TMI Blog2023 (9) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... o be classified under CTH 21061000 as claimed by Revenue or under CTH 18069040 as claimed by appellant? AS PER RAJU, MEMBER (TECHNICAL) HELD THAT:- There is no argument made in the appeal memorandum or in the written submissions of the appellant as to why the Supplementary Note 5(a) should not be followed in the instant case. It is apparent from the above reading of supplementary note 5(a) to Chapter 21 and that the Protein Concentrate and Textured Protein Substances would fall under the heading 2106 . It is seen that the sub heading 21061000 of Customs Tariff (just like HSN) specifically covers Protein Concentrates and Textured Protein Substances , still a chapter supplementary note was introduced to place the Protein Concentrate and Textured Protein Substances under heading 2106 - 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 goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able changes in HSN is therefore, in tandem with Indian Constitution as well as he structural provisions of HSN. - This has been aptly pointed out by learned brother in course of the decision on chapter 21 of India Custom Tarff Act, 1975 (specially the heading 2106) with related supplementary notes. These supplementary notes have been in existence since inception of HSN based Custom Tariff of 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. Chapter note, which is by way of supplementary note 5 seeks to define the scope and limits of heading 2106. It is thus clear that the expression Food preparation not elsewhere specified or included figuring in tariff heading 2106 when expanded by virtue of chapter note 5 (supplementary note) makes heading 2106 to specifically include Protein Concentrates and Textured Protein Substances therefore the legislature has clearly expanded the scope of tariff heading 2106 by virtue of supplementary notes 5 as brought out above. All this exercise makes even Head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals), Ahmedabad. Learned counsel for the appellant pointed out that Commissioner (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, valuation aspect of the transaction was referred to Special Valuation Branch (SVB) for further scrutiny. Accordingly, the goods imported by the Appellant have been assessed provisionally in terms of Section 18. The bills of entry against which impugned OIO and Order in Appeal was issued, have not yet been finalised. 4. Learned counsel for the appellant pointed out that while the assessments continued to be provisional for the afore-mentioned reasons in respect of the impugned bills of entry, the Respondent alleged that the impugned goods are properly classifiable under CTH 2106 of Customs Tariff. For this reason, the clearance in some of the Bills of Entry was not permitted. Learned counsel for the appellant pointed out that notwithstanding the provisional nature of assessments due to ongoing SVB proceeding, the Respondent chose to issue a speaking order under Section 17 of the Customs Act, 1962 seeking to classify the impugned goods under CTI 2106 10 00 and re-assessed the Bills of Entry. This required the appellant to deposit additional duty and interest under protest and seek clearance of the impugned goods. Ld counsel for the appellant pointed out that aggrieved by the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on perusal of Bills of Material, it is evident that the impugned goods contain differential amount cocoa and protein content. However, the impugned goods have been classified merely on the basis of the presence of protein content without reference to the appropriate chapter headings and discussion on the General Rules of Interpretation of the Customs Tariff. The supplier of the Appellant has shared a bill of material for each impugned product indicating the raw materials used in the food preparation. 7. Learned counsel for the appellant argued that the following are key issue under consideration before this Hon ble Tribunal: (i) Whether the impugned goods are classifiable under CTH 1806 or CTH 2106 of Customs Tariff? (ii) Whether the Respondent is entitled to do piece-meal finalisation of provisional assessment? The Ld counsel has conceded on the second issue and sought that the issue of classification may be finalised by the tribunal as is apparent from the submissions recorded in para 30 below. Therefore the only issue which remains to be decided is if the impugned goods are classifiable under CTH 1806 or CTH 2106 of Customs Tariff. 8. On the merits of classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the following decisions (i) O.K. Play (India) vs. CCE, (2005) 180 ELT 300 (SC 3-member bench); (ii) CC. Ex., Pune-I v. Praj Industries, 2009 (242) E.L.T. 430 (Tri-Mum); 9. He argued that on application of GIR Rule 1, the following are the relevant CTH under consideration: CTH PARTICULARS 1806 Chocolate and other food preparations containing cocoa 1901 Malt extract; Food preparations of flour, groats, meal, starch or malt extract, not containing cocoa or containing less than 40% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included; Food preparations of goods of headings 0401 to 0404, not containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included 2106 Food preparations not elsewhere specified or included He argued that in the light of the aforementioned relevant CTHs, it would be prudent to now examine the scope of each of the aforementioned CTHs. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paration . 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 this regard, Chapter Note to Chapter 18 of Customs Tariff provides the following: This Chapter does not cover the preparations of headings 04.03, 19.01 , 19.04. 19.05, 21.05, 22.02, 22.08, 30.03 or 30.04 He argued that that Chapter 18 only covers such cocoa and cocoa preparations which are not covered any of the aforementioned headings. He argued that HSN General Explanatory Notes to Chapter 18 provides that this Chapter covers cocoa (including cocoa beans) in all forms, cocoa butter, fat and oil and preparations containing cocoa (in any proportion) , except for the aforementioned exclusions. He argued that this view is further corroborated by the fact that HSN Explanatory Notes to CTH 1806 provides that it includes all food preparations containing cocoa (other than those excluded in the General Explanatory Note to this Chapter) .He argued that mere perusal of the aforementioned enlisted headings, it can be seen that the goods under consideration are not likely to be covered under any other CTH, except CTH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifically 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 2106 is as follows: (i) If a food preparation contains cocoa (other than defatted cocoa) in any proportion, then it is classifiable under CTH 1806 (ii) Food preparations of CTH 0401 to CTH 0404 containing less than or equal to 5% of cocoa on defatted basis are classifiable under CTH 1901; (iii) Food preparations of CTH 0401 to CTH 0404 containing more than or equal to 5% of cocoa (defatted basis) are classifiable under CTH 1806; (iv) Lastly, if the goods under consideration are not classifiable under the aforementioned CTHs, such goods can be classified under CTH 2106 of Customs Tariff. He argued that in respect of classification under CTH 1806, CTH 1901 and CTH 2106, the impugned goods being in the nature of food preparations , the preliminary condition under each of the aforementioned CTH is satisfied. He argued that for classification under CTH 1901, the impugned goods contain albumin and other prote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Counsel relied on the WCO s HS Committee decision, and other international rulings passed by the National Commodity Specialist Division, US Customs and Border Protection (US Customs) to hold that impugned goods are classifiable under CTSH 1806 90 of HTSUS. Reliance was placed on (i) US Cross Ruling N025135 dated 15.04.2008 and (ii) US Cross Ruling N204559 dated 02.03.2012 dealing with similar product classification wherein it was held that 100% Whey Classic- Chocolate and 100% Whey Gold Standard-Chocolate are classifiable under CTSH 1806.90. 17. Learned Counsel also relied on Ruling No. 1E17NT-14-4988-04 dated 08.06.3027, EU Taxation and Customs Union wherein it was held that impugned goods are classifiable under CTSH 1806 90 of HSN. Ld Counsel also relied on Canada Border Services Agency Advance Ruling No. C-2016-002882 dated 19.10.2016, wherein it was held that pre and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 impugned goods are classified under CTH 1806 only. Reliance in this regard is placed on sample import documents on import of cocoa-based whey protein powders. Therefore, Ld Counsel argued that, impugned goods containing cocoa are appropriately classifiable under CTSH 1806 90 of Customs Tariff. 20. Learned counsel submitted that Ld. Commissioner (Appeals) classified the impugned goods under CTH 2106 of Customs Tariff. CTH 2106 of Customs Tariff reads as under: Tariff Item Description 2106 Food Preparations Not elsewhere specified or included 2106 10 00 - Protein concentrates and texture protein substances 21. Learned Counsel argued that Ld. Commissioner (Appeals), owing to the high protein content in the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 specifically under CTH 1806 or CTH 1901. Thus, on application of GIR Rule 3(a), the impugned goods are rightly classifiable under CTH 1806. He placed reliance on the case of CC (Import) vs Abbott Healthcare Pvt. Ltd., 2015 (2) TMI 740 wherein the CESTAT has held that preparations for infant should not be classified under CTH 2106 which covers Food preparations not elsewhere specified or included as they are specifically covered by CTH 1901 which reads as Preparations for infant use . He also placed reliance on the case of Mauri Yeast India Pvt. Ltd. vs. State of UP, 2008 (225) ELT 321 (S.C.) wherein it was held by the Hon ble Supreme Court that if there is a conflict between two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.T. 241 (M.P). Ld Counsel argued that in the present case, cocoa products have been defined under the HSN Explanatory Notes to CTH 1806, CTH 1901 and CTH 2106. Ld Counsel argued that there is no ambiguity in respect of classification under such CTH. Hence, the reliance placed on the commercial parlance for the purpose of concluding classification of the impugned goods is incorrect. 26. Learned Counsel argued that the impugned goods are marketed as cocoa flavoured product only. Further, as submitted above, the impugned goods contain cocoa (along with alkali) within the range of 1 to 10 %, thereby providing cocoa benefits to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submission that even if the classification declared by them under CTH 8306 2110 is incorrect the goods are otherwise classifiable under CTH 9703 in such tariff entry also the IGST Rate is 12% and therefore, there will be no revenue implication. Though alternate classification suggested by the Appellant appears to be prima facie correct but since we have already taken a view that Revenue's claim of classification under CTH 8311 is absolutely incorrect and it is nobody's case in the Show Cause Notice that the goods are classified under CTH 9703 we are not addressing this issue. However, since the Revenue' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 imported and classification claimed by the appellant are as follows:- Sl.No. Name of product CTH as per importer Description in CTH 1 Nutritional Supplements Containing Cocoa 18069040 Preparations containing cocoa for making beverages. 2 Unflavoured Nutritional Substances 35040099 Peptones and their derivatives; other protein substances and their derivatives, not el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner (Appeals), Customs, Ahmedabad. Ld AR pointed out that the appellant vide their letter dated 26-08-2022 have accepted the classification of Creatine Powder and Glutamine Powder under CTH No. 21069099. 33. Learned AR pointed out that the Labels 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Protein 46 gm 28 gm 77% 3 Fat Total 17 gm 10 gm 57% 4 Saturated 4 gm 2 gm - 5 Carbohydrate 90 gm 55 gm - 6 Sugars 14 gm 8 gm - 7 Sodium 300 mg 182 mg 24% Learned AR pointed out that the above table reveals that BSN India True Mass Chocolate 5.82 LB (Nutrition Supplement) has protein of 77% daily values ingredients as protein concentrate, soy lecithin, calcium caseinate, milk protein isolate, whey protein isolate, micellar casein, hydrolysed whey protein, egg whites, etc.... . Further, these products are known to buyers in the market as Whey Protein Concentrates. Therefore, in the trade and commercial parlance, identity/ classification of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent flavours. For example, GOLD STANDARD 100% WHEY PROTEIN POWDER is marketed in different flavours such as Extreme Milk Chocolate, Delicious Strawberry, Vanilla Ice Cream and Double Rich Chocolate. 38. Learned AR pointed out that the appellants have submitted copies of commercial invoices. It can be seen that they have shown classification of same products under two different chapters of 18 and 21 for two different Flavors. Wherein product with description, ON INDIA 100% WGS AF/GF MOCHA CAP 907G is shown as covered under CTH No. 18069040 whereas another product with description, ON INDIA 100% WGS AF/GF BANANA CRM 907G ON INDIA 100% WGS AF/GF STRAW 907G are shown as covered under CTH No. 21061000. These products are known and sold in the market as WHEY GOLD STANDARD . The only difference is their flavour. Ld AR argued that mere addition of flavouring agent does not change the character, use or classification of the product. 39. Learned AR relied on the case of Wander Ltd Vs. Collector of Central Excise, Bombay, the Tribunal, Delhi reported at 1999 (110) ELT 735 (Tribunal) to assert that protein concentrate are rightly classifiable under heading 2106 and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule is applied, then the material which gives the essential character is the Pan Leaf Powder. Pan Leaf is part of a plant and preparation of pan leaves with other ingredients would merit classification under Heading 20.01 as preparation of fruits, nuts and vegetables and other parts of a plant prior to March, 2005 and under CETH 2008.9200 on or after March, 2005. As per this judgement, product is to be classified based on its essential character. In the instant case, there is no dispute that the import goods are Nutrition Supplements made from Whey Protein Concentrate and Whey Protein Isolate. Ld AR argued that Tribunal in the case of Raptakos Brett Co. Ltd Vs. Commissioner of C. Ex., Raigad 2014 (307) ELT 565 (Tri.-Mumbai) held that to constitute protein concentrate, at least 70% of protein is required. It can be seen from the Annexure-A, import goods except goods at Sl No. 7, 11 15, contain protein more than 70%. Hence these products can be classified as protein concentrates under CTH 21061000. 41. Learned AR argued that finalization of classification issue was under the competency of the adjudicating authority and the finalization on valuation issue was under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 packings, of a content exceeding 2 kg. kg. 30% - - Other, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... syrup; glucose syrup and malto dextrine syrup kg. 150% - 21069050 --- Compound preparations for making non-alcoholic beverages kg. 150% - 21069060 --- Food flavouring material kg. 150% - 21069070 --- Churna for pan kg. 150% - 21069080 --- Custard powder kg. 150% - --- Other : 21069091 ---- Diabetic foods kg. 150% - 21069092 ---- Sterilized or pasteurized millstone kg. 150% - 21069099 ---- Other kg. 150% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds below.. 47. Whey proteins are available in different flavours like Double Rich Chocolate, Chocolate Bliss, Cream Vanilla, Delicious Strawberry, Vanilla Ice-Cream, Mocha Cappuccino etc. The appellant has described the goods in the appeal memorandum as follows: The appellant is primarily engaged in the business of importing and selling nutritional supplements in India. In this regard, the appellant imported certain nutritional supplements containing cocoa, glutamine powder, creatine powder and certain unflavoured nutritional supplements from M/s Glanbia Nutritionals (Ireland) Ltd. The basic raw material of nutritional supplements imported by the appellant is WHEY . Ld Counsel has described the product as chocolate protein powders/chocolate-flavoured protein powders as can be seen from his submissions in para 6 above. These powders are used by the athletes and sport persons as food supplements to supplement their protein intake. The argument of the appellants is that mere presence of cocoa in the impugned products rules out classification under heading 2106 and takes it into heading 1806. 48. Such Protein Concentrates of Whey Protein are made in many f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof (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 (b) above are to be classified in heading 2101. 2.- Extracts of the substitutes referred to in Note 1 (b) above are to be classified in heading 2101. 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 infants or young children or for dietetic purposes, in containers of a net weight content not exceeding 250g. 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. 3.- For the purposes of heading 21.04, the expression homogenised composite food preparations means preparations consisti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 example, of flavoured or coloured syrups, syrup flavoured with an added concentrated extract, syrup flavoured with fruit juices and concentrated fruit juice with added ingredients. 6. Tariff item 2106 90 99 includes sweet meats commonly known as Misthans 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. COMPARISON of CHAPTER 18 of HSN with THE CHAPTER 18 OF THE CUSTOMS TARIFF CHAPTER NOTES OF CHAPTER 18 OF CUSTOMS TARIFF ACT CHAPTER NOTES OF CHAPTER 18 OF HSN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined 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 a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3. 3. When by application of Rule 2 (b) or for any other re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inter alia that the classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. Therefore when goods are prima facie, classifiable under two or more headings, classification shall be effected according to sub-rules (a), (b) and (c) of Rule 3 and in that order. The sub-rules are quoted :- (a) The heading which provides the most specific descr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 occurs last in the numerical order. The order of priority therefore is; (a) specific description, (b) essential character, and (c) the Heading which occurs last in numerical order. However, GRI-3 can only take effect provided the terms of the Heading or Section or Chapter Notes do not otherwise require. GRI-4 states that when the goods cannot be classified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N 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, nature as well as definition of the product in a common market parlance. He observed that in the market the product was known as toothpaste. He also observed that it is treated as toothpaste as per the product manual issued by the Dental Invocation Centre, Mumbai. Discussion is summed up in para 32 of the order passed by the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 teeth or for other purposes such an Anticaries prophylactic treatment. The Note also enumerates that toothpaste and other preparations for teeth remains classified under Heading 3306 whether or not they contain abrasives and whether or not they are used by dentist. The correct scope of the heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed 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 Notes and Explanatory Notes for the purpose of classification. In such cases reliance is to be placed on the Chapter Notes and Section Notes appearing in the Customs Tariff. The appellants have also relied on the decision of Tribunal in the case of Anutham Exim P. Ltd. 2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Pan masala means any preparation containing betel nuts and any one or more of the following ingredients, namely: lime, katha (catechu) and tobacco whether or not containing any other ingredient, such as cardamom, copr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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: 2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED 21061000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Protein Concentrates containing coco imported by the appellant under Heading 2106. There is no argument made in the appeal memorandum or in the written submissions of the appellant as to why the Supplementary Note 5(a) should not be followed in the instant case. It is apparent from the above reading of supplementary note 5(a) to Chapter 21 and that the Protein Concentrate and Textured Protein Substances would fall under the heading 2106 . It is seen that the sub heading 21061000 of Customs Tariff (just like HSN) specifically covers Protein Concentrates and Textured Protein Substances , still a chapter supplementary note was introduced to place the Protein Concentrate and Textured Protein Substances under heading 2106. It is noted that the supplementary Note 5(a) does not prescribe that Protein Concentrate and Textured Protein Substances would fall under sub heading 2106 1000 but it clearly states that Protein Concentrate and Textured Protein Substances would fall under Heading 2106 . This provision in the chapter notes has been prescribed specifically to place Protein Concentrate and Textured Protein Substances under the heading 2106 . Any other interpretation would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s themselves and arrive, if possible, at their meaning, without, in the first place, reference to cases or theories of construction. Let us, therefore, consider the meaning of the word soap household . The word household signifies a family living together. In the simplistic language toilet soap being used by the family as household soap is too simplification to reach a conclusion. Therefore, one has to gather its meaning in the legal setting to discover the object which the Act seeks to serve and the purpose of the amendment brought about. The task of interpretation of the statute is not a mechanical one. It is more than mere reading of mathematical formula. It is an attempt to discover the intention of the legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human thoughts. It is also idle to expect that the draftsman drafted it with divine prescience and perfect and unequivocal clarity. Therefore, court would endeavour to eschew literal construction if it produces manifest absurdity or unjust result. In Manmohan Das v. Vishnu Das [AIR 1967 SC 643] a Constitution bench held as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be rendered otiose if we read it to mean that Protein Concentrate and Textured Protein Substances are to be classified under sub-heading 2106 1000. The note clearly means and states that the said goods are to be classified under Heading 2106 . 54. From the above proposition in para 49 to 53 above it is apparent that (i) The Customs Tariff is not harmonized with the HSN, and therefore the conclusions based on HSN cannot be relied when it contradicts prescriptions of the Customs Tariff. (ii) If the classification can be made relying on interpretative Rule 1 there is no need to proceed further on any other Rule. (iii) The Supplementary Note 5(a) clearly provides that Protein Concentrate and Textured Substances would be classified under Heading 2106 . Rule 1 of the General rules of interpretation is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preparations containing cocoa... other... other...other. The rate of duty will be 6 percent ad valorem. The applicable subheading for the Vanilla Whey Protein Powder will be 2106.90.8200, HTSUS, which provides for food preparations not elsewhere specified or included other other containing over 10 percent by weight of milk solids... other... other. The rate of duty will be 6.4 percent ad valorem. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at http://www.usitc.gov/tata/hts/. This merchandise is subject to The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (The Bioterrorism Act), which is regulated by the Food and Drug Administration (FDA). Information on the Bioterrorism Act can be obtained by calling FDA at 301-575-0156, or at the Web site www.fda.gov/oc/bioterrorism/bioact.html. This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional supplements. 100 percent Whey Gold Standard - Strawberry consists of approximately 55 9 percent whey protein isolate, 37.9 percent whey protein concentrate, 4.8 natural and artificial flavor, and less than one percent each of whey peptides, Sucralose, color, citric acid, aminogen, and lactase. Classic Whey-Strawberry consists of approximately 95.7 whey protein concentrate, 1.3 percent each of lactalbumen (whey peptides) and whey protein isolate, 1 percent natural and artificial flavors, and less than one percent each of Sucralose, acesulfame potassium, citric acid, and color. 100 percent Whey Gold Standard-Strawberry, containing approximately 78 percent protein, will be put up in 2-, 5-, and 10-pound containers. The Classic Whey- Strawberry product, containing approximately 69 percent protein, will be put up in 2- and 5-pound containers. The applicable subheading for these products will be 2106.10.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for food preparations not elsewhere specified or included... protein concentrates and textured protein substances This ruling is being issued under the provisions of Part 177 of the Customs Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nored. 57. In view of above discussion we hold that the impugned goods are rightly classifiable under Heading 2106, sub heading 2106 1000 of the Customs Tariff. The impugned order is upheld and the appeals are dismissed. SOMESH ARORA, MEMBER (JUDICIAL) 58. I have gone through the above order, authored by my learned brother. I not only agree with his findings as well as, the analytical reasoning made available therein, but also appreciate the in-depth knowledge he has brought on record out of his expertise, experience of properly analyzing various headings and their background, including historical moorings of chapter 21. Same not having been aligned to the HSN in totality. It has been properly highlighted, how it needs to be correctly interpreted in view of peculiar changes brought in by Indian Custom Tariff, despite India being a signatory to HSN and agreeing largely to its frame work. It will not be out of place for me to appreciate the efforts which have been put in, both by the learned advocate as well as learned departmental representative including the appellate authority below, who analyzed the propositions involved. Proper assistance by officers of court sure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other contracting parties, Parliament may refuse to perform them leading the Union of India in default. 63. Regarding Course of action available to sovereign states and prevalence of municipal laws over public international law, following ruling of the apex court provides guidance: In Gramophone Company of India Ltd. v. Birendra Bahadur Pandey and Others [(1984) 2 SCC 534], the Apex Court held as under : 5. There can be no question that nations must march with the international community and the Municipal law must respect rules of International law even as nations respect international opinion. The comity of Nations requires that Rules of International law may be accommodated in the Municipal Law even without express legislative sanction provided they do not run into conflict with Acts of Parliament. But when they do run into such conflict, the sovereignty and the integrity of the Republic and the supremacy of the constituted legislatures in making the laws may not be subjected to external rules except to the extent legitimately accepted by the constituted legislatures themselves. The doctrine of incorporation also recognizes the position that the rules of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries' WTO schedules of tariff concessions are already written in terms of the Harmonized System and the process of converting the remaining WTO schedules to the Harmonized System continues. The Harmonized System is also providing a basis for new internationally accepted Rules of Origin which are being developed jointly by the WCO and the WTO. (Emphasis supplied) As far as Structure of HS is concerned same has been provided for in the Hand Book at Chapter 2 page II/5: 2. Structure of the HS The Harmonized System comprises: General Rules for the interpretation of the System: Section and Chapter Notes, including Subheading Notes: A list of headings arranged in systematic order and, where appropriate, subdivided into subheadings. (a) The Interpretative Rules To be completely sound, a classification system must associate each individual product with a single heading (and, as the case may be, subheading), to which that product can be simply and unequivocally assigned. Hence it must contain rules designed to ensure that a given product is always classified in one and the same heading (and subheading), to the exclusion of any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete description than the other. Rule 3 (b) deals with mixed or composite goods, goods consisting of an assembly of different articles and goods put up in sets. By application of this Rule, goods are classified in the heading applicable to the material or component which gives them their essential character. Rule 3 (c) applies only where goods cannot be classified by application of Rule 3 (a) or Rule 3 (b); it provides that goods should be classified in the heading which occurs last in numerical order amongst those which equally merit consideration in determining their classification. Rule 4 provides that goods which (for example because they have newly appeared on the world market) are not specifically covered by any heading of the Harmonized System shall be classified in the heading appropriate to the goods to which they are most akin. Rule 5 (a) governs the classification of cases, boxes and similar containers presented with the articles for which they are intended, while Rule 5 (b) applies more generally to packing containers presented w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of particular terms; for example sparkling wine is defined by Subheading Note 1 to Chapter 22, while Legal Note 5 to Section XI gives a general definition of the sewing thread of headings 52.04, 54.01 and 55.08 in terms of its appearance and texture; or Non-exhaustive list of typical examples: thus, Note 3 to Chapter 86 specifies the railway and tramway track fixtures and fittings covered by heading 86.08; or An exhaustive list of the goods covered by a heading or group of headings. Thus, Notes 2, 3 and 4 to Chapter 31 list the products that fall to be classified as fertilisers in headings 31.02. 31.03 and 31.04; or Exclusions, which list certain articles that must not be included in a particular subheading, heading (or group of headings), Chapters or Section. For example. Note 2 to Chapter 64 lists the articles which must not be regarded as parts of footwear within the meaning of heading 64.06. Certain Notes employ several of these drafting formulae. The definition of synthetic rubber in Note 4 to Chapter 40 provides an example of a definition in general terms, in accordance with scientific criteria, followed by an enumeration of products which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d System categories on a one-to-one basis, i.e., the categories in the Harmonized System are the same as those in the national Customs tariff. However, very often they do not coincide with the Harmonized System categories and, consequently, further subdivisions of the Harmonized System nomenclature have to be introduced at the national level. Furthermore, if other Customs measures are to be implemented, further subdivisions of Harmonized System categories may be required. It is thus clear that the HSN itself acknowledges and rather accepts the need for various member companies to make structural changes into their National Customs Tariff subject to guidance that Rule 1 to 5 of General Interpretative Rules (G.I. s )of the HSN shall applied mutatis mutandis to national sub-heading by virtue of General Interpretative Rule 6, thus clearly providing the leverage for the Member Nations to make suitable changes in their custom tariffs. This respects the sovereignty of member nations as well as their fiscal and statistical needs. The concept of providing need based suitable changes in HSN is therefore, in tandem with Indian Constitution as well as he structural provisions of HSN. 65 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chapter notes including sub-heading notes cited supra it is clear that chapter notes like the interpretative rules form an integral part of the harmonized system and have the same legal force being legal notes. It is also a prescription that sub heading notes refer solely to the interpretation of sub-heading. It is thus clear that since the function of the notes is to define the precise scope and limits of heading or group of headings, chapter or section or even for that matter the sub heading. Therefore, chapter note, which is by way of supplementary note 5 seeks to define the scope and limits of heading 2106. It is thus clear that the expression Food preparation not elsewhere specified or included figuring in tariff heading 2106 when expanded by virtue of chapter note 5 (supplementary note) makes heading 2106 to specifically include Protein Concentrates and Textured Protein Substances therefore the legislature has clearly expanded the scope of tariff heading 2106 by virtue of supplementary notes 5 as brought out above. All this exercise makes even Heading 2106 also as specific in relation to Protein Concentrates and textured proteins, and other items mentioned in Chapter not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. 80. Coming to Chapter 18, it is to be noted that Chapter 1806 is applicable to Chocolate and other food preparations containing COCOA. It is to be noted that chapter 18 has two chapter notes relevant for the purpose of this discussion which are reproduced below: This Chapter does not cover: (a) . (b) Preparations of headings 0403, 1901, 1902, 1904, 1905, 2105, 2202, 2208, 3003 or 3004. 2. Heading 1806 includes sugar confectionery containing cocoa and, subject to Note 1 to this Chapter, other food preparations containing cocoa. Since we are confining ourselves only to the tariff headings and chapter notes for the purpose of our discussion, therefore, the only GI Rules which remains relevant is General Interpretative Rule I, as has been correctly pointed out by the learned brother. Both of these have statutory force and therefore prevail over other legal aids like HSN Explanatory Notes or decisions in other territories as well as of WCO which in certain conditions of tariff being aligned, certainly command persuasive value. Same are therefore, correctly discarded in the factual matrix of the matter. 81. Coming to chapter note of heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich in this case is of Protein. While doing so no resort to explanatory notes is being taken in view of impugned contesting entries and their difference from HSN. 84. Thus, it is clear that in instant case classification in favor of 2106 can be decided without resort to Explanatory Notes which in any case do not part of the legal provisions of the harmonized system. Matter can be decided with the help of statutory provisions of Indian Customs Tariff Act, 1975. There is then no need to go further. The advocate for the appellant was at length that the resort should be taken to GI-3 specially Rule 3(a) and while so asserting it has been argued that specific description shall be preferred to general description. The fallacy of the notion has already been brought out in relation to TH to indicate that how the matter can be decided by section or chapter notes. 85. While not agreeing with the proposition of resort being required to be taken to G.I Note 3 (even if for the sake of argument), it has to be considered as to which head provides more specific description for a product which has dominance of Protein Concentrates and Textured Protein Substances, from the discussion above, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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