The Customs Tribunal has clarified a critical principle in tariff classification: when imported goods consist of a substantial mixture of animal and vegetable-origin ingredients intended for animal feeding, they cease to qualify as simple animal meals under Heading 2301 and must be classified under Heading 2309 as formulated feed preparations. This decision resolves longstanding ambiguity in the classification of marine-based feed ingredients blended with plant proteins.
Background & Facts
The Dispute
The appellants, M/s. Grobest Feeds Corporation India Pvt. Ltd. and M/s. Rohit Extractions (P) Ltd., imported "Squid Liver Powder" from South Korea, declaring it under Customs Tariff Heading (CTH) 2301 20 as "flours, meals and pellets of molluscs unfit for human consumption." This classification attracted a concessional Basic Customs Duty and exemption from Countervailing Duty (CVD). The Department, upon post-clearance verification, discovered that the product contained 40-50% soyabean meal - a vegetable-origin protein - mixed with squid liver paste. The Department reclassified the goods under CTH 2309 90 90 as "preparations of a kind used in animal feeding," resulting in substantial duty demands, interest, and penalties.
Procedural History
- 2015: Show Cause Notices issued under Section 28 of the Customs Act, proposing reclassification under CTH 2309, recovery of differential duty, and penalties.
- 2015: Commissioner of Customs (Original) confirmed the reclassification and imposed duty and penalty of ₹92.68 lakh.
- 2016: Commissioner of Customs (Appeals-II) upheld the order in two separate appeals.
- 2025-2026: Appeals filed before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, were heard together due to identical facts and legal issues.
Relief Sought
The appellants sought reversal of the reclassification, cancellation of duty demands, and quashing of penalties and confiscation, arguing that the product retained its essential character as squid meal and that the Show Cause Notices were defective.
The Legal Issue
The central question was whether imported squid liver powder containing 40-50% soyabean meal qualifies as a simple animal meal under CTH 2301 or as a formulated animal feed under CTH 2309, and whether the non-disclosure of this composition constitutes suppression of material facts justifying invocation of the extended period of limitation under Section 28(4).
Arguments Presented
For the Appellant
The appellants contended that the product is essentially squid meal, and the addition of soyabean meal does not alter its essential character. They relied on Rule 3(b) of the General Rules of Interpretation (GRI) to argue that the essential character remains animal-based. They cited certificates from Korean authorities, past clearances, and the fact that the goods were cleared under RMS as evidence of bona fide belief. They further argued that the Show Cause Notices failed to clearly propose reclassification under CTH 2309, violating principles of natural justice.
For the Respondent
The Revenue argued that CTH 2301 covers only products obtained by processing animal material "as such," without admixture of substantive vegetable ingredients. The presence of soyabean meal in such substantial proportion transforms the product into a compounded feed under CTH 2309, as confirmed by HSN Explanatory Notes. The Revenue emphasized that the non-disclosure of soyabean content amounted to suppression of material facts, justifying invocation of Section 28(4) and imposition of penalties under Section 114A and confiscation under Section 111(m). The Revenue relied on binding precedents from its own coordinate bench in Avanti Feeds Ltd. and Godrej Agrovet Ltd.
The Court's Analysis
The Tribunal conducted a rigorous analysis of the Customs Tariff, HSN Explanatory Notes, and judicial precedents. It held that CTH 2301 is strictly limited to products derived solely from animal or marine sources, processed without admixture. In contrast, CTH 2309 explicitly covers "preparations of a kind used in animal feeding," including mixtures of animal and vegetable nutrients designed for direct use or as feed ingredients.
"The decisive factor is not the predominance of a single ingredient, but the deliberate formulation and functional suitability of the product as compounded feed."
The Tribunal rejected the appellants’ reliance on Rule 3(b) of GRI, noting that classification under Rule 1 - plain reading of the tariff heading - is sufficient when the product clearly falls within one heading. Since the product’s composition and intended use as a formulated aquaculture feed squarely matched CTH 2309, there was no need to invoke Rule 3.
Regarding the Show Cause Notices, the Tribunal found them adequate. They explicitly proposed reclassification under CTH 2309, cited the composition, referenced HSN Notes, and outlined the legal basis. The appellants had ample opportunity to respond, filing detailed replies and citing technical literature.
On Section 28(4), the Tribunal held that the omission to disclose 40-50% soyabean content was not an oversight but suppression. The appellants, being in the animal feed industry, were expected to know the classification implications. Clearance under RMS does not absolve statutory obligations. The Tribunal affirmed that suppression of material facts in classification matters justifies extended limitation, citing Jaiprakash Industries Ltd. and Padmini Products.
Finally, the Tribunal held that penalty under Section 114A and confiscation under Section 111(m) are mandatory once suppression is established. The appellants’ reliance on past clearances or foreign certificates was irrelevant, as classification is governed solely by Indian tariff law.
The Verdict
The appellants lost. The Tribunal held that squid liver powder containing substantial soyabean meal is correctly classifiable under CTH 2309, that the Show Cause Notices were legally sufficient, that Section 28(4) was validly invoked due to suppression of material facts, and that penalties and confiscation under Sections 114A and 111(m) were mandatory statutory consequences. All appeals were rejected.
What This Means For Similar Cases
Classification Turns on Formulation, Not Dominant Ingredient
- Practitioners must assess whether imported goods are simple animal meals or formulated feeds based on intended use and composition, not merely the percentage of animal content.
- Any admixture of vegetable-origin nutrients (e.g., soy, wheat, rice bran) in significant proportion (>20%) should trigger scrutiny under CTH 2309.
- Importers must disclose full composition in Bills of Entry - even if the product is commonly known by a trade name like "squid meal."
Suppression Is Not Limited to Fraudulent Intent
- Non-disclosure of material composition, even if unintentional, can constitute suppression if the importer is in the industry and should have known the classification implications.
- Past clearances or foreign certificates do not create estoppel or override statutory classification rules.
- RMS clearance is a facilitation tool, not a shield against liability for mis-declaration.
Penalty and Confiscation Are Automatic Upon Suppression
- Once Section 28(4) is invoked due to suppression, Section 114A penalty is mandatory and non-discretionary.
- Confiscation under Section 111(m) applies where mis-declaration affects duty liability - no separate proof of fraud required.
- Practitioners must advise clients to avoid self-assessment of complex mixtures without full technical documentation and legal review.
