Commissioner of Customs Vs Shahnaz Commodities International P. Ltd (Madras High Court)
Madras High Court held that CTH 2008 19 20 specifically covers roasted areca nut / betel nut, accordingly, when there is a specific entry covering a product/commodity, the test of common parlance is irrelevant in determining classification.
Facts- The present appeal is filed by the Revenue challenging the rulings of the Customs Authority for Advance Rulings (CAAR) that “roasted areca nut / betel nut (whole/cut/split)” merit classification under Customs Tariff Heading (CTH), 2008, more particularly, sub heading 2008 19 20 of the First Schedule to the Customs Tariff Act, 1975.
Conclusion- Held that 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, the impugned Ruling is in consonance with HSN classification. When there is a specific entry covering a product/commodity, the test of common parlance is irrelevant in determining classification.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
These Civil Miscellaneous Appeals are filed by the Revenue challenging the rulings of the Customs Authority for Advance Rulings (hereinafter referred to as “CAAR”) that “roasted areca nut / betel nut (whole/cut/split)” merit classification under Customs Tariff Heading (hereinafter referred to as “CTH”), 2008, more particularly, sub heading 2008 19 20 of the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as “CTA”).
2. Brief Facts:
(a) The respondents / importers filed applications for Advance Ruling in CAAR-1 on 29.09.2022, 15.12.2022 and 31.01.2023 respectively, seeking ruling on the classification of “roasted areca nuts / betel nuts”. The respondents also submitted applications in CAAR-1 on the same issue pertaining to some other jurisdictional Commissionerate of Customs.
(b) The respondents stated in the applications that they intend to import “roasted areca / betel nuts (whole, split, and cut)” from Burma, Indonesia, Sri Lanka, Singapore, etc.
(c) The respondents had set out the various processes, which the areca nuts are subject to before import, and the same as stated in CMA.No.600 of 2023 are extracted hereunder for ready reference:
“1.De-husking the raw betel/areca nut and drying the same before being fed into the roasting oven;
2. Feeding the fresh areca nuts into a seed roasting oven, heating up to 100 degreeCelcius and roasting the fresh areca nuts in an oven of the seed roasting machine;
3. Take the areca nuts out of the oven, cooling at room temperature and feeding back into the oven, heat and roast them again, and perform this cycle until the water content of the fresh areca nut is 10 to 15 per cent; and
4. The fresh areca nuts are repeatedly heated, roasted and cooled to ensure that the areca nuts are quickly cooled and shrunk after thermal expansions so that the roasted areca nuts have higher quantity; the roasting time is around 2-3 days.”
(d) It was stated that the goods intended to be imported are roasted areca / betel nuts classifiable under CTH 2008 19 20 of CTA.
(e) The Jurisdictional Customs Commissionerate, Chennai had submitted its comments to the applications filed by the respondents before the Authority of Advance Rulings (in short “AAR”), which are summarised as under:
i. That there are two processes involved in making roasted areca / betel nuts, viz., one is cleaning and other is heating and roasting. The said processes are covered under Note 3 to Chapter 8 of CTH.
ii. That roasting or mere addition of certain additives for the limited purpose of additional preservation or enhancing appearance does not result in converting betel/ arecanut into a “preparation of betel / areca nut”. In other words, betel /areca nut even after being subject to the processes set out by the applicant / respondent herein, retains its character as betel nut. It does not merit classification under Chapter 21 instead would be covered by Chapter 8.
iii. While dealing with classification under Chapter 20, it was submitted that mere roasting of areca / betel nut does not result in emergence of a new product i.e., it does not alter the character of the original product viz., betel nut. Thus, betel nuts intended to be imported are liable to be classified under Chapter 8 of CTH.
(f) The respondent in CMA.No.600 of 2023 made additional submissions before the Authority on 09.11.2022 inter alia as follows:
i. That roasting is done using firewood / palm kernel based ovens and the temperature of the flames is around 600 degree Celsius. As a result, the betel /areca nuts are roasted beyond 100 degree Celsius, usually in the range of 130-150 degrees Celsius.
ii. The above process results in altering / changing appearance of areca / betel nut as well as chemical characteristic on account of the roasting process. That research would reveal that the tannin and arecoline content is substantially altered due to roasting and boiling. It was thus submitted that roasted betel / areca nut is distinct from betel nut.
iii. Reliance was placed on the judgment of the Hon’ble Supreme Court in the case of Crane Betel Nut Powder Works v. Commr. of Customs & Central Excise, (2007) 4 SCC 155 and the order of the Tribunal in the case of S.T. Enterprises v. Commissioner of Customs, reported in (2021) 378 ELT 514 apart from a number of Advance Rulings.
iv. Roasting is not meant for preservation or stabilization or to improve or enhance/maintain the appearance of the product.
(g) The Advance Rulings Authority after considering the materials placed, proceeded to rule that roasted areca / betel nuts -whole, split and cut fall under Chapter Heading 2008, specifically, under Tariff entry 2008 19 20: “other roasted nuts & seeds” of Chapter 20 of the the First schedule of CTA, on the strength of the following reasons:
i. That the goods covered under the applications are roasted betel nuts.
ii. That the nuts are roasted at temperatures of 130 to 150 degree Celsius. The process brings about change in physical and chemical characteristics of the betel nuts.
iii. That the judgment of the Hon’ble Supreme Court in the case of Crane Betel Nut Powder and S.T.Enterprises reported in 2007 (210) E.L.T. 171 (SC), and the other Advance Rulings, were not found to have any bearing in resolving the issue on hand inasmuch the classification of “roasted areca / betel nuts” under CTH was not dealt with in any of the said judgments, orders or Rulings.
iv. The Advance Rulings Authority after considering the submissions and material evidence let in by both parties, held that the processes mentioned in Chapter 8 would not include roasting and found that the distinction between drying and roasting, ought to be borne in mind while determining, whether areca nut would be covered under Chapter 0802 80 or 2008 19 20. Reliance was also placed on the HSN Explanatory Notes in support of its conclusion that roasted betel nuts would be covered under CTH 2008 and more specifically under Sub Heading 2008 19 20 of the First Schedule to CTH.
3. Case of the Appellant:
(a) That the Advance Rulings Authority ought to have seen that roasted areca nut is not commercially different from areca nut and thus, liable to be classified under CTH 0802.
(b) That the Advance Rulings Authority is contrary to the judgment of the Hon’ble Supreme Court in the case of Crane Betel Nut Powder and the order of the Tribunal in the case of S.T. Enterprises, which was affirmed by the Supreme Court vide judgment dated 19.03.2021 in Civil Appeal Nos. 850 and 851 of 2021.
(c) That the impugned ruling is also contrary to more than 10 different rulings by the Authority and is thus liable to be quashed.
(d) That the impugned ruling fails to appreciate and apply the Chapter Notes contained in Chapters 8 and 20, which would clearly show that the areca nut in question cannot be brought under Chapter 20, in view of the express exclusion contained in Note 1(a) to Chapter 20. CTH 2008 covers only such of those goods which are not specified elsewhere, areca nut having been mentioned / specified in CTH 0802 80, is excluded from being classified under CTH 2008 1920.
4. Case of the Respondents:
(a) That the CTA and HSN Explanatory Notes published by the World Customs Organization (WCO) provide / earmark a specific entry for roasted nuts in general including roasted betel nuts.
(b) That the order of the Advanced Rulings Authority in classifying roasted betel nut under CTH 2008 is in consonance with the HSN Explanatory Note which has been consistently held by the Hon’ble Supreme Court to be of great value in determining classification under CTH, and thus, the impugned ruling does not warrant any interference.
(c) That the decisions rendered in the cases of Crane Betel Nut and S.T. Enterprises and the various Advance Rulings referred to by the appellant are inapplicable to the issue on hand.
(d) That the classification of roasted nut under Chapter Heading 2008 stands covered by a series of decisions of the Apex Court and Advance Rulings.
5. Heard both sides. Perused the material on record.
6. The common question that arises for consideration in all these appeals is whether the ruling of the Customs Authority for Advance Rulings that “roasted betel nut – whole, split and cut”, merit classification under heading 2008 and more specifically under sub heading 2008 19 20 of the First Schedule to the CTA, warrants interference.
7. Before proceeding further, it may be necessary to refer to the General Rules for Interpretation, relevant Tariff Entries along with Chapter Notes and HSN Notes, and its relevance for determining the classification, which are as under:
i) General Rules for the Interpretation of Import Tariff:
“Classification of goods in this Schedule shall be governed by the following principles:
3. 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 follows:
a. The heading which provides the most specific descriptions shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only 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 give a more complete or precise description of the goods.
b. Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable.
c. When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.”
ii) Relevant entries under the Customs Tariff Act:
Chapter 8
Edible fruit and nuts; peel of citrus fruit or melons
NOTES
1. This Chapter does not cover inedible nuts or fruits.
2. Chilled fruits and nuts are to be classified in the same headings as the corresponding fresh fruits and nuts.
3. Dried fruit or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes:
(a) for additional preservation or stabilization for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate;
(b) to improve or maintain their appearance for example, by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nuts.
4.Heading 0812 applies to fruit and nuts which have been treated solely to ensure their provisional preservation during transport or storage prior to use (forexample, sulphurdioxidegas, in brine, insulphur water or in other preservative solutions) ,provided they remain unsuitable for immediate consumption in that state.”
