characteristics of CS is that of a mucopolysaccharide, like rubber. The expectation of the ultimate purchaser is that CS increases the general health of their bones and joints and may treat joint ailments through the same mechanism that it improves joint function generally. The channels of trade and environment of sale is through health food stores and pharmacies shelved with the dietary supplements. One can also purchase the product electronically on the internet through web sites promoting natural products for maintaining general good health. The product is advertised as a substance which maintains healthy joints. The product is used as a dietary supplement. The substance is not prepared for a sole use. The basic preparatory steps in the manufacture of the CS, e....
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....er a specific entry under the Tariff.......", whereas it has clearly stated that at the time of import, the goods are not edible. The Department has led no evidence to establish that Tendofit, at the time of import, was in an edible form. It is settled law that the goods have to be classified at the import stage and not as per the intended use. In order to determine the classification of the goods, we need to go by the settled principal of law that if the department intends to classify the goods under a particular heading, or subheading, different from the one claimed by the importer, the department is required to induce proper evidence and thereby discharge the burden of proof. We find that other than mere reiteration of their opinion, the Department has failed to discharge this burden. In this context, we rely on the decision of the Apex court in the case of HPL Chemicals versus Commissioner of Customs, Excise, Chandigarh [(2006(197)ELT 324)] which relied on the earlier decision of the Apex court in Union of India and Others versus Garware Nylon Limited and others. [(1996(10)SCC 413)] 10. The impugned order has rejected the appellant's submission that under the EU Customs Tari....
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....mb comprising of sodium hyaluronate, polysaccharide and collagen. The Chemical composition of the said product is as follows:- Substance ASSAY Hyaluronic acid and other components, including and collagen (60-75&) Polysaccharides 10% Collagen 5% 14. We find that the findings in respect of Mobilee in the impugned order is as follows:- "8.5.2 Mobilee is a natural extract derived from rooster comb and comprising of sodium hyluronate, polysaccharide and collagen. xxxxx xxxxxxx xxxxxx xxxxxxx 8.5.3 I find that the item 'Mobilee' is an extract consisting of Sodium Hyaluronate, Polysaccharides and collagen. The noticee has submitted that the impugned goods predominantly contain 'Sodium Hyaluronate' and as EU tariff structure which is upto 10 digit, it is classified under CTH 3913 9000 85 of the Tariff. I find that the notice is silent about the other two constituents of the composition i.e. Polysaccharides & Collagen, which are also important to decide the characteristics of the item. The issue before me is not about classification of 'Sodium Hyaluronate' but of a product comprising of 'Sodium Hyaluronate', polysaccharides and collagen.....
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....c acid in subheading 3913.90.20, HTSUS, the provision for "Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms: Other: Polysaccharides and their derivatives," in numerous rulings (see New York Ruling Letters (NY) 870775, dated February 19, 1992, NY 881465, dated January 20, 1993, NY 890398, dated October 6, 1993, NY A88459, dated October 28, 1996, NY D87202, dated February 4, 1999, and NY K87872, dated July 22, 2004). HOLDING: By application of GRI 1, bulk sodium hyaluronate is classified in heading 3913, HTSUS, specifically in subheading 3913.90.20, HTSUS, which provides for: "Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms: Other: Polysaccharides and their derivatives..............................." 17. In addition, we find that the EU Customs Tariff classified Sodkum Hyaluronate under CTH 3913 as natural polymer. As noted above, HSN adopted by the WCO ....
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....ublic institute of technology and has been created to be a Centre of Excellence for training, research and development in Science, Engineering and Technology. Per contra, we do not find any evidence led by the Revenue department to disprove the said opinion. No chemical test report or expert opinion has been placed before us in support of their contention. 20. We find that the product Mobilee being a mixture, the classification would have to be as per GIR 3 (b). Such a commodity/mixture would have to be classified by the component which gives it its essential character. In the instant case, the essential character of Mobilee is given by Sodium Hyaluronate which is liable to be classified under CTH 3913. The learned authorized representative has submitted that as collagen is also present along with sodium hyaluronate, hence the resultant product viz., Mobilee does not remain a natural polymer, and changes its nature to a food preparation. We are unable to appreciate this contention. It has been submitted before us that Mobilee, when imported is not in edible form and is in bulk packaging of 5 kgs. It needs to be formulated to the prescribed dosage strength of 80mg/day before the ....
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....Health & Dietary Supplement. It is evident that is in the nature of an edible preparation of miscellaneous kind for human consumption." 21.2 In this context, learned counsel has submitted that that GG Orosoluble, was an ingredient that was a pro-biotic known as Lactobacillus Rhamnosus GG, which was essentially cultures of bacteria i.e. live microorganisms, that helps promote healthy balance of gut bacteria. This has been certified by Dr. Biswaranjan Pradhan, Indian Institute of Technology, Bhubaneswar. Xylitol and sorbitol have been used as excipient carrier to provide better stability to GG Orosoluble, so that it can withstand conditions during storage, transportation as well as during industrial processes. Learned counsel further submitted that their contract manufacturer in India have obtained relevant licences under the State FDA under the appropriate product category of probiotics. He drew attention to the entries appearing under Sr. No. 22 of such license which specifically mentions the subject goods i.e. Lactobacillus rhammosus as probiotics. It has been contended that the said product was subjected to manufacturing process after its importation, which results in the edib....
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....epresentative. We take notice that the impugned orders are about the nature of the impugned goods in the context of exclusions in chapter 30 of First Schedule to Customs Tariff Act, 1975 and inclusions in chapter 21 of First Schedule to Customs Tariff Act, 1975 The rulings relied upon by both sides had arisen from examination of the relevant product in the framework of the enumerations at the domestic level in the respective tariffs and that of the European Union (EU) pertains to application of non-tariff barriers imposed by a constituent State. At this stage, we may also take notice that, notwithstanding the several submissions of Learned Authorized Representative on the proper classification of 'probiotics' -whether as food supplement or ingredient for manufacture of food supplement, the intent of law insofar as classification of probiotic within heading 3002 of First Schedule to Customs Tariff Act, 1975 is beyond question as the notification cited by the appellant unambiguously deem it to be so. No amount of argument or depth of research can move probiotics or for that matter, 'cultures of micro-organisms (excluding yeasty to chapter 21 as proposed by the show cause notices. ....