Glanbia Performance Nutrition India ... vs Mundra on 1 September, 2023

[Cites 14, Cited by 0]

Custom, Excise & Service Tax Tribunal

Glanbia Performance Nutrition India ... vs Mundra on 1 September, 2023

Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad

REGIONAL BENCH- COURT NO. 1

CUSTOMS Appeal No. 10849 of 2021-DB
(Arising out of OIA-MUN-CUS-000-APP-279-307-19-20 dated 28.02.2020passed by
Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax-
MUNDRA)

GLANBIA PERFORMANCE NUTRITION ..........APPELLANT
INDIA PVT LIMITED
502/504, 5TH FLOOR, STAR HUB, BUILDING, NO.2,
NEAR ITC MARATHA HOTEL, SAHAR ROAD, ANDHEDI
MUMBAI-MAHARASHTRA
VERSUS
COMMISSIONER OF CUSTOMS -MUNDRA ........RESPONDENT
OFFICE OF THE PRINCIPAL COMMISSIONERATE OF CUSTOMS, PORT USER BULD.
CUSTOM HOUSE MUNDRA KUTCH,GUJARAT-370421

WITH

(i) Customs Appeal No. 10850 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(ii) Customs Appeal No. 10851 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(iii) Customs Appeal No. 10852 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(iv) Customs Appeal No. 10853 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(v) Customs Appeal No. 10854 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(vi) Customs Appeal No. 10855 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(vii) Customs Appeal No. 10856 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(viii) Customs Appeal No. 10857 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(ix) Customs Appeal No. 10858 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(x) Customs Appeal No. 10859 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xi) Customs Appeal No. 10860 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xii) Customs Appeal No. 10861 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xiii) Customs Appeal No. 10862 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xiv) Customs Appeal No. 10863 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xv) Customs Appeal No. 10864 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xvi) Customs Appeal No. 10865 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xvii) Customs Appeal No. 10866 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xviii) Customs Appeal No. 10867 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xix) Customs Appeal No. 10868 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
2|Page C/10849 -10877/2021

(xx) Customs Appeal No. 10869 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxi) Customs Appeal No. 10870 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxii) Customs Appeal No. 10871 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxiii) Customs Appeal No. 10872 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxiv) Customs Appeal No. 10873 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxv) Customs Appeal No. 10874 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxvi) Customs Appeal No. 10875 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxvii) Customs Appeal No. 10876 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(xxviii) Customs Appeal No. 10877 of 2021 (GLANBIA
PERFORMANCE NUTRITION INDIA PVT LIMITED);
(Arising out of OIA-MUN-CUS-000-APP-279-307-19-20 dated 28.02.2020passed by
Commissioner (Appeals) Commissioner of Central Excise, Customs and Service Tax-
MUNDRA)

APPEARANCE:
Shri. V. Lakshmikumaran, Sh.Manish Jain, Sh. Sidhant Indrajeet and Ms. Shruti
Khanna, Advocates, for the Appellant
Shri. G. Kirupanandan, Superintendent (Authorized Representative)for the
Respondent

CORAM: HON‟BLE MR. RAJU, MEMBER (TECHNICAL)
HON‟BLE MR. SOMESH ARORA, MEMBER (JUDICIAL)

Final Order No. A/ 11846-11874 /2023

DATE OF HEARING: 11.05.2023
DATE OF DECISION:01.09.2023
RAJU

These appeals have been filed by the appellants against change of
classification of the goods by the original and first appellate authority.
2. Learned counsel for the appellant stated that M/s. Glanbia
Performance Nutrition (India) Pvt. Ltd., the Appellant, is engaged in the
business of importing and selling nutritional supplements in India. In this
batch of appeals, the Appellant is contesting the combined first appellate
order issued vide Order-in-Appeal No. MUN-CUSTM-000-APP-279 to 307-
19-20 dated 28.02.2020 passed by Commissioner of Customs (Appeals),
Ahmedabad. Learned counsel for the appellant pointed out that
Commissioner (Appeals) changed the classification for impugned goods
as detailed in Table below:

Summary of classification dispute
S. Product Name Department‟s Appellant‟s
No. Classification Classification
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1. BSN Syntha 6 Chocolate 21061000 18069040
2. BSN Truemass 1200 Chocolate 21061000 18069040
3. Isopure Low Carb - Chocolate 21061000 18069040
4. Isopure Zero Carb - Chocolate Mint 21061000 18069040
5. Optimum Nutrition 100% Casein-
Chocolate Supreme 21061000 18069040
6. Optimum Nutrition 100% Whey Gold
Standard- Chocolate 21061000 18069040
7. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Hazelnut 21061000 18069040
8. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Malt 21061000 18069040
9. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Mint 21061000 18069040
10. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Peanut Butter 21061000 18069040
11. Optimum Nutrition 100% Whey Gold
Standard- Cookies and Cream 21061000 18069040
12. Optimum Nutrition 100% Whey Gold
Standard- Double Rich Chocolate 21061000 18069040
13. Optimum Nutrition 100% Whey Gold
Standard Isolate - Chocolate 21061000 18069040
14. Optimum Nutrition 100% Whey Gold
Standard Isolate - Chocolate Bliss 21061000 18069040
15. Optimum Nutrition 100% Whey Gold
Standard- Mocha Cappuccino 21061000 18069040
16. Optimum Nutrition 100% Whey Gold
Standard- Rocky Road 21061000 18069040
17. Optimum Nutrition Serious Mass -
Chocolate 21061000 18069040

Learned counsel for the appellant argued that Ld. Commissioner
(Appeals) and Learned AC have failed to consider the nature and
composition of the impugned goods, and simplistically re-classified the
impugned goods under residual tariff heading 2106 of Customs Tariff.

3. Learned counsel for the appellant stated that the Appellant is
engaged, inter alia, in the import, storage, marketing, sales, and
distribution of impugned goods in India. Appellant have started directly
importing the impugned goods into India from March 2019from its
related supplier, i.e., M/s. Glanbia Nutritionals (Ireland) Ltd. In view of
the Appellant‟s relationship with the foreign supplier, valuation aspect of
the transaction was referred to Special Valuation Branch (SVB) for
further scrutiny. Accordingly, the goods imported by the Appellant have
been assessed provisionally in terms of Section 18. The bills of entry
against which impugned OIO and Order in Appeal was issued, have not
yet been finalised.
4|Page C/10849 -10877/2021

4. Learned counsel for the appellant pointed out that while the
assessments continued to be provisional for the afore-mentioned reasons
in respect of the impugned bills of entry, the Respondent alleged that the
impugned goods are properly classifiable under CTH 2106 of Customs
Tariff. For this reason, the clearance in some of the Bills of Entry was not
permitted. Learned counsel for the appellant pointed out that
notwithstanding the provisional nature of assessments due to ongoing
SVB proceeding, the Respondent chose to issue a speaking order under
Section 17 of the Customs Act, 1962 seeking to classify the impugned
goods under CTI 2106 10 00 and re-assessed the Bills of Entry. This
required the appellant to deposit additional duty and interest under
protest and seek clearance of the impugned goods. Ld counsel for the
appellant pointed out that aggrieved by the impugned OIO, the Appellant
filed appeals before Learned Commissioner (Appeals)disputing the re-
assessment and change in classification of the goods mentioned in Table
above. The Learned Commissioner (Appeals)upheld the classification
concluded by Learned AC vide a common impugned order. Learned
counsel for the appellant pointed out that the primary reasons for finding
against the Appellant are provided below:

 Predominant ingredient:Impugned goods contain 72% protein with
„Whey Protein Isolate‟ and „Whey Protein Concentrate‟ being the
main ingredients.
 Common Parlance:In common parlance the impugned goods are
known as nutritional supplements consisting of whey protein
concentrates.
 Note 5 to Chapter 21 of Customs Tariff includes Protein
Concentrates and suggests classification under CTH 2106.
 Cocoa is not the main ingredient in the impugned goods.

5. Learned counsel for the appellant argued that without considering
the submissions made by the Appellant, the classification mentioned in
Column-3 to Table above was upheld by Ld. Commissioner
(Appeals).Ld counsel for the appellant pointed out that aggrieved by the
classification of impugned goods concluded vide the impugned order,
Appellant filed 29 individual appeals before the Tribunal stated to be
involving same issue.

6. Learned counsel for the appellant argued that the products
mentioned in Table above, include nutritional supplements, pre-workout
beverages and general health products, sports supplements, protein
products in powder format and ready-to-drink format. These products
are whey protein powders containing cocoa in different proportions.
5|Page C/10849 -10877/2021

Accordingly, the impugned goods in the general trade parlance are
considered as nutritional products broadly understood as protein
powders with cocoa. In other words, the impugned goods are
identifiable as chocolate protein powders/chocolate-flavoured
protein powders. Ld counsel for the appellant argued that the
aforementioned understanding in the trade parlance is further
contributed by the fact that the labels of impugned goods refer such
products as "Gold Standard 100% Whey (Chocolate Peanut Butter)",
"Isopure Low Carb (Naturally and Artificially Flavoured Chocolate)",
amongst others. He pointed out that the ingredients mentioned on the
label also mention cocoa as an ingredient in the food preparation. He
argued that on perusal of Bills of Material, it is evident that the impugned
goods contain differential amount cocoa and protein content. However,
the impugned goods have been classified merely on the basis of the
presence of protein content without reference to the appropriate chapter
headings and discussion on the General Rules of Interpretation of the
Customs Tariff. The supplier of the Appellant has shared a bill of material
for each impugned product indicating the raw materials used in the food
preparation.

7. Learned counsel for the appellant argued that the following are key
issue under consideration before this Hon‟ble Tribunal:
(i) Whether the impugned goods are classifiable under CTH 1806
or CTH 2106of Customs Tariff?

(ii) Whether the Respondent is entitled to do piece-meal finalisation
of provisional assessment?
The Ld counsel has conceded on the second issue and sought that the
issue of classification may be finalised by the tribunal as is apparent from
the submissions recorded in para 30below. Therefore the only issue
which remains to be decided is if the impugned goods are classifiable
under CTH 1806 or CTH 2106of Customs Tariff.

8. On the merits of classification Learned counsel for the appellant
argued that before getting into the classification of impugned goods, it is
important to analyse the general rules governing classification of goods
under Customs Tariff. He argued that it is trite law that a product is to be
classified basis the condition in which such goods are presented for
clearance to the Customs Authorities. He relied on the following decisions

(i) Dunlop India Ltd. v. UOI1983 (13) E.L.T. 1566 (SC);
(ii) Commissioner v. Sony India Ltd.2008 (231) E.L.T. 385
(S.C.)].
6|Page C/10849 -10877/2021

He further argued that the appropriate classification of goods is
determined by following the General Rules for the Interpretation of
Import Tariff ("GIR"). He argued that for the purposes of present
submission, it is important to consider GIR Rule 1, 3(a) and 6, which
must be applied sequentially. He relied on the following

(i) Taj Sats Air Catering Ltd. v. CC Ex., Delhi-II, 2016 (334)
E.L.T. 680 (Tri-Del.);
(ii) Circular 36/2013-Cus. Dated 05.09.2013
He argued that as per the GIR Rule 1, the classification of goods must be
done in accordance with the Chapter Heading (CTH) and any relevant
Section and Chapter Notes. These Notes provide detailed explanation as
to the scope and ambit of the respective Sections and Chapters under
Customs Tariff. He relied on the following decisions

(i) Saurashtra Chemical, Porbandar vs. Collector of Customs,
1986 (23) ELT 283 (Tri-LB) [upheld in1997 (95) ELT 455
(SC)];
(ii) Central Excise vs. Simplex Mills Co. Ltd, 2005(181) E.L.T.
345 (S.C) and
(iii) CC, ICD, New Delhi v. Industrial Importers, 2014 (300)
E.L.T. 584 (Tri-Del)].
He argued that only when the goods cannot be classified in terms of GIR
Rule 1 and 2, recourse can be made to GIR Rule 3(a), which provides
that the heading which provides the most specific description must be
preferred. Lastly, GIR Rule 6 requires that while interpreting the sub-
headings of the tariff for classification, the guidance of the GIRs can be
applied mutatis mutandis to other levels. He further argued that in
addition to the foregoing rules of classification, for purposes of uniform
interpretation of the Harmonized System of Nomenclature (hereinafter
referred to as "HSN"), WCO has published detailed Explanatory Notes
to HSN which have long been recognized as a safe guide to interpret the
Customs Tariff. He relied on the following decisions

(i) O.K. Play (India) vs. CCE, (2005) 180 ELT 300 (SC 3-member
bench);
(ii) CC. Ex., Pune-I v. Praj Industries, 2009 (242) E.L.T. 430 (Tri-
Mum);
9. He argued that on application of GIR Rule 1, the following are the
relevant CTH under consideration:
CTH PARTICULARS
1806 Chocolate and other food preparations containing cocoa
1901 Malt extract; Food preparations of flour, groats, meal,
7|Page C/10849 -10877/2021

starch or malt extract, not containing cocoa or containing
less than 40% by weight of cocoa calculated on a totally
defatted basis, not elsewhere specified or included; Food
preparations of goods of headings 0401 to 0404, not
containing cocoa or containing less than 5% by weight of
cocoa calculated on a totally defatted basis, not
elsewhere specified or included

2106 Food preparations not elsewhere specified or included

He argued that in the light of the aforementioned relevant CTHs, it would
be prudent to now examine the scope of each of the aforementioned
CTHs.He argued that that CTH 1806 of Customs Tariff covers "Chocolate
and other food preparations containing cocoa". The precise heading along
with the entry has been provided hereinbelow for the ease of reference:

Tariff Item Description of goods Unit Rate of duty
Std. Pref.
Areas
(1) (2) (3) (4) (5)
1806 Chocolate and other food preparations Kg. -
containing cocoa
[...] [...] [...] [...] [...]
1806 90 - Other Kg. 30% -
1806 90 10 --- Chocolate and chocolate products 30%
1806 90 20 --- Sugar confectionary containing cocoa 30%
1806 90 30 ---- Spreads containing cocoa 30%
1806 90 40 ---- Preparations containing cocoa for 30%
making beverages
1806 90 90 ---- Other

He argued that the phrase "food preparation" have not been defined in
the Customs Tariff Act or Explanatory Notes. Hence, emphasis must be
laid on the plain meaning of the phrase and its use in general parlance.
He argued that the term „preparation‟ has been defined in Kothari
Chemicals v. UOI, 1996 (86) E.L.T. and Reckitt and Colman of
India Ltd., Calcutta v. CCE, Calcutta, 1985 (22) ELT 216
(Tribunal) as products made from separate components. Thus, a
product can be categorized as „food preparation‟ when there is a process
undertaken to give rise to a „prepared food‟ that is different from its
ingredients. He argued that all the CTHs under consideration deal with
"food preparation".

10. He argued that GIR Rule 1 provides that the classification of
products must also be in terms of relative Section and Chapter Notes. In
8|Page C/10849 -10877/2021

this regard, Chapter Note to Chapter 18 of Customs Tariff provides the
following:

"This Chapter does not cover the preparations of headings
04.03, 19.01, 19.04. 19.05, 21.05, 22.02, 22.08, 30.03 or
30.04"
He argued that that Chapter 18 only covers such cocoa and cocoa
preparations which are not covered any of the aforementioned headings.
He argued that HSN General Explanatory Notes to Chapter 18 provides
that this Chapter covers "cocoa (including cocoa beans) in all forms,
cocoa butter, fat and oil and preparations containing cocoa (in any
proportion)", except for the aforementioned exclusions. He argued that
this view is further corroborated by the fact that HSN Explanatory Notes
to CTH 1806provides that it includes "all food preparations containing
cocoa (other than those excluded in the General Explanatory Note to this
Chapter)".He argued that mere perusal of the aforementioned enlisted
headings, it can be seen that the goods under consideration are not likely
to be covered under any other CTH, except CTH 1901 of Customs Tariff,
which requires further analysis. The CTH 1901 is extracted hereinunder:

1901 Malt extract; food preparations of flour, groats, meal , starch or
malt extract, not containing cocoa or containing less than 40%
by weight of cocoa calculated on a totally defatted basis, not
elsewhere specified or included; food preparations of goods
of headings 0401 to 0404, not containing cocoa or
containing less than 5% by weight of cocoa calculated on
a totally defatted basis, not elsewhere specified or
included
He argued that CTH 1901 of Customs Tariff covers "food preparations of
goods of headings 0401 to 0404, not containing cocoa or containing less
than 5% by weight of cocoa calculated on a totally defatted basis, not
elsewhere specified or included". He pointed out that similar narration
has also been provided in HSN General Explanatory Notes to Chapter 19.
CTH 1901 covers the following:

(i) „food preparations‟ of CTH 0401 to CTH 0404 of Customs
Tariff; and
(ii) It contains „less than 5%‟ of defatted cocoa by weight.

He argued that in case of food preparation of whey of CTH 0401 to CTH
0404 containing defatted cocoa more than or equal to 5% by weight
(defatted), such food preparation would not be classified under CTH 1901
of Customs Tariff. He argued that this view is further augmented by
specific exclusion provided in HSN Explanatory Note to Chapter 18,
9|Page C/10849 -10877/2021

HSN Explanatory Note to CTH 1901, and HSN Explanatory Notes to
CTH 2106which provides that food preparations of CTH 0401 to CTH
0404 containing less than 5% cocoa (by weight) are instead covered
under CTH 1901.He argued that if the product under consideration does
not satisfy the dual condition as summarised in Para above, such goods
irrespective of their cocoa content are classifiable under CTH 1806 of
Customs Tariff. He relied on HSN Explanatory Notes to CTH 2106 and
HSN Explanatory Notes to CTH 1806.

11. He argued that CTH 2106, covers "Food preparations not elsewhere
specified or included". In other words, for classification under CTH 2106
of Customs Tariff requires two conditions to be satisfied, namely:

a. It must a food preparation;
b. It must not be specified or included elsewhere.

He argued that similar interpretation has also been provided under HSN
Explanatory Note to CTH 2106 which specifically mentions that CTH
2106 only covers those goods which are not covered under any other
heading of the Nomenclature. He argued that the point of distinction as
per HSN Explanatory Notes read with Customs Tariff in respect of CTH
1806, CTH 1901 and CTH 2106 is as follows:

(i) If a food preparation contains cocoa (other than defatted
cocoa) in any proportion, then it is classifiable under CTH
1806
(ii) Food preparations of CTH 0401 to CTH 0404 containing less
than or equal to 5% of cocoa on defatted basis are
classifiable under CTH 1901;
(iii) Food preparations of CTH 0401 to CTH 0404 containing
more than or equal to 5% of cocoa (defatted basis) are
classifiable under CTH 1806;
(iv) Lastly, if the goods under consideration are not classifiable
under the aforementioned CTHs, such goods can be classified
under CTH 2106 of Customs Tariff.
He argued that in respect of classification under CTH 1806, CTH 1901
and CTH 2106, the impugned goods being in the nature of „food
preparations‟, the preliminary condition under each of the
aforementioned CTH is satisfied. He argued that for classification under
CTH 1901, the impugned goods contain albumin and other protein
concentrates which are acting as the base material. He argued that the
impugned goods are food preparations having constituent ingredients
from CTH 3502 and CTH 3504, and are not food preparations of CTH
0401 to CTH 0404. He argued that the impugned goods do not satisfy
the condition of classification under CTH 1901 of Customs Tariff.
10 | P a g e C/10849 -10877/2021

Furthermore, he argued that cocoa used in the food preparation is not
defatted cocoa. He argued that the impugned goods are in the nature of
"food preparations". This fact is undisputed between the parties. It is on
this ground alone, classification under CTH 3502 and CTH 3504 of
Customs Tariff are ousted as they do not relate to food preparations.

12. He argued that a combined reading of HSN Explanatory Notes to
CTH 2106, HSN Explanatory Notes to CTH 1806 read with HSN General
Explanatory Notes to Chapter 18 shows that CTH 1806 covers all other
food preparations containing any amount of cocoa. He argued that in the
present case, the impugned goods have cocoa content (not defatted)
between the range of 1to 10%. Therefore, he argued that the impugned
goods merit classification under CTH 1806 of Customs Tariff, which
covers "Chocolate and other food preparations containing cocoa".

13. He relied on similar observations made by the Authority on
Advance Ruling (AAR) in the decision of In Re: Karnataka Co-operative
Milk Producers Federation Ltd., 2021 (46) G.S.T.L. 160 (A.A.R. - GST -
Kar.).He argued that on logically extending GIR Rule 6 read with GIR
Rule 1 to sixth and eight-digit level, the impugned goods are
appropriately classifiable under CTI 1806 90 40 of Customs Tariff, which
reads as "Chocolate and other food preparations containing cocoa:
Other: Preparations containing cocoa for making beverages".

14. He further argued that the issue in respect of "Cookies & Cream"
flavoured whey protein powder came up for discussion before the 68th
WCO‟s Harmonized System Committee of September 2021.He argued
that this decision, having Doc. NC2855Eb/K/6, WCO‟s HS Committee
concluded that "Cookies & Cream" flavoured whey protein powder
containing cocoa (along with processed alkali) of~1%are appropriately
classifiable under CTSH 1806 90. He argued that the product at S. No. 11
of Table above are similar to the goods under consideration before
WCO‟s HS Committee. Hence, the WCO‟s HS Committee decision applies
to the present case.

15. He argued that in the light of the foregoing submissions, the
classification undertaken by the Appellant and appearing in Column (4)
of Table (above) is correct. Thus, the duty incidence in respect of
impugned goods have been correctly discharged by the Appellant.

16. Ld Counsel relied on the WCO‟s HS Committee decision, and other
international rulings passed by the National Commodity Specialist
11 | P a g e C/10849 -10877/2021

Division, US Customs and Border Protection (US Customs) to hold that
impugned goods are classifiable under CTSH 1806 90 of HTSUS. Reliance
was placed on

(i) US Cross Ruling N025135 dated 15.04.2008and
(ii) US Cross Ruling N204559 dated 02.03.2012
dealing with similar product classification wherein it was held that "100%
Whey Classic- Chocolate" and "100% Whey Gold Standard-Chocolate"
are classifiable under CTSH 1806.90.

17. Learned Counsel also relied on Ruling No. 1E17NT-14-4988-04
dated 08.06.3027, EU Taxation and Customs Union wherein it was held
that impugned goods are classifiable under CTSH 1806 90 of HSN. Ld
Counsel also relied on Canada Border Services Agency Advance Ruling
No. C-2016-002882 dated 19.10.2016, wherein it was held that pre and
post-workout protein snack based on whey protein isolate and containing
cocoa powder are classifiable under CTSH 1806 90. Ld Counsel also
relied on WCO‟s 58th Session of Harmonized System Committee in
October 2016which classified „sugar coated milk chocolate sweets‟ under
CTH 1806 merely because of the cocoa content. Similar conclusions were
also reached in WCO‟s 68th Session of HS Committee in September 2021
pertaining to "Cookies & Cream" flavoured whey protein powder.

18. Learned Counsel argued that in the case of Jagson International
Ltd. v. CC, 2006 (199) E.L.T. 553 (T), the Tribunal held as follows:

"India is a signatory to the International Convention on
the Harmonized Commodity Description and Coding
System which was devised, inter alia, to facilitate
international trade and to facilitate the standardization of
trade documentation and the transmission of data. The
Harmonised System was intended to be used for the
purposes of freight tariffs and transport statistics and
intended to be incorporated into commercial commodity
description and coding systems to the greatest extent
possible, as contemplated by the preamble to the
Convention. It was undertaken by its "Contracting Parties"
that from the date on which the convention entered into
force in respect of it, its customs tariff and statistical
nomenclatures shall be in conformity with the Harmonised
System. Each contracting party undertook in respect of its
Customs tariff and statistical nomenclatures that: -
"(i) it shall use all the headings and subheadings of
the Harmonised System without addition or
modification, together with their related numerical
codes;
(ii) it shall apply the General Rules for the
interpretation of the Harmonised System and all the
Section, Chapter and Subheading Notes, and shall not
12 | P a g e C/10849 -10877/2021

modify the scope of the Sections, Chapters, headings or
subheadings of the Harmonised System; and
(iii) it shall follow the numerical sequence of the
Harmonised System."
(Emphasis Supplied)
Learned Counsel argued that the HSN acts as the basis for the
classification of the goods across the world. He submitted that the Indian
Courts must also march hand-in-hand with the decisions rendered by the
foreign counterparts in interpreting the treaties to which India is
signatory relating to classification of goods. Reliance in this regard was
placed on the decision of the Hon‟ble Supreme Court in CC v. G.M.
Exports, 2015 (324) ELT 209 (SC). Similarly, reliance was also be
placed on the decision of CC v. C-Net Communication (I) Pvt. Ltd.,
2007 (216) E.L.T. wherein the Hon‟ble Supreme Court relied upon the
decision of Canadian Customs Tribunal.

19. Learned Counsel argued that globally the impugned goods are
classified under CTH 1806 only. Reliance in this regard is placed on
sample import documents on import of cocoa-based whey protein
powders. Therefore, Ld Counsel argued that, impugned goods containing
cocoa are appropriately classifiable under CTSH 1806 90 of Customs
Tariff.

20. Learned counsel submitted that Ld. Commissioner (Appeals)
classified the impugned goods under CTH 2106 of Customs Tariff. CTH
2106 of Customs Tariff reads as under:

Tariff Item Description
2106 Food Preparations Not elsewhere specified or
included
2106 10 00 - Protein concentrates and texture protein
substances

21. Learned Counsel argued that Ld. Commissioner (Appeals), owing to
the high protein content in the goods, directly jumped to the conclusion
that such goods are specifically covered under CTI 2106 10 00 which
covers "Protein concentrates and texture protein substances" without
exhausting sequential application of GIR Rules.Ld Counsel argued that it
is important to revisit GIR Rule 1 for the purpose of classification of
goods under Customs Tariff. Under this rule, the goods under
consideration must be classified in accordance with the terms of the
Headings. In other words, the impugned goods must first satisfy the
heading of CTH 2106, which covers "Food preparations not elsewhere
13 | P a g e C/10849 -10877/2021

specified or included", before moving to the sub-heading level which
inter alia covers "Protein concentrates".

22. Learned Counsel argued that the impugned goods on the basis of
their cocoa content is specifically covered under CTH 1806, and
therefore, condition (ii) i.e.

"It must not be specified or included elsewhere."

under CTH 2106 is not satisfied. Hence, the impugned goodsare not
classifiable under CTH 2106 of Customs Tariff. Ld Counsel argued that
such goods would also not be classifiable under tariff sub-heading 2106
10 00 of Customs Tariff.

23. Learned Counsel also relied on the HSN Explanatory Note to CTH
2106which specifically mentions that CTH 2106 only covers those goods
which are not covered under any other heading of the Nomenclature.
Relevant extract reproduced hereinunder:

"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 [...]
(B) Preparations consisting wholly or partly of food
stuffs [...]"

Ld Counsel argued that the aforementioned conclusion is also supported
by virtue of specific exclusion provided under HSN Explanatory Notes of
2022 for CTH 2106. Here, it is relevant to note that under HSN
Explanatory Notes of 2022 of CTH 2106, food preparations containing
cocoa have been specifically excluded from falling under CTH 2106.
Relevant extract reproduced hereinunder:

"[...] This heading further excludes

(a) Preparations containing cocoa, put up as food
supplements for human consumption (heading 18.06)"

Learned Counsel argued that impugned goods are correctly classifiable
under CTH 1806 and therefore they are ipso facto excluded from the
scope of CTH 2106 of Customs Tariff.

24. Learned Counsel argued that as per GIR Rule 3(a), the heading
that provides the most specific description of the goods shall be preferred
to headings providing a more general description. It is pertinent to note
that GIR Rule 3(a) envisages comparison at the CTH level only. Ld
Counsel argued that a bare perusal of CTH 1806 which covers „Chocolate
14 | P a g e C/10849 -10877/2021

and other food preparations containing cocoa‟and CTH 2106 which covers
„Food preparations not elsewhere specified or included‟, it is evident that
impugned goods are covered more specifically under CTH 1806or CTH
1901. Thus, on application of GIR Rule 3(a), the impugned goods are
rightly classifiable under CTH 1806. He placed reliance on the case of CC
(Import) vs Abbott Healthcare Pvt. Ltd., 2015 (2) TMI 740wherein the
CESTAT has held that preparations for infant should not be classified
under CTH 2106 which covers "Food preparations not elsewhere specified
or included" as they are specifically covered by CTH 1901 which reads as
"Preparations for infant use". He also placed reliance on the case of Mauri
Yeast India Pvt. Ltd. vs. State of UP, 2008 (225) ELT 321 (S.C.)wherein
it was held by the Hon‟ble Supreme Court that if there is a conflict
between two entries one leading to an opinion that it comes within
purview of tariff entry and another the residuary entry, the former should
be preferred.

25. He argued that it is settled law that in cases of the disputes
involving classification of goods if two views are possible then the one in
favour of the assessee should be preferred. Reliance in this regard was
placed on the following judicial precedents:

 India Steel Industries v. UOI, 2018 (359) ELT 465 (Bom)
 CC, Madras vs. Lotus Links 1996 (87) E.L.T. 580 (S.C.);
 Poulose and Mathen vs. CCE, 1997 (90) E.L.T. 264 (S.C.);
 CCE, Calcutta vs. Calcutta Springs Ltd., 2008 (229) E.L.T.
161 (S.C.);
 Ocean Marketing v. CCEx&ST, Jaipur, 2017 (348) E.L.T. 269
(Tri-Del).
Learned Counsel argued that Commissioner (Appeals) in Para 6.1 and
Para 6.2 of the impugned order has relied upon the observations by Ld.
AC regarding treatment of the product in the commercial parlance as
„nutritional supplements‟. Accordingly, Ld. Commissioner (Appeals)
confirmed the classification under CTH 2106 of Customs Tariff. He argued
that the doctrine of commercial nomenclature or trade understanding
must be departed where the statutory context in which the tariff item
appears requires such departure. He placed reliance on decision of the
Hon‟ble Supreme Court in the case of Akbar Badruddin Jiwani v. Collector
of Customs, 1990 (47) ELT 161 (SC). The Hon‟ble Supreme Court in this
case was dealing with the classification of „marble‟. This term in the
technical criteria required gravity of 2.5% or more. Accordingly, the
Hon‟ble Supreme Court discarded the commercial understanding of the
product and held that where HSN contains specific definition then such
15 | P a g e C/10849 -10877/2021

definition must be preferred, and doctrine of commercial nomenclature
must not be applied. Ld Counsel argued that similar observations have
also been made by the Hon‟ble High Court of Mumbai in the case of
Kulkarni Black & Decker Ltd. v. UOI, 1992 (57) E.L.T. 401 (Bom). The
relevant extract from Kulkarni (Supra)summarizing the legal position has
been extracted herein under for ease of reference:

"It is now settled by catena of decisions of the Supreme
Court and this Court that it is not permissible to take
into consideration the trade meaning or commercial
nomenclature when the definition provided in the
statute is extremely clear and does not suffer from
any ambiguity. In case where the application of
commercial meaning or trade nomenclature runs
counter to the statutory context in which the word
is used in the Tariff Item, then the trade meaning or
commercial nomenclature should be ignored."
(Emphasis Supplied)
Learned Counsel argued that the trade/ commercial parlance is to be
examined only if the tariff entry is ambiguous. Reliance in this regard is
being placed on Nirlon Synthetic Fibres v. UOI, (1999) 110 E.L.T. 445
(Bom) (DB) and Panama Chemical Works v. UOI, 1992 (2) E.L.T. 241
(M.P). Ld Counsel argued that in the present case, cocoa products have
been defined under the HSN Explanatory Notes to CTH 1806, CTH 1901
and CTH 2106. Ld Counsel argued that there is no ambiguity in respect
of classification under such CTH. Hence, the reliance placed on the
commercial parlance for the purpose of concluding classification of the
impugned goods is incorrect.

26. Learned Counsel argued that the impugned goods are marketed as
cocoa flavoured product only. Further, as submitted above, the
impugned goods contain cocoa (along with alkali) within the range of 1
to 10 %, thereby providing cocoa benefits to the user of impugned
goods. Ld Counsel argued that the impugned goods are commercially
recognised as cocoa flavoured food preparations only.

27. Learned Counsel argued that Commissioner (Appeals) in Para 6.1
and 6.2 of the impugned order took a simplistic way of deciding the
classification of impugned goods basis the pre-dominant weight or
volume of the protein content. Ld Counsel argued that Commissioner
(Appeals) directly applied the essential character test laid down under
GIR Rule 3(b). He argued that it is trite law that GIR Rules must be
applied in a sequential manner. Thus, before applying GIR Rule 3(b), the
16 | P a g e C/10849 -10877/2021

classification of goods must be undertaken in terms of GIR Rule 1, GIR
Rule 2 and GIR Rule 3(a).

28. Learned Counsel argued that merely on application of GIR Rule 1,
i.e., relying upon Section and Chapter Notes read with HSN Explanatory
Notes, the impugned goods are classifiable under CTH 1806. Ld Counsel
argued that the classification of impugned goods basis the pre-dominant
weight [GIR Rule 3(b)] is erroneous. Reliance in this regard is being
placed on the decision of CC (Prev) Kolkata v. Anutham Exim Pvt. Ltd.,
2021 (378) E.L.T. 611,wherein the Hon‟ble CESTAT at Kolkata held that
classification based on predominant test based on composition of the
product is incorrect in law and may give rise to absurd classification
result.

29. Learned Counsel argued that Ld. Commissioner (Appeals) in Para
6.1 of impugned order, observed that cocoa has not been mentioned as
the main ingredient on the label of the product. He pointed out that the
name on the label and Bills of Material gives reference to the cocoa
content of the product. Ld Counsel argued that the label of the impugned
goods invariably mentions the presence of cocoa on the product name.

30. Learned Counsel argued that the impugned goods are more
appropriately classifiable under CTH 1806 of Customs Tariff and on
account of failure of revenue to justify classification under the CTH 2106
of Customs Tariff, the entire proceedings initiated by the Department is
unsustainable. He placed reliance on the decision of L&T v. CC, Mundra,
2021-VIL-224-CESTAT-AHM-CUwherein this Hon‟ble Tribunal whilst
relying on the dictum of Hindustan Ferrodo Ltd. v. Collector of Central
Excise, Bombay, 997 (89) E.L.T. 16 (S.C.), HP Chemicals Ltd. v. CCEx.,
Chandigarh, 2006 (197) E.L.T. 324 (S.C.),Pepsico Holding Pvt. Ltd. v.
CCEx, Pune-III, 2019 (25) G.S.T.L. 271 (Tri. - Mum)and Warner
Hindustan Ltd. v. Collector of CE, Hyderabad, 1999 (113) E.L.T. 24
(SC)held as follows:

"10. In view of the above settled law, irrespective whether the
classification claimed by the Appellant is correct or not since
the classification proposed by the Revenue is absolutely
incorrect, the entire case of the Revenue will not sustain.
Therefore, we are not addressing the issue that whether the
Appellant's classification was correct or otherwise. The
Appellant also made an alternate submission that even if the
classification declared by them under CTH 8306 2110 is
incorrect the goods are otherwise classifiable under CTH 9703
in such tariff entry also the IGST Rate is 12% and therefore,
there will be no revenue implication. Though alternate
17 | P a g e C/10849 -10877/2021

classification suggested by the Appellant appears to be prima
facie correct but since we have already taken a view that
Revenue's claim of classification under CTH 8311 is absolutely
incorrect and it is nobody's case in the Show Cause Notice that
the goods are classified under CTH 9703 we are not
addressing this issue. However, since the Revenue's claim of
classification is held to be incorrect the entire proceeding of
the Revenue is quashed. The impugned order is set aside. The
appeal is allowed with consequential relief, if any arise, in
accordance with law."

Learned Counsel argued that Ld. AC and Ld. Commissioner (Appeals)
passed the orders while the assessment was provisional due to matter
pending with SVB. Ld Counsel argued that the assessments cannot be
finalised in a piecemeal manner. Ld Counsel argued that that a request
for provisional assessment was made consequent to investigations
initiated by the SVB in respect of imports from related party. However,
till the date of hearing (25.08.2022), no Investigation Report pertaining
to the import of goods from related party has been issued by the SVB.
Thus, the provisional assessment of impugned BOE‟s are yet to be
finalised by the proper officer in terms of Customs Act.Learned Counsel
argued that despite the provisional nature of assessment, speaking order
was passed in terms of Section 17(4) read with Section 17(5) of Customs
Act on the issue of classification. Ld Counsel argued that it is trite law
that the assessment cannot be undertaken by Learned AC in a piecemeal
manner. Learned Counsel argued that during the pendency of the SVB
investigation, passing of speaking order on issue of classification under
Section 17(5) of Customs Act must be discouraged. He places reliance on
the decision of CCEx, Madras v. Enfield India Ltd., 1999 (114) E.L.T. 162
(Tri) wherein the Hon‟ble CEGAT held that more than one order finalising
the assessment cannot be made by the proper officer. In this case, the
Hon‟ble Tribunal noted that once an assessment is provisional, it is
deemed to be provisional on all counts. He also relied on the case of ITC
Ltd. v. Collector of Central Excise, Patna, 1998 (102) E.L.T. 660
(Tri),where the Tribunal held that issues of classification cannot be
separated from the question of valuation. Thus, provisional assessment
remains provisional in respect of all issues, which must be adjudicated
together and not in a piecemeal manner. Accordingly, the Tribunal
remanded the matter back for fresh adjudication including all the issues
involved therein [In Re: Castrol India Ltd., 2001 (138) E.L.T. 979
(Commr. Appls)]. He also relied on the case of Nitco Tiles Ltd. v. CC
(Export Promotion), Mumbai, in Order No. S/491 to 497/08/CSTB/C-II
18 | P a g e C/10849 -10877/2021

and A/485 to 491/08/CSTB/C-II dated 20.08.2008 [Compilation, p.
150]where taking note of the above-mentioned decision, remanded the
case for fresh adjudication citing finalisation of provisional assessment in
piecemeal manner. Ld Counsel argued that the impugned order results in
multiplicity of proceedings and challenges the grundnorm as envisaged
under the Customs Act. Ld Counsel submitted that in order to
conclude the classification dispute Tribunal may pass orders on
the classification of the impugned goods determinatively.

31. Learned AR pointed out that the goods imported and classification
claimed by the appellant are as follows:-

Sl. CTH as per Description in CTH
Name of product
No. importer
Nutritional Preparations containing cocoa for
1 Supplements 18069040 making beverages.
Containing Cocoa
Peptones and their derivatives;
Unflavoured other protein substances and their
2 Nutritional 35040099 derivatives, not elsewhere specified
Substances or included; hide powder, whether
or not chromed - Others.
Acyclic amides (including acyclic
3 Glutamine Powder 29241900 carbamates) and their derivatives;
salts therefor; - Others.
Carboxyimide-Function Compounds
(Cluding Saccharin and its salts)
4 Creatine Powder 29252990 and Imine-Function Compounts -
Imines and their derivatives; salts
thereof - Others

Learned AR pointed out that the Assessment of imported impugned
goods was done provisionally for the following reasons:-

(a) The issue regarding the relationship of the appellant with the
foreign supplier viz., M/s. Glanbia Nutritionals (Ireland) Ltd,
Ireland is under investigation before the Special Valuation
Bench, Mumbai for SVB Investigation.
(b) In addition to the above, the import goods have been mis-
classified by the appellant instead of classifying them
appropriately as given below:
CTH claimed
Sl. CTH as per
Name of product by the
No. Department
appellant
(1) (2) (3) (4)
Nutritional Supplements
1 18069040 21061000
Containing Cocoa
Unflavoured Nutritional
2 35040099 21061000
Substances
3 Glutamine Powder 29241900 21069099
4 Creatine Powder 29252990 21069099
19 | P a g e C/10849 -10877/2021

Learned AR pointed out that the appellant has paid duty under protest on
the imported goods under CTH No. 21061000 and CTH No. 21069099.

32. The Bills of Entry were re-assessed by way of Speaking Orders
under Section 17(4) of the Customs Act, 1962 thereby the import goods
are ordered to be classified under CTH 21061000 for Nutritional
Supplements and under CTH No. 21069099 for Glutamine Powder and
Creatine Powder. It was also ordered for vacation of protest for payment
of customs duty. Aggrieved with the order of the assessment, the
appellant have filed appeal before the Commissioner(Appeals), Customs,
Ahmedabad. Ld AR pointed out that the appellant vide their letter dated
26-08-2022 have accepted the classification of Creatine Powder and
Glutamine Powder under CTH No. 21069099.

33. Learned AR pointed out that the Labels of all the products
produced by the appellant clearly mention that the main ingredients of
the imported goods are "Whey Protein Isolate (WPI) and Whey
Protein Concentrate (WPC)". For example, the actual description of
the import goods as declared in Bill of Entry No. 3139731 dated 07-05-
2019 and their protein content per 100 grams as appearing in the label
produced by the appellant, are given below:-
TABLE-A
Sl. Description of the import goods Unit Protein
No. Qty. content
in in the import
grams goods per
100 grams
1 On Ind 100% WGS AF/GF DBL Rich Choc 5 LB 100 78.90
2 On Ind 100% WGS AF Cookies & Cream 5 LB 100 72.70
3 BSN India True Mass Chocolate 5.82 LB 100 28.00
4 On Ind 100% WGS AF Cookies & Cream 5 LB 100 72.70
5 On Ind 100% WGS AF/GF DBL Rich Choc 5 LB 100 78.90
6 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90
7 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90
8 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90
9 On Ind 100% WGS AF/GF DBL Choc 907 G 100 78.90
10 On Ind 100% WGS AF/GF Rocky Road 5 LB 100 76.00
11 On Ind 100% WGS AF/GF Mocha Capp 5 LB 100 75.00

Learned AR pointed out that from above table, it is evident that all the
import items except item mentioned at Sl. No. 3 contain more than 72%
protein in all the import goods. Thus, it is apparent that in the products
imported as Nutritional Supplement, protein concentration is higher than
72%. Therefore, all the aforesaid products are clearly in the nature of
20 | P a g e C/10849 -10877/2021

protein concentrates and are also being sold in the market so, by the
appellant, therefore all these products are classified under CTH No.
21061000.

34. In respect of product at Sl. No. 3 of above table, the same contains
28% of protein and 55% carbohydrates. Thus, even this product is
having the essential character of whey protein with carbohydrates as
base material has rightly been declared on the labels and also being sold
in the market so. Label of this product vis., BSN India True Mass
Chocolate 5.82 LB (Nutrition Supplement) specifies as nutrition
information of the product as under:-

Sl. Value For Quantity Quantity per % Daily
No. Per Serving 100 gms. Values
1 Energy 2941 kJ/704 kcal 1782 kJ/426 kcal 26%
2 Protein 46 gm 28 gm 77%
3 Fat Total 17 gm 10 gm 57%
4 Saturated 4 gm 2 gm -
5 Carbohydrate 90 gm 55 gm -
6 Sugars 14 gm 8 gm -
7 Sodium 300 mg 182 mg 24%

Learned AR pointed out that the above table reveals that BSN India True
Mass Chocolate 5.82 LB (Nutrition Supplement) has protein of "77%
daily values" ingredients as protein concentrate, soy lecithin, calcium
caseinate, milk protein isolate, whey protein isolate, micellar casein,
hydrolysed whey protein, egg whites, etc....". Further, these products
are known to buyers in the market as Whey Protein Concentrates.
Therefore, in the trade and commercial parlance, identity/ classification
of the import goods is clearly known as nutrition supplements consisting
of whey protein concentrates which people take for the general well
beings of humans.

35. Learned AR argued that the classification of import goodsis to be
determined as per the guidelines enunciated in "General Rules for the
Interpretation of the Harmonized System". It contains a set of 6 rules
for classification of goods in the Tariff Schedule. These rules have to be
applied sequentially.

36. Learned AR pointed out that the appellants have imported goods
like Gold Standard 100% Whey, Isopure Protein Powder, Gold Standard
100% Isolate, Serious Mass, True Mass 1200, Syntha-6, etc. Ld AR
21 | P a g e C/10849 -10877/2021

pointed out that these products are known in the market and by the
public as "Nutrition Supplements". There is no dispute that the
appellants have also declared these products as "Nutrition Supplements"
in the Bill of Entries. He pointed out that these products are marketed in
different flavours such as vanilla, strawberry, chocolate/cocoa, double
rich chocolate, etc. Ld AR argued that the appellants have claimed
classification of these products under CTH No. 18069040 as
"Preparations containing cocoa for making beverages" under Chapter -
18 of the Customs Tariff Act, 1975 which covers "Cocoa and Cocoa
Preparations".Ld AR argued that the products made from whey such as
Whey Protein Concentrates and Whey Protein Isolates are not covered
under chapter 18. The adjudicating authority clearly held that none of
the labels of the import products mention Cocoa as the main ingredient
of the import items for which classification has been claimed as falling
under Chapter-18. Ld AR pointed out that merely because cocoa is
added as a flavoring agent does not change the content, composition and
character of these products and they do not become cocoa and cocoa
preparations.

37. He argued that as per Supplementary Note - 5(a), protein
concentrates and textured protein substances are covered under CTH
2106. The appellant have produced images of labels of some of the
import goods. Ld AR pointed out that in these labels, "Chocolate" is
mentioned as only a flavour but not as main constituent of the product.
These products‟ main constituent is "protein and carbohydrate"and these
products are known in the market as protein powder/ protein powder
neutraceutical. These products are marketed as "Nutrition Supplements"
with different flavours. For example, "GOLD STANDARD 100% WHEY
PROTEIN POWDER" is marketed in different flavours such as Extreme
Milk Chocolate, Delicious Strawberry, Vanilla Ice Cream and Double Rich
Chocolate.

38. Learned AR pointed out that the appellants have submitted copies
of commercial invoices. It can be seen that they have shown
classification of same products under two different chapters of 18 and 21
for two different Flavors. Wherein product with description, "ON INDIA
100% WGS AF/GF MOCHA CAP 907G" is shown as covered under CTH
No. 18069040 whereas another product with description, "ON INDIA
100% WGS AF/GF BANANA CRM 907G & ON INDIA 100% WGS AF/GF
22 | P a g e C/10849 -10877/2021

STRAW 907G" are shown as covered under CTH No. 21061000. These
products are known and sold in the market as "WHEY GOLD STANDARD".
The only difference is their flavour. Ld AR argued that mere addition of
flavouring agent does not change the character, use or classification of
the product.

39. Learned AR relied on the case of Wander Ltd Vs. Collector of
Central Excise, Bombay, the Tribunal, Delhi - reported at 1999 (110) ELT
735 (Tribunal) to assert that protein concentrate are rightly classifiable
under heading 2106 and not under chapter 4 as dairy product.

40. Learned AR relied on the case of Collector of Central Excise Vs.
Frozen Foods Pvt. Ltd - reported at 1992 (59) ELT 279 (Tribunal),
wherein it was held that dietary supplement „Surje‟, consisting of whey
protein and casein peptides (37%), carrier and sweetening agents (62%)
and flavouring and vitamins (1%), put up in unit containers classifiable
under sub-heading 2107.91 (presently covered under sub-heading
2106).Ld AR relied on the case of Commissioner of Customs(Import),
Mumbai Vs. E. I. Dupant (I) Pvt. Ltd - reported at 2005 (190) ELT 20
(Tri.-Mumbai).Ld AR relied pointed out that theTribunal while deciding
similar issue of classification of Kit-Kat coated with chocolate in the case
Nestle (India) Ltd Vs. CCE, Mumbai - 2000 (124) ELT 898 held that

"13. It might have been necessary, in view of the presence of
chocolate, to refrigerate the product to prevent its melting or
spoiling. That alone cannot justify the view that the product‟s
essential character of the product has been conferred upon it by
chocolate. There is nothing to show that the buyers of the goods
bought as chocolate, not as a combination of chocolate and
biscuits; that it was the presence of the chocolate alone as distinct
from the chocolate and biscuits which length of the product is
appeal to customers. On the other hand, the market advertising
brief produced by the appellant refers to the presence of the biscuit
market as well as the chocolate market and it talks of the products
as wafer covered with crisp chocolate and say that the product
creates niche for itself, drawing from both the biscuit market as
well as the chocolate market."

This judgement in the case of Nestle (India) Ltd is also followed by the in
the case of Little Star Foods Pvt. Ltd Vs. Commissioner of Central Excise,
Hyderabad reported at 2006 (199) ELT 451 (Tri.-Bang.).In the case of
Dhariwal Industries Ltd Vs. Commissioner of Central Excise, Pune-III
reported at 2014 (304) ELT 585 (Tri.-Mumbai), the Tribunal, has held
that
23 | P a g e C/10849 -10877/2021

"4.2 ....As per Rule 3(b), "Mixtures, composite goods consisting of
different materials or made up of different components, and goods
put up for retail sale, which cannot be classified by reference to
3(a), shall be classified as if they consisted of the material or
component which gives them their essential character. If this rule
is applied, then the material which gives the essential character is
the Pan Leaf Powder. Pan Leaf is part of a plant and preparation of
pan leaves with other ingredients would merit classification under
Heading 20.01 as preparation of fruits, nuts and vegetables and
other parts of a plant prior to March, 2005 and under CETH
2008.9200 on or after March, 2005."

As per this judgement, product is to be classified based on its essential
character. In the instant case, there is no dispute that the import goods
are Nutrition Supplements made from Whey Protein Concentrate and
Whey Protein Isolate.Ld AR argued that Tribunalin the case of Raptakos
Brett & Co. Ltd Vs. Commissioner of C. Ex., Raigad - 2014 (307) ELT 565
(Tri.-Mumbai) held that to constitute protein concentrate, at least 70% of
protein is required. It can be seen from the Annexure-A, import goods
except goods at Sl No. 7, 11 & 15, contain protein more than 70%.
Hence these products can be classified as protein concentrates under
CTH 21061000.

41. Learned AR argued that finalization of classification issue was
under the competency of the adjudicating authority and the finalization
on valuation issue was under SVB. That is the reason, the adjudicating
authority in the order portion mentioned that "this order is issued
without prejudice to the outcome of the issue of supplies from related
party which is to be decided by the Special Valuation Branch, Mumbai".

42. Learned AR argued that it is not forthcoming whether the appellant
have submitted labels of all their products, bills of materials, etc. before
the adjudicating authority. It can be definitely said that all bills of
materials submitted by the appellant before this hon‟ble Tribunal are
issued on 18-08-2022. These were not produced before the adjudicating
authority or before the first appellate authority.

FINDINGS:

43. We have considered the rival submissions. After raising the ground
of assessment being provisional and piecemeal finalisation of assessment
the appellants have given up this issue. The Ld counsel has sought that
the issue of classification may be finalised by the tribunal as is apparent
24 | P a g e C/10849 -10877/2021

from the submissions recorded in para 30 above.The submission in this
regard is reproduced below:

"Having said the foregoing, in order to conclude the classification
dispute, it is most respectfully prayed before this Hon‟ble Tribunal
to pass orders on the classification of the impugned goods
determinatively."
In view of above, we proceed to decide the classification issue despite
the assessment being provisional on account of Valuation.

44 The following table contains the classification sought by the
appellant and the classification adjudicated by the Revenue.

S.No. Product Name Department‟s Appellant‟s
Classification Classification
1. BSN Syntha 6 Chocolate 21061000 18069040
2. BSN Truemass 1200 Chocolate 21061000 18069040
3. Isopure Low Carb - Chocolate 21061000 18069040
4. Isopure Zero Carb - Chocolate Mint 21061000 18069040
5. Optimum Nutrition 100% Casein-
Chocolate Supreme 21061000 18069040
6. Optimum Nutrition 100% Whey Gold
Standard- Chocolate 21061000 18069040
7. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Hazelnut 21061000 18069040
8. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Malt 21061000 18069040
9. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Mint 21061000 18069040
10. Optimum Nutrition 100% Whey Gold
Standard- Chocolate Peanut Butter 21061000 18069040
11. Optimum Nutrition 100% Whey Gold
Standard- Cookies and Cream 21061000 18069040
12. Optimum Nutrition 100% Whey Gold
Standard- Double Rich Chocolate 21061000 18069040
13. Optimum Nutrition 100% Whey Gold
Standard Isolate - Chocolate 21061000 18069040
14. Optimum Nutrition 100% Whey Gold
Standard Isolate - Chocolate Bliss 21061000 18069040
15. Optimum Nutrition 100% Whey Gold
Standard- Mocha Cappuccino 21061000 18069040
16. Optimum Nutrition 100% Whey Gold
Standard- Rocky Road 21061000 18069040
17. Optimum Nutrition Serious Mass -
Chocolate 21061000 18069040

45 The appellants have themselves ruled out the classification under
chapter 4 or chapter 35 of the Customs tariff as the said headings do not
relate to food preparations. In the written submissions they have argued
as follows:
25 | P a g e C/10849 -10877/2021

"B.2 Nature of food preparation:In the present case,
on perusal of the Bills of Material and Labels available on
Page 288 and Page 273 of Additional Paper Book,
respectively, constituents of the impugned goods have
undergone a process to make them independent of its
constituents [Process Chart, Additional Paper Book, p.
305]. Hence, the impugned goods are in the nature of
"food preparations". This fact is undisputed between the
parties. It is on this ground alone, classification under CTH
3502 and CTH 3504 of Customs Tariff are ousted as they
do not relate to food preparations [HSN Explanatory
Notes to CTH 3502, Para (1), pg. VI-3502-1; and
HSN Explanatory Notes to 3502, Para B (6), pg. VI-
3504-1] [Compilation, p. 33-34]
B.4 Coming to classification under CTH 1901, the
impugned goods contain albumin and other protein
concentrates which are acting as the base material [Bill(s)
of Material, Additional Paper Book, p. 288-287].In other
words, the impugned goods are food preparations of
having constituent ingredients from CTH 3502 and CTH
3504, and are not food preparations of CTH 0401 to CTH
0404. Thus, it is submitted that the impugned goods do
not satisfy the condition of classification under CTH 1901
of Customs Tariff. Furthermore, cocoa used in the food
preparation is not defatted cocoa."
They have themselves argued that the impugned goods are food
preparations having constituent ingredients from CTH 3502 and CTH
3504 and are not food preparations of CTH 0401 to CTH 0404. They
have also argued that the impugned goods do not satisfy the condition of
classification under CTH 1901 of the Customs Tariff Act. They have also
argued that the coco used by them in the food preparation is not
defatted coco as required for classification under heading 1901. In view
of the above, the only contesting classification that remain are CTH 1806
and CTH 2106.

46 In this regard the competing heading in the schedule to Custom
Tariff Act 1975 in the instant case are reproduced below:

1806 CHOCOLATE AND OTHER FOOD
PREPARATIONS CONTIANING COCOA
1806 10 00 - Cocoa powder and other food preparations Kg. 30% -
containing coca
1806 20 00 - Other preparations in blocks, slabs or bars Kg. 30% -
weighing more than 2 kg or in liquid,
paste, powder, granular or other bulk
form in containers or immediate
packings, of a content exceeding 2 kg.
- Other, in blocks, slabs or bars:
1806 31 00 -- Filled Kg. 30% -
1806 32 00 -- Not filled Kg. 30% -
1806 90 - Other:
1806 90 10 --- Chocolate and chocolate products Kg. 30% -
1806 90 20 --- Sugar confectionary containing cocoa Kg. 30% -
26 | P a g e C/10849 -10877/2021

1806 90 30 --- Spreads containing cocoa Kg. 30% -
1806 90 40 --- Preparations containing coca for Kg. 30% -
making beverages
1806 90 90 --- Other Kg. 30% -

2106 FOOD PREPARATIONS NOT ELSEWHERE
SPECIFIED OR INCLUDED
2106 1000 - Protein concentrates and textured Kg. 40% -
protein substances
2106 90 - Other : -
--- Soft drink concentrates :
2106 90 11 ---- Sharbat Kg. 150% -
2106 90 19 ---- Other Kg. 150% -
2106 90 20 --- Pan masala Kg. 150% -
2106 90 30 --- Betel nut product known as "Supari" Kg. 150% -
2106 90 40 --- Sugar-syrups containing added flavouring Kg. 150% -
or colouring matter, not elsewhere
specified or included; lactose syrup;
glucose syrup and malto dextrin syrup
2106 90 50 --- Compound preparations for making non- Kg. 150% -
alcoholic beverages
2106 90 60 --- Food flavouring material Kg. 150% -
2106 90 70 --- Churna for pan Kg. 150% -
2106 90 80 --- Custard powder Kg. 150% -
--- Other :
2106 90 91 ---- Diabetic foods Kg. 150% -
2106 90 92 ---- Sterilized or pasteurized millstone Kg. 150% -
2106 90 99 ---- Other Kg. 150% -

The products imported by the appellant are essentially Protein
Concentrates of Whey Protein with additives, in different proportions.
The other additives to the product can be of various kinds like flavouring
agents, stabilisers etc. The argument of the appellant is that the
description of Customs Tariff Heading 2106 which reads as under

"CHOCOLATE AND OTHER FOOD PREPARATIONS CONTIANING
COCOA "

is more appropriate classification for the „Protein Concentrates containing
Cocoa‟ as compared to the Customs Tariff Heading 1806 which reads as
under

"FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR
INCLUDED".

While doing so the Ld counsel has totally ignored the Supplementary
Note 5(a) to Chapter 21. It is seen that the Supplementary Notes
appearing in Chapter 21 distinguish the Chapter 21 of Customs Tariff
from the Chapter 21 of the HSN (para 49 below). It is seen that in the
entire appeal as well as written submissions the appellant has not dealt
with the Supplementary Notes to Chapter 21. The argument of the
appellants that while other „Protein Concentrates‟ imported by them are
classifiable under Customs Tariff Heading 2106 (Sub Heading 2106
1000), the „Protein Concentrates containing Cocoa‟ are classifiable under
Customs Tariff Heading 1806 (Sub Heading 1806 9040). This claim is
solely based on the HSN ignoring the Supplementary Notes to Chapter
21. The competing subheadings are as follows
27 | P a g e C/10849 -10877/2021

1806 CHOCOLATE AND OTHER FOOD
PREPARATIONS CONTIANING COCOA
1806 90 40 Kg. 30% -
--- Preparations containing coca for
making beverages

2106 FOOD PREPARATIONS NOT ELSEWHERE
SPECIFIED OR INCLUDED
2106 1000 - Protein concentrates and textured Kg. 40% -
protein substances

The heading 2106 is qualified by the Supplementary notes to Chapter 21.
Therefore the Heading 2106 needs to be read with Supplementary Note
5(a) in terms of rule 1 of the Rules of Interpretation of Customs Tariff as
discussed in para 49 onwards below..

47. Whey proteins are available in different flavours like Double Rich
Chocolate, Chocolate Bliss, Cream Vanilla, Delicious Strawberry, Vanilla
Ice-Cream, Mocha Cappuccino etc.The appellant has described the goods
in the appeal memorandum as follows:

"The appellant is primarily engaged in the business of
importing and selling nutritional supplements in India. In
this regard, the appellant imported certain nutritional
supplements containing cocoa, glutamine powder, creatine
powder and certain unflavoured nutritional supplements
from M/s Glanbia Nutritionals (Ireland) Ltd. The basic raw
material of nutritional supplements imported by the
appellant is „WHEY‟."

Ld Counsel has described the product as "chocolate protein
powders/chocolate-flavoured protein powders" as can be seen
from his submissions in para 6 above.These powders are used by the
athletes and sport persons as food supplements to supplement their
protein intake. The argument of the appellants is that mere
presence of cocoa in the impugned products rules out
classification under heading 2106 and takes it into heading 1806.

48 Such Protein Concentrates of Whey Protein are made in many
flavours like Double Rich Chocolate, Chocolate Bliss, Cream Vanilla,
Delicious Strawberry, Vanilla Ice-Cream, Mocha Cappuccino etc. The
compositions and the main ingredients of all such products is similar. All
such products, except those containing cocoa, are classified by
appellants themselves under heading 2106. The dispute is solely
related to the Protein Concentrates of Whey Protein containing some
28 | P a g e C/10849 -10877/2021

amount of cocoa. The appellants are seeking to classify the same under
heading 1806. The assertion is based on the Chapter and heading notes
of the HSN to chapter 18 and 21 and some decisions of foreign countries
and international bodies.

49 To examine the issue the comparative chart of relevant chapter
notes appearing in HSN as compared to those appearing in Customs
Tariff is reproduced below

COMPARISON OF CHAPTER 21 OF HSN with THE
CHAPTER 21 OF THE CUSTOMS TARIFF
CHAPTER NOTES OF CHAPTER 21 CHAPTER NOTES OF CHAPTER 21
OF CUSTOMS TARIFF ACT OF HSN
MISCELLANEOUS EDIBLE MISCELLANEOUS EDIBLE
PREPARATIONS PREPARATIONS

NOTES:- CHAPTER NOTES:-
1.- This Chapter does not cover : 1.- This Chapter does not cover :
(a)Mixed vegetables of heading (a)Mixed vegetables of heading
0712; 0712;
(b) Roasted coffee substitutes (b) Roasted coffee substitutes
containing coffee in any containing coffee in any
proportion (heading 0901); proportion (heading 0901);
(c) Flavoured tea (heading (c) Flavoured tea (heading
0902); 0902);
(d) Spices or other products of (d) Spices or other products of
headings 0904 to 0910; headings 0904 to 0910;
(e) Food preparations, other (e) Food preparations, other
than the products than the products
described in heading 2103 described in heading 2103
or 2104, containing more or 2104, containing more
than 20 % by weight of than 20 % by weight of
sausage, meat, meat offal, sausage, meat, meat offal,
blood, fish or crustaceans, blood, fish or crustaceans,
molluscs or other aquatic molluscs or other aquatic
invertebrates, or any invertebrates, or any
combination thereof combination thereof
(Chapter 16); (Chapter 16);
(f) Yeast put up as a (f) Yeast put up as a
medicament or other medicament or other
products of heading 3003 products of heading 3003
or 3004; or or 3004; or
(g) Prepared enzymes of (g) Prepared enzymes of
heading 3507. heading 3507.
2.- Extracts of the substitutes 2.- Extracts of the substitutes
referred to in Note 1 (b) above referred to in Note 1 (b) above
are to be classified in heading are to be classified in heading
2101. 2101.
3.- For the purposes of heading 3.- For the purposes of heading
21.04, the expression 21.04, the expression
"homogenised composite food "homogenised composite food
preparations" means preparations" means
preparations consisting of a preparations consisting of a
finely homogenised mixture of finely homogenised mixture of
two or more basic ingredients two or more basic ingredients
such as meat, fish, vegetables such as meat, fish, vegetables
or fruit, put up for retail sale as or fruit, put up for retail sale as
29 | P a g e C/10849 -10877/2021

infants or young children or for infants or young children or for
dietetic purposes, in containers dietetic purposes, in containers
of a net weight content not of a net weight content not
exceeding 250g. For the exceeding 250g. For the
application of this definition, no application of this definition, no
account is to be taken of small account is to be taken of small
quantities of any ingredients quantities of any ingredients
which may be added to the which may be added to the
mixture for seasoning, mixture for seasoning,
preservation or other purposes. preservation or other purposes.
Such preparations may contain Such preparations may contain
a small quantity of visible pieces a small quantity of visible pieces
of ingredients. of ingredients.
SUPPLEMENTRY NOTES :
1. In this Chapter, "Pan masala"
means any preparation containing
betel nuts and any one or more of the
following ingredients, namely: lime,
katha (catechu) and tobacco whether
or not containing any other ingredient,
such as cardamom, copra or menthol.
2. In this Chapter "betel nut product
known as Supari" means any
preparation containing betel nuts, but
not containing any one or more of the
following ingredients, namely: lime,
katha (catechu) and tobacco whether
or not containing any other
ingredients, such as cardamom, copra
or menthol.
3. For the purposes of tariff item 2106
90 11, the expression "Sharbat"
means any non-alcoholic sweetened
beverage or syrup containing not less
than 10% fruit juice or flavoured with
non-fruit flavours, such as rose, Khus,
Kevara, but not including aerated
preparations.
4. Tariff item 2106 90 50, inter alia,
includes preparations for lemonades or
other beverages, consisting, for
example, of flavoured or coloured
syrup, syrup flavoured with an added
concentrated extract, syrup flavoured
with fruit juice and intended for use in
the manufacture of aerated water,
such as in automatic vending
machines.
5. Heading 2106 (except tariff
items 2106 90 20 and 2106 90
30), inter alia, includes:
(a) protein concentrates and
textured protein substances;
(b) preparations for use, either
directly or after processing (such
as cooking, dissolving or boiling in
water, milk or other liquids), for
human consumption;
(c) preparations consisting wholly or
partly of foodstuffs, used in the
making of beverages of food
preparations for human
consumption;
30 | P a g e C/10849 -10877/2021

(d) powders for table creams, jellies,
ice-creams and similar
preparations, whether or not
sweetened;
(e) flavouring powders for making
beverages, whether or not
sweetened;
(f) preparations consisting of tea or
coffee and milk powder, sugar
and any other added ingredients;
(g) preparations (for example,
tablets) consisting of saccharin
and foodstuff, such as lactose,
used for sweetening purposes;
(h) pre-cooked rice, cooked either
fully or partially and their
dehydrates; and
(i) preparations for lemonades or
other beverages, consisting, for
example, of flavoured or coloured
syrups, syrup flavoured with an
added concentrated extract,
syrup flavoured with fruit juices
and concentrated fruit juice with
added ingredients.
6. Tariff item 2106 90 99 includes
sweet meats commonly known as
"Misthans" or "Mithai" or called by any
other name. They also include
products commonly known as
"Namkeens", "mixtures", "Bhujia",
"Chabena" or called by any other
name. Such products remain classified
in these sub-headings irrespective of
the nature of their ingredients.

COMPARISON of CHAPTER 18 of HSN with THE CHAPTER
18 OF THE CUSTOMS TARIFF
CHAPTER NOTES OF CHAPTER 18 CHAPTER NOTES OF CHAPTER 18
OF CUSTOMS TARIFF ACT OF HSN
NOTES:- NOTES:-
1. This Chapter does not cover 1. This Chapter does not cover
the preparations of headings the preparations of heading
0403, 1901, 1904, 1905, 04.03, 19.01, 19.04, 19.05,
2105, 2202, 2208, 3003 and 21.05, 22.02, 22.08, 30.03 or
3004. 30.04.

2. Heading 1806 includes sugar 2. Heading 18.06 includes sugar
confectionary containing confectionery containing
cocoa and, subject to Note 1 cocoa and, subject to Note 1
to this Chapter, other food to this Chapter, other food
preparations containing cocoa. preparations containing
cocoa.

Not alligned GENERAL

This Chapter covers cocoa
(including cocoa beans) in all
31 | P a g e C/10849 -10877/2021

forms, cocoa butter, fat and oil and
preparations containing cocoa (in
any proportion), except:

(a) Yogurt and other products
of heading 04.03.

(b) White chocolate (heading
17.04).

(c) Food preparations of flour,
groats, meal, starch or malt
extract, containing less than
40% by weight of cocoa
calculated on a totally
defatted basis, and food
preparations of goods of
headings 04.01 to 04.04
containing less than 5% by
weight of cocoa calculated on
a totally defatted basis, of
heading 19.01.

(d) Swelled or roasted cereals
containing not more than 6%
by weight of cocoa calculated
on a totally defatted basis
(heading 19.04).

(e) Pastry, cakes, biscuits and
other bakers' wares,
containing cocoa (heading
19.05).

(f) Ice cream and other edible
ice, containing cocoa in any
proportion (heading 21.05).

(g) Beverages, non-alcoholic or
alcoholic (e.g, "crème de
cacao"), containing cocoa and
ready for consumption
(Chapter 22).

(h) Medicaments (heading
30.03 or 30.04).

The Chapter also excludes
theobromine, an alkaloid extracted
from cocoa (heading 29.39).

50. The dispute in the instant case relates to classification. For the
purpose of classification, the Custom Tariff Act prescribes the general
rules of interpretation. Rule 1, 2 and 3 of the said Rules are reproduced
below:
32 | P a g e C/10849 -10877/2021

"Classification of goods in the Nomenclature shall be
governed by the following principles:

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 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 following
provisions:

2. (a) Any reference in a heading to an article shall
be taken to include a reference to that article
incomplete or unfinished, provided that, as presented,
the incomplete or unfinished article has the essential
character of the complete or finished article. It shall
also be taken to include a reference to that article
complete or finished (or falling to be classified as
complete or finished by virtue of this Rule). presented
unassembled or disassembled.

(b) Any reference in a heading to a material or
substance shall be taken to include a reference to
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 principles of Rule 3.

3. When by application of Rule 2 (b) or for any
other reason, goods are, prima facie, classifiable under
two or more headings, classification shall be effected as
follows:

(a) The heading which provides the most specific
description shall be preferred to headings providing a
more general description. However, when two or more
headings each refer to part only of the materials or
substances contained in mixed or composite goods or
to part only of the items in a set put up for retail sale,
those headings are to be regarded as equally specific in
relation to those goods, even if one of them gives a
more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different
materials or made up of different components, and
goods put up in sets for retail sale, which cannot be
classified by reference to 3 (a), shall be classified as if
they consisted of the material or component which
gives them their essential character, insofar as this
criterion is applicable.

(c) When goods cannot be classified by reference to 3
(a) or 3 (b), they shall be classified under the beading
which occurs last in numerical order among those
which equally merit consideration."
33 | P a g e C/10849 -10877/2021

We agree with the proposition made by the Ld counsel reproduced in
para 8 above that product is to be classified basis the condition in which
such goods are presented for clearance to the Customs Authorities
referred to in para 8 above. He relied on the following

(i) Taj Sats Air Catering Ltd. v. CC Ex., Delhi-II, 2016 (334)
E.L.T. 680 (Tri-Del.);
(ii) Circular 36/2013-Cus. Dated 05.09.2013
We also agree to the proposition referred in para 8 above to the effect
that the appropriate classification of goods is determined by following the
General Rules for the Interpretation of Import Tariff which must be
applied sequentially. We also agree in principle to the proposition that
only if classification cannot be made following Rule 1, can resort be made
to rule 2, and thereafter only if classification cannot be made by following
rule 1 or 2 can a recourse to rule 3 be made, and so on.We also find
support for this proposition in the following decisions

(i) In the case of CCE Nagpur vs Simplex Mills Co Ltd. 2005
(181) ELT 345 SC Hon‟ble Apex Court has observed as
follows:

"11.The rules for the interpretation of the Schedule
to the Central Excise Tariff Act, 1985 have been
framed pursuant to the powers under Section 2 of
that Act. According to Rule 1 titles of Sections
and Chapters in the Schedule are provided for
ease of reference only. But for legal purposes,
classification "shall be determined according to
the terms of the headings and any relevant
section or Chapter Notes". If neither the
heading nor the notes suffice to clarify the
scope of a heading, then it must be construed
according to the other following provisions
contained in the Rules. Rule-I gives primacy to
the Section and Chapter Notes along with terms
of the headings. They should be first applied. If
no clear picture emerges then only can one
resort to the subsequent rules. The appellants
have relied upon Rule 3. Rule 3 must be understood
only in the context of sub-rule (b) of Rule 2 which
says inter alia that the classification of goods
consisting of more than one material or substance
shall be according to the principles contained in Rule
3. Therefore when goods are prima facie, classifiable
under two or more headings, classification shall be
effected according to sub-rules (a), (b) and (c) of
Rule 3 and in that order. The sub-rules are quoted :-

"(a) The heading which provides the most specific
description shall be preferred to heading providing a
more general description. However when two or more
headings each refer to part only of the materials or
substances contained in mixed or composite goods or
to part only of the items in a set, those headings are
to be regarded as equally specific in relation to those
goods, even if one of them gives a more complete or
precise description of the goods.
34 | P a g e C/10849 -10877/2021

(b) Mixtures, composite goods consisting of
different materials or made up of different
components, and goods put up in sets, which cannot
be classified by reference to (a), shall be classified as
if they consisted of the material or component which
gives them their essential character, insofar as this
criterion is applicable.

(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."

12.Applying the Rules of Interpretation particularly
Rule 1, we are of the opinion that the reasoning of
the Tribunal in Jyoti Overseas is unexceptionable and
in our opinion the decision in Simplex-I was correctly
overruled."

(ii) The Hon‟ble Apex Court in the case of C.C. Amritsar vs D.L.
Steels 2022 (381) ELT 289 (SC) has observed as follows:

"10.Classification under the Harmonised System
is done by placing the good under the most apt
and fitting sub-heading. This is done by choosing
the appropriate Chapter, Heading, and sub-
heading respectively. To facilitate interpretation
and classification, each of the 97 Chapters in the
HSN contain corresponding Chapter Notes, General
Notes, and Explanatory Notes applicable to the
Headings and sub-headings within that Chapter. In
addition, there are six General Rules of
Interpretation applicable to the Harmonised
System as a whole.

11.GRI-1 states that the titles of Sections,
Chapters, and sub-chapters are provided for
ease of reference only. Therefore, they have
no legal bearing on classification.
Classification is to be effected : (a) according
to the terms of the Headings and any relative
Section or Chapter Notes; and, (b) provided
the Headings or Chapter Notes do not
otherwise require according to the provisions
thereinafter contained, viz., GRIs 2 to 6.
Thus, it is clear from the above that : (i) the
Headings, and, (ii) the relative Section or
Chapter Notes must be considered before
classification is done. Only after this exercise
is done, if a conflict in classification still
persists, the subsequent GRIs are to be
resorted to. GRI-2 is not germane to the present
case and therefore, we make no reference to it.
GRI-3 provides for classification in the event when
the goods are classifiable under two or more
Headings. As per GRI-3, when by application of
GRI-2(b) or for any other reason, the goods are,
prima facie, classifiable under more than one
Heading, then; (a) the „most specific description‟ is
35 | P a g e C/10849 -10877/2021

preferred, (b) a mixture of different goods will be
classified as that good which gives the mixture its
„essential characteristic‟, and (c) when goods
cannot be classified with reference to (a) or (b),
they should be classified under the Heading which
occurs last in the numerical order. The order of
priority therefore is; (a) specific description, (b)
essential character, and (c) the Heading which
occurs last in numerical order. However, GRI-3 can
only take effect provided the terms of the Heading
or Section or Chapter Notes do not otherwise
require. GRI-4 states that when the goods cannot
be classified in accordance with the
aforementioned rules, they shall be classified
under the heading appropriate for the goods "to
which they are most akin". GRI-5 applies
exclusively to cases and packing material, and
therefore, is not apropos. GRI-6 states that the
classification of goods in the sub-headings of a
Heading shall be determined according to the
terms of those sub-headings and any related
Notes, and mutatis mutandis to the above GRIs,
on the understanding that only sub-headings at
the same level are comparable."

(iii) In the case of Westinghouse Saxby Farmers Ltd. 2021 (376)
ELT 14 (SC) the Hon‟ble Apex Court has observed as follows:

"31.But in invoking General Rule 3(a), the
Authorities have omitted to take note of 2
things. They are : (i) that as laid down by this
Court in Commissioner of Central Excise v.
Simplex Mills Co. Ltd. [(2005) 3 SCC 51 = 2005
(181) E.L.T. 345 (S.C.)] the General Rules of
Interpretation will come into play, as mandated
in Rule 1 itself, only when no clear picture
emerges from the terms of the Headings and the
relevant section or chapter notes; and (ii) that
in any case, Rule 3 of the General Rules can be
invoked only when a particular goods is
classifiable under two or more Headings, either
by application of Rule 2(b) or for any other
reason. Once the authorities have concluded
that by virtue of Note 2(f) of Section XVII,
„relays' manufactured by the appellant are not
even classifiable under Chapter Heading 8608,
we do not know how the Authorities could fall
back upon Rule 3(a) of the General Rules. There
is a fundamental fallacy in the reasoning of the
Authorities, that Rule 3(a) of the General Rules will
apply, especially after they had found that „relays‟ are
not classifiable under Chapter Heading 8608, on
account of Note 2(f) of Section XVII."
36 | P a g e C/10849 -10877/2021

In all the aforesaid cases, it has been held that when the
classification can be made on the basis of Interpretative Rule 1,
there is no need to go for rule 2 to 6.

51. The Hon Apex court has held in many cases that if there is a
difference between the chapter notes and Section notes of the Customs
Tariff and the chapter notes and Section notes appearing in HSN, then
those appearing in the Customs Tariff take precedence over those
appearing in the HSN. In other words HSN can be relied for the purposes
of classification under Customs Tariff only if the HSN is harmonised with
the Customs Tariff.

(i)We find that Hon‟ble Apex Court in the case of Global Healthcare
Products 2015 (322) ELT 365 (SC) has observed as follows:

"10. The Commissioner, thus, noted that in the HSN
Notes, sub-heading 3306.10 deals with dentifrices. The
Commissioner noted that the meaning of dentifrices as per
the Concise Oxford Dictionary is „a paste or powder for
cleaning of teeth‟. On that basis, he concluded that the
product in question was paste, namely, the toothpaste for
cleaning the teeth and, therefore, would fall under sub-
heading 3306.10. En passe, the Commissioner also
observed that there is no major difference in these
products, namely, Close-Up Whitening and Close-Up
Red/Blue/Green, except one ingredient used in the
manufacture of Close-Up Whitening and the addition of
that ingredient does not change the purpose, nature as
well as definition of the product in a common market
parlance. He observed that in the market the product was
known as toothpaste. He also observed that it is treated as
toothpaste as per the product manual issued by the Dental
Invocation Centre, Mumbai. Discussion is summed up in
para 32 of the order passed by the Commissioner, which
reads as under :

"32. As narrated in the SCN that the tooth paste, being
dentifrice has been correctly classified under the HSN and
the Central Excise Tariff has been based on HSN.
Accordingly it is essential to follow the correct classification
of the product in question as described and classified under
the relevant chapter of HSN. In this connection it may be
mentioned that the Hon‟ble Supreme Court in the case of
CCE, Shillong v. Wood Craft Product Ltd. reported in 1995
(77) E.L.T. 23 (S.C.) in para 18 has held that the structure
of Central Excise Tariff is based on the internationally
accepted nomenclature found in the HSN and therefore,
any dispute relating to tariff classification must, as far as
possible be resolved with reference to the nomenclature
indicated by the HSN unless there be an express different
intention indicated in the Central Excise Tariff Act, 1985
itself.

Further it may be mentioned that the Hon‟ble Bombay High
Court in the case of Jagdish D. Devgekar v. Collector of
Central Excise, Poona reported in 1978 (2) E.L.T. (J581) in
para 6 has held that the correct test in interpreting any
item mentioned in the First Schedule to the Central Excise
Act is to see the commercial sense in which the item is
37 | P a g e C/10849 -10877/2021

understood or the sense in which traders or persons
dealing in that terms understand it and not the technical or
scientific sense.

Even it may be mentioned that the Hon‟ble Tribunal in case
Veto Co. v. CCE reported in 1992 (62) E.L.T. 584 (T) in
para 6 has held that the goods have to be classified under
the tariff schedule according to their popular meaning or as
they are understood in their commercial sense and not as
per their scientific or technical meaning. While holding so
the Hon‟ble Tribunal has referred to the observations of the
Hon‟ble Supreme Court‟s judgment in case of Plasmac
Machine Mfg. Co. Pvt. Ltd. v. CCE reported in 1991 (51)
E.L.T. 161 (S.C.) (Para 13)."

11. The aforesaid approach adopted by the
Commissioner has been found fault with by the
Tribunal. The Tribunal pointed out that there was
material difference in the sub-heading 3306.10 in
the Indian statute when contrasted with Harmonized
Commodity Description and Coding System.
Whereas, as per the Tariff Entry 3306.10 in the
Excise Act, it is „tooth powder‟ and „toothpaste‟,
under the Harmonized Commodity Description and
Coding System, what is mentioned is „dentifrices‟. It
is further noticed by the Tribunal that dentifrices
was more generic in nature as it recognized all three
types of products, namely, (i) toothpaste, (ii) other
preparations for teeth and (iii) denture cleaners,
than tooth powders and toothpaste. Thus, when
under Indian statutory regime there is a restricted
sub-heading under 3306.10, namely, tooth powder
and toothpaste only, the approach of the
Commissioner in taking aid of HSN Notes was
erroneous. Discussion on this aspect runs as follows:

"A perusal of the HSN notes would indicate
that all three types of „Dentifrices‟ are
recognized as (i) „Toothpaste‟, (ii) Other
preparations for teeth, and (iii) „Denture
cleaners‟. The Note further explains that
"Dentifrices" to include „toothpaste‟ and
"other preparations for teeth" whether for
cleaning or polishing the assessable surface
of teeth or for other purposes such an
Anticaries prophylactic treatment. The Note
also enumerates that „toothpaste‟ and „other
preparations for teeth‟ remains classified
under Heading 3306 whether or not they
contain abrasives and whether or not they
are used by dentist. The correct scope of the
heading as per the submission of the
appellants is that when one refers to HSN
Item 3306 and the bifurcations as also under
CETA, 1985 there is a variance seen. In other
words, this bifurcation under Heading 3306
for HSN and is not pari materia and under
CETA, 1985 and therefore, the sub-heading
structure of HSN would not apply to CETA.
38 | P a g e C/10849 -10877/2021

The CETA proves preparation for oral or
dental hygiene including Dentifrices and
Denture Fixative paste and powders under
Heading 3306 and at the four digit level it is
para material HSN. The scope of sub-heading
3306.10 of CETA, 1985 restricts it to only
„tooth powder and paste‟ and any entity
which is not a „toothpowder or toothpaste‟
would be covered under Heading 3306.90.
This submission has to be upheld."

We find ourselves in agreement with the aforesaid
approach of the Tribunal having regard to the cogent
reasons given by it.

12. This Court in the case of Camlin Limited v.
Commissioner of Central Excise, Mumbai - (2008) 9 SCC
82 = 2008 (230) E.L.T. 193 (S.C.) held that if the entries
under HSN and the entries under the Central Excise Tariff
are different, then reliance cannot be placed upon HSN
Notes for the purposes of classification of goods under
Central Excise Tariff. This is so stated in para 24 of the
judgment that makes the following reading :

"24. In our considered view, the Tribunal erred
in relying upon the HSN for the purpose of
marker inks in classifying them under Chapter
sub-heading 3215.90 of the said Tariff. The
Tribunal failed to appreciate that the entries
under the HSN and the entries under the said
Tariff are completely different. As mentioned
above, it is settled law that when the entries in
the HSN and the said Tariff are not aligned,
reliance cannot be placed upon HSN for the
purpose of classification of goods under the said
Tariff. One of the factors on which the Tribunal
based its conclusion is the entries in the HSN.
The said conclusion in the order of the Tribunal
is, therefore, vitiated and, accordingly, set aside.
We agree with the findings recorded by the
Commissioner (Appeals)."

(iii) Hon‟ble Apex Court in the case of Camlin 2008 (230) ELT 193
(SC) has observed as follows:

"26. In our considered view, the Tribunal erred in
relying upon the HSN for the purpose of marker inks in
classifying them under Chapter Sub-Heading 3215.90
of the said Tariff. The Tribunal failed to appreciate that
the entries under the HSN and the entries under the
said Tariff are completely different. As mentioned
above, it is settled law that when the entries in the
HSN and the said Tariff are not aligned, reliance cannot
be placed upon HSN for the purpose of classification of
goods under the said Tariff. One of the factors on
which the Tribunal based its conclusion is the entries
in the HSN. The said conclusion in the Order of the
39 | P a g e C/10849 -10877/2021

Tribunal is, therefore, vitiated and, accordingly, set
aside. We agree with the findings recorded by the
Commissioner (Appeals)."

(iii) From the above decisions of Hon‟ble Apex Court, it is apparent that
reliance on the HSN Section Notes, Chapter Notes and Explanatory Notes
can be placed only when the Customs Tariff is harmonized with HSN.
Wherever there is a difference between the Customs Tariff and HSN
reliance cannot be placed on HSN Section Notes, Chapter Notes and
Explanatory Notes for the purpose of classification. In such cases
reliance is to be placed on the Chapter Notes and Section Notes
appearing in the Customs Tariff. The appellants have also relied on the
decision of Tribunal in the case of Anutham Exim P. Ltd. 2021 (378) ELT
611 (T-Kol.). In the said decision also in para 13 following has been
observed:

"13.The Schedule to the Customs Tariff Act, 1975
(commonly referred to as Customs Tariff) is based on,
although it is not identical to, the Harmonised System of
Nomenclature (HSN) - an internationally recognised
scientific method of classifying all goods. Sometimes
there are differences between the HSN and the Customs
Tariff in which case, the latter is relevant for
determining the duty liability under the Customs Act. In
view of the explanation to this effect in the IGST
Notification specifying the rates of IGST chargeable on
different goods, IGST is also to be charged as per the
classification under the Customs Tariff. Customs Tariff,
groups goods into Sections, each of which is further
divided into Chapters with a two digit Chapter number.
Within each Chapter, there are four digit headings which
are further divided into six digit and still further divided
into eight digit tariff headings."

Thus even going by the decision cited by the appellant, it is seen that no
reliance can be placed on HSN when the Schedule to the Customs Tariff
Act is not aligned with the HSN.

52. It is seen that there are major differences between Customs Tariff
and the HSN in respect of Chapter 21. A comparative table of the
Chapter Notes appearing in Customs Tariff and the HSN is reproduced in
para 49 above. It is noticed that while the Customs Tariff contains
supplementary notes in Chapter 21, there are no such notes in the HSN.
While supplementary notes are there in Chapter 21 of the Customs Tariff
Act the same are not appearing in the HSN. In the HSN, there are only
three chapter notes, which are as follows:
40 | P a g e C/10849 -10877/2021

"Chapter Notes to Chapter 21 of HSN (Harmonized System
of Nomenclature)

1-This Chapter does not cover:
(a) Mixed vegetables of heading 07.12;
(b) Roasted coffee substitutes containing coffee in any
proportion (heading 09.01):
(c) Flavoured tea (heading 09.02);
(d) Spices or other products of headings 09.04 to 09.10;
(e) Food preparations, other than the products described in
heading 21.03 or 21.04. containing more than 20% by
weight of sausage, meat, meat offal, blood, fish or
crustaceans, molluses or other aquatic invertebrates, or any
combination thereof (Chapter 16);
(f) Yeast put up as a medicament or other products of
heading 30.03 or 30.04; or
(g) Prepared enzymes of heading 35.07.
2- Extracts of the substitutes referred to in Note 1 (b) above are
to be classified in heading 21.01.
3- For the purposes of heading 21.04, the expression"
homogenised composite food preparations" means
preparations consisting of a finely homogenised mixture of
two or more basic ingredients such as meat, fish, vegetables
or fruit, put up for retail sale as infant food or for dietetic
purposes, in containers of a net weight content not
exceeding 250 g. For the application of this definition, no
account is to be taken of small quantities of any ingredients
which may be added to the mixture for seasoning.
preservation or other purposes. Such preparations may
contain a small quantity of visible pieces of ingredients."

In the Custom Tariff Act, notes apart from three chapter notes there are
additional „Supplementary Notes‟ whichreads as follows:

"SUPPLEMENTRY NOTES :

1. In this Chapter, "Pan masala" means any preparation containing betel
nuts and any one or more of the following ingredients, namely: lime,
katha (catechu) and tobacco whether or not containing any other
ingredient, such as cardamom, copra or menthol.

2. In this Chapter "betel nut product known as Supari" means any
preparation containing betel nuts, but not containing any one or more of
the following ingredients, namely: lime, katha (catechu) and tobacco
whether or not containing any other ingredients, such as cardamom,
copra or menthol.

3. For the purposes of tariff item 2106 90 11, the expression "Sharbat"
means any non-alcoholic sweetened beverage or syrup containing not
less than 10% fruit juice or flavoured with non-fruit flavours, such as
rose, Khus, Kevara, but not including aerated preparations.

4. Tariff item 2106 90 50, inter alia, includes preparations for lemonades
or other beverages, consisting, for example, of flavoured or coloured
syrup, syrup flavoured with an added concentrated extract, syrup
flavoured with fruit juice and intended for use in the manufacture of
aerated water, such as in automatic vending machines.
41 | P a g e C/10849 -10877/2021

5. Heading 2106 (except tariff items 2106 90 20 and 2106 90 30),
inter alia, includes:

(a) protein concentrates and textured protein substances;

(b) preparations for use, either directly or after processing (such
as cooking, dissolving or boiling in water, milk or other
liquids), for human consumption;

(c) preparations consisting wholly or partly of foodstuffs, used in
the making of beverages of food preparations for human
consumption;

(d) powders for table creams, jellies, ice-creams and similar
preparations, whether or not sweetened;

(e) flavouring powders for making beverages, whether or not
sweetened;

(f) preparations consisting of tea or coffee and milk powder, sugar
and any other added ingredients;

(g) preparations (for example, tablets) consisting of saccharin and
foodstuff, such as lactose, used for sweetening purposes;

(h) pre-cooked rice, cooked either fully or partially and their
dehydrates; and

(i) preparations for lemonades or other beverages, consisting, for
example, of flavoured or coloured syrups, syrup flavoured with
an added concentrated extract, syrup flavoured with fruit
juices and concentrated fruit juice with added ingredients.

6. Tariff item 2106 90 99 includes sweet meats commonly known as
"Misthans" or "Mithai" or called by any other name. They also include
products commonly known as "Namkeens", "mixtures", "Bhujia",
"Chabena" or called by any other name. Such products remain classified
in these sub-headings irrespective of the nature of their ingredients."

These supplementary notes appearing in Custom Tariff are not part of
the HSN. In this background it is seen that the Customs Tariff Act is not
aligned to the HSN (Harmonized System of Nomenclature) on account of
the text contained in supplementary notes to Chapter 21. Thus it is
seen that Government of India has deliberately chosen to deviate
from the Harmonised System of Nomenclature (HSN).By this
Supplementary note the Government of India has chosen to
enlarge the scope of the Heading 2106 by specifically including in
it the various items listed in Supplementary note. In view of
deliberate changes made in the Customs Tariff the HSN notes
lose their relevance.

53. The Supplementary notes of Chapter 21 of the Schedule to the
Custom Tariff Act prescribes at S.No. 5(a) that „Protein Concentrate and
42 | P a g e C/10849 -10877/2021

Textured Protein Substances‟ would fall under heading 2106.The heading
2106 of the Custom Tariff Act reads as follows:

2106 FOOD PREPARATIONS NOT ELSEWHERE
SPECIFIED OR INCLUDED
2106 1000 -Protein concentrates and textured protein substances Kg. 40% -
- Other :
2106 90 --- Soft drink concentrates : -
---- Sharbat
2106 90 11 ---- Other Kg. 150% -
2106 90 19 --- Pan masala Kg. 150% -
2106 90 20 --- Betel nut product known as "Supari" Kg. 150% -
2106 90 30 --- Sugar-syrups containing added flavouring or Kg. 150% -
2106 90 40 colouring matter, not elsewhere specified or Kg. 150% -
included; lactose syrup; glucose syrup and malto
dextrin syrup
--- Compound preparations for making non-alcoholic
2106 90 50 beverages Kg. 150% -
--- Food flavouring material
2106 90 60 --- Churna for pan Kg. 150% -
2106 90 70 --- Custard powder Kg. 150% -
2106 90 80 --- Other : Kg. 150% -
---- Diabetic foods
2106 90 91 ---- Sterilized or pasteurized millstone Kg. 150% -
2106 90 92 ---- Other Kg. 150% -
2106 90 99 Kg. 150% -

It is seen that OIA in the instant case relies on Supplementary Note 5(a)
and interpretative Rule1 for the purpose of classifying the Protein
Concentrates containing coco imported by the appellant under Heading
2106. There is no argument made in the appeal memorandum or in the
written submissions of the appellant as to why the Supplementary Note
5(a) should not be followed in the instant case. It is apparent from the
above reading of supplementary note 5(a) to Chapter 21 and that the
"Protein Concentrate and Textured Protein Substances" would fall under
the "heading 2106". It is seen that the sub heading 21061000 of
Customs Tariff (just like HSN) specifically covers "Protein Concentrates
and Textured Protein Substances", still a chapter supplementary note
was introduced to place the „Protein Concentrate and Textured Protein
Substances‟under heading 2106. It is noted that the supplementary Note
5(a) does not prescribe that "Protein Concentrate and Textured Protein
Substances" would fall under „sub heading 2106 1000‟ but it clearly
states that "Protein Concentrate and Textured Protein Substances" would
fall under „Heading 2106‟. This provision in the chapter notes has been
prescribed specifically to place "Protein Concentrate and Textured Protein
Substances" under the „heading 2106‟. Any other interpretation would
make the said note 5(a) redundant since these goods are as it is covered
under sub heading 2106 1000 in the tariff itself. In other words there
was no need of the Supplementary Note 5(a) if the goods are already
covered under sub heading 2106 1000. Hon‟ble Supreme Court in the
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case of Oswal Agro Mills Ltd. 1993 (66) ELT 37 (SC) has observed as
follows:

3. The provisions of the Tariff do not determine
the relevant entity of the goods. They deal whether
and under what entry, the identified entity attracts
duty. The goods are to be identified and then to find
the appropriate heading, sub-heading under which
the identified goods/products would be classified. To
find the appropriate classification description
employed in the tariff nomenclature should be
appreciated having regard to the terms of the
headings read with the relevant provisions or
statutory rules of interpretation put up thereon. For
exigibility to excise duty the entity must be specified
in positive terms under a particular tariff entry. In
its absence be deduced from a proper construction
of the tariff entry. There is neither intendment nor
equity in a taxing statute. Nothing is implied.
Neither can we insert nor anything can we delete
but it should be interpreted and construed as per
the words the legislature has chosen to employ in
the Act or Rules. There is no room for assumption or
presumptions. The object of the Parliament has to
be gathered from the language used in the statute.
The contention that toilet soap is commercially
different from household and laundry soaps, as
could be seen from the opening words of Entry 15,
needs careful analysis. It is well, at the outset, to
guard against confusion between the meaning and
the legal effect of an expression used in a statute.
Where the words of the statute are plain and clear,
there is no room for applying any of the principles of
interpretation which are merely presumption in
cases of ambiguity in the statute. The court would
interpret them as they stand. The object and
purpose has to be gathered from such words
themselves. Words should not be regarded as being
surplus nor be rendered otiose. Strictly speaking
there is no place in such cases for interpretation or
construction except where the words of statute
admit of two meanings. The safer and more correct
course to deal with a question of construction of
statute is to take the words themselves and arrive,
if possible, at their meaning, without, in the first
place, reference to cases or theories of construction.
Let us, therefore, consider the meaning of the word
soap "household". The word household signifies a
family living together. In the simplistic language
toilet soap being used by the family as household
soap is too simplification to reach a conclusion.
Therefore, one has to gather its meaning in the legal
setting to discover the object which the Act seeks to
serve and the purpose of the amendment brought
about. The task of interpretation of the statute is
not a mechanical one. It is more than mere reading
of mathematical formula. It is an attempt to
44 | P a g e C/10849 -10877/2021

discover the intention of the legislature from the
language used by it, keeping always in mind, that
the language is at best an imperfect instrument for
the expression of actual human thoughts. It is also
idle to expect that the draftsman drafted it with
divine prescience and perfect and unequivocal
clarity. Therefore, court would endeavour to eschew
literal construction if it produces manifest absurdity
or unjust result. In Manmohan Das v. Vishnu Das
[AIR 1967 SC 643] a Constitution bench held as
follows :

"The ordinary rule of construction is the
provision of a statute must be construed
in accordance with the language used
therein unless there are compelling
reasons, such as, where a literal
construction would reduce the provision
to absurdity or prevent manifest
intention of the legislature from being
carried out."

Hon‟ble Apex Court in the case of Calcutta Jute Manufacturing Co. 1997
(93) ELT 657 has observed as follows:

"10. The State is empowered by the
legislature to raise revenue through the mode
prescribed in the Act so the State should not be the
sufferer on account of the delay caused by the tax
payer in payment of the tax due. The provision for
charging interest would have been introduced in
order to compensate the State (or the Revenue) for
the loss occasioned due to delay in paying the tax
[vide Commissioner of Income Tax (A.P.) v. M.
Chandra Sekhar - 1985 (1) SCC 283 and Central
Provinces Manganese Ore Co. Ltd. v. Commissioner
of Income Tax - 1986 (3) SCC 461]. When
interpreting such a provision in a taxing statue a
construction which would preserve the purpose of
the provision must be adopted. It is well-settled that
in interpreting a taxing statute normally, there is no
scope for consideration of principles of equity. It was
so said by Rowlatt J. in Cape Brandy Syndicate v.
Inland Revenue Commissioners [1921 (1) KB 64 at
page 71] :

"In a taxing Act one has to look merely
at what is clearly said. There is no room
for any intendment. There is no equity
about a tax. There is no presumption as
to a tax. Nothing is to be read in,
nothing is to be implied. One can only
look fairly at the language used."

The above observation has been quoted with
approval by a Bench of three Judges of this Court in
Commissioner of Income Tax, Madras v. Ajax
45 | P a g e C/10849 -10877/2021

Products Ltd. [55 STC 741]. In another decision
rendered by a Bench of three Judges of this Court in
The State of Tamil Nadu v. M.K. Kandaswami and
others [36 STC 191] it has been observed thus:

"In interpreting such a provision, a
construction which would defeat its
purpose and, in effect, obliterate it from
the statute book should be eschewed. If
more than one construction is possible,
that which preserves its workability and
efficacy is to be preferred to the one
which would render it otiose or sterile."

In view of above, it is apparent that Supplementary Note 5(a) would be
rendered otiose if we read it to mean that "Protein Concentrate and
Textured Protein Substances" are to be classified under sub-heading
2106 1000. The note clearly means and states that the said goods are
to be classified under "Heading 2106".

54. From the above proposition in para 49 to 53 above it is apparent

that

(i) The Customs Tariff is not harmonized with the HSN,
and therefore the conclusions based on HSN cannot
be relied when it contradicts prescriptions of the
Customs Tariff.
(ii) If the classification can be made relying on
interpretative Rule 1 there is no need to proceed
further on any other Rule.
(iii) The Supplementary Note 5(a) clearly provides that
Protein Concentrate and Textured Substances would
be classified under "Heading 2106".

Rule 1 of the General rules of interpretation is reproduced below:

"Classification of goods in the Nomenclature shall be
governed by the following principles:

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 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 following provisions:

It is seen that it clearly states that „for legal purposes, classification shall
be determined according to the terms of the headings and any relative
Section or Chapter Notes‟. In the instant case Supplementary Note 5(a)
clearly provides that Protein Concentrate and Textured Substances would
46 | P a g e C/10849 -10877/2021

be classified under "Heading 2106".In view of above in terms of
interpretative Rule-1, the goods imported by the appellant would be
classified under Heading 2106 in terms of Supplementary Note 5(a). Any
other interpretation would make Supplementary Note 5(a) otiose. Since
the goods are specifically classified under heading 2106 by virtue of
Supplementary Note 5(a), there is no need to further go into
interpretative Rule 2 to 6.

55. The appellants have relied on various international decisions. The
said decisions are examined as under:-

(I) In the decisions given by Thomas J Russo, in US Cross Ruling
N204559 dated 02.03.2012, following has been observed:

"Ingredients breakdowns accompanied your November letter.
Additional information was provided with your February letter and
an email transmission dated February 29, 2012. Whey Protein
Powder will be offered in two flavors-chocolate and vanilla.
Ingredients common to both products are approximately 37-38
percent whey protein isolate, 34-36 percent whey protein
concentrate, 12-13 percent fructose, 6 percent l-glutamine, 2-3
percent chicory root extract (inulin), one percent erythritol, and
less than one percent, cach, colloid gum powder, sodium chloride,
aminogen (plant enzyme), cream flavor, red orange extract,
ascorbic acid and stevia- rebiana. Other ingredients, depending on
the flavor, include about 2 percent cocoa (lecithinated), 2 percent
chocolate flavor and I percent natural vanilla flavor. Both products
will be put up for retail sale in containers holding 908 grams, net
weight, and used as a food supplement.

You have suggested that the subject products are classifiable in
subheading 0404.10.0500. Harmonized Tariff Schedule of the
United States (HTSUS), which provides for whey protein
concentrates. We disagree. Based on the ingredients breakdowns,
they will be classified elsewhere.

The applicable subheading for the Chocolate Whey Protein Powder
will be 1806.90.9090, HTSUS, which provides for other food
preparations containing cocoa... other... other...other. The rate of
duty will be 6 percent ad valorem.

The applicable subheading for the Vanilla Whey Protein Powder will
be 2106.90.8200, HTSUS, which provides for food preparations not
elsewhere specified or included... other... other...
containing over 10 percent by weight of milk solids... other... other.
The rate of duty will be 6.4 percent ad valorem.
Duty rates are provided for your convenience and are subject to
change. The text of the most recent HTSUS and the accompanying
duty rates are provided on the World Wide Web at
http://www.usitc.gov/tata/hts/.

This merchandise is subject to The Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (The
Bioterrorism Act), which is regulated by the Food and Drug
Administration (FDA). Information on the Bioterrorism Act can be
obtained by calling FDA at 301-575-0156, or at the Web
site www.fda.gov/oc/bioterrorism/bioact.html.
47 | P a g e C/10849 -10877/2021

This ruling is being issued under the provisions of Part 177 of the
Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should
be provided with the entry documents filed at the time this
merchandise is imported. If you have any questions regarding the
ruling, contact National Import Specialist Bruce N. Hadley, Jr. at
(646) 733-3029."

From the above decision it is apparent that the said authority has held
that:

(i) Vanilla Whey protein will be classifiable under heading
2106.90.8200 of HTSUS;
(ii) The chocolate whey protein powder will be classifiable under
1806 90.9090 HTSUS (Harmonized Tariff Schedule of United
States);
(iii) Whey proteins of this kind will not be classified under
heading 0404.10.0500 HTSUS.

(II) Similar conclusion has been reached in ruling No. 025135 dated
15.04.2008 given by Robert B. Swierupski Director National Commodity
Special Division wherein he has clarified as follows:

"The subject merchandise is described as 100% Whey Classic -
Chocolate and 100% Whey Gold Standard-Chocolate. The main
ingredients in 100% Whey Classic-Chocolate are Protein Blend
(Whey Protein Isolate, Whey Protein Concentrate and Whey
Peptides), Cocoa (processed with alkali), Artificial Flavor, Lecithin
and Acesulfame Potassium. The main ingredients in 100% Whey
Gold Standard-Chocolate are Protein Blend (Whey Protein Isolate,
Whey Protein, Concentrate and Whey Peptides), Cocoa (processed
with alkali), Artificial Flavor, Lecithin and Acesulfame Potassium.

All products are in powder form, put up for retail sale in plastic
containers. The 100% Whey Classic-Chocolate comes in sizes
weighing either 2 pounds or 5 pounds. The 100% Whey Gold
Standard - Chocolate comes in sizes weighing 1 pound, 2 pounds,
5 pounds or 10 pounds. The product is mixed with water, milk or
other beverages to make a dietary supplement.

The applicable subheading for the 100% Whey Classic - Chocolate
and 100% Whey Gold Standard-Chocolate will be 1806.90.90,
Harmonized Tariff Schedule of the United States (HTSUS), which
provides for chocolate and other food preparations containing
cocoa... other... other... other. The rate of duty will be 6 percent ad
valorem."

(III) Similarly in the tariff Ruling No. N028196 dated 02.06.2008 by
Robert B. Swierupski Director National Commodity Specialist Division,
has clarified as follows:

"Ingredients breakdowns, descriptive information, and a
manufacturing flow chart for two products were submitted with
your letter. The products, described as pink-colored, free-flowing
powders, will be used as nutritional supplements. 100 percent
Whey Gold Standard - Strawberry consists of approximately 55 9
48 | P a g e C/10849 -10877/2021

percent whey protein isolate, 37.9 percent whey protein
concentrate, 4.8 natural and artificial flavor, and less than one
percent each of whey peptides, Sucralose, color, citric acid,
aminogen, and lactase. Classic Whey-Strawberry consists of
approximately 95.7 whey protein concentrate, 1.3 percent each of
lactalbumen (whey peptides) and whey protein isolate, 1 percent
natural and artificial flavors, and less than one percent each of
Sucralose, acesulfame potassium, citric acid, and color. 100
percent Whey Gold Standard-Strawberry, containing approximately
78 percent protein, will be put up in 2-, 5-, and 10-pound
containers. The Classic Whey- Strawberry product, containing
approximately 69 percent protein, will be put up in 2- and 5-pound
containers.

The applicable subheading for these products will be
2106.10.0000, Harmonized Tariff Schedule of the United States
(HTSUS), which provides for food preparations not elsewhere
specified or included... protein concentrates and textured protein
substances

This ruling is being issued under the provisions of Part 177 of the
Customs Regulations (19 CFR. 177)."

From the above rulings, it is apparent that the various
international rulings are based on harmonized system of
nomenclature and have ruled that the "Protein Concentrates" of
the kind imported by the appellant are to be classified under
heading 21061000 if the same do not contain cocoa. However
same product, "Protein Concentrates",if containing coco would be
classifiable under 1806.90.90 of HTSUS. This conclusion is based on
the reading of HSN and its chapter and section notes.In most cases the
HSN has been totally adopted in the Schedule to the Customs
Tariff Act, 1975. However, in some cases, like in case of heading
2106, the government has chosen to deviate from the language
and prescription of the HSN by introducing Supplementary Notes
to Chapter 21. Since all international rulings are based on the
HSN, which is different from the Customs Tariff in respect of
Chapter Heading 2106, no reliance can be placed on these
decisions.

56. Ld counsel has also relied on the fact that the Explanatory Notes to
the HSN were amended by the HSN Committee in its 64 th Session in
September 2019 to introduce a specific exclusion for Chapter heading
2106 ("Amendment to Chapter heading 2106"). The amendments
were made applicable from 1st December 2019. The relevant extract of
the Amendment to Chapter heading 2106 is reproduced below for ease of
reference-
49 | P a g e C/10849 -10877/2021

.. CHAPTER 21

Heading 21.06

Page IV-2106-3. Item (16)

....

Insert a new exclusion note (c):

(c) Preparations containing cocoa, put up as food supplements for human consumption (heading 18.06).

While such amendments would have relevance if the Customs Tariff is aligned with the HSN, such changes have no relevance when Government of India has chosen to deviate from the HSN by specially prescribing that the impugned products would be classified under „Heading 2106". The prescription in Chapter Supplementary Note 5(a) would take precedence over the HSN Heading Notes of the CTH 2106.In case of heading 2106, the government has chosen to deviate from the prescription of the HSN by introducing Supplementary Notes to Chapter 21 which specifically classify the impugned products under „Heading 2106‟. In these circumstances the HSN notes to the Chapter heading, and amendments made therein, which are in conflict with the supplementary notes to the Chapter, are to be ignored.

57. In view of above discussion we hold that the impugned goods are rightly classifiable under Heading 2106, sub heading 2106 1000 of the Customs Tariff. The impugned order is upheld and the appeals are dismissed.

(RAJU) MEMBER (TECHNICAL) (SOMESH ARORA) MEMBER (JUDICIAL) 50 | P a g e C/10849 -10877/2021 SOMESH ARORA, MEMBER (JUDICIAL)

58. I have gone through the above order, authored by my learned brother. I not only agree with his findings as well as, the analytical reasoning made available therein, but also appreciate the in-depth knowledge he has brought on record out of his expertise, experience of properly analyzing various headings and their background, including historical moorings of chapter 21. Same not having been aligned to the HSN in totality. It has been properly highlighted, how it needs to be correctly interpreted in view of peculiar changes brought in by Indian Custom Tariff, despite India being a signatory to HSN and agreeing largely to its frame work. It will not be out of place for me to appreciate the efforts which have been put in, both by the learned advocate as well as learned departmental representative including the appellate authority below, who analyzed the propositions involved. Proper assistance by officers of court sure enables better deliberation of the issues.

59. At the heart of the issue are the specific provisions which were created by Indian legislature, while being a signatory to the Customs Cooperation Council (which as an organization is now called World Customs Organization). The HSN is one of the most significant instrument, derived as an outcome of cooperativeefforts of the comity of nations in international trade that aims at bringing out not only uniformity of nomenclature for goods, but also the trade data and statistics compilation. All this to make the economic policy making of the member nations, reliable as well as conducive to comparison for the purpose of International Trade. Much later, after creation of HSN, the statistical data assumed importance when under aegis of World Trade organization, exceptional measures to liberalized tariff like Anti-Dumping, Safeguard and Countervailing duty, came to be implemented.

60. I would like to briefly dwell upon the evolution of public international law in Indian context and how entering into various international treaties did not circumscribe the sovereignty of member states including India. Whenever International Treaties were sought to be implemented by the sovereign states in their capacity as members of such treaties, reservations were either permitted by the treaties or were brought in for approval by member states to safeguard their own national interests.

51 | P a g e C/10849 -10877/2021

61. As far as the Constitution of India is concerned which acts as a grundnorm, for all laws made by Indian Legislature. Validity of enactments by legislature is derived from Article 73 of the Constitution of India delineates the extent of executive power of the union which extends for all matters with respect to which the Parliament has a right to make laws and it extends to the exercise of such wide authority and jurisdiction as are excisable as a Central Government by virtue of any treaty or agreement.

62. This gives, through Article 73 (b), the Central Government a power to enter into international treaties/ agreement/ conventions under Article 73 and also to the Parliament the power to legislate in respect of such treaties/ agreements/ conventions. It is equally open to Parliament to refuse to perform such treaties/ agreements/ conventions. In such a case while the treaties made/ agreements/ conventions bind the Union of India as against the other contracting parties, Parliament may refuse to perform them leading the Union of India in default.

63. Regarding Course of action available to sovereign states and prevalence of municipal laws over public international law, following ruling of the apex court provides guidance:

"In Gramophone Company of India Ltd. v. Birendra Bahadur Pandey and Others [(1984) 2 SCC 534], the Apex Court held as under :

"5. There can be no question that nations must march with the international community and the Municipal law must respect rules of International law even as nations respect international opinion. The comity of Nations requires that Rules of International law may be accommodated in the Municipal Law even without express legislative sanction provided they do not run into conflict with Acts of Parliament. But when they do run into such conflict, the sovereignty and the integrity of the Republic and the supremacy of the constituted legislatures in making the laws may not be subjected to external rules except to the extent legitimately accepted by the constituted legislatures themselves. The doctrine of incorporation also recognizes the position that the 52 | P a g e C/10849 -10877/2021 rules of international law are incorporated into national law and considered to be part of the national law, unless they are in conflict with Act of Parliament. Comity of Nations or no, Municipal Law must prevail in case of conflict. National Courts cannot say yes if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National Courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid conformation with the comity of Nations or the well-established principles of International law. But if conflict is inevitable, the latter must yield."

Therefore, it is brought out that sovereign states can not only bring about reservations in treaties, wherever allowed but also in case of any provision not being in tune with treaty provisions, it will be municipal law which shall prevail."

64. Now coming to specific provisions about HSN, the following are the relevant extracts as derived from HS Classification Handbook of World Custom Organization November-2013 Edition part II/1 following has been stated as object of bringing in world product nomenclature:

"At its 1976 Sessions, the United Nations Statistical Commission took a policy decision that UN economic classifications should be harmonized by using HS subheadings as building blocks. The Standard International Trade Classification (SITC, Rev. 3), the International Standard Industrial Classification of all economic activities (ISIC) and the Central Products Classification (CPC) have been prepared on the basis of this decision.

As regards the application of the Harmonized System by users other than Customs authorities and statisticians, good progress has been made in broadening the acceptance of the System. Several maritime conferences and numerous European and Asian railway networks associated with the International Union of Railways (UIC) have agreed to use the System as a basis for their freight tariffs.

The World Trade Organization (WTO) and individual countries are using the Harmonized System as a common language of trade for purposes of trade negotiations. In this connection, it should be noted that most countries' WTO schedules of tariff concessions are already written in terms of the Harmonized System and the process of converting the remaining WTO schedules to the Harmonized System continues. The Harmonized System is also providing a basis for new internationally accepted Rules of Origin which are being developed jointly by the WCO and the WTO."( Emphasis supplied As far as Structure of HS is concerned same has been provided for in the Hand Book at Chapter 2 page II/5:

53 | P a g e C/10849 -10877/2021 "2. Structure of the HS The Harmonized System comprises:

 General Rules for the interpretation of the System:

 Section and Chapter Notes, including Subheading Notes:  A list of headings arranged in systematic order and, where appropriate, subdivided into subheadings.

(a) The Interpretative Rules To be completely sound, a classification system must associate each individual product with a single heading (and, as the case may be, subheading), to which that product can be simply and unequivocally assigned. Hence it must contain rules designed to ensure that a given product is always classified in one and the same heading (and subheading), to the exclusion of any others which might appear to merit consideration. All classification decisions must be based upon the application of these rules.

The text of the Harmonized System therefore incorporates a series of preliminary provisions codifying the principles on which the System is based and laying down general rules to ensure uniform legal interpretation.

There are six of these rules, known as the General Rules for the Interpretation, which are applied in hierarchical fashion, i.e., Rule 1 takes precedence over Rule 2, Rule 2 over Rule 3, etc. The General Interpretative Rules are explained at the beginning of Volume 1 of theExplanatory Notes to the Harmonized System.

General Interpretative Rule 1 provides that, for legal purposes, classification is determined by the terms of the headings and of the Section or Chapter Notes. There are, however, cases where the texts of the readings and of these Notes cannot, of themselves, determine the appropriate heading with certainty. Classification is then effected by application of the other Interpretative Rules.

The first part of Rule 2 (a) extends the scope of any heading which refers to a particulararticle to cover not only the complete article but also that article incomplete or unfinished, providedthat, as presented, it has the essential character of the complete or finished article. The secondpart of Rule 2 (a) provides that complete or finished articles presented unassembled ordisassembled, usually for reasons such as the requirements or convenience of packing, handlingor transport, are to be classified in the same heading as the assembled article.

Rule 2 (b) extends the scope of any heading referring to a material or substance or articles made therefrom. Under this Rule, goods consisting of more than one material or substance must, unless another heading refers to them in their mixed or composite state, be classified according to the principles of Rule 3.

Rule 3 provides classification principles for goods which, prima facie, fall under two or moreheadings.

54 | P a g e C/10849 -10877/2021 Rule 3 (a) stipulates that goods should be classified in the heading giving the most specific description. However, there is a provision that if two or more headings each refer to only one of the materials or substances contained in mixed or composite goods, or to only some of the articles included in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete description than the other.

Rule 3 (b) deals with mixed or composite goods, goods consisting of an assembly of different articles and goods put up in sets. By application of this Rule, goods are classified in the heading applicable to the material or component which gives them their essential character.

Rule 3 (c) applies only where goods cannot be classified by application of Rule 3 (a) orRule 3 (b); it provides that goods should be classified in the heading which occurs last innumerical order amongst those which equally merit consideration in determining theirclassification.

Rule 4 provides that goods which (for example because they have newly appeared on the world market) are not specifically covered by any heading of the Harmonized System shall be classified in the heading appropriate to the goods to which they are most akin.

Rule 5 (a) governs the classification of cases, boxes and similar containers presented with the articles for which they are intended, while Rule 5 (b) applies more generally to packing containers presented with the goods they hold. It should be noted that the classification of packingmaterials and containers not covered by Rule 5 (a) or 5 (b) is left to the discretion of countries, which may take whatever measures they consider appropriate in this area.

Finally, Rule 6 provides that classification in the subheadings of a heading must be determined, mutatis mutandis, with reference to the principles applicable to classification in the 4- digit headings; in any event, the terms of the subheadings or Subheadings Notes must be given precedence. This Rule also specifies that, for classification purposes, only subheadings of the same level are comparable; this means that, within a single heading, the choice of a l-dash subheading may be made only on the basis of the texts of the competing 1-dash subheadings; similarly, selection of the appropriate 2-dash subheading, where necessary, may be made only on the basis of the texts of the subdivisions within the applicable 1-dash subheading.

The Interpretative Rules thus establish classification principles which are applicable throughout the Harmonized System Nomenclature.

Moreover, the Interpretative Rules clearly provide a step-by- step basis for the classification of goods within the Harmonized System so that, in every case, a product must first be classified in its appropriate 4-digit heading, then to its appropriate 1-dash subdivision within that heading and only thereafter to its appropriate 2-dash subheading within the predetermined 1- dash subdivision. It should be emphasized that at each step in 55 | P a g e C/10849 -10877/2021 the process, no account is taken of the terms of any lower-level subdivisions. This principle applies without exception throughout the Harmonized System.

(Emphasis supplied)

(b) Section and Chapter Notes, including subheading Notes Certain Sections and Chapters are preceded by Notes which, like the Interpretative Rules form an integral part of the Harmonized System and have the same legal force. Some of these Notes, grouped under the title "Subheading Notes", refer solely to the Interpretation of subheadings.

The function of the Notes is to define the precise scope and limits of each subheading. heading (or group of headings). Chapter or Section. This has been achieved, depending on the circumstances, by means of:

 Either general definitions delineating the scope of a subheading or heading or the meaning of particular terms; for example sparkling wine is defined by Subheading Note 1 to Chapter 22, while Legal Note 5 to Section XI gives a general definition of the sewing thread of headings 52.04, 54.01 and 55.08 in terms of its appearance and texture; or  Non-exhaustive list of typical examples: thus, Note 3 to Chapter 86 specifies the railway and tramway track fixtures and fittings covered by heading 86.08; or  An exhaustive list of the goods covered by a heading or group of headings. Thus, Notes 2, 3 and 4 to Chapter 31 list the products that fall to be classified as fertilisers in headings 31.02. 31.03 and 31.04; or  Exclusions, which list certain articles that must not be included in a particular subheading, heading (or group of headings), Chapters or Section. For example. Note 2 to Chapter 64 lists the articles which must not be regarded as parts of footwear within the meaning of heading 64.06.

Certain Notes employ several of these drafting formulae. The definition of "synthetic rubber" in Note 4 to Chapter 40 provides an example of a definition in general terms, in accordance withscientific criteria, followed by an enumeration of products which, within the context of thisdefinition, are to be taken as covered by the definition.

Under Interpretative Rule 6, the Section and Chapter Notes also apply to the classification of goods in the subheadings unless, of course, the context otherwise requires. This is the case, for example, with Note 4 (b) to Chapter 71 (definition of the term "platinum"), which cannot apply to subheadings 7110.11 and 7110.19, for which the term "platinum" is more restrictively defined by Subheading Note 2 to Chapter 71.

It would no doubt have been possible, at least in certain cases, to incorporate the substance of these Notes in the text of the headings or subheadings themselves. But this would have greatly lengthened these texts, making them difficult to understand, and would have involved a great deal of repetition. The Notes thus made it possible to 56 | P a g e C/10849 -10877/2021 draft the headings in concise form while at the same time safeguarding the precision and exactness of interpretation that are essential to avoid doubts and disputes in classification.

To distinguish these Section, Chapter or Subheading Notes from the Explanatory Notes, which are not legally binding under the Convention, they are normally referred to as "Legal Notes".

Additional Notes (or supplementary Notes) may be included at the national level by an administration for its own national use and are national in scope. They may be binding at the national level only.

To complement the legal core, there are Explanatory Notes to the HS published separately by the WCO. While these notes do not form part of the legal provisions of the HS, it is important that they be consulted during the classification process."

(Emphasis supplied) Whatever the obligations and expectations from the Member States while implementing HSN has been brought out in Chapter 4 titled „The Harmonized System and National Customs Tariffs‟ at page II/27 of the above hand Book:

"Contracting Parties to the Harmonized System Convention have to apply the Harmonized System Nomenclature for Customs purposes (Article 3 of the Convention, which deals with obligations of Contracting Parties- see Annex B). This means that they have to introduce the structure of the Harmonized System into their national Customs tariff. In a simple situation, the goods or categories of goods referred to in the national Customs tariff relate to the Harmonized System categories on a one-to-one basis, i.e., the categories in the Harmonized System are the same as those in the national Customs tariff. However, very often they do not coincide with the Harmonized System categories and, consequently, further subdivisions of the Harmonized System nomenclature have to be introduced at the national level. Furthermore, if other Customs measures are to be implemented, further subdivisions of Harmonized System categories may be required.

It is thus clear that the HSN itself acknowledges and rather accepts the need for various member companies to make structural changes into their National Customs Tariff subject to guidance that Rule 1 to 5 of General Interpretative Rules (G.I.‟s )of the HSN shall applied mutatis mutandis to national sub-heading by virtue of General Interpretative Rule 6, thus clearly providing the leverage for the Member Nations to make suitable changes in their custom tariffs. This respects the sovereignty of member nations as well as their fiscal and statistical needs. The concept of providing need based suitable changes in HSN is

57 | P a g e C/10849 -10877/2021 therefore, in tandem with Indian Constitution as well as he structural provisions of HSN.

65. This has been aptly pointed out by learned brother in course of the decision on chapter 21 of India Custom Tarff Act,1975 (specially the heading 2106) with related supplementary notes. These supplementary notes have been in existence since inception ofHSN based Custom Tariff of India. Similar changes have also been made by not only India but various other Countries beyond Chapter 97 which were originally not part of the HSN. Chapter 98 is again outcome of India‟s need, as is manifested in its own Custom Tariff.

66. As observed above, the Custom Cooperation Council while permitting member countries to de-align from HSN to serve their own needs has mandated a particular requirement that the same should not be made in a manner the General Interpreted Rules cannot be pressed into service for interpretation.

67. In short, heading 2106 under Chapter 21 as well as supplementary notes to chapter 21 have been specifically carved out in the Indian Custom Tariff. The relative chapter notes including supplementary notes as well as headings and sub-headings, therefore, will have to be construed differently from HSN, albeit, with the help of general interpretive notes is the requirement of Customs Cooperation Council. Learned Brother has dealt at length and correctly so, to indicate that chapter note 5 of supplementary notes which reads as follows "Heading 2106 (except tariff item 2106 9020 and 2106 9030), interalia, includes:

"(a) Protein Concentrates and Textured Protein Substances" which is found that in sub-heading Protein Concentrates and Textured Protein Substances are mentioned as 2106 1000.

68. It is to be noted that the supplementary note 5 specifically provided in Chapter 21 of the Indian Customs Tariff,is not sub-heading note but the supplementary Chapter Note to TH 2106, therefore it seeks enlarge the scope of Tariff heading, specifically. Note3, 4 and 6 of the same Chapter, despite being supplementary notes deal with scope of specific sub-headings and particularly expend the scope of sub-heading. But Chapter note 5 expands the scope of heading 2106, as distinguished from supplementary notes -3, 4 and 6 which describe the inclusions and exclusions even from 8 -digit sub heading. And therefore expend/ 58 | P a g e C/10849 -10877/2021 contract the scope of such sub-headings following mandate of above Handbook on HSN as above.

69. From the structure of HSN, section notes and chapter notes including sub-heading notes cited supra it is clear that chapter notes like the interpretative rules form an integral part of the harmonized system and have the same legal force being legal notes. It is also a prescription that sub heading notes refer solely to the interpretation of sub-heading. It is thus clear that since the function of the notes is to define the precise scope and limits of heading or group of headings, chapter or section or even for that matter the sub heading. Therefore, chapter note, which is by way of supplementary note 5 seeks to define the scope and limits of heading 2106. It is thus clear that the expression "Food preparation not elsewhere specified or included" figuring in tariff heading 2106 when expanded by virtue of chapter note 5 (supplementary note) makes heading 2106 to specifically include "Protein Concentrates and Textured Protein Substances" therefore the legislature has clearly expanded the scope of tariff heading 2106 by virtue of supplementary notes 5 as brought out above. All this exercise makes even Heading 2106 also as specific in relation to Protein Concentrates and textured proteins, and other items mentioned in Chapter note 5. This is in consonance with HSN Handbook narrative, a portion of which is therefore worthy of re- production, even at the cost of little repetition:

"It would no doubt have been possible, at least in certain cases, to incorporate the substance of these Notes in the text of the headings or subheadings themselves. But this would have greatly lengthened these texts, making them difficult to understand, and would have involved a great deal of repetition. The Notes thus made it possible to draft the headings in concise form while at the same time safeguarding the precision and exactness of interpretation that are essential to avoid doubts and disputes in classification."

Above interpretation also gets fortified from the directive of the Customs Cooperation Council which requires minimal disturbances to be done by the Member States so as to maintain the statistical and data collection similarity between Member States. Learned brother is thus correct in pointing out that in view of the special circumstances of Chapter 21 and heading 2106 in Indian Custom Tariff, the inclusion of „Protein Concentrates and Textured Protein Substances‟ is clearly specific and that too in tariff heading 2106. The net effect of supplementary note 5 59 | P a g e C/10849 -10877/2021 in TH 2106 in Indian Custom Tariff Act is that the heading description 2106 i.e. "Food preparation not elsewhere specified or included" ceases to be a residuary head, in relation to those products which are included in heading 2106, specifically (even if by virtue of any supplementary note). Given above, it is clear that till the product has dominance of Protein Concentrates and Textured Protein Substances (sold as whey protein in the present instance) ,which is undisputed in this case as other similar Whey Protein with different flavours, have been included by the party itself in this head.

70. From the foregoing it is also clear that Chapter 21 of India Custom Tariff Act read with supplementary notes not having been cast in accordance with HSN, the Explanatory Notes as well as other rulings of other countries including of WCO, till it does not contain realities of Chapter 21 and supplementary of Chapter 21 which are peculiar to India, cease to have even persuasive value and become incomparable as they seek to compare the incomparable. Indian Chapter 21 being exclusive and peculiar has to be interpreted with all its peculiarities.

80. Coming to Chapter 18, it is to be noted that Chapter 1806 is applicable to Chocolate and other food preparations containing COCOA. It is to be noted that chapter 18 has two chapter notes relevant for the purpose of this discussion which are reproduced below:

"This Chapter does not cover:

(a)...............................

(b) Preparations of headings 0403, 1901, 1902, 1904, 1905, 2105, 2202, 2208, 3003 or 3004.

2. Heading 1806 includes sugar confectionery containing cocoa and, subject to Note 1 to this Chapter, other food preparations containing cocoa."

Since we are confining ourselves only to the tariff headings and chapter notes for the purpose of our discussion, therefore, the only GI Rules which remains relevant is General Interpretative Rule - I, as has been correctly pointed out by the learned brother. Both of these have statutory force and therefore prevail over other legal aids like HSN Explanatory Notes or decisions in other territories as well as of WCO which in certain conditions of tariff being aligned,certainly command persuasive value. Same are therefore, correctly discarded in the factual matrix of the matter.

60 | P a g e C/10849 -10877/2021

81. Coming to chapter note of heading 1806, chapter note-2 only mentions sugar confectionery containing cocoa and other food preparations containing cocoa shall be classified under Chapter 1806. Clearly chapter note 1806 does not do away with the requirements of predominance of cocoa in the food preparations in relation to heading 1806. In such a situation, heading 2106 read with Supplementary Note- 5 having become more specific for "Protein Concentrates and Textured Protein Substances"(known to market as „whey protein‟) clearly becomes the preferred head as the product has the predominance of Protein. Again we find that Chapter 18 only excludes preparations of heading 0403, 1901, 1902, 1904, 1905, 2106, 2202, 2208, 3003 or3004. In chapter note 3 to heading 1904, it has been mentioned that heading 1904 does not cover preparations containing more than 6% by weight of cocoa calculated on a totally defatted basis or completely quoted with chocolate or other food preparation containing cocoa of heading 1806.

82. Above chapter note has been pointed out by way of example that wherever weight percentage other than the pre-dominance is to be considered, the chapter notes have gone on to specifically mention the percentage of weight. Similar is the situation with heading 1901.

HS Code Item Description 1901 Malt extract; food preparations of flour, groats, meal starch or malt extract, not containing cocoa or containing < 40% by weight of cocoa calculated on a totally defatted basis. Not elsewhere specified or included; food preparations of goods of headings 04.01 to 04.04, not Containing cocoa or containing less than 5% by weight of cocoa calculated on a totally defatted Basis, not elsewhere specified or included.

Even Chapter note 5 to Chapter 71 dealing with alloys of precious metals has specifically given prescription of 2% or more by weight of gold, platinum and even silver to be treated as alloy of gold, platinum and silver respectively.

83. Thus, it is clear that wherever a particular (lower) percentage is required to be read into any preparation the same has been provided either by way of chapter note or in the heading itself. This not being the case with tariff item 1806, the expression „Food Preparations containing Cocoa‟ has to be decided by the pre-dominance of ingredients in 61 | P a g e C/10849 -10877/2021 admixture which in this case is of Protein. While doing so no resort to explanatory notes is being taken in view of impugned contesting entries and their difference from HSN.

84. Thus, it is clear that in instant case classification in favor of 2106 can be decided without resort to Explanatory Notes which in any case do not part of the legal provisions of the harmonized system. Matter can be decided with the help of statutory provisions of Indian Customs Tariff Act, 1975. There is then no need to go further. The advocate for the appellant was at length that the resort should be taken to GI-3 specially Rule 3(a) and while so asserting it has been argued that specific description shall be preferred to general description. The fallacy of the notion has already been brought out in relation to TH to indicate that how the matter can be decided by section or chapter notes.

85. While not agreeing with the proposition of resort being required to be taken to G.I Note 3 (even if for the sake of argument), it has to be considered as to which head provides more specific description for a product which has dominance of Protein Concentrates and Textured Protein Substances, from the discussion above, it is clear that under Indian Tariff 2106 of Indian Customs Tariff above.Learned brother has gone at length with heading 2106 having been extended to include Protein Concentrates and Textured Protein Substances, the same becomes in any case, more specific in description to 1806, in which other food preparations containing Cocoa have been included. It is to be kept in mind that unlike other tariff headings, where the percentage of cocoa has been mentioned the heading 1806 does not speak of percentage of cocoa. Therefore, it is clear that even GI Rule - 3 would have made TH 2106only as more specific heading for the impugned product.

86. Learned advocate during arguments had taken resort to HSN explanatory notes to justify lower percentage of Cocoa to term products still as `preparation of Cocoa‟. But in doing so, the argument has sidetracked the reality of Indian tariff being different and capable of providing answer through its own existing statutory clauses by way of supplementary notes, as discussed above.

87. While arriving at the above conclusion, support is also drawn from the decision in the matter of Collector of Central Excise vs. Frozen Food P.L. reported in 1992 (59) ELT 279 (Tri.) which was the decision under 62 | P a g e C/10849 -10877/2021 HSN based Central Excise Tariff(which also had similar head and supplementary notes de-aligned from HSN- though numbered differently) in relation to the additive supplement "surje", following observations are relevant:

"42. As for the argument that protein concentrates mentioned in HSN Chapter Note 5(a) of Chapter 21 would refer to protein concentrated from sources other than milk like Soya protein, groundnut, etc., there is no warrant for such a claim. The items which are covered under Chapter IV find specific mention in headings and sub-headings, of that Chapter. We do not find any mention of the expression "protein concentrates" in this Chapter and for this reason alone, protein concentrates would be covered under Chapter 21 by virtue of Note 5(a).

43. We agree with the contention of Shri Chakrabarty that because of interpretative Rule 1, classification of a product is to be determined according to the terms of the headings and relative Section of Chapter Notes. By application of this principle, the indication in Note 1(a) of Chapter 30 that dietitic, diabetic or fortified foods and food supplements are covered by Section IV is a clear indication of the classification of these products. This note has therefore, legal force and is not merely an indication of the possible classification as contended by Shri Lakshmi Kumaran."

(Emphasis supplied) The above decision has been approved by the Hon‟ble Supreme Court as reported in 1998 (98) ELT 295 (SC). Therefore, it is clear that addition of any additive of flavoring content will not alter the characteristic of protein concentrate etc. and will not take it out from the entry 2106 in the present instance.

88. In view of the foregoing, I agree with the views of learned brother and accordingly uphold the classification of the department for the impugned product. Appeal dismissed.

(Pronounced in the open court on 01.09.2023) (SOMESH ARORA) MEMBER (JUDICIAL) Neha

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