In re Perfect Trading Co. (CAAR Delhi)
Introduction: M/s. Perfect Trading Co. has sought an advance ruling from the Customs Authority for Advance Rulings, New Delhi (CAAR) regarding the classification of imported “Roasted Areca Nuts/Betel Nuts” from various countries. The applicant wishes to determine the appropriate Customs Tariff Heading (CTH) for these products, specifically Roasted Areca Nut (Whole), Roasted Areca Nut (Split), and Roasted Areca Nut (Cut).
Applicant’s Submissions: The applicant contends that the roasting process, which involves heating the areca nuts up to 130-150 degrees Celsius, results in a distinctive product suitable for immediate consumption. They argue that the products should be classified under CTH 20081920 based on the HSN Explanatory Notes to Heading 2008.
Roasting Process: The roasting process consists of de-husking, drying, and roasting the raw areca nuts, followed by repeated cycles of heating and cooling until the moisture content is reduced to below 6%. The applicant claims that roasting changes the chemical and physical characteristics of the areca nuts.
Legal References: The applicant refers to various case laws, including L.M.L Ltd. vs. Commissioner of Customs, Holostick India Ltd. vs. Commissioner of Central Excise, and Collector of Central Excise vs. Wood Craft Products Ltd., to support their argument that the HSN Explanatory Note is a reliable guide for classification.
Opposing Views: The Customs Department opposes the applicant’s claim, asserting that roasting falls under “moderate heat treatment” mentioned in Chapter Note 3 of Chapter 8. They argue that the end product retains the character of dried areca nuts and should be classified under Chapter 8.
Authority’s Decision:
1. The authority distinguishes between processes in Chapter 8 (chilling, steaming, boiling, drying) and processes in Chapter 20, which includes “Preparations of vegetables, fruit, nuts or other parts of plants.” Roasting is not explicitly mentioned in Chapter 8.
2. The authority relies on the HSN Explanatory Notes, citing that dry-roasted, oil-roasted, or fat-roasted nuts are covered under Chapter 2008.
3. References are made to the recent rulings by CAAR Mumbai and the Madras High Court, supporting the classification of roasted betel nuts under CTH 20081920.
4. The authority rejects the applicant’s claim that roasting is covered by Note 3 to Chapter 8, emphasizing the distinctive nature of roasting compared to mild heat treatment.
Conclusion: The Roasted Areca Nuts/Betel Nuts are classified under CTH 20081920 of Chapter 20 of the Customs Tariff Act, 1975, according to the authority’s ruling. The decision aligns with recent judicial precedents and the HSN Explanatory Notes, rejecting the claim that roasting falls under Chapter 8. The authority also denies the request for maintaining confidentiality, considering the public availability of similar rulings.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI
M/s. Perfect Trading Co., having IEC No. AESPK3717Q (`applicant’, in short) has filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, New Delhi (CAAR, in short). The said application was received in the secretariat of the CAAR, New Delhi on 28.11.2023 along with their enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant intends to import “Roasted Areca Nuts/Betel Nuts” from Myanmar, Thailand, Indonesia, Vietnam, Sri Lanka, Cambodia, Laos & Singapore into India through two ports, i.e. (i) ICD, Patparganj, New Delhi and (ii) ICD, LCS Petrapole, Kolkata Port; Accordingly, two separate applications have been filed before CAAR.
2. The applicant is currently engaged in the local trading of paan shop related spices & betel nuts items. The aapplicant intends to import Roasted Areca Nut (Whole), Roasted Areca Nut (Split) and Roasted Areca Nut (Cut) and sought ruling of the Authority in the matter of classification of the goods which in the opinion of the applicant, are classifiable under chapter Sub-heading 20081920. The submission of the applicant are as under:
2.1 The process of “roasting” is neither defined in the Customs Tariff nor in the HSN Explanatory/Sections/Chapter Note.
2.2 The process for roasting involved in the manufacture of the above said goods is as under: –
2.3 Roasted Areca Nut (Whole), Roasted Areca Nut (Split) and Roasted Areca Nut (Cut): Following processes are conducted on raw betel nut-:
a) De-husking the raw betel/areca nut and drying the same before being fed into the roasting oven.
b) Feeding the fresh areca nut into a seed roasting oven, heating up to 130-150 C and roasting the fresh areca nuts in an oven of the seed roasting machine.
c) Take the areca nuts out of the oven, cooling at room temperature and feeding back into the oven, heat and roast them again, and perform this cycle until the moisture content of areca nuts goes below 6 percent (%).
d) The fresh areca nuts are repeatedly heated, roasted and cooled to ensure that the areca nuts are quickly cooled and shrunk after thermal expansion so that the roasted areca nuts have higher quality; the roasting time is around 2-3 days.
e) Packaging in industrial packs of 50kgs to 80kg as per requirement.
In India, areca nut is chewed for a variety of reasons such as stress reliever, mouth freshener, concentration improver and for digestive purposes following food intake.
2.4 The above mentioned goods are specifically covered and are classifiable under CTH 20081920 of the Customs Tariff Act, 1975. As per the HSN Explanatory Notes to Heading 2008, given below, Dry Roasted Areca (or Betel) Nuts are specifically covered under Chapter Heading 2008.
CTH 2008: Fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included -Nuts, ground nuts and other seeds, whether or not mixed together:
20081920– Other roasted nut and seeds
2.5 The applicant placed reliance upon the case laws of L.M.L Ltd. Versus Commissioner of Customs reported in 2010 (258) E.L.T 321 (S.C), Holostick India Ltd. Versus Commissioner of Central Excise, Noida reported in 2015 (318) E.L.T 529 (S.C), Collector of Central Excise, Shillong Versus Wood Craft Products Ltd. reported in 1995 (77) E.L.T 23 (S.C) to submit that the HSN Explanatory note is the safe and dependable guide in the matters of classification of items.
2.6 As per the Explanatory Notes to Chapter 8, fruits and nuts of this Chapter remain classified here even if put up in airtight packing (e.g. dried prunes, dried nuts in cans). In most cases, however, products put up in these packing have been prepared or preserved otherwise than as provided for in the headings of this Chapter, and are therefore excluded from chapter 8 (and will fall under Chapter 20). The processes mentioned in Chapter 8 are different from the processes performed on impugned goods, they are excluded for the purpose of classification from Chapter 8 of the Customs Tariff Act, 1975 (hereinafter also referred as “Tariff).
2.7 The process of roasting changes the chemical and physical characteristics of the areca nut by reducing arecoline and tannin as well moisture.
2.8 In respect of alternate CTH 2106, the applicant draw attention to Chapter Note 2 and Explanatory Note (A) to Chapter 21, which is as under:
“Betel Nut product known as Supari” means any preparation containing betel nuts but not containing any one or more of following ingredients, namely lime, katha (Catechu) and tobacco whether or not containing any other ingredients such as cardamom, copra or menthol.
2.9 As per the Explanatory note, the heading covers preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption.
2.10 The goods have undergone roasting, but they don’t contain lime, Katha (catechu) and tobacco. Further, roasted betel nut can be consumed directly by merely cutting them into pieces. Therefore, the goods are equally classifiable under Chapter 21 of the Customs Tariff Act, 1975.
2.11 The applicant also referred to and discuss the case law of M/s Crane Betel nut Powder Works reported in 2007 (210) E.L.T 171 (S.C) stating that in this case, the Hon’ble Supreme Court purely went into the aspect whether crushing and adding other ingredients to betel-nut would amount to manufacture or not. Upon convincing that crushing and mixing other ingredients to the betel-nut into powder would not amount to manufacture, the Court ruled in favour of the party thus permitting them to classify the item under the CTH 0803. Based on the above, earlier ruling issued by the Customs Authority for Advance Rulings rejected the classification of betel-nut products under the HS Code 2106 90 30 and confirmed the same under Heading 0802, by holding that the process of such as boiling, slicing, removal of impurities, metal-deflection, garbling, polishing, roasting, cutting and adding flavours to the betel-nut do not alter the nature and characteristics of the product so as to it outside the purview of the Heading 0802. However, after the subsequent amendment to the Central Excise Tariff Act, 1985 vide the Finance (No.2) Act, 2009 (Act No.33 of 2009 dated 19th August 2009) with the insertion of Note to Chapter 21, the decision of the Hon’ble SC in the above-mentioned case law was rendered infructuous.
2.12 In support of the above, they cited on the ruling issued in case of M/s Excellent Betel Nut Products by the Authority of Advance Rulings, wherein the authority took proper judicial notice and distinguished the decision in the case of M/s Crane Betelnut Powder Works Vs Commissioner of Customs & C. EX, Thirupathi reported in 2007 (210) E.L.T 171 (S.C) and held the classification of processed betel nuts under 21069030.
2.13 Roasted Areca nut is used for eating (mukhwas) directly as well as with paan (betel leaf).
2.14 The roasting is done using firewood/palm karnel-based ovens and temperature of the flames is around 600 degrees Celsius. As a result, the betel nuts would be roasted well beyond 100 degree Celsius, usually in the range of 130-150 degree Celsius.
2.15 Roasted betel nut undergoes a change in its appearance as well as chemical characteristics on account of the roasting process. There is a substantial change in the chemical characteristics of the betel nut product on account of roasting process. The tannin and arecoline content of raw betel nut/areca nut get substantially changed by subjecting the same to roasting. Therefore, roasted betel nut is a distinctive product of betel nut making it suitable for immediate consumption.
2.16 Roasting is not aimed at additional preservation or stabilization or to improve or maintain their appearance.
2.17 The applicant has further submitted that as per their best knowledge and belief the items are classified under Custom Tariff heading 20081920. The said entry in Customs tariff Act’ 1975 reads as under:
