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Case Law Details

Case Name : Great Nuts Impex Pvt. Ltd. Vs Commissioner of Customs Delhi & Ors. (Delhi High Court)
Appeal Number : CUSAA 17/2022
Date of Judgement/Order : 01/03/2023
Related Assessment Year :

Great Nuts Impex Pvt. Ltd. Vs Commissioner of Customs Delhi & Ors. (Delhi High Court)

Delhi High Court held that Betal Nuts known as ‘Boiled Supari’ is classifiable under Chapter 8 of the Customs Tariff Act and not under Chapter 21 of the Customs Tariff Act.

Facts- M/s Great Nuts Impex Pvt. Ltd. (Appellant in CUSAA 17/2022) had filed an application dated 23.09.2020 before the Customs Authority of Advanced Ruling (CAAR) seeking an advance ruling under Section 28H of the Customs Act regarding classification of the goods proposed to be imported. M/s Great Nuts Impex Pvt. Ltd. proposed to import into India a preparation of Betal Nuts known as ‘Boiled Supari’ packed in consumer packing and bulk packing.

The said appellant proposed that the afore­mentioned goods be classified as “Betel nut product known as ‘Supari’” under sub-heading 2106 90 30 in Chapter 21 of the First Schedule to the Customs Tariff Act

According to M/s Great Nuts Impex Pvt. Ltd., the said goods were not classifiable under Chapter 8 of the Customs Tariff as Areca nuts (heading 0802 80). The CAAR, inter alia, relied upon the decision of Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr.: 2007 (210) E.L.T. 171 to hold that the products in question, merit classification under Chapter 8 of the Customs Tariff.

Conclusion- Insofar as flavoured supari is concerned, the CAAR relied on the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. and held that the same would continue to be classified under Chapter 8 of the Customs Tariff.

We find no infirmity with the aforesaid view. As noted above, the decision in the case of Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. squarely covers the issue involved in the present cases.

Given the definition of the sub-heading “Betel nut product known as ‘Supari’”, read in the context of the main title of Chapter 21 and sub-heading 0802 read in the context with the title of Chapter 8 of the Customs Tariff (“Edible fruits and nuts; peel of citrus fruit or melons”); we are of the view that it would not be apposite to classify the products in question as those covered under Chapter 21 of the Customs Tariff.

FULL TEXT OF THE CESTAT DELHI ORDER

1. These appeals, filed under Section 28KA of the Customs Act, 1962 (hereafter ‘the Customs Act’), involve a common question regarding the classification of “Boiled Supari” under the Customs Tariff Act, 1975 (hereafter ‘the Customs Tariff Act’). The orders impugned in these appeals are also somewhat similarly worded. Thus, the present appeals were heard together and are being disposed of by this common order.

2. M/s Great Nuts Impex Pvt. Ltd. (Appellant in CUSAA 17/2022) had filed an application dated 23.09.2020 before the Customs Authority of Advanced Ruling (hereafter ‘CAAR’) seeking an advance ruling under Section 28H of the Customs Act regarding classification of the goods proposed to be imported. M/s Great Nuts Impex Pvt. Ltd. proposed to import into India a preparation of Betal Nuts known as ‘Boiled Supari’ packed in consumer packing and bulk packing. The proposed items included, (i) API Supari; (ii) Chikni Supari; (iii) Unflavoured Supari; (iv) Flavoured Supari; and (v) Boiled and Cut Supari. The said appellant proposed that the afore­mentioned goods be classified as “Betel nut product known as ‘Supari’” under sub-heading 2106 90 30 in Chapter 21 of the First Schedule to the Customs Tariff Act (the First Schedule to the Customs Tariff Act is hereafter referred to as ‘Customs Tariff’) and sought a ruling on the following question:

“Whether the goods sought to be imported is preparation of betel nut commonly known as Supari as described herein above, whether or not containing added ingredients such as food starch, spices, mulethi, menthol (flavors), perfume etc. Though not containing lime or katha (catechu) or tobacco and will the resultant product be classifiable under Chapter/ heading 2106 90 30 as Food Preparation.”

3. According to M/s Great Nuts Impex Pvt. Ltd., the said goods were not classifiable under Chapter 8 of the Customs Tariff as Areca nuts (heading 0802 80). M/s Great Nuts Impex Pvt. Ltd.’s contention was not accepted and by an order dated 20.05.2021 (Ruling No. CAAR/DEL/GREAT NUTS/05/2021), which is impugned in CUSAA 17/2022, the CAAR ruled to the contrary. The CAAR found that the goods in question were classifiable under heading 0802 and not under sub-heading 2106 90 30 as contended by M/s Great Nuts Impex Pvt. Ltd.

4. M/s The Nuts Co. (Appellant in CUSSA 18/2022) had also filed a similar application before the CAAR proposing to import goods similar to those as proposed to be imported by M/s Great Nuts Impex Pvt. Ltd. in its application. M/s The Nuts Co. also sought a ruling on the question, which was identically worded as the question framed by M/s Great Nuts Impex Pvt. Ltd. in its application. M/s Great Nuts Impex Pvt. Ltd. and M/s The Nuts Co. are hereafter, for the sake of brevity, collectively referred to as ‘the appellants’.

5. The said application filed by M/s The Nuts Co. also met the same fate as the application of M/s Great Nuts Impex Pvt. Ltd. and was disposed of by a ruling dated 04.06.2021 (Ruling No. CAAR/DEL/The Nut/10/2021), in similar terms as the ruling dated 20.05.2021. The CAAR, inter alia, relied upon the decision of Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr.: 2007 (210) E.L.T. 171 to hold that the products in question, merit classification under Chapter 8 of the Customs Tariff.

6. The rulings dated 20.05.2021 and 04.06.2021 are hereafter referred to as ‘the impugned rulings’.

7. Before proceeding further, it would be relevant to refer to the goods as proposed to be imported by the appellants and the process of preparation. As noted above, both the appellants proposed to import “Boiled Supari packed in consumer packing and bulk packing”. They claimed that the process of preparation of the various types of import items is as under:-

“i) ‘API Supari: Following processes are conducted on raw green fresh betel nut: removing of large impurities by labourers, boiling in water for 6 hours, mixing food starch, drying, polishing and packaging.

(ii) Chikni Supari: Following processes are conducted on raw green fresh betel nut: removing of large impurities by labourers, slicing in small pieces, boiling in water for 6 hours, mixing food starch, drying, polishing and packaging.

(iii) ‘Unflavoured Supari: Following processes are conducted on raw dried betel nut: removing of large impurities by labourers, removing of small impurities by de-stoner, metal deflection (removal of metal item, if any), garbling, polishing in polishing machine, 3 stage cutting, blowing of weightless particles in blowers, gravity separation by automatic gravity separation machine, roasting in fire gas rotary roaster, metal detection by magnetic metal detectors and packaging.

(iv) ‘Flavoured Supari: Following processes are conducted on raw dried betel nut: removing of large impurities by labourers, removing of small impurities by de-stoner, metal deflection (removal of metal item, if any), garbling in automatic garblers, polishing in polishing machine, sterilization to remove bacterial count, splitting (half) and/or 3 stage cutting, blowing of weightless particles in blowers; gravity separation by automatic gravity separation machine, roasting in fire gas rotary roaster, flavoring in large size automatic blenders with compound, metal detection by magnetic metal detectors, sterilization to kill bacteria count increased due to handling in processing and packaging.

(v) Boiled Supari’: Following processes are conducted on raw green fresh betel nut: removing of large impurities by labourers, boiling in water for upto 4 hrs, removing the husk, boiling again for upto 2 hours, drying by hot air, sterilizing, shorting, polishing and packaging.”

8. It would be relevant to refer to the two competing entries. Chapter 8 of the Customs Tariff covers goods described as “Edible fruit and nuts; peel of citrus fruit or melons”. The relevant Tariff Item 0802 is set out below:

0802 Other nuts, fresh or dried, whether or not shelled or peeled

–   Almonds :

0802 11 00 — In shell …….. .
0802 12 00 — Shelled ……. .
Hazalnuts or filberts (Corylus spp.) :
0802 21 00 — In shell ……. .
0802 22 00 — Shelled ……. .
– Walnuts :
0802 31 00 — In shell ……. .
0802 32 00 — Shelled …….. .
Chestnuts (Castanea spp.) :
0802 41 00 — In shell …….. .
0802 42 00 — Shelled …….. .
Pistachios :
0802 51 00 — In shell …….. .
0802 52 00 — Shelled …….. .
Macadamia nuts :
0802 61 00 In shell …….. .
0802 62 00 – Shelled …….. .
0802 70 00 — Kola nuts (Cola spp.) …..
0802 80 – Areca nuts :
0802 80 10 — Whole ……..
0802 80 20 — Split. …….
0802 80 30 — Ground …….
0802 80 90 — Other …….
0802 90 00 — Other ……. ”

9. Chapter 21 of the Customs Tariff covers goods under the heading “Miscellaneous Edible preparations”. The relevant Tariff Item is quoted below:

2106 Food preparations not elsewhere specified or included
2106 10 00 – Protein concentrates and textured protein substances ….
2106 90 Other:
— Soft drinks concentrates:
2106 90 11 —- Sharbat…..
2106 90 19 —- Other ……
2106 90 20 — Pan Masala …..
2106 90 30 Betel nut product known as “Supari

10. It is contended on behalf of the appellants that by applying the common parlance test, the products in question would clearly be covered under the sub-heading 2106 90 30.

11. Sunil, learned counsel appearing for the appellants, submitted that the goods in question were commonly known as ‘Supari’ and sold as such. The said goods were not sold as ‘Areca nuts’. He submitted that the CAAR had accepted that the process of boiling is irreversible, and a boiled betel nut would be distinct from an unboiled betel nut. He contended that since, as a result of boiling, a distinct product known in the market had come into existence, it would be erroneous to classify the same as the original product. He submitted that the CAAR had erred in proceeding on the basis that the processes for preparing boiled supari, flavoured supari, unflavoured supari, chikni supari and API supari could not be considered as a preparation of betel nuts.

12. Next, Mr. Sunil submitted that the CAAR had erred in relying on Note 3 to Chapter 8 of the Customs Tariff, as none of the processes resulting in the products in question, namely, boiled supari, API supari, chikni supari, flavoured supari, unflavoured supari, boiled and cut supari, were for the purposes of additional preservation or stabilisation or to improve or maintain their appearance. The said processes were for the purpose of resulting in an edible product recognised and sold in the market.

13. Lastly, he contended that the CAAR had erred in relying on the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra) and submitted that the said decision was concerning the question whether betel nut powder, along with permitted ingredients, amounted to manufacture for the purposes of excise duty. He also submitted that, at the material time, the relevant heading read as “Betel nut known as ‘Supari’”. He stated that there was a material change in the heading of the Tariff Entry 2106 90 30, which now reads as “Betel nut product known as ‘Supari’”. He also referred to an earlier decision of the Authority for Advance Ruling (AAR) in Re: Excellent Betel Nut Products Pvt. Ltd.: (2015) 324 E.L.T. 619 (A.A.R.) and, on the strength of the said decision, submitted that the product proposed to be imported would fall within the Tariff heading 2106 90 30 – “Betel nut product known as ‘Supari’”. He also pointed out that the learned AAR had clarified that the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra) was not applicable for considering the classification of import of goods in question as the said decision was in respect of the Central Excise Act, 1944 and the question whether changes brought about in betel nut amounted to manufacture. The learned AAR had also noticed that there was a material change in the relevant Tariff heading in the First Schedule to the Central Excise Tariff Act, 1944, expressly providing that the process of adding or mixing cardamom, copra, menthol, spices, sweetening agents or any such ingredients other than lime, katha (catechu) or tobacco to betel nut would amount to manufacture.

Reasons and Conclusion

14. We are of the view that the question of classification of the products in question is squarely covered by the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra). Although the said decision was rendered in the context of the question whether the goods in question could be cleared under the Tariff heading in the entry 21 07 of the Central Excise Act, 1944, which read as “Betel nut powder known as ‘Supari’”; the said decision continues to be applicable because, by virtue of the Supplementary Note 2 to Chapter 21 of the Customs Tariff, the definition of the goods, “Betel nut product known as ‘Supari’” is identical to the definition of “Betel nut powder known as ‘Supari’”.

15. It is clear from a plain reading of the judgment in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra), that the Supreme Court was of the view that the product in question, sweetened betel nut powder, did not fall within the definition of “Betel nut powder known as ‘Supari’”. The Supreme Court agreed with the view of the Custom Excise and Service Tax Appellate Tribunal that “Betel nut remains a Betel nut”. The Supreme Court held that “the process of manufacture employed by the appellant-company did not change the nature of the end product” and agreed with the conclusion that “the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agents etc. did not result in a new and distinct product having a different character and use”. Accordingly, the Supreme Court held that the product in question is covered by sub­heading 0801 00 under Chapter 8 of the First Schedule of the Central Excise Tariff Act, 1985.

16. Concededly, the Tariff sub-heading 0801 of the First Schedule to the Central Excise Tariff Act, 1985 at the material time is identical to the heading 0802 of the Customs Tariff which fell for consideration of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra). However, the heading under entry 21 07 of the First Schedule to the Central Excise Tariff Act, 1985 (which was considered by the Supreme Court in that case) read as “Betel nut powder known as ‘Supari’”. It was rightly pointed out by Mr. Sunil that the language of sub-heading 2106 90 30 of Customs Tariff – “Betel nut product known as ‘Supari’” – is different. However, the difference in the language of sub-heading 2107 00 of the First Schedule to the Central Excise Tariff Act, 1985 [which was considered in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra)] and sub-heading 2106 90 30 of the Customs Tariff, is not material. This is because both the expressions have been similarly defined by virtue of Note 4 to Chapter 21 of the First Schedule to the Central Excise Tariff Act, 1985 and Supplementary Note 2 to Chapter 21 of the Customs Tariff.

17. Supplementary Note 2 to Chapter 21 of the Customs Tariff reads as under:-

“2. In this Chapter “betel nut product known as Supari” means any preparation containing betel nuts, but not containing any one or more of the following ingredients, namely: lime, katha (catechu) and tobacco whether or not containing any other ingredients, such as cardamom, copra or menthol.”

18. The above Note is identically worded as Note 4 to Chapter 21 of the First Schedule to the Central Excise Tariff Act, 1985, which was considered by the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra).

19. In view of the above, the language of the two entries – sub­heading 2107 00 of Chapter 21 of the First Schedule to the Central Excise Tariff Act, 1985, which was considered by the Supreme Court in the Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra) and sub-heading 2106 90 30 of the Customs Tariff, which now falls for consideration in this appeal – are defined in identical terms.

20. Thus, the Supreme Court’s view that the products in question did not fall within the classification under Chapter 21 but under Chapter 8 of the First Schedule to the Central Excise Tariff Act, 1985 would squarely cover the controversy in this case as well. The decision of the learned AAR in Re: Excellent Betelnut Products Pvt. Ltd. (supra) to the extent that it runs contrary to the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra), is erroneous.

21. The CAAR has also referred to Note 3 of Chapter 8 of the Customs Tariff in the impugned rulings. The said note reads as under:-

“3. 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.”

22. The CAAR had referred to the aforesaid Note and had observed that the same was not considered by the learned AAR in Re: Excellent Betelnut Products Pvt. Ltd. (supra). The CAAR had also referred to the Guidelines to Chapter 8 of the Harmonized Commodity Description and the Coding System of the World’s Customs Organization, which provided that fruit and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled and that the addition of small quantities of sugar would not affect the classification of fruit.

23. The CAAR had ruled that that the processes for making API Supari, flavoured supari, unflavoured supari chikni supari, boiled supari, and boiled and cut supari are, essentially, the processes of cleaning, preservation and enhancing the appearance offu presentation and thus, were covered under Note 3 of the Chapter 8 of the Customs Tariff.

24. Insofar as flavoured supari is concerned, the CAAR relied on the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra) and held that the same would continue to be classified under Chapter 8 of the Customs Tariff.

25. We find no infirmity with the aforesaid view. As noted above, the decision in the case of Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra) (supra) squarely covers the issue involved in the present cases.

26. Before concluding, we also consider it apposite to refer to Supplementary Note 2 of Chapter 21 of the Customs Tariff, which expressly provides that the goods covered under the sub-heading “Betel nut product known as ‘Supari’” would mean “any preparation containing betel nuts”. Thus, the goods covered under the said sub­heading would necessarily have to be a preparation that contains betel nuts as against the product being treated as betel nut.

27. Given the definition of the sub-heading “Betel nut product known as ‘Supari’”, read in the context of the main title of Chapter 21 and sub-heading 0802 read in the context with the title of Chapter 8 of the Customs Tariff (Edible fruits and nuts; peel of citrus fruit or melons); we are of the view that it would not be apposite to classify the products in question as those covered under Chapter 21 of the Customs Tariff.

28. These appeals are unmerited and, accordingly, dismissed.

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