ISLAMABAD: The Customs Classification Committee of the Federal Board of Revenue (FBR) has declared that “Kola Vanilla Extract”, used as a flavouring agent/ preservative in the manufacturing of beverages is appropriately classifiable under Pakistan Customs Tariff (PCT) Heading 2106.9010.
This ruling is based on characteristics and use of imported goods.
In this regard, Customs Classification Committee has issued a new valuation ruling.
Background of the issue revealed that the Collectorate of Customs (Appraisement) Islamabad forwarded a reference for the determination of actual classification of “Kola Van” imported by M/s. Pepsi Cola International and sought clearance under PCT heading 1302.1900. However, the Directorate General of Audit (Customs & Petroleum) Lahore during the audit of Islamabad dry-port for the year 2013-14 raised audit observation No. 09 (DP-2256) stating that:
‘According to 1st schedule to the customs act 1969, flavours and concentrates for aerated beverages are classifiable under PCT heading 3302.1010 with customs duty @ 10% and federal excise duty @50% ad valorum. Further, introductory notes to chapter 13 clearly state that 1302 does not cover “Essential oils, concretes, absolutes, resinoids, extracted oleoresins, aqueous distillates or aqueous solutions of essential oils or preparations based on odoriferous substances of a kind used for the manufacture of beverages (chapter 33)”.
Since, ‘Kola Van’ consisting of natural saponins, sugar, glycerin and ethanol which has been used as preservative, therefore, ‘Kola Van’ being an odoriferous substance and flavoring agent, is appropriately classifiable under PCT heading 3302.1010. It was, further pointed out that M/s. Pepsi Cola has already availed clearance of Kola Van under HS code 3302.1010 vide GD No. ICSI-HC-2944-30-05-2017 and ICSI-HC-679-04-10-2016.
The Collectorate of Customs Islamabad referred the case to the Adjudication Collectorate. The adjudicating authority decided the case in favour of the department vide order in original No. 70/2017 dated 14.05.2017. Being aggrieved, the importer filed an appeal before the Appellate Tribunal vide Appeal No. 139/CU/IB/2017. During hearing proceedings, the Appellate Tribunal directed to refer the subject case to the Classification Centre Karachi for determination of appropriate classification of goods.
In view of the directions of the Appellate Tribunal, Islamabad, the case was forwarded to the Classification Center, Collectorate of Customs Appraisement (East), Karachi along with relevant documents for determination of appropriate classification.
After thorough examination, the Classification Committee concludes that “Kola Vanilla Extract,” comprising kola and vanilla extracts, propylene glycol, glycerin, sugar, and caramel, and by the application of relevant Tariff rules confirm that the product is not a raw extract as defined under Chapter 13.02. As per GIR -1, the product must be classified according to the terms of the headings and Chapter Notes. Furthermore, Chapter Note 1(ij) to Chapter 13 explicitly excludes preparations based on odoriferous substances used for the Manufacture of beverages, while Chapter Note 1(a) to Chapter 33 excludes vegetable extracts of heading 13.02. Additionally, GIR 3(b) provides that for mixtures or composite goods, classification is based on the component that gives the essential character. In this context the product’s use as a concentrate for aerated beverages determines its essential character.
In light of the foregoing analysis, “Kola Vanilla Extract” is appropriately classifiable under PCT Heading 2106.9010 based on characteristics and use of imported goods by application of GIR-1 and 3(b), the ruling added.
Copyright Business Recorder, 2024
Comments