Classification of “Foil balloons and balloons made of natural rubber latex”

In re Sri Devi Timbers (CAAR Mumbai)

CAAR rule that subject goods i.e. “Foil Balloons” are made of Nylon/HDPE and not of Latex/Rubber and imported for the purpose of party decoration, celebrations, festivities, carnivals or entertainment, merit classification under the heading 9505 and specifically under CTI 9505 90 90 and “Balloons made of natural rubber latex” merit classification under CTI 9503 00 20 of the First Schedule to the Customs Tariff Act, 1975.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI

M/s. Sri Devi Timbers (having IEC No. 0406023557 and hereinafter referred to as ‘the applicant’, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 30.01.2024 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant is seeking advance ruling on the classification of “Foil balloons and balloons made of natural rubber latex” for imports through the port of Chennai.

2. The applicant has submitted as follows in the present application:

2.1 The applicant is intending to import “Foil Balloons” and “Balloons made of Natural Rubber Latex” from Vietnam, Malaysia, Thailand and China. Foil Balloons are used for party decoration and entertainment purposes. These balloons ordinarily have shiny reflective surfaces and are often printed with colour pictures and patterns for gifts and parties. These are used for decoration for various events such as birthday, and marriage. The said Foil Balloons are of the shape of alphabets, numbers and other shapes such as heart, star etc. The said foil balloons are not used as toys but are only used for decoration and entertainment purposes. Balloons made of Natural Rubber Latex are toy balloons primarily used as children’s toys and also for decoration. They come in many sizes and shapes.

2.2 The applicant is of the bonafide belief that the subject goods “Foil balloons” are rightly classifiable under heading CTH 9505 9090 under the heading “other” and the main heading deals with festive, carnival and other entertainment articles, including conjuring tricks and novelty jokes. The goods balloons made up of natural rubber latex (or) latex balloons are rightly classifiable under the CTH 9503 0020 which deals with non-electronic toys.

2.3 The classification of the product “foil balloon” would fall under heading 9505 which reads as under:

9505 Festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes.

9505 10 00 – Articles for Christmas festivities

9505 90 – Other:

9505 9010 — Magical equipments

9505 9090 — Other

2.4 The HSN Explanatory Notes to the heading 9505 states that the heading 95.05 covers the following goods.

A) Festive, carnival or other entertainment articles, which in view of their intended use are generally made of non-durable material. They include:

(1) Decorations such as festoons, garlands, Chinese lanterns, etc., as well as various decorative articles made of paper, metal foil, glass fibre, etc., for Christmas trees (e.g., tinsel, stars, icicles). artificial snow, coloured balls, bells, lanterns, etc. Cake and other decorations (e.g., animals, flags) which are traditionally associated with a particular festival are also classified here.

(2) Articles traditionally used at Christmas festivities, e.g., artificial Christmas trees (these are sometimes of the folding type), nativity scenes, Christmas crackers, Christmas stockings, imitation yule logs.

(3) Articles of fancy dress, e.g., masks, false ears and noses, wigs, false beards and moustaches (not being articles of postiche – heading 67.04), and paper hats. However, the heading excludes fancy dress of textile materials, of Chapter 61 or 62.

(4) Throw-balls of paper or cotton-wool, paper streamers (carnival type), cardboard trumpets, “blow-outs”, confetti, carnival umbrellas, etc.

2.5 The HSN Explanatory Notes read with the tariff heading 9505 makes it very clear that festive, carnival or other entertainment articles get classified under heading 9505. The Explanatory Note also clarifies that decorations used to decorate rooms such as garlands, lanterns etc., and decorative articles for Christmas trees such as coloured balls, animals and other figures are classifiable under heading 9505. The goods in question viz., foil balloons are also of the category of goods mentioned in the heading 9505 and as explained in the USN Explanatory Notes.

2.6 The applicant further submitted that the goods cannot be considered to be a toy balloon which ordinarily falls under heading 9503 of the Customs Tariff Act, 1975. Due to the fragile nature of the foil balloons and its actual use, the goods cannot be used by children as a toy.

2.7 In this respect the applicant submitted that the Indian Standard applicable for toys is given in IS 9873 (Part 1):2019. The said Indian Standard categorically states that the following products are not included within the scope of the said Indian Standard.

a) bicycles, except for those considered to be toys, i.e., those having a maximum saddle height of 435 mm (see Clause E.1);

b) slingshots; NOTE “Slingshots” are also known as “catapults”.

c) darts with metal points;

d) home and public playground equipment;

e) compressed air- and gas-operated guns and pistols (see Clause E.1);

f) kites (except for the electric resistance of their strings, which is included);

g) model kits, hobby and craft items, in which the finished item is not primarily of play value;

h) sporting goods and equipment, camping goods, athletic equipment, musical instruments and furniture; however, toys which are their counterparts are included.

It is recognized that there is often a fine distinction between, for example., a musical instrument or a sporting item and its toy counterpart. The intention of the manufacturer or distributor, as well as normal use and reasonably foreseeable abuse, determines whether the item is a toy counterpart or not;

i) models of aircraft, rockets, boats and land vehicles powered by combustion engines; however, toys which are their counterparts are included (see Clause E.1);

j) collectible products not intended for children under 14 years of age;

k) holiday decorations that are primarily intended for ornamental purposes;

l) aquatic equipment intended to be used in deep water, swimming-learning devices and flotation aids for children such as swim-seats and swim-aids;

m) toys installed in public places (e.g., arcades and shopping centres);

n) puzzles having more than 500 pieces or without a picture, for specialists;

o) fireworks including percussion caps, except percussion caps specifically designed for toys;

p) products containing heating elements intended for use under the supervision of an adult in a teaching context;

q) steam engines;

r) video toys that can be connected to a video screen and operated at a nominal voltage greater than 24 V;

s) babies’ pacifiers (dummies);

t) faithful reproduction of firearms;

u) electric ovens, irons or other functional products operated at a nominal voltage greater than 24 V;

v) bows for archery with an overall relaxed length exceeding 120 cm;

w) fashion jewellery for children (see Clause E.1)

From the exclusion given in the Indian Standard, reproduced .above, it is apparent that the actual use of the item and the intention of the manufacturer and distributor is a relevant criterion. If the item in question is not manufactured or distributed for use as a toy, then the Indian Standard does not apply. It is pertinent to note that as per Sl. No. (k) above, holiday decorations that are primarily intended for ornamental purpose have been excluded from the Indian Standards. Therefore, the test for determining whether the goods are classifiable under heading 9503 as a toy or under the heading 9505 as a decorative article is the end use.

2.8 The Hon’ble Supreme Court in the case of Collector of Customs Vs. Kumudam Publications [1997 (96) ELT 226 (SC)] has held that “it is not entirely correct to say that the end use or function of the goods is irrelevant to decide the question of classification”. A three Judge Bench of the Hon’ble Supreme Court had also relied upon the function and end use in determining the classification in Indian Tool Manufactures Vs. Asst. Collector of Central Excise, Nasik & Others reported in 1994 (74) .ELT 12 (SC).

2.9 The Hon’ble Supreme Court in the case of Commissioner of Central Excise Vs. Wockhardt Life Sciences Ltd reported in 2012 (277) ELT 299 (SC) had held that the functional. utility and predominant usage of the commodity must be taken into account apart from the understanding in common parlance to determine the correct classification of the product. Applying the said test to the present case, it can be safely concluded that the goods are rightly classifiable under the heading 9505 9090. The applicant has also submitted that even by applying the common parlance test, the goods in question cannot be termed to be a ‘toy’. The goods are not sold as a toy in the market and are only sold for decorative purposes.

2.10 Without prejudice to the contention above, the applicant submitted that Rule 4 of the General Rules for the Interpretation of the Import Schedule clearly states that the goods which cannot be classified in accordance with Rule 1 to 3 shall be classified under heading appropriate to the goods to which they are most akin. Therefore, even by following the kinship rule, the goods under consideration, viz., “foil balloon” are of the category/type mentioned in the HSN Explanatory Notes, which are used as decorations to decorate rooms.

2.11 The applicant relies upon the final order No. 75483-75484/2023 dated 17/05/2023 passed by the Hon’ble CESTAT Kolkata, which related to the issue of classification of foil balloons. The Hon’ble CESTAT, Kolkata held that foil balloons are not covered by the Toy Quality Control Order, 2020 and to arrive at this conclusion the Hon’ble Tribunal relied upon the clarification dated 24/02/2022 given by the Department of Promotion of Industry and Internal Trade. The Hon’ble Tribunal further held that inflatable party items are classifiable under heading 3926 9099 and the foil inflatable items are classifiable under heading 9505 9090. The applicant also submitted that the Hon’ble Customs Authority to Advance Ruling vide Advance Ruling No. CAAR/MUM/ARC/61/2023 dated 05/09/2023 has clarified that foil balloons made of nylon/HDPE and imported for the purpose of party decoration or entertainment are classifiable under heading 9505 9090.

2.12 The classification of the product “Balloon made of natural rubber latex” would fall under heading 9503 which reads as under:

9503 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys; reduced-size (“scale”) models and similar recreational models, working or not; puzzles of all kinds

9503 00 Tricycles, scooters, pedal cars and similar wheeled toys,. dolly’ carriages; dolls; other toys,. reduced-size (“scale’) models and similar recreational models, working or not; puzzles of all kinds

9503 00 10 Electronic

9503 00 20 Non electronic Parts:

9503 00 91 Of electronic toys

9503 00 99 Other

These balloons are ordinarily latex balloons and are produced from suitable latex compound. It is considered as cheapest of all toys and hence it is extremely popular in all segments of population. Balloons of natural rubber latex have no formal specifications such balloons are perhaps the most popular toy of children.

The I-ISN Explanatory Notes to the heading 9503 states that the heading 95.03 covers the following goods.

D). Other toys

This group covers toys intended essentially for the amusement of persons (children or adults). However, toys which, on account of their design, shape or constituent material, are identifiable as intended exclusively for animals, e.g., pets, do not fall in this heading, but are classified in their own appropriate heading. This group includes:

All toys not included in (A) to (C). Many of the toys are mechanically or electrically operated.

These include…

(i) Toys representing animals or non-human creatures even ifpossessing predominantly human physical characteristics (e.g., angels, robots, devils, monsters), including those for use in marionette shows.

(ii) Toy pistols and guns.

(iii) Constructional toys (Construction sets, building blocks, etc.)

(iv) Toy vehicles (other than those of group A), trains (Whether or not electric), aircraft, boats, etc., and their accessories (e.g., railway tracks, signals).

(v) Toys designed to be ridden by children but not mounted on wheels, e.g., rocking horses.

(vi) Non-electric toy motors, toy steam engines, etc.

(i) Toy balloons and toy kites.

(Wiz) Tin soldiers and the like, and toy armaments.

(ix) Toy sports equipment, whether or not in sets (e.g., golf sets, tennis sets, archery sets, billiard sets; baseball bats, cricket bats, hockey sticks).

(vii) Toy tools and implements; children wheelbarrows.

(viii) Toy cinematographs, magic lanterns, etc.; toy spectacles.

The HSN Explanatory Notes read with the tariff heading 9503 makes it very clear that tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys and similar recreational models articles get classified under heading 9503. The Explanatory Note also clarifies that toy balloons are classifiable under heading 9503. The goods in question viz., Toy balloon made up of natural rubber latex are of the category of goods mentioned in the heading 9503 and as explained in the HSN Explanatory Notes. Hon’ble Karnataka High Court in the case of Kundanmal Ganeshmal & Brothers reported in (1995) 96 STC 149 held that primarily balloons are used as toys by the children, sometimes they are also used for other purposes like decoration. Decorative purpose of balloons is only incidental because of the colours given to the balloons by the manufacturer. If all the balloons are manufactured under a particular colour, the decorative utility of the balloons will be lost. in the circumstances, the dominant purpose of the balloons shall have to be taken into consideration.

2.13 Explanatory notes to HSN also includes Toy Balloons in the heading 9503. Further, as per the explanation to Sl.No.29 of the Notification No. 02/2021-Customs dated 01.02.2021 it is explicitly mentioned that toy balloons made of natural rubber latex are classified under heading 9503. The relevant portion of S. No.29 of the Notification 02/2021 dated 01.02.2021 is reproduced as under:

(29) against S. No. 284, in column (3), after item (iii), the following explanation shall be inserted, namely: –

“Explanation. – For the removal of doubts, this entry does not include toy balloons made of natural rubber latex (toy balloons are classified under custom tariff heading 9503).”

The balloons made up of natural rubber latex are correctly classifiable under CTI1 9503 0020, BIS standards on toys which includes balloons play a crucial role in ensuring the safety of toys for children. Therefore, certificate regarding conformation of the goods to the standards prescribed by ISIS is required in view of the DGFT vide Notification No. 26/2015-20 dated 01.09.2017 as amended vide Notification No. 33/2015- 20 dated 01.12.2019. Ministry of Commerce and Industry has issued Toys (Quality Control) Order, 2020 instructing the mandatory requirement of the certificates mentioning that the goods are conforming to the standards prescribed by BIS in this regard. Balloons (made of natural rubber latex) are generally identified as toys in common parlance the heading which provides most specific description is 9503 and classified under CTH 9503 0020, under the heading ‘Non-electronic’. Without prejudice to the contention above, in the case of Wood craft Products Ltd reported in 1995 (77) ELT 23 (SC) Supreme court held that in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act.

2.14 In view of the above, the applicant has submitted that the subject good “Foil balloons” are classifiable under CTH 9505 9090 and “Balloons made up of natural rubber latex” are classifiable under CTH 9503 0020.

3. The Jurisdictional Commissionerate of Customs i.e. Chennai-II (the department) submitted their comments on the subject application as follows:

3.1 Relevant portion of Explanatory Notes to Chapter Heading 9505 is reproduced as under.

9505 Festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes.

9505.10 – Articles for Christmas festivities

9505.90- Other

This heading covers:

A. Festive, carnival or other entertainment articles, which in view of their intended use are generally made of non-durable material.

The heading excludes statuettes, statues and the like of a kind used for decorating places of worship. The heading also excludes articles that contain a festive design, decoration, emblem or motif and have a utilitarian function, e.g., tableware, kitchenware, toilet articles, carpets and other textile floor coverings, apparel, bed linen, table linen, toilet linen, kitchen linen.

B. Conjuring tricks and novelty jokes, e.g., packs of cards, tables, screens and containers, specially designed for the performance of conjuring tricks; novelty jokes such as sneezing powder, surprise sweets, water-jet buttonholes and “Japanese flowers”.

Heading 9505 does not cover the item Balloons of any description i.e. toy balloon, party balloon, foil balloon etc. Further, printed foil balloons are generally identified as toys in common parlance and hence, the goods i.e. Foil Balloons of different designs and colours arc toy balloons which falls under Heading 9503. It was specifically mentioned in the Para (D)(vii) of Explanatory Notes to Chapter 1-leading 9503.

3.2 The Explanatory notes to heading 9503 makes reference to toy balloons, without making any distinction on the material used for production. Consequently, any balloon, that may be used as a toy, would be classified under CTH 9503, irrespective of the material whether they made up of Natural Rubber Latex or otherwise. Variety of the Foil Balloons/latex balloons are easily available in the market not only for decoration purposes but also sold as toys. Foil Balloons, in different shapes, are sold in public places like beaches and parks with the intention to be used as toys. Also, Foil balloons are sold only for the purpose of toys, whether or not having decorative purpose. Thus, in the normal course of trading in balloons there is no difference of use as toys or for decoration. Further, as per Analytics Report 46/2021-22 dated 29.10.2021 issued by NCTC (National Customs Targeting Centre) Mumbai had confirmed that balloons made of latex/ rubber or foil/ mylar or plastic, also commonly known as party or decoration balloons need to classified under heading 9503.

3.3 However, the 1-ISN explanatory notes, under Heading 9505 reads with festive, Carnival and other entertainment articles, including conjuring tricks and novelty jokes. The cargo under 9505 indicates that the goods covered under that head are associated with festivals as ornaments or decorative items. These items are not available as play things for kids as they are placed on Christmas trees or as decorative items of celebration. This chapter entry extends to only those decorations that are used for religious festivals and carnivals. Further, the goods “Foil Balloon” and “Balloons made of Natural Rubber Latex” liable to classification under CTH 95030090 are to be in conformity with BIS standards vide DGFT Notification No. 26/2015-20 dated 01/09/2017 as amended vide Notification No. 33/2015-20 dated 01/12/2019 and consequently in line with the Toys (Quality Control) Order, 2020.

3.4 The Hon’ble Customs Authority of Advance Rulings, Mumbai, vide their judgetnent in Ruling No. CAAR/MUM/ARC/61/2023 dated 05/09/2023 filed by M/s Bharat Balloons, ordered that, “Foil Balloons”, made of Nylon/HDPE not of latex/Rubber and imported for the purpose of party decoration or entertainment, merit classification under the heading 9505 and specifically under sub heading 9505 9090 of the first Schedule to the Customs Tariff Act, 1975.

3.5 However, the department has filed an Appeal in the Hon’ble High Court of Madras against the Order dated 05/09/2023 of the Hon’ble Advance Ruling, Mumbai with a prayer to classify the goods “Foil Balloons” under 9503. The case has been admitted by the Hon’ble High Court of Madras, vide Appeal Number CMA No. 3004/2023 (CMP No. 28450/2023). Copy of the appeal filed by the department is enclosed.

3.6 The description of CTH 9505 as provided in the Customs Tariff Act, read with Explanatory Notes of CTH 9505, it is noted that there is no mention of toy balloons in the said CTH.

3.7 In view of the description provided in-customs tariff, Explanatory notes of CTH 9503 and analytics report of NCTC it is clear that Balloons made of latex/rubber or foil or plastic commonly known as party balloons are classifiable under CTH 9503 and more particularly under CTI 95030090 and attracts BCD @70%, SWS @10% of BCD, IGST @12% and requires mandatory BIS compliance/certification as per toys (Quality Control)

3.8 In view of the above submissions, the foil balloons are not classifiable under CTI 9505 9090 and are rightly classifiable under CTI 9503 0090 and the request of the M/s Sri Dcvi Timbers, for an advance ruling may be decided accordingly.

4. A personal hearing in the matter was conducted on 16.05.2024 wherein Shri. Hari Radhakrishnan, Advocate appeared from the applicant side and Shri Ravi Verma, Appraiser Gr. VI, Chennai appeared from the department side, both through the online hearing mode. Sh. Radhakrishnan reiterated the contention of the applicant filed with the application. He submitted that the foil balloons are for party decoration and entertainment purposes and are with shiny reflective surfaces and merit classification under CTI- 9505 9090. He further submitted that regular balloons are made of latex/rubber and merit classification under chapter heading 9503 0020. It was asked to Sh. Radhakrishnan to provide the declaration of the constituting materials comprising the foil balloon.

He submitted that Foil balloon is not toy balloon but it is used for decoration for various events like birthday, marriages etc. He relied upon case laws in the case reference: 75483­75484/2023 dated 17/05/2023- order passed by Hon’ble CESTAT Kolkata and the Advance Ruling: CAAR/MUM/ARC/61/2023 dated 5/9/2023. He also relied upon case law CC v/s Kumudam Publication 1997(96) ELT 226(SC), 1994(74) ELT (12) SC, 2012 (277) ELT 299(SC).

Sh. Ravi Verma, Appraiser Gr VI from the Chennai Customs submitted that department has not accepted the order of Hon’ble CESTAT dated 17/05/2023 and CAAR Mumbai order dated 05/09/2023 and filed appeal. He also submitted that in NSC meeting it is comprehended that any balloon may fall under CTH 9503, more particularly 9503 0090. On specifically asked, the department informed that no stay of the operation was granted in any of the above appeals by the competent court.

The department was asked vide this office letter dated 12.07.2024 to inform about the status of the appeal, if any, filed and whether there is any stay granted by any competent court. In reply thereto, the department submitted that an appeal has been filed against the Advance Ruling: CAAR/MUM/ARC/61/2023 along with stay application and the same is pending. The said case have been listed on 19.01.2024 and is adjourned without mentioning any next date.

5. Further, the applicant has filed additional submissions on 28.05.2024 as follows:

During the course of hearing, CAAR, Mumbai had raised a query regarding the composition of the foil balloons that are proposed to be imported. In this regard, it is clarified that foil balloons are made of nylon/HDPE and are used for party decorations. During the course of personal hearing, the applicant had relied upon the clarification given by the Department of Promotion of Industry and Internal Trade, Ministry of Commerce, vide their letter dated 24.02.2022 issued in F. No. 14031/47/2020-CI. The Ministry had clarified that party decoration items made of nylon/ HDPE are classifiable under heading 9505 and other inflatable party items made of nylon/HDPE are classifiable under heading 3926. The applicant submitted that the issue regarding classification of foil balloons has already been decided by this Hon’ble Forum vide Ruling No. CAAR/MUM/ARC/61/2023 dated 05/09/2023. Though the Department had filed an appeal in CMA No. 3004 of 2023 against the said advance ruling, no stay has been granted by the Hon’ble High Court of Madras. This can be verified from the website of the High Court of Madras. Therefore, the advance ruling dated 05.09.2023 passed in the case of M/s Bharat Balloon house still holds the field.

6. I have taken into consideration all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearings. I have gone through the response received from the Chennai Customs and the rebuttal to that filed by the applicant. I therefore proceed to decide the present applications regarding classification of “Foil balloons and balloons made of natural rubber latex” on the basis of the information on record as well as the existing legal framework having bearing on the classification of the subject goods under the first schedule of the Customs Tariff Act, 1975.

7. I find that “Foil Balloons” are used for party decoration and for entertainment purposes. These balloons ordinarily have shiny reflective surfaces and are often printed with colour pictures and patterns for gifts and parties. “Foil Balloons” are used for decoration for various events such as birthday, marriage, new-year eve celebration and many other joyous programmes. The said foil balloons are available in various shapes such as alphabets, numbers, heart, star etc. The said foil balloons are not used as toys but are only used for decoration and entertainment purposes. “Foil Balloons” are very fragile and non-durable goods which are not purchased in the market for the purpose of play by children. “Foil Balloons” are used like festoons also as explained in the application. Some images of the Foil Balloons submitted by the applicant are as under:

They are decorated on the wall on various joyous occasions. the rejoinder of applicant that Toy Balloons mentioned in paragraph (D)(vii) of the Explanatory Notes to heading 9503 refer to latex/rubber balloons is correct and grounded in facts. I am also of the view that “Foil Balloons” made of Nylon/HDPE don’t merit classification under the heading 9503 as they are not purchased in market as toys for the purpose of play by children, rather they are purchased as decorative items.

8. Contention of the department that “Foil Balloons” are identified as toys in the common parlance is clearly misconceived and without any evidence. Further, the said Analytics Report of NCTC, M um bai does not take into account the common parlance test as indicated above as well as the HSN explanatory notes to the heading 9505. If the subject goods i.e. “Foil Balloons” are classified under the heading 9503 as per the paragraph (D)(vii) of the Explanatory Notes thereto, it would be similar to completely disregarding the fact “Foil Balloons” are purchased in the market for the purpose of decoration or entertainment.

9. Further, relevant portion of CTH 9505 is reproduced below for ease of reference:-9505 Festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes.

9505 10 00 – Articles for Christmas festivities

9505 90 – Other:

9505 9010 — Magical equipments

9505 9090 — Other

From the above and also taking into account the Explanatory Notes to the chapter heading 9505, I agree with the contention of the applicant that the ‘Foil Balloons’ are rightly classifiable under heading CTI-1 9505 9090 under the heading “other” and the main heading deals with festive, carnival and other entertainment articles, including conjuring tricks and novelty jokes.

On going through the wording used in the CTH 9505, it can be seen that the goods covered under this heading have the specific purpose and includes festive, carnival or other entertainment articles, whereas, chapter heading 9503 provides for certain toys, dolls’ carriages, other toys, reduced-size (scale) models and similar recreational models etc. The difference between the two headings are intended and distinguishable. As for the festivity.

carnival or other articles of entertainment, these may comprise of articles for Christmas festivities (CTI 9505 1000) and other such articles to celebrate other joyous occasions, for instance “HAPPY BIRTHDAY, HAPPY NEW YEAR, HAPPY ANNIVERSARY, GROOM TO BE, BABY BOY” etc. I find from the open sources that foil balloons are popular for parties and celebrations because they are durable, light-weight and can hold their shape for a longer period compared to traditional latex balloons.

10. Further, to find out correct classification of the “Balloons made of natural rubber latex” relevant portion of heading 9503 is reproduced as under:

9503 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys; reduced-size (“scale”) models and similar recreational models, working or not; puzzles of all kinds

9503 00 Tricycles, scooters, pedal cars and similar wheeled toys; dolls’ carriages; dolls; other toys; reduced-size (“scale’) models and similar recreational models, working or not; puzzles of all kinds

9503 00 10 — Electronic
9503 00 20 — Non electronic
— Parts:
9503 00 91 —- Of electronic toys
9503 00 99 —- Other

CTI 9503 0020 specifically covers Non electronic toys and the applicant is in agreement with this classification when the subject goods i.e. balloons are made of Latex/Rubber. Illustrative image of the latex balloons as submitted by the applicant is as under:

11. Further, as per the FINAL ORDER NO. 75483-75484/2023 dated 17.05.2023 of CESTAT, Kolkata, the CESTAT has held that decoration foil balloons do not fall under the purview of BIS. CESTAT while arriving at this decision has relied upon a clarification from the Department of Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India vide F. No. 14031/47/2020-CI dated 24.02.2022. As per the said clarification, it is clear that the Indian Standard IS Registration i.e. any product or material designed or clearly intended for use in play by children under 14 years of age, includes requirements for safety of toy balloons as well. These requirements include the possible choking hazards presented by pieces of broken latex balloons or by mouthpieces fitted to balloons. Further, it was held that the impugned goods imported by the respondent under EISN 39269099/95059090 are not covered under Toy Control Order, 2020. Thus, from the perusal of above cited order of CESTAT, Kolkata it is clear that subject goods “Foil Balloons” cannot be considered as toys and no BIS Registration is required to import the same. CESTAT, Kolkata has held NCTC report inconclusive.

12. Now as far as judicial discipline and law is concerned the Hon’ble Supreme Court has held in the case of UOI vs Kamalakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC), that “order of higher appellate authorities should be unreservedly .161lowed by subordinate authorities. The mere fact that the order of the appellate authority is not “acceptable” to the department — in itself and objectionable phrase- and is the subject-matter of an appeal can furnish no ground, for not following it unless its operation has been suspended by a competent court. If this healthy rule is not .followed, the result will only be undue harassment to assesses and chaos in administration of laws”.

The Hon’ble Supreme Court has confirmed the same view already taken in the matter of U0/ Ks. Kamalakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC) and passed the judgement on 01.02.2023 in the matter of M/s Godrej Sara lee Ltd. Vs. Excise and taxation officer-cum-assessing Authority, 2023 (384) E.L.T. 8 (S.C.). Para 34 of said judgement dated 01.02.2023 is reproduced as under”-

“In our view, the revisional authority might have been justified in exercising suo motu power to revise the order of. the Assessing Authority had the decision of the Tribunal been set aside or its operation stayed by competent court. So long it is not disputed that the Tribunal’s decision, having regard to the framework of classification of products/tax liability then existing, continues to remain operative and such framework too continues to remain operative when the impugned revisional orders were made, the Revisional authority was left with no other choice but to follow the decision of the Tribunal without any reservation. Unless the discipline of adhering to decisions made by the higher authorities is maintained, there would he utter chaos in administration of laws apart from undue harassment to assesses. We share the view expressed in Kamlakshi Finance Corporation Ltd. (supra). –

13. In view of the foregoing discussions and findings, I rule that if the subject goods i.e. “Foil Balloons” are made of Nylon/HDPE and not of Latex/Rubber and imported for the purpose of party decoration, celebrations, festivities, carnivals or entertainment, merit classification under the heading 9505 and specifically under CTI 9505 90 90 and “Balloons made of natural rubber latex” merit classification under CTI 9503 00 20 of the First Schedule to the Customs Tariff Act, 1975.