In re Jai Shree Krishna Impex (CAAR Delhi)
CAAR held 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. CAAR am also of the view that “Toy Balloons” made of Latex don’t deserve classification under the heading 9505 as they are not purchased in market as decorative items but as toys for the purpose of play by children. CAAR would further like to emphasize the fact that as proposed in the application that the balloons would be only sold to those above the age of 14 years is bereft of any logic and conviction. Once the balloons are sold off, its very difficult to ascertain the end-use of it. Thus, it appears as an alibi to divert the attention from the fact that the subjected goods shall be classified as “toy balloons” and thus be out of the purview of CTH 9503. Further, it has been elaborated in the application and during the personal hearing that the said goods would be used as water balloons during the Holi festivities. Thus it could feature under the CTH 9505 as it is meant for items for celebrations in a festivity like that of Christmas celebrations. But the product category that is “toy balloons” is fairly and squarely covered under the CTH 9503, as the explanatory notes of the HSN carries a specific entry for it. Also, CAAR do not find any merit classifying the subject goods under CTH 4016, as there is no specific entry for the product.
Further, CAAR find that the subject items are not “Foil Balloons”, which are used for party decoration and for entertainment purposes. As foil balloons ordinarily have shiny reflective surfaces and are often printed with colour pictures and patterns for gifts and parties and they are used for decoration for various events such as birthday, marriage, new-year eve celebration and many other joyous programmes and they are available in various shapes such as alphabets, numbers, heart, star etc., the subject goods do not pertain to the category of foil balloons. The said foil balloons are not used as toys but are only used for decoration and entertainment purposes.
From the description of CTH 9503 as provided above and in Customs Tariff Act, 1975, read with Explanatory Notes of the HSN of CTH 9503 (paragraph 3 & 4 above), it is evident that toy balloons are classifiable under the CTH (4-digit level), more particularly under CTH 9503 0099, if made of rubber latex or any other material. CAAR hold that the subject goods are rightly classifiable under heading CTH 9503 0099 under the heading “other” and the main heading deals with 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.
Furthermore, from the description of CTH 4016 and CTH 9505 as provided in Customs Tariff Act, 1975, read with Explanatory Notes of the HSN of CTH 4016 (paragraphs 7 & 8) and Explanatory Notes of CTH 9505 (paragraph 5 & 6 above), it may be noted that there is no mention of toy balloons in the said CTH. Moreover, the Explanatory Notes of the HSN of CTH 4016 specifically excludes “Toys, games and sports requisites and thereof of Chapter 95”.
In addition to the aforesaid, it is further stated that on perusal of the said advance ruling application, it is noted that the applicant seeks information regarding BIS on toys; however, the intonation pertaining to the Bureau of Indian Standards (BIS) regulations on toys is not within the scope of the questions of law that can be addressed through an advance ruling under section 28H of the Customs Act, 1962; therefore, no comments to offer in the said matter. Thus, the provisions under Sub-section (2) of the Section 28H refer only to classification of goods under the Customs Tariff Act, 1975 and not to the classification of goods covered under the Bureau of Indian Standard Requirements as per “The Toy (Quality Control) Order, 2020 for the purpose of Import. CAAR also note that the questions framed by the applicant for seeking advance ruling on the BIS on Toys is not in accordance with the provisions under Sub-section (2) of the Section 28H of the Customs Act, 1962.
In view of the foregoing discussions and findings, CAAR rule that the subject goods i.e. “Balloons” imported for the purpose of being used for filling water and used during Holi celebrations, merit classification under the heading 9503 and specifically under subheading 9503 0099 of the First Schedule to the Customs Tariff Act, 1975.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI
M/s. Jai Shree Krishna Impex (having IEC No. 0512055050 and hereinafter referred to as ‘the applicant’, in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, New Delhi (CAAR in short). The said application was received in the secretariat of the CAAR, New Delhi on 11.05.2023 along with its (‘Act’). The Applicant intends to import “Balloons” (hereinafter referred to as the ‘subject item’) from other countries’ suppliers at competitive costs to expand their business. The imported Balloons shall be traded in Indian markets at competitive prices. Through the present Application, the Applicant has approached the present authority for the purpose of advancing ruling upon the “classification of the product” intended to he imported under the description “Balloons” and accordingly, determining the correct Chapter/Section Head under the provisions of the Customs Tariff Act, 1975 for the purpose of correct application of Customs Duty or any benefits thereon, as per the provisions of the Customs Act, 1962.
2. The Applicant proposes to import ‘Balloons’ from countries outside India. The goods will be described as “Balloons” for the purpose of import in the documents of Import. The goods shall he small, thin balloons, light weighted, elastic, made of latex rubber material and available in different unique colours. As far as the composition/material of the goods are concerned, the goods “Balloons” shall be made up of Latex Rubber mainly. Balloons will be Biodegradable and non-toxic material which naturally decomposes. Being thin layered balloons, they can be inflated with water only and shall not be fit for the purpose of filling air or gas. The balloons are intended for one-time use. By filling it with plain or coloured water, it can be used for celebrations in Holi. It can be used both by kids of any age as well as adults for the purpose of celebrations. Further, the “Balloons” may be imported in large quantities and shall be sold in small bunches as a single pack through retail channels. The “Balloons” intended to be imported are not the regular “Balloons” for the use of children for playing due to their size, shape and limited shelf life.
3. That after the import and domestic procurement of the above products respectively, the Applicant shall undertake following process on the product:-
i. Final packaging of the retail product in attractive cardboard boxes, polybags or paper;
ii. Affixing company marks and stickers for the final sale of the product;
iii. Labelling their own brand or trade name at their premises for trade in India.
4. Classification and applicable Customs Duty:- Under the provisions of the Customs Tariff Act, 1975, as amended vide the Finance Act, 2020, the product “Balloon” of the above description used for the purpose other than transportation, is not classified specifically under any of the Chapter Head. Upon perusal of the Customs tariff and past import data available on public domains, it is find that the concerned goods i.e. “Balloons” are being imported by other importers under the following Customs Tariff Heads, they are: –
a) Customs Tariff Head 40169590:–The product “Balloon” made of latex rubber as its major composition is classified under Chapter Tariff Head 40169590 attracting 20% BCD. The CTH 40169590 provides as under: –
b) Customs Tariff Head 95030020: The product “Playing Balloons” used for playing as toys are classified under Chapter Tariff Head 9503. The C7111 9503 provides as under:
c) Customs Tariff Head 95059090:- Thirdly, the goods used for parties, celebrations, carnivals, festivals, entertainment articles etc. are classifiable under Customs Tariff Head 9505 which states as under:-
4.1 However, vide recent amendment in Notification No. 50/2017- Customs, dated 30.06.2017, which provides for the rate of Customs Duty and IGST on goods of various descriptions for the purpose of import wherein for CTH 40169590 the BCD is 10%. The following explanation to CTH 40169590 & 40169990 was inserted under entry 284 of Notification No. 50/2017- Customs, dated 30.06.2017 vide Notification No. 02/2021-Customs dated 01.02.2021, which provides that:-
5. Questions on which the Advance Ruling is sought: In light of the above set of facts, the Applicant seeks Advance Ruling on the following issues, as per the provisions of the Customs Act, 1962 read with the Customs Tariff Act. 1975, they are:-
A. “What shall be the appropriate classification of the Applicant’s product “Balloons” in question under Schedule 1 to the Customs Tariff Act, 1975 and the applicable rate of duty may be provided on the basis of the stated description, specifically intended for use for the purpose of Holi Celebrations only, hence being made from Latex Rubber especially small in size, available in varied colours, useable after being inflated with water only and not fitted for the purpose of inflation by air or gas:-
a. Whether on the basis of General Rules of Interpretation, in the absence of any specific entry, are liable to be classifiable under the residual entry of CTH 4016 or CTH 9505 and do not get classified as Toys under CTH 9503?
b. Where, the “Holi Celebration Balloons” are classified under CTH 9503 whether, the same are eligible for Bureau of Indian Standard Requirements as per “The Toy (Quality Control) Order, 2020 for the purpose of Import?
6. The submission before the Authority has been summarized as follows:
Classification of the goods intended to be imported as “Balloons” falling under the Chapter Tariff Head 4016; or CTH 9505 but does not fall under CTH 9503 of the Customs Tariff Act, 1975-
i. The description of the goods intended to be imported is “Balloons”
ii. Appropriate classification of the imported product as “Balloons” as per the General Rules of Interpretation;
iii. As per material composition i.e. Latex Rubber, the goods are liable to be classified under CTH 4016;
iv. As per the intended use, the goods are liable to be classified under CTH 9505
v. Goods do not get classified as “Toys” under CTH 9503;
A. Even the mandatory BIS requirement standards do not mention any product of the description “Latex Rubber Balloon” to classify the Applicant’s Product as “Toys”;
B. Without prejudice, if the importer’s product is classified as “Toys” there is no requirement of BIS registration for the purpose of import of the Applicant’s product as they do not fall under the BIS standards requirements.
Non-Binding value of the Explanatory Notes of the CTH 4016 95 90 under entry 284 of Notification No. 50/2017- Customs, dated 30.06.2017 inserted vide Notification No. 02/2021-Customs dated 01.02.2021. The Explanatory Notes are merely a clarification and not the amendment in the Tariff head specifically classifying all balloons under CTH 9503.
7. In the present case, it is submitted that Chapter 40 deals with products of rubber and articles thereof and hence, the “Balloons” intended to be imported, being inflatable articles made of latex material, are liable to be classifiable under the above Chapter Tariff Head 4016. Further that Chapter Head 9505 deals with the festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes etc. most appropriately classifies the goods “Latex Rubber Balloon” which are intended to be used for Holi festive Celebrations, decorative purposes etc. in India. However, the Custom Head 9503 which deals with “non-electronic toys” under the category “Tricycles, Scooters, Pedal Cars And Similar Wheeled Toys; Doll’s Carriages; Dolls; Other Toys; Reduced-Size (“Scale”) Models And Similar Recreational Models, Working Or Not; Puzzles Of All Kinds” does not in any description specifically covers the product “Latex Rubber Balloon” small in size and intended use.
8. The classification of the goods mentioned in the First Schedule of the Import tariff is governed by General Rule for Interpretation. The said rules for interpretation have been adopted from the General Rules for the Interpretations of the Harmonized System. It provides that:-
“2. THE GENERAL RULES FOR THE INTERPRETATION OF IMPORT TARIFF
Classification of goods in this Schedule 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 articles 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. 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 (a), shall be classified as U. they consisted of the material or component which gives them their essential character, in so far 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 numerical order among those which equally merit consideration.
4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.
5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein:
(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character;
(b) Subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use.
6. For legal purposes, 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 headings 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.”
8.1 It is submitted that the above rules are to be applied in a sequential manner for the purpose of classification of a product. As per the understanding, in the above provisions, Rule 3 is attracted which provides that 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 affected as follows:
3. 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 i f one of them gives a more complete or precise description of the goods.
3(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 (a), shall be classified as i f they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.
3 (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
Further, Rule 4 provided that the Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.
8.2 In the present case, the concerned goods are “Balloon” which has not been specified under any Custom’s Tariff Chapters. Further, the goods shall be small, very thin balloons, light weighted, elastic, made of latex rubber material and available in different unique colours. “Balloons” will be Biodegradable and non-toxic material which naturally decomposes. The “Balloons” may range in size and shall be sold in quantities in a single pack through retail channels. The “Balloons” can be inflated only with water and do not have any strength to be filled with air or gas. The “Balloons” are specifically used for celebrations in Holi for both children as well as adults. The said “Balloons” have no other use and is having a low shelf life.
8.3 Thus, applying Rule 3, as there is no specific description heading covering the goods “Balloons” hence, per the material description of the products intended to be imported, the composition of balloons i.e. ‘the latex Rubber’ Rule 3(b) is applied shall most appropriately confer the classification under CTH 4061 i.e. “Other Articles of Vulcanised Rubber Other Than Hard Rubber” the products are liable to be classified under the Chapter 40 having description as “Rubber and articles thereof” and thereby being an inflatable article is liable to be further classified as “Other” under CTH 4016 95 90.Hence, in the light of the above submissions, it can be safely concluded that the goods “Balloons” (Small thin balloons made up of latex rubber compound) imported in different unique colors are liable to be classified as “Other” under Chapter Head 4016 only by applying Rule 3(b) of GI Rules.
8.4 Further, even if by applying the general use of the goods, Chapter 95 is applied then the most appropriate classification shall be 9505 i.e. festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes etc. Chapter Head 9503 covers the electronic or non-electronic goods or any parts thereof of the description 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. Applying the rule of sedum generis for the Goods “Balloons”, it nowhere falls under the category of any working model, recreational models or puzzles etc. The Applicant’s Goods i.e. “Balloons” are not the general rubber latex balloons used for the purpose of playing by the kids generally. On the contrary, the goods shall be small, thin balloons, light weighted, elastic, made of latex rubber material and available in different unique colours. The goods “Balloons” shall be made up of Latex Rubber mainly. “Balloons” will be Biodegradable and non-toxic material which naturally decomposes. Being thin layered balloons, they can be inflated with water only and shall not be fit for the purpose of filling air or gas. The balloons are intended for one-time use. By filling it with plain or coloured water, it can be used for celebrations in Holi. It can be used both by kids of any age as well as adults for the purpose of celebrations. The “Balloons” may be imported in large quantities and shall be sold in small bunches as a single pack through retail channels. The “Balloons” intended to be imported are not the regular balloons for the use of children for playing due to their size, shape and limited shelf life.
9. In the present case, the concerned goods are “Balloon” which has not been specified under any Custom’s Tariff Chapters. Further, the goods shall be small, very thin balloons, light weighted, elastic, made of latex rubber material and available in different unique colours. “Balloons” will be Biodegradable and non-toxic material which naturally decomposes. The “Balloons” may range in size and shall be sold in quantities in a single pack through retail channels. The “Balloons” can be inflated only with water and do not have any strength to be filled with air or gas. The “Balloons” are specifically used for celebrations in Holi for both children as well as adults. The said “Balloons” have no other use and is having a low shelf life.
9.1 Thus, applying Rule 3, as there is no specific description heading covering the goods “Balloons” hence, per the material description of the products intended to be imported, the composition of balloons i.e. ‘the latex Rubber’ Rule 3(b) is applied shall most appropriately confer the classification under CTH 4016 i.e. “Other Articles of Vulcanised Rubber Other Than Hard Rubber” the products are liable to be classified under the Chapter 40 having description as “Rubber and articles thereof” and thereby being an inflatable article is liable to be further classified as “Other” under CTH 4016 95 90. Hence, in the light of the above submissions, it can be safely concluded that the goods “Balloons” (Small thin balloons made up of latex rubber compound) imported in different unique colors are liable to be classified as “Other” under Chapter Head 4016 only by applying Rule 3(b) of GI Rules. 9.2 Further, even if by applying the general use of the goods, Chapter 95 is applied then the most appropriate classification shall be 9505 i.e. festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes etc. Chapter Head 9503 covers the electronic or non-electronic goods or any parts thereof of the description 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. Applying the rule of sedum generis for the Goods “Balloons”, it nowhere falls under the category of any working model, recreational models or puzzles etc. The Applicant’s Goods i.e. “Balloons” are not the general rubber latex balloons used for the purpose of playing by the kids generally. On the contrary, the goods shall be small, thin balloons, light weighted, elastic, made of latex rubber material and available in different unique colours. The goods “Balloons” shall be made up of Latex Rubber mainly. “Balloons” will be Biodegradable and non-toxic material which naturally decomposes. Being thin layered balloons, they can be inflated with water only and shall not be fit for the purpose of filling air or gas. The balloons are intended for one-time use. By filling it with plain or coloured water, it can be used for celebrations in Holi. It can be used both by kids of any age as well as adults for the purpose of celebrations. The “Balloons” may be imported in large quantities and shall be sold in small bunches as a single pack through retail channels. The “Balloons” intended to be imported are not the regular balloons for the use of children for playing due to their size, shape and limited shelf life.
10. Though the Harmonized System of Nomenclature has been adopted internationally and forms the basis of the Customs Tariff Head though not binding. Applicant places reliance on the HSN Explanatory Notes to HSN with respect to the chapter heading 95.05 reads as under:
95.05-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 Renerally 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 tree (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, imitationyule logs.
(3) Articles of fancy dress, e.g., masks, false ears and noses, wigs, false beards and moustaches (not being articles of pastiche -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, papers treamers (carnival tape), cardboard trumpets, “blow-outs”, confetti, carnival umbrellas, etc.
The heading excludes statuettes, statue sand the like of akin used for decorating places of worship.
(B) Conjuring tricks and novelty jokes, e.g., packs of cards, tables, screens and containers, specifically designed for the performance of conjuring tricks: novelty jokes such as sneezing powder, surprises sweets, water-jet button-holes and “Japanese flowers”.
This heading also excludes:
(a) Natural Christmas trees (Chapter 6)
(b) Christmas candles and Christmas trees candles (heading 34.06)
(c) Packaging of plastics or of paper, used during festivals (classified according to constituent material, for example, Chapter 39 or 48).
(d) Christmas tree stands (classified according to constituent material).
(e) Textile flags or bunting of heading 63.07.
(f) Electric garlands of all kinds (heading 94.05).
10.1 Thus, on perusal of the above FISN notes, it is apparent that the CTH 9505 intends to include the goods used specifically for festival celebration and in view of their intended use is generally made of non-durable material. In the present case as well, the Applicants goods i.e. “Balloons” are non-durable, have limited shelf life, are used specifically for the Holi celebrations, intended to be used for both children as well as adults. Hence, the most appropriate classification as per the Applicant shall be CTH 9505.
10.2 The last option i.e. CTH 9503 does not appear to be an optimal classification of the goods “Balloons”. The said classification is opted by the Ld. Department in various imports only on the basis of the Explanation notes of the CTH 4016 95 90 mentioned under entry 284 of Notification No. 50/2017- Customs, dated 30.06.2017inserted vide Notification No. 02/2021-Customs dated 01.02.2021 wherein it was stated that:
In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and sub-section (12) of section 3 of Customs Tariff Act, 1975 (51 of 1975), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India, Ministry of Finance (Department of Revenue), Notification No. 50/2017- Customs, dated 30.06.2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section 0, vide number G.S.R. 785(E), dated the 30th June, 2017, namely:-
In the said notification, –
1. In the Table, –
——–
(29) against S. No. 284, in column (3), after item 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 Customs tariff heading 9503).”;— “
10.3 At the outset, it is submitted that the addition of an explanatory note to a chapter head does not mean a specific Chapter heading for the purpose of classification of the product. “Explanation” is an internal aid of interpretation to any section. An explanation only explains the intention of the law behind that section. It cannot modify or alter or restrict the language of any section. If any section is providing a clear meaning of the words, the explanations cannot be used as internal aids to interpretation. In the case of Bengal Immunity Company vs. State of Bihar, the Hon’ble Apex Court observed that the explanation given is a section that is part of that section. This section and explanations should be read together to know the true meaning of the provision. Thus, explanations are part of the section with the purpose to explain the meaning and intention of the section. If there is an absurdity in the main section, the explanation of that action can be used as an internal aid to interpreting that particular section. If the meaning of the section is clear and unambiguous, the explanation cannot be referred to interpret the section. If there is any confusion between the main provision and the explanation attached to it, then the main provision is to prevail. In the case of Hardeo motors transport vs. the State of Madhya Pradesh, the Supreme Court observed that the explanation cannot enlarge the scope and effect of a provision. Thus, an explanation cannot take the place of a provision in any Act.
10.4 Thus, in the present case, an explanation is added to CTH 4016 only for the purpose of understanding the intention of the legislature to apply a reduced rate of 10% on the products falling under CTH 4016 95 90 but it does not alter the Chapter head itself for the purpose of classification. However, the Custom Head 9503 which deals with “non-electronic toys” under the category “Tricycles, Scooters, Pedal Cars And Similar Wheeled Toys; Doll’s Carriages; Dolls; Other Toys; Reduced-Size (“Scale”) Models And Similar Recreational Models, Working Or Not; Puzzles Of All Kinds”. The HSN notes to CTH 9503 cover “toy balloons” and do not specifically covers the product “Latex Rubber Balloon” small in size and intended use. Under the above residual head, the goods classified, if falls under exclusions shall be understood to have the Customs duty rate of 20% only. The Explanatory Notes are merely a clarification and not the amendment in the Tariff Head specifically classifying all balloons under CTH 9503. There has been no clarification, Notification or amendment in the Tariff head itself to cover the products “Balloons” made specifically for Holi Celebrations in general. There is no amendment or alteration in the Chapter Notes even to support the intention of the legislature in a Notification specifically issued for the purpose of exemption and reduced rate of customs duty. Thus, such explanation cannot supersede the General Rules of Interpretation and hence, for interpreting the classification of a product General Rule for interpretation shall prevail. In the present case, applying the general rules of interpretation, the goods “Latex Rubber Small size Balloons” specifically designed for Holi celebrations, cannot fall under CTH 9503 and are more appropriately liable to be classified under CTH 9505.
10.5 It shall not be out of place to mention that under recent changes BIS is required for the import of Toys in view of the DGFT Notification No. 26/2015-20 dated 01.09.2017 as amended vide Notification No. 33/2015-20 dated 01.12.2019 which revised the Policy Condition No. 2 of Chapter 95 of ITC (HS) for import of Toys in India. Further, the Ministry of Commerce and Industry has issued Toys (Quality Control) Order, 2020 instructing the mandatory requirement of certificates mentioning that the goods are conforming to the standards prescribed by BIS in this regard.
10.6 In this regard, it is submitted that the BIS requirements as per Toy (Quality Control) Order, 2020 do not apply to all kinds of goods covered under Chapter 95. The Toy (Quality Control) Order, 2020 are specifically worded with intent to cover the “Toys” used by Children of 14 years or less for playing. The said order, states that:-
“This Quality Control Order shall apply to (Toys) Products or material designed or clearly intended, whether or not exclusively, for use in play by children under 14 years of aye or any other product notified by the Central government from time to time.
Further that under Section 4, the bureau shall be the certifying and enforcement authority for the goods or articles specified in column (1) of the following table.
In the present case, the Applicant’s goods are water “Balloons” for Holi celebrations which are not specifically intended for the use by the children of 14 years or below. Holi Celebration is done all over north India by children, and adults both and such water balloons are an important part of the celebration, hence, such goods are more aptly classifiable under items of celebrations instead of Toys to classify the same as “Toy Balloons” to be incorporated under CTH 9503.
10.7 Without prejudice to the above submissions, Applicant further submits that even if the Ld. Department intends to classify the goods under CTH 9503, the Applicant is not mandated to comply with the BIS requirement for the same, as discussed above. The Toy (Quality Control) Order, required Toys for children below 14 years to be accompanied with the BIS certificate. The Applicant’s Goods i.e. “Water Balloons” cannot specifically be attributes to the toys for children below 14 years.
10.8 In conclusion thereof, it has been established rule that where a product has to be classified which is capable of different treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. Even, if it is considered that the classification of the products intended to be imported i.e., “thin layered Latex Rubber water Balloons” has to be in parlance with the explanation notes given under the Customs Tariff Head 4016, the said does not have any binding effect on the intended import goods as they do not hold its end use to be used as toys or in related activities. That the said products as per the General rules of interpretation are rightly classifiable under the CTH 4016 as per the dominant material or otherwise under CTH 9505 as per the intended use. The CTH 9503 has no applicability over the Goods of the Applicant intended to be imported.
11. In conclusion the submissions, the Applicant’s interpretation of the law and the understanding of the facts with respect to the issues raised in the present Application for Advance Ruling are as under:-
12. Further, The ‘Jurisdictional Commissioner of Customs’ (ICD Tughlakabad Imports) sent the comments to CAAR, New Delhi vide letter dated 13.09.2023. They submitted that:-
“A balloon is a flexible bag that can be inflated with a gas, such as helium, hydrogen, nitrous oxide, oxygen, and air. Balloons are made from materials such as rubber, latex, polychloroprene, or a nylon fabric, and can come in many different colours. A toy balloon or party balloon is a small balloon which can be used for decoration, advertising and children’s toys. Toy balloons are usually made of rubber or aluminized plastic and inflated with air or helium. They come in a great variety of sizes and shapes. The applicant has claimed that the latex balloons that he intends to use for children for playing due to their size, shape and limited self-life. Balloons as a class or kind of merchandise, are indeed designed for the amusement of children or adults and that obtaining amusement is the principal use of this merchandise. Since the subject item is for children, the same should be classified appropriately under sub-heading 9503 as per the explanatory notes of the tariff heading 9503. Further it is also submitted that the items “Balloons made of Latex/rubber or foil/mylar or plastic or party balloons, decoration balloons and toy balloons” are classifiable under tariff heading 9503 as per the NCTC Analytics Report No. 46/2021-22 dated 29.10.2021. Based on the said objection raised by said NCTC Analytics Report, some 010s have been passed by the Port Commissionerate.”
13. A personal hearing in the matter was held on 11.10.2023 in the New Delhi office. Ms. Ms. Vibha Narang, Advocate, represented the case for M/s. Jai Shree Krishna Impex. The applicant reiterated the points submitted in the application and requested for the ruling regarding the accurate classification of subject goods i.e. ‘Balloons’. She informed that presently imported balloons are being classified under various headings of the import Tariff viz 4016, 9503 and 9505. She further mentioned that the applicant will be importing latex balloons which are being used mainly during the festival of Boll; and accordingly, they have requested for ruling on classification of the goods in question in tariff heading 4016 or 9505. Quoting the recent advance ruling, she mentioned that CAAR, Mumbai has classified balloons under heading 9505. The Authority enquired if the applicant has imported similar goods in the past, the advocate replied that they intend to import goods in question for the first time and also clarified that these balloons are to be used only as water balloons, not to be filled with air or gas and has limited shelf life.
14. 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 hearings as well as the response received from the ‘Jurisdictional Commissioner of Customs’. The subject item for which advance ruling has been sought, its characteristics, functionality and utility etc. are broadly discussed in the foregoing paras. Therefore, I proceed to pronounce a ruling on the basis of information available on record as well as existing legal framework having bearing on the classification of the subject goods i.e. ‘Latex Balloons’.
15.1 I find 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 “Toy Balloons” made of Latex don’t deserve classification under the heading 9505 as they are not purchased in market as decorative items but as toys for the purpose of play by children. I would further like to emphasize the fact that as proposed in the application that the balloons would be only sold to those above the age of 14 years is bereft of any logic and conviction. Once the balloons are sold off, its very difficult to ascertain the end-use of it. Thus, it appears as an alibi to divert the attention from the fact that the subjected goods shall be classified as “toy balloons” and thus be out of the purview of CTH 9503. Further, it has been elaborated in the application and during the personal hearing that the said goods would be used as water balloons during the Holi festivities. Thus it could feature under the CTH 9505 as it is meant for items for celebrations in a festivity like that of Christmas celebrations. But the product category that is “toy balloons” is fairly and squarely covered under the CTH 9503, as the explanatory notes of the HSN carries a specific entry for it. Also, I do not find any merit classifying the subject goods under CTH 4016, as there is no specific entry for the product.
15.2 Further, I find that the subject items are not “Foil Balloons”, which are used for party decoration and for entertainment purposes. As foil balloons ordinarily have shiny reflective surfaces and are often printed with colour pictures and patterns for gifts and parties and they are used for decoration for various events such as birthday, marriage, new-year eve celebration and many other joyous programmes and they are available in various shapes such as alphabets, numbers, heart, star etc., the subject goods do not pertain to the category of foil balloons. The said foil balloons are not used as toys but are only used for decoration and entertainment purposes.
15.3 Before deciding on the issue, let me deliberate on the legal framework prescribed in Customs Tariff Act, 1975, Chapter/ Section notes along with HSN explanatory notes.
Relevant portion of CTH 9503 is reproduced below for ease of reference:-
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
Quoted from HSN Explanatory Notes 9503:
(A) Wheeled toys.
———
(B) Dolls’ carriages (e.g., strollers), including folding types.
———-
(C) Dolls
———-
(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) —–
(ii) ——
(iii) —–
(iv) ——
(v) ——
(vi)——
(vii) Toy balloons and toy kites.
—–
From the description of CTH 9503 as provided above and in Customs Tariff Act, 1975, read with Explanatory Notes of the HSN of CTH 9503 (paragraph 3 & 4 above), it is evident that toy balloons are classifiable under the CTH (4-digit level), more particularly under CTH 9503 0099, if made of rubber latex or any other material. I hold that the subject goods are rightly classifiable under heading CTH 9503 0099 under the heading “other” and the main heading deals with 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.
15.4 Furthermore, from the description of CTH 4016 and CTH 9505 as provided in Customs Tariff Act, 1975, read with Explanatory Notes of the HSN of CTH 4016 (paragraphs 7 & 8) and Explanatory Notes of CTH 9505 (paragraph 5 & 6 above), it may be noted that there is no mention of toy balloons in the said CTH. Moreover, the Explanatory Notes of the HSN of CTH 4016 specifically excludes “Toys, games and sports requisites and thereof of Chapter 95”.
15.5 In addition to the aforesaid, it is further stated that on perusal of the said advance ruling application, it is noted that the applicant seeks information regarding BIS on toys; however, the intonation pertaining to the Bureau of Indian Standards (BIS) regulations on toys is not within the scope of the questions of law that can be addressed through an advance ruling under section 28H of the Customs Act, 1962; therefore, no comments to offer in the said matter. Thus, the provisions under Sub-section (2) of the Section 28H refer only to classification of goods under the Customs Tariff Act, 1975 and not to the classification of goods covered under the Bureau of Indian Standard Requirements as per “The Toy (Quality Control) Order, 2020 for the purpose of Import. I also note that the questions framed by the applicant for seeking advance ruling on the BIS on Toys is not in accordance with the provisions under Sub-section (2) of the Section 28H of the Customs Act, 1962.
16. In view of the foregoing discussions and findings, I rule that the subject goods i.e. “Balloons” imported for the purpose of being used for filling water and used during Holi celebrations, merit classification under the heading 9503 and specifically under subheading 9503 0099 of the First Schedule to the Customs Tariff Act, 1975.
