Customs, Excise and Gold Tribunal - Mumbai
Commissioner Of Cus. (P) vs Artherton Engg. Pvt. Ltd. on 10 January, 2001
Equivalent citations: 2001(74)ECC217, 2001(129)ELT502(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. The dispute in the present case relates to classification of Brine Shrimp Eggs imported by the respondent from USA. The imports made by the respondents, prior to the imports involved in the present appeal, were all along classified by the Department under sub-heading No. 2309.90 of the Customs Tariff. The Bills of Entry relating to the imports in question were also assessed under sub-heading 2309.90 and the goods were allowed to be cleared accordingly.
2. The Assistant Commissioner issued a notice to show cause dated 18-8-1998 alleging that the same were classifiable under sub-heading 0511.91 and not under sub-heading 2309.90 and on this basis differential duty was also sought to be demanded. The Assistant Commissioner, however, by his Order dated 6-10-1988 rejected the submissions made and confirmed the demands made in the show cause notice. On appeal being filed by the importers the Commissioner (Appeals) was pleased to restore the classification under sub-heading 2309.90 by the following order :-
"I have carefully gone through the records of the case and heard the appellant. It is the case of the department that the goods covered under Heading 05.11.91 and not under Heading 2309.90 for the following reasons:
(1) As per Deputy Chief Chemist (DYCC) report dated 24-1-1996, the goods were found to be comprising of artemia cysts.
(2) As per chapter note l(b) of chapter 3, fish products unfit for human consumption are classifiable under chapter 5.
(3) The imported goods do not conform to conditions stipulated in chapter note to chapter 23 and as such are not classifiable under chapter 23.
(4) Artemia is specifically covered under heading 05119901.10 of ITC (HS) Classifications of Export and Import items and this classification is based on harmonised system of nomenclature. Therefore, goods are classifiable under Heading 0511.91.
(5) Since chapter 5 provides more specific description than chapter 23, the goods are classifiable under chapter 5 in terms of Rule 3(a) of the rules of interpretation of Customs Schedule.
The appellant contented that the goods are correctly assessable under Customs Tariff Item number 2309.90 and are fully exempted from the duty under serial number 17 of the table to notification number 11/97-Cus., dated 1-3-1997. In terms of chapter note to chapter 23, Heading 23.09 includes ani mal feeds, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material. Regarding classification under Heading 23.09 there is dispute on 2 accounts. Firstly the goods (i.e. shrimp eggs), in view of lower authority, have not lost essential characteristics of the original material since these are to be hatched before feeding to larval prawns. Secondly, these being artemia cyst, as per test report, are specifically covered under Heading 05119901.10 of ITC (HS) Classifications of Export and Import Items.
Appellant contended that chapter 5 does not cover edible products whereas goods imported being prawn feed were edible. Lower authority has observed that in interpreting any statute the meaning of the words used therein has to be understood in the context in which it is used and not in isolation. The word "edible" in ordinary parlance means "food". That this reference to food in chapter 5 refers to food for human beings is clear from the chapter note l(a) of chapter 3 which clearly lays down that fish products unfit for human consumption are classifiable under chapter 5. Viewed in this context the word "edible" would mean food which is fit for human consumption. By no stretch of imagination this can be stretched to include food fit for animals. Many animals feed on organic waster. For example : pigs are known to feed on excreta. But excreta cannot be considered as food just because it is being consumed by animals. I agree with the view taken by lower authority and hold that the impugned goods were inedible not excluded from chapter 5. Inedible fish eggs and roes are classifiable under Heading 05.11 in terms of harmonised system of nomenclature explanatory notes. Inclusion of fishing bait indicates that word "edible" used in the chapter note has to be taken to mean as fit for human consumption as observed by lower authority. However, the impugned goods are prawn feed and not fishing bait. For legal purposes classification is to be determined according to the terms of the heading and the heading which provides the most specific description shall be preferred to headings providing a more general description, It has been contended by the appellant that these are not fertile eggs for hatching in their natural state. These had undergone substantial processing so as to have lost original identity and so as to make them fit as prawn feed.
Animal feeds are specifically covered under Heading 23.09. However, lower authority has objected to this on the ground that the impugned goods had not been processed enough to have lost the essential characteristics of the original material and do not satisfy the condition of the chapter note. Appellant has countered this by stating that all the essential characteristics of the original brine shrimp eggs are no more there in the goods imported by the appellant. In the natural condition the shrimp eggs hatch within 24 hours and cannot be used as prawn feed. Owing to the processing undertaken by the foreign supplier the cysts are totally inactivated and are sent into a dormant state leading to complete stoppage of all metabolic activities. These processed cysts, in the condition in which these are imported by the appellant, are totally different marketable goods in a dry, inactivated and dormant state and are capable of being preserved in the said condition for years together. I note that in order to achieve hatching from the imported brine shrimp eggs, the same should be hydrated, disinfected and placed in filtered sea water aerated near a strong light source for 24 hours. This indicates that the shrimp eggs in the imported condition are not capable of natural hatching and require further operations to achieve the same. It is well settled that for classification purposes it is the condition of goods at the time of import, which alone is relevant. At the import stage the impugned goods do not have essential characteristics of the original material. Further as per import document and commercial parlance the goods are prawn feed and are not commercially known as fertile eggs classifiable under Heading 05.11. Artenia specifically covered under Heading 05119901.10 of ITC (HS) Classifications of Export and Import Items refers to fertile eggs for reproduction as can be seen from the scheme of classification and relevant explanatory notes. Further, the said publication is meant for licensing purpose and is not binding for classification purposes, as also admitted by lower authority in the impugned order.
It is clear from above that the impugned goods in the imported condition satisfy all the conditions of chapter note to chapter 23 and being prawn feed were specifically covered under Heading 23.09. The impugned goods are commercially known as prawn feed and there is no other known use. This view is supported by certificates from Marine Products Export Development Authority, Indian Council of Agricultural Research, the supplier and the Deputy Chief Chemist test report. Being dehydrated, inactivated to dormant state leading to complete stoppage of metabolic activity, the same are not classifiable under Heading 05.11. Also in terms of Rule 3 (a) to General Rules for Interpretation of Customs Tariff Act, 1975, a specific heading is preferable to generic heading. Further in terms of Rule 3(c), in case more than one heading merit equal consideration, the goods shall be classified under heading which occurs last in the numerical order. In the present case though Headings 05.11 and 23.09 do not merit equal consideration, heading 23.09 being preferable to 05.11, the Heading 23.09 shall prevail in case of a tie."
3. The revenue has filed this appeal on the following grounds :-
(1) The learned Commissioner of Customs (Appeals) has failed to appreciate the fact that the goods have been described as SHRIMP EGGS only in the Commercial Invoice. Therefore, it is wrong to state that the goods are known as Prawnfeed in commercial parlance.
(2) The Learned Commissioner of Customs (Appeals), while admitting that inedible fish eggs and roes are classifiable under Heading 05.11 and Headings which provide more specific description should be preferred to Headings which provide a more general description, has wrongly reached a conclusion that the Heading 23.09 is more specific than Heading 05.11. A plain reading of the Heading 05.11 makes it abundantly clear that this is more specific Heading than 23.09. Heading 05.11 is specific to all products of fish or crustaceans whereas Heading 23.09 covers all products used for feeding animals, whether of animal origin or plant origin subject to the provisions of Chapter Notes to Chapter 23.
(3) The learned Commissioner of Customs (Appeals) has failed to appreciate the fact that in the form in which it is imported it cannot be even used for feeding prawns. Dehydration only increases the shelflife and does not take away the character of goods that is of shrimp eggs. Therefore, the form in which it is imported it cannot be said to be prawnfeed also. Therefore, if one were to accept the argument that the goods should be classified on the basis of form in which it is imported then goods cannot be treated as animal feed also as hatching is required before feeding to prawn larva as per literature produced by the importer. These goods cannot be fed to prawns in the form of its import.
(4) Neither, Chapter Notes to Chapter 5 nor HSN explanatory notes restrict the scope of "Eggs" under Chapter 5 to only those eggs which are "fertile". In any case the Commissioner of Customs (Appeals) has himself observed that these eggs are hatched before use. Hence, these eggs are fertiled eggs only.
(5) The learned Commissioner of Customs (Appeals) has incorrectly held that ITC (HS) Classifications of Export and Import is relevant only for licensing purposes. At present classification under Customs Tariff and ITC purposes is same and both are based on HSN classification. Reliance can be placed on ITC (HS) classification. Both to draw inference for classification under Customs as well.
4. Heard learned JDR, Shri B.B. Sarkar for the department and Shri S.K. Bagaria, Advocate with Shri J.C. Patel and Shri S.N. Kantawala, Advocates for the appellant.
5. Rule 3(c) of the Rules of Interpretation comes into operation only if goods cannot be classified by following Rule 3(a) & 3(b). The goods are more specifically covered under Heading 05.11 and as such are classifiable under the heading in preference to 23.09.
6. The goods i.e. eggs have not been processed to such an extent so as to look their essential characteristics since it is identified that eggs are hatched and once hatched they cease to be eggs and they do not cease to be eggs if dehydrated for storage and transfer purposes and they do not hatch.
7. We have considered the matter and after considering the submissions we find that :-
(a) The importers have submitted documents which show use and the product imported to be as follows :
"(i) In the prawn hatcheries the only source of food is brine shrimp eggs (prawn feed). This 'prawn feed' is fed to the young prawns from the initial stages and as soon as the prawns are able to grasp and consume large quantities of food particles, the prawn larvae in the early stages have to eat up to 50 brine shrimp eggs per day.
(ii) Brine shrimp eggs are collected in cyst form from salinas located worldwide, processed and packed to be sold commercially. They come in sealed tin cans. Once the can is opened, the brine shrimp eggs are kept in a dry and free of exposure to the humidity. The hatch rate will be greatly infected if not kept in a dessicntor or other dry container. Once the can is opened the contents should be used rapidly.
(iii) No feed has been as effective or as easy to culture and feed to the young prawns as the brine shrimp eggs. This prawn feed meets all requirements of a good food source. It is sufficient in fatty acids, proteins and is nutritionally complete. Some results have shown that young shrimps have grown larger and healthier rapidly when fed with brine shrimp eggs. There is no supplement for this feed. The feeding regime is a closely monitored and specifically timed manner which is vital for the growth of the prawns from the entry stage to the post larvae 2.5 stage. The Aquaculture Industry is an important consumer of brine shrimp eggs harvest from the Orient Salt Lake. The brine shrimp eggs are a critical source of prawn feed and have no other use in India. Many prawn hatcheries depend on brine shrimp eggs which forms excellent for the young shrimps.
(iv) The hatching process is simple. The brine shrimp eggs should be hydrated, disinfected and then placed in filtered sea water aerated heat a strong or intense light source for 24 hours. The unhatched cyst floats on top while the hatched cyst sinks to the button of the container and can be collected by siphoning.
(v) One way to determine the amount of brine shrimp eggs to be added to the rearing tank is by following 6 easy steps :
(1) Number of feed/ml required + A (2) Present density in larval renting tank (/ /feed/ml) = B (3) A-B = C (4) C+ (Volume of larval - rearing tank in ml) = D (5) Number of feed/liter in hatching container = E (6) D/E+ 100=//mls of feed to be added to LRT Decapsulation of the cyst is a standard procedure for the hatchery. This is the best way to feed brine shrimp eggs to the penacids. A small amount of algae is maintained in the rearing tank oven during the mysis or the brine shrimp egg period so that the second day old feed will be a good source when eaten by penneid larvae."
From this data, it would be evident that the goods as imported need lot of careful processing, before they get converted into larvae which are actual prawn feed. The goods which as imported cannot be used by prawns, to be considered to be prawn feed. The goods therefore, as imported are not found to be edible by the prawns. They become edible after processing, after the eggs hatched become larvae. In fact, it is the admitted position, as per the documents submitted by the importer, that all the quantity imported will not hatch into larvae.'
(b) Chapter Note 1 to Chapter 5 of Customs Tariff reads-
"1. This Chapter does not cover :
(a) Edible products (other than guts, bladders and stomachs of animals, whole and pieces thereof, and animal blood, liquid or dried"
and the headings read as "05.11 -Animal products not elsewhere specified or included;
dead animals of Chapter 1 or 3, unfit for human con-
sumption-
0511.10 -Bovine Semen
-Others
0511.91 -Products of fish or crustaceans, molluscs or other
aquatic invertebrates; dead animals of Chapter 3.
0511.99 -Other""
(c) From our findings herein above and the admitted position the goods under import are not edible, therefore they are not excluded from chapter 5 by note 1. Therefore the classification of goods as classified under heading 0511.99 would be the appropriate classification of the goods under import; in the condition in which they are imported. We are reinforced in this view of the classification of these goods, as the goods under import, are packed brine shrimp eggs supplied and would fall under heading 05.11 of the HSN and the Customs Tariff which is based on the HSN and not 'larvae' which are 'prawn feed'.
(d) We have examined the alternative classification under chapter 23 of the Customs Tariff note under Chapter 23 provides as under:
"Heading No. 23.09 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by products of such processing".
and the headings read as "23.09 -Preparation of a kind used in animal feeding.
23.09.10 -Dog or cat food, put up for retail sale 2309.90 -Other"
A perusal of the Chapter above notes would indicate that if it is to be classified as a preparation of a kind used in animal feeding, in the present case, the larvae after processing are used as feed, therefore, the larvae as imported, would be classified under 2309. Since 'larvae' have not been imported and it is only that in egg form imports are effected the classification under 2309, of unprocessed animal materials i.e., eggs in this case, cannot be found by us to be correct, if we read the chapter notes.
(e) In view of our findings we do not consider the other submissions and the case law provided and relied upon by the respondent importers before us as we do not consider it necessary to deal with. The same as it is not for product under classification which is being arrived at based on the material supplied by the importers and the chapter notes. Therefore we find that classification of the present goods imported can be arrived at on a simple and plain reading of the chapter notes 2 to chapter 5 and chapter 23 and considering the classification of the goods in form in which they have been admittedly to have been imported.
11. In view of our finding hereinabove we would set aside the order of the Commissioner (Appeals) impugned before us and allow the appeal of the department.