Case Law Details
In re Solae Company India Private Limited (CAAR Delhi)
CAAR ruled that The Supro Nuggets Isolated Soy Protein does not appear to find a place under the heading 2106, which provides for “21.06 – Food preparations not elsewhere specified or included”. The six digit level entry in the tariff “2106.10 – Protein concentrates and textured protein substances”. Further, this heading covers: “(A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk etc.), for human consumption; (B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption.” The heading “includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.), for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.). These entries also don’t provide any space for the mentioned item under examination” Further, the following entries are not included as provided under “Entry 6. Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, used in food preparations (e.g., for flavouring); protein concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used for protein-enrichment of food preparations; soya-bean flour and other protein substances, textured. However, the heading excludes non-textured defatted soya-bean flour, whether or not fit for human consumption (heading 23.04) and protein isolates (heading 35.04).”
However, this particular classification entry appears to provide the appropriate heading, which encapsulates the item under consideration. Let us look closely at the entries of the heading CTH 3504. The Chapter 35 deals with “Albuminoidal Substances; Modified Starches; Glues; Enzymes”. The “CTH 35.04 —Peptones and their derivatives; other protein substances and their derivatives, not elsewhere specified or included; hide powder, whether or not chromed. This heading covers: (A) Peptones and their derivatives; (B) Other protein substances and their derivatives, not covered by a more specific heading in the Nomenclature, including in particular ………….. (6) Protein isolates obtained by extraction from a vegetable substance (e.g., defatted soya bean flour) and consisting of a mixture of proteins contained therein. The protein content of these isolates is generally not less than 90%. This heading does not include: (a) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, and concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used as additives in food preparation (heading 21.06)”. The Supro Nuggets Isolated Soy Protein is appropriately thus finds a place under CTH 3504 and Entry (6) under the Explanatory Notes. The item under consideration, is obtained by extraction from a vegetable substance (e.g., defatted soya bean flour) and consisting of a mixture of proteins contained therein. The protein content of these isolates is generally not less than 90%. As could be seen in the details of the literature submitted in the application, it is clear that the substance is extracted from soya-bean flour, which is a pure plant-based product, and also it is also evident that the protein content is more than 90% as enclosed in the application along with moisture and gluten.
There are multiple US-CROSS Rulings, which delineates the basic criterion of classification of any product under CTH 3504. As provided under ‘HQ 963306, dated September 6, 2000’, “Substances that have classified in heading 3504 have at least four things in common. First, these protein substances are iy for use in making pharmaceuticals, textiles or plastics. Second, the protein substances of heading consist of a very high percentage of protein. Third, the protein in substances of heading 3504 are derived a single source, such as whey, wheat gluten, or eggshell membrane, respectively. Lastly, the substances therefore classified in heading 3504, HTSUS, may be mixtures of protein and other substances, such as ash /ad moisture, but the other substances are a product of the derivation of the protein substance from its source, cot a deliberate preparation of different protein substances mixed with flavoring and anti-caking agents.” Further, under ‘HQ 956644 dated December 8, 1994’, “Subheading 3504.00.1000, HTSUS, specifically provides for protein isolates. It is concluded that this eo nomine provision is without qualification, and is not limited to the vegetable sourced protein isolate; the example in the ENs of the vegetable sourced product being illustrative and not restrictive.”
For the reasons above, it is found that heading 2106 does not describe such a substance at GRI I. Before progressing through the GRIs, we must look to other headings that may describe the goods at GRI 1. The instant merchandise contains ‘Isolated Soy Protein’ containing a rich concentration of protein to the tune of 90% and more, which is extracted from a single plant source of soya-bean flour, and which also contains moisture of 10% and gluten as provided under the lab report enclosed with the application, thus is ejusdem generis to the products classified in heading CTH 3504, as a protein isolate. There is no need to continue to an essential character analysis of GRIs 2 and 3, discussing the relative merits, weight, volume, or other characteristics of each ingredient of the preparation, when there is a heading which describes just such protein isolates. Heading 3504 is that heading.
The illustrations contained in the preceding paras of 7.4 and 7.5 also strongly indicates that the product “Supro Nuggets” has an established ingredient which is protein rich and the protein is extracted from a plant based source e.g. Soya-bean flour.
Keeping in view of the foregoing, it is evident that the proposed items of import namely, “Supro Nuggets 570 G IP- Soy Protein Nuggets” derived from plant source and containing relatively high protein levels, justifies classification under Sub-heading 35040091 of the First Schedule to the Customs Tariff Act, 1975.
FULL TEXT OF ORDER OF CUSTOMS AUTHORITY FOR ADVANCE RULINGS
M/s Solae Company India Private Limited, Electronics Pvt. Ltd., 6th Floor, Tower C, DLF Cyber Greens, Sector 25 A, DLF City Phase III, Gurugram, Haryana, 122002 (IEC-0506066541) hereinafter referred to as “the applicant” filed an application (CAAR- 1) dated 02.08.2023 for Advance Ruling before the Customs Authority for Advance Ruling, (CAAR in short), New Delhi. The said application was received in the secretariat of CAAR New Delhi on 18.09.2023 along with its enclosures in terms of Section 28H(1) of Customs act, 1962 (hereinafter referred to as the “Act”). The company a registered Private Limited company, is now proposing to import the product `Supro Nuggets 570 G IP’ for the purpose of selling the same to buyers who will use it for manufacturing purposes under the port jurisdiction of the Commissioner of Customs, NS-I, JNCH, Tal- Uran, Dist: Raigad, Nhava Sheva, Maharashtra — 400707. The present Application seeks a ruling on question, whether Supro Nuggets 570 GIP proposed to be imported by the applicant is classifiable under Tariff Item 35040091 of the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as “the Tariff”)?.
Grounds of application- Issue requiring Advance Ruling
2.1 In light of the aforementioned, the applicant seeks Advance Ruling as under:
a) Question1: Whether Supro Nuggets 570 IP proposed to he imported by the applicant is
classifiable under Tariff Item 35040091 oldie first Schedule to the Customs Tariff Act, 1975 (hereinafier referred to as “the l’arill”)?
b) Question 2: If the answer to the above question is in the negative, then what is the
appropriate classification of Supro Nuggets 570 (1 IP soy protein nuggets under the “tariff?
3. CLASSIFICATION OF SUPRO NUGGETS 570 G IP
3.1 The goods imported into India are to be classified under the Headings set out in the “tariff.
3.2 The classification of the goods under the Tariff is governed by the principles as enumerated in the General Rules of Interpretation (‘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.
3.3 The Tariff is aligned, upto the 6 digit level, with the Harmonized System of Nomenclature (‘HSN’) issued by the World Customs Organization (`WCO’). The FISN Explanatory Notes released by the WCO aid in the interpretation of the Headings of the Tariff and may be used as a safe guide for the same. It has been held so by the Supreme Court in the case of Collector of Customs, Bombay v. Business Forms Ltd. Thr. 0.L., 2002 (142) E.L.T. 18 (S.C.).
Classification under Ileadinz 35.04
3.4 As per the Applicant, the product in question merits classification under Heading 3504. The relevant extract from Heading 3504 is reproduced below:
|
Tariff Item |
Description of Goods |
| (1) | (2) |
| 3504 | PEPTONES AND THEIR DERIVATIVES; OTHER PROTEIN SUBSTANCES AND THEIR DERIVATIVES, NOT ELSEWHERE SPECIFIED OR INCLUDED; HIDE POWDER, WHETHER OR NOT CHROMED |
| 350400 | – Peptones and their derivatives; other protein substances and their derivatives, not elsewhere specified or included; hide powder, whether or not chromed: |
| 35040010 | — Peptones |
| — Other | |
| 35040091 | — Isolated soya protein |
| 35040099 | — Others |
3.5 Perusal of the above makes it evident that Tariff Item 35040091 specifically covers Isolated Soya Protein.
3.6 At this juncture it is also pertinent to peruse the HSN Explanatory Notes to Heading 3504. The relevant portion of the same is as below –
“35.04 – Peptones and their derivatives; other protein substances and their derivatives, not elsewhere specified or included; hide powder, whether or not chromed
This heading covers :
*****
(B) Other protein substances and their derivatives, not covered by a more specific heading in the Nomenclature, including in particular:
****
(6) Protein isolates obtahted by extraction from a vegetable substance (e.g., defatted soya bean flour) and consisting of a mixture of proteins contained therein. The protein content of these isolates is generally not less than 90 %.
***
The heading does not include :
(a) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, and concentrates obtained by the elimination of certain constituents of defaced soya-bean flour, used as additives in food preparations (heading 21.06).
****
3.7 From the above, it is evident that soy protein isolates, obtained from a vegetable source, having at least 90% protein content, and having a mixture of proteins are specifically included in Heading 35.04.
3.8 Manufacturing process of soy protein isolate is attached herewith as Exhibit — F.
The imported product:
a. is soy protein isolate (as evident from the Exhibit -A product brochure.).
b. contains minimum 90% protein (as evident from Exhibit – A product brochure).
c. is manufactured from vegetable source – Soya (as evident from Exhibit-C manufacturing process).
d. is having a mixture of proteins. (as evident from Exhibit — D).
3.10 Thus, the product imported is squarely covered under Heading 35.04.
3.11 Reliance is also placed on Cross Ruling N128003 wherein a similar product has been classified by the United States Customs under the Heading 35.04. Copy of the Ruling is enclosed herewith as Exhibit-H.
Classification under Heading 21.06
3.12 Another possible classification of this product is under the Heading 21.06. The relevant extract from Heading 21.06 is reproduced below:
|
Tariff Item |
Description of Goods |
| 2106 | FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED |
| 21061000 | Protein concentrates and textured protein substances |
3.13 The relevant part of the HSN explanatory notes to the Heading 21.06 is reproduced below for ready reference:
21.06 – Food preparations not elsewhere specified or included
2106.10 – Protein concentrates and textured protein substances
2106.90 – Other
Provided that they are not covered by any other heading of the Nomenclature, this heading covers:
(A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk, etc.), for human consumption.
(B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption. The heading includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.), for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.) (see the General Explanatory Note to Chapter 38).
However, the heading does not cover enzymatic preparations containing foodstuffs (e.g., meat tenderisers consisting of a proteolytic enzyme with added dextrose or other foodstuffs). Such preparations fall in heading 35.07 provided that they are not covered by a more specific heading in the Nomenclature.
The heading includes, inter alia :
****
(6) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, used in food preparations (e.g., for flavouring); protein concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used for protein-enrichment of food preparations; soya-bean flour and other protein substances, textured However, the heading excludes non-textured defatted soya-bean flour, whether or not fit for human consumption (heading 23.04) and protein isolates (heading 35.04).
3.14 A bare perusal of the IISN explanatory notes to Heading 21.06 shows that:
a) “Protein Isolates” are excluded from the ambit of Heading 21.06 and the suggested classification for the same is Heading 35.04.
b) Heading 21.06 is a residuary Heading and products are classifiable under Heading 21.06 only if they are not classifiable under a more appropriate Heading in the Tariff.
3.15 In light of the above, the imported product is specifically covered under Heading 35.04 and is excluded from the ambit of Heading 21.06. Thus, the product proposed to be imported is appropriately classifiable under Tariff Item 35040091 of the Tariff.
Comments of the filed formation
4. The comments of the designated port Commissionerate i.e. JNCH, Nhava Sheva, Mumbai dated 07.11.2023 was received by CAAR Delhi office are as follows:
4.1 The office is of the opinion that the application seeking tariff heading for Soya Nuggets/chunks is not something that require advance ruling as the tariff heading for Soya Nuggets is appropriately settled position under CTH 21061000. Any attempt to get a ruling for classification in different heading of CTH 35040091 appears to be an attempt to find lower duty structure for something which is already defined under CTH 21061000. The Effective Duty under CTH 21061000 is 69.92% (BCD 40%; IGST18%; SWS4%) whereas the Effective Duty under CTH 35040091 is 43.96% (BCD 30% effective 20%); IGST 18%; SWS 2%). The application appears to be clouded with ulterior motives of duty evasion and self -serving interests.
4.2 The applicant in his application has not furnished any process which can support their product to be classifiable under the CTH 35040091, where in Peptones and their derivatives; other protein substances and their derivatives are classified. The soya nuggets / chunk are nothing but Protein hydrolysates consisting mainly of a mixture of amino acids and sodium chloride, used in food preparations (e.g., for flavouring; protein concentrates obtained by the elimination of certain constituents of deflated soya-bean flour, used for protein-enrichment of food preparations; soya-bean flour and other protein substances, textured, and are appropriately classifiable under CTH 21061000. Any attempt to get advance ruling with respect to tariff heading by furnishing misleading description and procedure/process should amount to rejection of the application.
The Soya Nuggets/Soya Chunk are appropriately classifiable under tariff item 21061000. Any attempt classify soya chunk/nuggets under item 35040091 is merely an attempt to search areas of misleading tariff eading to classify the goods in tariff heading with lower duty and hence evasion of legitimate duty of revenue.
4.4 All over world the Soya nuggets/chunks are classified under CTH 21061000. The Explanatory Notes Harmonised Commodity Description and Coding System published by World Customs Organization under Chapter Heading 2106 states that:
21.06 – Food preparations not elsewhere specified or included
21.06.10 — Protein concentrates and textured protein substances
21.06.90 — Other
Provided that they are not covered by any other heading of the Nomenclature,
This heading covers:
(A) Preparations for use, either directly or after processing such cooking, dissolving or boiling in water, milk, etc.), for human consumption.
(B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption. The heading includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc), for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc)
However, the heading does not cover enzymatic preparations containing foodstuffs (e.g. meat tenderisers consisting of a proteolytic enzyme with added dextrose or other foodstuffs). Such preparations fall in heading 3.507 provide that they are not covered by a more specific heading in the Nomenclature.
The heading includes, inter alia:
(1)…
(2)…
……………..
(6) Protein hydrolysates consisting mainly of a mixture of amino acids and sodium chloride, used in food preparations (e.g. flavouring; protein concentrates obtained by the elimination of certain constituents of deflated soya-bean flour, used for protein-enrichment of food preparations; soya-bean flour and other protein substances, textured. However, the heading excludes non-textured defatted soya-bean flour, whether or not fit for human consumption (heading 2304) and protein isolates (heading 3504).
To further clarify the appropriate tariff heading for soya-bean nuggets/chunks the analysis of tariff heading is given here under as per the Explanatory Notes, which is as follows:
The Chapter 35 includes Albuminoidal substances; modified starches; glues; enzymes.
35.04 — Peptones and their derivatives; other protein substances and their derivatives, not elsewhere
specified or included; hide powder, whether or not chromed.
This heading covers:
(A) Peptones and their derivatives.
(1) Peptones….
(2) Peptonates..
(B) Other protein substances and their derivatives, not covered by a more specific heading in the Nomenclature, including in particular:
(1) Glutelins and prolamins (e.g. gliadins extracted from wheat or rye, and zein extracted from maize), being cereal proteins.
(2) Globulins, g. lactoglobulins and ovoglobulins.
(3) Glycinin, the main soya protein.
(4) Keratins obtained from hair, nails, horns, hoofs, feathers, etc.
(5) Nucleoproteids, being proteins combined with nucleic acids, and their derivatives. Nucleoproteids are isolated, for example from brewer’s yeast, and their salts (or iron, copper, etc.) are used mainly in pharmacy.
(6) Protein isolates obtained by extraction from a vegetable substance (c.g, defatted soya bean flour) consisting of a mixture ofproteins contained therein. The protein content of these isolates is generally not less than 90%.
(C)…..
The heading does not include:
(a) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, and concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used as additives in food preparations (heading 21.06)
4.5 The question raised in the application is devoid of any merit and need to be rejected. The other manufacturers and importers of the product soy nuggets/chunks are classifying their products under CTH 21061000 and there appears no reason to interfere the classification of the product. Further the products classifiable under CTH 35040091 are of very specific nature which are usually derived with the use of highly sophisticated technology and of high purity in one or two specific derivatives of protein/enzyme etc. and find their utility in pharma industry.
4.6 Law and Analysis
(i) The Explanatory Notes (ENs) to the Harmonized Tariff Schedule of the World Customs Organization (I-ITS), provide an interpretation of the tariff at the international level. The Explanatory Notes for heading 3504, which includes other protein substances and their derivatives, not elsewhere specified or included, state that the provision includes globulins (e.g. lactoglobulins and ovoglobulins). In addition, it notes that the provision includes protein isolates, including vegetable protein isolates, which it describes as being extracted from vegetable substances; mixtures would also be included in the term. Sub-heading 35040091 specifically provides for peptones, protein substances or their isolates and derivatives.
(ii) This is also to be noted that the applicant, in their application, failed to give any process or end products which can be considered derivatives as defined under the Explanatory notes to the tariff heading in chapter 35, which demands very advanced processing wherein the derivative of specific particular nature is derived/extracted from the whole. This might be some very specific nature protein/amino-acid or enzyme substrate (like casein/caseinates found in milk; Albumins/ albuminates; Gelatin/gelatin derivatives; Peptones/peptonates obtained from proteins by action of certain enzymes; other substances like Glutelins/ Prolamins/ Globulins/Glycinin/Keratins/Nucleoproteids/Protein isolates). All these extractions/isolates consist of very pure form of the isolated/extracted/derived substrates and are usually used in pharma and food industries with a very specific purpose. The concentration of these isolates is always in high percentage like 90% or more.
(iii) In essence, heading 2106 covers products which serve as, or are incorporated in, food preparations, while 3504 covers products which are not usually consumed, but are used, for instance, in making pharmaceuticals (peptones), textiles and plastics (glutelin and prolamins) and elastic fibres (keratins).
(iv) Here in this case as per the declaration of the applicant the subject product is designed to be used as a protein source in foods/supplementary food and thus, is ejusdem generic to the nutritional food products and supplements which have been classified in heading 2106. Its principal use is as a food preparation. Further, a product may still be classified in 2106 even if it may require further processing to be used as a food preparation or if it is merely used as an ingredient in order to make or improve a beverage or food preparation.
(v) For these reasons, as mentioned above the soya nuggets/chunks is classifiable in heading 2106. The applicable sub-heading should 21061000 as this product is a simply nutritional and healthful food preparation consumable by humans and not elsewhere provided for or included under other headings in the HTS.
Additional submissions made in response to the comments of field formation
The additional submissions dated 28.11.2023 were made to the CAAR Delhi office. The details of are placed as below:
The subject goods are rightly classifiable under Heading 35.04
5.1. It is submitted that the subject goods have only a single ingredient viz. Isolated soy protein. This is the only ingredient that goes into the manufacture of the subject goods. This can be gleaned from the product brochure of the subject goods annexed as Exhibit-A at page 44 of the CAAR Application as well as the process to manufacture the subject goods annexed as Exhibit-B to the Application at page 46.
5.2 It is also submitted that the subject goods cannot be consumed directly in the imported state and the same is further sold to manufacturers of protein bars and other confectionary items. This is evident from the product brochure enclosed as Exhibit-A to the CAAR Application, which provides that the subject goods are used for “sheet and cut nutritional bar applications where high protein is required in structured form.”
5.3 Further, the subject goods contain a minimum of 90% of proteins. This is evident from the product analysis table of the product brochure annexed as Exhibit-A at page 44 of the CAAR Application. It was also submitted that the subject goods are composed of more than one protein as is evident from Exhibit-D at Page Nos.55 to 58 of the CAAR application.
5.4 The process of manufacture of isolated soy protein which is the raw material used for the manufacture of the subject goods is set out as Exhibit-F at page-62 of the CAAR Application which provides that the same is processed from defatted soy flakes.
5.5 As per the HSN Explanatory Notes to Heading 35.04, this heading specifically covers “Protein isolates obtained by extraction from a vegetable substance (e.g., defatted soya bean flour) and consisting of a mixture of proteins contained therein. The protein content of these isolates is generally not less than 90%.” It is submitted that the HSN explanatory notes and the Customs Tariff are aligned on this aspect. The subject goods therefore satisfy all the above conditions and hence is rightly classifiable under the Heading 35.04.
The subject goods are not classifiable under Heading 21.06
5.6 The comments of the jurisdictional Customs Officer states that the goods are classifiable under Heading 21.06 on the basis of the unsubstantiated assumption that the subject goods are protein hydrolysates and not protein isolates.
5.7 A bare perusal of the HSN Explanatory Notes to Heading 21.06 would show that protein hydrolysates mainly consist of a mixture of amino acids and sodium chloride and are used in food preparations. As already stated above, the subject goods have only a single ingredient which is protein isolate and the protein content of the same exceeds 90% hence the same cannot be classified under Heading 21.06.
5.8 Further:
a) “Protein Isolates” are excluded from the ambit of Heading 21.06 by virtue of the HSN Explanatory Notes to Heading 35.04 as mentioned at Page 12 of the CAAR Application.
b) Heading 21.06 is a residuary Heading and products are classifiable under Heading 21.06 only if they are not classifiable under a more appropriate Heading in the Tariff.
In light of the above, the subject goods are specifically covered under Heading 35.04 and is excluded — the ambit of Heading 21.06. Thus, the subject goods arc appropriately classifiable under Tariff Item 3504 091 of the Tariff.
5.10 The Certificate of analysis evidencing the composition of the subject goods, to show that the same is protein isolates and not protein hydrolysate as averred in the comments of the Department, is enclosed herewith as Annexure-2. The same is co-relatable with the Bill of Entry and invoice enclosed herewith as Annecxure-1.
Submissions as regards the allegation of duty evasion
5.11 It was submitted that the comments received from the Jurisdictional Customs officer, who has alleged that the subject CAAR application has been filed with an ulterior motive of duty evasion. It was submitted that such comments ought not to be passed by the Customs Authorities as seeking as advance ruling in respect of a particular product is a statutory option available to an applicant. Such an option is being exercised to clarify the applicant’s queries, as regards the classification of the subject goods and in no way is this an attempt to evade duty to further the applicant’s self-serving interests. Such blatant comments have the effect of rendering the Statutory provisions regarding advance rulings otiose and ineffective and further discourage applicants from seeking an advance ruling in the future.
5.12 It is also further submitted that the applicant is part of the renown International Flavors & Fragrances Inc. (hereinafter referred to as “IFF”) and the global team of the IFF has been consistently adopting Heading 35.04 as the classification of the subject goods at the time of export.
Records of Personal Hearing
6. A personal hearing in the matter was held on 17.11.2023. The authorized representative submitted that the company imports Supro Nuggets 570 GIP, a source of high-quality protein in the form of soy protein nuggets and is designated for nutritional bar applications. The product has 90% or more of protein content and the sole ingredient of the product is Isolated Soy Protein. It has less than lOppm of gluten. He elaborated as to why the subject product merits classification under CTH35040091. He further submitted that the regular Soy Nuggets are different from Soy Protein. He also negated the view of the field that the same product could be classified under CTH 2106.
6.1 During the hearing, it was decided to seek a lab report to ascertain as to whether the product is Protein Isolate and the protein content is 90% or more. Accordingly, the concerned Commissioner was directed to draw a sample from the subject product and to send the requisite report within 21 days.
Operative part of the Order
7. After finding that the application is valid in terms of the provisions of the Customs Act, 1962 and the CAAR Regulations, 2021, having gone through the submissions of the applicant, comments of the concerned Commissioner, having heard the applicant, and recognizing the importance of timely pronouncement of rulings, I proceed to examine the question on merits. [Whether the Supro Nuggets 570 G IP which are soy protein nuggets proposed to be imported are classifiable under the Tariff Item 35040091 of the First Schedule to the Customs Tariff Act, 1975?]
7.1 The important questions raised by the field Commissionerate are:
i. Soy nuggets are classifiable under CTH 21061000;
ii. There is a deliberate attempt by the applicant to find lower duty structure;
iii. The applicant has not furnished any process, which can support their product to be classifiable under CTH 3504, wherein peptones and their derivatives; other protein substances and their derivatives are classified;
iv. Soy nuggets and chunks are nothing but protein hydrolysates consisting mainly of a mixture of amino acids and sodium chloride, used in food preparation;
v. Any attempt to get advance ruling w.r.t. tariff heading by furnishing misleading descriptions and procedures should amount to rejection of application;
vi. Any attempt to classify soya nuggets/chunks under CTI I 3504 is merely an attempt to search areas of misleading tariff heading to classify the goods in tariff headings with lower duty and hence resulting in evasion of legitimate duty of revenue;
vii. All over the world, the soya nuggets are classified under CTI I 2106;
viii. HSN Explanatory Notes indicates at it;
ix. The question raised in the application is devoid of any merit and need to be rejected as products under CTH 3504 are very specific in nature which are derived with the use of highly sophisticated technology and of high purity.
7.2 The key responses provided by the applicant are as follows:
i. The subject goods are rightly classifiable under Heading 35.04
ii. The subject goods have only a single ingredient viz. Isolated soy protein.
iii. The subject goods cannot be consumed directly as the imported state and the same is further sold to manufacturers of protein bars and other confectionary items.
iv. The subject goods contain a minimum of 90% of proteins. It was also submitted that the subject goods are composed of more than one protein as is evident from Exhibit-D at Page Nos.55 to 58 of the CAAR application.
v. The process of manufacture of isolated soy protein which is the raw material used for the manufacture of the subject goods is set out as Exhibit-F at page-62 of the CAAR Application which provides that the same is processed from defatted soy flakes.
vi. The subject goods are not classifiable under Heading 21.06
vii. The comments of the jurisdictional Customs Officer states that the goods are classifiable under Heading 21.06 on the basis of the unsubstantiated assumption that the subject goods are protein hydrolysates and not protein isolates.
viii. A bare perusal of the HSN Explanatory Notes to Heading 21.06 would show that protein hydrolysates mainly consist of a mixture of amino acids and sodium chloride and are used in food preparations. As already stated above, the subject goods have only a single ingredient which is protein isolate and the protein content of the same exceeds 90% hence the same cannot be classified under Heading 21.06.
ix. “Protein Isolates” are excluded from the ambit of Heading 21.06 by virtue of the HSN Explanatory Notes to Heading 35.04 as mentioned at Page 12 of the CAAR Application.
x. The Certificate of analysis evidencing the composition of the subject goods, to show that the same is protein isolates and not protein hydrolysate as averred in the comments of the Department.
xi. Seeking an advance ruling in respect of a particular product is a statutory option available to an applicant. Such an option is being exercised to clarify the applicant’s queries, as regards the classification of the subject goods and in no way is this an attempt to evade duty to further the applicant’s self-serving interests. Such blatant comments have the effect of rendering the Statutory provisions regarding advance rulings otiose and ineffective and further discourage importers from seeking an advance ruling in the future.
7.3 Even though during the personal hearing, it was directed to draw the samples and obtain the laboratory test report on the protein content of the product, it is observed that the applicant has been seeking an advance ruling on the said product since the February 2023 and substantial time has lapsed since then, defeating the purpose of advance ruling as a forum to provide expeditious ruling within the ambit of law in a span of 90 days. First, the applicant filed an application before the authority in Mumbai and it was provided in the rulings after passing of some months that the jurisdiction lies with the Delhi Authority. Then a fresh application was filed with this authority and after obtaining the comments of the field Commissionerate, this authority is constrained to observe that the ruling in the matter shall be proceeded without waiting for the outcome of the lab report as the applicant has submitted that only during the future imports, the samples could be drawn, The facts and observations already submitted in the application shall be considered for issuing the current ruling.
Further, it is also observed by the Authority that, when the facility of Advance Ruling has been duly provided under the statute, e.g. the Customs Act, 1962, it is not in right spirit to receive such comments from the field commissionerates that the applicant has approached the authority and ‘sought a ruling on certain classification heading with an intent to evade duty’. The field formation is free to initiate any restrictive action under law if anything unlawful is observed or found. But it may not be prudent to undermine the facility of advance ruling provided to any bonafide applicant by making colored and vicious statements against the applicant or its assumptions.
7.4. Let us proceed by examining some of the key elements submitted in the application.
7.4.1 As per Annexure-I under Page 5 of the application, SUPRO NUGGETS 570 G IP is a source of high-quality protein in the form of soy protein nuggets and is designed for nutritional bar applications.
7.4.2 Under Exhibit-A placed at Page 44 of the application, the Product Standard as provided for Supro Nuggets 570 G IP- Soy Protein Nuggets bears the following Product Description, namely,-
SUPRO NUGGETS 570 G IP is a crunchy source of high-quality protein. The crisp product is designed for sheet and cut nutritional bar applications where high protein is required in structured form. In addition, this product has been tested to confirm, it has <10ppm of gluten. The Chemical Analysis also provides, Max 5.5% of Moisture; Min 90% of Protein Dry Basis; Max <10PPM of Gluten.
7.4.3 Under Exhibit-F placed at Page 62 of the application, the “General Isolated Soy Protein Process Narrative”, it is provided that —
(i) Defatted soy flakes are introduced with a base and water into the slurry tank. The protein is solubilized and separated from insoluble carbohydrates and other insoluble materials. Potable water is the only solvent used to extract the protein;
(ii) The solubilized protein is transferred to the acid tank where the pH of the extract is adjusted to the isoelectric point of the protein. The protein becomes insoluble at the acid pH and precipitates. This causes further separation of the protein fraction from carbohydrates and other non-protein fractions.
(iii) The acid curd is then brought to a defined solid level in the reslurry tank, and separated one last time to concentrate the protein level to > 90.0% protein on a dry matter basis.
7.5 An attempt was made to see the product mentioned in the application to look for under multiple websites. The following are found, which provides certain key insights to reach to the conclusion.
7.5.1 As per “Natural Products Insider” ST. LOUIS Solae LLC, developer of soy-based technologies and ingredients, introduced Supro Nugget 570, a high protein soy nugget for nutritional bars, snacks, bakery products, cereals and other applications. This ingredient uses a patent-pending technology to create a nugget that is 90% protein on a dry weight basis. https://wwvv.naturalproductsinsider.com/supplements/solae-supro-nugget-570]
7.5.2 As per the website of International Flavors & Fragrances Inc (IFF), the following are described under https://www.iff.com/portfolio/markets/food-beverage/protein-solutions –
I. SUPRO® Soy Protein Isolates product range has a minimum of 90% protein (dry basis) that helps achieve the desired protein level of bars and snacks with just the perfect texture. Our Soy Proteins Isolates are not only an economical alternative to dairy protein with fewer price fluctuations, but it is a high-quality plant-based protein with proven health benefits. Protein Solutions are available as standard or ‘identity preserved non-genetically modified’ (IP non-GM) varieties.
II. SUPRO® Soy Protein Nuggets are ideal for nutrition bars and crispy, crunchy snacks: The range includes our unique 90% soy protein option, SUPRO® 90% Protein Nuggets. These nuggets have an exceptionally high protein level and can appear on your list of ingredients as an isolated soy protein.
SUPRO® 90% Protein Nuggets have a neutral flavor and a crispy, crunchy texture that make them ideal for high-protein snacks, cereals, and nutrition bars. They are available in a variety of shapes and sizes and blend well with other grains, nuts, and seeds to create a ‘natural look.’ Protein Solutions are available as standard or ‘identity preserved non-genetically modified’ (IP non-GM) varieties.
III. Beverage- Supro Soy Protein Isolates: Our soy protein ingredients deliver high-quality protein, reduce formulation costs when used as an alternative to dairy protein, and provide excellent flavor and functionality. SUPRO® Soy Protein consists of an extensive range of soy protein isolates and systems which provide excellent dispersibility, stability, mouthfeel, and viscosity. Protein Solutions are available as standard or ‘identity preserved non-genetically modified’ (IP non-GM) varieties.
IV. Supro Soy Protein Isolates: Our soy protein solutions are great for dairy alternatives, delivering high-quality protein, reducing formulation costs when used as an alternative to dairy protein, and providing excellent flavor and functionality. It is a sustainable protein as it has a low carbon footprint. SUPRO® Soy Protein consists of an extensive range of soy protein isolates and systems which provide excellent dispersibility, stability, mouthfeel, and viscosity. Protein Solutions are available as standard or `identity preserved non-genetically modified’ (IP non-GM) varieties.
7.6 The provisions contained under the Explanatory Notes (of the respective chapters of 21 and 35 and the subheadings of 2106 and 3504) of the HSN issued by the World Customs Organization is as follows:
A. CHAPTER 21-MISCELLANEOUS EDIBLE PREPARATIONS-IV/21-1
Notes:
1. This chapter does not cover:
(a) Mixed vegetables of heading 0712;
(b) Roasted coffee substitutes containing coffee in any proportion (heading 0901);
(c) Flavored tea (heading 0902);
(d) Spices or other products of headings 0904 to 0910;
(e) Food preparations, other than the products described in heading 2103 or 2104, containing more than 20 percent by weight of sausage, meat, meat offal, blood, insects, fish or crustaceans, molluscs or other aquatic invertebrates, or any combination thereof (chapter 16);
(f) Products of heading 2404;
(g) Yeast put up as a medicament or other products of heading 3003 or 3004; or
(h) Prepared enzymes of heading 3507.
2. Extracts of the substitutes referred to in note 1(b) above are to be classified in heading 2101.
3. For the purposes of heading 2104, the expression “homogenized composite food preparations” means preparations consisting of a finely homogenized mixture of two or more basic ingredients such as meat, fish, vegetables, fruit or nuts, put up for retail sale as food suitable for infants or young children or for dietetic purposes, in containers of a net weight content not exceeding 250 g. For the application of this definition, no account is to be taken of small quantities of any ingredients which may be added to the mixture for seasoning, preservation or other purposes. Such preparations may contain a small quantity of visible pieces of ingredients.
21.06 – Food preparations not elsewhere specified or included
2106.10 – Protein concentrates and textured protein substances
2106.90 — Other
Provided that they are not covered by any other heading of the Nomenclature, this heading covers:
(A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk etc.), for human consumption.
(B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption. The heading includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.), for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.)
However, the heading does not cover enzymatic preparations containing foodstuffs (e.g., meat tenderisers consisting of a proteolytic enzyme with added dextrose or other foodstuffs). Such preparations fall in heading 35.07 provided that they are not covered by a more specific heading in the Nomenclature.
The heading includes, inter alia:
(I) Powders for table creams, jellies, ice creams or similar preparations, whether or not sweetened.
Powders…………….
(2) Flavouring powders
(3) Preparations based on butter or other fats…………………
(4) Pastes based on sugar,
(5) Natural honey
(6) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, used in food preparations (e.g., for flavouring); protein concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used for protein-enrichment of food preparations; soya-bean flour and other protein substances, textured. However, the heading excludes non-textured defatted soya-bean flour, whether or not fit for human consumption (heading 23.04) and protein isolates (heading 35.04).
(….. )
B. CHAPTER 35-ALBUMINOIDAL SUBSTANCES; MODIFIED STARCHES; GLUES; ENZYMES-VI/ 35-1
Notes
1. This chapter does not cover:
(a) Yeasts (heading 2102);
(b) Blood fractions (other than blood albumin not prepared for therapeutic or prophylactic uses), medicaments or other products of chapter 30;
(c) Enzymatic preparations for pre-tanning (heading 3202);
(d) Enzymatic soaking or washing preparations or other products of chapter 34;
(e) Hardened proteins (heading 3913); or
(f) Gelatin products of the printing industry (chapter 49).
2. For the purposes of heading 3505, the term “dextrins” means starch degradation products with a reducing sugar content, expressed as dextrose on the dry substance, not exceeding 10 percent.
Such products with a reducing sugar content exceeding 10 percent fall in heading 1702.
35.04 — Peptones and their derivatives; other protein substances and their derivatives, not elsewhere specified or included; hide powder, whether or not chromed.
This heading covers:
(A) Peptones and their derivatives.
(B) Other protein substances and their derivatives, not covered by a more specific heading in the Nomenclature, including in particular:
……….
(6) Protein isolates obtained by extraction from a vegetable substance (e.g., defatted soya bean flour) and consisting of a mixture of proteins contained therein. The protein content of these isolates is generally not less than 90%. This heading does not include:
(a) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, and concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used as additives in food preparation (heading 21.06)
8. Law and Analysis:
8.1 The subject item is classifiable under the Customs Tariff Act, 1975 and the General Rules for the Interpretation (GRI) of Import Tariff provides that the classification of goods in the Schedule shall be governed by the principles, GRI 1 lays down that 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 heading or notes do not otherwise require, according to the remaining GRI’s, taken in their appropriate order. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings or notes do not require otherwise, the remaining GRIs 2 through 6 may be applied. Accordingly, we first have to determine whether the articles are classified under GRI 1.
8.2 The Supro Nuggets Isolated Soy Protein does not appear to find a place under the heading 2106, which provides for “21.06 – Food preparations not elsewhere specified or included”. The six digit level entry in the tariff “2106.10 – Protein concentrates and textured protein substances”. Further, this heading covers: “(A) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk etc.), for human consumption; (B) Preparations consisting wholly or partly of foodstuffs, used in the making of beverages or food preparations for human consumption.” The heading “includes preparations consisting of mixtures of chemicals (organic acids, calcium salts, etc.) with foodstuffs (flour, sugar, milk powder, etc.), for incorporation in food preparations either as ingredients or to improve some of their characteristics (appearance, keeping qualities, etc.). These entries also don’t provide any space for the mentioned item under examination” Further, the following entries are not included as provided under “Entry 6. Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, used in food preparations (e.g., for flavouring); protein concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used for protein-enrichment of food preparations; soya-bean flour and other protein substances, textured. However, the heading excludes non-textured defatted soya-bean flour, whether or not fit for human consumption (heading 23.04) and protein isolates (heading 35.04).”
8.3 However, this particular classification entry appears to provide the appropriate heading, which encapsulates the item under consideration. Let us look closely at the entries of the heading CTH 3504. The Chapter 35 deals with “Albuminoidal Substances; Modified Starches; Glues; Enzymes”. The “CTH 35.04 —Peptones and their derivatives; other protein substances and their derivatives, not elsewhere specified or included; hide powder, whether or not chromed. This heading covers: (A) Peptones and their derivatives; (B) Other protein substances and their derivatives, not covered by a more specific heading in the Nomenclature, including in particular ………….. (6) Protein isolates obtained by extraction from a vegetable substance (e.g., defatted soya bean flour) and consisting of a mixture of proteins contained therein. The protein content of these isolates is generally not less than 90%. This heading does not include: (a) Protein hydrolysates consisting mainly of a mixture of amino-acids and sodium chloride, and concentrates obtained by the elimination of certain constituents of defatted soya-bean flour, used as additives in food preparation (heading 21.06)”. The Supro Nuggets Isolated Soy Protein is appropriately thus finds a place under CTH 3504 and Entry (6) under the Explanatory Notes. The item under consideration, is obtained by extraction from a vegetable substance (e.g., defatted soya bean flour) and consisting of a mixture of proteins contained therein. The protein content of these isolates is generally not less than 90%. As could be seen in the details of the literature submitted in the application, it is clear that the substance is extracted from soya-bean flour, which is a pure plant-based product, and also it is also evident that the protein content is more than 90% as enclosed in the application along with moisture and gluten.
8.4 There are multiple US-CROSS Rulings, which delineates the basic criterion of classification of any product under CTH 3504. As provided under ‘HQ 963306, dated September 6, 2000’, “Substances that have classified in heading 3504 have at least four things in common. First, these protein substances are iy for use in making pharmaceuticals, textiles or plastics. Second, the protein substances of heading consist of a very high percentage of protein. Third, the protein in substances of heading 3504 are derived a single source, such as whey, wheat gluten, or eggshell membrane, respectively. Lastly, the substances therefore classified in heading 3504, HTSUS, may be mixtures of protein and other substances, such as ash /ad moisture, but the other substances are a product of the derivation of the protein substance from its source, cot a deliberate preparation of different protein substances mixed with flavoring and anti-caking agents.” Further, under ‘HQ 956644 dated December 8, 1994’, “Subheading 3504.00.1000, HTSUS, specifically provides for protein isolates. It is concluded that this eo nomine provision is without qualification, and is not limited to the vegetable sourced protein isolate; the example in the ENs of the vegetable sourced product being illustrative and not restrictive.”
8.5 For the reasons above, it is found that heading 2106 does not describe such a substance at GRI I. Before progressing through the GRIs, we must look to other headings that may describe the goods at GRI 1. The instant merchandise contains ‘Isolated Soy Protein’ containing a rich concentration of protein to the tune of 90% and more, which is extracted from a single plant source of soya-bean flour, and which also contains moisture of 10% and gluten as provided under the lab report enclosed with the application, thus is ejusdem generis to the products classified in heading CTH 3504, as a protein isolate. There is no need to continue to an essential character analysis of GRIs 2 and 3, discussing the relative merits, weight, volume, or other characteristics of each ingredient of the preparation, when there is a heading which describes just such protein isolates. Heading 3504 is that heading.
8.6 The illustrations contained in the preceding paras of 7.4 and 7.5 also strongly indicates that the product “Supro Nuggets” has an established ingredient which is protein rich and the protein is extracted from a plant based source e.g. Soya-bean flour.
9. Keeping in view of the foregoing, it is evident that the proposed items of import namely, “Supro Nuggets 570 G IP- Soy Protein Nuggets” derived from plant source and containing relatively high protein levels, justifies classification under Sub-heading 35040091 of the First Schedule to the Customs Tariff Act, 1975.
10. I rule accordingly.
