Case Law Details
In re Rose Marry International (CAAR Mumbai)
CAAR held that subject goods placed before CAAR for consideration, i.e.. 1) Processed API Betel-nut product known as Supari and 2) Processed Betel-nuts unflavoured chemically processed Supari in small cut‑pieces (not split) merit classification under chapter 8 of the Customs Tariff, and more appropriately, under the heading 0802, as under:
1) Processed API Betel-nut product known as SUPARI (Not Prepared): 0802 80 10 and
2) Processed Betel-nuts unflavoured chemically processed SUPARI in small cut pieces (Not split): 0802 80 90.
FULL TEXT OF ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
M/s Rose Marry International (hereinafter referred to as ‘the applicant’. in short) filed an application for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR, in short). The said application dated 23.08.2022 was received in the secretariat of the CAAR, Mumbai on 08.09.2022 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant is seeking advance ruling on the classification for the proposed import of 1) Processed API Betel-nut product known as Supari and 2) Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split).
2. The applicant are manufacturer and merchant exporter/importer of betel nuts, having FSSAI No. 10016043001636 dated 17.10.2017 and UDYAM Registration No. UDYAM-KR03-0113863 Dt. 26.10.2021 and have never imported betel-nuts in any form. It is submitted that they intend to import 1) Processed API Betel-nut product known as Supari and 2) Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split) (hereinafter referred to as the ‘subject goods’), since they are having several orders from local markets for supply of processed betel-nuts known as Supari for local consumption. They intend to import the said goods through the ICD Whitefield, Bengaluru. Accordingly, comments from the jurisdictional Principal Commissioner / Commissioner of Customs were invited.
3. The applicant has submitted that they have neither imported Areca-nuts dried in any form which is covered under CTH 0802 80 for trading into India nor they have ever imported Betel-nut product known as Supari covered under CTH 2106 90 30. However, they came to know that there is dispute of classification among these two competitive entries under the Customs Tariff heading 0802 80 and 2106 90 30 for the Areca-nuts dried and the Betel-nut products and they are unable to understand their betel-nut products which are in a processed form shall be classifiable under Chapter heading 0802 80 or 2106 90 30. For this reason and for proper classification of the goods which they are planning to import and for payment of correct amount of Customs duty on these goods, they have filed this application seeking Advance Ruling from the Advance Ruling Authority under The Customs Act,1962.
4. Further, in this respect the applicant has added that the following processes and preparations are carried out on Areca-nuts dried to arrive at the finished Processed product API Betel-nut product known as Supari under CTH 2106 9030 and another product Processed Betel-nuts Unflavoured chemically processed Supari in Small cut-pieces (not split) covered under 2106 9030 as enumerated below. Applicant proposes to import these two different products as per description given by the applicant and the text of the same is reproduced below:
4.1 Processed product API Betel-nut product known as Supari under CTH 2106 90 30
(i).The first stage process involved is the collection of Areca fruits of 6 to 7 months old immature dark green fresh nuts which are manually harvested from the palm tree.
(ii).In the second stage these freshly harvested nuts are dipped in chlorinated water to remove the adhering dirt, the fruits are then soaked in water mixed with chemicals to reduce microbial load /fungal infections.
(iii).In the third stage large impurities are removed by labour with the help of mechanical de-husking process.
(iv).In the fourth stage minor impurities are removed by de-stoner machine which is fully automatic process and then they are subjected to Garbling process for the removal of extraneous matter such as other parts of the plants, dirt and added adulterants.
(v).In the fifth stage the tender nuts are boiled in water mixed with areca nut extract in which the same water is used for boiling 2 to 3 batches of areca-nuts. The areca nut extract is used to impart red color and good glossy appearance. While boiling the tender nuts, the highly concentrated Tannin is obtained as a by-product which is separated and is used in various industrial applications.
(vi).In the sixth stage these boiled tender nuts are dried for 15 days in open space and are
dried by blowing hot air in mechanized processing with the use of heat exchangers.
(vii).In the seventh stage these dried nuts are once again subjected to removal of any metal/minor impurities by magnetic. metaldetecting machines and blowers.
(viii).In the eight stages these dried nuts are sorted out using automatic Sorting machines, thereafter they are graded using grading machines with pre-graded photo chromatic devices.
(ix).During the above referred processes/stages the Oral Sub Mucosal Lesion(fibrosis) and Cancer-causing chemicals like Tannin and Arecoline contents are remarkably reduced, this changes the character of the original product i.e., Areca-nut. In this process it is not only change in the character of the Areca-nut but the new synthesis product will have reduced polysaccharides (Carbohydrate) contents and the resultant new / final product is hypoglycaemic, which is suitable for consumption by diabetic and elderly people. This product is a Synthesis of new Betel-nut processed product and is squarely covered under CTH 2106 90 30.
(x).In the above said preparation of Betel-nut it supersedes the process of API Supari and is altogether a different newly Synthesis product which is chemically processed hence it cannot be equated with the API supari but a product of processed Betel-nut which qualifies the characteristics of CTH 2106 90 30.
4.2 Processed Betel-nuts Untlavoured chemically processed Supari in Small cut pieces (not split) covered under 2106 90 30
The processes and Preparation of Unflavoured Supari in Small Cut Pieces which changes the characteristics of Betel-nuts are enumerated below:
(i).Areca fruits of 7 to 8-month-old immature dark green fresh nuts which are the fresh harvest taken from the Areca tree for making this class of Processed Areca Nuts.
(ii).The freshly harvested nuts are dipped in chlorinated water to remove the adhering dirt; the fruits are then soaked in water mixed with chemicals to reduce microbial load /fungal infections.
(iii).Removal of large impurities/ Extraneous material by manual labour and through mechanical de-husking machine.
(iv).The nuts are soaked in running water for 4 to 5 months for treating it under fermentation process in the curing ponds, the nuts are placed in holding baskets which are passed through continuously running water, the level of the running water is maintained at the flow rate of 36 ltrs/ minute. This is a continuous process and the same running water is passing through the holding baskets for 4 to 5 months. This steeping of water results in discoloration of outer husk and subsequently the foul smell as well as bacterial presence is treated by heat blanching using sodium benzoate (0.1%) and potassium Meta bisulphate (0.2%) to eliminate the foul smell and improving the quality of nuts. This process is over and above the process of Chapter Heading 0802 due to the reason that the inputs to the Areca-nuts has taken place in this process for obtaining the final Unflavoured processed Betel-nut in cut pieces, this process amounts manufacturing by adding up of chemicals to the final product and is appropriately classifiable under CTH 2106 90 30.
(v).Then the tender nuts are dried in open space and this drying is being done by blowing hot air in mechanized processing using heat exchangers.
(vi).The dried nuts are once again subjected to removal of any metal /minor impurities by magnetic metal detecting machines and blowers.
(vii).Sterilization process is undertaken to remove the Bacterial Count.
(viii).3 Stage cutting of Betel Nuts are carried out (customized) and weightless particles are blowed by blower machine and gravity separation through Automatic Gravity Separation Machine.
(ix).The nuts used in preparation of Unflavoured Supari are slightly more matured than those used for Kalipak / API Supari and over and above the characteristics of Chapter heading 0802.
(x).As a result of the above process the Tannin content of fresh immature nuts is considerably reduced below 17%. During the course of this processing, the Carbohydrate content are reduced remarkably and the resultant final product is hypoglycaemic which is suitable for consumption by elderly as well as diabetic people. Product obtained through the above stages of preparation are suitable and safe for human consumption and is duly covered under the characteristics of processed Unflavoured Betel-nuts cut into small pieces which are covered under the Customs Tariff Heading 2106 90 30. This is an additional process which is changing the characteristics of the raw Betelnuts into a processed Betel-nuts.
5. In this respect, the comments of the jurisdictional commissionerate were received on 11.10.2022 from office of the Commissioner of Customs, City Customs Commissionerate, Bengaluru. Their comments are as follows:
As per importer’s application, they have proposed import of: ‑
1) Processed API betel-nut product known as supari
2) Processed Betel-nuts unflavored chemically processed supari in small cut-pieces (not split)
It is noticed that importer has not imported these goods in the past in ICD, Bengaluru and advance ruling is sought to import goods mentioned above. This office has not come across any information about the applicant’s case before any officer of customs, the Appellate Tribunal or any court. The applicant has sought advance ruling as to whether the aforementioned goods will be classifiable under CTH 0802 80 or under CTH 2106 90 30.
5.1 The import tariff as mentioned in First Schedule to the Customs Tariff Act, 1975 w.r.t. sub-heading 080280 of the Customs Tariff Act, 1975 is reproduced as follows,
| 0802 | 80 | – | Areca nuts |
| 0802 | 80 | 10 – | Whole |
| 0802 | 80 | 20 – | Split |
| 0802 | 80 | 30 – | Ground |
| 0802 | 80 | 90 – | Other |
HSN Explanatory notes (HSN, 2022) of the Chapter 8 reads as follows,
GENERAL
“This Chapter covers fruit, nuts and peel of citrus fruit or melons (including watermelons), generally intended for human consumption (whether as presented or after processing). They may be ,fresh (including chilled), frozen (whether or not previously cooked by steaming or boiling in water containing added sweetening matter) or dried (including dehydrated, evaporated or freeze-dried): provided they are unsuitable for immediate consumption in that state, they may he provisionally preserved (e.g., by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions).
The term “chilled” means that the temperature of a product has been reduced, generally to around 0 °C, without the product being frozen. However, some products, such as melons and certain citrus fruit, may he considered to be chilled when their temperature has been reduced to and maintained at + 10 °C. The expression frozen” means that the product has been cooled to below the product’s freezing point until it is frozen throughout.
Fruit and nuts of this Chapter may he whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled.
It should be noted that homogenisation, by itself does not qualify a product of this Chapter for classification as a preparation of Chapter 20.
The addition of small quantities of sugar does not ailed the classification of:fruit in This Chapter. The Chapter also includes dried fruit (e.g., dales and prunes), the exterior of which may be covered with a deposit of dried natural sugar thus giving the fruit an appearance somewhat similar to that of the crystallised fruit of heading 20.06. However, this Chapter does not cover fruit preserved by osmotic dehydration. The expression “osmotic dehydration” refers to a process whereby pieces of fruit are subjected to prolonged soaking in a concentrated sugar syrup so that much of the water and the natural sugar of the fruit is replaced by sugar from the syrup. The fruit may subsequently be air-dried to further reduce the moisture content. Such fruit is classified in Chapter 20 (heading 20.08).
HSN Explanatory notes (HSN, 2022) to heading 0802 of the Chapter 8 reads as, follows, This heading also covers areca (betel) nuts used chiefly as a masticatory, cola (kola) nuts’ used both as a masticatory and as a base in the manufacture of beverages, and an edible, nutlike, spiny-angled fruit of the species Trapa 11(11(111S, sometimes referred to as a water chestnut.”
Further, Supplementary note No.2 to Chapter 21 of First Schedule to the Customs Tariff Act, 1975 defines “Supari” and the same is re-produced as follows: ‑
“In this Chapter —betel nut product known as Supari means any preparation containing betel nuts, but not containing any one or more of the JOIlovving ingredients, namely.’ lime, katha (Catechu) and tobacco whether or not containing any other ingredients, such as cardamom, copra or menthol.”
And the commodity is specifically classified under tariff item 2106 90 30 with item description “Betel-nut product known as Supari”
5.2 As per the submission of the applicant the 7-8 months old fresh areca fruits/ nuts are harvested and dipped in chlorinated water to remove dirt. Then the fruits are soaked in water mixed with chemicals to reduce microbial load /fungal infections. Then the large impurities are removed by manual labour with the help of mechanical de-husking process and then minor impurities are removed by de-stoner machine which is fully automatic process and then they are subjected to Garbling process for the removal of extraneous matter such as other parts of the plants, dirt and added adulterants. Till this stage, all the processes involved are in relation to removal of impurities to the areca fruits/nuts which is due to harvest.
5.3 Further, the applicant submitted that after the removal of impurities, the nuts are boiled in water mixed with areca nut extract. The areca nut extract is used to impart red color and glossy appearance. While boiling the tender nuts, the highly concentrated Tannin is obtained as a by-product which is separated and is used in various industrial applications. After boiling, the areca fruits/nuts are dried for 15 days in open space and is dried by blowing hot air in mechanized processing with the use of heat exchangers. In this stage, the areca fruits/nuts are boiled in water mixed areca nut extract and are being dried.
5.4 Further, the applicant submitted that after boiling and drying of the areca fruits/nuts, they are sorted out using automatic Sorting machines and graded using grading machines with pre-graded photo chromatic devices. In this stage, the areca fruits/nuts are sorted and graded and the resultant commodity is known as “Processed API Betel-nut product known as SUPARI”.
5.5 The process is same for second commodity viz., ‘Processed Betel-nuts unflavoured chemically processed SUPARI in small cut pieces (Not split)” but the commodity undergoes further cutting of Betel Nuts and being sorted and graded. as per the processes described by the applicant, the freshly harvested areca nuts/fruits are being cleaned for removal of impurities and are boiled and dried.
5.6 One commodity is whole and the other is cut into pieces. The process of boiling is covered under general notes of Chapter 8 and boiling is part of “homogenisation” of the agricultural product. The general notes to Chapter 8 of HSN Explanatory Notes, 2022 is very categorical, wherein it states that “It should be noted that homogenisation, by itself, does not qualify a product of this Chapter for classification as a preparation of Chapter 21”. Accordingly, mere boiling of the areca nuts/ fruits will not qualify them to be classifiable under tariff item 2106 9030. Further, it is opined that as per the definition of “Supari” under Supplementary note No. 2 to Chapter 21 of First Schedule to the Customs Tariff Act, 1975, the betel nut product should be a preparation. However, in the submission, no preparation details have been submitted except boiling with chemicals which are primarily for homogenisation and preservation of the commodity. In addition, during the entire process, no other ingredients are being mixed to justify the “preparation” and accordingly it is opined that both the commodities are correctly classifiable under Chapter 8 of First Schedule to the Customs Tariff Act, 1975 as mentioned in the table below:
Table-1
| Commodity Description | CTH classifiable |
| Processed API Betel-nut product known as SUPARI (Not Prepared) | 0802 80 10 |
| Processed Betel-nuts unflavoured chemically processed SUPARI in small cut pieces (Not split) | 0802 80 90 |
6. The personal hearing in the matter was scheduled on 12.10.2022. Shri. K. C. Kala, retired IRS officer and Shri. Harshad H. Karotra, Advocate represented the applicant and stated that since they have received the comments of .jurisdictional commissionerate on the day of personal hearing they requested to reschedule the hearing on 09.11.2022 so as to enable them to go through the comments and file rejoinder/rebuttal for the same. Accordingly, the personal hearing was rescheduled and was held on 09.11.2022 wherein Shri. K. C. Kala, retired IRS officer and Shri. Harshad H. Karotra, Advocate represented the applicant and submitted additional submissions including a research paper authored by Shri. B.R. Gurumurthy (Dec. 2017). They explained the first product of proposed imports covered in CAAR-1 application stating the process carried out on betel nut take it out of the scope of Chapter 8 of the Customs Tariff Act. However, for the Second product they requested additional time up to 18.11.2022 to submit additional write-ups. However, no one was present for the jurisdictional commissionerate.
7. The applicant submitted their additional write-up with regard to their second product of the proposed import on 18.11.2022. They submitted a review article, “Chemical Composition, Pharmacological and Toxicological Effects of Betel Nut”. This article was published in Hindawi, Evidence-based Complementary and Alternative Medicine — Vol 2021, (Article ID — 180808, 7 pages). In the said article it has been analysed by the researcher that the Betel Nut is the dried seed of the fruit from the Areca Palm tree, which is cultivated particularly in South and South-East Asian countries. In addition, they also submitted the second original research article which is published in “Advances in Foods Sciences, Sustainable Agriculture and Agro-industrial Engineering (AFSSAAE) 2018, 1(2), 27-33ISSN 2622-5921”. This research article is with the title ‘Combination of kinetic maceration digestion in the extraction of the Areca Seeds (Area catechu L.)’. In the said article they have defined Pinang (Areca catechu L.) as one of the planation commodities from the palm group. One of the secondary metabolites contained in areca nut is tannin. Extraction of the tannin and other alkaloids (arecoline) is defined in this particular article with the chemical process for extraction of tannin and arecoline for achieving the reduced levels of these substances in areca nuts which is less harmful for the human consumption. In the introduction part under para 2, extraction of tannins from the seeds of areca nuts is discussed by using the methods of maceration & soxhletation these are the processes involving the various chemicals as solvents. They also submitted a Chapter having title ‘Tannins: Extraction from Plants’ which has been jointly authored by 7 scientists who are working in the 7 different universities. This is an authentic article published in 2019 with the licensee Intech Open. This has been described in the footnote of the said article and stated that this chapter is distributed under the terms of the Creative Commons Attribution License. In the said article tannins, which are found in plants including (areca nut palm tree) have been defined and stated that tannin content can range from 0.2% to 25% DW depending on plant species, harvest time, habitat of plants, and extraction method. It further discussed the problem of tannin in areca nut and other plants as well as on their extraction methods of tannin and alkaloids through the processes of maceration, microwave, ultrasounds, enzyme, decoction. irradiated radiation and gamma methods. The para 4 of the said chapter as published in the aforesaid article deals with extraction method as various processes for extraction of tannins and alkaloids (arecoline). Any of these processes maybe used for extraction of the aforesaid two substances from areca nuts depending upon the type of solvent used, extraction material used and the extraction conditions. Under sub para 4.1 of the said chapter the solvent used for these extraction processes has been defined, they are chemical solutions — ethanol, acetone, water as solvent, methanol, Na2SO3, NaOH. The same is discussed in the table 1 of the said article with the name of solution, condition of extraction and references. Based on these submissions it is submitted that the second product has undergone the chemical processes of extraction of tannin and arecoline with the resultant product of processed betel nut unflavoured chemically processed supari in small cut pieces (not split) with reduced amount of toxic substances of tannin and arecoline with the resultant effect of making it less harmful for human consumption. These processes are very crucial for changing the essential characteristics of raw tendered betel nuts with the resultant betel nut product which is chemically processed and is most appropriately classifiable under CTH 2106 90 30. These processes are out of the scope of Chapter 8 of the Customs Tariff Act, 1975 and the processes are duly covered under CTH 2106 90 30.
8. I have gone through the above submissions and all the documents placed before me. I have also gone through the comments from the jurisdictional commissionerate and have taken on record the rejoinder and additional write-up filed by the applicant. Before any further analysis, I must note that I completely disagree with the way facts are represented before me by the applicant. Applicant has deliberately described the products along with their CTH on their own classifying both products under chapter 21. Such attempt by the applicant is not acceptable. I proceed to deliberate upon the issue on the basis of documents and submissions placed on record. The applicant proposes to import (i) Processed API Betel-nut product known as Supari and (ii) Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split). Therefore, in this context, it is necessary to examine the competing chapters and tariff headings of the tariff for both the products. For the present case I find that the classification of proposed betel nuts is required to be examined by examining relevant entries in Chapter 8 and Chapter 21 of the schedule I of the Customs Tariff Act, 1975 read with HSN Explanatory notes to these 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 two different types of betel-nuts proposed to be imported by the applicant.
Accordingly, I take the subject products one by one for classification analysis.
8.1 In so far as the subject goods are concerned the alternate classifications can be from chapter 8, and chapter 21 of the Customs Tariff Act, 1975. The relevant notes to chapter 8 lay down the following: –
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 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.
In the chapter 8, areca nuts, whole, split, ground, and two residuary sub-headings are accommodated under CTHs 08028010, 08028020, 08028030, 08028090, and 08029000, respectively. In short, nuts including betel nut, are either partially rehydrated or treated for additional preservation or stabilization or for improving or maintaining appearance of the original product. So far as chapter 8 is concerned, apart from the relevant chapter notes already reproduced above, the HSN Explanatory Note, rightly relied upon by the jurisdictional Customs Commissionerate while submitting their response, prescribes the following as general guidelines:
`Fruit and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled.
The addition of small quantities of sugar does not affect the classification of fruit in this Chapter.’
In this chapter, the entry 0802.80 refers to areca nuts, used chiefly as a masticatory. Thus the Explanatory Notes to Chapter-I indicate that chapter I covers nuts intended for human consumption (whether as presented or after processing): whether they are fresh, frozen (whether or not previously cooked by steaming or boiling in water) or dried (including dehydrated, evaporated or freeze-dried) and whether the nuts could also be whole, sliced, chopped, shredded, stoned. pulped, grated, peeled or shelled. The processes to which the subject goods would be subjected to, as described in their submission, appear more of a process for additional preservation or stabilization and/or to improve or maintain their appearance only and they retain their original character.
8.2 Classification claimed by the applicant for the subject goods is from the chapter 21. Chapter 21 includes within its ambit, miscellaneous edible preparations and tariff item 2106 covers Food preparations not elsewhere specified or included. Further, the supplementary note 2 to the said chapter lays down that:
`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’.
21.06- Food preparations not elsewhere specified or included.
2106.10 ‑
2106.90 –Other
2106 90 30 — Betel nut product known as “Supari”
In this classification the word ‘preparation’ is a guiding factor. The applicant has submitted the detailed processes carried out on the raw products i.e., betel nut as described in para 4.1 and 4.2 above. As claimed by the applicant, these processes as described and carried out on the subject products are essential for the preparation of the subject goods. I find that there is nothing on record to support the claim of the applicant that the subject goods have undergone any preparation to merit their classification under heading 2106. All the processes as described in para 4 supra apparently are carried out to improve or maintain their appearance, and in fact they aid to retain the character of betel nut, in short, for preservation or stabilization.
8.3 The applicant has submitted few case laws in support of the claim that the subject goods merit classification under heading 2106. The ratio of cited case law, i.e., Commissioner of Central Excise, Indore vs S.K. Industries Pvt. Ltd. 2004 (175) E.L.T.509 (TRI. -DEL.) does not appear applicable for the case at hand for the simple fact that there is no manufacturing activity involved in the processes as described by the applicant in their application and absence or presence of such activity, which was defined in section 2(f) of the Central Excise Act, 1944and contested through multiple litigations, is not relevant for classification of the subject products at present. Also, in the case of M/s Crane Betel Nut Powder Works Vs CC & CE Tirupathi as reported in 2007 (210) E L.T. 171 (S.C.). the Hon’ble Supreme Court held that even after undergoing certain processes the betel nut remained betel nut only and resultant product could not be identified as new product to be classifiable under chapter 21. The Hon’ble Supreme Court held that the end product shall remain under chapter 8 only. Further, in the case of M/s S.T Enterprises Vs Commissioner of Customs (Chennai VIII) 2021 (378) E.L.T. 514 (Tri. — CHENNAI) it was observed that ‘the question is whether by mere boiling and drying whole betel nut it would merit classification under 21069030 so as to surpass the prohibition of import?’, and remarked that
“Moreover, it can be seen that the impugned products in the case of Crane Betel Nut Powder Works (supra) have undergone much more elaborate processes like cutting into different sizes; adding essential / non-essential oils, menthol, sweetening agents etc. Even when the physical appearance undergoes a change, Apex Court held that the processes undertaken do not amount to manufacture. Whereas, the processes undertaken in the instant case are less complex and simple like de-husking, cleaning, boiling and drying. For the reasons cited above, the processes cannot be held to be amounting to manufacture so as to necessitate the movement of goods from Chapter 8 to Chapter 21.”
In this context the decision of the Hon’ble Calcutta High Court in the case of Killing Valley Tea Co. v/s Secretary to State (A.I.R. 1921, Cal.) is worth mentioning, wherein it was held that a tea leaf remains the same even after being subjected to mechanical processes like withering, crushing. roasting, fermenting etc. is a definite pointer to the principle that needs to be applied for classification in such matters. The same principle was also applied by the Hon’ble Supreme Court’s in their decision dated 11.09.1979 in the case of D. S. Bist and Ors. wherein it was held that all agricultural produce undergoes some processing on or outside the farm in order to make it non-perishable, transportable, and marketable and just because processing is a bit longer or complicated wouldn’t rob the produce of its agricultural character.
The observations of the Hon’ble Supreme Court in the case of M/s. Crane Betelnut Powder Works, that the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent etc. did not result in a new and distinct product having a different character and…0 -nsion of the same line of reasoning.
However, after amendment by insertion of a note in chapter 21 of Central Excise Tariff these decisions are of no relevance at present in deciding classification matters under the Customs law.
8.4 The applicant has also submitted some Research Papers on the topic of ‘Extraction of Tannin and Arecoline from Areca Nut’, ‘Combination of kinetic maceration – digestion in the extraction of areca seeds (Areca catechu L.)’ and review article namely ‘Chemical Composition, Pharmacological, and Toxicological Effects of Betel Nut’ and a Chapter having title ‘Tannins: Extraction from Plants’ which is jointly authored by seven scientists from seven different universities said to be an authentic article published in 2019 with the licensee `Intech Open’. In the aforesaid articles and research papers the problem of tannin in areca nut and other plants as well as the extraction methods of tannin and alkaloids through the processes of maceration, microwave, ultrasounds, enzyme, decoction, irradiated radiation and gamma methods is discussed. The para 4 of the said chapter as published in the aforesaid article deals with the various processes of extraction method of tannins and alkaloids (arecoline). Under sub para 4.1 of the said chapter the solvents used for these extraction processes have been described as chemical solutions — ethanol, acetone, water as solvent, methanol, Na2SO3, NaOH. It is claimed that any of these processes may be used for extraction of the aforesaid two substances from areca nuts depending upon the type of solvent used, extraction material used and the extraction conditions.
8.5 I find that the above research papers are on the subject of extraction of Tannin from areca nuts, and the studies have been carried out under a controlled environment apparently aimed to find the best procedure of extraction in producing good quality tannins in an effective way to increase extract yield with a fairly small operational risk. Further, nowhere it has been categorically brought out that the subject goods, proposed to be imported by the applicant, are processed and treated with employing the same methods. All throughout the said imperial papers it has been emphasised that these are the processes and methods carried out for extraction of tannin / arecoline from the areca nut seeds. In my opinion these are indeed study papers that showcase the various extraction methods, which may or may not have been employed upon the impugned subject goods since nothing is adduced to evidence the same. Further, the claim of applicant that these processes are very crucial for changing the essential characteristics of raw tendered betel nuts with the resultant betel nut product which, as argued by the applicant, is chemically processed and is most appropriately classifiable under CTH 2106 90 30 falls flat solely due to the fact that these are carried out to preserve or to stabilize and/or to improve or maintain their appearance, and in fact they aid to retain the character of betel nut. In my opinion the applicant has failed to substantiate their claim that the subject goods are chemically processed. Notwithstanding the claim of the applicant to any chemical process discussed above it is observed that the resultant product remains the same – betel nut-may be with variation in arecoline and tannin contents. Due to this no preparation of betel nut has come in to existence requiring classification under chapter 21. Hence I do not find the applicant’s recourse to and reliance placed on the research paper as legally acceptable for deciding the classification of subject goods.
9. The classification of the goods under the Tariff is governed by the principles as enumerated in the General Rules of Interpretation (GRI). As per Rule 1 of the GRI the titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions of GRI. As per Rule 2 (b) of the GRI. the classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3 which stipulates that when by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as per Rule 3(a) of the GRI, whereby the most specific heading shall be preferred over headings providing a more general description for classification of the goods.
To summarize the forgoing analysis, even at the cost of repetition, I find that, in order to arrive at a ruling regarding the classification of the subject goods, it is incumbent on me to consider the notes to chapter 8 as also the scope of supplementary notes to the chapter 21 and the guidelines contained in the HSN Explanatory Notes and the ratio as well as relevance, if any, of the decisions already referred during forgoing discussion.
HSN Explanatory Note under heading “General” to chapter 8 provides that fruit and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled. Further, it is also provided that the addition of small quantities of sugar does not affect the classification of fruit in this Chapter.’ Thus, the HSN explanatory notes to Section-I indicate that chapter 8 covers nuts intended for human consumption (whether as presented or after processing); whether they are fresh, frozen (whether or not previously cooked by steaming or boiling in water) or dried (including dehydrated, evaporated or freeze-dried) and whether the nuts could also be whole, sliced, chopped. shredded. stoned, pulped, grated, peeled or shelled. Further, according to the description of “Supari” as provide under Supplementary Note No.2 to Chapter 21 of First Schedule to the Customs Tariff Act, 1975, the “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”. However, in the applicant’s submissions no preparation details are forthcoming in case of first product namely Processed API Betel-nut product known as Supari. For second product namely Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split) applicant’s claim to the process of boiling with chemicals using sodium benzoate and potassium meta bisulphate is aimed at. by their own admission, elimination of foul smell and improve the quality of nuts. It simply means that the processes to which second product is subjected are primarily meant for homogenisation and preservation of the product – betel nut. Hence, I conclude that the processes described by the applicant do not necessitate the subject goods to be moved from the purview of chapter 8 to bring under the ambit of chapter 21 for the purpose of classification.
10. In view of the aforesaid discussions, I have reached the conclusion that the subject goods placed before me for consideration, i.e.. 1) Processed API Betel-nut product known as Supari and 2) Processed Betel-nuts unflavoured chemically processed Supari in small cut‑pieces (not split) merit classification under chapter 8 of the Customs Tariff, and more appropriately, under the heading 0802, as under:
1) Processed API Betel-nut product known as SUPARI (Not Prepared): 0802 80 10 and
2) Processed Betel-nuts unflavoured chemically processed SUPARI in small cut pieces (Not split): 0802 80 90.
