Custom, Excise & Service Tax Tribunal
Sundyota Numandis Probioceuticals Pvt ... vs Principal Commissioner, Customs-New ... on 29 January, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi
PRINCIPAL BENCH - COURT NO. 1
Customs Appeal No.51113 Of 2022
[Arising out of Order-in-Original No. VII (HQ)10/Imp/Adj/Sundyota/96/2020/8089
dated 28.06.2021 passed by the Commissioner of Customs, New Delhi]
Sundyota Numandis Probioceutical
Private Limited : Appellant
701-702, Indraprasth Corporate, 100 Feet Road,
Prahladnagar, Ahmedabad-380015
Versus
Principal Commissioner, Customs New Delhi: Respondent
Air Cargo Complex (import)
New Customs House, near IGI Airport
New Delhi-110037
APPEARANCE:
Mr. Tarun Gulati, Senior advocate, Mr. Ketan Tadsare, Ms. Shruti Kulkarni,
and Mr. Rajat Chhabra, Advocates for the Appellant
Mr. M.K. Shukla, Authorised Representative for the Department
CORAM :
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL)
FINAL ORDER No. 50167/2026
Date of Hearing:08.10.2025
Date of Decision:29.01.2026
HEMAMBIKA R. PRIYA
The present appeal has been filed by M/s Sundyota Numandis
Probioceuticals Private Limited1 to assail the Order-in-Original No. VII
(HQ)10/Imp/Adj/Sundyota/96/2020/8089 dated 28.06.20212 wherein
the Commissioner had confirmed the demand of Rs. 7,07,02,027/-
along with interest and penalties.
1 the appellant
2 the impugned order
2
Customs Appeal No. 51113 Of 2022
2. The brief facts of the case are that the appellant was engaged in
the manufacture and sale of nutraceutical and pro-biotic products in
India. These products comprise variety of key ingredients which were
proprietary of the overseas vendors. The appellant imported these
ingredients on payment of customs duty. The Department issued
show cause notice alleging that the appellant had mis-classified (a)
Tendofit, (b) Mobilee, & (c) GG Orosoluble and was liable to pay
differential duty along with interest thereon,and that the goods were
liable to confiscation. The matter was adjudicated vide the impugned
order dated 28.06.2021 wherein the demand of customs duty to the
tune of Rs. 7.07.02.027/- along with interest was confirmed along with
appropriate penalties. Aggrieved by the said order, the appellant has
filed the present appeal.
3. Learned counsel for the appellant submitted that Tendofit was a
key ingredient that goes into the manufacturing of nutraceutical
products that support tendon health. Tendofit consists of 85% of
Mucopolysaccharides (MPS) and Collagen of 15%. Further, MPS
consists substantially Chondroitin Sulphate which provides the
essential characteristic to MPS and, as a corollary, to Tendofit as well.
Learned counsel submitted that as bovine extract and comprises
Chondroitin Sulphate and as Tendofit derives its essential
characteristics from Chondroitin Sulphate, the product can be said to
be a "Natural Polymer. Learned counsel submitted that this
understanding of the appellant was also corroborated by a certificate
issued by Dr. Joseman Jacob, Professor and Head, Department of
Materials Science and Engineering, Indian Institute of Technology
Delhi. He further contended that Mobilee also comprised a key
3
Customs Appeal No. 51113 Of 2022
ingredient derived from rooster comb that went into the manufacturing
of nutraceutical products that support joint health. Learned counsel
stated that Mobilee was an extract that consists of Sodium
hyaluronate, Polysaccharides and collagen. The Sodium hyaluronate
was a natural polymer by itself and constituted 60-75% of Mobilee,
while Polysaccharide and Collagen constitutes 10% and 5%
respectively. As such, Sodium hyaluronate provided the essential
character to Mobilee, and can be considered to be a Natural Polymer.
This understanding of the appellant is also supported by certificate
issued by Dr. Joseman Jacob. As regards, GG Orosoluble, learned
counsel submitted that it was an ingredient that was a pro-biotic
known as Lactobacillus Rhamnosus GG, which was essentially cultures
of bacteria i.e. live microorganisms, that helps promote healthy
balance of gut bacteria and have been linked to a wide range of health
benefits which include digestive health and immune functions. This had
been certified by Dr. Biswaranjan Pradhan, Indian Institute of
Technology, Bhubaneswar. Xylitol and sorbitol have been used as
excipient carrier to provide better stability to GG Orosoluble, in order
to withstand conditions during storage, transportation as well as
during industrial processes.
3.1 Learned counsel further submitted that the impugned order had
classified the imported goods under Chapter 21 as miscellaneous
edible preparations, thereby regarding them as edible preparation in
the form in which these are imported. However, he contended that
the imported articles were not edible in the form in which these are
imported for following reasons:-
4
Customs Appeal No. 51113 Of 2022
(i) Tendofit and Mobilee are imported in bulk packaging [25kg and
5kg drums respectively) which necessarily needed to be formulated
into prescribed dosage strength 260-520 mg/day and 50 mg/day
respectively. The dosage strength is also a condition prescribed for
FSSAI approval. Learned counsel reiterated that the imported goods
are not edible, prior to such process of formulation.
(ii) GG Orosoluble has clinical efficacy and tolerability of dosage of
up to 6 billion cells per day and exceeding these limits may pose a risk
of un-desired, un-noticed adverse events. Learned counsel submitted
that the time of import, it has a concentration of 16 billion cells per
gram and cannot be consumed as such without being formulated into
permissible dosage concentration.
(iii) Further, GG Orosoluble, being microorganism, was sensitive to
temperature/moisture. To ensure stability as well as palatability (to
mask the obnoxious smell and taste) it is accompanied by an
excipient. During the transportation, exposure to temperature and
moisture tends to affect composition of excipient in proportion to the
strength microorganism and thus viability of the product. GG
Orosoluble thus requires calibration of excipient before being
consumed. Due to the possibility of affected composition of excipient,
GG Orosoluble cannot be consumed as imported.
3.2 Learned counsel further submitted that the impugned order had
failed to ascertain the inedible nature of the imported goods, and the
findings to classify the import goods as 'Miscellaneous Edible
Preparations‟ under Chapter 21 were misplaced. He submitted that the
imported GG Orosoluble was subjected to the process of
manufacturing after its importation. The manufactured finished goods
5
Customs Appeal No. 51113 Of 2022
resultantly attained the character of an edible preparation.
Accordingly, the retail packagings of the manufactured finished goods
bore the remarks/declaration regarding its edible nature. The
impugned Order had relied on the declaration in the retail packaging of
the finished goods manufactured in India and has concluded that the
imported GG Orosoluble itself was in edible condition. Learned counsel
stated that the impugned order had erroneously relied on the
declarations made in respect of the finished goods, to determine
classification of the imported raw material required therefore.
3.3 Learned counsel further submitted that Tendofit and Mobilee
weremeant for improving joint health while GG Orosoluble is meant for
gut health. These were neither "known' or 'used' as 'food' or 'food
preparation in common parlance. He concluded that Note 16 of HSN
Explanatory Notes to Chapter 21 categorically exclude preparations
intended for the prevention of treatment of diseases or ailment for
chapter 21. In this regard, he relied on the decision of the Supreme
Court in the case of Indian Cable Company Limited Calcutta vs.
Collector of Central Excise Calcutta3 wherein it was categorically
emphasized the need to refer to common parlance or understanding of
the relevant trade in matters of classification of products. Learned
counsel also relied on the decision of the Supreme Court in the case of
Union of India vs. Garware Nylons Ltd.4, where the Court held that
revenue is under the burden to prove the classification alleged by it.
Learned counsel contended that revenue authorities alleged
classification of the subject goods under CTH 2106 as 'food preparation
3 (1994 (74) ELT 22 (SC)
4 1996 (87) ELT 12 (SC)
6
Customs Appeal No. 51113 Of 2022
not elsewhere classified without putting forth any evidence in support
thereof.
3.4 Learned counsel further submitted that the appellant had relied
upon certification by Dr. Joseman Jacob, Professor and Head,
Department of Materials Science and Engineering, IIT Delhi that
Tendofit and Mobilee are essentially natural polymers and on the
conclusions drawn by the Dr. Biswaranjan Pradhan, Research Scientist,
IIT Bhubaneswar that GG Orosoluble is essentially a probiotic and is
consumed for the benefit of gut health. He contended that the
illustrations provided under Note 6 are indicative of the items which
are sought to be classified under tariff item 2106 9099, which includes,
items such as "misthans", "mithal", "namkeens", "bhujia", etc. On the
other hand, Tendofit, Mobilee and GG Orosoluble are known and used
as nutraceutical supplement needed for support and improvement of
health and not for the purpose of any food preparations or any food
stuff.Rule 3(b) of the General Rules for Interpretation, is with
reference to goods consisting of different materials or components,
wherein the classification of such goods is to be based on the material
or component which gives them its essential character. In the present
case, "Tendofit" consists of MPS which constitutes about 85% of its
overall composition, and MPS substantially consists of Chondroitin
Sulphate which is a polymer by itself and provides the essential
characteristics to Tendofit. Similarly, Mobilee was an extract consisting
of Sodium hyaluronate, Polysaccharides and collagen. Sodium
hyaluronate is a natural polymer by itself and constitutes 60-75% of
the overall composition of Mobilee. As such, Sodium hyaluronate
provided the essential character to Mobilee which is classified as
7
Customs Appeal No. 51113 Of 2022
Natural Polymer. In this context, learned counsel stated that EU
Customs also recognizes Chondroitin Sulphate (in Tendofit) and
Sodium Hyaluronate (in Mobilee) to be covered under CTH 3913, more
particularly under entry 3913 9000 95 and 3913 9000 BS respectively.
3.5 Learned counsel further submitted that the definition of food as
provided under the FSSAI was wide enough to include 'substance'
which may not be considered as food in the conventional sense of the
expression. Therefore, issuance of an FSSAI license did not
conclusively determine whether the subject item is a food preparation
which would necessarily fall within CTH 2106 9099. He submitted that
the impugned order did not even attempt to analyse the contents of
the EU tariff structures, Certificate issued by Dr. Joseman Jacob so as
to ascertain its applicability in the present dispute. In this context, he
relied upon the Tribunal‟s decision in the case of Commissioner of
Customs (Import), Nhava Sheva vs. NDC Drug & Chemical
Private Limited5.
3.6 Learned counsel further submitted that Probiotics are live
microorganisms when consumed in adequate amount, improves or
restores gut flora. GG Orosoluble was essentially culture of bacteria
i.e. live microorganisms that help promote a healthy balance of gut
bacteria and have been linked to a wide range of health benefits which
include digestive health and immune function. The micro-organisms
are highly sensitive in nature and are easily affected by high
temperature/moisture and loss its viability. It is for these reasons that
these cultures of micro-organisms are always accompanied by an
excipient carrier. Cultures of microorganism are expressly covered
5 2012 (284) ELT 366 (Tri.-Mumbai)
8
Customs Appeal No. 51113 Of 2022
under CTH 30029030 and hence GG Orosoluble is nothing but a
probiotic i.e. culture of microorganism, and is liable to be classified
under CTH 3002 9030. In support of his submission, learned counsel
relied upon the recent decision of Mumbai Tribunal in the case of
Danisco (India) Pvt. Ltd. vs. CC, Air Cargo complex Andheri6.
3.7 Learned counsel further submitted that the appellant had
classified the subject goods i.e. Tendofit and Mobilee under Chapter
Heading 3913 for being a natural polymer and GG Orosoluble under
Chapter heading 3002 for being a probiotic, was based on the specific
characteristics possessed by them, whereas the impugned order
classified the subject goods under residual Chapter heading 2106 as
'food preparation not elsewhere specified merely because these are to
be consumed orally. The appellant had a bona fide belief that it has
correctly classified Mobilee and Tendofit under Chapter 39 and GG
Orosoluble under Chapter 30 and such belief was also supported by
various judicial decisions holding ground during the relevant period
such Commissioner of Customs (Import), Nhava Sheva vs. NDC
Drug & Chemical P. Ltd.7 Further, there was no judicial precedent in
contradiction with the appellant's belief in the present case. With
respect to the imposition of interest, learned counsel submitted that it
was a settled principle of law that, in cases where the original demand
is not sustainable, interest cannot be imposed. In the present set of
facts and circumstances, since the demand itself is unsustainable, the
interest imposed on such demand is erroneous and is liable to be
dropped. He prayed for setting aside the demand along with interest
and penalties.
6 (2023 (5) TMI 398-CESTAT Mumbai)
7 2012 (284) E.L.T. 366 (Tri. Mumbai)
9
Customs Appeal No. 51113 Of 2022
4. Learned authorized representative for the department submitted
that Tendofit is a mixture of two separate compounds, and is used to
prepare nutraceutical products to support tendon health. Merely
because of the presence of mucopolysaccharide, the entire product
cannot be called natural polymer as along with mucopolysaccharide,
Collagen to the extent of 15% was also present in impugned goods.
Thus, when Collagen was added to the mucopolysaccharides, the
resultant product namely Tendofit, no longer remained as „Natural
Polymer‟ and changed its nature to food preparation falling under CTH
2106. Learned authorized representative further submitted that for
import of impugned goods, FSSAI clearance is required, thus making it
a nutraceutical formulation. Learned authorized representative stated
that the definition of „Food‟ under Sec 3(j) of FSSAI Act, 2006 means
any substance, whether processed, partially processed or unprocessed,
which is intended for human consumption and includes primary food to
the extent defined in clause (zk), genetically modified or engineered
food or food containing such ingredients, infant food, packaged
drinking water, alcoholic drink, chewing gum, and any substance,
including water used into the food during its manufacture, preparation
or treatment but does not include any animal feed, live animals unless
they are prepared or processed for placing on the market for human
consumption, plants, prior to harvesting, drugs and medicinal
products, cosmetics, narcotic or psychotropic substances. He
submitted that as per section 3(zk) of FSSAI Act, 2006, "primary food"
means an article of food, being a produce of agriculture or horticulture
or animal husbandry and dairying or aquaculture in its natural form,
resulting from the growing, raising, cultivation, picking, harvesting,
10
Customs Appeal No. 51113 Of 2022
collection or catching in the hands of a person other than a farmer or
fisherman. The importer had taken FSSAI certificate/clearance at the
time of import, which clearly indicates the edible nature of the
imported goods.
4.1 Learned authorized representative further submitted that as per
appellant's submission Tendofit is a bovine cartilage extract, whichwas
used to prepare nutraceutical products to support tendon health.
Nutraceuticals are substances or compounds derived from food that
provide health benefits beyond basic nutrition. The term is a
combination of the words "nutrition" and "pharmaceutical".
Nutraceuticals can be consumed-as part of a diet or taken as
supplements. Nutraceuticals help with improving health, delaying
aging, preventing chronic diseases,increasing life expectancy, and
supporting the body's structure or function. Learned authorized
representative submitted that HSN explanatory Notes CTH 2106 says
that "(16) preparations, often referred to as food supplements, based
on extracts from plants, fruit concentrates, honey, fructose, etc. and
containing added vitamins and sometimes minute quantities of iron
compounds. These preparations are often put up in packaging with
indications that they maintain general health or well-being." The
impugned goods fall in CTH 2106. Both food supplements and
nutraceuticals serve to improve the health and wellness of individuals.
It is not prophylactic (done or used in order to prevent a disease),
therapeutic (helping to cure an illness).
4.2 Learned authorized representative further contended that the
drugs mainly used to treat diseases are referredto as
"Pharmaceuticals" while the drugs which prevent diseases are called
11
Customs Appeal No. 51113 Of 2022
"Nutraceuticals". Nutraceuticals are classified under CTH 21069099 as
a general practice. In this context, learned Authorized Representative
submitted thatin the context of the present GST tax regime, CESTAT
Ahmedabad had ruled that Nutrition/Dietary Supplements are covered
by Sl. No. 453 of Schedule III of Notification No. 1/2017-IGST-Rate
with CTH 2106 attracting IGST at rate of 18 per cent. Learned
Authorized Representative further submitted that the appellant had
submitted that Mobileewas a natural extract derived from rooster
comb, primarily comprising of sodium hyaluronate along with some
amount of polysaccharide and collagen. It was used to prepare
nutraceutical products to support joint health. The FSSAI product
approval licensewasfor rooster comb extract. Learned authorized
representative contended that Mobilee was of animal origin and the
classification proposed by the appellant of 3913 as natural copolymers
was not justified. He contended that similar toTendofit, Mobileewas
also rightly classifiable under CTH. 2106. Merely because of the
presence of Sodium Hyaluronate, the entire product could not be
classified as „natural polymer‟ as along with Sodium Hyaluronate,
Polysaccharides and Collagen were also present in the impugned good
viz., Mobilee. Thus,when other substances are added to the Sodium
Hyaluronate, the resultant product namely Mobileeno longer remained
as Natural Polymer and was converted as food preparation falling
under CTH 2106. Learned Authorized Representative further contended
that GG Orosoluble was a probiotic culture used for pediatricdiarrhoea
as well as maintenance of gut flora.Itwas not culture of micro-
organism liable to be classified under CTH. 3002. It was a final
12
Customs Appeal No. 51113 Of 2022
product which has already undergone the process to be marketed as a
dietary supplement.
5. We have heard the learned counsel for the appellant and the
learned Authorized Representative for the Department. The issue
before us for consideration relates to the classification of the impugned
goods viz. Tendofit, Mobilee &GG Orosoluble. However, before we
consider the submissions made by the learned counsel and the learned
authorized representative, we proceed to take note of the provisions of
the Customs Act, 1962.
6. Customs duty is levied as per section 12(1) of the Customs Act,
which is reproduced below:-
"12. Dutiable goods - (1) Except as otherwise provided in
this Act, or any other law for the time being in force,
duties of customs shall be levied at such rates as may be
specified under the [Customs Tariff Act, 1975 (51 of
1975)], or any other law for the time being in force, on
goods imported into, or exported from India"
What is apparent from the above is that under the Customs Act,
19628, the taxable event for customs duty occurs on import of the
goods into India or export of goods. It is settled law that the
fundamental principle while determining the classification under the
Customs Tariff Act, 1975 is the condition of goods at the time of
import, which is the taxable event. In this context, we draw support
from the Supreme Court‟s decision in Commissioner of Customs
(Imports) versus M/s Welkins Foods9 wherein the Court held as
follows:-
"85.The twin factors mentioned should be regarded as
fundamental principles while determining the classification
of a product under the First Schedule of the Act, 1975.
This is because, according to Section 12 of the Act, 1962,
it is evident that the goods are taxable at the point of
8 the Act
9 Civil Appeal No. 5531 of 2025 dated 06.01.2026
13
Customs Appeal No. 51113 Of 2022
import. Therefore, as recognised by this Court in Dunlop
India (supra), what is crucial is the condition of the goods
at the time of import, which is the taxable event under the
Act, 1962. By excluding consideration of actual use
and subjective intentions regarding use, it is
ensured that classification aligns with the taxable
event. Actual use can be considered only in those rare
instances where there is overwhelming statutory evidence
to that effect.
86. Furthermore, relying on „objective characteristics and
properties‟ ensures legal certainty and ease of verification.
The core of the principles outlined above is to prevent
„subjectivity‟ from influencing classification disputes.
Reckless and unfounded consideration of subjective
elements can lead to a cascade of issues in classification,
as such elements may be used as a shield to import goods
at a lower duty."
(emphasis supplied)
6.1 Classification under the Customs Tariff Act, 1975, relies on the
Harmonized System of Nomenclature (HSN) to assign 8-digit codes for
imported and exported goods, to determine the applicable duty rates.
The Customs Tariff Act is organized into 21 sections, 98 chapters,
headings, sub-headings, and 8-digit tariff items. This HSN-aligned
system, maintained by the World Customs Organization, standardizes
classification globally while allowing India-specific extensions.
6.2 The General Rules of Interpretation (GIR)
to be followed for classification of goods follows six GIRs sequentially:
• GIR 1: Determined by heading terms and relevant
section/chapter notes.
• GIR 2: Covers incomplete/unfinished articles or mixtures by
essential character.
• GIR 3: For multiple headings, prefers (a) most specific
description, (b) essential character for mixtures, or (c) last-in-
number for equal specificity.
14
Customs Appeal No. 51113 Of 2022
• GIR 4-5: Applies to unlisted goods akin to listed ones or by
material/function.
• GIR 6: Sub-heading classification mirrors above rules at that
level.
6.3 These rules ensure objective, hierarchical application without
trade parlance overriding statutory terms unless specified.
7. With the above guiding principles, we proceed to take each of
these products for consideration.
7.1 Tendofit:- It has been submitted before us that Tendofit is
Bovine Cartilage extract and its composition is as follows:
Substance ASSAY
Mucopolysaccharides 84.6%
Collagen 15.4%
Bovine Cartilage extract, contains collagen and chondroitin sulfate, or
similar proteins. While classifying the said goods in CTH 2106, the
impugned order has held as follows:-
"8.4.3 ................. Tendoflt is a Bovine Cartilage
Extract containing Mucopolysaccharides and Collagen to
the extent of 84.6% and 15.4% respectively. The noticee
has stated that Mucopolysaccharide is a natural polymer,
in primary form und that it substantially consists of
Chondroitin Sulphate which is a biological polymer that
acts as the flexible connecting matrix between the protein
filaments in cartilage. However, I observe that the
submission made by the noticee is silent regarding the
role of Collagen in the said impugned item. Collagen is a
protein made up of various amino acids and is an
important constituent of the impugned preparation. Since
the said item 'Tendofit' is in a form of a preparation
containing two ingredients Chondroitin
Sulphate/Mucopolysaccharides and Collagen, therefore, it
cannot be termed as "natural polymer" in primary form. I
find that as the said item is in the form of a preparation,
hence there is a need to look into for the appropriate
classification as a whole and not splitting it into its
constituents and classify them. The item in the manner it
has been imported has to be classified and not its
separate constituents as has been attempted by the
15
Customs Appeal No. 51113 Of 2022
noticee. Going by the composition of the impugned goods,
I am of the view that it loses its character as a natural
polymer and becomes a food preparation which is taken
as a nutraceutical by the human beings for general health
benefits. Here it is very relevant to state that the
impugned goods are in fully manufactured state, ready for
human consumption when packed for retail sale and the
importer has obtained certificate from FSSAI for this
purpose. FSSAI regulates the manufacture, storage,
distribution, sale and import of food items to ensure
availability of safe and wholesome food for human
consumption. Does an import of polymers falling under
Chapter 39 of the Tariff require a FSSAI certificate? The
answer is no. The very reason that the importer obtained
FSSAI certificate clearly implies that the impugned goods
are nothing but food preparations under CTH 2106 and
not some natural polymer/ plastic as covered under 3913
of the Tariff."
xxxxxx xxxxxx xxxxxx xxxxxx
8.4.9 .............. I now proceed to examine the
classification as proposed in the show cause notice of the
impugned goods under CTH 2106 9099 of the Tariff
Chapter 21 covers miscellaneous edible preparations.
Further the entry 2106 covers „Food preparations not
elsewhere specified or included‟ such as Protein
concentrates and textured protein substances and others.
xxxxx xxxxx xxxxxxx xxxxxxx
Such preparations for use either directly or after
processing for human consumption are covered within the
CTH 2106 of the tariff. Having examined the nature of the
goods covered under CTH 2106 from the supplementary
notes, I am of the view the item „Tendofit‟ which is
undisputedly an edible preparation of miscellaneous
nature and thus going by the essential nature and
character of the impugned goods, I hold a firm view that
as per General Rules for Interpretation of the Customs
Tariff, being a composition of Mucopolysaccharides and
collagen, Tendofit, meant for human consumption duly
certified by FSSAI as a food merits classification under
CTH 21069090 of the Tariff."
7.2 A perusal of the submission indicates that Tendofit comprises
MPS and Collagen of 85% & 15% respectively. In order to appreciate
the findings of Commissioner, it would be imperative to reproduce the
competing headings, which are reproduced below:
"Chapter Heading 21
FOOD PREPARATIONS, NOT ELSEWHERE SPECIFIED
OR INCLUDED
16
Customs Appeal No. 51113 Of 2022
2106 10 00 - Protein concentrates and textured protein
Substances 2106 90 - Other
--- Soft drink concentrates:
2106 90 11 --- Sharbat
2106 90 19 --- Other
2106 90 20 --- Pan masala
2106 90 30 --- Betel nut product known as "Supari"
2106 90 40--- Sugar-syrups containing added flavouring
or colouring matter, not elsewhere specified or included;
lactose syrup; glucose syrup and maltodextrine syrup
2106 90 50 --- Compound preparations for making
nonalcoholic beverages
2106 90 60 ---- Food flavouring material
2106 90 70 --- Churna for pan
2106 90 80--- Custard powder
--- Other
2106 90 91 ---- Diabetic foods
2106 90 92---- Sterilized or pasteurized millstone
21069099 --- Other"
7.3 The relevant HSN Explanatory notes for the said CTH is as
below:
"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 :
17
Customs Appeal No. 51113 Of 2022
(1) Powders for table creams, jellies, ice creams or
similar preparations, whether or not
sweetened.
.................................. ................................ ...............................
.........................
(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 fillings, 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).
.................................... ....................................... .................." 7.4 From a bare perusal of the CTH 2106 and the connected HSN notes, it is evident that the said CTH covers diverse range of products that do not fit into more specific categories of Chapter 1 to Chapter 20. The goods are liable to be classified under the said heading, if they meet one of the primary conditions as defined in the said HSN viz., (i) Preparations intended for direct human consumption or for consumption after simple processing such as cooking, dissolving of milk or water (ii) manufacturing inputs which are preparations consisting wholly or partly of foodstuffs used in making beverages or other food preparations. The impugned order has classified the said 18 Customs Appeal No. 51113 Of 2022 product under CTH 2106.90 in the other category which basically covers the following products:-
2106 90: The "Other" category, which includes:
o Soft Drink Concentrates/Sharbat:Bases for non- alcoholic beverages.
o Pan Masala & Supari: Betel nut products known as "Supari" (2106 90 30) and Pan Masala (2106 90 20).
o Traditional Snacks: Items like Namkeens, Bhujia, and Mithai (sweetmeats).
o Dietary Supplements: Food supplements and diabetic foods.
o Culinary Aids: Food flavoring materials, sugar syrups with added flavors, and custard powder. 7.5 The said order has relied on the fact that the said products contained a percentage of collagen which makes it edible for human consumption and therefore is rightly classifiable under the said heading, albeit the final product viz., the Tendofit being a nutraceutical would be a food preparation and more liable to be classified under this heading. However, we observe that the Ld Counsel has submitted that Tendofit, at the time of import,is a raw ingredient and not edible as imported, as the same is imported in bulk i.e., 25 kgs drum. It has been contended that as per the FSSAI approval, Tendofit is required to be formulated into prescribed dosage strength of 260-520 mg/day before they can be considered as edible. The analysis of the raw material by Prof Bibhu Prasad Panda, Jamia Hamdard who has certified the imported ingredient as follows:-
"-it is hygroscopic in nature and, if handled in an uncontrolled environment, poses a risk pathogenic contamination and alterations in physiochemical characteristics.19
Customs Appeal No. 51113 Of 2022
-It is unpalatable due to its salty and chalky flavour and disagreeable odour."
7.6. From the above, it is very clear that the raw material, Tendofit, which at the time of import is not edible, would not be classifiable under the said residuary heading 21069099. This is further strengthened by the examples of „Namkeen, Mithai, Misthans‟ etc given for the said heading. It is also important to note that there is no chemical examination report which supports the Department‟s contention that the imported goods are edible at the time of import.
8. We now move to the classification of the said product as per the GIR. In this context, we find that the said product comprises 86.4% of Mucopolysaccharides(MPS) derived from Bovine cartilage which substantially consists of Chondroitin Sulphate and 15.4% of Collagen. Thus we would need to sequentially move through the GIRs to establish the correct classification of the said item. GIR 1 and GIR 2 would not be applicable in the instant case. We find that the GIR 3 pertains to classification in case of multiple headings, which prefers (a) most specific description, (b) essential character for mixtures, or (c) last-in-number for equal specificity. Tendofit, being a composite product would then be classifiable as per 3(b) on the basis of the material which gives its essential character. In the instant case, it is the MPS/Chondroitin Sulphate which gives Tendofit its essential character. It is noted that the appellant has chosen to classify their product as 3913 as polysaccharide derivatives. In order to appreciate their contention, we reproduce the competing heading and the HSN notes hereinafter:
Chapter Heading 39139092 20 Customs Appeal No. 51113 Of 2022 3913 Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms 3913 10 - Alginic acid, its salts and esters:
3913 10 10 --- Sodium alginate 3913 10 90 --- Other 3913 90 --- Other
--- Chemical derivatives of natural rubber 3913 9011 ---- Chlorinated rubber 3913 9019 --- Other 3913 90 20 --- Hardened proteins (such as hardened casein, gelatine) 3913 0 -- Dextran 3913 90 90 --- Other The HSN explanatory notes is also reproduced hereinafter:-
39.13 - Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms.
3913.10 - Alginic acid, its salts and esters 3913.90 - Other The following are some of the principal natural or modified natural polymers of this heading.
(1) Alginic acid, its salts and esters Alginic acid, a poly(uronic acid), is extracted from brown algae (Phaeophyta) by maceration in an alkaline solution. It may be produced by precipitating the extract with a mineral acid or by treating the extract to obtain an impure calcium alginate which on treatment with a mineral acid is transformed into alginic acid of high purity...................................... Among the esters is propylene glycol alginate which is used in foodstuffs, etc. The heading excludes :
(a) Unmodified natural resins (heading 13.01).
(b) Etherified or esterified endosperm flour of locust beans or guar seeds (heading 13.02).
(c) Linoxyn (heading 15.18).
(d) Heparin (heading 30.01).
(e) Starch ethers and esters (heading 35.05).
(f) Rosin, resin acids and their derivatives (including ester gums and am gums) (heading 38.06).21
Customs Appeal No. 51113 Of 2022
9. The appellant has chosen to classify the product as natural polymer and has relied on the US Custom Ruling in this context. In order to appreciate the said contention, we may refer to the said US Customs Ruling in this regard, which is reproduced hereinafter:-
"Re: Chondroitin Sulfate imported in bulk form:
This is in reference to your letter of May 19, 1999, to the Director, Customs National Commodity Specialist Division, concerning the classification, under the Harmonized Tariff Schedule of the United State (HTSUS), of "chondroitin sulfate" (CS), imported in bulk form. In preparing our response, we have reviewed the decisions in NY A82011, issued by the Customs National Commodity Specialist Division on June 20, 1996, NY 815350, issued on October 19, 1996, and HQ 960053, which was issued by Customs Headquarters on October 21, 1997, and have determined that the classification set forth in those rulings for CS imported in bulk is in error.
xxxxxxxx xxxxxxxxx xxxxxxxx
xxxxxxxxxxx
FACTS:
The substance CS imported in bulk form is a white powder "glycosaminoglycan that predominates in the ground substance of cartilage, bone, and blood vessels but also occurs in other connective tissues. It consists of repeating disaccharide units in specific linkage, each composed of a glucoronic acid residue linked to a sulfated N-
acetylgalactosamine residue." Dorland's Medical Dictionary, 321 (28th Edition,W. B. Saunders Company, 1994). Furthermore, the Merck Index, §2270, 371 (12th Edition, Merck & Co., Inc., 1996) adds that "[t]hese biological polymers act as the flexible connecting matrix between the tough protein filaments in cartilage to form a polymeric system similar to reinforced rubber." Id. The CAS registry number assigned to CS is 12678-07-8 and it is not listed in the Chemical or Pharmaceutical Appendixes to the HTSUS.
We note that there are varying grades and types of CS. All are produced using three basic steps:22
Customs Appeal No. 51113 Of 2022 extraction from animal cartilage, drying, and milling into a fine powder.
ISSUE:
Whether CS imported in bulk form is classified in heading 3001, HTSUS, as animal substances for therapeutic or prophylactic use, or heading 3913, HTSUS, as a naturally occurring polysaccharide.
LAW AND ANALYSIS:
Merchandise imported into the U.S. is classified under the HTSUS. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context that requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law.
.......................................
The following headings are relevant to the classification of this product: 3001 Glands and other organs for
organotherapeutic uses, dried, whether or not powdered; extracts of glands or other organs or of their secretions for organotherapeutic uses; heparin and its salts; other human or animal substances prepared for therapeutic or prophylactic uses, not elsewhere specified or included:
* * * * * * * * * * * * 3913 Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms:
Other Polysaccharides and their derivatives xxxxxxx xxxxxxx xxxxxx xxxxxx
.......................... We note that the FDA's use of a term does not control Customs classification 23 Customs Appeal No. 51113 Of 2022 decisions. However, Customs is not classifying the product according to the definition of the terms "therapeutic" and "prophylactic" in FDA statutes. Rather, the FDA regulates the use of this product in the U.S. Where Customs must determine whether a "use" provision applies to a substance, the controlling regulatory scheme is indeed relevant. More importantly, the Courts have delineated some of the factors to consider in determining whether a product falls within the class or kind of a particular "use" provision. These are: (1) the general physical characteristics, (2) the expectation of the ultimate purchaser, (3) the channels of trade, (4) the environment of sale (accompanying accessories, manner of advertisement and display), (5) the use in the same manner as merchandise which defines the class, (6) the economic practicality of so using the import, and (7) the recognition in the trade of this use....................... Applying these factors, we find that they weigh overwhelmingly in favor of finding that CS is not prepared principally for use in the U.S. for therapy or prophylaxis. Our analysis follows thus: The general physical characteristics of CS is that of a mucopolysaccharide, like rubber. The expectation of the ultimate purchaser is that CS increases the general health of their bones and joints and may treat joint ailments through the same mechanism that it improves joint function generally. The channels of trade and environment of sale is through health food stores and pharmacies shelved with the dietary supplements. One can also purchase the product electronically on the internet through web sites promoting natural products for maintaining general good health. The product is advertised as a substance which maintains healthy joints. The product is used as a dietary supplement. The substance is not prepared for a sole use. The basic preparatory steps in the manufacture of the CS, extraction from animal cartilage, drying, and milling into a fine powder, occur whether or not the CS is being used as a dietary supplement. The very same CS which is sold as a dietary supplement may currently be recommended for use to "treat" osteoarthritis. We note that some medical doctors have recommended CS for use in therapy and prophylaxis of joint maladies. Therapeutic is defined as "having healing or curative powers....................... It may well be that CS has therapeutic or prophylactic use. However, to the extent health care professionals suggest using CS, these recommendations are no different from recommending a healthy diet to "treat" coronary 24 Customs Appeal No. 51113 Of 2022 artery disease, eating a hard candy to "treat" low blood sugar associated with the administration of insulin, or taking vitamin C to "prevent" a cold. Healthy foods, hard candy and vitamin C are not classified under subheading 3001, HTSUS, by virtue of these doctor recommendations. The fact remains that in this country, CS is marketed, used and regulated as a dietary supplement to maintain strong joints not unlike the purposes provided by any nutrient.................. The economic practicality of using the import as therapy or prophylaxis is not feasible as regulations preclude its being marketed as such. Our research indicates that there is no consensus that CS has prophylactic or therapeutic use, regardless of the grade of the product, beyond its ability to maintain healthy joints. Indeed, the NIH states that "results of previous studies in the medical literature have yielded conflicting results on the effectiveness of glucosamine and CS as effective treatments for osteoarthritis."
HOLDING:
CS is classified in subheading 3913.90.20, HTSUS, the provision for "[N]atural polymers . . .: [O]ther:
[P]olysaccharides and their derivatives..............................."
9.1 The US Customs Ruling is for the Chondroitin Sulfate which is the essential ingredient of Tendofit. The impugned order has not accepted the ruling stating that the same was for bulk import. In this context, we note that the Ld Counsel has submitted that Tendofit is imported in bulk form i.e., 25 kgs drums, a fact which has clearly been ignored by the Commissioner. The Commissioner has held that the "essential character of the impugned goods is of an edible preparation which shall be sole criteria to classify it under a specific entry under the Tariff.......", whereas it has clearly stated that at the time of import, the goods are not edible. The Department has led no evidence to establish that Tendofit, at the time of import, was in an 25 Customs Appeal No. 51113 Of 2022 edible form. It is settled law that the goods have to be classified at the import stage and not as per the intended use. In order to determine the classification of the goods, we need to go by the settled principal of law that if the department intends to classify the goods under a particular heading, or subheading, different from the one claimed by the importer, the department is required to induce proper evidence and thereby discharge the burden of proof. We find that other than mere reiteration of their opinion, the Department has failed to discharge this burden. In this context, we rely on the decision of the Apex court in the case of HPL Chemicals versus Commissioner of Customs, Excise, Chandigarh10 which relied on the earlier decision of the Apex court in Union of India and Others versus Garware Nylon Limited and others.11
10. The impugned order has rejected the appellant‟s submission that under the EU Customs Tariff, Chondroitin Sulphate is classified under Chapter 39139000, on the grounds that the import was not of Chondroitin Sulphate. We are unable to appreciate this finding of the Commissioner. It is an admitted fact that Tendofit is a Bovine Cartilage extract which contains 86% of Chondroitin Sulphate. Therefore, to merely reject the submission on the ground that the imported goods is not the same cannot be accepted. In this context, we find that the Tribunal in S. R. Files and Tissues Limited versus Commissioner of Central Excise12 held that the decision of the Supreme Court of South Africa based upon the opinion of the committee on Harmonised system, can be made applicable to the Indian context. The said
10 (2006(197)ELT 324), 11 (1996(10)SCC 413) 12 2013 (565) ELT 294 26 Customs Appeal No. 51113 Of 2022 decision of the Tribunal in arriving at the classification has been affirmed by the Apex Court in Commissioner of Central Excise versus Hindalco industries Limited.13 Hence, the US Customs Ruling and the EU Tariff have a persuasive value that cannot be ignored or wished away by the Department.
11. Further, we find that the Supreme Court in its decision in the case of Welkins (supra) has relied on its judgment in Dunlop India and held as follows:-
"73. While the judgment of this Court in Dunlop India (supra) was delivered in the pre-HSN era, it laid down two principles governing classification under the customs law which remain relevant even in the HSN era. They are: (i) evaluation and classification of goods based on their condition at the time of import, generally referred to as the „as imported‟ principle; and (ii) consideration of „use‟ only when reference to use or adaptation is provided in the tariff heading......................................................"
12. In the instant case, it is an admitted fact that the Tendofit imported is converted to capsules for use as nutraceutical, for which the appellant has the FSSAI license as well. However, what was imported is not the final product, ready to use as nutraceuticals but merely its raw material. Hence, the use of the imported goods cannot become the principle for its classification. In view of the above discussions, we hold that Tendofit is rightly classified under CTH 3913 by the appellant.
13. We now address the submissions with regard to Mobilee:-
It is on record that Mobilee is a natural extract derived from rooster comb comprising of sodium hyaluronate, polysaccharide and collagen.
The Chemical composition of the said product is as follows:-
Substance ASSAY
13 (2023) 3 Centax 132(SC)
27
Customs Appeal No. 51113 Of 2022
Hyaluronic acid and other components, (60-75&) including and collagen Polysaccharides 10% Collagen 5%
14. We find that the findings in respect of Mobilee in the impugned order is as follows:-
"8.5.2 Mobilee is a natural extract derived from rooster comb and comprising of sodium hyluronate, polysaccharide and collagen.
xxxxx xxxxxxx xxxxxx xxxxxxx
8.5.3 I find that the item „Mobilee‟ is an extract
consisting of Sodium Hyaluronate, Polysaccharides and collagen. The noticee has submitted that the impugned goods predominantly contain „Sodium Hyaluronate‟ and as EU tariff structure which is upto 10 digit, it is classified under CTH 3913 9000 85 of the Tariff. I find that the notice is silent about the other two constituents of the composition i.e. Polysaccharides & Collagen, which are also important to decide the characteristics of the item. The issue before me is not about classification of „Sodium Hyaluronate‟ but of a product comprising of „Sodium Hyaluronate‟, polysaccharides and collagen. The EU classification was about „Sodium Hyaluronate‟ only and thus not relevant to the case in hand. The item imported by the notice is an edible preparation duly supported as a food under FSSAI certificate and not a plastics as contended by the notice for classifying it under Chapter 39 of the Tariff.
8.5.4...................I am of the view that Mobilee is an edible preparation of miscellaneous nature and thus as per General Rules for Interpretation of the Customs Tariff, I hold the classification under CTH 21069090 of the Tariff as proposed in the notice and reject CTH 39139090 as adopted by the notice."
15. Learned counsel has submitted that Mobilee was imported in bulk packaging i.e., 5 kg drums which was required to be formulated into prescribed dosage strength 80 mg/day as per the FSSAI approval. He further submitted that the imported goods were not edible prior to such process of formulation. Learned authorized representative has submitted that the said goods were nutraceuticals to support joint health. Its classification as natural polymer is not justified as Collagen 28 Customs Appeal No. 51113 Of 2022 was also present, in addition to Sodium Hyaluronate. The learned authorized representative has relied on the decision of this Tribunal in the case of Bright Performance Nutrition versus Commissioner of Customs, Mundra14 wherein nutraceuticals/food supplement has been classified under CTH 2106. The dispute in the instant case relates to the raw material Mobilee imported in bulk for formulation of Mobilee the supplement. Therefore, this decision is not applicable in the instant case.
16. We note that Sodium hyaluronate's customs classification typically falls under Harmonized Tariff Schedule (HTS) code 3913.90, for natural polymers and their derivatives, specifically under subheadings like 3913.90.20 (polysaccharides and derivatives) or 3913.90.90 (other), depending on its form (bulk powder vs. finished product). The finished medicaments or cosmetic preparations can shift its classification. In the context of its classification, we once again take note of the US Ruling CLA-2 OT:RR:CTF:TCM H017425 ARM regarding the classification of Sodium Hyaluronate derived from Rooster Comb in heading 3001, HTSUS, or as "natural polymers" of heading 3913, HTSUS. The relevant paras are extracted hereinafter:
"CBP has classified bulk sodium hyaluronic acid in subheading 3913.90.20, HTSUS, the provision for "Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms: Other: Polysaccharides and their derivatives," in numerous rulings (see New York Ruling Letters (NY) 870775, dated February 19, 1992, NY 881465, dated January 20, 1993, NY 890398, dated October 6, 1993, NY A88459, dated October 28, 1996, NY 14 [(2024) 18 Centax 1 (Tri.Ahmd)] 29 Customs Appeal No. 51113 Of 2022 D87202, dated February 4, 1999, and NY K87872, dated July 22, 2004).
HOLDING:
By application of GRI 1, bulk sodium hyaluronate is classified in heading 3913, HTSUS, specifically in subheading 3913.90.20, HTSUS, which provides for: "Natural polymers (for example, alginic acid) and modified natural polymers (for example, hardened proteins, chemical derivatives of natural rubber), not elsewhere specified or included, in primary forms: Other:
Polysaccharides and their derivatives..........................................."
17. In addition, we find that the EU Customs Tariff classified Sodkum Hyaluronate under CTH 3913 as natural polymer. As noted above, HSN adopted by the WCO forms the basis on which commodities/goods are internationally classified by all Member countries upto the six digit level. Consequently, the persuasive value of such rullings cannot be ignored.
18. Further, we find that the classification adopted by the appellant is supported by the opinion of the Professor & head of Material Science &Engineering, IIT Delhi Dr. Joseman Jacob, wherein he has categorically opined as follows:-
"Product name: Tendofit (Mucopolysaccharide) Mucopolysaccharide: not less than 86.4% Collagen content: not less than 15.4% Product name: Mobilee Sodium hyaluronate content: 60-75% Polysaccharide: not less than 10% Collagen content: not less than 5% xxxxxxx xxxxxxxx xxxxxxxxxx The TGA and ITG thermograms in Figure A2 and Figure A3 represent the thermal degradation behaviour of mucopolysaccharide (Tendofit) and Mobilee, respectively. The mucopolysaccharide (Tendofit) TGA thermogram depicts a three-stage degradation of the polymer at 106, 257 and 476 °C which is in close agreement with literature reported data of collagen. For Mobilee, the degradation stages appear at 106, 279 and 650 °C. The DSC thermogram of mucopolysaccharide (Tendofit) and Mobilee is represented in Figure A4 and Figure AS respectively.30
Customs Appeal No. 51113 Of 2022 From DSC analysis, a melting peak at 241 °C (we could not find the literature value for this for comparison, although collagen value is known, its content is low to be distinctly seen) was observed for mucopolysaccharide (Tendofit) and at 237 °C (265 °C for pure hyaluronic acid, this sample has only 65% content, so probably the value is fine) for Mobilee.
xxxxxxx xxxxxxxx xxxxxxx Based on the data it can be concluded that both products
- Mucoploysaccharide (Tendofit) and Mobilee are essentially a 'polysaccharide' and if both the products derived or extracted from natural source then both can be considered as 'natural polysaccharide'."
19. In this context, it is settled law that expert opinion such as above are assistive, but not binding, requiring scrutiny for bias, completeness and scientific criteria. In classification matters, the revenue department bears the burden of proof via robust evidence. The expert opinion in the instant case is none other than the Head of the Department in IIT, Delhi which is a pre eminent public institute of technology and has been created to be a Centre of Excellence for training, research and development in Science, Engineering and Technology. Per contra, we do not find any evidence led by the Revenue department to disprove the said opinion. No chemical test report or expert opinion has been placed before us in support of their contention.
20. We find that the product Mobilee being a mixture, the classification would have to be as per GIR 3 (b). Such a commodity/mixture would have to be classified by the component which gives it its essential character. In the instant case, the essential character of Mobilee is given by Sodium Hyaluronate which is liable to be classified under CTH 3913. The learned authorized representative has submitted that as collagen is also present along with sodium hyaluronate, hence the resultant product viz., Mobilee does not remain 31 Customs Appeal No. 51113 Of 2022 a natural polymer, and changes its nature to a food preparation. We are unable to appreciate this contention. It has been submitted before us that Mobilee, when imported is not in edible form and is in bulk packaging of 5 kgs. It needs to be formulated to the prescribed dosage strength of 80mg/day before the same becomes edible. Consequently, applying the principle of customs classification which is at the time of import, the same cannot be termed as preparation of food falling under CTH 2106. Consequently, we uphold the appellant‟s contention in classifying Mobilee in CTH 3913.
21. We now proceed to deal with the classification of the product - GG Orosoluble.
21.1 GG Orosoluble - The appellant has claimed the classification of the said product under CTH 3002 whereas the Department has classified the same under CTH 2106. In order to appreciate the submissions, we reproduce the findings in respect of this commodity in the said impugned order, which are reproduced hereinafter:-
"8.6.2 „GG Orosoluble‟ has been submitted by the notice as per which it contains a specific grade of bacteria based Probiotic culture, viz., Lactobacillus Rhamnosus GG and certain other ingredients such as Xylitol, Sorbitol, Natural Vanilla Flavour & Maltodextrin.
xxxxx xxxxxx xxxxxxx xxxxxx said item is in not a „probiotic‟ but a form of a preparation/ products which contains other important ingredients making it fit for human consumption along with the specific grade of bacteria based Probiotic culture, hence the appropriate classification as a whole and not splitting it into its constituents is required to be look into. It is a settled law that the item has to be classified in the manner it has been imported and not its separate constituents. From the ingredients of the impugned goods, I am of the view that itlosses its character as a probiotic and becomes a food supplement, ready to use for human consumption for general health benefits. Here it is very relevant to state that the impugned goods are in fully manufactured state, ready for human consumption when packed for retail sale.32
Customs Appeal No. 51113 Of 2022 Chapter 30 covers pharmaceutical products whereas on the impugned product, it has clearly been mentioned that it is „Not for medicinal use‟. The importer is not in possession of any Drug License which is a mandatory requirement for import, manufacturer and sale of pharmaceutical preparations. Further from the above composition that GG Orosoluble contains bacteria based Pro-biotic Micro- organism, but also Sorbitol, Xylitol & Maltodextrin for stabilizing and diluting the said item and vanilla flavour, it is in the nature of a preparation for human intake and is akin as Health & Dietary Supplement. It is evident that is in the nature of an edible preparation of miscellaneous kind for human consumption."
21.2 In this context, learned counsel has submitted that that GG Orosoluble, was an ingredient that was a pro-biotic known as Lactobacillus Rhamnosus GG, which was essentially cultures of bacteria i.e. live microorganisms, that helps promote healthy balance of gut bacteria. This has been certified by Dr. Biswaranjan Pradhan, Indian Institute of Technology, Bhubaneswar. Xylitol and sorbitol have been used as excipient carrier to provide better stability to GG Orosoluble, so that it can withstand conditions during storage, transportation as well as during industrial processes. Learned counsel further submitted that their contract manufacturer in India have obtained relevant licences under the State FDA under the appropriate product category of probiotics. He drew attention to the entries appearing under Sr. No. 22 of such license which specifically mentions the subject goods i.e. Lactobacillus rhammosus as probiotics. It has been contended that the said product was subjected to manufacturing process after its importation, which results in the edible preparation GG Orosoluble. Consequently, the retail packaging of the product of the final product bear the declaration of its edible nature. Learned authorized representative has submitted that the imported product 33 Customs Appeal No. 51113 Of 2022 was a final product which has already undergone the process to be marketed as a dietary supplement.
21.3 As stated supra, goods have to be classified based on their state at the time of the import. In the instant case, we note that Dr. Biswaranjan Pradhan, Indian Institute of Technology, Bhubaneswar, has clearly opined that the imported powder represents a probiotic powder which is used for suitable formulation production as per required dosage. The addition of Xylitol and sorbitol is for better stability during storage, transportation as well during the industrial processes. It has been categorically stated that the goods are raw material grade, which has to undergo processes for making it edible. The use of the excipient carriers is not used as a flavouring agent or sweetener for food preparation. We find that the Department has not led any evidence to controvert these submissions.
24. It is settled law that the Department has to discharge the burden of proving the classification alleged by them. In the instant case, the appellant has submitted the expert opinion of the Professor of a reputed institute to substantiate their claim. We observe that the Supreme Court in its judgment in Hindustan Ferodo Ltd versus Collector of Central Excise, Bombay 15 held that it was for the Revenue to lead and evidence in and demonstrate that the classification is incorrect. The relevant para is reproduced hereinafter:
"4. It is not in dispute before us, as it cannot be, that the onus of establishing that the said rings fell within Item 22F lay upon the Revenue. The Revenue led no evidence. The onus was not discharged. Assuming therefore, that the Tribunal was right in rejecting the evidence that was produced on behalf of the appellants, the appeal should, nonetheless, have been allowed."
15 [1997 (89) ELT 16(SC)] 34 Customs Appeal No. 51113 Of 2022
25. Further, we draw from CESTAT‟s decision in Denisco (India) Private Limited versus Commissioner of Customs, Air Cargo Complex Andheri16. The relevant paras are reproduced hereinafter:-
"9. Learned Counsel has placed before us rulings of foreign customs administrations as has Learned Authorized Representative. We take notice that the impugned orders are about the nature of the impugned goods in the context of exclusions in chapter 30 of First Schedule to Customs Tariff Act, 1975 and inclusions in chapter 21 of First Schedule to Customs Tariff Act, 1975 The rulings relied upon by both sides had arisen from examination of the relevant product in the framework of the enumerations at the domestic level in the respective tariffs and that of the European Union (EU) pertains to application of non-tariff barriers imposed by a constituent State. At this stage, we may also take notice that, notwithstanding the several submissions of Learned Authorized Representative on the proper classification of 'probiotics‟ -whether as food supplement or ingredient for manufacture of food supplement, the intent of law insofar as classification of probiotic within heading 3002 of First Schedule to Customs Tariff Act, 1975 is beyond question as the notification cited by the appellant unambiguously deem it to be so. No amount of argument or depth of research can move probiotics or for that matter, 'cultures of micro-organisms (excluding yeasty to chapter 21 as proposed by the show cause notices.
10. It, therefore, only remains to be seen if any finding of the adjudicating authority permits such re classification within the restraining framework supra and in conformity with the rules of engagement for alteration of classification as decided by the Hon'ble Supreme Court in re HPL Chemicals Ltd. The impugned orders have held, and ignoring the lack of any allegation on the description of imported goods as detailed in the bills of entry, that the goods are ingredients intended for use in manufacture of food supplements and such goods find acceptability within chapter 30 only to the extent that these are intravenously administered. Indeed, on the admission on behalf of the appellant that the cultures are to be processed further before use by consumers, intravenous administration is not a claim at all. The adjudicating authority, and Learned Authorized Representative, rely upon note 1(a) in chapter 30 of First Schedule to Customs Tariff Act, 1975 based upon a statement of a technically qualified representative of the importer before the investigators and, having excluded the "food additive' thereby, proceeds to rely upon the General Rules for the Interpretation of the Schedule in Customs Tariff Act, 1975 for fitment in the proposed classification
11. All of this commences with the supposition that the impugned goods are 'food preparations for which reliance has been placed on the elements elaborated in the 16 2023 (5) TMI 398-CESTAT Mumbai 35 Customs Appeal No. 51113 Of 2022 description corresponding to subheading 3002 06 in Explanatory Notes to Harmonized System of Nomenclature (HSN) and the common ground of administration other than intravenously. Thereafter, conformity with that pertaining to heading 2106 in Explanatory Notes to Harmonized System of Nomenclature (HSN) was rendered.
However, this approach may be validated only upon exclusion of the impugned goods from chapter 30 of First Schedule to Customs Tanff Act, 1975 and is tantamount to comparison of two rival headings for the more appropriate fitment which is permissible only after fulfilment of fitment of the description within the heading sought to be imposed by customs authorities, viz, heading 2106 of First Schedule to Customs Tariff Act, 1975 sans reference to notes in the chapter containing the declared classification. This is evident from
1. The titles of Sections Chapters and sub-Chapters are provided for ease of reference only, for legal purposes, classification shall be determined according to terms of the headings and any relative Section or Chapter Notes....... in the General Rules for the Interpretation of this schedule in Customs Tariff Act, 1975 and absence thereof is insufficient discharge of obligation laid down in re HPL, Chemicals Ltd."
(emphasis supplied)
26. In the instant case, apart from the expert opinion of Dr Pradhan, there is no contrary chemical examination report which would establish the Department‟s contentions. In view of the same, we are of the opinion that the classification adopted by the appellant for GG Orosoluble is correct.
27. In the light of the above discussions, we set-aside the impugned order. Consequently, the appeal is allowed.
(Order pronounced in the open Court on 29.01.2026) (JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) G.Y.