CESTAT Rejects Customs’ Bid to Treat Imported Nutraceutical Ingredients as ‘Edible Preparations’, Quashes Rs. 7.07 Crore Duty Demand

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a Rs. 7.07 crore customs duty demand raised against a nutraceutical manufacturer, holding that imported probiotic and nutraceutical ingredients cannot be mechanically classified as “miscellaneous edible preparations” merely because they are ultimately meant for oral consumption. The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) ruled that classification under the Customs Tariff must be determined strictly based on the condition of goods at the time of import, and not on their eventual use after processing in India. The dispute arose from the import of three products—Tendofit, Mobilee, and GG Orosoluble—used as active ingredients in nutraceutical and probiotic formulations. The Customs Department alleged misclassification and reclassified all three products under Customs Tariff Heading (CTH) 2106 as “food preparations not elsewhere specified”, confirming a differential duty demand of over ₹7 crore along with interest and penalties. The importer had classified Tendofit and Mobilee under CTH 3913 as natural polymers, and GG Orosoluble under CTH 3002 as a probiotic culture (microorganisms). Relying on settled principles of customs law and recent Supreme Court precedent, the Tribunal reiterated that customs duty is attracted at the time of import, and therefore classification must be based on the objective characteristics of goods as imported, not on post-import processing or retail labelling. The Bench relied heavily on the Supreme Court’s ruling in Commissioner of Customs (Imports) v. Welkins Foods, emphasizing that subjective factors such as intended use or marketing strategy cannot override tariff rules. The Tribunal found that Chapter 21 applies only to goods that are edible or directly consumable at the time of import, or capable of consumption after simple processes like dilution or cooking. In contrast, the Tribunal noted that Tendofit and Mobilee were imported in bulk industrial drums and required formulation into specific dosages before they could be consumed. GG Orosoluble was imported with an extremely high microbial concentration and required precise calibration with excipients for safety, stability, and palatability. Expert certifications confirmed that these products were hygroscopic, unpalatable, biologically sensitive, and not fit for direct consumption in their imported form. Accordingly, the Tribunal held that classification under CTH 2106 was legally unsustainable. Applying Rule 3(b) of the General Rules for Interpretation, the Tribunal held that composite goods must be classified based on the component that gives them their essential character. Tendofit was found to derive its essential character from Chondroitin Sulphate, a naturally occurring polysaccharide. Mobilee was dominated by Sodium Hyaluronate, another natural polymer. The Tribunal accepted international tariff practice, expert evidence from IIT professors, and comparative EU/US customs rulings to conclude that both products correctly fell under CTH 3913 as natural polymers in primary form. On GG Orosoluble, the Tribunal held that it was fundamentally a culture of live microorganisms. The presence of excipients did not alter its essential character. Probiotic cultures are specifically covered under CTH 3002. The Bench also relied on prior CESTAT precedent holding that probiotics do not automatically become food preparations merely because they are orally administered. Rejecting Customs’ reliance on FSSAI licensing, the Tribunal clarified that the definition of “food” under the FSSAI Act is broader and regulatory in nature. FSSAI clearance does not decide tariff classification under the Customs Tariff Act. Regulatory approvals cannot override tariff rules or HSN principles. Since the Tribunal found the classification adopted by Customs to be incorrect, it held that the duty demand was unsustainable, interest could not survive independently, and penalties were liable to be quashed. Case Details Case Title: Sundyota Numandis Probioceutical Private Limited Versus Principal Commissioner, Customs New Delhi Case No.: Customs Appeal No.51113 Of 2022 Date: 29.01.2026 Counsel For Appellant: Tarun Gulati, Senior advocate Counsel For Respondent: M.K. Shukla, Authorised Representative Click Here To Read Order Read More: Top 10 Copper ETFs for Indian Investors In 2026

CESTAT Rejects Customs’ Bid to Treat Imported Nutraceutical Ingredients as ‘Edible Preparations’, Quashes Rs. 7.07 Crore Duty Demand

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CESTAT Rejects Customs’ Bid to Treat Imported Nutraceutical Ingredients as ‘Edible Preparations’, Quashes Rs. 7.07 Crore Duty Demand

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