Case Law Details
In re Soft India Private Limited (CAAR Mumbai)
In a recent ruling by the Customs Authority for Advance Ruling (CAAR) Mumbai, the classification of Nickel Hydroxide Compound has been addressed. The ruling specifically pertains to the product, which contains Nickel Hydroxide ranging from 92% to 100%, along with Cobalt Hydroxide and Sodium Sulphate. The applicant, M/s Soft India Private Limited, sought clarification on the tariff entry for this product.
Detailed Analysis:
Background: M/s Soft India Private Limited (hereafter referred to as “the Applicant”) filed an application for an advance ruling with CAAR Mumbai, seeking clarity on the classification of Nickel Hydroxide Compound. The product in question consists of Nickel Hydroxide (Ni(OH)2) in the range of 92% to 100%, with the remaining composition comprising Cobalt Hydroxide and Sodium Sulphate.
Applicant’s Submission: The Applicant argued that the product should be classified under the Customs Tariff Subheading (CTSH) 28254000 of the First Schedule to the Customs Tariff Act, 1975. They contended that the compound, despite containing additional components, remains primarily Nickel Hydroxide, which is used as a key material in Nickel Cadmium Batteries.
Description of the Goods: Nickel Hydroxide (Ni(OH)2) serves as a critical raw material in the production of positive electrode plates used in Nickel Cadmium Batteries. These batteries consist of two electrodes, Nickel Hydroxide for the positive electrode and Cadmium Hydroxide for the negative electrode, immersed in a potash solution. The role of the positive electrode is fulfilled by Nickel Hydroxide.
The Chemical Process: The production process of Nickel Hydroxide involves gradually co-precipitating Nickel Sulphate solution with a small quantity of Cobalt Sulphate solution using an aqueous solution of sodium hydroxide. This results in the formation of crystallized Nickel Hydroxide, which is subsequently washed, dewatered, and dried. The final product is mainly Nickel Hydroxide, with a minor portion of co-precipitated Cobalt Hydroxide and Sodium Sulphate.
The Issue: The central issue at hand is the classification of the compound of Nickel Hydroxide, considering the presence of Cobalt Hydroxide and Sodium Sulphate. The Applicant’s argument is that the product should be classified under CTSH 28254000, primarily based on the nature of Nickel Hydroxide as the main component.
Customs Authority’s Ruling: After considering the submissions of the Applicant and the response from the jurisdictional Commissionerate, the Customs Authority for Advance Ruling in Mumbai arrived at the following conclusions:
- The classification of goods is determined according to the terms of the headings, relevant Section or Chapter Notes, and General Rules of Interpretation (GIRs). Rule 1 of GIRs is the primary rule for classification.
- Rule 1 of GIRs states that classification shall be determined according to the terms of the headings, relevant Section or Chapter Notes, and other GIRs, provided that such headings or notes do not require otherwise.
- The Chapter Notes to Chapter 28, which covers chemicals and compounds, indicate that separately defined chemical compounds are classifiable under Chapter 28, whether or not they contain impurities. This means that the nature of the compound, including the presence of Cobalt Hydroxide and Sodium Sulphate, does not disqualify it from classification under Chapter 28.
- The presence of Cobalt Hydroxide and Sodium Sulphate in the compound is for enhancing the performance and life cycle of Nickel Hydroxide, and it does not change the fundamental nature or function of Nickel Hydroxide.
- Rule 2(b) of GIRs also supports the classification of goods consisting of more than one material or substance. Rule 3(a) of GIRs specifies that specific headings prevail over general headings.
- Given that the specific heading for Nickel Hydroxide (CTSH 28254000) is applicable, the Customs Authority ruled that the proposed goods, despite containing Cobalt Hydroxide and Sodium Sulphate, should be classified under CTSH 28254000.
Conclusion:
The ruling by the Customs Authority for Advance Ruling in Mumbai clarifies the classification of Nickel Hydroxide Compound containing 92% to 100% Nickel Hydroxide, Cobalt Hydroxide, and Sodium Sulphate. The ruling confirms that, despite the presence of additional components, the product is appropriately classified under CTSH 28254000, primarily based on the nature of Nickel Hydroxide as the main constituent.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
M/s Soft India Private Limited (IEC No.: 0797016791) (Herein after will be referred to as ‘Applicant’) filed an application for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling (CAAR) Mumbai on 11.05.2023. The applicant intends to import Nickel Hydroxide Compound (containing Nickel Hydroxide of 92 % to 100%, and balance of Cobalt Hydroxide and Sodium Sulphate) and want to classify the subject goods under the tariff Entry 28254000.
2. Submission by the Applicant:
2.1 M/s Sail India Private Limited., Plot No 10/1A,1B&1C, ABBANAKUPP, Bidadi Industrial Area, Bangalore (hereinafter referred to as “Applicant”) intends to import Nickel Hydroxide Compound (containing 92 % to 100% of Nickel Hydroxide, and balance of Cobalt Hydroxide and Sodium Sulphate).
2.2 The applicant submits that the above goods are classifiable under the Customs Tariff Heading 2825 and Customs Tariff Subheading (CTSH) 28254000 under of the First Schedule to the Customs Tariff Act,1975.
2.3 Description Of Goods: Nickel Hydroxide [Ni(OH)2] is the main raw material used to make positive electrode plates used in Nickel Cadmium Batteries. Nickel-Cadmium batteries are made from two electrodes (Nickel and Cadmium hydroxide) immersed in a potash solution. The positive electrode consists of Nickel hydroxide, while the negative one is made from Cadmium. The electrolyte is based on potash.
2.4 Nickel Hydroxide compound proposed to be imported is majorly Nickel Hydroxide (ranging from 92 to 100 %) as the constituent in the compound with a very small portion of co-precipitated Cobalt Hydroxide – Co(OH)2, and balance contains Sodium Sulphate (Na 2 SO4)).
2.5 The process followed to make Nickel Hydroxide is – Nickel sulphate solution and small quantity of cobalt sulphate solution is gradually co-precipitated using an aqueous solution of sodium hydroxide with constant stirring, forming crystallized nickel hydroxide, which is subsequently washed, dewatered, and then dried.
2.6 The active material for the positive electrode contains mainly of nickel hydroxide [Ni(OH)2] with a small quantity of co-precipitated cobalt hydroxide. To enable electricity to percolate well, a formation of an electrically conductive network is imperative for an efficient utilization of the nickel hydroxide-based active material.
2.7 In this ‘context, it is a well-known and standard procedure to add cobalt hydroxide and Sodium Sulphate to the nickel hydroxide. The cobalt hydroxide is added mainly to impart electric conductivity to the nickel hydroxide and is readily oxidized at the time of initial charging to form an electrically conductive micro scale network comprising of cobalt oxyhydroxide, COOOH. The Sodium Sulphate addition imparts a conductivity increase to the nickel hydroxide structure on a macro scale. However, the product under question remains Nickel Hydroxide.
2.8 The main reaction involved in the nickel hydroxide on the positive plate of the Nickel- Cadmium Batteries is found below:
Charge
————–>
2 Ni(OH)2 + 2 OH 2 NIOOH + 2 H2O + 2 e
<————-
Discharge
During charging, the nickel hydroxide will undergo oxidation process thereby converting it into nickel oxyhydroxide. During discharge, the nickel oxyhydroxide is reduced to nickel hydroxide (Ni(OH)2).
2.9 Nickel Hydroxide [Ni(OH)2] in the positive electrode and Cd(OH)2 in the negative electrode mainly used to manufacture Nickel-Cadmium Batteries as back-up power for critical Industrial sectors. including Oil & Gas, Mobility segments like Air, Railways and all Metro systems and Thermal Power systems.
2.10 The presence of cobalt in the compound does not form any new product, and the product under question remains as Nickel Hydroxide. The Nickel Hydroxide is used in manufacture of Nickel-Cadmium Batteries. Nickel hydroxide is the main raw material for nickel cadmium battery (and not a supporting catalyst/reaction initiator). Also, only nickel hydroxide (positive electrode) will react with the negative electrode (cadmium). The battery is widely known as nickel cadmium battery, even if there is some presence of Cobalt Hydroxide and Sodium Sulphate Na2SO4.
2.11 Issue Involved In The Application: The issue is the classification of the goods i.e. compound of Nickel Hydroxide [Ni(OH)2]. Applicant’s submission is that being the single compound of Nickel Hydroxide, it is classifiable under Customs Tariff Subheading 2825.
2.12 The Statement containing applicant’s interpretation of law in light of the above statement is has also been submitted in the detailed application.
3. Port of Import and reply from jurisdictional Commissionerate:
3.1 The applicant in their CAAR-1 indicated that they intend to import the impugned goods from Inland Container Depot, Kadugodi, Whitefield, Bengaluru (Under jurisdiction of Office of the Commissioner of Customs, City Customs Commissionerate, Bengaluru). The application was forwarded to the jurisdictional Commissioner of Customs, City Customs Commissionerate, Bengaluru for their comments on 19.05.2023 & 23.08.2023. Further, an email dated 30.08.2023 was also forwarded for their comments.
3.2 The jurisdictional Commissioner of Customs, City Customs Commissionerate, Bengaluru sent the comments vide their letter dated 04.09.2023 it has been informed:
3.2.1. Classification of goods — Nickel Hydroxide Compound (containing Nickel Hydroxide of 92% to 100%, and the balance of Cobalt Hydroxide and Sodium Sulphate).
3.2.2 The goods as indicated by the party are a stable compound of Nickel Hydroxide with cobalt hydroxide and Sodium Sulphate.
3.2.3 Nickel Hydroxides are covered under HS Code 28254000
3.2.4 Chapter Note 1(a) to the Chapter 28 reads as under:
Except where the context otherwise requires, the headings of this chapter apply only to.
(a) separate chemical elements and separate chemically defined compounds, whether or not containing impurities.
(b) the products mentioned in (a) above dissolved in water;
(c) the products mentioned in (a) above dissolved in other solvents, provided that the solution constitutes a normal and necessary method of putting up these products adopted solely for reasons of safety or for transport and that the solvent does not render the product particularly suitable for specific use rather than for general use;
3.2.5 Therefore, to be classified under Chapter 28 it is essential that the product should either be a separate chemical elements or a separate chemically defined compound, whether or not containing impurities. The proposed goods, i.e. Nickel Hydroxide compound contains up to —92% Nickle Hydroxide [Ni(OH)2] and are remaining of Cobalt Hydroxide and Sodium Sulphate. The applicant declares the subject goods are single chemical compound and not a mixture.
3.2.6 Further the insertion of the Cobalt Hydroxide and Sodium Sulphate is indicated by the applicant for improving the performance and life cycle of Nickel Hydroxide. As Chapter Note 1 indicates that certain additions to the compounds are admissible e.g., colouring agents, anti-dusting agents, stabilizers provided these additions do not render the goods particularly suitable for specific use rather than general use.
3.2.7 As the subject goods are a chemically stable compound and the additions to these compound only enhance the life cycle and performance of Nickel Hydroxide and since tariff item 28254000 is a specific entry, the goods merit the classification under HSN 28254000.
4. Details of Personal Hearing:
4.1 A personal hearing was held virtually on 14.09.2023 at 11:00 AM, Shri T. Viswanathan, Advocate along with other officials of applicant appeared for the hearing. During the virtual PH, the representatives of the applicant M/s Saft India Private Limited, through their authorized representative Shri. Satish Kumar Reddy reiterated their points submitted in the application in CAAR-1. Further, they elaborated the product in question i.e. Nickel Hydroxide Compound (Containing Nickel Hydroxide & Cobalt Hydroxide) and requested the Authority to clarify the correct CTH for their proposed import of the product. No one appeared on behalf of Jurisdictional Customs Commissionerate.
4.2 They have informed that the addition of additives in the product has been done for only increase in efficiency and not for changing use and nature of the product. The applicant have taken reference of Mumbai CAAR ruling in case of M/s Smartage Projects Pvt Ltd. (CAAR/Mum/ARC/02/2022). Further they have cited Tribunal Order in case of M/s. OCL India Ltd. Vs Commissioner of Customs.
4.3 On being asked regarding reason for opting Advance Rulings the representative informed that they just want to have clarity and certainty before their proposed import. On being asked if the applicant had earlier imported any such consignment containing product in question the representative informed that they had earlier imported 1 small consignment for testing purpose only.
5 I have considered all the materials placed before me in respect of the subject goods. I have gone through the submissions made by the applicant during the personal hearing as well as the response received from the Jurisdictional Customs Commissionerate. Therefore, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework. The issue before me is the classification of the goods i.e. compound of Nickel Hydroxide [Ni(OH)2] (containing Nickel Hydroxide of 92 % to 100%, and balance of Cobalt Hydroxide and Sodium Sulphate ).
6.1 Before deciding on the issue, let me deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/ Section notes along with I-ISN explanatory notes. Relevan portion of Customs tariff is reproduced here for ease of reference
6.2 Classification of imported goods is governed by the principles set forth in the General Rules of Interpretation (GIR). Rule 1 of GIR provides that 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 other-wise require, according to the following provisions [that is, GIRs 2 to 6]. This is the first Rule to be considered in classifying any product. In other words, if the goods to be classified are covered by the words in a heading and the Section and Chapter Notes do not exclude classification in that heading, the heading would apply to the said goods. As required under Rule 1 of GIRs, the classification of the compound of Nickel Hydroxide is determinable according to the terms of heading and relative Chapter Note of Chapter 28 and these headings or Notes do not leave any ambiguity that proposed goods, which is a separately defined chemical compound, is aptly classifiable under HSN Code 28254000 of heading 28.
6.3 As per the chapter notes to chapter 28, separately defined chemical compounds would remain classified under chapter 28, whether or not containing impurities. The Nickel Hydroxide, though containing cobalt in minor quantities, remains suitable for general use in manufacture of Nickel Cadmium batteries. The presence of cobalt does not render the product suitable for any different use or for a specific use. The additives merely improve the performance and life cycle of Nickel Hydroxide. As stated in the explanatory notes to heading 2825, Nickel Hydroxide is a fine green powder used in electroplating, as a constituent of plates. The mixture of cobalt does not form any distinctive new product, which remains as Nickel Hydroxide. Also, only Nickel Hydroxide (positive electrode) will react with the negative electrode (Cadmium). The battery is widely known as Nickel Cadmium battery, even if there is some presence of Cobalt. The additives are minor and do not change the nature or function of the compound; they enhance the performance and life cycle of the Nickel electrode. The formation of the electrically conductive network favorably impacts the utilization of the active material, which is Nickel Hydroxide.
6.4 Inclusion of Cobalt metal as a conducting additive during the electrode fabrication of pasted electrodes is expected to enhance the electrochemical performance of Nickel Hydroxide. Thus, the addition of Cobalt does not change the character and application of Nickel Hydroxide. Hypothetically, Nickel Hydroxide does not act as a reaction initiator, accelerator or catalyst to any product, and it cannot do so even with refinement or enrichment processes. Thus, the proposed goods is classifiable under tariff entry 28254000, on the basis of its nature and composition in terms of the chapter notes and the Rule 1 of the GIR.
6.5 Further, Rule 2 (b) of GIR states that 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.
6.6 As per the general Rule 3 (a) of General Interpretation Rules, the specific heading shall prevail over the general heading. In this case there is a specific heading for Nickel Hydroxide under the tariff entry 28254000. Therefore the proposed goods are appropriately classified under the specific tariff entry 28254000.
6.7 I also find that both the applicant and comments received from ICD (Jurisdictional Commissioner of Customs, City Customs Commissionerate, Bengaluru) have proposed that the accurate classification of the subject product is CTI 28254000.
7. Thus, it is in terms of the Chapter Note I of chapter 28 read with Rules I, 2 and 3(a) of the GIR, the goods proposed to be imported i.e. Nickel Hydroxide Compound (containing Nickel Hydroxide of 92 % to 100%, and balance of Cobalt Hydroxide and Sodium Sulphate) is classifiable under sub-heading 28254000.
