Classification of Roasted Areca Nuts: CAAR Delhi Ruling

In re Shreehari Ananta Overseas Private Limited (CAAR Delhi)

CAAR held that that the Roasted areca nuts (whole, cut or ground) fall under Custom Tariff Heading 2008, specifically under CTI 2008 19 20 ‘Other roasted nuts & seeds’ of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975.

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

M/s. Shreehari Ananta Overseas Private Limited (hereinafter referred to an applicant”), having its registered address at Near ATV Project, Agra-Delhi NH-2, Near Bharatpur Choraha, Mathura, Uttar Pradesh – 281004, is a private limited company, and are engaged in trading of food items and further propose to engage in the business of import of Roasted Areca nut (Betel Nuts) commonly known as “Supari” and more particularly the goods i.e. Roasted Areca Nuts (Whole) and Roasted Areca Nuts Cut from Burma (Myanmar), Indonesia, Sri Lanka and Singapore. The Applicant is registered under the Companies Act, 2013 and holder of CIN U52200UP2023PTC176263, holder of PAN ABKCS1017P and holder of IEC ABKCS1017P. The Jurisdiction of Applicant falls under the Commissioner of Customs, ICD Patparganj, Delhi.

1.1 The Areca nut is a tropical plant, belonging to the palm tree species. The kernel is obtained from the fruit of areca nut palm, known as the Areca Nut/Betel Nut or supari in India. The raw betel nut obtained is subjected to various processes to produce various products.

The goods in the present application are “Roasted Areca Nuts Whole and Roasted Areca Nuts Cut”.

1.2 The applicant intends to import “Roasted Areca Nuts/Betel Nuts” from Burma (Myanmar), Indonesia, Sri Lanka and Singapore. Since the process of “Roasting” is not specifically defined in the Customs Tariff Act nor in the HSN explanatory notes or in its Chapter Notes, clarification is being sought from this Advance Ruling Authority.

1.3 The applicant states that the cultivation, harvesting and processing of the Roasted Areca Nut has undergone tremendous transformation, such that the involvement of labour and their dependency has reduced, by bringing about mechanization, which invariably increases the efficiency, reduces the wastage, enhances the quality and brings about uniformity in the final product. Further, the preparation time of “roasted Areca Nut” has also drastically reduced, in comparison with the manual method of preparation.

1.4 That, the process of preparation of the import items is given as under:

a. Firstly, the raw areca nut is de-husked and its outer shell is removed. Thereafter, the de-husked nut is scattered to check for any visible impurities and the same is cleaned, pursuant to which the raw de-husked areca nut/betel nut is left to dry.

b. Secondly, the cleared and dried de-husked areca nuts are fed into the seed roasting oven/machine and heated in the temperature of above 100 Degree Celsius. The roasting is done using firewood/palm kernel-based ovens/machines and the temperature of the flames is around 400 to 600 degrees Celsius. As a result, the betel nuts would be roasted well beyond 100 degrees Celsius, usually in the range of 130-150 degrees Celsius.

c. Thirdly, the areca nuts are removed from the roasting oven and allowed to cool at normal room temperature, with the assistance of the cooling fans.

d. Fourthly, when the areca nuts have cooled and attained normal room temperature, they are again fed back into the oven at enormous heat, so as to evenly roast the areca nut.

e. This process is performed repeatedly, until the water content of the fresh areca nuts is reduced to 10 to 15 per cent. Thereby, the areca nut shrinks and becomes brittle. The process of repeatedly heating, roasting and cooling the areca nuts is to ensure that the areca nuts are quickly cooled and shrunk after thermal expansion, such that the roasted areca nuts have higher quality.

1.5 That, the abstract about Roasted Areca Nut is as follows:

a. The initial roasting time used to be around 7 to 8 days, but with mechanization the process of roasting and cooling is completed in about 2 to 3 days.

b. Pursuant to roasting, the areca nut undergoes a drastic change in its appearance as well as chemical characteristics on account of the roasting process. There is a visible deposition of an ash-like substance on the outer surface of the betel nut. There is a substantial change in the chemical characteristics of the betel nut product on account of the roasting process. It has been established through research that the Tannin and Arecoline content of raw areca nuts get substantially changed by subjecting the same to roasting.

c. Various research and articles throws light on the chemical composition of various forms of areca nuts. As per the article titled “Estimation of Arecoline content of various forms of areca nut preparations by high-pressure thin-layer chromatography” substances viz. Polyphenols (flavonols, tannins) constitute a large proportion of the dry weight of the nut, their content in areca nut vary depending on the degree of maturity and its processing method. The tannin content is highest in unripe areca nuts and decreases significantly with increasing maturity.

d. Roasting is not aimed at additional preservation or stabilization or to improve or maintain its appearance. Therefore, roasted areca nut is a distinctive product, more specifically classifiable under Chapter 20 of the Customs Tariff Act, 1975 and Chapter Notes in HSN.

e. Roasted Areca Nut without the addition of any ingredients added to it is saleable in the Indian market in various forms like tukda (pieces) roasted betel nut as well as shredded roasted betel nut. These roasted betel nut products are sold in the market without any additives or without subjecting to any other preparation than the roasting process. These roasted betel nut variants are approved by the Government agency viz. FSSAI.

f. The “Roasted Areca Nut” is edible in its actual form and suitable for immediate consumption. It is masticatory and used for a variety of reasons such as stress reliever, mouth freshener, concentration improver and digestive following food intake.

1.6 Therefore, the process and the end product viz “Roasted Areca Nut Whole and Roasted Areca Nut Cut” is most suitable to be classified under Chapter 2008 19 20 of the CTH 1975. That, the main raw material for manufacturing of above items is betel nut/ supari covered under sub-heading 0802 8090.

1.7 In the light of above the question on which advance ruling has been sought is,

“Whether goods sought to be imported, qualify to be classifiable under chapter/heading 2008 19 20 as Roasted Nuts?”

1.8 ELIGIBILITY TO FILE PRESENT ADVANCE RULING APPLICATION

1.8.1 That Regulation 6 of the Notification no. 01/2021 — Customs (N.T.) dated 4^th Jan, 2021 prescribes the form and manner of application before the Authority of Advance ruling. In the present matter, the jurisdiction of Applicant as per table mentioned in regulation 6 falls under ‘Customs Authority of Advance Ruling, Delhi’ as Applicant are from Uttar Pradesh. For reference copy of IEC code and Certificate of incorporation is enclosed.

1.8.2 Further Section 28H of the Customs Act, 1962 (Act for brevity) specifies the issues for which an advance ruling can be sought. Section 28H of the said act reads as under:

(1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and in such manner ¹ [and accompanied by such fee] as may be prescribed, stating the question on which the advance ruling is sought.

(2) The question on which the advance ruling is sought shall be in respect of, –

(a) classification of goods under the Customs Tariff Act, 1975 (51 of 1975);

(b) applicability of a notification issued under sub-section (1) of section 25, having a bearing on the rate of duty;

(c) the principles to be adopted for the purposes of determination of value of the goods under the provisions of this Act.

1(d) applicability of notifications issued in respect of tax or duties under this Act or the Customs Tariff Act, 1975 (51 of 1975) or any tax or duty chargeable under any other law for the time being in force in the same manner as duty of customs leviable under this Act or the Customs Tariff Act,1

1(e) determination of origin of the goods in terms of the rules notified under the Customs Tariff Act, 1975 (51 of 1975) and matters relating thereto.]

[(f) any other matter as the Central Government may, by notification, specify.]

1.8.3 Thus, as per the said section, advance ruling may be sought by the applicant on the questions concerning classification of goods under the Customs Tariff Act, 1975. The applicant submits that the questions for determination in the instant advance ruling application concern:

-Classification of goods under Customs Tariff Act, 1975; and

1.8.4 Therefore, in the instant case the applicant is eligible to file the present advance ruling before the Customs Authority for Advance Ruling, Delhi.

1. APPLICANT’s INTERPRETATION IN RESPECT OF THE QUESTIONS RAISED FOR ADVANCE RULING

2.1 CLASSIFICATION OF ROASTED ARECA NUT (WHOLE) AND ROASTED ARECA NUTS CUT

2.1.1 That, present matter is with respect to classification of goods proposed to be imported, guidance of the Harmonized commodity description and coding system of the world customs organization, to which India is a signatory.

2.1.2 That, applicant propose to import goods said to be Roasted Areca Nut (Whole) and Roasted Areca Nut (Cut).

2.1.3 Further, Raw material used by the foreign manufacturer for the proposed import goods is raw betel nut covered under Chapter 080280 of the schedule of the Customs Tariff Act, 1975. The process of preparation of the import item is as under:

• Firstly, the raw areca nut is de-husked and its outer shell is removed. Thereafter, the de-husked nut is scattered to check for any visible impurities and the same is cleaned, pursuant to which the raw de-husked areca nut/betel nut is left to dry
• Secondly, the cleared and dried de-husked areca nuts are fed into the seed roasting oven/machine and heated in the temperature of above 100 Degree Celsius. The roasting is done using firewood/palm kernel-based ovens/machines and the temperature of the flames is around 400 to 600 degrees Celsius. As a result, the betel nuts would be roasted well beyond 100 degrees Celsius, usually in the range of 130-150 degrees Celsius.
• Thirdly, the areca nuts are removed from the roasting oven and allowed to cool at normal room temperature, with the assistance of the cooling fans.
• Fourthly, when the areca nuts have cooled and attained normal room temperature, they are again fed back into the oven at enormous heat, so as to evenly roast the areca nut.
• This process is performed repeatedly, until the water content of the fresh areca nuts is reduced to 10 to 15 per cent. Thereby, the areca nut shrinks and becomes brittle. The process of repeatedly heating, roasting and cooling the areca nuts is to ensure that the areca nuts are quickly cooled and shrunk after thermal expansion, such that the roasted areca nuts have higher quality.

2.1.4 Applicants assert that, according to their records, the goods described above fall within the purview of CTH 2008, specifically categorized under sub-heading 2008 19 20 of the First Schedule of the Customs Tariff Act. For reference entry is reproduced as under:

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.

CTH 2008 19 20 — Other Roasted Nuts and Seeds

HSN explanatory note to Chapter 20 states that:

This chapter includes:

1. Vegetables, fruit, nuts and other edible parts of plants prepared or preserved by vinegar or acetic acid.

2. Vegetables, fruit, nuts, fruit-peel and other parts of plants preserved by sugar.

3. Jams, fruit jellies, marmalades, fruit or nut purees, fruit or nut pastes, obtained by cooking.

4. Homogenised prepared or preserved vegetables and fruit.

5. Fruit or vegetable juices, neither fermented nor containing added alcohol, or of an alcoholic strength by volume not exceeding 0.5% vol.

6. Vegetables, fruit, nuts and other edible parts of plants prepared or preserved by other processes not provided for in Chapter 7. 8 or 11 or elsewhere in the Nomenclature.

…………………

It includes, inter alia: (1) Almonds, Ground Nuts, Areca (or betel) nuts and other nuts, dry-roasted, oil-roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavors, spices or other additives.

2.1.5 The Applicant emphasizes that the explanatory notes serve as guiding principles in resolving disputes related to the classification of goods. These notes are particularly useful when interpreting specific chapters, addressing similar or competing entries, and have been consistently upheld in numerous judicial rulings:

• M.L. LTD V COMMISSIONER OF CUSTOMS 2010 (258) ELT 321 (SC).
• HOLOSTICK INDIA LTD V COMMISSIONER OF CENTRAL EXCISE, NOIDA 2015 (318) ELT 529 (SC).
• COLLECTOR OF CENTRAL EXCISE, SHILONG V WOOD CRAFT PRODUCTS LTD 1995(77) ELT 23 (SC)

2.1.6 Applicant further submits that as per the HSN explanatory note to Chapter 8 fruit 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 applicant states that as 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).

2.1.7 Indeed, the Hon’ble Customs Authority for Advance Rulings (CAAR) in Mumbai has already issued a ruling on a similar product, clarifying that the mentioned goods fall under CTH 20, specifically CTH 20081920, rather than CTH 8. This ruling was provided in the case of M/s Shahnaz Commodities International, Chennai (CAAR/Mum/ARC/44, 45 & 46/2022) dated 07.12.2022, Application no. AAR/Cus/APPL/70,77 & 78/2022, by the Office of the Commissioner of Customs CAAR-Mumbai.

2.1.8 Moreover, the customs authority contested this Advance Ruling in the Hon’ble High Court of Madras through CMA No. 600, 1206, and 1750 of 2023 – The Commissioner of Customs Chennai V M/s Shahnaz Commodities International P Ltd. However, the department’s plea was dismissed by the Hon’ble High Court in a judgment dated 01.08.2023.

2.1.9 The applicant also relies on the decision of the Hon’ble CAAR Delhi in the case of M/s A One Trades, J-3, S-4 Dilshad Colony East Delhi, Delhi (ruling no. CAAR/Del/A One/05/2024/715) dated 04.03.2024, Application no. 31/2023 dated 07.12.2023. In this ruling, the Authority determined that Roasted areca/betel nuts are classified under Custom Tariff Heading 2008, specifically under sub-heading 20081920, as “Other roasted nuts & seeds” of the First Schedule of the Customs Tariff Act, 1975.

2.1.10 A similar stance was taken by the Hon’ble CAAR Mumbai in the case of Universal lmpex (2023) 7 CENTAX 36 (AAR-Cus-Mum), where Roasted betel nuts were classified under CTH 2008, specifically under Sub-heading 20081920.

2.1.11 Hence, the subject goods i.e. Roasted areca nuts are squarely covered under the classification 2008 19 20 and cannot be covered under CTH 08 which has been stand taken by the customs authority before this Hon’ble Authority as well as before the Hon’ble High Court.

3. Comments of the ICD, Patparganj Commissionerate

(i) The Applicant is a valid entity bearing IEC No. ABKCS1017P as per the requirement under Section 28E(c) of the Customs Act;

(ii) As far as the applicability of the Proviso (1) of the Section 28-I (2) of Customs Act, 1962 is concerned, no such matter is pending before any officer in this office. Further, the office is not a party in any appeal on such matter pending before any Appellate Tribunal or Court;

(iii) The nature of activity cannot be verified due to non-provision of any details of the proposed activity.

(iv) The comments on the merits of the question in the application are:

The question in the application is “Whether Goods being “Roasted Areca Nuts (Whole), Roasted Areca Nuts (Split) & Roasted Areca Nut (Cut)” imported by the applicant from Countries- Burma (Myanmar), Indonesia, Sri Lanka and Singapore is classifiable under Chapter Sub-Heading 20081920 of the first schedule to the Customs Tariff Act, 1975?”

a. The applicant’s claim that roasting is not defined in the Customs Tariff Act, 1975 does not appear to be correct. Though roasting as a process is not defined, it appears to fall under `moderate heat treatment’ mentioned in Chapter Note 3 of Chapter 8, which is reproduced below-

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

(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.”

b. Further, applicant’s claim that after repeated roasting of the areca nuts at the temperature up to 130-150 degrees Celsius in a roasting oven due to which the water content is reduced to 10 to 15% appears to be a complete misrepresentation of facts. The applicant has claimed that after roasting water content comes down to 10 to 15 percent. Therefore, there does not seem to be a much difference between the roasted nuts and raw areca nuts in terms of temperature. Applicant did not provide any test report before the Advance Ruling Authority. Hence, it appears that the applicant did not provide the complete process before the CAAR and have misrepresented the facts. The applicant states that processes mentioned in Chapter 8 are different from the processes performed on impugned goods. Since the claimed process by the applicant is devoid of any test report and roasting is well inclusive in heat treatment mentioned in Chapter Note No.3 of Chapter 8 of Customs Tariff, the applicant’s contention does not hold any water. After roasting, the end product remains dried areca nut, which is well defined in Chapter 8 up to 6-digit level i.e.080280.

c. Further, under Chapter 8 of Customs Tariff, areca nuts, whole, split, ground and one residuary sub heading are accommodated under 08028010, 20, 30 and 90 respectively.

d. In the process flow to make roasted areca nut, one set of process are found to be intended for cleaning, the second set for heating and roasting. These processes appear to be covered by the Chapter Note 3 to Chapter 8 (supra). In the instant case, areca nuts after being roasted are cooled and this fact per se would not exclude the end-products from the scope of “dried nut”. Further, it is equally obvious that roasting or mere addition of certain additives for the limited purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of areca nut. Therefore, the process to which raw areca nuts have been subjected as per process flow submitted by the applicant is squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Notes. Hence at the end of the said processes, the areca nuts retain the character of areca nut and do not qualify to be considered as “preparations” of areca nut, which is sine qua non for the goods to be classifiable under Chapter 20. To be classified under Chapter 20 there should be some preparation as the Chapter Heading reads as “Preparations of vegetables, fruit, nuts or other parts of plants”, mere roasting of areca nut does not render the product to be distinctive as claimed by the applicant or does not alter the character of the original good. Hence, it remains the areca nut and is rightly classifiable under Chapter 08. According to Cambridge Dictionary, “Preparation is a mixture of substances, often for use as a medicine”. According to Collins Dictionary “A preparation is a mixture that has been prepared for use as food, medicine, or a cosmetic.” However, in the process flow, it is evident that there is neither any mixture of products nor any change in the original good which tantamount to no preparation. Hence, the impugned goods rightly classified under Chapter 080280.

e. The applicant has claimed that dry Roasted Areca Nuts are specifically covered under Chapter Heading 2008. The relevant portion of the chapter heading 2008 is reproduced below:

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, grounded-nuts and other seeds, whether or not mixed together:

2008 19 — Other, including mixtures

20081920— Other roasted nuts and seeds

This is another misrepresentation of facts since the Chapter 20 cannot and does not cover any nuts or fruits prepared or preserved by the processes specified under Chapter 8 as per the Chapter Note 1 of the Chapter 20 and the Chapter Note 3 of Chapter 8 includes roasting under ‘moderate heat treatment’, hence the impugned goods cannot be classified under Chapter 20. The said chapter note is reproduced below:

This chapter does not cover:

a. Vegetables, fruit or nuts, prepared or preserved by the processes specified in Chapter 7, Chapter 8, or Chapter 11;

b. Vegetable fats and oils (chapter 15);

c. Food preparations containing more than 20% by weight of sausage, meat, meat offal, blood, insects, fish or crustaceans, molluscs or other aquatic invertebrates, or any combination thereof (Chapter 16)

d. Bakers’ wares and other products of heading 1905; or

e. Homogenized composite food preparations of heading 2104.

Further, heading 2008 covers fruits, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter. As the Areca nut already defined under Chapter 08 (including roasted/heated/raw, in any form), hence, the subject goods rightly are classifiable under CTH 080280.

f. Further, as per Rule 3 (a) of the General Rules for the Interpretation of the Harmonized System since the product is more specifically classified under CTH 080280, and classification under Chapter 2008 and Chapter 2106 is unwarranted.

When by application of Rule2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

g. It is pertinent to mention that the Chapters are organized as per evolution which is evident by the fact that the edible nuts and fruits are classified under Chapter 8, preparations of vegetables, fruits, nuts or other parts of plants under Chapter 20 and miscellaneous edible preparations classified under Chapter 21. Hence, since the roasted areca nut which did not undergo any preparation is rightly classifiable under Chapter 080280.

h. The CESTAT judgment in case of M/s. S.T. Enterprises and M/s. Ayush Business Overseas vs Commissioner of Customs (VII) in Customs Appeal No. 40002 and 40003 of 2021 respectively, is applicable mutatis mutandis to the present case, wherein the question decided in the said case was classification of “boiled betel nuts” under CTH 08028010, which was affirmed by Hon’ble Supreme Court vide judgment dated 19.03.2021 in civil appeal nos.850-851 of 2021. Though the process dealt with by the Hon’ble Tribunal was not exactly the same, the principle involved holds relevance. When the boiled supari can be classified under Chapter 08 on the grounds that boiling does not alter the original characteristics of the goods, the same would apply in the preset case also as roasting alone would not alter the character of the goods and therefore, roasted areca nut should be classified under Chapter 08 even on this principle also.

i. Several advance ruling applications are being filed seeking application of the Roasted Areca/Betel nut to avoid classification under Chapter 08 as there is a Minium Import Price as well as a tariff rate applicable which is regularly revised by DGFT and CBIC respectively. These applications are being submitted to circumvent the Minimum Import Price and increasing tariff values by legalizing betel nut import through mis-declaration and mis­classification. The CAAR may not entertain such applications considering that several advance rulings have already rejected the classification of betel nut under chapter 21 in the interest of the local areca nut farmers and to safeguard the interest of revenue.

j. In this regard, it is submitted that as per Chapter Note 3 of Chapter 8 as long as the goods retain the character of dried nut, they remained classified under CTH 080280. Since the Areca nut which has undergone the processes wherein it does not lose its original character i.e. in raw form, the item areca nut shall be covered under CTH 080280.

3.1 In view of above, in the instant case, it appears that the instant application does not fall under the purview of the sub-section (2) of section 28H of the Customs Act, 1962. Therefore, the instant application does not appear to be maintainable.

4. A Personal Hearing was conducted on 24.06.2024, whereby the authorized person of the applicant including the representative of the applicant participated in the hearing and reiterated the position taken in the original application. Further, they also produced a para-wise rebuttal of the comments of the Port Commissionerate in the form of a written submission.

5. WRITTEN SUBMISSIONS AT THE TIME OF PERSONAL HEARING ON 24-06-2024

In the matter of Shree Ananta Overseas Private Limited as per application submitted on 14­05-2024

5.1  We present ourselves for PH before your good office at NCH, New Delhi on 24-06­2024. We reiterate our submissions already made in our CAAR-01 application made on 14­05-2024. To reiterate, we intend to import from ICD, Patparganj & other ICDs, under the jurisdiction of Commissioner (ICD, PPG), masticatory items, namely “Roasted Areca (Betel) Nuts” Whole or Cut from overseas suppliers based in Myanmar, Sri Lanka, Indonesia, Singapore etc.

5.2 As explained in our application in details, the Roasted Nuts are prepared from raw areca nut by processes namely, de-husking, cleaning (for removal of visual impurities), roasting in roasting oven (even up to temperature 130 to 150 degrees Celsius), thereafter cooling under fans, again roasting and cooling (complete process continues for 2-3 days).

5.3 At the end of the above processes, the moisture(water) content in the nuts comes down to 10 to 15 percent and nuts shrink in size as also become brittle. We confirm and reiterate at the outset that the processes are exactly similar as it obtains in Para 2.3 of the Advance Ruling Order dated 04-03-2024 passed by Learned CAAR, New Delhi in the case of applicant M/s A One Traders, Delhi.

5.4 As we are similarly placed, we pray that the ratio of above Ruling of Learned CAAR is squarely applicable to us. We stake our rightful claim for classification of Roasted Nut to be imported by us under CTH 20081920 of the CTA, 1975 in view also of the Explanatory Notes of the Harmonised Commodity Description and Coding System in relation to Chapter 20 as is being stated hereunder:

20.08- 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:

2008.19—Other, including mixtures

This heading covers fruits, nuts and other edible parts of plants…………….. of this chapter.

It includes, inter-alia:

(1) Almonds, ground-nuts, areca (betel) nuts, dry-roasted, oil- roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives.

5.5 As our products are Roasted Areca (Betel) Nut, the goods merit classification under heading 2008.19 as per the HSN. We also submit that as per rule 3(a) of the Rules of Interpretation, the specific heading shall prevail over any general heading. As there is specific entry as 20081920 in the CTA 1975, the goods ” Roasted Areca( Betel) Nut ” deserve classification herein.

5.6 We also wish to draw attention of learned CAAR to the case laws cited by us along with our application. Learned CAAR, Mumbai [(2023) 4 Centax 231 ( A.A.R.-Cus-Mum) had given a Ruling in favour of Roasted Areca Nuts. The Commissioner of Customs, Chennai II preferred an appeal before High Court of Judicature at Madras against the The matter was examined in depth by the High court. The High Court dismissed the appeal of the Commissioner vide order dated 01.08.2023 [ 2023(386)E.L.T. 214( Mad.)] in the matter of Commissioner of Customs, Chennai II Vs. Shahnaz Commodities International Pvt. Ltd and affirmed the Ruling of the AAR. The para 16 of the judgment giving observation of the High Court is very relevant, which has categorically ruled that Roasted Areca/ Betel Nut would merit classification under CTH 20081920 in terms of HSN as well as Customs Rules of Interpretation that specific entry would prevail over a general entry.

a. CAAR, Mumbai in the matter of M/s Universal Impex [2023 (385) E.L.T 587 ( A.A.R.-Cus-Mum)] has ruled vide Ruling dated 12-05-2023 that Roasted Betel Nut would merit classification under CTH 20081920 of CTA 1975. In para 4.8 of the Ruling, the CAAR has distinguished between the processes mentioned in Chapter 8 vis-a vis Roasting of Betel Nut as stated in chapter 20. It has been held that as Roasting is not defined under Customs tariff, the common trade parlance should be taken into account and accordingly the Ruling states that Roasting is a severe heat treatment process.

b. CAAR , Delhi in the matter of M/s A One Traders vide their Ruling dated 04-03-2024 have ruled that roasted betel nut would merit classification under CTH 20081920. The processes in respect of M/s A One Traders ( as in para 2.3 of ruling) are identical to the treatment processes to be done in respect of impugned goods to be imported by us and for which we are seeking advance ruling.

c. We also wish to draw reference of learned CAAR in respect of judgment dated 07-02­2008 of the Apex Court copy now being submitted at the time of PH) in which the Apex Court examined a case of M/s Phil Corporation Ltd., who were clearing goods( Roasted Nuts) under chapter 8 in terms of the HSN based Central Excise Tariff. The court ruled that roasted nut would fall under chapter 20 of erstwhile Central Excise Tariff. It may be stated the Central Excise Tariff is aligned with HSN.

5.7 We are not at all in agreement with the report/comments of the jurisdictional Commissioner vide their latter dated no VIII( 06)/ ICD/PPG/Rev/Misc/10/23-24/4959 dated 14.06.2024 and its enclosure letter dated 31.05.2024. Our brief comments on the latter dated 31.05.2024 are stated below.

Para 2.

(i) Need no comment.

(ii) Need no comment.

(iii) Denied that nature of proposed activity has not been provided. It is clearly stated in serial 6 of the application that nature of activity is the proposed import of ‘Roasted Areca ( Betel) Nut’.

(iv) Yes, we intend to import ‘Roasted Areca ( Betel) Nut’ from the stated foreign countries.

(a) The Commissioner has stated that it “does not appear” that Roasting is not defined under CTA 1975. So, it clear that Roasting as such is not defined. Thus we have to go by common understanding and parlance. Further it is again stated by the Commissioner in respect of impugned goods “that it appears to fall under moderate heat treatment”. While they (Commissioner)themselves have doubt in this matter, it may be stated that heating in roasting oven up to temperature of 130­150 degree Celsius cannot be treated to be moderate heat treatment as temperature going up to 130-150 degree Celsius is not moderate.

(b) All averments made in this para are denied. In this para, it has been stated without any basis that on Roasting the water content does not come down to 10-15 percent. It has again been stated that Roasting is covered under moderate heat treatment. This is denied as also stated in the preceding para also. Roasted Areca Nuts are other that raw areca nut and for the same reason a new chapter/tariff heading has been created in HSN/ CTA 1975, which should be appreciated and accepted as such.

(c), (d), (e)- All averments made in these paras are denied. It is denied that Roasted Areca Nuts will fall under any heading of Chapter 8 to CTA 1975. Moderate heat treatment has been wrongly equated with Roasting as Roasting involves much higher temperature up to 130-150 degree Celsius. It should be appreciated that there are repeated putting of impugned goods in roasting overa cooling, for 2-3 days, which makes the product different from raw areca nut of Chapter 8. Due to these, the water content gets reduced to 10-15 percent. Areca nut shrinks and becomes brittle. This can be easily checked with import goods. It is to also state that the chapter 20 covers ‘Fruits, nuts and other edible parts of plants, otherwise prepared or preserved’. So, ‘prepared’ here should not be confused with preparation as stated in the comments.

(f) It is denied that in terms of Rules of Interpretation, the goods are liable to be classified under two or more heading. However, it is admitted that specific heading shall prevail over a general heading. In terms of Rule 3(a), the specific heading for Roasted areca nut is 20081920, which would thus prevail for classification of the impugned goods.

(g) As per above averments, it is denied that Roasted Areca Nuts would merit classification under chapter 08 of CTA, 1975 as already stated in details in foregoing paras.

(h) It is denied that CESTAT judgment in respect of M/s S.T. Enterprises and Ayush Business Overseas Vs. Commissioner of Customs has any application in our case in as much as the judgment covered boiled betel nuts, which hardly go for any change vis -a -vis raw betel nut. Our case is different for which we have enclosed relevant case laws as applicable.

(i) We deny that we have filed this application to circumvent Minimum Import Price etc. We also deny that any misdeclaration or mis-classification shall be indulged into by us.

(j) We deny that goods (Roasted Areca Nut) would merit classification under chapter 8. Rather they would fall under CTH 20081920 as Roasted Areca Nut are specifically covered here both as per HSN and CTA 1975.

6. Analysis, Interpretation & Ruling

6.1 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 Areca nut (whole) and Areca nut (cut) on the basis of the information on record as well as the existing legal framework under the first schedule of the Customs Tariff Act, 1975.

6.2 The brief grounds of the applicant are as follows:

6.2.1 The goods in the present application are “Roasted Areca Nuts (Whole) and Roasted Areca Nuts (Cut)”. The applicant intends to import “Roasted Areca Nuts/Betel Nuts” from Burma (Myanmar), Indonesia, Sri Lanka and Singapore. Since the process of “Roasting” is not specifically defined in the Customs Tariff Act nor in the HSN explanatory notes or in its Chapter Notes, clarification is being sought from this Advance Ruling Authority.

6.2.2 Further, the preparation time of “Roasted Areca Nut” has also drastically reduced, in comparison with the manual method of preparation.

a. Firstly, the raw areca nut is de-husked and its outer shell is removed. Thereafter, the de-husked nut is scattered to check for any visible impurities and the same is cleaned, pursuant to which the raw de-husked areca nut/betel nut is left to dry.

b. Secondly, the cleared and dried de-husked areca nuts are fed into the seed roasting oven/machine and heated in the temperature of above 100 Degree Celsius. The betel nuts would be roasted well beyond 100 degrees Celsius, usually in the range of 130-150 degrees Celsius.

c. Thirdly, the areca nuts are removed from the roasting oven and allowed to cool at normal room temperature, with the assistance of the cooling fans.

d. Fourthly, when the areca nuts have cooled and attained normal room temperature, they are again fed back into the oven at enormous heat, so as to evenly roast the areca nut.

e. This process is performed repeatedly, until the water content of the fresh areca nuts is reduced to 10 to 15 per cent. Thereby, the areca nut shrinks and becomes brittle. The process of repeatedly heating, roasting and cooling the areca nuts is to ensure that the areca nuts are quickly cooled and shrunk after thermal expansion, such that the roasted areca nuts have higher quality.

6.2.3 The abstract about Roasted Areca Nut is as follows:

a. The initial roasting time used to be around 7 to 8 days, but with mechanization the process of roasting and cooling is completed in about 2 to 3 days.

b. Pursuant to roasting, the areca nut undergoes a drastic change in its appearance as well as chemical characteristics on account of the roasting process. It has been established through research that the Tannin and Arecoline content of raw areca nuts get substantially changed by subjecting the same to roasting.

c. As per the article titled “Estimation of Arecoline content of various forms of areca nut preparations by high-pressure thin-layer chromatography” substances viz. Polyphenols (flavonols, tannins) constitute a large proportion of the dry weight of the nut, their content in areca nut vary depending on the degree of maturity and its processing method.

d. Roasting is not aimed at additional preservation or stabilization or to improve or maintain its appearance. Therefore, roasted areca nut is a distinctive product, more specifically classifiable under Chapter 20 of the Customs Tariff Act, 1975 and Chapter Notes in HSN.

e. Roasted Areca Nut without the addition of any ingredients added to it is saleable in the Indian market in various forms like tukda (pieces) roasted betel nut as well as shredded roasted betel nut. These roasted betel nut products are sold in the market without any additives or without subjecting to any other preparation than the roasting process. These roasted betel nut variants are approved by the Government agency viz. FSSAI.

6.2.4 Therefore, the process and the end product viz “Roasted Areca Nut Whole and Roasted Areca Nut Cut” is most suitable to be classified under Chapter 2008 19 20 of the CTH 1975. In the light of above the question on which advance ruling has been sought is, “Whether goods sought to be imported, qualify to be classifiable under chapter/heading 2008 19 20 as Roasted Nuts?”

6.3 The Applicant has asserted that, according to their records, the goods described above fall within the purview of CTH 2008, specifically categorized under subheading 2008 19 20 of the First Schedule of the Customs Tariff Act. For reference entry is reproduced as under:

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.

CTH 2008 19 20 — Other Roasted Nuts and Seeds

HSN explanatory note to Chapter 20 states that: This chapter includes:

1. Vegetables, fruit, nuts and other edible parts of plants prepared or preserved by vinegar or acetic acid.

…………………..

6. Vegetables, fruit, nuts and other edible parts of plants prepared or preserved by other processes not provided for in Chapter 7, 8 or 11 or elsewhere in the Nomenclature.

…………………..

It includes, inter alia: (1) Almonds, Ground Nuts, Areca (or betel) nuts and other nuts, dry-roasted, oil-roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavors, spices or other additives.

6.3.1 Applicant further submits that as per the HSN explanatory note to Chapter 8 fruit 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 applicant states that as 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).

6.3.2 The CAAR Mumbai has already issued a ruling on a similar product, clarifying that the mentioned goods fall under CTH 20, specifically CTH 20081920, rather than CTH 8. This ruling was provided in the case of [Ws Shahnaz Commodities International, Chennai (CAAR/Mum/ARC/44, 45 & 46/2022) dated 07.12.2022, Application no. AAR/Cus/APPL/70, 77 & 78/2022, by the Office of the Commissioner of Customs CAAR-Mumbai. Moreover, the customs authority contested this Advance Ruling in the Hon’ble High Court of Madras through CMA No. 600, 1206, and 1750 of 2023 – The Commissioner of Customs Chennai V M/s Shahnaz Commodities International P Ltd. However, the department’s plea was dismissed by the Hon’ble High Court in a judgment dated 01.08.2023.

6.3.3 The applicant has also relied on the decision of the CAAR Delhi in the case of M/s A One Trades, J-3, S-4 Dilshad Colony East Delhi, Delhi (ruling no. CAAR/Del/A One/05/2024/715) dated 04.03.2024, Application no. 31/2023 dated 07.12.2023. In this ruling, the Authority determined that roasted areca/betel nuts are classified under Custom Tariff Heading 2008, specifically under sub-heading 20081920, as “Other roasted nuts & seeds” of the First Schedule of the Customs Tariff Act, 1975.

6.3.4 A similar stance was taken by the CAAR Mumbai in the case of Universal lmpex (2023) 7 CENTAX 36 (AAR-Cus-Mum), where roasted betel nuts were classified under CTH 2008, specifically under Sub-heading 20081920.

6.4 The Comments of the ICD, Patparganj Commissionerate is summarized below:

(i) The Applicant is a valid entity bearing IEC No. ABKCS1017P as per the requirement under Section 28E(c) of the Customs Act;

(ii) As far as the applicability of the Proviso (1) of the Section 28-I (2) of Customs Act, 1962 is concerned, no such matter is pending before any officer in this office. Further, the office is not a party in any appeal on such matter pending before any Appellate Tribunal or Court;

(iii) The nature of activity cannot be verified due non provision of any details of the proposed activity.

(iv) The comments on the merits of the question in the application are:

a. The applicant’s claim that roasting is not defined in the Customs Tariff Act, 1975 does not appear to be correct. Though roasting as a process is not defined, it appears to fall under `moderate heat treatment’ mentioned in Chapter Note 3 of Chapter 8.

b. Further, applicant’s claim that after repeated roasting of the areca nuts at the temperature up to 130-150 degrees Celsius in a roasting oven due to which the water content is reduced to 10 to 15% appears to be a complete misrepresentation of facts. Therefore, there does not seem to be a much difference between the roasted nuts and raw areca nuts in terms of temperature. Applicant did not provide any test report before the Advance Ruling Authority. After roasting, the end product remains dried areca nut, which is well defined in Chapter 8 up to 6-digit level i.e.080280.

c. Further, under Chapter 8 of Customs Tariff, areca nuts, whole, split, ground and one residuary sub heading are accommodated under 08028010, 20, 30 and 90 respectively.

d. In the instant case, areca nuts after being roasted are cooled and this fact per se would not exclude the end-products from the scope of “dried nut”. Hence at the end of the said processes, the areca nuts retain the character of areca nut and do not qualify to be considered as “preparations” of areca nut, which is sine qua non for the goods to be classifiable under Chapter 20. To be classified under Chapter 20 there should be some preparation as the Chapter Heading reads as “Preparations of vegetables, fruit, nuts or other parts of plants”, mere roasting of areca nut does not render the product to be distinctive as claimed by the applicant or does not alter the character of the original good.

e. The applicant has claimed that dry Roasted Areca Nuts are specifically covered under Chapter Heading 2008. This is another misrepresentation of facts since the Chapter 20 cannot and does not cover any nuts or fruits prepared or preserved by the processes specified under Chapter 8 as per the Chapter Note 1 of the Chapter 20 and the Chapter Note 3 of Chapter 8 includes roasting under ‘moderate heat treatment, hence the impugned goods cannot be classified under Chapter 20.

f. It is pertinent to mention that the Chapters are organized as per evolution which is evident by the fact that the edible nuts and fruits are classified under Chapter 8, preparations of vegetables, fruits, nuts or other parts of plants under Chapter 20 and miscellaneous edible preparations classified under Chapter 21. Hence, since the roasted areca nut which did not undergo any preparation is rightly classifiable under Chapter 080280.

g. The CESTAT judgment in case of M/s. S.T. Enterprises and M/s. Ayush Business Overseas vs Commissioner of Customs (VII) in Customs Appeal No. 40002 and 40003 of 2021 respectively, is applicable mutatis mutandis to the present case, wherein the question decided in the said case was classification of “boiled betel nuts” under CTH 08028010, which was affirmed by Hon’ble Supreme Court vide judgment dated 19.03.2021 in civil appeal nos.850-851 of 2021. Though the process dealt with by the Hon’ble Tribunal was not exactly the same, the principle involved holds relevance.

h. In this regard, it is submitted that as per Chapter Note 3 of Chapter 8 as long as the goods retain the character of dried nut, they remained classified under CTH 080280. Since the Areca nut which has undergone the processes wherein it does not lose its original character e. in raw form, the item areca nut shall be covered under CTH 080280.

In view of above, in the instant case, it appears that the instant application does not fall under the purview of the sub-section (2) of section 28H of the Customs Act, 1962. Therefore, the instant application does not appear to be maintainable.

6.5 In the additional submissions made by the applicant, it has been confirmed that the processes are exactly similar as it obtains in Para 2.3 of the Advance Ruling Order dated 04­03-2024 passed by CAAR, New Delhi in the case of applicant M/s A One Traders, Delhi.

6.5.1 The classification of Roasted Nut under CTH 20081920 of the CTA, 1975 in view also of the Explanatory Notes of the Harmonised Commodity Description and Coding System in relation to Chapter 20 as is being stated hereunder:

20.08- 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:

…………………….

2008.19—Other, including mixtures

…………………….

……………

This heading covers fruits, nuts and other edible parts of plants………………. of this chapter.

It includes, inter-alia:

(2) Almonds, ground-nuts, areca (betel) nuts, dry-roasted, oil- roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours. spices or other additives.

6.5.2 The CAAR, Mumbai in the matter of M/s Universal Impex [2023 (385) E.L.T 587 (A.A.R.-Cus-Mum)] has ruled vide Ruling dated 12-05-2023 that Roasted Betel Nut would merit classification under CTH 20081920 of CTA 1975. In para 4.8 of the Rulin•, the CAAR has distinguished between the processes mentioned in Chapter 8 vis-a vis Roasting of Betel Nut as stated in chapter 20.

6.5.3 The CAAR , Delhi in the matter of M/s A One Traders vide their Ruling dated 04-03­2024 have ruled that roasted betel nut would merit classification under CTH 20081920.

6.5.4 Reference is also drawn to the Ruling of CAAR in respect of judgment dated 07-02­2008 of the Apex Court in which the Apex Court examined a case of M/s Phil Corporation Ltd., who were clearing goods( Roasted Nuts) under chapter 8 in terms of the HSN based Central Excise Tariff. The court ruled that roasted nut would fall under chapter 20 of erstwhile Central Excise Tariff. It may be stated the Central Excise Tariff is aligned with HSN.

6.5.5 The CESTAT judgment in respect of M/s S.T. Enterprises and Ayush Business Overseas Vs. Commissioner of Customs has any applicability in as much as the judgment covered boiled betel nuts, which hardly go for any change vis -a -vis raw betel nut.

6.6 The applicant has answered all the queries raised by the Jurisdictional Commissionerate during the Personal Hearing. The queries raised regarding the method of packing of the goods in question and the moisture content have been logically answered by the applicant in its rebuttal submitted in this office. I concur with the arguments submitted by applicant in its rebuttal.

6.6.1 It is an established fact that in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Tariff Act. The case of Commissioner of Customs & Central Excise vs Phil Corporation Ltd in Appeal (civil) 2215 of 2002 dated 07/02/2008, is directly relevant and applicable in the instant case of the applicant. While delivering Phil Corporation Judgment honourable Supreme Court has clearly spelt out importance of HSN Explanatory notes in deciding the matters of classification placing reliance on the judgment of Supreme Court in the case of Collector of Central Excise, Shillong v. Wood Craft Products Ltd. (1995) 3 SCC 454. Honourable Supreme Court in paragraph 12 of the said judgment observed as under: – “Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of the Central Excise Tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act.”

6.6.2 Chapter 20 of the Tariff covers the Preparations of vegetables, fruit, nuts or other parts of plants. As per Chapter Note 1 (a) to Chapter 20, the Chapter does not cover vegetables, fruits or nuts prepared or preserved by the processes specified in Chapters 7, 8 or 11. Therefore, vegetable, fruit or nut products or preparations made other than by the processes specified in Chapters 7, 8 or 11 are classifiable in Chapter 20. The processes specified in Chapters 7, 8 or 11 mainly include freezing, steaming, boiling, drying, provisionally preserving and milling. Therefore, any vegetable, fruit, nut or edible parts of a plant which is prepared or preserved by any other process than these are liable to be classified under Chapter 20.

6.6.3. The Honourable High Court of Madras in its recent judgement on 01.08.2023, has upheld the classification of Roasted Betel Nuts under CTH 2008 19 20. The Honourable High Court went on to analyse the various aspects in determining classification and summed up that:

(a) Roasting is a process treated to be distinct from the process of boiling and drying. in fixing the classification in respect of betel/areca nut under CTH.

(b) Roasted betel/areca nut having been specifically classified under CTH 2008 19 20, the attempt to classify under CTH 08 02 80 would fall foul of the settled rule of construction that specific entry would prevail over general entry.

(c) HSN explanatory notes is normally a safe guide in determining classification under CTH. Roasted areca / betel nut having been mentioned in CTH 2008 19 20 under HSN.

(d) When there is a specific entry covering a product/commodity, the test of common parlance is irrelevant in determining classification.

(e) There is considerable force in the submission that the classification as far as possible must be in conformity and in consonance with the HS tory Notes.

6.6.4 In this judgement the Hon’ble High Court has stated about the relevance of CAAR Rulings relied on by the Jurisdictional Commissionerate. Relevant para of the said judgement is reproduced verbatim as follows:-“on perusal of the Rulings relied upon by the appellant, we find that the same did not deal with roasted areca / betel nuts, but boiled/ dried nuts and in some cases, the question was whether the commodity in issue was a preparation of betel nut. However, the cases did not deal with roasted betel/ areca nut nor was CTH 20 considered. Thus, the above Rulings may have no relevance.”

6.6.5 I find that the issue dealt with i.e. Classification of “Roasted betel nuts” in the judgement of the Honourable High Court of Madras is of exactly the same issue that is impugned in this application and therefore is squarely applicable to this case.

7. On the basis of foregoing, I am of the view that the Roasted areca nuts (whole, cut or ground) fall under Custom Tariff Heading 2008, specifically under CTI 2008 19 20 ‘Other roasted nuts & seeds’ of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975.

8. I rule accordingly.