CESTAT Delhi- Nutraceutical Raw Materials Not Classifiable as ‘Food Preparations’ Under CTH 2106

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 07.03.2026

CESTAT Delhi- Nutraceutical Raw Materials Not Classifiable as ‘Food Preparations’ Under CTH 2106

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a landmark judgment in the case of Sundyota Numandis Probioceutical Pvt. ​ Ltd. vs. Principal Commissioner, Customs New Delhi. ​ The case revolved around the classification of three imported products—Tendofit, Mobilee, and GG Orosoluble—and the imposition of customs duty, interest, and penalties amounting to ₹7,07,02,027. ​ The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal. ​

Background of the Case

Sundyota Numandis Probioceutical Pvt. ​ Ltd., an Ahmedabad-based company engaged in the manufacture and sale of nutraceutical and probiotic products, imported three key ingredients—Tendofit, Mobilee, and GG Orosoluble—for use in their products. ​ The Customs Department alleged that the company had misclassified these products and issued a show-cause notice, claiming that the goods were liable to be classified under Chapter Heading (CTH) 2106 as “Miscellaneous Edible Preparations.” ​ The Department argued that the products were edible preparations and imposed differential customs duty, interest, and penalties. ​

The appellant challenged the classification, asserting that the products were raw materials and not edible preparations at the time of import. ​ They argued that Tendofit and Mobilee should be classified under CTH 3913 as natural polymers, while GG Orosoluble should be classified under CTH 3002 as a probiotic. ​

Key Arguments by Sundyota Numandis ​

1. Tendofit Classification:
   • Tendofit is a bovine cartilage extract containing 85% mucopolysaccharides (MPS) and 15% collagen. ​
   • MPS, primarily composed of chondroitin sulfate, provides the essential character to Tendofit, making it a natural polymer. ​
   • The product is imported in bulk packaging (25 kg drums) and is not edible in its imported form. ​ It requires further formulation into prescribed dosage strength (260-520 mg/day) as per Food Safety and Standards Authority of India (FSSAI) approval. ​
   • Expert opinions from IIT Delhi and international rulings, such as the US Customs Ruling, support the classification of chondroitin sulfate under CTH 3913. ​
2. Mobilee Classification:
   • Mobilee is a natural extract derived from rooster comb, comprising 60-75% sodium hyaluronate, 10% polysaccharides, and 5% collagen. ​
   • Sodium hyaluronate provides the essential character to Mobilee, making it a natural polymer under CTH 3913. ​
   • Similar to Tendofit, Mobilee is imported in bulk packaging (5 kg drums) and is not edible in its imported form. ​ It requires formulation into prescribed dosage strength (80 mg/day) before consumption. ​
   • The classification of sodium hyaluronate under CTH 3913 is supported by US Customs Rulings and the EU Customs Tariff. ​
3. GG Orosoluble Classification:
   • GG Orosoluble is a probiotic containing Lactobacillus Rhamnosus GG, along with excipient carriers like xylitol and sorbitol for stability during storage and transportation. ​
   • The product is not edible in its imported form and requires further processing to become a dietary supplement. ​
   • Expert opinion from IIT Bhubaneswar confirmed that GG Orosoluble is a probiotic and should be classified under CTH 3002, which covers cultures of microorganisms.

Key Arguments by the Department

1. The Department argued that Tendofit and Mobilee were food preparations due to the presence of collagen and their use as nutraceuticals for human consumption. ​
2. It contended that GG Orosoluble was a dietary supplement and not a probiotic, as it contained excipient carriers and was ready for human consumption. ​
3. The Department relied on the FSSAI certification obtained by the appellant to argue that the products were edible preparations. ​

Tribunal’s Observations and Ruling ​

The Tribunal analyzed the case based on the provisions of the Customs Act, 1962, the Customs Tariff Act, 1975, and the General Rules of Interpretation (GIR). ​ Key observations and rulings include:

1. Classification at the Time of Import:
   • The Tribunal emphasized that goods must be classified based on their condition at the time of import, as per the “as imported” principle established by the Supreme Court in the case of Commissioner of Customs (Imports) vs. M/s Welkins Foods. ​
   • The Department failed to provide evidence that the imported goods were edible at the time of import. ​
2. Tendofit:
   • The Tribunal ruled that Tendofit is not edible in its imported form and is a raw material for nutraceuticals. ​ It upheld the appellant’s classification under CTH 3913 as a natural polymer. ​
3. Mobilee:
   • The Tribunal found that Mobilee’s essential character is provided by sodium hyaluronate, which is classified under CTH 3913 as a natural polymer. ​ It rejected the Department’s claim that the presence of collagen changes its classification to a food preparation. ​
4. GG Orosoluble:
   • The Tribunal ruled that GG Orosoluble is a probiotic and not a food preparation. ​ It upheld the appellant’s classification under CTH 3002, relying on expert opinion and the absence of contrary evidence from the Department. ​
5. Burden of Proof:
   • The Tribunal reiterated that the burden of proof lies with the Department to establish the correctness of its proposed classification. ​ In this case, the Department failed to discharge this burden. ​

Conclusion

The Tribunal’s decision to set aside the impugned order and allow the appeal is a significant victory for Sundyota Numandis Probioceutical Pvt. ​ Ltd. The judgment underscores the importance of classifying goods based on their condition at the time of import and the need for the Department to provide robust evidence to support its claims. ​ This case also highlights the value of expert opinions and international rulings in resolving classification disputes.​

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Source: CESTAT Delhi

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