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TMI Blog2024 (3) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... enclosures in terms of Section 28H(1) of the Customs Act, 1962 (hereinafter referred to as the 'Act' also). The applicant is seeking advance ruling on the classification of imported pet foods in bulk bags and the rate of custom duty applicable on the imported goods. 2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 application : 2.1 The applicant is a subsidiary of Royal Canin SAS, France ('RC France'), engaged in import and sale of pet food i.e., dog and cat food in India (hereinafter referred to as 'product' or 'pet food'). The Company imports pet food from its overseas related entities i.e., Royal Canin South Africa, Royal Canin France, Royal Canin South Korea and Mars Austria (collectively referred to as 'overseas suppliers'). Description of the product : 2.1.1 The pet food imported by the Company from its overseas related entities is imported in retail packages of 1 kilogram (kg.), 2 kgs., 4 kgs. and so on up to 20 kgs. The imported goods are intended for 'as is' sale to customers in India. The retail packages imported by the Company are considered as pre-packaged commodity under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it sees that smaller pack size across value chain is much more acceptable in the market. However, currently the Company faces various supply chain issues like supply constraints from overseas factories, import lead times, storage, quality and shelf-life issues to make available right pack size to consumers as per market/seasonal trends and is not able to cater to the demand in the market. 2.1.7 The bulk packages proposed to be imported by the Company will be in bags/packing starting from 15 kgs. which can go up to 700 kgs. etc. The pet food to be imported in bulk are not covered under or subject to the provisions applicable to packages intended for retail sale under LM Rules. The bulk bags will thus not have any requisite labelling, information, MRP etc. printed on the packages that are required for retail packages under the LM Rules and cannot be sold in the market as it is without repacking and labelling, i.e., the imported goods shall not be marketable to ultimate consumers. 2.1.8 The bulk packages will be unloaded in a bonded warehouse on filing of an inbond BOE. The imported products will be stored in the bonded warehouse and shall be cleared for home consumption on regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation :- 3.1 The Applicant is engaged in the business of import and sale of pet food in India and offers variety of wet and dry nutritious foods for dogs and cats of all ages, sizes, breeds and sensitivities. 3.2 In order to efficiently cater to the demand and effectively tap market opportunities, the Applicant, going forward, proposes to also import pet food in bulk bags from its overseas related entities. The pet food imported in bulk will be imported in plain white bags with no branding or MRP stickering. The bulk bags imported cannot be sold as such to the ultimate consumers/customers in India. 3.3 The Applicant is establishing a repacking center in India, whereby post importation of the pet food in bulk, the Applicant will undertake repacking of imported bulk bags into smaller unit packages (retail packs) with requisite information as required under LM Act and LM Rules for further sale in India. 3.4 The repacking activity will involve packing the imported pet food in bulk into smaller units for sale to customers in India (for example in packages of 200 g., 1 KG. or 4 KG. etc.). The smaller units shall be packed in packing material having fixed mandatory details req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing." The Applicant is engaged in trading of processed cat and dog food with tailored nutrition for pets of varied age groups and special needs to sustain the animal's health. The manufacturing of the product includes ingredients such as meat and fish (i.e., animal material) and vegetables. The raw material is modified and processed to manufacture the pet food (as an end product) traded by the Applicant. Currently, the processed pet food is imported by the Applicant pre-packaged in retail unit packages. The imported goods are moved to a custom bonded warehouse and the requisite information as required under the LM Rules in India (including MRP) is affixed on them vide a label sticker Post the aforesaid, the retail packages are suitable for direct sale to the customers, without any further processing, repacking etc. upon clearance of goods for home consumption. Accordingly, the products are currently, classified under the Chapter Heading 2309 having description 'Preparations of a kind used in animal feeding' as discussed hereinabove. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (e) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Specific heading to be preferred over general headings. Variance in classification of pet food imported in retail packages and in bulk packages as defined under the Legal Metrology Act and Rules The term retail package or retail sale is not defined under the Customs Act. The packaging and labelling of pre-packaged commodity meant for retail sale is governed by the provisions of the LM Act and shall bear the relevant declarations as provided for under the LM Rules. Accordingly, the definition and scope of these terms shall thus be derived from the LM Act and LM Rules. The LM Rules define the scope of the term retail package and retail sale for understanding the applicability of the concerned rules to the pre-packaged commodities. The term 'retail package' is defined under Rule 2(k) of LM Rules to mean - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts, measures or number of the commodity contained in wholesale package;" Thus, there is no requirement under the LM Rules for declaration of 'Maximum Retail Price' (MRP) on wholesale packages. In the present case, the Applicant is currently importing retail packages of pet food intended for further sale to the consumers via distributors. The retail packages imported are of quantity 1 kg., 2 kg., 5 kg., 10 kg. etc. and are affixed with all relevant declarations and labels (including MRP) as is required under the LM provisions at the custom bonded warehouse. The 8-digit CTH 2309 10 00 having description 'dog and cat food, put up for retail sale' thus specifically covers the pet food imported by the Applicant currently in retail package meant for retail sale. Further to the above, from the provisions of the LM Rules, it is hereby inferred that packages meant for wholesale shall not be construed as retail packages/pre-packaged commodity meant for retail sale. In view of the above, CESTAT New Delhi while deciding the matters in relation to classification of goods described as "0.1 percent natural brassinolide fertiliser" in the case of M/s. Midas Fertchem Impex Pvt. Ltd., Ms. Rash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Commissioner after concluding the hearing and before passing the impugned order which we already have found cannot be used against the appellant." Thus, under the proposed business model, the Applicant shall import bulk packages/bags of pet food in quantities starting from 15 kgs. which can go up to 700 kgs. etc., and the same shall not qualify as retail packages or packages meant for retail sale. The bulk packages imported shall also bear the declaration "not for retail sale". The imported bulk bags will be construed as import of goods in wholesale. Therefore, the bulk packages imported by the Applicant shall not be required to bear the labels, declarations, MRP etc. as is mandated under the provisions of LM Rules applicable to packages meant for retail sale. Given the above, there appears to be a clear differentiation of the packaged commodities to be considered as retail packages meant for retail sale and wholesale/bulk packages. The 8-digit CTH 2309 10 00, clearly and specifically includes the cat and dog food 'put up for retail sale'. Therefore, where the product under consideration is not meant for retail sale, the same shall not get covered under the specific 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sification under the specific entry. However, in case of bulk product not put up in packaging for retail sale, the bulk product shall be classified under the residual entry. Thus, since the pet food proposed to be imported in bulk bags by the Applicant is not fit for direct sale to customers in India and do not have the relevant labels and information to be sold to customers, the same cannot be considered as being 'put up for retail sale'. Hence, the same shall not be classified under the specific entry 2309 10 00. The pet food imported in bulk bags by the Applicant merits classification under the residual CTH of 2309 90 90 Rule 3(c) of the GRI provides that further clarifies that when goods cannot be classified by reference to Rule 3(a) or (b) they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration. The residuary entry of Chapter Heading 2309 includes a residuary entry for classification of preparations of a kind used in animal feeding which cannot be classified under the specific entry, i.e. CTH 2309 90 90. As discussed hereinabove, since the pet food imported in bulk bags by the Applicant cannot be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified under two probable CTHs then the product shall be classified under the CTH occurring subsequently in the tariff. Thus, in this regard, the Applicant is of the belief that the pet food - i.e., dog and cat food imported by the Applicant in bulk bags, shall be classified under the residual entry of Chapter Heading 2309 which includes the formulations for preparations of a kind used in animal feeding, i.e., CTH 2309 90 90 occurring subsequently in the tariff. Global classification of the product in bulk packages The Applicant is part of the Group which has presence in multiple countries. Similar model of import of pet food in bulk packages is also implemented in Japan. The overseas entities in Japan are classifying the pet food, i.e., dog and cat foods in bulk packages under HSN 2309 90 299 as per the country specific requirements. The extract of Japan's custom tariff schedule is as below Japan CTH Description 23.09 Preparations of a kind used in animal feeding 2309.1 Dog or cat food, put up for retail sale 2309.90 Other (1) Preparations of a kind used in animal feeding, excluding those directly used as feed or fodder ... .... (2) Others ... 230 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cleared at nil rate of IGST and 15% rate of Basic Customs Duty instead of correct classification of said goods if put up for retail sale, under CTH 2309 10 00 where Basic Customs Duty and IGST rates are 20% & 18% respectively. 4.4 Concerned GST authority may also verify the claim of importer that goods will be put up for retail sale only after re-labelling and re-packing of the same into smaller unit packages suitable for retail sale as per the market requirement and demands in compliance with the rule 3 of LM (PC) Rules, 2011 for packaging of goods intended for retail sale. In view of the reasons as mentioned above the Bulk Pet Food is classifiable in heading 23099090." 5. A personal hearing in the matter was conducted on 30-1-2024 in office of the CAAR, Mumbai. During the personal hearing the authorized representatives of M/s. Royal Canin India Pvt. Ltd., Shri Gautam Khattar (authorized representative) reiterated their earlier submissions made in the applications to CAAR, Mumbai. They mainly argued that their subject import goods i.e. pet food for dogs/cat to be imported and cleared in bulk bags merit classification under CTH : 2309 90 90. They relied upon GIR 3(c) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et food bulk bags can be classified, i.e., 2309 10 00 and 2309 90 90, i.e. the residual entry. The CTI 2309.10.00, clearly and specifically covers the cat and dog food 'put up for retail sale'. Therefore, where the product under consideration is not meant for retail sale, the same shall not get covered under the specific CTI 2309.10.00. It is seen that the products under consideration are to be imported without any labelling, information, MRP etc. printed on the packages that are required for retail packages defined under Rule 2(k) of LM(PC) Rules, 2011. In fact, it cannot be sold directly in retail market considering inasmuch as the nature of the bulk import and the obligation of the applicant to follow the provisions of LM Rules. Hence the said goods cannot be classified under CTI 2309 10 00. Instead, the proposed pet food imported in bulk packages by the Applicant should be classified separately from the classification provided for packages for retail sale The other possible classification for the subject goods thus can be CTI 2309 90 90 i.e. "Other preparation of a kind used in animal feeding" under the same heading. Further, Rule 3 of the GRI, provides for classification of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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