TaxTMI 
TaxTMI 
2024 (12) TMI 1753
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....rmly blended products (emulsions) from ingredients which, because of fundamental differences in their physical and chemical properties are immiscible. The chemical name of the product is Sodium Stearoyl Lactylate. 1.3 The subject product offers the following benefits: i. Improves emulsion stability, whitening effect, and mouthfeel when used with monoglycerides in coffee whiteners ii. Increases stability against feathering in coffee whiteners iii. Combines dough strengthening and crumb softening 1.4 The subject product is mainly composed of Sodium Stearoyl Lactylate. Palm oil is the raw material used for the manufacturing of the subject product. Palm oil contains different types of fatty acids (stearic acid). During the manufacturing process, Fatty acid (Stearic acid) is made to react with Lactic Acid in presence of Caustic Soda (NaOH) in an equilibrium esterification reaction that yields Sodium Stearoyl Lactylate. 1.5 The subject product may contain other constituents such as un-neutralized palmitoyl and stearoyl lactylic acid, free fatty acids, free lactic acid etc. 1.6 The physical processes of Distillation, Storage, Filtration, Tube chillin....
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....tains more than one molecular species, viz., stearoyl lactylic acids, other salts of related acids, etc. For this reason, the subject product cannot be said to be a separate chemically defined compound given in Chapter Note 1 to Chapter 29. Additionally, there is not a fixed chemical formula of the Sodium Stearoyl-2-Lactylate, as "R" can either be C17H35 or C15H31 and "n" can range from 1- 2.Hence, it is not removed from the ambit of Chapter 34. 1.15 Similar understanding can be developed from Scientific Opinion on the re-evaluation of sodium stearoyl-2-lactylate (E 481) and calcium stearoyl-2-lactylate (E 482) as food additives done on request of European Commission, Question No EFSA-Q-2011-00568 and No EFSA-Q-2011-00569, adopted on 13 March 2013. Determined that Sodium Stearoyl-2-Lactylate is waxy in consistency. Relevant portion of Report is extracted below Other components present in the product may include sodium/calcium salts of fatty acids or free fatty acids (15-20 %), non-neutralised stearoyl lactylic acid, sodium/calcium lactate, free lactic acid or polymers of lactic acid. (Boutte and Skogerson, 2004; Burch et al., 2007; Austen Business Solutions, 2010, unpub....
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....ment and Regulation) Act, 1992; b. Application for advance ruling is in relation to clause (a) of Section 28H (2) of the Customs Act, 1962. Non-Applicability of Bar under Section 28I 1.24 Section 28I of the Customs Act, 1962 is set out below: "SECTION 28-I. Procedure on receipt of application. - (1) On receipt of an application, the Authority shall cause a copy thereof to be forwarded to the [Principal Commissioner of Customs or Commissioner of Customs] and, if necessary, call upon him to furnish the relevant records : Provided that where any records have been called for by the Authority in any case, such records shall, as soon as possible, be returned to the [Principal Commissioner of Customs or Commissioner of Customs]. (2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application : Provided that the Authority shall not allow the application [* * *] where the question raised in the application is - (a) already pending in the applicant's case before any officer of customs, the Appellate Tribunal, or any Court; (b) the same as in a matter already dec....
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....es do not otherwise require, according to the remaining Rules of the GRI. 2.3. Given that it has a waxy nature, it may be classified under Chapter 34, which covers, inter-alia, Artificial Waxes and Prepared Waxes. Under Chapter 34, the relevant customs tariff heading ("CTH") that is most relevant to the classification of the subject product is CTH 34.04, which concerns Artificial waxes and prepared waxes. 2.4. Before examining the classification of the subject product under CTH 3404, it is relevant to visit the Notes to Chapter 34. 2.5. As per Note 1 to Chapter 34 "separate chemically defined compounds" are excluded (1) This Chapter does not cover (a) **** (b) Separate chemically defined compounds; or. (c) **** 2.6. Additionally, as per Note 5 to Chapter 34, "artificial waxes and prepared waxes" applies to: (a) Chemically produced organic products of waxy character, whether or not water-soluble. (b) *** (c) **** 2.7. Further, the HSN Explanatory Notes to Heading 3404 provide for its applicability as under: This heading covers artificial waxes (sometimes known in industry as "synthetic waxes") and....
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.... of reference the relevant definition is reproduced below: (A) Chemically defined compounds (Chapter Note 1) A separate chemically defined compound is a substance which consists of one molecular species (e.g., covalent or ionic) whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram. In a crystal lattice, the molecular species corresponds to the repeating unit cell. 2.10. As already mentioned, JECFA Report provides that the subject product is not a chemically defined compound due to the presence of residual mono- and diglycerides and glycerol. II. Subject product is waxy in nature 2.11. Additionally the JCEFA Report also provides that the subject product is waxy in character III. The product must be chemically produced organic product 2.12. As per the manufacturing process of the subject product, it is manufactured by a chemical reaction of fatty acid (stearic acid) with propylene glycol in an esterification reaction. The resultant product contains a carbon-hydrogen bond, which is characteristic of an organic product. Hence, the subject product is a chemically produced organic ....
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...., and Note 5 to the Chapter 34, the subject product merits classification under CTH 3404. 2.18. Now, coming to the 8-digit classification, reliance must be placed on GRI Rule 6 which states that "the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub-headings and any related sub-heading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires". 2.19. Therefore, upon application of GRI Rule 6 read with GRI Rule 1, the classification of subject products must be determined according to the terms of sub-headings. In view of the above, reference must be made to the description mentioned at sub-heading level. 2.20. It is also pertinent to mention that as per GRI, descriptions of the goods provided under "-"(single dash) are first to be considered for sub-classification under a heading first, before proceeding to further classify under "- - " (double dash). Articles whose description are preceded by a " --- " (triple dash) o....
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....imported' form contains neither bromine nor any chlorine. Thus, the subject product is not classifiable under CTIs 34049031, 34049032 or 34049033. Hence, the subject product merits classification under CTI 3404 90 39. ISSUES REQUIRING ADVANCE RULING AND APPLICANT'S UNDERSTANDING In light of the aforementioned submissions, the Applicant's interpretation of the questions raised will be as under: a) Question: Whether the subject product in question in the present application is classifiable under Tariff Item 3404 90 39? Applicant's Understanding: Yes. b) Question: If the answer to the above question is in the negative, then what would be the correct classification of the products mentioned above under the Customs Tariff of India? Applicant's Understanding: Not Applicable Comments of the Port Commissionerate 1. The application was forwarded to Assessment Group in terms of section 28I (1) of the Customs Act, 1962 for comments and relevant records. In this regard, comments are as follows: Point 3 i). Applicant is eligible in terms of section 28-E (c) of the Customs Act, 1962 to seek advance ruling. Point 3 ii). ....
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....eferred to as "BCD") @ 10%, Social Welfare Surcharge (hereinafter referred to as "SWS") @10% and Integrated Goods and Services Tax (hereinafter referred to as "IGST") @18% in terms of SI. No. 62 of Schedule III of IGST Notification No. 01/2017 - Integrated Tax (Rate) dated 28.06.2017 (hereinafter referred to as "Notification No. 01/2017"). Comments by the Ld. Joint Commissioner of Customs, Gr. II (C-F), NS-I, JNCH, Nhava Sheva, Mumbai, Customs Zone-Il 4.4. Vide letter dated 02.12.2024, the Ld. Joint Commissioner of Customs, Gr. II (C-F), NS-I, JNCH, Nhava Sheva, Mumbai, Customs Zone-II (hereinafter referred to as the "Ld. Jt. Commissioner"), has provided his comments on the AAR filed by the Applicant. In the said letter dated 02.12.2024, the Ld. Jt. Commissioner has stated that the subject product can either be classified under CTH 3404 or CTH 3824 depending on whether it meets the character of artificial waxes or otherwise and that accordingly, the compliance of the subject product to various conditions set forth for classification under CTH 3404 needs to be examined. Technical Details of the Subject Product 4.5. The present application pertains to a brand of food emul....
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....), as food additives done on the request of the European Commission, Question No. EFSA-Q-2011-00568 and No. EFS-2011-00569, adopted on 13.03.2013 (hereinafter referred to as the "EFSA Report"), which describes both, Sodium Stearoyl-2-Lactylate and Calcium Stearoyl-2-Lactylate as "normally white to pale yellow, ivory-coloured, waxy material of a consistency determined by the fatty acid 4.11. The subject product is pre-dominantly composed of Sodium Stearoyl Lactylate and is proposed to be imported in ready-to-sell packages of polyethylene/aluminium lined paper bags of 25 kgs each. The said product will be used in the food industry as an emulsifying agent. Classification of the Subject Product 4.12. The Applicant proposes to classify the subject product under CTI 3404 90 39 of the Customs Tariff. The relevant tariff entries are extracted below for ready reference: Heading/ Sub- heading/ Tariff Item below for ready reference: Description of Goods Rate of Duty 3404 ARTIFICIAL WAXES AND PREPARED WAXES 3404 20 00 - Of poly (oxyethylene) (polyethylene glycol) 10% 3404 90 - Other: 3404 90 10 ....
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....ely high molecular weight organic substances and which are not separate chemically defined compounds. These waxes are : (A) Chemically produced organic products of a waxy character, whether or not water-soluble. Waxes of heading 27.12, produced synthetically or otherwise (eg. Fischer-Tropsch waxes consisting essentially of hydrocarbons) are, however, excluded. Water-soluble waxy products having surface-active properties are also excluded (heading 34.02). (B) ......... (C) Products of a waxy character with a basis of one or more waxes and containing fats, resins, mineral substances or other materials. Unmixed animal or vegetable waxes, whether or not refined or coloured, are, however, excluded (heading 15.21). Unmixed mineral waxes or mixtures of mineral waxes, whether or not coloured are also excluded (heading 27.12) ......... ....... The waxes of paragraphs (A), and (C) above must have: (1) a dropping point above 40 ℃; and (2) a viscosity, when measured by rotational viscometry, not exceeding 10 Pa.s (or 10,000 cP) at a temperature of 10 degrees C above their dropping point. ....... Apart from t....
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....s submitted that a carbon-hydrogen bond being present in a product is a characteristic of that product being an organic product. Reliance in this regard is placed on the definition of an "organic compound" as outlined by Britannica Technical Dictionary [Noller, Carl R., Norman, Richard O.C. and Usselman, Melvyn C.. "organic compound". Encyclopedia Britannica, 25 Oct. 2024, https://www.britannica.com/science/organic-compound. Accessed 22 November 2024.] which is extracted below: "organic compound, any of a large class of chemical compounds in which one or more atoms of carbon are covalently linked to atoms of other elements, most commonly hydrogen, oxygen, or nitrogen." (Refer to the Structural Formula provided by the JECFA Report as extracted in Para 6 hereinabove and in the AAR Application which consists of the Carbon-Hydrogen Bond) The product must not be CTH 2712 covers "Petroleum, Jelly, Paraffin Wax, Microcrystalline Petroleum Wax or other mineral waxes" A bare perusal of the terminology of the CTH 2712 is apparent to conclude that subject product is out of the scope of the waxes covered by CTH 2712. covered within the scope of CTH 2712 The subject p....
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....ted that the subject product has not been subjected to bromination or chlorination during its manufacturing process and neither does the subject product contain bromine or chlorine in its 'as- imported' condition. The subject product is thus, not classifiable under CTI 3404 90 31, 3404 90 32, 3404 90 33 and is therefore, correctly classifiable under CTI 3404 90 39. 4.23. Examination of classification of the subject product under CTH 3824 vide the letter dated 02.12.2024, the Ld. Jt. Commissioner opined that the subject product may be classified under CTH 3404 provided that the subject product meets the requirement of 'waxy character' relying upon the relevant HSN EN. 4.24. It is, therefore, iterated that as outlined in the foregoing discussion, the subject product is palm oil- based Fatty acid (Stearic acid) which is subjected to an equilibrium esterification reaction, with Lactic Acid in the presence of Caustic Soda (NaOH) to obtain the final subject product in its 'as-imported' condition. Analysis and Conclusion 5 The Applicant is importing the products Grindsted SSL P 70 Veg' for the purpose of trading. The product, Grindsted SSL P 70 Veg ....
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....ption Form Powder; Beads Physical state Solid Colour White to off-white Odor Slight fatty acid Water solubility Insoluble in water 5.4 As per, 46th Joint FAO/WHO Expert Committee on Food Additive ("JECFA Report") report published in FNP 52 Add 4 (1996), which has analysed the subject product. JECFA report defines the subject product as: A mixture of sodium salts of stearoyl lactylic acids and minor proportions of other salts of related acids, formed by the esterification of commercial stearic acid with lactic acid and neutralized to the sodium salts; may contain unnaturalized palmitoyl and stearoyl lactylic acid, free fatty acids (principally palmitic and stearic), free lactic acid and salts of fatty acid esters of lactic acid and polymerized lactic acid. 5.5 The subject product contains more than one molecular species, viz., stearoyl lactylic acids, other salts of related acids, etc. For this reason, the subject product cannot be said to be a separate chemically defined compound given in Chapter Note 1 to Chapter 29. Additionally, there is not a fixed chemical formula of the Sodium Stearoyl-2-Lactylate, as "R" can either be C17H35 or C1....
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....relevant to the classification of the subject product is CTH 34.04, which concerns Artificial waxes and prepared waxes. 5.8.1.1 For ease of reference, the chemical composition and the physical property of the subject product is captured below: Grindsted SSL P 70 Veg PARTICULARS DESCRIPTION QUANTITY Ingredient Sodium Stearoyl Lactylate (E481) Approx 100% Form Powder, Beads - Physical State Solid - Colour White to off-white - Odor Slightly fatty acid - Water Solubility Insoluble in Water - 5.8.2 Before examining the classification of the subject product under CTH 3404, it is relevant to visit the Notes to Chapter 34. As per Note 1 to Chapter 34 "separate chemically defined compounds" are excluded (1) This Chapter does not cover (a) **** (b) Separate chemically defined compounds; or. (c) **** 5.8.3 Additionally, as per Note 5 to Chapter 34, "artificial waxes and prepared waxes" applies to: (a) Chemically produced organic products of waxy character, whether or not water-soluble. (b) **** (c) **** 5.8.4 Further, the HSN Explanatory Notes to H....
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....tance which consists of one molecular species (e.g., covalent or ionic) whose composition is defined by a constant ratio of elements and can be represented by a definitive structural diagram. In a crystal lattice, the molecular species corresponds to the repeating unit cell. As already mentioned, JECFA Report provides that the subject product is not a chemically defined compound due to the presence of residual mono- and diglycerides and glycerol. II The Subject product is waxy in nature 5.8.6.2 As per the scientific opinion referred, the subject product is waxy in character III. The product must be chemically produced organic product 5.8.6.3 As per the manufacturing process of the subject product, it is manufactured by a chemical reaction of fatty acid (stearic acid) with lactic acid in the presence of caustic soda (NaOH) in an equilibrium esterification reaction. The resulting contains a carbon-hydrogen bond, which is characteristic of an organic product. Hence, the subject product is a chemically produced organic product. IV. The product must not be covered within the scope of CTH 2712 5.8.6.4 CTH 2712 covers Petroleum Jelly, Paraffin Wax, Microcrystalline Pe....
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....ings of a heading shall be determined according to the terms of those sub-headings and any related sub-heading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires". Therefore, upon application of GRI Rule 6 read with GRI Rule 1, the classification of subject products must be determined according to the terms of sub-headings. In view of the above, reference must be made to the description mentioned at sub-heading level. It is also pertinent to mention that as per GRI, descriptions of the goods provided under "-"(single dash) are first to be considered for sub-classification under a heading first, before proceeding to further classify under "- - " (double dash). Articles whose description are preceded by a " --- " (triple dash) or " ---- " (quadruple dash) are sub-classifications of the immediately preceding single dash or double dash, as the case may be. 5.8.10 Therefore, the classification of the subject goods must be first determined at the single-dash level. In this regard, it is eviden....
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....product is mainly composed of Sodium stearoyl lactylate (SSL), and appears to be an ester of stearic acid, which is covered under CTH 2915. However, as stated by the importer, the product not being a separate chemically defined compound, it is not classifiable under Chapter 29. It appears that the imported product may be classifiable under CTH 34.04 depending on whether it meets the character of artificial waxes or otherwise. The compliance of the imported product to the various explanatory notes to CTH 34.04 need to be examined. 5.8.16 The subject product has a waxy character. Reliance for the same is placed on the Scientific Opinion prepared at 46th JECFA Report on the re-evaluation of sodium stearoyl-2-lactylate (E481) and calcium stearoyl-2-lactylate (E482), as food additives done on the request of the European Commission, Question No. EFSA-Q-2011-00568 and No. EFS-2011-00569, adopted on 13.03.2013 (hereinafter referred to as the "EFSA Report"), which describes both, Sodium Stearoyl Lactylate and Calcium Stearoyl Lactylate as "normally white to pale yellow, ivory-coloured, waxy material of a consistency determined by the fatty acid. 5.8.17 Considering the subject product ....
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....000 cP) at a temperature of 10 degrees C above their dropping point. ....... Apart from the exclusions mentioned above, the heading does not cover : ..... (f) Mixtures of mono-, di- and tri-, fatty acid esters of glycerol, not having the character of waxes (heading 38.24)." 5.8.19 Each of the above-listed conditions are dealt with specifically as under: The subject product is not a Separate Chemically Defined Compounds Due to the absence of a constant ratio of elements which determines the composition of the subject product, it cannot be covered under the scope of a separate chemically defined compound. The subject product also does not have a definite structural diagram as the 'R' in the structural diagram captured hereinabove can mean either 'C17H35' or 'C15H31' i.e. either Stearic Acid or Palmitic Acid which is the variability in the fatty acids. The subject product does not consist of only one molecular species due to the presence of Lactic Acid. Stearic Acid, Caustic Soda, and other constituents such as un-neutralized palmitoyl and stearoyl lactic acid, free fatty acid, free lactic acid, etc. and is thu....