Customs, Excise and Gold Tribunal - Delhi
Ranbaxy Laboratories Ltd. vs Collector Of C. Excise on 2 May, 1994
Equivalent citations: 1994(72)ELT197(TRI-DEL)
ORDER
S.K. Bhatnagar, Vice President
1. This is an appeal against the order in appeal passed by the Collector of Central Excise (Appeals), New Delhi, dated 31-5-1991.
2. The learned counsel stated that the appellants are engaged in the manufacture of Animal feed supplements.
3. They had filed a classification list and claimed classification under Heading No. 23.02 CET. They had also filed a letter of 6-6-1986 indicating the composition of PENTAFORTE AND FAMITONE, the products in question.
4. The Assistant Collector, however, asked them to show cause as to why these should not be classified under heading 3003.10 on the grounds that their products appear to have theraupeutic or prophylactic uses.
5. It was their submission that these are animal feed supplements and in this connection they would draw attention to explanation II to Notification 234/82-C.E. and the language of the Heading 23.02 of Chapter 23.
6. They would also refer to Rule 3 of the rules for the interpretation of the schedule and submit that the Heading provides the most specific description is to be preferred to Heading providing a more general description.
7. It was also their contention that the products are exclusively used for animal feeding purposes and not for any other purposes.
8. It was their contention that a feed supplement is a formulation of a product which is to be added in the food as a supplement to make it a complete food in the final form. The feed supplements may therefore contain the contents which may be added to the animal feed in micro quantities visually in a concentration of parts per million to achieve a definite purpose like prevention of diseases, improvement in the performance of live stock, increase in production, increases in weight, increase in milk production, etc.
9. Pentaforte is mixed in micro quantities with poultry feed before administration and its concentration in the final mixed compound feed is only between 0.002% to .006%.
10. Famitone is given to poultry as the feed supplement in water in micro quantity i.e. 0.05% and it is not by direct administration but only through drinking water.
11. It was also their contention that description of the products under Heading 23.02 is an 'inclusive' one and not an exhaustive one and it is not essential that an animal feed be obtained by processing of vegetable or animal materials.
12. The learned Assistant Collector had in his order observed inter alia that the products cannot be considered as vaterinary drugs and the labels indicate that the products are not to be used as drugs but are sold as feed supplements by the suppliers of animal food. Accordingly the learned Assistant Collector had in his order upheld the classification under 23.02 attracting nil rate of duty.
13. An appeal was filed against this order of the Assistant Collector by the Department. The learned Collector (Appeals) in his order held that they were classifiable under Heading 29.36 on entirely new grounds i.e. the other than those urged by the appellants before him.
14. It was also their contention that the Collector (Appeals) has decided the issue on presumption.
15. It was their contention that the order is contrary to the trade understanding of the product and interpretation of the tariff.
16. The learned Collector has not appreciated that for a product to fall under Heading 2936 a product must be an intermixture of vitamins and nothing else.
17. The Collector has also erred in taking cognizance of a part of the label of the product and ignoring the main object of the label.
18. In any case it is the settled law that a product is to be appreciated by the contents and trade parlance and not on certain claims made on the label. It was also his submission that since the products in question were not drugs or medicines there was no requirement to declare all the contents in the label.
19. In the case of Pentaforte powder, apart from vitamins the preparation also contains Calcium Sulphate and Magnesium Oxide, which are minerals. Further the solvent used in the preparation is Soyabean Oil.
20. In case of Famitone the active ingredients include, apart from vitamins, Ascorbic acid and Poly sorbate, and also a solubiliser. The solvents used in the preparation are purified water and Polyethylene glycol.
21. They would also like to draw attention to Chapter note 1 to Chapter 29 which defines the scope of the Headings under Chapter 29 and Heading 2936 covers only specified items and does not cover products containing vitamins.
22. It is not in dispute that the products in question are for a specific purpose and not for general use.
23. It was their submission that the products in question were merely preparations of a kind used in animal feeding classifiable under Heading 23.02.
24. Further, the Collector has relied on Trade Notice 10/90 of Bombay Collectorate without distinguishing the earlier Trade Notice and has not realised that there is no consistency in the opinions so expressed.
25. The learned counsel further stated that they would also like to draw attention to the order of the Tribunal No. 755-756/91-C, dated 7-10-1991 1992 (60) E.L.T. 124 (Tri.) and HSN entry relating to Heading 23.09 in support of his contention.
26. The learned DR reiterated the department's view and explained that the active ingredients in both the products were various vitamins although some other compounds have also been added.
27. Although the show cause notice was issued asking the appellants to show cause as to why the goods should not be classified under 3003.10, the Asst. Collector had in his order held the goods as classifiable under 2302.00. The department has thereupon filed an appeal before Collector (Appeals) who has classified the products under 29.36 for reasons mentioned in the order in appeal.
28. It was their contention that Chapter 23 relates to 'Residues and wastes from the food industries and prepared animal fodder' and the Chapter note says "Heading 23.02 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". Whereas the appellant's products are apparently synthetic preparations consisting basically of an admixture of vitamins as active ingredients, although they contain a small quantity of other mineral elements or compounds as would be evident from the composition indicated by the appellant themselves in their appeal memorandum.
29. It was his contention that the products under consideration have got essential characteristics of an inter-mixture of vitamins and are as such ousted from the purview of Chapter 23. The exclusion clause below heading 2309 in the HSN also covers products of Chapter 29. Further apart from vitamins, other ingredients are basically in the nature of solvents or solubiliser or vehicles for the vitamins. Therefore the products would fall under Heading 29.36 even if they were used for feeding animals and in this connection he would like to rely upon the Trade Notice No. 17-C.E. (CH 29.90) which mentions that:
"The Trade is hereby informed that animal feed supplements which are just inter mixtures of vitamins only and that there are no other ingredients except solvents, stabilisers or anti-oxidants are specifically covered under heading 29.36 of Central Excise Tariff as inter mixtures of vitamins. Even though there are used as animal feed supplements, the same are not classifiable under heading 23.02 as preparations of kind used in them because this is a general heading. Accordingly the products in question are correctly classifable under heading 29.36 ibid."
30. We have considered the submissions of both the sides (including the case law cited). We observe that Chapter 23 of CET covers
"Residues and Wastes from the food industries; prepared animal fodder"
31. As such, apart from the characteristic features, the properties and uses, it is necessary to ascertain how the product is obtained and processed or prepared, for the product must be either in the nature of a residue or waste from the food industries or prepared animal fodder or a preparation derived from or traceable to such a material, in order to attract any of the entries under this chapter; and the products included under Heading 23.02 by virtue of the Chapter note are also required to be ascertained accordingly.
The language of the Chapter note which is significant and has a bearing on the controversy reads as follows :
"CHAPTER NOTE"
"Heading No. 2302 includes products of a kind used in animal feeding not elsewhere specified or included, obtained by processing vegetable or animal material's to such an extent that they have lost the essential characteristics if the original material, other than vegetable waste, vegetable residues and by-products of such processing."
32. The word "includes" mentioned here has to be understood in the context referred to above. As such it could only be taken to refer to only those preparations used in animal feeding, which were :
(i) not elsewhere specified or included; and
(ii) were obtained by processing vegetable or animal materials; and it is significant that the products so obtained shall continue to be included in this Heading even if the processing has proceeded to such an extent that in the process, the essential characteristics of the original material are lost. Hence heading 23.02 includes two types of products,
(1) those in which the essential characteristics of the original material have been lost and
(2) those in which the characteristics of the original material are still recognisable.
And the original material referred to here is vegetable or animal material obtained as a residue or waste from the food industries.
33. Nowhere, there is even an iota of indication or slightest hint of any synthetic material or mixtures thereof or of products made mainly or wholly of or from synthetic material(s).
34. Hence, in the above context the word "includes" used in the Chapter note cannot be stretched or extended to cover synthetic material(s) and it can only be taken to mean and refer to products obtained by processing of vegetable or animal materials in the nature of residues or waste from food industries.
35. This view finds support from HSN as well, inasmuch as Chapter 23 thereof titled as
"RESIDUES AND WASTE FROM THE FOOD INDUSTRIES; PREPARED ANIMAL FODDER".
The following Chapter Note explicitly states that:
"General
This Chapter covers the various residues and wastes derived from vegetable materials used by food preparing industries, and also certain products of animal origin. The main use of most of these products is as animal feeding stuffs, either alone or mixed with other materials. However, certain of them (e.g. wine lees, argol, oil-cake) have industrial uses".
36. Furthermore, the headings and sub-headings also indicate the nature and type of products covered by this Chapter as evident from the following :--
23.01 - FLOURS, MEALS AND PELLENTS, OR MEAT OR MEAT OFFAL, OF FISH OR CRUSTACEANS, MOLLUSCS OR OTHER AQUATIC INVERTEBRATES, UNFIT FOR HUMAN CONSUMPTION; GREAVES
23.02 - BRAN, SHARPS AND OTHER RESIDUES, WHETHER OR NOT IN THE FORM OF PELLETS, DERIVED FROM THE SIFTING, MILLING OR OTHER WORKING OF CEREALS OR OF LEGUMINOUS PLANTS.
23.03 - RESIDUES OF STARCH AND SIMILAR RESIDUES BEET, PULP, BAGASSE AND OTHER WASTE OR SUGAR , BREWING OR DISTILLING DREGS AND WASTE, WHETHER OR NOT IN THE FORM OF PELLETS.
23.04 - OIL-CAKE AND OTHER SOLID RESIDUES, WHETHER OR NOT GROUND OR IN THE FORM OF PELLETS, RESULTING FROM THE EXTRACTION OF SOYABEAN OIL.
23.05 - OIL-CAKE AND OTHER SOLID RESIDUES, WHETHER OR NOT GROUND OR IN THE FORM OF PELLETS, RESULTING FROM THE EXTRACTION OF GROUNDNUT OIL.
23.06 - OIL-CAKE AND OTHER SOLID RESIDUES, WHETHER OR NOT GROUND OR IN THE FORM OF PELLETS, RESULTING FROM THE EXTRACTION OF VEGETABLE FATS OR OILS, OTHER THAN THOSE OF HEADING NO. 23.04 OR 23.05.
23.07 - WINE LEES; ARGOL
23.08 - VEGETABLE MATERIALS AND VEGETABLE WASTE, VEGETABLE RESIDUES AND BY-PRODUCTS WHETHER OR NOT IN THE FORM OF PELLETS, OF A KIND USED IN ANIMAL FEEDING, NOT ELSEWHERE SPECIFIED OR INCLUDED
23.09 - PREPARATIONS OF A KIND USED IN ANIMAL FEEDING.
37. The Heading 23.09 of HSN corresponds to Heading 23.02 of the CET; (And the Chapter Note of Chapter 23 CET relating to Tariff Heading 23.02 clearly follows Chapter Note of Chpater 23 of HSN); and if we see this Heading of HSN we find that the examples of the type of products covered by it are as follows:
1. Sweetened Forage (including preparations containing molasses, wheat bran, palm kernel or copra oil-cake, etc.
2. Preparations containing cereals, Malt-sugar mangolds, tallow, straw, etc.
3. Preparations from leguminous vegetables, brewing drugs, oil cake, dairy by-products.
4. Fish or marine mammal solubles in liquid or viscose solutions or in paste or dried form and derived from the manufacture of fish or marine mammal meal or oil.
5. Whole green leaf protein concentrate and green fraction leaf protein concentrate obtained from alfalfa (lucerne).
6. Premixes (including those containing mineral substances and vitamins or provitamins, antibiotics, trace elements, appetisers, soya flour or meal, yeast, etc.
38. In the above illustrations, the nature and type of products are worth noting ; And it is significant that even where there is a reference to substances or preparations containing proteins or minerals or vitamins, antibiotics, etc. the basic material is always derived from the processing of residues or waste from food industry.
39. Thus a reading of the chapter as whole, including various headings and sub-headings, clearly shows that this Chapter was intended to cover only those products the origin of which could be traced to vegetable or animal material in the nature of a residue or waste from the food industries (apart from prepared animal fodder).
40. The appellant's products are obviously of a very different type. They are preparations containing mixtures of vitamins, as active ingredients, as per the composition declared by the appellants themselves. They are evidently not of a type whose origin could be traced to vegetable or animal material in the nature of residue or waste from the food industries. Therefore the argument that they are used as supplement to animal feed does not help the cause of the appellants and these products are outside the scope of Chapter 23.
41. That apart it is interesting to note that the appellants do not appear to be sure of their own case. In the EA 3 form in Column 8(A)(a) while giving description to classification of goods they have mentioned "animal food supplement classification under Heading 23.02 or 29.36. In spite of the fact that they had claimed only 23.02 in their classification list as apparent from the copy of the classification list effective from 1-3-88 filed by them as also para 1 of the appeal memorandum.
42. It is also interesting to note that in their appeal memorandum filed before the Collector (Appeals) in form EA 2 they had claimed classification under 29.36 CET or under any other appropriate heading as deemed fit. Even in the prayer before the Collector (Appeals) they have stated that "it is respectfully prayed that the impugned order in original 17/89, dated 17-7-1989 wrongly approving the product to be assessable at nil rate of duty under Heading 23.02 of CET may be ordered to be set aside and the correct classification under Chapter Heading 29.36 of CET chargeable to duty at the rate of 15% ad valorem or in any other heading as deemed fit may be ordered". In the appeal memorandum filed before us, on the contrary they have mentioned inter alia at page 9 para (a) "Hence this preparation is not merely an inter-mixture of vitamins under classification 29.36...". Thus these two preparations are correctly classifiable under 23.02". In other words while they had prayed before Collector (Appeals) to hold that classification under 23.02 is incorrect and prayed for classification under 29.36 or any other appropriate heading now when the Collector (Appeals) had classified the goods under 29.36 they are still aggrieved and have not even indicated in the appeal memorandum or during the course of hearing the reasons for their changing and fluctuating stands.
43. As far as other entries are concerned we find that the entry 3003.10 falls under a Chapter which covers "pharmaceutical products".
The Chapter Note (1) shows that this Chapter does not cover, inter alia,
"(a) Foods or beverages (such as dietetic, diabetic, or fortified foods, food supplements, tonic beverages and mineral waters) (Section IV)".
And for the purpose of Heading 30.03,
"Medicaments", means "Medicaments (including veterinary medicaments").
In other words the items falling under Chapter 30 have to be of necessity pharmaceutical products and must have therapeutic value of prophylectic use, to be included therein. That means, it must be a preparation for prevention or cure of ailments in human beings or animals. The products in question admittedly contain mixtures of vitamins and it is well-known that the vitamin mixtures also act as tonics. They are also used to take care of vitamin or mineral deficiency and improve the general condition of health and can also be used as food supplement for men and animals as also for fortifying their food or medicine to ensure good health and strength. There is however nothing in the material before us to indicate that the item in question were meant to be sold as medicines or drugs for men and animals.
As far Heading 29.36 is concerned it reads as follows :
"Provitamins and vitamins, natural or reproduced by synthesis (including natural concentrates), derivatives thereof used -primarily as vitamins, and intermixtures of the foregoing, whether or not in any solvent".
44. Further, the following clauses of Chapter Note (1) are significant in the above context.
"(a) xxx
(b) x x x
(c) The products of Heading Nos. 29.36 to 29.39 or the sugar ethers and sugar esters and their salts, of Heading No. 29.40 or the products of Heading No. 29.41 whether or not chemically defined.
(d) The products mentioned in (a), (b) or (c) above dissolved in water.
(e) The products mentioned in (a), (b) or (c) above dissolved in other solvents provided that the solution constitutes a normal and necessary method of putting up these products adopted solely for reasons of safety or for transport and that the solvent does not render the product particularly suitable for specific use rather than for general use.
(f) The products mentioned in (a), (b), (c), (d) or (e) above with an added stabiliser necessary for their preservation or transport.
(g) The products mentioned in (a), (b), (c), (d), (e) or (f) above with an added-anti-dusting agent or a colouring or odoriferous substance added to facilitate their identification or for safety reasons, provided that the additions do not render the product particularly suitable for specific use rather than for general use".
The heading entry, read with the above clauses, shows that this entry not only covers the items named therein but also products or preparations made from them or containing them and includes such products dissolved in water/ other solvents and/or with added stabilisers or preservatives etc.;
Hence the products in question being admittedly preparations containing a number of vitamins as active ingredients are covered by the entry and the fact that some minerals and materials are also present, does not make any difference.
45. Even otherwise as per Rule 2(B) of Rules for Interpretation of the Schedule "any reference in a heading to a material or substance shall be taken to include a reference 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 particulars contained in Rule 3".
46. Therefore the fact that the preparations in question contain a number of vitamins, minerals and other substances would not make much of a difference. Once it is recognised that the vitamins are active ingredients in these preparations.
47. Further as per Rule 3, "when by application of Sub-rule (b) of Rule 2 or any other reason goods are, prima-facie classifiable under two or more headings, classification shall be effected as follows :--
(a) xxx
(b) xxx
(c) When goods cannot be classified by reference to (a) or (b) they shall be classified under the Heading which occurs last in the numerical order among those which equally merit consideration".
48. Therefore in any eventuality, even if it is presumed for arguments sake, that the products were classifiable under 23.02 as well as 29.36, the Heading 29.36 occurring later in the numerical order will have to be preferred. Thus whichever way we may look at it the products will be classifiable under heading 29.36.
49. In view of the above discussion we find no reason to interfere with the order of the learned Collector (Appeals) directing classification under Heading 29.36 CET.
The appeal is disposed of accordingly.
Dated : 10-9-1993 (S.K. Bhatnagar)
Vice President
Jyoti Balasundaram, Member (J)
50. I have gone through the order proposed by the Learned VP(T) and regret that lam unable to persuade myself to the same point of view.
51. The question involved is the classification of two products viz. Pentaforte and Famitone. It is not in dispute that both the products are exclusively to be used as animal feed supplements and have all the essential characteristics thereof including the nature of packing, the indications thereon and the method of use. It is also not in dispute that both the products have apart from vitamins, other elements like minerals, specialised solvents, preservatives, anti-oxidants, chelating agents, promoters of absorption of soluble vitamins, anti-microbial preservatives, binders, etc. It is also admitted that both the products are to be exclusively used as animal feed supplements for vitamin enrichment in the animals. Under these circumstances the classification of the product is to be determined under Heading 23.02 or Heading 29.36.
52. Before a detailed discussion takes place certain facts have to be clarified. In this matter, the original show cause notice issued by the Assistant Collector to the appellants was for classifying these two products under Heading 30.03 as medicaments for animals. The Assistant Collector having been satisfied that the products would not come under Chapter 30, classified them under Heading 23.02 as originally claimed by the appellants. The Collector of Central Excise took up the matter with the Collector of Central Excise (Appeals) under Section 35E(2) and sought classification of the goods under Heading 29.36 (which Heading was not claimed before the original adjudicating authority viz. the Assistant Collector). In fact the EA 2 form prays for the classification of the goods under Heading 29.36 and this prayer is made by the Collector of Central Excise and not by the appellants herein. Thus, there appears to be no change in the stand by the appellants before us in that the appellants have been consistently seeking classification of the products only under Heading 23.02. In the present EA 3 form, the appellants have indicated the classification in dispute as Heading 23.02 or 29.36. We cannot read anything more by such mention.
53. The main reasons for classifying these two products under Heading 29.36 would appear to be :
(a) That Chapter 23 covers only residues and wastes from the food industries and prepared animal fodder and in the products in question, the vitamins are synthetically manufactured and not as residues of food industry and hence the products cannot be classified under Heading 23.02.
(b) That Chapter notes of Chapter 29 cover products of Chapter 29 even though they are cleared as dissolved in water or other solvents or cleared with added stabilisers or preservatives ;
(c) That by virtue of Interpretative Rule 2(b) as also Rule 3(c) the products would merit classification under Heading 29.36.
53.1 In the Central Excise Tariff Act there are only two Headings under Chapter 23 and they are :
"23.01 2301.00 Residues and waste from food industries, Nil including bagasse, other waste of sugar manufacture and oil cakes 23.02 2302.00 Preparations of a kind used in animal Nil"
feeding, including dog and cat food.
While Heading 23.01 would appear to cover residues and waste from the food industries, no such mention has been made under Heading 23.02. Accordingly it would include not only those preparations for animal feeding which are residues and waste of other food industry but also other types of animal feed supplements etc. The title of Chapter 23 cannot be utilised for interpreting Heading 2302 for purposes of legal interpretation. In fact the interpretative Rule 1 states as follows :
"1. The titles of Sections and 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 such Headings or Notes do not otherwise require, according to the provisions hereinafter contained."
53.2 The title of Chapter 23 should not, therefore, influence us to interpret Heading 23.02. This is not to mean that Chapter Note 1 to Chapter 23 should also be ignored. Chapter Note 1 to Chapter 23 reads as under :
"Heading No. 23.02 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."
53.3 This has been interpreted to mean that Heading 23.02 should be obtained by processing vegetable or any materials and not otherwise. According to me, this chapter note should not be interpreted in this manner. This Chapter note is an inclusive definition and not a specific definition. This Chapter note merely says that Heading 23.02 includes products of a kind used in animal feeding obtained by processing vegetable or animal materials. It does not say that Heading 23.02 would cover only those types of animal feeds which are obtained by processing of vegetable or animal materials. In fact any inclusive definition would merely indicate an illustration but what is covered by the illustration is not exhaustive. In fact this is the view taken by the Tribunal in Glaxo's case (supra) as also in Roche's case (Order No. 1101/90-C, dated 9-10-1990). Even according to the HSN, Heading relating to preparations of a kind used in animal feeding would cover (a) preparations designed to provide the animal with all the nutrient elements required to ensure a rational and balanced daily diet (complete feeds); (b) preparations for supplementing (balancing) farm-produced feed (feed supplements); and (c) preparations for use in making the complete feeds or supplementary feeds described in (a) and (b) above. Under the category (c) examples have been given viz.
"(a) Those which improve digestion and, more generally, ensure that the animal makes good use of the feeds and safeguard its health; vitamins or provitamins, amino-acids, anti-biotics, coccidiostats, trace elements, emulsifiers, flavourings and appetisers, etc.
(b) Those designed to preserve the feeding stuffs (particularly the fatty components) until consumption by the animal; stabilisers, anti-oxidants etc.
(c) Those which serve as carriers and which may consist either of one or more organic nutritive substances (manioc or soya flour or meal, middlings, yeast, various residues of the food industries, etc.) or of inorganic substances (e.g. magnesite, chalk, kaolin, salt, phosphates)."
53.4 The Explanatory Notes further state that the concentration of the substances described in (1) above and the nature of the carrier are determined so as to ensure, in particular, homogeneous dispersion and mixing of these substances in the compound feeds to which the preparations are added. These examples would clearly establish that preparations for use in the making of complete feeds or supplementary feeds need not be derivatives of food processing industry but can be synthetically prepared/vitamins, minerals, anti-oxidants, amino-acids, antibiotics, emulsifiers, appetisers, etc. Therefore, the contention that Heading 23.02 should cover only those animal feeds and animal feed supplements which are in the nature of residues or waste from the food industry has to be negatived.
53.5 Coming to Heading 29.36 this Heading is very specific in nature viz.
"Provitamins and vitamins, natural or reproduced by synthesis (including natural concentrates), derivatives thereof used primarily as vitamins, and intermixtures of the foregoing, whether or not in any solvent."
(emphasis supplied).
A plain reading of Heading 29.36 would indicate that the Heading would cover vitamins, provitamins and derivatives thereof used as vitamins and intermixtures of the foregoing only. In other words if these vitamins, provitamins and their derivatives are mixed with other substances, such mixtures are not to be classified under Heading 29.36. Any attempt to classify products which are mixtures of vitamins, provitamins, their derivatives with other substances like minerals, anti-oxidants, stabilisers, appetisers, etc., by use of Interpretative Rule 2(b) would result in classifying certain products under Heading 29.36 which are not to be classified therein. In other words we would be doing violence to the words used in the Heading. The purpose of expression "intermixtures of the foregoing" would be completely lost in such a situation. In this connection, Rule 1 of the Interpretative Rules as extracted above would make it clear that where there is a prohibition of the use of Interpretative Rules in the wordings of a Heading, we should not use the other Interpretative Rules (Interpretative Rules 2 to 4) to classify the product under that Heading. The Explanatory Notes to Rule (1) which is reproduced below is very relevant and provides a clear indication that the other Rules of Interpretation starting from 2 to 4 are not to be utilised where the Headings or the Chapter Notes do not otherwise require.
"(v) In provision (III) (b), the expression "provided such Headings or Notes do not otherwise require" is intended to make it quite clear that the term of the Headings and any relative Section or Chapter Notes are paramount, i.e. they are the first consideration in determining classification. For example, in Chapter 31, the Notes provide that certain headings relate only to particular goods. Consequently those Headings cannot be extended to include goods which otherwise might fall there by reason of the operation of Rule 2 (b)."
(emphasis supplied).
54. Coming to the Chapter Notes of Chapter 29 it is observed that Chapter 29 basically covers organic chemicals which are separately chemically defined, so long as these separately chemically defined compounds are sold as separately chemically defined compounds in the market not necessarily in the original form but in a dissolved condition or in conjunction with stabilisers etc. for the preservation or transportation till these separately chemically defined compounds or organic compounds are ultimately used by the user. In other words Chapter Note 1 (a to h) states that separately chemically defined organic compounds sold as such either in its original form or in dissolved form or with admixture with stabilisers but sold as separately chemically defined compounds would come under Chapter 29. It is interesting to note Note 1(c) and 1(e). Note 1(c) gives a special treatment to the products of Heading 29.36 to 29.39 and also certain products of Heading 29.40 and 29.41. Note 1(e) is very relevant for interpreting the Heading 29.36 for the purpose of this appeal. Note 1(e) is reproduced below :
"(e) The products mentioned in (a), (b) or (c) above dissolved in other solvents provided that the solution constitutes a normal and necessary method of putting up these products adopted solely for reasons of safety or for transport and that the solvent does not render the product particularly suitable for specific use rather than for general use."
In fact Note 1(e) clarifies all the doubts on the point viz. that when products of Heading 29.36 are dissolved in other solvents (other than water) such products would still come under Heading 29.36 provided that the solution constitutes a normal and necessary method of putting up these products adopted solely for reasons of safety or for transportation and that the solvent does not render the product particularly suitable for specific use rather than for general use.
In the instant case, for example in the product, Famitone, the solvent used is water as also polyethylene glycol. While water will dissolve the vitamin C (ascorbic acid) vitamins A, D & E are not dissolvable in water but are dissolvable in polyethylene glycol and polyethylene glycol would appear to be used specifically in this case to render the product to be used ultimately as an animal feed supplement and not as sale of vitamins. In fact, Hawley's Condensed Chemical Dictionary, 11th Edition at page 936 describes the uses of polyethylene glycol (among others) as permissible additives to foods and animal feed. Thus applying Note 1(e) of Chapter 29 it can be clearly seen that the solvents specially used are for rendering the product as a whole to be used as an animal feed and not for the purpose of selling the vitamins in the market as vitamins. We are not concerned here with classification of vitamins in dissolved forms but with the classification of animal feed supplements. Though the animal feed supplements in question are for the purpose of vitamin enrichment, the products are not sold as vitamins but only an animal feed supplements. Further the addition of other ingredients like minerals, anti-oxidants, chelating agents, etc., would make the products travel away from Heading 29.36 towards 23.02.
55. In the light of the above, I hold that the products Pentaforte and Famitone fall for classification under Heading 23.02 of the CETA, 1985. Therefore, I set aside the impugned order and allow the appeal.
Sd/-
(Jyoti Balasundaram)
Dated: 24-9-1992 Member (J)
In view of the difference of opinion between Hon'ble Member Judicial and the Vice President, the matter is submitted to the Hon'ble President for reference to a Third Member on the following point:
Whether in the facts and circumstances of the case, the products in question are classifiable under Heading 29.36, CET or 23.02, CET?
Sd/- Sd/-
(Jyoti Balasundaram) (S.K. Bhatnagar)
Dated: 29-9-1992 Member (J) Vice President
ORDER
Harish Chander, President
56. I have perused the orders written by learned brother, Shri S.K. Bhatnagar, Vice President and learned sister Ms. Jyoti Balasundaram, Member Judicial. The following point of difference has been referred to me :--
"Whether in the facts and circumstances of the case, the products in question are classifiable under Heading 29.36, CET or 23.02, CET ?"
Since learned brother, Shri S.K. Bhatnagar, Vice President, has narrated the facts in detail and as such, I need not reproduce the same.
57. Shri V. Lakshmi Kumaran, the learned advocate has appeared on behalf of the appellant. He reiterated the facts. He pleaded that the product in dispute is Pentaforte and Famitone manufactured by the appellants and the appellants are marketing these goods as animal feed supplements. He pleaded that the composition of Pentaforte powder is as under :--
PENTAFORTE POWDER
-------------------------------------------------------------
Active Ingredients Each Gm to contain
-------------------------------------------------------------
1. Vitamin B2 IP 50.00 mg
2. Vitamin D3 IP 12,000 10
3. Vitamin A IP 82,500 10
4. Vitamin K3 IP 66 10.00 mg
5. Vitamin EVSP 10.00 mg
6. Calcium Sulphate USNP 185.00 mg
equivalent to Calcium
7. Magnesium Oxide (Light) 30.00 mg
equivalent to Magnesium
Others
-------------------------------------------------------------
1. Purified Water IP 18.0 Granulating Fluid
2. Sodium Benzoate IP 0.15 Antimicrobial Preservative
3. Methyl Paraben Sodium IP 0.15 Antimicrobial Preservative
4. Starch Maize IP 3.0 Binder
5. Butylated Nydroxyanisole IP 0.1 Antioxidant
6. Butylated Hydroxytohien IP 0.1 Antioxidant
7. Soyabean Oil VSP 1.0 Solvent
Composition of Famitone Liquid is as under :--
FAMITONE LIQUID
-------------------------------------------------------------
Active Ingredients Each 5 ml to contain
-------------------------------------------------------------
1. Vitamin D3 IP 25,000 10
2. Vitamin A Palitate IP 2,50,000 10
3. Vitamin E Acetate IP 150 10
4. Ascorbic Acid IP 500 mg
5. Poly Sorbate 80 IP 1.82 gm
(1) Promoter of absorption of fat
soluble vitamins (Vitamin A, Vitamin
E, Vitamin D3)
(2) Solubiliser
Others
-------------------------------------------------------------
1. Sisodium Edetate IP 0.08% Chelating agent
2. Butylated Nydroxyanisole IP 0.02x Antioxidant
3. Butylated Hydroxytohien IP 0.02% Antioxidant
4. Methyl Paraben IP 0.1% Antimicrobial Preservative.
He referred to page 3 of the appeal memo. Shri Lakshmi Kumaran, the learned advocate argued that the appellants claim assessment under Heading 2302.00 of the Central Excise Tariff and it is a preparation of a kind used in animal feeding including dog and cat, whereas the revenue wants to assess the same under Heading 2936.00 as pro-vitamins and vitamins. He argued that the items are sold as animal feed supplement. He argued that a show cause notice was issued and in the show cause notice the proposed classification by the revenue was under Heading 30.03 against the claimed assessment of Heading 2302.00 by the assessee. He pleaded that the Assistant Collector had agreed with the classification of the appellants and had dropped the show cause notice, whereas the Collector reviewed the order passed by the Assistant Collector and a review application was filed before the Collector (Appeals) under Section 35E of the Central Excises and Salt Act, 1944 and had ordered classification under Heading 2936.00. Shri V. Lakshmi Kumaran, the learned advocate referred to para No. 42 of the order passed by the Hon'ble Vice President. Shri Lakshmi Kumaran, the learned advocate argued that the observations made by the Hon'ble Vice President in para No. 42 are not correct. He also drew my attention to column No. 8A of the appeal memo and argued that the observations of the Hon'ble Vice President are not correct. Shri Lakshmi Kumaran also drew my attention to the reply to the show cause notice dated 7th November, 1988. He also referred to the order-in-original dated 18th July, 1989 holding assessment under Heading 2302.00 which appears on page 28 of the paper book. He argued that though in the show cause notice different classification was claimed by the revenue but in the application before the Collector different classification under heading 2936.00 has been claimed and the assessee being not satisfied with the order passed by the Collector (Appeals) is before the Tribunal. He has referred to para Nos. 41 and 42 of the order passed by the Hon'bel Vice President and argued that there was no appeal filed by the assessee before the Collector (Appeals) and as such, para No. 42 of the order passed by the Hon'ble Vice President is factually incorrect. On merits, he referred to the description of the Heading 23.02 and also referred to Heading 23.09 HSN Explanatory Note 2. He argued that the animal feed includes poultry feeding. He argued that the product is marketed as poultry not to be used as a medicine. In support of his argument he cited the decision of the Tribunal in the case of RocheProducts Ltd. v. Collector of Central Excise vide Order No. 1101/90-C. He argued that the earlier order of the Tribunal in the case of Roche Products Ltd. v. Collector of Central Excise is in favour of the assessee and argued that the correct classification is under Heading 23.02. He also referred to the decision in the case of Glaxo Laboratory (India) Ltd v. Collector of Central Excise vide Order No. 755 and 756, dated 7-10-1991 1992 (60) E.L.T. 124 (Tri.). He pleaded that the product is the same. Only trade name is different. He also referred to another judgment in the case of Punjab Bone Mills and M/s. Protinkem v. Collector of Central Excise, Chandigarh vide Order No. 105 and 106/92-C, dated 23rd March, 1992. He also referred to another decision in the case of Collector of Central Excise, Chandigarh v. Protinkem vide Order No. 238 and 239/92-C, dated 3rd August, 1992. Shri Lakshmi Kumaran, the learned advocate argued that Chapter 29 covers only vitamins and pro-vitamins. Shri Lakshmi Kumaran in support of his argument referred to para No. 53 of the order passed by the Member Judicial and pleaded that she had dealt at length the classification aspect of the product in dispute. He referred to Chapter 23 which reads : "Heading No. 23.02 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 byproducts of such processing." He laid emphasis on the word "including" and he reads Heading 29.36. It is provitamins and vitamins, natural or reproduced by synthesis (including natural concentrates), derivatives thereof used primarily as vitamins, and intermixtures of the foregoing, whether or not in any solvent. He referred to para No. 53.5 of the Member Judicial's order at page 80. He also referred to para No. 53.4 of the order passed by the Member Judicial. He referred to the Rules of Interpretation and referred to Rule 2(b) and 3(c) which have been reproduced in the order passed by the Member Judicial. He referred internal page 19 of the order passed by the Member Judicial. He pleaded that while coming to the classification aspect title of the Chapter cannot be looked into. In support of his argument he referred to Interpretative Rule 1. Shri Lakshmi Kumaran, the learned advocate pleaded for the acceptance of the appeal.
58. Shri Sidharath Kak, the learned Joint CDR is present on behalf of the respondent. He has referred to HSN Explanatory Notes and Chapter 23 of the Central Excise Tariff. He relies on the order passed by the Collector of Central Excise as well as the Hon'ble Vice President's order. He cited a decision in his favour in the case Aries Agro-Vet Industries Pvt Ltd., Bombay v. Collector of Central Excise, Bombay reported in 1984 (16) E.L.T. 467 (Tribunal). He reads Heading 23.02 and also Chapter Note 1. He cited the following decisions :
(1) 1990 (48) E.L.T. 40T - Shri Paper Mills v. Collector of Central Excise (1) 1988 (37) E.L.T. - Chetna Polycoats (P) Ltd. v. Collector of Central Excise Shri Kak, the learned Joint CDR argued that Chapter Note 1 has to be restricted and Chapter Heading is very relevant for classification. In support of his argument, he cited a decision of the Tribunal in the case of Collector of Central Excise v. Roha Dye Chem Pvt. Ltd., reported in 1989 (41) E.L.T. 667 (Tri.). He also argued that the process used is "animal feeding" and not "animal feed". The first phrase is a verb, whereas the second one is a noun. If the term had been "animal feed', then very clearly) the preparation used as parts in "animal feed" would be covered by Chapter 23.02, but this is not so in the present case. It is an admitted fact that both the products (Pentaforte and Famitone) are supplements in the sense that they enhance the function of the main animal feed. It is not a supplement which is a foodstuff by itself which can be consumed directly. It is not a dietary supplement. It is only a supplement to the main animal feed. Therefore, components or ingredients of animal feeds which are not capable of direct administration or feeding to animals to use the phrase of the Tariff itself are not covered by Chapter 23.02. He also referred to a decision of the Tribunal in the case of Hoechst Pharmaceuticals Ltd. v. Collector of Central Excise reported in 1988 (38) E.L.T. 304 (Tribunal) and laid special emphasis on paras 8 to 11. He argued that the correct classification is under Heading 29.36 of the Central Excise Tariff. Shri Kak, the learned Joint CDR argued that Rule 2(b) of the Interpretative Rules is applicable. He referred to para No. 53.5 of the order passed by the Member Judicial where she had discussed Heading 29.36 and she has mentioned that: "A plain reading of Heading 29.36 would indicate that the Heading would cover vitamins, provitamins and derivatives thereof used as vitamins and intermixtures of the foregoing only. In other words, if these vitamins, provitamins and their derivatives are mixed with other substances, such mixtures are not to be classified under Heading 29.36. Any attempt to classify products which are mixtures of vitamins, provitamins, their derivatives with other substances like minerals, anti-oxidants, stabilisers, appetisers, etc., by use of Interpretative Rule 2(b) would relsult in classifying certain products under Heading 29.36 which are not to be classified therein. In other words, we would be doing violance to the words used in the Heading. The purpose of expression "intermixtures of the foregoing" would be completely lost in such a situation. He argued that the observations of the learned Member Judicial are not correct. He again referred to Heading 29.36. He referred to the observations of the Member Judicial on page 21 para 54 where she has mentioned that "Famitone, the solvent used is water as also polyethylene glycol. While water will dissolve the vitamin C (ascorbic acid) vitamins A, D, and E are not dissolvable in water but are dissolvable in polyethylene glycol and polyethylene glycol would appear to be used specifically in this case to render the product to be used ultimately as an animal feed supplement and not as sale of vitamins." He argued that the judgments cited by the learned advocate are not applicable in this case. He again referred to the larger Bench decision of the Tribunal in the case of Aries Agro-Vet Industries Pvt. Ltd., Bombay v. Collector of Central Excise, Bombay reported in 1984 (16) E.L.T. 467 (Tribunal) where the Tribunal had held that "the products marketed by Aries Agro-Vet Industries are only mineral additives or mixtures to be added to ordinary feed. The mineral supplements are indeed part of the animal feed but these supplements are not by themselves animal feed as one would understand "animal feed". Feed can never be only one or another of the various ingredients, elements, substances that an animal needs in a balanced diet." He argued that the decision of the larger Bench in the case of Aries Agro-Vet Industries Pvt. Ltd., Bombay v. Collector of Central Excise, Bombay reported in 1984 (16) E.L.T. 467 has been upheld vide Civil Appeal No. 17 of 1984. He also referred to S.P. Sarkar's Words and Phrases. He also referred to the judgment in the case of Metro Satellite Ltd. v. Collector of Central Excise reported in 1990 (45) E.L.T. 697 (Tribunal). He referred to para No. 4 of the said decision. Shri Kak, the learned Joint CDR argued that it does not fall under Heading 23.02 since the item is of synthetic origin neither vegetable nor animal origin and Heading 29.36 applies. He referred to Rule 2(b) read with Explanatory Notes 11 and 12 of HSN. He refers to the Rules of Interpretation Rule 2(b) and 3(c). He refers to paras No. 43 to 47 of the order passed by Shri S.K. Bhatnagar, Vice President. He pleaded that the order passed by the Vice President, Shri S.K. Bhatnagar, is correct and the same should be accepted.
59. Shri V. Lakshmi Kumaran, the learned advocate in reply referred to HSN 23.09 at page 177. He again referred to the decision in the case of Collector of Central Excise, Chandigarh v. Punjab Bone Mills, reported in 1988 (38) E.L.T. 389 (Tribunal) and referred to page 327 of HSN. He argued that there is no difference of opinion between the two Members and the term "animal feed" will not include animal feed supplement. He again referred to page 177 clause (c) of HSN. He pleaded for the acceptance of the appeal.
60. I have heard both the sides and have gone through the facts and circumstances of the case and duly considered the written submission filed by both the sides. For the proper appreciation of the legal position Note to Chapter 23 as well as tariff heading are reproduced below the applicability of which is being claimed by the appellant, whereas the revenue seeks classification under Heading 29.36 which relates to organic chemicals.
"Note: Heading No. 23.02 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.
-------------------------------------------------------------------------
Heading Sub-heading Description of goods Rate of No. No. duty
-------------------------------------------------------------------------1 2 3 4
-------------------------------------------------------------------------
23.02 2392.99 Preparations of a kind used in Nil.
animal feeding, including dog and cat food.
-------------------------------------------------------------------------
Heading XI of Heading 29.36 is reproduced below :--
"XI. Provitamins, Vitamins and Hormones.
29.36 2936.00 Provitamins and vitamins, natural 15% or reproduced by synthesis (in-
cluding natural concentrates), derivatives thereof used primarily as vitamins, and intermixtures of the foregoing, whether or not in any solvent.
29.37 2937.00 Hormones, natural or reproduced 15%"
by synthesis; drivatives thereof, used primarily as hormones; other steroids used as primarily as hor-
mones.
A perusal of Note 1 to Chapter 23 shows that Heading No. 23.02 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. My learned brother, Shri S.K. Bhatnagar, Vice President in his order on internal page 5 in para No. 27 has observed that the appellant's products are apparently synthetic preparations consisting basically of an' admixture of vitamins as active ingredients, although they contain a small quantity of other mineral elements or compounds as would be evident from the composition indicated by the appellants in their appeal memo. I have already reproduced the composition in para No. 57 of my order above. This means the wording of the Chapter Note 1 "not elsewhere specified or included" is very relevant. This means Chapter Note 1 clearly lays down that if the product is specified in any other heading, the product would fall in that heading. The Tribunal in the case of Saurashtra Chemicals, Porbandar v. Collector of Customs, Bombay reported in 1986 (23) E.L.T. 283 (Tribunal) in para No. 7 has held as under :--
* * * * * * Hon'ble Supreme Court in the case of Khandelwal Metal & Engineering Works and Anr. etc. reported in 1985 (20) E.L.T. 222 (SC) in para No. 28 had held as under :--
Hon'ble Justice Higgins of the High Court of Australia had observed that : "for identification of the imported goods (a) the actual intention of an importer as to the use to which he intends to put the imported goods is irrelevant, (b) one ought to look simply at the article as it is and (c) consider the purpose of the goods only so far as it indicates its character." (Extract taken from Customs Levy, Valuation and Classification 1988 Edition by V.J. Taraporevala.)
61. Now coming to the Rules of Interpretation, for proper appreciation Rules of Interpretation of the Schedule are reproduced below :--
* * * * * * A perusal of Rule 1 shows that the titles of Sections and Chapters are provided for ease of refernce only; for legal purposes, classification shall be determined 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 provisions hereinafter contained. It is a settled law that a legal provision cannot be read in a piecemeal manner. It has to be read as a whole. The learned advocate, Shri V. Lakshmi Kumaran had placed heavy reliance on the decision of the Hon'ble Supreme Court in the case of Trick India Ltd. v. Union of India reported in 1990 (48) E.L.T. 627 (SC) where in para No. 6 the Hon'ble Supreme Court had observed as under :--
* * * * * * In the matter before me, the appellants claim assessment under Heading 23.02 and Chapter Note 1 cannot be isolated. I have already observed above that in view of the larger Bench decision of the Tribunal in the case of Saurashtra Chemicals, Porbandar v. Collector of Customs, Bombay Chapter Notes and Section Notes are part of the Tariff. I have already discussed above that my learned brother, Shri S.K. Bhatnagar, Vice President in his order on internal page 5 in para No. 28 has observed that appellants' products are apparently synthetic preparations. For classification we have to look at the function and use of the article and it is the most important criteria for determining the essential character of an article. The product in dispute by no stretch of imagination can be treated as an animal feed. The Tribunal in the case of Crompton Greaves Ltd. v. Collector of Customs reported in 1989 (43) E.L.T. 788 (Tribunal) in paras 5 and 6 had held as under :--
* * * * * * The same were the observations of the large Bench in the case of Precious Industries v. Collector of Customs reported in 1989 (44) E.L.T. 47.
The Tribunal in its earlier decision in the case of Aries Agro-Vet Industries Pvt. Ltd., Bombay v. Collector of Central Excise, Bombay reported in 1984 (16) E.L.T. 467 (Tribunal) (Paras 7 to 10) had held as under :--
* * * * * * This decision of the Tribunal was upheld by the Hon'ble Supreme Court vide Civil Appeal No. 17/1984. The Tribunal in the case of Collector of Central Excise v. Roha Dye Chem Pvt. Ltd. reported in 1989 (41) E.L.T. 667 (Tribunal) had held as under :--
"12. Though it is true that Chapter titles by virtue of the Rules for the interpretation of the Central Excise Tariff Schedule are provided for an ease of reference only and, for legal purposes, classification shall be determined according to the terms of headings and any relative section or Chapter notes, they do provide a broad indication of the goods sought to be covered within the respective chapters. Chapter 21 is entitled "Miscellaneous edible preparations" and Chapter 32 "Tanning and Dyeing Extracts; Tannins and their Derivatives; Dyes, Colours, Paints and Varnishes; Putty, Fillers and other Mastics; Inks". Broadly speaking, therefore, edible preparations must find classification under one or the other of the heading in Chapter 21 in preference to Chapter 32. We have already referred to the Supreme Court's observations with reference to food colours in relation to the Sales Tax entry "dyes and colours and compositions thereof. The Department seeks to bring the subject goods under the description "synthetic organic colouring matter, whether or not chemically defined" under Heading 3204.90. In our opion, there is no real difference between colours and colouring material. What applies to colours would apply to colouring material also. If food colours are not "dyes and colours", they would not be colouring matter either, if the Supreme Court's observations in the S.N. Brothers case were to be applied to the present case. On the other hand, Chapter Note 5 to Chapter 21 shows that Heading No. 21.07 inter alia includes flavouring powders for making beverages, whether or not sweetened. The said Note 5 is not an exhaustive one but an inclusive one and if flavouring powders for making beverages are included in Heading No. 21.07, we do not see any reason why food colours should not also be deemed to be covered by the said heading. Of course, Chapter Note 5(j) is a specific one and does not cover the present food colours. The respondents' contention that the goods are akin to coloured syrups is not tenable because the goods are powders."
62. After looking into the essential characteristics of the product, I agree with the observations of my learned brother, Shri S.K. Bhatnagar, Vice President and the manner of the applicability of the Rules of Interpretation which have been mentioned in paras No. 45 to 47 of his order. I am of the view that the product will be classifiable under Heading 29.36 of the Central Excise Tariff, and I further direct the Registry to place the matter before the original Bench for passing appropriate order.
Sd/-
(Harish Chander)
Dated: 29-4-1994 President
ORDER
In view of the majority opinion, the products were classifiable under Heading 29.36 of the Central Excise Tariff and there was no need to interfere with classification under this heading.
2. The Appeal is disposed of accordingly.