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TMI Blog2024 (7) TMI 1530X X X X Extracts X X X X X X X X Extracts X X X X ..... ey felt that the product was more appropriately classifiable under CTH 29161590 as the Chapter covers linolenic acids. The original authority vide Order in Original dated 24.2.2009 reclassified the goods under CTH 13021990 based on the Chapter notes on the reasoning that it is an extract from marine algae, that CTH 13091990 specifically classifies vegetables saps and extract and there is no exclusion found for item in the Chapter notes. Aggrieved by the Order in Original dated 24.2.2009, the importer filed an appeal before Commissioner of Customs (Appeals) who vide Order in Appeal dated 16.6.2011 remanded the issue back to the original authority for fresh consideration and mentioned that the product was obtained from algae and CTH 2106 appeared to be the appropriate classification. The department filed an appeal before CESTAT against the said order of Commissioner (Appeals). The Tribunal vide Final Order dated 27.8.2013 remanded the matter back to the original authority. Vide Order in Original dated 5.5.2017, the lower authority classified the goods under CTH 29161590 as claimed by the respondent. Hence department filed an appeal before Commissioner (Appeals) against the said Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined organic compound under CTH 2914 2110 and 2914 2120, whereas camphor oil is classified under CTH 3301 2941 as discussed at para 22.14 of the OIO. The Ld. AR referred to the definition of 'food' as per section 3(j) of FSAS Act, 2006 and Regulation 6 of FSSAI wherein health supplements are stated to contain concentrated source of plants or botanicals nutrients among others. He referred to the impugned goods as per the product literature of the suppliers, M/s Martek Biosciences, USA to state that DHA Algal oil is used as a novel food ingredient/food supplement in various food and milk items. He drew attention to the Technical Evaluation Report compiled by ICF international for USDA National Organic Program, wherein it is further mentioned that DHA Algal oil is used as an ingredient, as a source of DHA in foods, beverages, etc. That, the Food, Safety and Standards (Food Products Standards and Food Additives) Regulations 2011, mentions Algal and fungal oil as source of DHA and ARA at the level of maximum 0.5% DHA of total fatty acids and ratio of ARA: DHA as 1:1 minimum. Reliance was also placed on Cross Ruling N293133 dated 19/01/2018 of US customs whereby algae oil powder is clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mically defined organic compounds, whether or not containing impurities. In addition, as per the HSN Explanatory Notes for chapter 29 and chapter 28, a product falling under one of these chapters may contain impurities, i.e. substances whose presence in the product results solely and directly from the production process and which may be unconverted starting materials or impurities present in the starting materials. Further, as per note 1(f) of Chapter 29, the products mentioned in note 1(a) may contain added stabilizers (including anticaking agent) for their preservation or transport. In view of the above, the respondent sought classification of the DHA imported by it under CTH 2916 1590 which was accepted both by the Original Authority and by the Commissioner (Appeals) in the impugned order. He hence prayed that the appeal may be rejected. 4. We have carefully gone through the appeal and have heard the rival parties. We find that the following issues arise for consideration; (A) Whether the appeal before the Commissioner (Appeals) is time barred. (B) Whether the goods as imported under the brand name "Martech DHA" by the respondent are DHA (docosahexaenoic acid) classifiable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e analysis made by the Full Bench is correct in view of the opinion expressed by us in the preceding paragraph and accordingly we hold the said view to the correct." (emphasis added) In the light of the said judgement, we find that the appeal filed by revenue before the Commissioner (Appeals) was not time barred and that the matter related to classification needs to be examined and disposed of on merits. 6. Before taking up the second issue, we find that the appellant-department have, in their oral and written submissions before us, made reference to certain 'evidence' downloaded from the internet site amazon.com. We had during the hearing stated that the said evidence could not be admitted. Rule 23 of the Customs Excise Service Tax Appellate Tribunal (Procedure) Rules, 1982 states that the parties to the appeal shall not be entitled to produce any additional evidence, either oral or documentary, before the Tribunal. Thus, the general principle is that the appellate court should not travel outside the record of the Original Authority, unless the Tribunal itself feels the need to do so. No application was filed and prayer made by the Appellant to produce additional evidence befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is not completely dependable in terms of academic veracity and can promote misleading information as has been noted by this court on previous occasions also. The courts and adjudicating authorities should rather make an endeavor to persuade the counsels to place reliance on more reliable and authentic sources. (emphasis added) We hence disregard the internet-based print-outs of advertisement sought to be used by the appellant. 7. The classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the imported goods under a particular category different from that claimed by the assessee, the Department has to adduce proper evidence and discharge the burden of proof. The judgments of the Hon'ble Supreme Court in Union of India v. Garware Nylons Ltd. [1996 10 SCC 413]; H.P.L Chemicals vs. Commissioner of Central Excise, [2006 (197) E.L.T. 324 (S.C.)]; Puma Ayruvedic Herbal (P) Ltd. v. Commissioner of C. Ex., Nagpur [2006 (196) E.L.T. 3 (S.C.)], declare the law rendered in the case of classification under the Central Excise Act and Nanya Imports and Exports Enterprises Vs Commissioner of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned goods which are manufactured from the extract of algae, which is undoubtedly a plant source are specifically covered under the CTH 2106. The respondent has stated that there is a fundamental difference between a "food preparation" which is marketed and consumed as such, and a product which is used in microscopic quantities in the manufacture of a "food preparation", as in their case. The HSN Explanatory Notes cited by revenue has failed to note that the goods do not contain "added vitamins" and have not been "put up in packaging with indications that they maintain general health or wellbeing", as required for the goods to be classified under CTH 2106. 10. The respondents have submitted that if the goods are rightly classifiable under Chapter 29, then they cannot go out of Chapter 29 merely based on the end use of the goods. There are several items specified in Chapter 29 which have various uses such as uses in medicine, perfumery and food. These items, however, do not go out of Chapter 29 merely on that ground. They have given the following examples taken from the HSN Explanatory Notes for Chapter 29: a) CTH 2918: Citric acid is used extensively in food and beverages. b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolved by this process, aid can be taken from external judgments, references etc. Even so the in Hari Khemu Gawali Vs Deputy Commissioner of Police, Bombay and another [AIR 1956 SC 559], a Constitution Bench of the Apex Court has cautioned as under: "It has been repeatedly said by this Court that it is not safe to pronounce on the provisions of one Act with reference to decisions dealing with other Acts which may not be in pari materia." 14. In its judgment in Commissioner of Customs and Central Excise, Amritsar (Punjab) Vs. D.L. Steels etc. [2022 SCC OnLine SC 863], the Apex Court discussed the issue of classification and the assistance that can be taken from the HSN, as extracted below. 9. The Harmonised System of Nomenclature, developed by the World Customs Organisation, has been adopted in India by way of the Customs Tariff Act, 1975, though there are certain entries in the Schedules to this Act which have not been assigned HSN codes. The Harmonised System is governed by the International Convention on Harmonised Commodity Description and Coding System, which was adopted in 1983, and enforced in January, 1988. This multipurpose international product nomenclature harmonise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods are rightly classifiable under 2106 as food supplement/ ingredients. Para 2.15 of the Grounds of Appeal which reproduces Board's letter dated 04/09/2017 and encapsulates the views of Revenue is reproduced below. 2.15 Further, the Tariff Unit, CBEC, New Delhi vide letter in file F. No. 521/07/2017-STO (TU) dated 27.7.2017 has clarified about the classification issue of the subject goods "Market DHA" in powder form on the basis of its composition and form is appropriately classifiable under CTH 2106 90 99. The relevant parts are reproduced below:- Para 2 - (i) "The issue has been examined on the basis of the product composition as mentioned in the OIO dated 5.5.2017. On that basis it is clear that the product is in two forms: i) Oil form ii) Powder form". "The product in oil form is basically DHA Algal Oil which is nothing but a vegetable oil extracted from the algae containing DHA. DHA powder is nothing but the same Algal oil microencapsulated in the powder form". (ii) "Therefore, the product is not DHA per se, but it is a product containing DHA and cannot be considered as defined chemical compound in terms of chapter 29 and does not merit classification under chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nic Acid and its Derivatives are specified in CTSH 291615. Revenue's argument that the goods cannot be classified under CTH 291615 since there is no mention of linolenic acid in the Bill of Entry is totally misconceived since what is required to be stated in a Bill of Entry is the description of the goods and not what the goods are a derivative of. Once the goods are described as DHA, and DHA is shown by technical material to be an Unsaturated Acyclic Monocarboxylic Acid falling under CTH 2916 and a derivative of Linolenic Acid falling under CTH 29161590, the same would be classifiable there under. 18. We find that the case of the department is that the impugned goods which are a product containing only 10-17 % DHA, cannot be considered as a defined chemical compound in terms of chapter 29. 19. It's the respondent's case that DHA is extracted from marine algae. The process involves subjecting the marine algae to fermentation followed by the rupturing of the cells of the marine algae by enzyme action. The resulting extract of DHA in "oil" form is highly susceptible to oxidation and requires stabilization through the addition of stabilizers. To make the storage and transportation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eutical and allied industries. However, it has not been shown as to why "Martech DHA" has acquired the characteristics of food preparation alone and is not for example an ingredient of the pharma or allied industry when the goods are supplied to the said industries. The problem of trying to classify goods as per their perceived end use without first examining that the other ingredients present are permissible or not as per the chapter notes and whether they alter the nature of the product, is a fatal flaw in the arguments set out by Revenue. Further the Assistant Commissioner and the Commissioner (Appeals) have held, based on customer declarations produced before them, that DHA, which contains impurities and added stabilizers, is known in trade parlance as "DHA". Revenue has not challenged this finding or produced contrary evidence. Hence the 'trade test' is also satisfied. In fact during the oral submissions revenue had stated that certain subsequent imports of the impugned goods were made through Mumbai are were subjected to provisional assessment on account of the pendency of the present appeal. However, even in that case as per dated 22/02/2018 addressed to DRI, the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms Tariff, the headings of the said Chapter apply to separate chemically defined organic compounds, 'whether or not containing impurities'. (vi) as per Note 1(f) of Chapter 29, the products mentioned in Note 1(a) may contain added stabilizers (including anti-caking agent) for their preservation or transport. (vii) it has not been shown by revenue as to why "Martech DHA" has acquired the characteristics of food preparation alone and is not for example an ingredient of the pharma or allied industry and takes the characteristics thereof. (viii) the Original Authority, Appellate Authority and Commissioner of Customs Mumbai have all found the goods classifiable under Chapter 29. (ix) the same goods imported by other importers and when manufactured domestically have also been classified under chapter 29 as mentioned in the OIO and is not refuted. (x) Boards letter dated 04/09/2017 is issued only to the Commissionerate and is not a general Circular meant to bring uniformity in classification of the same product across the country. Hence Revenue has not been able to discharge the burden of proof as required to show that "Martech DHA" has acquired the characteristics of food prep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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