Classification of Food Emulsifier Grindsted PS 101-M by CAAR

In re Danisco India Pvt. Ltd. (CAAR Delhi)

The Customs Authority for Advance Ruling (CAAR), Delhi, analyzed the classification of Grindsted PS 101-M, a food emulsifier primarily composed of fully hydrogenated palm-based triglycerides. The product, delivered in bead form, is widely used in the food industry to prevent oil separation in fat-based products like peanut butter and margarine. Under Chapter 15 of the Customs Tariff Act, which covers animal, vegetable, or microbial fats and oils, the product underwent evaluation per the General Rules of Interpretation (GRI) to determine its appropriate classification.

Applying GRI Rules 1 and 6, CAAR concluded that Grindsted PS 101-M falls under the heading for vegetable fats and oils (CTH 1516 20). Further sub-classification identified it as an edible-grade product (CTH 1516 20 91), based on its intended use in the food industry. This classification aligns with Circular No. 29/97 issued by the Ministry of Finance, which clarified that edible-grade vegetable oils include those suitable for human consumption post-processing. Consequently, Grindsted PS 101-M is classified under the specified tariff heading, ensuring clarity for import procedures and applicable duties.

RELEVANT TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI

Analysis and Conclusion

5. The present application pertains to a brand of food emulsifying agent, namely GRINDSTED PS 101-M. An emulsifier enables the creation of uniformly blended products from ingredients which, because of the fundamental differences between each other are immiscible without the presence of the said emulsifiers. The subject product, which is used a food emulsifying agent, is pre-dominantly composed of ‘Fully Hydrogenated Palm-based Triglycerides’. The physical processes of filtration, spray cooling, magnet separation takes place to get the subject product in its imported form. The subject product prevents oiling out in fat containing products, e.g. peanut butter, margarine, spreads etc. The subject product has high oil-binding capacity and is delivered in beads form. For ease of reference, the chemical composition and the physical property of the subject product is captured below:

5.2 The Tariff is aligned, up to the 6-digit level, with the Harmonized System of Nomenclature (“HSN”) issued by the World Customs Organization (`WC0′). It has been held by the Hon’ble Supreme Court in the case of Collector of Customs, Bombay Vs. Business Forms — 2002 (142) ELT 18 that the HSN Explanatory Notes aid in the interpretation of the Headings of the Tariff and may be used as a safe guide for the same.

5.3 The classification of the goods imported into India is to be determined based on the General Rules of Interpretation (hereinafter referred to as the “GRI”) set out in the Tariff. As per Rule 1 of the GRI, classification of the imported products 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 remaining Rules of the GRI. As per GIR 1, the goods under consideration should be classified following the terms of the chapter headings (4-digit codes followed with description) and the relevant Section or Chapter Notes. It further states that in the event the goods cannot be classified solely based on said Rule 1, and if the headings and legal notes do not otherwise require, the subsequent Rules 2 to 6 may be applied in sequential order. The text of Rule 1 reads as follows:

“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 “

5.3.1 Now, coming to the 6 digit and 8-digit classification, reliance must be placed on GRI Rule 6 which 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 sub-heading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires”.

5.3.2 Therefore, upon application of GRI Rule 6 read with GRI Rule 1, the classification of the subject product must be determined according to the terms of sub-headings. In view of the above, reference must be made to the description mentioned at sub-heading level. It is also pertinent to mention that as per GRI, descriptions of the goods provided under “-“(single dash) are first to be considered for sub-classification under a heading first, before proceeding to further classify under “- -” (double dash). Articles whose description are preceded by a “—” (triple dash) or “—-” (quadruple dash) are sub-classifications of the immediately preceding single dash or double dash, as the case may be.

5.4 Chapter Notes from Chapter 15 of the Customs Tariff becomes relevant on application of GRI 1.

The same has been reproduced hereinunder.

(A) This Chapter covers

(1) Animal, vegetable or microbial fats and oils, whether crude, purified or refined or treated in certain way (e.q., boiled. sulphurised or hydrogenated)

(2)

(³) “”

5.4.1 Further, General Explanatory Notes to heading 1516 covers “animal, vegetable or microbial fats and oils, which have undergone a specific transformation of a kind below but not been further prepared”. In regards to “specific transformation”, General Explanatory Notes to heading 1516 provides following processes.

(A) Hydrogenated fats and oils

Hydrogenation. which is effected by bringing the products into contact with pure hydrogen at a  suitable temperature and pressure in the presence of a catalyst (usually finely divided nickel) raises the melting points of fats and increase the consistency of oils by transformation unsaturated glycerides (e.g., of oleic, linoleic, etc.. acids) into saturated glycerides of higher melting points (e. q.,  of palmitic. stearic. etc., acids). The degree of hydrogenation and the final consistency of the product depend on the conditions employed in the process and the length of treatment. The heading covers such products whether they have been :

• Partly hydrogenated (even if these products tend to separate into pasty and liquid layers). This also has effect of converting the cis-form of the unsaturated fatty acids into trans-form in order to raise melting point.
• Wholly hydrogenated (e.q., oil converted into pasty or solid fats).

The products most commonly hydrogenated are oils of fish or marine mammals and certain vegetable oils (cotton-seeds oil, sesame oil, ground-nut oil, coiza oil, soya-bean oil, maize (corn) oil, etc.). Wholly or partly hydrogenated oils of this type are frequently used not only increases their consistency but also makes them less liable to deterioration by atmospheric oxidation, and improves their taste and odour, and, by bleaching them gives them better appearance.

(B) *****

5.4.2 Therefore, the classification of the subject product must be first determined at the single-dash level.

In this regard, it is evident that CTH 1516, has been sub-divided into:

5.4.3 Considering the nature of subject product, it is not made up of Animal and Microbial fats and oils and their fractions, but vegetable fats and oils and their fractions. Accordingly, the subject product will be classified under the entry, i.e., CTSH 1516 20 which reads as “Vegetable fats and oils and their fractions”. Now, upon perusal of the single-dash entry “Vegetable fats and oils and their fractions”. The entry is sub­divided into the following:

5.4.4 Further, it is submitted that under the CTSH 1516 20, the subject product is most appropriately covered under the ‘triple-dash’ entry bearing the term “Other:” as the subject product is not in the nature of “Cotton Seed oil”, “Groundnut oil”, “Hydrogenated castor oil (opal-wax)’.

5.4.5 As the subject product is made of palm oil, the subject product will fall under the residuary entry

5.4.6 The said entry is further categorised in two “—” (quadruple dash) entries which cover the products, namely, “Edible Grade” and “Other’. It is submitted that the subject product is correctly covered under the “Edible Grade’ entry. Reliance for the same is placed on Circular bearing F. No. 528/27/97-Cus. (TU) (Circular No. 29/97) dated 31.07.1997 issued by the Ministry of Finance, Department of Revenue (Tariff Unit), New Delhi, clarified that the term ‘vegetable oil of edible grade’ shall not only contain those vegetable oils which are fit for human consumption ‘as-imported’, and will also include those vegetable oils which will be fit for human consumption after further processing.

5.5 In this regards reference is made to Circular bearing F. No. 528/27/97-Cus. (TU) (Circular No. 29/97) dated 31-7-1997 issued by the Ministry of Finance, Department of Revenue, (Tariff Unit). New Delhi, clarified that the term ‘vegetable oil of edible grade’. Relevant portion of Circular is produced below:

2. A doubt has arisen regarding scope of the term ‘Vegetable oils of edible grade’ appearing in the said notification i.e. as to whether this term will cover only those vegetable oils which are fit for human consumption as it is imported or it will also include the vegetable oils which are not fit for human consumption at the time of import but will be fit for human consumption at the time of import but will be fit for human consumption after further processing.

3. The matter has since been examined in consultation with the Ministry of Food, Department of Food, Directorate of Vanaspati, Vegetable Oils and Fast, Ministry of Civil Supplies, Consumers Affairs and Public Distribution and Department of Economic Affairs. It is clarified that the term ‘vegetable oils of edible grade’ will cover vegetable oils which are fit for human consumption after further processing. The benefit of duty exemption is admissible so long as the oils imported is used for edible purposes, even after refining. Pending cases of assessment may be finalized on the basis of above clarification

5.6 The subject product is of edible grade, as it is intended use is in the food industry as an emulsifier, merits classification under CTI 1516.20.91

Classification of the Subject Product under CTH 2106

5.7 Vide the letter dated 10.12.2024, the Port Commissionerate has opined that the subject product is correctly classifiable under CTH 2106 by placing reliance upon Explanatory Note No. 16 of the HSN EN to CTH 2106. HSN EN No. 16 to CTH 2106 is extracted below for ready reference:

HSN EN to CTH 2106:

“(16) Preparations, often referred to as food supplements or dietary supplements, consisting of, or based on, one or more vitamins. minerals, amino acids, concentrates, extracts, isolates or the like of substances found within foods or synthetic versions of such substances, put up as a supplement to the normal diet. It includes such products whether or not also containing sweeteners, colours, flavors, odoriferous substances, carriers, fillers, stabilisers or other technical aids. Such products are often put up in packaging with indications that they maintain general health or well-being. improve athletic performance, prevent possible nutritional deficiencies or correct sub-optimal levels of nutrients.”

5.7.1 As per Explanatory note (16) of heading 2106, food supplements or dietary supplements consisting of or based on extracts put up as a supplement to the normal diet fall under the heading 2106 Further, from the note (14) of heading 2106, it may be observed that products which consist of plants or its parts such as seeds and mixed with other substances such as other plant extracts_; which are not consumed as such, but which are claimed to offer relief from ailments or contribute to general health and well-being falls under the heading CTH 2106.

5.7.2 Further, placing reliance on the HSN EN No. 14 to CTH 2106, it was opined that products which consist of plants or its parts such as seeds, and are then mixed with other substances such as other plant extracts, which are not consumed as such, but which are claimed to offer relief from ailments or contribute to general health and well-being falls under the heading CTH 2106. HSN EN No. 14 to CTH 2106 is extracted herein below:

“Products consisting of a mixture of plants or parts of plants (including seeds or fruits) of different species or consisting of plants or parts of plants (including seeds or fruits) of a single or of different species mixed with other substances such as one or more plant extracts, which are not consumed as such, but which are of a kind used for making herbal infusions or herbal “teas”, (e.g., those having laxative, purgative, diuretic or carminative properties), including products which are claimed to offer relief from ailments or contribute to general health and well-being.”

5.7.3 It could be seen in this regard that even upon a bare perusal of the HSN EN to CTH 2106 and GRIs, it is apparent that the subject product is not covered under the scope of CTH 2106. The very first HSN EN to CTH 2106 prescribes that “provided that they are not covered by any other heading of the Nomenclature, this heading covers^. ………..  It is submitted in this regard that the subject product is more specifically covered under CTH 1516 as “vegetable fat/oil, wholly hydrogenated and not further prepared of edible grade”. It is trite law that the heading which provides a more specific description of the product shall be preferred over the heading which provides a more general description of the product.

5.7.4 Further, the said principle also finds statutory backing in GRI 3(a) which is extracted below for ready reference:

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.

5.8 Coming to analyse the HSN Explanatory Notes to Chapter 15 as given below:

GENERAL:

(B) This Chapter covers:

2. Animal, vegetable or microbial fats and oils, whether crude. purified or refined or treated in certain ways (eq. boiled, sulpharised or hydrogenated)

HSN EN to CTH 1516:

This heading covers animal, vegetable or microbial fats and oils, which have undergone a specific chemical transformation of a kind mentioned below, but have not been further prepared.  The heading also covers similarly treated fractions of animal, vegetable or microbial fats and oils.

3. Hydrogenated fats and oils: Hydrogenation, which is effected by bringing products into contact with pure hydrogen at a suitable temperature and pressure in the presence of a catalyst (usually finely divided nickel), raises the melting points of fats and increases the consistency of oils by transforming unsaturated glycerides (e.g., of oleic, linoleic, etc., acids) into saturated glycerides of higher melting points (e.g., of palmitic, stearic, etc., acids)._The degree of hydrogenation and the final consistency of the products depend on the conditions employed in the process and the length of treatment. The heading covers such products whether they have been: 3. Partly hydrogenated (even if these products tend to separate into pasty and liquid layers). This also has the effect of converting the cis-form of the unsaturated fatty acids into the trans­form in order to raise the melting point.

4. Wholly hydrogenated (e.q. Oils converted into pasty or solid fats),

The products most commonly hydrogenated are oils of fish or marine mammals and certain vegetable oils (cotton-seed, sesame oil, ground-nut oil, colza oil, soya-bean oil, maize (corn) oil, etc.) Wholly or partly hydrogenated oils of this type are frequently used as constituents in the preparation of edible fats of heading 1517  since the hydrogenation not only increases their consistency but also makes them less liable to deterioration by atmospheric oxidation. and improves their taste and odour, and, by bleaching them. gives them a better appearance.

The heading includes the products as described above, even if they have a waxy character and even if they have been subsequently deodorised or subjected to similar refining processes, and whether or not they can be used directly as food. But it excludes hydrogenated. Etc., fats and oils and their fractions which have undergone such further preparation for food purposes as texturation (modification of the texture or crystalline structure) (heading 1517). The heading further excludes hydrogenated. inter-esterified, re-esterified or elaidinised fats and oils or their fractions, where modification involves more than one fat or oil (heading 1517 or 1518).”

5.8.1 From a combined perusal of the foregoing discussion and extracts, the conditions which are outlined for a product to be classifiable under CTH 1516 is that

(a) the product should be an ‘animal, vegetable or microbial fat or oil’: and

(b) can either be crude, purified or refined or treated in certain ways (eg. boiled, sulphurised, inter-esterified, re-esterified, elaidinised or hydrogenated): and

(c) the subject product should involve only one fat/oil; and

(d) should not be worked further than the processes outlined in the HSN EN.

5.8.2  In light of the above, it is submitted that the subject product fulfils all the conditions set forth by the combined reading of the terminology of Chapter 15, CTH 1516, and the HSN EN to CTH 1516 to be adequately covered under CTH 1516 in the following manner:

5.9 In light of the above, it can be concluded that the subject product merits classification under CTH 1516 and more specifically under CTI 1516 20 91 as the said heading covers the subject product more adequately, both at the CTH and the CTI level as compared to CTH 2106. The same is also apparent from a bare perusal of the terminology of CTH 2106 which covers “Food Preparations Not Elsewhere Specified or Included”. It is also a fact that CTH 2106 is a residual heading and the subject product does not merit classification under the said CTH. Further, it is also submitted that the subject product is not classifiable under CTH 2106 at the CTH (four-digit) level itself basis GRI 3(a) and the above-captured principle of classification and accordingly, further examination of the entries under CTH 2106 and of the HSN EN to CTH 2106 would merely be a futile exercise.

6. In light of the aforementioned submissions, the answers to the questions raised will be as under:

a) Question: Whether the subject product in question in the present application is classifiable under Tariff Item 1516 20 91?

Answer: Yes.

b) Question: If the answer to the above question is in the negative, then what would be the correct classification of the products mentioned above under the Customs Tariff of India?

Answer: Not Applicable.

7. I, rule accordingly.