Classification of Provisionally Preserved Areca Nuts: CAAR Delhi Ruling

In re Vaibhav Enterprises (CAAR Delhi)

The case of Vaibhav Enterprises before the Customs Authority for Advance Rulings (CAAR), Delhi, delves into the classification of provisionally preserved Areca nuts under the Customs Tariff Act. The applicant seeks clarity on the appropriate classification of these nuts imported from various countries for trading purposes.

The applicant, Vaibhav Enterprises, presents the process involved in preparing provisionally preserved Areca nuts for importation. This process includes de-husking, heat treatment, and preservation with substances like sulphur-di-oxide or sodium benzoate to prevent deterioration during storage and transportation. The nuts undergo treatments to ensure they are fit for human consumption, with the preservatives removable before use.

The Customs Authority scrutinizes the arguments presented by both the applicant and the concerned Commissionerate. It considers the legal framework and past rulings on similar cases. The authority interprets Chapter 8 of the Customs Tariff Act, which covers edible fruits and nuts, along with relevant chapter notes.

After thorough examination, the CAAR concludes that provisionally preserved Areca nuts fall under Customs Tariff Heading 0812, specifically sub-heading 08129090. It emphasizes that these nuts, while provisionally preserved, remain unsuitable for immediate consumption. The ruling dismisses the applicant’s request for confidentiality, citing the availability of similar rulings in the public domain.

FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING,DELHI

Vaibhav Enterprises, WZ-32A, Shop No. 1, Asalat Pur, Janak Puri, Delhi 110058 having IEC No. 0515063908 (`applicant’, in short) has filed an application (CAA R-1) dated 18.03.2024 for advance ruling before the Customs Authority for Advance Rulings. New Delhi (CAAR. in short) vide letter dated. The said application was received in the Secretariat of the CAAR, New Delhi on 18.03.2024 along with its enclosures in terms of Section 28H (I) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant intends to import of “Provisionally Preserved Areca Nut (Whole) and Provisionally Preserved Areca Nut (Split)” from Myanmar, Thailand, Indonesia, Vietnam, Sri Lanka, Cambodia, Laos & Singapore into India through the port falling under the Pr. Commissioner of Customs, Nhava Sheva-1, JNCH, Nhava Sheva, Tal: Urban, Dist. Raigad, Maharashtra — 400707.

2.1. The applicant submits that the firm M/s Vaibhav Enterprises, WZ-32A, Shop No. 1, Asalat Pur, Janak Puri, Delhi 110058 having IEC No. 0515063908 currently engaged in the local trading of pan shop related spices & betel nuts items. The Applicant intends to import the following goods and seeks ruling of Hon’ble Authority in the matter of classification of the goods which in the opinion of the the Applicant are classifiable under chapter heading 0812 90 90

2.2. Areca Nut is a tropical plant found all over South-Last Asia. The tree belongs to the palm tree species and is from the Arecaceae family. The fruit (nut) of this tree is popularly known as betel nut or “supari” in India. The Areca nut is an important commercial plantation crop. The fruit has a fibrous mesocarp and seeds arc with a truncate base, endosperm deeply ruminates with a hasalar embryo. It is also known as “betel nut” which is the kernel obtained from the fruit of areca nut palm. It is mostly used by people as masticatory and is an essential requisite during several religious, social and cultural functions in India.

2.3. After harvesting, the tender nut is de-husked and then peeled. Thereafter, these are split and subjected to heat treatment and then dried. The process mentioned above can be mechanical or manually carried out. For preservation of these nuts and to protect them from fungi and moulds and to prevent deterioration while in storage and for safe transportation, these are subjected to preservative treatment before packing and export. The supplier of these nuts will treat them with sulphur-di-oxide gas or sodium benzoate solution and also provide analysis certificate and inspection report with regards to the treatments carried out. Thereafter, the nuts will be imported and cleared from customs.

2.4. The preservatives can be removed before use of these nuts through simple processes. In case of preservation carried out with sodium benzoate solution, the nuts can be treated with sodium bi carbonate and when washed with plain water the excess benzoic acid will get removed. In the process, by way of neutralization and after getting dissolved in water the benzoic acid get removed.

2.5. In cases where nut is treated with sulphur-di-oxide, these can be treated with hydrogen peroxide by which the sulphur-di-oxide is oxidized to sulphate and during the process addition of sodium bi carbonate and water will remove the excess peroxides.

2.6. Thus, after carrying out the above processes, the nut will become suitable for human consumption. With regards to the preservative treatment that are carried out on areca nuts, the Professor and Head of the Department of Food Process Engineering, College of Food and Dairy Technology, Koduveli, Chennai has issued a certificate clarifying the above. Thus it can be seen that the preservative treatment in this case is provisional and temporary and the preservatives can be removed before consumption of the areca nut.

2.7. The above mentioned goods “Provisionally Preserved Areca Nuts” are specifically covered and are classifiable under CTH 0812 90 90 of the Customs Tariff Act, 1975.

Chapter 8 covers edible fruit and nuts, peels of citrus fruits or melons. Chapter note (3) to chapter 8 reads as follow-:

“3. Dried fruits or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes:

(a) for additional preservation or stabilization (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate)

(b) to improve or maintain their appearance (for example, by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nut”

Again, Chapter note (4) reads as follow-:

(a) Heading 0812 applies to fruit and nuts which have been treated solely to ensure their provisional preservation during transport or storage prior to use (for example, by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions), provided they remain unsuitable for immediate consumption in that state.”

2.8. Heading 0812 covers fruits and nuts provisionally preserved but unsuitable in that state for immediate consumption. Following are the four sub-headings under the above four-digit heading.

0812 10 00- Cherries

0812 90- Other:

0812 90 10 — Mango slices in brine

0812 90 90 — Other

2.9. Though areca nuts are separately mentioned tinder 0802, as nuts provisionally preserved but unsuitable in that state of immediate consumption, the areca nuts in the present case will answer more precisely the description under heading 0812 which occurs later in the schedule and accordingly, the nuts that are provisionally preserved need to be classified under heading 0812 90 90.

2.10. In the conspectus of submission supra, the Applicant seeks a ruling by the Hon’ble Authority as under:

“The goods sought to be imported namely “Provisionally Preserved Areca Nuts (whole) and Provisionally Preserved Areca Nut (Split)” are classifiable under Customs Tariff Heading 0812 90 90 of the First Schedule to the Customs Tariff Act, 1975″.

2.11. The applicant has submitted the statement of relevant facts and respectfully sought the following questions of law —

That prior to import the raw betel nuts are subjected to following processes like —

2.11.1. After harvesting, the tender nut in de-husked and then peeled. Thereafter, these are split and subjected to heat treatment and then dried. The process mentioned above can be mechanical or manually carried out. For preservation of these nuts and to protect them from fungi and moulds and to prevent deterioration while in storage and for safe transportation, these are subjected to preservative treatment before packing and export. The supplier of these nuts will treat them with sulphur-di-oxide gas or sodium benzoate solution and also provide analysis certificate and inspection report with regards to the treatments carried out. Thereafter, the nuts will be imported and cleared from customs.

2.11.2. The preservatives can be removed before use of these nuts through simple processes. In case of preservation carried out with sodium benzoate solution, the nuts can be treated with sodium bi­carbonate and when washed with plain water the excess benzoic acid will get removed. In the process, by way of neutralization and after getting dissolved in water the benzoic acid get removed.

2.11.3. In cases where nut is treated with sulphur-di-oxide, these can be treated with hydrogen peroxide by which the sulphur-di-oxide is oxidized to sulphate and during the process addition of sodium bi-carbonate and water will remove the excess peroxides.

2.11.4. In view of the above facts and legal provisions, the product “Provisionally Preserved Areca Nuts (whole) and Provisionally Preserved Areca Nut (Split)” are classifiable under Customs Tariff Heading 0812 90 90 of the First Schedule to the Customs Tariff Act, 1975″.

2.12. On the matter of interpretation of law of facts, the applicant submits that as per their best knowledge and belief the items are classified under classification heading no. given in Custom Tariff heading 0812 90 90.

2.1 3. The said entry in Customs tariff Act’ 1975 reads as under:-

Chapter 8 covers edible fruit and nuts, peels of citrus fruits or melons. Chapter note (3) to chapter 8 reads as follow-:

“3. Dried fruits or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes:

(c) for additional preservation or stabilization (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate)

(d) to improve or maintain their appearance (for example, by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nut”

Again, Chapter note (4) reads as follow-:

(a) Heading 0812 applies to fruit and nuts which have been treated solely to ensure their provisional preservation during transport or storage prior to use (for example, by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions), provided they remain unsuitable for immediate consumption in that state.”

2.14. The Applicant place reliance upon on the following judgments-:

i. Ruling No. CAAR/Mum/ARC/42/2023 dated 15.05.2023 of Hon’ble Authority passed in the matter of M/s. Hi Tech Prints Systems, Chennai Vs. The Commissioner of Customs (Import), Tuticorin, where identical goods are held classifiable under 0812 90 90.

ii. Ruling No. CAAR/Mum/ARC/26/2024 dated 22.02.2024 of Hon’ble Authority passed in the matter of M/s. Radiance Enterprises, Chennai Vs. The Commissioner of Customs II (Import), Chennai and The Commissioner of Customs, Tuticorin, where identical goods are held classifiable under 0812 90 90.

3. Comments on the application for advance rulings have been received from the concerned Commissionerate of Nhava Sheva-1, JNCH, Nhava Sheva, Tal: Urban, Dist. Raigad, Maharashtra — 400707 wherein the claim of the applicant has been opposed and submitted as under: –

i. Provisionally preserved Areca nut (whole &Split) are classifiable under Heading 080280 and not under heading 0812. The processing as mentioned by the importer – i.e., de-husking, heat treatment„ drying, peeling, preservation with the help of sulphur di-oxide or sodium benzoate do not change the character of the Areca nuts and the product alter undergoing through said processes have not attained any major change. Therefore, the goods Provisionally Preserved Areca Nuts (Whole and Split) are classifiable under Heading 080280 and not under 0812 as requested by the importer.

ii. Further, as per importer’s submission, provisional preservation is a process to prevent the goods from fungi, moulds and for safe transportation and with the treatment of goods with the hydrogen peroxide and sodium bicarbonate, further washing with water, these can be used for home consumption as it will turn into normal nuts classifiable under 0802. It is worth mentioning that the processes which applicant has mentioned are simple processes to preserve the goods for longer time and in no way change the basic nature/characteristics of the Areca Nut and thus the said goods are correctly classifiable under CT1 080280. Hence, to classify it under CTH 08129090 when a specific classification of areca nut is present, there appears to be an effort to evade higher Customs duty as well as circumvention of import policy of said goods (i.e. MIP condition for import of Areca Nuts).

iii. In this regard kind attention was drawn to the following Court/ tribunal case laws regarding roasting of nuts:

Hon’ble CESTAT (Chennai), final order bearing nos. 40736-40737/2021 dated 26- 02-2021, in Appeal Nos. C/40002-40003/2021 (Appellants- M/s. ST Enterprises and M/s. Ayush Business Overseas, wherein Hon’ble CESTAT (Chennai), ordered that Areca nuts “whole” subjected to processes like de-husking, cleaning, boiling, preserving and drying, are classifiable under HS CODE 08028010. The said order of Hon’ble CESTAT (Chennai) has been further endorsed by Hon’ble Supreme Court of India stating that they are not incline to interfere with the Hon’ble CESTAT, in Civil Appeal Nos. 850-51 of 2021-M/s. Ayush Business Overseas-vs-Commissioner of Customs (Chennai VII).

(iv) further, as Observed in the Process and flow chart processing as mentioned by the importer of the Fends involves harvesting, splitting, cleaning, drying, peeling, treating with sulphur di-oxide or sodium benzoate and packing. It is observed that the purpose of treatment of areca nuts with sulphur di-oxide or sodium benzoate here is to remove the fungi or moulds growth and further to preserve the goods for longer time during transportation. I fence as per chapter note 3 of Chapter 8, which pertains to dried nuts, it retains the essential character of area nuts. Merely treatment with sulphur di-oxide or sodium benzoate, doesn’t change the essential character of areca nuts.

(v) Thus, areca nuts of any form are classifiable under 080280. However, CD’ 0812 covers fruits or nuts provisionally preserved but unsuitable in that state for immediate consumption. Thus, in the chapter it defines the description in a specific manner rather than a general one. It is tin acceptable and is clearly classifiable under 080280, Further, Areca nut whole is classifiable under 08028010 and Split form is classifiable under CTI1 08028020.

(vi) Further, reliance is also placed on the following advance ruling: CAAR Delhi vide its ruling no. CAAR/Del Vaibhav/21/2021 in the case of same applicant (i.e. M/s. Vaibhav Enterprise)” The CAAR rejects the application of applicant by giving ruling that API Supari, Chikni Supari, Boiled Supari, Unflavoured Supari etc, merit classification under chapter 8 and more precisely under CTH 080280.

(vii) Thus, it is observed that several new applications are being submitted to circumvent the minimum import prize and increasing tariff values by legalizing areca nut import through m is-declaration and mis-classification. Thus, the CAAR may not entertain such applications considering that several advance rulings have already rejected the classification of areca nut under CT1 0812, 2008 and 2106 in the interest of the local areca nut industry and to safeguard the interest of revenue.

(viii) A. Chapter Note 3 to Chapter 8.

“Dried fruit or dried nuts of this Chapter may be partially rehydrated or treated for the following purposes.

(a) for additional preservation or stabilisation (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate:

(b) to improve or maintain their appearance (for example, by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nuts.”

(c) The Tariff Item 0812 as claimed by the importer is produced below:

0812 Fruit and nuts provisionally preserved, but unsuitable in the state for immediate consumption.

As per General Rules of Interpretation (GIR 1): “The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require…”

Since there is a specific heading of areca nuts in Chapter 080280 the imported goods merits classification under Chapter 080280 and not tinder chapter 0812.

3.1 Conclusion as per HS code and Explanatory notes:

3.1.1 The areca nut is specifically mentioned under subheading 080280 instead of 0812 therefore Areca nuts (whole &split) nuts merits classification in CTH 080280.

3.1.2 Further, the duty structure in CTH 080280 and 0812 is as under:-

3.1.3 From the above table it appears the applicant is trying to get the goods areca nuts classified at the HS CODE 0812 which has no policy angle and to avoid applicability of MIP and is trying to evade the applicable customs duty.

3.1.4 From the submission made by the importer in the Advance ruling application and the applicable duty structure, MW condition, Chapter Notes and Tariff value it appears the applicant is trying to get the goods areca nuts classified at the HS Code 08129090 which has no policy restriction when the same are rightly classifiable under HS Code 08028010/20. Accordingly, application is liable for rejection.

4. The applicant was provided the comments received from the jurisdictional Commissionerate. The applicant vide email dated 22.04.2024 submitted their counter reply on the comments of the concerned commissionerate, wherein the applicant relied upon some rulings pronounced earlier on the identical issues and submitted at under: –

(1) Chapter Note (4) provides as follows-:

“4. Heading 0812 applies to fruit and nuts which have been treated solely to ensure their provisional preservation during transport or storage prior to use (for example, by Sulphur dioxide gas, in brine, in Sulphur water or in other preservative solutions, provided they remain unsuitable for immediate consumption in that state.”

(ii) Previous Advance ruling no. CAAR/Del Vaibhav/21/2021 in their case was for different products namely Api Supari, Chikni Supari, Unflavoured Supari, Flavoured Supari, Boiled Supari and Boiled & Cut Supari. The product for which the present application is filed i.e. “Provisionally Preserved Areca Nuts” is all together a different product from those in earlier ruling. It’s is a distinct product.

(iii) Further, the applicant placed reliance on the Advance ruling issued in the matter of identical goods vide CAAR/Mum/ARC/42/2023 dated 15.05.2023 and CAAR/Mum/ARC/26/2024 dated 22.02.2024, where the identical goods have been held classifiable under 0812 90 90.

(iv) The applicant, further, requested for the instant Advance Ruling to be kept confidential as per Point no.27 “Publication of Orders or Advance Ruling” vide notification no.63/2022-Customs (N .1) dated 20.07.2022.

5. A personal hearing in the matter was conducted on 22.04.2024. During the personal hearing, the authorized representative representing the applicant explained in brief the reasons for filing the application and referred to a few earlier rulings of CAAR, Mumbai on the similar question of classification for goods in question. He reiterated the submissions given in their application for advance ruling. The AR further requested not to make the ruling in public to maintain confidentiality.

Finding, Discussion and Conclusion

6. I have taken into consideration of all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. I have gone through the response from the Customs Port Commissionerate. I proceed to decide the present application regarding classification of Provisionally preserved Areca nut (whole) and Provisionally preserved Areca nut (split) on the basis of the information on record as well as the existing legal framework having bearing on the classification of the Provisionally preserved Areca nut (whole) and Provisionally preserved Areca nut (split) under the first schedule of the Customs Tariff Act, 1975.

7. The applicant has answered the queries raised by the Port Commissionerate. It is reiterated that:

i. According to the applicant, the subject product undergoes preservative treatment before packing and export to protect them from fungi and moulds and to prevent deterioration safe transportation.

ii. The supplier of these nuts treats them with sulphur-di-oxide gas or sodium benzoate solution and also provide analysis certificate and inspection report with regards to the treatments carried out. Thereafter the nuts will be imported and cleared from customs.

iii. The preservatives can be removed before use of these nuts through simple processes. In case of
preservation carried Out with sodium benzoate solution, the nuts can be treated with sodium bi- Carbonate and when washed with plain water the excess benzoic acid will get removed. In the process, by way of neutralization and after getting dissolved in water the benzoic acid get removed.

iv. In cases where nut is treated with sulphur-di-oxide, these can be treated with hydrogen peroxide by with the sulphur di-oxide is oxidized to sulphate and during the process addition of sodium t­will remove the excess peroxides.

7.1 Chapter 8 covers fruit, nuts and peel of citrus fruit or melons (including watermelons), generally intended for human consumption (whether as presented or after processing). As per I-ISN explanatory notes, goods under Chapter 8 may be fresh (including chilled), frozen (whether or not previously cooked by streaming or boiling in water or containing added sweetening matter) or dried (including dehydrated, evaporated or freeze-dried); provided they are unsuitable for immediate consumption in that state they are unsuitable for immediate consumption in that state they may be provisionally preserved (e.g., by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions).

7.1.1 Chapter 8 under the Customs tariff Act 1975 covers Edible fruit and nuts; peel of citrus fruit or melons and note (3) to chapter 8 provided as:

“3. Dried fruits or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes:

(a) for additional preservation or stabilization (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate)

(b) to improve or maintain their appearance (for example, by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nut”

The Chapter note (3) specifies the physical status of the goods along with corresponding process that could be carried on those goods under this chapter. The areca/betel nut is mentioned in Heading 0802 as well as 0812. The explanatory note to Heading 0802 states that this heading also covers areca (betel) nuts used chiefly as a masticatory. One of the main uses of the goods under CTH 0802 is masticatory.

7.1.2 However, I find that the provisionally preserved betel nuts are not fit for immediate human consumption and they are more specifically covered under Chapter Heading 0812 due to following Chapter Note. The Chapter note (4) reads as follow-:

“4. Heading 0812 applies to fruit and nuts which have been treated solely to ensure their provisional preservation during transport or storage prior to use (for example, by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions), provided they remain unsuitable for immediate consumption in that state.”

Following are the four sub-headings under CTH 0812 reads as under:-

In view of the process carried out by the applicant reproduced in para 7 supra, I find that the conditions of Chapter Note (4) as mentioned above are duly fulfilled and hence the said goods come within the ambit of Customs Heading 0812.

7.1.3 The Heading 0812 applies to fruit and nuts (whether or not blanched or scalded) which have been treated solely to ensure their provisional preservation during transport or storage prior to use (for example, by sulphur. dioxide gas, in brine, in sulphur water or in other preservative solutions), provided they remain unsuitable immediate consumption in that state. Though areca nuts are separately mentioned under 0802, nuts provisionally preserved but unsuitable in that state for immediate consumption as the area nuts in the present case, will get covered under Heading 0812 which occurs later in the schedule and accordingly, nuts that are provisionally preserved and not lit for immediate consumption need to be classified more specifically under the CTH 08129090.

7.1.4 Further, reliance has also been placed upon on the following rulings-:

i. Ruling No. CAAR/ Mum/ARC/42/2023 dated 15.05.2023 of Hon’ble Authority passed in the matter of M/s. Hi Tech Prints Systems, Chennai Vs. The Commissioner of Customs (Import), Tuticorin, where identical goods are held classifiable under 0812 9090.

ii. Ruling No. CAAR/Mum/ARC/26/2024 dated 22.02.2024 of Hon’ble Authority passed in the matter of M/s. Radiance Enterprises, Chennai Vs. The Commissioner of Customs II (Import), Chennai and The Commissioner of Customs, Tuticorin, where identical goods are held classifiable under 0812 90 90.

8. On the basis of aforesaid discussions and finding and also earlier CAAR Rulings in the matter. I am of the view that the Provisionally Preserved Areca Nut (whole) and Provisionally preserved Areca nut (split) merit classification under Custom Tariff Heading 0812, specifically under Sub-heading 08129090 of the First Schedule of the Customs Tariff Act, 1975.

9. The applicant has requested the authority to keep the ruling confidential as per the CAAR regulation 2021 read with notification no.63/2022-Customs (N .1) dated 20.07.2022. In this regard, I find that there are number of rulings on the identical issue available in public domain. So, I do not consider the request of the applicant to keep the ruling confidential.

10. I rule accordingly.

(SAMAR NANDA)
Customs Authority for Advance Rulings
New Delhi