In re BASF India Ltd. (CAAR Mumbai)
CAAR held that Luprosil salt is classifiable under heading 2915 and more specifically, under subheading 29155000 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 Ltd. (the applicant, in short) has filed an application for advance ruling on 16.04.2022 seeking an advance ruling on the classification of Luprosil Salt Calcium. The applicant has stated that the import would be from their German parent and other parties. The product is a formulation in the form of powder with 98% calcium propionate, equivalent to approx. 77% propionic acid and approx. 21% calcium and acts as feed preservative by inhibiting mould growth. It is stated that, propionic acid has a pronounced anti-microbial effect and acts on moulds, yeast and bacteria. The product would be used in animal feed in the form in which it is imported and has no other use, either as medicine or for the manufacture of medicine for humans. The global desk of the applicant has been classifying the product as organic acids under HS code 29.15. However, as per the applicant’s understanding, on account of the fact that the product in question is used for a very specific purpose, i.e., preparation of animal feed, classification under heading 23.09 of the customs tariff as premix for animal feed is also a possibility and the domestic industry is also classifying similar products under the heading 23.09 of the tariff. Thus, considering the difference in views between the applicant’s global desk and the practice followed by the domestic industry, the present application is preferred. The applicant intends to import the said goods through the entry points of seaports/airports at Nhava-Sheva, Mumbai (Air Cargo Complex), Chennai (preventive commissionerate) and Kolkata. Accordingly, comments from the jurisdictional Principal Commissioners/ Commissioners of Customs were invited.
2. The applicant has submitted that the end use would only be in animal feed preparations and are labelled, marketed and considered by the trade as intended for use only in preparation of animal feed. This fact has also been clarified by the Department of Animal Husbandry, Dairying and Fisheries and the clarificatory letter written to the Drug Controller by the Department of Animal Husbandry also states the same.
3. The customs preventive commissionerate of Chennai, in their comments, has stated that there is no clarity about the preparation process of the item Luprosil salt except that it is chemically named as calcium propionate or calcium di-propionate and prepared by using calcium hydroxide and propionic acid. Since, it is basically a salt of propionic acid, as per the Indian customs tariff, it has to be classified under the sub-heading 29155000. As per the HSN explanatory notes, chapter 23.09 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. But, Luprosil salt is not obtained from any animal or vegetable materials. Moreover, it can be classified under the heading 2309 only when it is not mentioned or specified anywhere else. Calcium Propionate is basically used as food preservative and cannot form a complete feed for the animal. As per the HSN explanatory notes, even though preparations designed to preserve the feeding stuffs can be classified under the heading 2309, it should be a compound composition (additives or premixes) consisting of a number of substances like vitamins, minerals, organic and inorganic matter, antibiotics, anti-oxidants, stabilizers etc and should form a complete animal feed.
3.1 Further as per note 1 (a) to chapter 29, separate chemically defined organic compounds, whether or not containing impurities are classifiable under chapter 29. Thus, Luprosil salt being a separate chemically defined organic compound, is classifiable under the chapter 29 and not under the chapter 23. M per the HSN explanatory notes, the term “premix” under the heading 2309 has to be a mixture of the following three items: –
(1) Those which improve digestion and, more generally, ensure that the animal makes good use of the feeds and safeguard its health: – vitamins or pro-vitamins, amino-acids, antibiotics, coccidiostats, trace elements, emulsifiers, flavourings and appetisers, etc.
(2) Those designed to preserve the feeding stuffs (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 soya flour or meal, middlings, yeast, various residues of the food industries, etc.) or of inorganic substances (e.g., magnesite, chalk, kaolin, salt, phosphates).
3.2 Therefore, Luprosil salt, used to preserve the feeding stuffs, cannot be accepted as animal feed/premix unless mixed with other additives, organic matters, carriers etc. Reliance has also been placed on the landmark Supreme Court judgement in the case of Dilip Kumar (https://www.cbic.gov.in/resources//htdocs-cbec/legalaffairs/Dilip Kumar&Co.pdf) wherein it has held that even if the items are used in animal feed (vitamin E in that case) they have to be classified as per the provisions of Indian customs tariff, chapter notes, HSN explanatory notes, headings etc.
4. Personal hearing was held on 01.06.2022 in virtual mode along with four other applications on the matter of classification of animal feed/supplements filed by the same applicant. Shri. T. Vishwanathan and others represented the applicants. However, no one was present for the department/jurisdictional commissionerates. Shri. Vishwanathan and his colleagues explained the technical/safety data sheets, manufacturing process, composition and product label of the products. They have also submitted a compilation containing, inter-alia, notifications/circulars, cross rulings, case laws etc. My attention was specifically drawn to the decision of Hon’ble Tribunal in the case of Lalchand Bhimraj & Tetragon Chemie as well as the CBEC circular of 26.03.1996. Shri. Vishwanathan was informed that comments have been received from one jurisdictional commissioner which has been send to them and they should expedite their rejoinder. Shri. Vishwanathan promised to expedite the same and stated that they would be submitting another compilation at the earliest.
5. The applicant additionally submitted an excel sheet containing the end use of the product and its inactive ingredients.
Table 1
