Lucantin Red/Yellow 10% NXT & Lucantin Pink classifiable under heading 2309

In re BASF India Limited (CAAR Mumbai)

CAAR held that the 3 products, i.e., Lucantin Red 10% NXT, Lucantin Yellow 10% NXT and Lucantin Pink are classifiable under heading 2309 and more specifically, under subheading 23099090 of the first schedule to the Customs Tariff Act, 1975.

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

M/s BASF India Limited filed an application on 20.04.2022 seeking advance rulings on the classification of carotenoid products, namely Lucantin Red 10% NXT, Lucantin Yellow 10% NXT and Lucantin Pink.

2. The applicant is in the business of trading and manufacturing chemicals and animal feed. They are a part of the BASF group, a global supplier of innovative feed additives for livestock, aquaculture and companion animals. The applicant imports and trades in various categories of products used in the preparation of animal feed supplements. One such group of products are carotenoids imported from the parent company (BASF Germany) and other third parties for use in the manufacture of animal feed/supplements. The applicant intends to import the following products:

Table: 1

As per the applicant, these products are used in the preparation of animal feeds. They help in enhancing pigmentation (colour) in the animals/eggs. The products are used by mixing them directly into the animal feed, in the proportion as prescribed. The products in question are not subject to further processing post importation into India. The applicant states that the products which have been imported by the applicants are exclusively for use for animals and have no other use, either as medicine or for the manufacture of medicine.

2.1 In regards to classification, the applicant submits that the global desk of the M/s BASF classifies these products as carotenoids under heading 3204 of HSN, which is different from the practice followed by the domestic industry. As per the applicant’s understanding, the said goods, on account of the fact that the products in question are used for a very specific purpose, i.e. preparation of animal feed, merit classification under heading 2309 of the Customs Tariff Act, 1975. In support of the above, they have submitted Circular No. 80/54/2018-GST, dated 31.12.2018 issued by the Ministry of Finance, Department of Revenue (Tax Research Unit) to clarify applicable GST rates and classification of certain products wherein it was held that the heading 2309 would cover only such product, which in the form supplied, are capable of specific use as a food supplement for animals and not capable of any general use. The applicant also referred to circular No.188/22/95-CX. dated 26.03.1996 wherein the classification of animal feed supplements was clarified. According to the said circular, preparations containing active ingredients are classifiable under heading 2309. This circular also states that while deciding the classification of the products claimed to be animal feed supplements, it is necessary to ensure that the said animal feed supplements are ordinarily or commonly known in the trade as products for specific use in animal feeding. As per the applicant, heading 2309 read with HSN explanatory notes covers the preparations used in animal feeds- including products which contribute to the overall health of the animals and aid in the quality of eggs and other products produced by the animals. Therefore, these products can be classified under subheading 23099090 as ‘Other’. The applicant also submitted a certificate issued by the German Government’s certifying agency stating that these products are feed supplements and are of animal grade only along with test reports issued by Doctors Analytical Laboratories Pvt. Ltd. evidencing the fact that the imported products are compound preparations for use in animal feed. They have also referred to the instructions issued by the Department of Animal Husbandry, Dairying and Fisheries listing out the animal feed additives/ supplements permitted to be used in India.

2.2 Alternatively, the applicant has suggested subheading 32042090 as ‘others’, similar to the classification being adopted by the global classification desk of the applicant. As per the applicant, if the product is merely a synthetic carotenoid (pure or in combination with permitted mixtures, and additives) then the same can also be classified under heading 3204, unless it has been modified to the extent it is capable of being used for specific uses and not general use.

3. The applicant, in their CAAR-1 form, declared that they intend to import the impugned goods from the seaports of Nhava Sheva, Mumbai, Chennai and Kolkata and Air Cargo Complex, Mumbai. The application was therefore, forwarded to the jurisdictional commissioners of customs for comments. However, no reply has been received, though reminders have also been sent.

4. The application along with the other 4 applications of the applicant was listed on 01.06.2022 for hearing. Sh. T. Vishwanathan and others appeared on behalf of the applicant. No one appeared on behalf of the commissioners of customs. Sh. Viswanathan explained the technical/safety data sheet, manufacturing process, composition certificate, and product labels of each item for which advance rulings have been sought. The applicant also submitted a compilation containing, inter-alia, notifications/circulars, cross-rulings, case laws, etc. My attention was specifically drawn to the decisions of the Hon’ble Tribunal in the case of Lalchand Bhimraj & Tetragon Chemie and the CBEC circular of 26.03.1996. Sh. Vishwanathan gave assurance to submit detailed compositions’ along with a manufacturing flow chart of the products.

4.1. The applicant additionally submitted an excel sheet containing the end use of the product and its inactive ingredients.

Table: 2

The applicant submitted the manufacturing flowchart of Lucantin Red 10% NXT and Lucantin Yellow 10% NXT as below:

Table: 3

5. I have considered all the materials placed before me in respect of the subject products/preparations. I have gone through the submissions made by the applicant during the personal hearing. No comments have been received from the jurisdictional commissioners. Therefore, I proceed to pronounce my ruling on the basis of information available on record as well as information gathered from other reliable sources. The issue before me is the classification of carotenoid products, namely, Lucantin Red 10% NXT, Lucantin Yellow 10% NXT and Lucantin Pink. Carotenoids are 40-carbon isoprenoid molecules that produce the red, yellow, and orange pigmentation found in nature. Carotenoids are included in the feed as part of the nutrients that support animal health as well as product quality. Feed carotenoids are compounds used in animal feed as a colouring pigment to enhance various livestock-based products, including egg yolk, broiler skin, fish, and crustaceans. They also have antioxidant properties, and immune & provitamin A functions. The feed carotenoids are segmented by type into beta-carotene, lycopene, lutein, astaxanthin, canthaxanthin, and other types. By animal type, they are segmented into ruminant, poultry, swine, aquaculture, and other animal types. In the instant case, the products Lucantin Red 10% NXT, Lucantin Yellow 10% NXT and Lucantin Pink contain carotenoids Canthaxanthinhin, C-30 ester and astaxanthin as active ingredients. Different animals for which these products are used as feed and their benefits are given in Table 2. Thes products are used as premixes containing active substances and carriers. Carrier is a substance that animals can eat (mixed with active ingredients in the premix) but does not affect the health of the animal. The product composition given in the registration form of BASF is given below:

Table: 4

5.1 GRI 1 provides that the classification of goods shall be “determined according to the terms of the headings and any relative section or chapter notes.” In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, GRls 2 through 6 may be applied in order. The relevant headings for classifications are reproduced below:

2309 Preparations Of A Kind Used In Animal Feeding

3204 Synthetic Organic Colouring Matter, Whether Or Not Chemically Defined; Preparations As Specified In Note 3 To This Chapter Based On Synthetic Organic Colouring Matter; Synthetic Organic Products Of A Kind Used As Fluorescent Brightening Agents Or As Luminophores, Whether Or Not Chemically Defined

Note to Chapter 23 states that “Heading 2309 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and by-products of such processing”. This chapter note is inclusive in nature and it is clear that the heading covers other items and also includes products obtained by processing vegetable or animal material, not elsewhere specified or included. This view is supported by the Tetragon Chemie (P) Ltd. vs. Collector of C. Ex., Bangalore, wherein it was held that there is no limiting factor in the said chapter note so as to restrict its meaning.

5.2 The HSN explanatory notes to the heading 2309 the heading covers sweetened forage and prepared animal feeding stuff consisting of a mixture of several nutrients designed : (1) to provide the animal with a rational and balanced daily diet (complete feed); (2) to achieve a suitable daily diet by supplementing the basic farm produced feed with organic or inorganic substances (supplementary feed); or (3) for use in making complete or supplementary feeds. Therefore, the first type of animal feedstuff, i.e., complete feed, contains energy nutrients, bodybuilding protein nutrients or minerals and function nutrients. The second type of animal feedstuff, i.e., secondary feed, is the preparations devised to compensate for deficiencies, so as to ensure a well-balanced animal diet, consisting of proteins, minerals or vitamins plus additional-energy feeds. The preparations of the third category, also known as premixes, are used in making the complete feed or supplementary feed. The products in question are stated to belong to this category of premix.

5.2.1 The HSN explanatory note II (C) to heading 2309 further elaborates on premixes as below:

These preparations, known in the trade as “premixes”, are, generally speaking, compound compositions consisting of a number of substances (sometimes called additives) the nature and proportions of which vary according to the animal production required. These substances are of three types :

(1) Those which improve digestion and, more generally, ensure that the animal makes good use of the feeds and safeguard its health: vitamins or provitamins, amino acids, antibiotics, coccidiostats, trace elements, emulsifiers, flavourings and appetisers, etc.

(2) Those designed to preserve the feeding stuff (particularly the fatty components) until consumption by the animal: stabilisers, anti-oxidants, etc.

(3) Those which serve as carriers and which may consist either of one or more organic nutritive substances (manioc or soy flour or meal, middlings, yeast, various residues of the food industries, etc.) or of inorganic substances (e.g., magnesite, chalk, kaolin, salt, phosphates).

The concentration of the substances described in (1) above and the nature of the carrier are determined so as to ensure, in particular, homogeneous dispersion and mixing of these substances in the compound feeds to which the preparations are added.

5.2.2 The impugned products are a combination of active ingredients and other ingredients such as antioxidants, minerals and stabilisers. The product composition is given in Table 4. These goods consist of active ingredients, preservatives, anti-oxidants and carriers. As per HSN explanatory notes, active ingredients (vitamins, pro vitamins, amino acids, etc) with a suitable carrier along with additives required for preservation and transport is a premix, which is added to the complete animal feed or supplementary animal feed. The Hon’ble Tribunal in Reckitt and Colman of India Ltd. vs. CCE – 1985 (22) ELT 216 (Tribunal) has held that to qualini as a preparation the said product should be prepared by addition, mixing or such other similar process to the original commodity in order to derive a new commodity. From the above, it is clear that the products under consideration are preparations, also known as premixes.

5.3 For the identity of the products, the applicant has declared in their application that they were for animal use. The applicant in their submissions has categorically mentioned that the impugned products are exclusively used in animal feed and have no other use; that the impugned products contain active ingredient preparations; and that the impugned products are commonly known in the trade as products for specific use in animal feeding i.e. to manufacture animal feed. In support of the above, they have submitted the following documents:

A. A certificate issued by the German Government’s certifying agency mentions that these products are feed supplements and are of animal grade.

B. Test reports issued by Doctors Analytical Laboratories Pvt. Ltd. clearly evidence that the impugned products are compound preparations for use in animal feed.

5.3.1 Board’s Circular No. No.188/22/95-CX, dated 26.03.1996 mentions as below:

“5. Heading 23.02 of Central Excise Tar i i.e. “preparations of a kind used in animal feeding including dog and cat food” corresponds to Heading 23.09 “Preparations of a kind used in animal feeding” or the HSN. As per Explanatory notes under Heading 23.09 of the HSN, the said heading covers complete animal feeds, supplementary animal feeds and preparations for use in making the complete feeds or supplementary feeds. The preparations for use in making complete feeds or supplementary feeds are known in the trade as “premixes”. These preparations are compound compositions consisting of a number of substances- each type of these substances being present in the ‘premix” in varying proportions to serve a particular purpose. The explanatory notes under heading 23.09 of HSN further indicate that pre-mixes contain, in addition to the active substances (vitamins, amino-acids, anti-biotics, coccidiostats etc) and stabilizers, anti-oxidants etc., certain organic or in-organic nutritive substances known as carriers which help in homogeneous dispersion and mixing of the active substances in the compound feed to which the preparations referred to in the said explanatory notes are added

6. In this view of the matter, it would appear that preparations containing the active substances (vitamins or provitamins, amino acids, antibiotics, coccidiostats etc.) along with the said carriers would fall under Heading 23.02 of the CET provided such preparations are of a kind used in animal feeding. It may however be noted that Heading 23.09 of the HSN excludes products of Chapter 29 and medicaments of Heading 30.03 or 30.04. Hence, while deciding the classification of the products claimed to be animal feed supplements, it may be necessary to ensure that the said animal feed supplements are ordinarily or commonly known to the trade as products for specific use in animal feeding.”

According to the Board, the preparation containing active ingredient preparations used for animal feeding is classifiable under heading 2309. The Board has also clarified that while deciding the classification of the products claimed to be animal feed supplements, it is necessary to ensure that the said animal feed supplements are ordinarily or commonly known in the trade as products for specific use in animal feeding.

5.3.2 Similar clarification was issued vis Board Circular No. 80/54/2018-GST, dated 31.12.2018. The relevant paras are reproduced below:

“5.2 As per the HSN, 2309 inter-alia covers reading vita s and provitamins which improve digestion and, more generally, ensure that the animal makes good use of the feeds and safeguards its health. On the other hand, HS code 2936 coves vitamins and provitamins which are medicinal in nature and have a much higher concentration of an active substance.

5.5 … Thus, HS code 2309 would cover only such products, which in the form supplied, are capable of specific use as food supplements for animals and not capable of any general use….”

5.3.3 It is observed that heading 2309 is an end-use-based heading. In this regard, reliance may be placed on the decision ofthe large bench of the Hon’ble tribunal in the case of Tetragon Chemie (P) Ltd. vs. Commissioner of Central Excise, Bangalore 2001 (138) E.L.T. 414, wherein it was held that end-use assumes importance in determining the classification of goods under heading 2302 of CETA, 1985. The same is because the description of the goods under heading 2302 reads as ‘Preparations of a kind used for animal feeding including cat and dog food’. The heading specifically states that the preparations must be used for animal feeding. Therefore, heading 2302 is an end-use-based heading. It must be noted that heading 2302 of CETA, 1985 is akin to Heading 2309 of the Customs Tariff Act, 1975. After considering technical literature, the end-use certificate issued by the dealer, HSN explanation, defmitions of animal feed and clarification contained in the Board’s circular, the Hon’ble Tribunal concluded in para 135 of the said judgement as under:

“Having regard to the discussions in the preceding paragraphs, what has to be seen is as to whether, in this case before us, any such clinching evidence of common trade understanding has been placed on record so as to put the matter beyond all possible doubt and justify the respondent’s contention for ignoring any type of reference to technical literature, On a commutative reading of the record, we reply in the affirmative. We certainly also take into consideration the principles laid down by the Hon’ble Supreme Court in the Sun Exports Corporation’s case. There is a treasure of valuable wealth placed on record by the Appellants to support the view that preparations in dispute are preparations squarely falling in those preparations given under Heading 23.09 of HSN which corresponds to Heading 23.02 of CETA 1985. We feel that Explanatory notes to the HSN are representative and symbolic of the common trade parlance and these notes particularly those under Heading 23.09 also throw light on the question that pre-mixes including those containing mineral substances and vitamins or provitamins, trace elements, appetisers, soya flour or meal, yeast, etc. are covered by it. We think that the test laid down by the Hon’ble Bombay High Court in the case of Chemical Fibres [1982 E.L.T. 9171 is a safer and reliable test where the evidence of trade usage is not beyond doubt, then a reference to technical literature cannot be precluded. In regard to Niger Seed/Rice Bran extractions, we hold that they are animal feed.”

5.3.4 The applicant has submitted that the impugned products are commonly known in the trade as products for specific use in animal feeding i.e. to manufacture animal feed. The safety data sheet provided by the manufacturer mentions the use of these products as feed additives. The manufacturer on their global website https://www.basf.com/global/en.html has categorised these products as feed ingredients under animal nutrition products. A certificate issued by the German Government’s certifying agency states that these products are feed supplements and are of animal grade. Further, test reports issued by Doctors Analytical Laboratories Pvt. Ltd. specify that the impugned products are compound preparations for use in animal feed. Therefore, on the basis of trade parlance and the opinion of experts, it appears that the said products are used for animal feed. These products are not covered under the exclusion list provided in the HSN explanatory notes. In the light of the above, the products appear to merit classification under heading 2309 and specifically under subheading 23099090 as ‘Other’.

6. with regard to the alternate classification under heading 3204, it is observed that subheading 32041800 covers “carotenoid colouring matters and preparations based thereon”. The relevant extracts from HSN explanatory notes to heading 3204 are reproduced below:

“32.04 – Synthetic organic colouring matter, whether or not chemically defined; preparations as specified in Note 3 to this Chapter based on synthetic organic colouring matter; synthetic organic products of a kind used as fluorescent brightening agents or as luminophores, whether or not chemically defined (+).

(I) SYNTHETIC ORGANIC COLOURING MATTER, WHETHER OR NOT CHEMICALLY DEFINED; PREPARATIONS AS SPECIFIED IN NOTE 3 TO THIS CHAPTER BASED ON SYNTHETIC ORGANIC COLOURING MATTER

Synthetic organic colouring matter is generally obtained from oils or other products of the distillation of coal tar.

This heading applies, inter alia, to:

(A) Unmixed synthetic organic colouring matter (whether or not chemically defined compounds) and synthetic organic colouring matter diluted with substances which have no dyeing properties (e.g., anhydrous sodium sulphate, sodium chloride, dextrin, starch) to decrease or standardise their colouring power. The addition of small quantities of surface-active products to encourage penetration and fixation of the dye does not affect the classification of colouring matter. The Colouring matter of these descriptions is usually in the form of powder, crystals, pastes, etc. Synthetic organic colouring matter put up in forms or packings for retail sale is classified in heading 32.12 (see Part (C) of the Explanatory Note to that heading).

(B) Different types of synthetic organic colouring matter are mixed together.

(C) Concentrated dispersions of synthetic organic colouring matter in plastics, natural rubber, synthetic rubbers, plasticisers or other media. These dispersions are usually in the form of small plates or lumps and are used as raw materials for colouring rubber, plastics, etc., in the mass.

(D) Mixtures of synthetic organic colouring matter with relatively large quantities of surface-active products, or with organic binders, which are used for colouring in the mass plastics, etc., or as ingredients in preparations for printing textiles. They are normally in the form of pastes.

(E) Other preparations based on synthetic organic colouring matter of a kind are used for colouring any material or used as ingredients in the manufacture of colouring preparations. However, the preparations referred to in the last sentence of Note 3 to this Chapter are excluded

The various types of synthetic organic colouring matter classified here (whether as dyes or pigments) include… (15) Carotenoids obtained by synthesis (e.g., /3-carotene, 8 ‘-apo-₁8-carotenal, 8 ‘-apo-13-carotenic acid, ethyl 8 ‘-apo-fl-carotenate, methyl 8 ‘-apofr carotenate and canthaxanthin).”

It is to be noted that the active ingredient presents in the impugned goods, i.e., carotenoid, does not exceed 10% by composition (Table 4). Further, it can be observed that heading 3204 pertains to synthetic organic colouring matter or preparations based on synthetic organic colouring matter. However, the impugned goods are not simple colouring matters, rather they are compound preparations used for animal feed as additives having active ingredients such as carotenoids. HSN explanatory notes state that certain of these substances are also used as laboratory reagents or for medical purposes. As per the description available in respect of impugned goods, these are not used as laboratory reagents or for medical purposes. HSN explanatory notes further state that substances which in practice are not used for their dyeing properties are excluded The impugned products are not used for their dyeing properties. They are, as discussed earlier, specifically used as animal feed for improvement in the quality of eggs and skin due to pigmentation after consumption. Therefore, the said products do not merit classification under heading 3204.

7. In view of the foregoing discussions, I rule that the 3 products, i.e., Lucantin Red 10% NXT, Lucantin Yellow 10% NXT and Lucantin Pink are classifiable under heading 2309 and more specifically, under subheading 23099090 of the first schedule to the Customs Tariff Act, 1975.