Case Law Details
In re Wood Tech Industries (CAAR Delhi)
In the case of In re Wood Tech Industries, the Customs Authority of Advance Ruling (CAAR), Delhi, reviewed the classification of “Roasted Areca Nuts (Whole, Split, and Cut)” under the Customs Tariff Act, 1975. The applicant, Wood Tech Industries, sought clarification on whether these roasted areca nuts should be classified under Chapter Heading 2008 1920. The applicant argued that the roasting process, which involves repeated cycles of heating and cooling at high temperatures, fundamentally alters the chemical composition and physical characteristics of the nuts, making them distinct from raw or dried areca nuts classified under Chapter 8. Roasted areca nuts are suitable for direct consumption and undergo a high-heat treatment, unlike the moderate heat treatment or preservation methods covered in Chapter 8. Citing the Harmonized System Nomenclature (HSN) explanatory notes, the applicant contended that roasted nuts, including areca nuts, fall under Chapter 2008 due to the specific process of dry roasting. The ruling reaffirmed this classification, distinguishing roasted nuts as a separate product from raw or dried areca nuts.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, DELHI
The Applicant is a partnership concern having two partners namely Sh. Vinod Aggarwal and Sh. Mithun Kumar. The Applicant wants to import/export the goods and for this purpose, is having I EC AAEFW4396B. The Applicant is also registered with GST department having registration no. 01AAEFW4396B1ZF. That the Applicant intends to import “Roasted Areca Nuts (Whole), Roasted Areca Nuts (Split) and Roasted Areca Nuts (Cut)” from outside India. The Applicant is filing the present application seeking proper clarification regarding classification of goods. That the processes carried out to manufacture “Roasted Areca Nuts” are as under: a) De-husking the raw areca nut and drying the same b) Above areca nuts are put into oven for roasting. Areca nuts are roasted at temperature ranging around 1500 degree. Roasting is done using firewood/palm kernel based oven in need roasting machine under the temperature of flames around 600 Degree Celsius; c) After roasting in oven, areca nuts are taken out from oven and left open in room temperature; d) Again areca nuts are put in oven for roasting. The said process takes place again and again until water contents goes below 6%; e) Fresh areca nut is repeatedly heated, roasted and cooled to ensure higher quality. Roasting time is around 2-3 days; f) Thereafter, polishing process takes place and thereafter packaging of roasted areca nut.
1.1 That fresh areca nut after undergoing the process of roasting, became a different product as far as appearance and chemical characteristics are concerned. Therefore, raw areca nuts and roasted areca nuts are two distinct products. After roasting, areca nuts became suitable for immediate consumption and used for eating directly as well as with Paan (Betel Leaf). That the Applicant is of the bonafide opinion that “Roasted Areca Nut” are classifiable under Chapter Heading 2008 and more specifically under Chapter Entry 2008 1920. The Applicant is thus, filing the present application to have advance ruling on following issue:
“Whether the goods sought to be imported i.e. Roasted Areca Nut [Whole/Split/Cuts is classifiable under Chapter Heading 2008 1920 of the Customs Tariff Act, 1975.”
1.2 That classification of a product is determined on the basis of general rules for the interpretation, Section Notes and Chapter Notes. As per Rule 1 of the General Rules for the interpretation, classification shall be determined on the basis of the headings and any related section or chapter notes. Thus, Section Notes and Chapter Notes are binding in nature. That as per Note 2 & 3 of Chapter 8:
“2. Chilled fruits and nuts are to be classified in the same headings as the corresponding fresh fruits and nuts.
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 additional of sorbic acid or potassium sorbate);
(b) To improve or maintain their appearance (for example, by addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nuts.”
1.3 On perusal of above chapter notes, it comes out that even after chilling process. product i.e. fruit & nuts are to be classified under chapter 08 only. Further, the product classified in chapter 08 may be subject to rehydration, heat treatment, sulphuring, addition of sorbic acid or potassium sorbate for the purpose of additional preservation or stabilisation and to improve or maintain their appearances. Thus, the processes mentioned in chapter 8 includes chilling, steaming, boiling and adding of ingredients like Sulphur, sorbic acid, potassium sorbate, vegetable oil or glucose syrup.
1.4 However, for obtaining the product in question, roasting process is done which is nowhere included in chapter 8 as discussed above. The process of roasting (dry/oil/fat) as referred in chapter 20 is completely different from process stated in chapter 8. Thus, roasted areca nuts are not included in chapter 8 and appropriately classifiable under chapter 20. Chapter 8 includes the process of moderate heat treatment whereas chapter 20 includes process of roasting which involves high excessive heat treatment. That as per chapter note 3, processes of dehydration, drying and addition of some ingredients, heat treatment are meant for additional preservation or stabilization or to improve/maintain the appearance of the product. Process of roasting is not done for additional preservation or stabilization or to maintain, improve the appearance, Roasting process is done for immediate consumption of areca nut and it also changes the appearance. And chemical composition of the product. Therefore, a new product emerges after roasting process. After processing of roasting, there is visible deposition of an ash- like substance on the outer surface of the Areca nut. Tannin and Arecoline content of raw areca nut gets substantially changed by subjecting the same to roasting. Tannin contents is highest in unripe areca nut and decreases significantly after roasting. Roasting of nuts also made it crispy by changing its internal structure as well as chemical changing of the ingredients of the nuts by reducing of arecoline by Homarcoline. Process of roasting is controlled to the extent of converting raw areca nut to roasted areca nut of given standard. Thus, roasted areca nut is clearly distinct product of areca nut provided in Chapter 8.
1.5 That was submitted above, processes carried out on the product in question do not find place in processes mentioned in Note 3 of Chapter 8. As per Chapter Note 1(a) to Chapter 20, Chapter does not cover vegetables, fruits or nuts, prepared or preserved by the processes specified in Chapter 7, 8 or 11 and therefore, are classifiable under chapter 20 only. That as per HSN explanatory notes, heading 2008 covers fruit/nuts/edible parts of plants, whole/piece/crushed, prepared or preserved otherwise than by any process specified in other chapters or in the preceding headings of this chapter. As submitted earlier, processes carried out in the present case are different from processes prescribed under chapter 8. Thus, the goods in question clearly fall under chapter heading 2008. That as per HSN explanatory notes, chapter heading 2008 includes, areca nuts, dry-roasted, oil roasted or fat-roasted. Our product is dry-roasted areca nut without any dispute and thus, rightly classifiable under chapter heading 2008 in view of HSN explanatory notes.
1.6 It is worthwhile to mention that HSN is great tool/guide for classification of a product and has great importance as mentioned in various judgments of Hon’ble Supreme Court and Tribunal. Thus, HSN has persuasive value and needs to be considered in case of any ambiguity in respect of classification. That the contentions of the Applicant is fully supported with judgment of Hon`ble Madras High Court in case of Commissioner of Customs. Chennai-II Vs. Shahnaz Commodities International Pvt. Ltd. 2023 (386) ELT 214 (Mad) in which Hon’ble High Court has dismissed the writ petition filed by the department against the Advance Ruling given by Advance Authority, Mumbai and has upheld the classification of roasted areca nut under chapter heading 2008. That the Applicant seeks leave to add/ amend /modify/ substitute / delete any submission or grounds at the time of hearing or before final conclusion.
2. Records of the personal hearing in the matter: –
In the instant case, the personal hearing was conducted on 04.09.2024 in Audio Visual Mode, wherein the authorized representative attended virtually. The authorized representative of the applicant reiterated the points that had already been submitted with the application for advance rulings.
3. The AR of the applicant submitted additional submissions to the comments of the concerned custom port Commissionerate, which are as under: – opposed for the advance ruling as sought by the applicant for the goods i.e. roasted areca nut under CTH 20081920. That it is further to add that the roasting falls under the process of Moderate Heat Treatment which is mentioned under Chapter Note 3 of Chapter 8 which examined as under and found that the term “Moderate heat Treatment” moisture content in ‘Raw areca nut’ is anywhere between 10% to 15%. After, the process of drying the moisture content is reduced to a maximum of 6% to 7%. Further any amount of drying or moderate heat treatment cannot remove the moisture content below the said level of 6%. Further, only by the process of roasting, by use of roasting ovens /furnace, the moisture content in “Roasted Areca Nut” is brought below 4% by process of competing of multiple cycle of heating and cooling of the nuts at room temperature. The roasting of the nuts also made it crispy by changing its internal structure as well as chemical changing of the ingredients of the nuts by reducing of arecoline by Homarcoline.
3.2 That 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. Heading 2008 covers Fruit, 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. Roasting is a process used for bringing in to existence roasted nuts and as discussed earlier the processes mentioned in chapter 8 do not cover roasting process, therefore, the Roasted Areca Nut is totally different from Dry Areca Nut.
3.3 That the processes as mentioned in Chapter 8 includes chilling, steaming, boiling, drying and provisionally preserving. It does not specifically include the process of roasting. Here it is important to understand the difference between the processes of moderate heat treatment & dehydrating/drying referred in chapter 8 and processes of dry roasting, oil-roasting and fat- roasting referred in chapter 20. The terms dry-roasting. oil roasting and fat-roasting however are not defined in the Customs Tariff Act, 1975. Therefore, these terms have to be understood in a commonly accepted sense. The Hon’ble Apex Court in the case of Alladi Venkateswarlu v. Government of Andhra Pradesh 1978 AIR 945 held that “the commonly accepted sense of a term should prevail in construing the description of an article of food. In common trade parlance, “drying is a method of food preservation by the removal of water content. On the other hand, “roasting” means the excess or very high heat treatment that produces fundamental chemical and physical changes in the structure and composition of the goods, bringing about a charred physical appearance. Therefore, drying is a moisture removal process involving methods such as dehydration, evaporation. etc., whereas roasting is a severe heat treatment process completed in multiple cycles of process of heating and cooling.
3.4 That on examining the scope of CTH 2008 it is found that, as per HSN Explanatory Notes, heading 2008 covers fruit, 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. Specifying what is included in this heading, the explanatory note states that 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. Dry-roasting, oil-roasting & fat-roasting, as a process, are very much a part of chapter heading 2008 by virtue of HSN Explanatory Notes. It is also pertinent to observe that none of these processes are mentioned in the chapter note 3 to Chapter 8 of the Customs Tariff Act, 1975 as well as HSN Explanatory Notes to Chapter heading 0802.
3.5 That Chapter 8 specifically certain treatments that could be carried out on the dried nuts for additional preservation or stabilization or to improve or maintain their appearance. The objectives of the roasting are not as specified in the said note. Further, as per the above note, the processes that could be carried out are moderate heat treatment, sulphuring, and the addition of sorbic acid or potassium sorbate by the addition of vegetable oil or small quantities of glucose syrup whereas, roasting is different from all the processes mentioned above. Roasting, as submitted, is carried out using roasting ovens due to which betel nuts are roasted up to 140 – 150 degrees Celsius then cooled in room temperature and the cycle is repeated until the moisture content is about to 6%. This clearly indicates that the roasting is much more than mild heat treatment. Even in the generally understood meaning of the terms, it is understood that roasting involves severe heat treatment and is different from moderate heat treatment as well as dehydration. Therefore, the impugned goods do not satisfy Note 3 to Chapter 8. That the vital question as to whether roasted nuts would fall under Chapter 0802 or Chapter 2008, would affirmatively be answered in favour of Chapter 2008 by the decision of Hon’ble Supreme Court in the case of Commissioner of Customs & Central Excise, Goa vs Phil Corporation Ltd. reported in 2008 (223) EL.T9/S.C. Hence, the settled position of law is that nuts falling under Chapter 08 would be classified under Chapter 20, if the same is subjected to the process of roasting.
3.6 That the classification as far as possible must be in conformity and in consonance with the HSN explanatory Notes. The law says that whenever there is specific entry, the same would prevail over general entry; the said general principal is statutorily incorporated in General Rules of Interpretation, in particular, under Rule 3(a) of the General Rules of Interpretation. CTH 2008 1920 is a special entry covering nuts subject to the process of roasting when contrasted with CTH 08 02 90 which covers dried nuts. Having come to the conclusion that the classification of areca nuts is made on the basis of the process which it is subject to with a distinction between dried and roasted nut being maintained CTH 2008.19.20 which covers roasted nut including areca nut is a specific entry which opposed with the entries/items covering nuts under CTH 08. That it is submitted that the betel nut in its various forms finds classification in chapters 8, 20 and 21 of the schedule – I of the Customs Tariff Act, 1975 read with HSN Explanatory notes to the relevant headings under these chapters. General Rules of Interpretation (GRI), specifically rule 1 and rule 3(a), to the Customs Tariff Act, 1975 provide further context for understanding of various tariff entries in the Tariff. The legal framework mentioned above has to be factored in while deciding classification of roasted arena nut which is proposed to be imported by the applicant.
3.7 That as per General Rules of Interpretation (GIR) 3(a) of the Customs Tariff Act 1975, when by application of GIR 2(b) or for any other reason, the goods are prime facie, classifiable under more than one Heading, the ‘most specific description’ is Section notes along with terms of heading and explanatory notes are examined for both Headings 0802 and 2008, it is observed that roasted nuts which include roasted betel nuts find a specific description Heading 2008. Therefore, on the application of GIR 3(b), the subject goods merits classification—’4, under Heading 2008 and more specifically under Subheading 2008 19 20 as “Other roasted nuts and seeds”, in view of specific CTH 2008 19 20: Other roasted nuts & seeds in chapter 20 of the first schedule to the Customs Tariff, HSN Explanatory note to CTH 2008, various Supreme Court rulings upholding guiding value of the HSN Explanatory notes for deciding classification under Customs Tariff Act, 1975 and previously mentioned two Supreme Court judgments classifying roasted nuts which include almonds, betel nut and other nuts under chapter 20 by taking recourse to HSN explanatory note to Tariff Heading 2008. In view of the above, it is submitted that roasted betel nuts are correctly classifiable under the tariff item 2008 19 20 of chapter 20 of the first schedule of the Customs Tariff Act. 1975. That on the basis of foregoing it is submitted that the Roasted betel nuts fall under Tariff heading 2008, specifically under Tariff entry 2008 1920: “Other roasted nuts & seeds of chapter 20 of the first schedule of the Customs Tariff Act, 1975.
3.8 In view of the above, it is requested and most humbly prayed that this Hon’ble Advance Ruling Authority may take the aforesaid additional submissions on record along with the Advance Rulings passed by the Authority of Advance Ruling New Delhi and Mumbai, into consideration while passing orders in this matter in the interest of justice.
Findings, Discussion and Conclusion
4. I have taken into consideration of all the materials placed on record in respect of the subject goods including the submissions and rebuttal reply to the comments made by the applicant. I have gone through the response from the Customs Port Commissionerate. I therefore proceed to decide the present application regarding classification of Roasted Areca Nut on the basis of the information on record as well as the existing legal framework having bearing on the classification of the roasted areca nut under the first schedule of the Customs Tariff Act, 1975.
4.1.I note that the processes mentioned in Chapter 8 include chilling, steaming, boiling, drying and provisionally preserving. It does not specifically include the process of roasting. Here, it is important to understand the difference between the processes of moderate heat treatment & dehydrating/drying referred in chapter 8 and processes of dry roasting, oil-roasting and fat-roasting referred in chapter 20. The terms dry-roasting. oil roasting and fat-roasting however are not defined in the Customs Tariff Act, 1975. Therefore, these terms have to be understood in a commonly accepted sense. The Hon’ble Apex Court in the case of Alladi Venkateswarlu v. Government of Andhra Pradesh 1978 AIR 945 held that “the commonly accepted sense of a term should prevail in construing the description of an article of food”. In common trade parlance. “drying” is a method of food preservation by the removal of water content. On the other hand. “roasting” means the excess or very high heat treatment that produces fundamental chemical and physical changes in the structure and composition of the goods, bringing about a charred physical appearance. Therefore, drying is a moisture removal process involving methods such as dehydration, evaporation, etc., whereas roasting is a severe heat treatment process”.
4.2. I also note that Chapter 20 of the Tariff covers the Preparations of vegetables, fruits, 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 classified under Chapter 20. Heading 2008 covers 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. Roasting is a process used for bringing in to existence roasted nuts and I find that the processes mentioned in chapter 8 do not cover roasting process.
4.3. I also note on the submissions of the applicant that the Note 3 to Chapter 8 specifies certain treatments that could be carried out on the dried nuts for additional preservation or stabilization or to improve or maintain their appearance. The applicant in their application has declared that the objectives of the roasting are not as specified in the said note. Further, as per the above note, the processes that could be carried out are moderate heat treatment, sulphuring, and the addition of sorbic acid or potassium sorbate by the addition of vegetable oil or small quantities of glucose syrup. Roasting is different from all the processes mentioned above. Roasting, as submitted by the applicant, is carried out using roasting ovens due to which betel nuts are roasted in the range of 150 degrees Celsius then cooled in room temperature and the cycle is repeated until the moisture content is less than 6 %. This clearly indicates that the roasting is much more than mild heat treatment. Even in the generally understood meaning of the terms, it is understood that roasting involves severe heat treatment and is different from moderate heat treatment as well as dehydration. Therefore, the impugned goods do not satisfy Note 3 to Chapter 8.
4.4. While examining the scope of CTH 2008, I find that as per HSN Explanatory Notes, heading 2008 covers fruit, 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. Specifying what is included in this heading, the explanatory note states that 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. Dry-roasting, oil-roasting & fat-roasting, as a process, are very much a part of chapter heading 2008 by virtue of HSN Explanatory Notes. It is also pertinent to observe that none of these processes are mentioned in the Chapter Note 3 to Chapter 8 of the Customs Tariff Act, 1975 as well as HSN Explanatory Notes to Chapter heading 0802.
4.5. Moreover, 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. 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.”
4.6. Further, in the CAAR, Mumbai Ruling No. CAAR/ Mumbai/ ARC/ 39,40,41/ 20,3-ii the case of M/s. Universal Impex, the Authority has stated his findings and has40′. accordingly-“in view of the specific CTH 2008 19 20: Other roasted nuts & seeds info’s 20 of the first schedule to the Customs Tariff. HSN Explanatory note to CTH 2008, various Supreme Court rulings upholding guiding value of the HSN Explanatory notes for deciding classification under Customs Tariff Act, 1975 and previously mentioned two Supreme Court judgments classifying roasted nuts which include almonds, betel nut and other nuts under chapter 20 by taking recourse to HSN explanatory note to Tariff Heading 2008″, I rule that roasted betel nuts are correctly classifiable under the tariff item 2008 19 20 of chapter 20 of the first schedule of the Customs Tariff Act. 1975.”
4.7. Also, the Honourable High Court of Madras in its recent judgement on Civil Miscellaneous Appeal (CMA) No’s 600/2023, No. 1206/2023 and No. 1750/2023, dated 01.08.2023, had 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 are 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 HSN Explanatory Notes.
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 similar in nature to that of the impugned issue in this application and therefore is squarely applicable to this case. On the basis of aforesaid orders of Hon’ble Courts and also earlier CAAR Rulings in the matter, I am of the view that the “Roasted Areca Nuts (Whole), Roasted Areca Nuts (Split) and Roasted Areca Nuts (Cut)” fall under Custom Tariff Heading 2008, specifically under Sub-heading 20081920 covering “Other roasted nuts & seeds” of the First Schedule of the Customs Tariff Act, 1975.
6. 1 rule, accordingly.
