M/S. Abbott Healthcare Pvt. Ltd vs Commissioner Of Customs (General & Cfs, ...

(Arising out of Order-in-Original No.114/2013/CAC/CC(G)/PKA/CFS/M-I dt.31.8.2013 & OIA No. 1376 (CFS/Mulund)/2013 (JNCH)/IMP-1113 dated 19.12.2013 passed by the Commissioner of Customs (General & CFS, Mulund), Mumbai)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.S.Pruthi, Member (Technical)

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1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : of the Order?

4. Whether Order is to be circulated to the Departmental : authorities?

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M/s. Abbott Healthcare Pvt. Ltd. : Appellant S.K. Enterprises

VS

Commissioner of Customs (General & CFS, Mulund, Mumbai : Respondent

Appearance

Shri T. Vishwanathan, Advocate for Appellant

Shri Ahibaran, Addl. Commissioner (A.R) for respondent

CORAM:

Mr. M.V. Ravindran, Member (Judicial) Mr. P.S.Pruthi, Member (Technical)

Date of hearing : 08/04/2015 Date of decision : 08/04/2015

ORDER NO.

Per : M.V. Ravindran

This appeal is directed against Order-in-Original No. No.114/2013/CAC/CC(G)/PKA/CFS/MI dt. 31.8.2013. Connected Appeal No. C/89394/2013 was called from registry and taken up for disposal together as also appeal No. C/85233/2014 which is in respect of same appellant, against Order-in-Appeal No. 1376 (CFS/Mulund)/2013 (JNCH)/IMP-1113 dated 19.12.2013

2. The relevant facts that arise for consideration are the appellant herein filed Bill of Entry No. 6750153 dt. 07.05.2012 for clearing the goods for home consumption, described them as Mamas Best India Chocolate 400 grams. The appellant also claimed that the subject goods are classifiable under CTH/CETH 19019090 claiming the concessional BCD as being supplies fromAIFTA Country of Origin under Notification No. 46/2011 (Sr. No. 158) as the goods were covered by the Country of Origin Certificate issued by Director General of Customs, Singapore. The goods covered under the Bill of Entry was cleared in RMS; after the out of charge was given, the Customs authorities noticed that the actual trade name of the goods on the container was Mamas Best Premium Chocolate and not as Mamas Best India Chocolate; it was a nutritional powder which is a proprietary food. Further investigation was undertaken and it was noticed that the identical goods were cleared by 17 Bills of Entries during the period 22.3.2011 to 2.5.2012, wherein it was ascertained that duty was short paid. Show cause notice dt. 29.10.2012 was issued for the recovery of the differential Customs duty and various other duties along with interest as also for imposition of penalties. The appellants contested the issue on merits and limitation before the adjudicating authority. The adjudicating authority after following the due process of law did not agree with the contentions raised by the appellant, accordingly confirmed the demands raised with interest and imposed various penalties.

3. The Ld. Counsel would take us through the entire records and also the CETH 19019090 and 21069099. He would submit that the present proceedings are in correctly held against the appellant as the Chapter Heading 19019090 very specifically applies to the appellants imported goods. He would take us through the said Chapter Heading number and submit that the said Chapter covers the item imported by the appellant and is eligible for concessional rate of duty. It is his submission that as against the classification claimed by the appellant, Revenue classification under 21069099 is totally incorrect in as much, the said heading covers residuary entries of food preparations not elsewhere specified or included. He would produce before us the sample pack of the goods imported and take us through the labels on the container and submitted that it contains non-fat dry milk, lactose and various other ingredients like cocoa powder, minerals etc., he would also submit that the appellant had informed the Assistant Commissioner of Customs CFS Mulund, Mumbai by a letter dt. 6.6.2012 that the main ingredients of the product are Skim Milk Powder (64.7%), Lactose (15.2%), Sucrose (12%), Cocoa Powder (2.5%), Oligofructose (FOS) (2.2%), minerals and vitamins.

It is his submission that it has been clearly established that the product imported by the appellant would be covered under the category of food or food preparation falling under Chapter heading 0401 to 0404 as the product contains more percentage of milk product. He would then draw our attention to the HSN Explanatory Notes of Chapter 19 and would submit that as per HSN, food preparation of goods of Headings 0401 to 0404 would apply and the product being imported is used for dietetic purpose and hence correctly classifiable under Chapter 19. He would submit that similar issue involving classification of a product SIMILAC -2 was before the Bench in Appeal No. C/87691/13-MUM on the very same appellant. He would submit that the Bench vide Final Order No. A/1711/14/CSTB/C-I dt. 10.10.2014 disposed of the appeal in favour of the appellant. He would submit that in that case, the issue was whether the product imported would fall under the very same headings 21069099 as claimed by the Revenue or as claimed by the appellant under CTH 19011090. He would submit that the Bench had categorically recorded that the said product being specifically covered under 19011090 and cannot be classified under Chapter heading No. 2106. It is also his submission that the Bench has recorded that the product SIMILAC is admittedly preparation predominantly of milk powder and it is consumed by an infant and hence, the product merits classification under CTH 1901as the product would fall under Chapter 0401 to 0404 a food preparation.

He would also rely upon the judgment of the Tribunal in the case of Dalmia Dairy Industries Ltd. Vs. Collector of C. Ex. 1989 E.L.T. 164 (Tribunal) for the proposition that when the ingredients of goods include mainly skimmed milk, the product merits classification under Chapter 0401 to 0404 and would get classified under Chapter 19.01 if it has got any other additional ingredients. He would submit that the said case of the Dalmia Dairy Industries Ltrd. was taken in appeal by the Revenue to Apex Court and Apex Court has upheld the order of the Tribunal . It is also his submission that in view of the facts, it may be held that the appellants product merits classification under Chapter Heading No. 19019090.

4. The Ld. DR on the other hand would draw our attention to the labels of the product. It is his submission that the appellant had misclassified the product despite knowing that the product imported by them is not covered under the Chapter Heading No. 1901 of the Customs Tariff. He would submit that the description given by the appellant in the Bill of Entry is Mamas Best India Chocolate 400 grams while the product labels specifically state that it is Mamas Best Premium Chocolate a Nutritional Powder. He would submit that appellant being an ACP client was required to give proper declarations and description of the product and claim eligible benefit of the notification, as their products are not subject to any examination and are cleared through RMS procedure. He would submit that the Chapter Heading No. 2106 would appropriately apply in the case in hand. He would draw our attention to Chapter Heading No. 21069099 and submit that the products are nothing but food preparations not elsewhere specified or included and accordingly correctly classified and the applicable Customs rate of duty needs to be paid. He would also draw our attention to the findings recorded by the adjudicating authority that the Chapter Heading No. 1901 covers only very basic preparations of flour mills etc., while the product imported by the appellant is not having any flour etc. It is his further submission that Chapter Heading 19019090 only covers product made out of Malt extract or food preparations of flour, groats, meal and starch; in the absence of any substantiation by the appellant the product have been correctly classifiable under Chapter heading 2106. The impugned order is to be upheld and the demand of the differential duty needs to be confirmed along with interest and penalties.

5. We have considered the submissions made at length by both sides and perused the records.

6. Undisputed facts are the appellants have imported the product which as per label indicates as Mamas Best Premium Chocolate Nutritional Powder, and the description of the goods on the Bill of Entry is Mamas Best India Chocolate 400 grams. It is also not in dispute that during the clearances made by the appellant of this similar product, they had filed all the relevant documents with the authorities including the county of origin certificate from Director General of Customs, Singapore. It is also undisputed that appellant is a ACP client and the goods are cleared under RMS Procedure.

7. The dispute in this case is regarding the classification of the goods imported by the appellant. The assessee is claiming classification of the goods under Customs Tariff Heading 1901 while the Revenue is trying to classified the said product under Customs Tariff 2106. The classification claimed by the appellant is 19019090 while Revenue seeks to classify the same under Chapter Heading 21069099. In order to appreciate the correct classification we reproduce the said rival Tariff Headings.

Tariff Item Description of goods Unit Rate of duty

Standard Preferential Areas

(1) (2) (3) (4) (5) 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

190110

-Preparations for infant use, put up for retail sale:

19011010

---Malted milk (including powder).

Kg 50%

-

19011090

--- Other Kg 50%

-

19012000

-Mixes and doughs for the preparation of bakers wares of heading 1905 Kg 30%

-

190190

- Other;

Kg 30%

-

19019010

---Malt extract.

Kg 30%

-

19010 90

---Other Kg 30%

-

Tariff Item Description of goods Unit Rate of duty

Standard Preferential Areas

(1) (2) (3) (4) (5) 2106 Food preparations not elsewhere specified or included

210610 00

-Protein concentrates and textured protein substances Kg 30%

-

2106 90

-Other :

---Soft drink concentrates:

2106 90 11

----Sharbat. Kg 150%

-

2106 90 19

----Other. Kg 150%

-

2106 90 20

---Pan masala. Kg 150%

-

2106 90 30

----Betel nut product known as Supari. Kg 150%

-

2106 90 40

----Sugar-syrups containing added flavouring or colouring matter, not elsewhere specified or included; lactose syrup; glucose syrup and malto dextrine syrup Kg 150%

-

2106 90 50

----Compound preparations for making non-alcoholic beverages. Kg 150%

-

2106 90 60

----Food flavouring mateiral. Kg 150%

-

2106 90 70

----Churna for pan. Kg 150%

-

2106 90 80

----Custard powder.

---Other Kg 150%

-

2106 90 91

----Diabetic foods. Kg 150%

-

2106 90 92

----Sterlized or pasteurized millstone. Kg 150%

-

2106 90 99

----Other. Kg 150%

-

It may be also necessary to reproduce the Customs Chapter Heading No. 0401 to 0404 of Customs Tariff which is as under :

8. In the backdrop of the rival contending entries and the submissions made by both sides, we find that the correct classification of the product as is before us would fall under Chapter Heading No. 19019090 as claimed by the appellant for more than one reason.

8.1. Firstly, we find that the ingredients of the product as has been claimed by the appellant in their letter dt. 6.6.2012 as containing (a) Skim milk powder (64.7%), (b) Lactose (15.2%), (c) Sucrose (12%), (d)Cocoa Powder(2.5%),(e) Oligofructose (2.2%), (f) Minerals and Vitamins is not disputed by the revenue. The main ingredients as indicated hereinabove in the letter by the appellant would indicate that the product predominantly contains milk and milk derivative. The said product would have got ordinarily classified under Chapter Heading 0404 as product containing natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included ( as per the CTH reproduced hereinabove), but since the product imported by the appellant contains various other minerals and cocoa powder to the extent of 2.5%, the said product does not merit classification under Chapter Heading 0404. This would take us do the next available chapter heading which this product can be classified is 1901. The chapter notes of heading No.1901 specifically indicates that the goods of headings 0401 to 0404 which do not have cocoa containing more than 5% by weight are classified under the said heading 1901. As is already recorded by us, there is no dispute as to the claim of the appellant that the imported goods contain cocoa of 2.5%, and hence Chapter Note of Chapter Heading 1901 clearly applies to the goods imported and the product merits to be classified under 1901 as being specific entry. As against this, the Revenues claim that the product fall under Chapter 2106 is misplaced as we agree with the contentions raised by the Ld. Counsel that the said heading 2106 would cover the residual products which are not classified elsewhere.

8.2. Secondly, we find that the HSN Explanatory Notes to Chapter 19 in respect of Chapter Heading No. 1901 reads as under:

Food preparations of goods of headings 04.01 to 04.04, not containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted basis, not elsewhere specified or included.

The preparations of this heading may be distinguished from the products of heading 04.01 to 04.04 in that they contain, in addition to natural milk constituents, other ingredients not permitted in the products of those earlier headings. Thus heading 19.01 includes, for example:

(1) Preparations in powder or liquid form used as infant food or for dietetic purposes and consisting of milk to which secondary ingredients (e.g., cereal groats, yeast) have been added. (2) Milk preparations obtained by replacing one or more constituents of milk (e.g., butyric fats) by another substance (e.g., oleic fats).

The products of this heading may be sweetened and may contain cocoa. However, the heading excludes products having the character of sugar confectionery (heading 17.04) and products containing 5% or more by weight of cocoa calculated on a totally defatted basis (see the General Explanatory Note to this Chapter) (heading 18.06) and beverages (Chapter 22)

The heading also covers mixes and bases (e.g., powders) for making ice cream but it excludes ice cream and other edible ice based on milk constituents (heading 21.05).

It can be noticed from the above reproduced HSN Explanatory Notes that the products as is imported by the appellant would get covered under Chapter 1901. It is settled law that HSN Explanatory Notes can be considered for the correct classification of the products. We find that the HSN Explanatory Notes for Chapter Heading NO. 2106 may not apply to the products imported in as much as, the said note also clearly indicates that the products in question would merit classification under Chapter Heading No. 1901. We reproduce the relevant portion of HSN Explanatory Notes of Chapter 21.

21.06  Food preparations not elsewhere specified or included.

2106.10  Protein concentrates and textured protein substances.

2106.90  Other

Provided that they are not covered by any other heading of the Nomenclature, this heading covers:

(A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk, etc.), for human consumption.

(B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption. The heading includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.) for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.) (see the General Explanatory Note to Chapter 38).

However, the heading does not cover enzymatic preparations containing foodstuffs (e.g., meat tenderisers consisting of a proteolytic enzyme with added dextrose or other foodstuffs). Such preparations fall in heading 35.07 provided that they are not covered by a more specific heading in the Nomenclature.

The heading includes, inter alia :

(1) Powders for table creams, jellies, ice creams or similar preparations, whether or not sweetened.

Powders based on flour, meal, starch, malt extract or goods of heading 04.01 to 04.04, whether or not containing added cocoa, fall in heading 18.06 or 19.01 according to their cocoa content (see the General Explanatory Note to Chapter 19). The other powders are classified in heading 18.06 if they contain cocoa. Powders which have the character of flavoured or coloured sugars used for the preparation of lemonade and the like fall in heading 17.01 or 17.02 as the case may be.

(2) Flavouring powders for making beverages, whether or not sweetened, with a basis of sodium bicarbonate and glycyrrhizin or liquorice extract (sold as cocoa-powder)

(3) Preparations based on butter or other fats or oils derived from milk and used, e.g., in bakers wares.

(4) Pastes based on sugar, containing added fat in a relatively large proportion and, sometimes, milk or nuts, not suitable for transformation directly into sugar confectionery but used as filling, etc, for chocolates, fancy biscuits, pies, cakes, etc.

(5) Natural honey enriched with bees royal jelly.

(6) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, used in food preparations (e.g., for flavouring); protein concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used for protein-enrichment of food preparations; soya-bean flour and other protein substances, textured. However, the heading excludes non-textured defatted soya-bean flour, whether or not fit for human consumption (heading 23.04) and protein isolates (heading 35.04).

It can be clearly held after reading the HSN Explanatory Notes of Chapter 1901 and Chapter 2106 holistically goods imported by the appellant would merit classification under Chapter 1901 only.

8.3. Thirdly, we find that the Division Bench of this Tribunal had an opportunity of looking at similar kind of products which are imported by the appellant herein. In the final order dated 10/10/2014, this Bench was considering classification of a product called SIMILAC-2 which is imported by the appellant and cleared as preparation for infant use under Chapter Heading No. 1901.10 and Revenue disputed the same and held a view that the product merits classification under Chapter 2106. In the said order, Bench after reproducing the rival contending entries held as under:

From the reading of the above tariff entry of 1901 it is clear that Food preparations of goods of heading 0401 to 0404 is classifiable under 1901 and in particular preparations for infant use falls under 1901.10. From the heading 2106 it can be seen that it covers Food preparations not elsewhere specified or included. On analysis of both the above tariff entries, it is clear that if any food preparation is specifically covered and included in any other tariff heading other than 21.06, the same will not fall under Custom Tariff Head 21.06. The product in question i.e. SIMILAC-2 is admittedly preparation predominantly of milk powder and it is for consumption by an infant. The milk powder is goods falling under 04.02. Thus the product SIMILAC-2 is a food preparation of goods of heading 04.02 and exclusively meant for consumption of infant babies. From the above undisputed facts, it is clearly established that the product SIMILAC-2 is specifically covered under the CTH 19011090. Since SIMILAC-2 is covered under 19011090, the same can not, by any stretch of imagination, be covered under CTH 21.06 for a simple reason that the tariff entry of 21.06 is a residuary entry and only those products, which do not find any place in any specific entry, will get classified under the residuary tariff entry. From the product literature of SIMILAC-2, it is seen that the product is a follow up formula for infants between the age of 6 months and 2 years and the same is used as a substitute for mothers milk. SIMILAC-2 is also recommended as a weaning food.

The findings as reproduced hereinabove have proceeded on the ground that the products which are having preparations predominantly of milk powder would merit classification under Chapter 1901. The said order also rejected the contention of the Revenue that the product would fall under Chapter 2106. The ratio of the said decision would apply in the case in hand before us.

9. Accordingly, in view of the facts and circumstances in this case and as also the judicial pronouncement on the similar products, imported by the appellant, we hold that the correct classification of the products imported by the appellant is 19019090. In view of the foregoing, we set aside the impugned orders and allow the appeals filed by the appellant with consequential relief if any.

(Pronounced in court)

(P.S.Pruthi) Member (Technical)

(M.V. Ravindran) Member (Judicial)

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