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Case Law Details

Case Name : In re Perfect Trading Co. (CAAR Delhi)
Appeal Number : Advance Ruling No. CAAR/Del/Perfect/05/2024/705
Date of Judgement/Order : 28/02/2024
Related Assessment Year :

In re Perfect Trading Co. (CAAR Delhi)

The case of “In re Perfect Trading Co.” before the Customs Authority for Advance Rulings (CAAR), Delhi, has brought to light the complex issue of classifying Roasted Areca Nuts in various forms: whole, split, and cut. M/s. Perfect Trading Co., seeking to import these nuts from several countries into India, requested an advance ruling on their classification under the Customs Tariff Act, 1975.

 The applicant argued that the roasted areca nuts are classifiable under chapter sub-heading 20081920, citing the lack of a definition for “roasting” in both the Customs Tariff and the Food Safety and Standards (FSS) explanatory notes. The process of roasting involves de-husking, drying, and subjecting the areca nuts to high temperatures, resulting in a product with a moisture content below 6 percent, aimed at improving quality rather than preservation. The applicant supported their classification with references to various case laws and the Harmonized System Nomenclature (HSN) Explanatory Notes, which explicitly include dry-roasted nuts under Chapter 2008.

The counter-argument from the concerned Commissionerate suggested that the roasted areca nuts fall under Chapter 080280, classifying them as merely dried nuts rather than a product that underwent a substantial transformation. They emphasized the standard procedures of drying and the regulations set by FSSAI, suggesting that the roasting process described by the applicant does not sufficiently alter the product to warrant a different classification.

After considering the submissions, the CAAR Delhi ruled in favor of the applicant, classifying the roasted areca nuts under sub-heading 20081920 as “Other roasted nuts and seeds.” This decision was supported by the specific mention of roasted nuts in the HSN Explanatory Notes and various judicial precedents that underscore the importance of these notes in tariff classification. The ruling acknowledges the distinct process and product outcome of roasting, differentiating it from mere drying or preserving methods. This decision not only clarifies the classification of roasted areca nuts for Perfect Trading Co. but also sets a precedent for similar cases in the customs and trade sector.

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

M/s. Perfect Trading Co., having IEC No. AESPK3717Q (`applicant’, in short) has filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, New Delhi (CAAR, in short). The said application was received in the Secretariat of the CAAR, New Delhi on 04.01.2024 along with their enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant intends to import “Roasted Areca Nuts (Whole), Roasted Areca Nuts (Split) & Roasted Areca Nuts (cut)” from Myanmar, Thailand, Indonesia, Vietnam, Sri Lanka, Cambodia, Laos & Singapore into India through the port falling under the Commissioner of Customs, Custom House, New Harbour Estate, Tuticorin — 628004 (Tamilnadu).

2. The applicant is currently engaged in the local trading of pan shop related spices & betel nuts items. The applicant intends to import Roasted Areca Nut (Whole), Roasted Areca Nut (Split) and Roasted Areca Nut (Cut) and sought ruling of the Authority in the matter of classification of the goods which in the opinion of the applicant, are classifiable under chapter Sub-heading 20081920, The submission of the applicant are as under:

2.1 The process of “roasting” is neither defined in the Customs Tariff nor in the FISN Explanatory/Section/Chapter Note.

2.2 The process for roasting involved in the manufacture of the above said goods is as under: –

2.3 Roasted Areca Nut (Whole), Roasted Areca Nut (Split) and Roasted Areca Nut (Cut): Following processes are conducted on raw betel nut:-

a) De-husking the raw betel/areca nut and drying the same before being fed into the roasting oven.

b) Feeding the fresh areca nut into a seed roasting oven, heating up to 130-150 deg. C and roasting the fresh areca nuts in an oven of the seed roasting machine.

c) 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 moisture content of areca nuts goes below 6 percent (%).

d) The fresh areca nuts are repeatedly heated, roasted and cooled to ensure that the areca nuts are quickly cooled and shrunk after thermal expansion so that the roasted areca nuts have higher quality; the roasting time is around 2-3 days.

e) Packaging in industrial packs of 50kgs to 80kg as per requirement.

In India, areca nut is chewed for a variety of reasons such as stress reliever, mouth freshener, concentration improver and for digestive purposes following food intake.

2.4 The above-mentioned goods are specifically covered and are classifiable under CTH 20081920 of the Customs Tariff Act, 1975. As per the HSN Explanatory Notes to Heading 2008, given below, Dry Roasted Areca (or Betel) Nuts are specifically covered under Chapter Heading 2008.

CTH 2008: Fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included -Nuts, ground nuts and other seeds, whether or not mixed together:

20081920— Other roasted nut and seeds

2.5 The applicant placed reliance upon the case laws of L.M.L Ltd. Versus Commissioner of Customs reported in 2010 (258) E.L.T 321 (S.C), Holostick India Ltd. Versus Commissioner of Central Excise, Noida reported in 2015 (318) E.L.T 529 (S.C), Collector of Central Excise, Shillong Versus Wood Craft Products Ltd. reported in 1995 (77) E.L.T 23 (S.C) to submit that the HSN Explanatory note is the safe and dependable guide in the matters of classification of items.

2.6 As per the Explanatory Note to Chapter 8, fruits and nuts of this Chapter remain classified here even if put up in airtight packing (e.g. dried prunes, dried nuts in cans). In most cases, however, products put up in these packing have been prepared or preserved otherwise than as provided for in the headings of this Chapter, and are therefore excluded from chapter 8 (and will fall under Chapter 20). The processes mentioned in Chapter 8 are different from the processes performed on impugned goods, they are excluded for the purpose of classification from Chapter 8 of the Customs Tariff Act, 1975 (hereinafter also referred as “Tariff’).

2.7 The process of roasting changes the chemical and physical characteristics of the areca nut by reducing arecoline and tannin as well moisture.

2.8 In respect of alternate CT11 2106, the applicant draw attention to Chapter Note 2 and Explanatory Note (A) to Chapter 21, which is as under:

“Betel Nut product known as Supari” means any preparation containing betel nuts but not containing any one or more of following ingredients, namely lime, katha (Catechu) and tobacco whether or not containing any other ingredients such as cardamom, copra or menthol.

2.9 As per the Explanatory note, the heading covers preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption.

2.10 The goods have undergone roasting, but they don’t contain lime, Katha (catechu) and tobacco.

Further, roasted betel nut can be consumed directly by merely cutting them into pieces. Therefore, the goods are equally classifiable under Chapter 21 of the Customs Tariff Act, 1975.

2.11 The applicant also referred to and discuss the case law of M/s Crane Betel nut Powder Works reported in 2007 (210) ELI 171 (S.C) stating that in this case, the Hon’ble Supreme Court purely went into the aspect whether crushing and adding other ingredients to betel-nut would amount to manufacture or not. Upon convincing that crushing and mixing other ingredients to the betel-nut into powder would not amount to manufacture, the Court ruled in favour of the party thus permitting them to classify the item under the CTH 0803. Based on the above, earlier ruling issued by the Customs Authority for Advance Rulings rejected the classification of betel-nut products under the HS Code 2106 90 30 and confirmed the same under Heading 0802, by holding that the process of such as boiling, slicing, removal of impurities, metal-deflection, garbling, polishing, roasting, cutting and adding flavours to the betel-nut do not alter the nature and characteristics of the product so as to it outside the purview of the Heading 0802. However, after the subsequent amendment to the Central Excise Tariff Act, 1985 vide The Finance (No.2) Act, 2009 (Act No.33 of 2009 dated 19″ August 2009) with the insertion of Note to Chapter 21, the decision of the Hon’ble Supreme Court in the above-mentioned case law was rendered infructuous.

2.12 In support of the above, they cited on the ruling issued in case of M/s Excellent Betel Nut Products by the Authority of Advance Rulings, wherein the authority took proper judicial notice and distinguished the decision in the case of M/s Crane Betelnut Powder Works Vs Commissioner of Customs & C. EX, Thirupathi reported in 2007 (210) E.L.T 171 (S.C) and held the classification of processed betel nuts under 21069030.

2.13 Roasted Areca nut is used for eating (mukhwas) directly as well as with paan (betel leaf).

2.14 The roasting is done using firewood/palm karnel-based ovens and the temperature of the flames is around 600 degrees Celsius. As a result, the betel nuts would be roasted well beyond 100 degree Celsius, usually in the range of 130-150 degree Celsius.

2.15 Roasted betel nut undergoes a change in its appearance as well as chemical characteristics on account of the roasting process. There is a substantial change in the chemical characteristics of the betel nut product on account of roasting process. The tannin and arecoline content of raw betel nut/areca nut get substantially changed by subjecting the same to roasting. Therefore, roasted betel nut is a distinctive product of betel nut making it suitable for immediate consumption.

2.16 Roasting is not aimed at additional preservation or stabilization or to improve or maintain their appearance.

2.17 The applicant further submitted that as per their best knowledge and belief the items are classified under Custom Tariff heading 20081920. The said entry in Customs tariff Act’ 1975 reads as under:

Tariff Item Description of Goods Unit

2008

Fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included Kg’s (Kilo grams)
2008 19 – Other, including mixtures:
2008 19 20

– Other roasted nuts and seeds

2.18 The applicant relied upon the following judgments:-

a. Ruling No. CAAR/Mum/ARC/39,40&41/2023 dated 07.12.2022 passed in the matter of M/s. Universal Impex, Mumbai Vs. The Commissioner of Customs 11, Chennai, The Commissioner of Customs, Nhavashcva & the Commissioner of Customs (Krishnapatnam), Andhra Pradesh in Application No. CAAR/CUS/APPL/I 9, 21, 22/2023-0/o Commr.-CAAR-MUMBAI, where identical goods are held classifiable under 20081920.

b. The Customs Department had challenged the aforesaid Advance Ruling of the CAAR, Mumbai of M/s Shahnaz Commodities International (P) Ltd, Chennai, M/s Neena Enterprises, Telangana and M/s Universal Impex, Mumbai, by way of a Civil Miscellaneous Appeal (CMA) No’s 600/2023, No. 1206/2023 and No. 1750/2023, dated 01.08.2023 respectively before the Hon’ble Madras High Court. Wherein the Division Bench of Hon’ble Madras High Court after elaborately hearing all the parties dismissed the CMA’s of the Customs Department, thereby upholding the aforesaid ruling of the CAAR, Mumbai.

c. Ruling No. CAAR/Del/Shree Durga/26, 27 & 28/2023 dated 17.11.2023 of Honsble Authority passed in the matter of M/s. Shree Durga Traders, Kolkata Vs The Commissioner of Customs (Preventive) Kolkata, The Principal Commissioner of Customs, Chennai II (Import) &The Principal Commissioner of Customs Nagpur in Application No.22, 23 & 24/2023-DELHI 0/o Commr-CAAR-NEW DELHI, where identical goods are held classifiable under 20081920.

d. Ruling No. CAAR/Mum/ARC/67/2023 dated 16.10.2023 of Hon’ble Authority passed in the matter of M/s. Shree Ganesh TradersRuling No. CAAR/Mum/ARC/67/2023 dated 16.10.2023 of Hon’ble Authority passed in the matter of M/s. Shree Ganesh Traders, Chennai Vs. The Commissioner of Customs II (Import), Chennai, in Application No. CAAR/CUS/APPL/95/2023-0/o Commr-CAAR-MUMBAI, where identical goods are held classifiable under 20081920.

3. A personal hearing in the matter was conducted on 21.02.2024. During the personal hearing, the authorized representative of the applicant stated that they are giving reply to the comments of the concerned Commissioner and stated that their submissions in the application be considered as reiteration of the submissions in their earlier application.

4. Comments on the application for advance rulings have been received from the concerned Commissionerate wherein the claim of the applicant has been opposed and submitted as under:

Pam 3:

i. No comments as provisions quoted.

ii. This office has filed an appeal in Hon’ble High court of Madras (Madurai Bench) vide CMA(MD) No.600 of 2003 and the same is pending for orders.

iii, ‘the item described as “Roasted Areca nuts(whole), (split) & (cut)” are freely importable if the unit price of the goods is more than Rs.35 I/kg and classifiable under CTI-I 080280.

iv. Comments to points raised by the applicant vide Annexure I & Annexure 11 of the application are as under:

The claims made by the applicant and the ruling sought is devoid of any concrete evidence and legally untenable on the following grounds:

i) The applicant’s claim that roasting is not defined in the Customs Tariff Act, 1975 is not correct. Though roasting as a process is not defined, it will fall under the ‘moderate heat treatment’ mentioned in Chapter Note 3 of Chapter 8 reproduced below for easy reference:

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

a) For additional preservation 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 betel nut, fruit or dried nuts.”

(ii) The applicant’s claim that after repeated roasting of the area nuts at the temperature of more than 100 degrees Celsius in a roasting oven, moisture content of the fresh areca nuts is reduced to 10-15%. The reduced moisture content of 4% upon repeated roasting at high temperatures, as claimed by the applicant does not hold much water as the maximum moisture of the dried areca nuts should be 7% as per standards set by the FSSAI Regulations, 2011 and the dried areca nuts with more than 7% are unfit for human consumption as per FSSAI regulations. It implies that the moisture content in sun dried fresh areca nuts imported under CTH 0802 is also 7% or less. Hence, claim that moisture content is reduced to 10-15% after repeated roasting at higher than 150-degree Celsius temperature appears illogical and misrepresentation of facts. Logically, if sun dried areca nuts are not expected to have more than 7% moisture, then the moisture after repeated roasting at such high temperatures should come down to much lower levels than being claimed. The importers have made only statement and have not produced any evidence of carrying out the process claimed. Therefore, in absence of any hard evidence, it appears that the proposed areca nuts are only subjected to moderate heat treatment, which is very much covered under CTH 0802. Further, the process mentioned by the importer appear to be only for the purpose of drying and hence, purported roasted Areca nuts are rightly classifiable under Chapter 08, specifically under CTH 080280.

(iii) In the process flow mentioned in application to make roasted betel nut, one set of process is found to be intended for cleaning and the second set for heating and roasting. These processes are clearly covered by the Chapter Note 3 to Chapter 8 (reproduced in above pars 11). In the instant case, betel nuts after being roasted are cooled and this fact per se would not exclude the end-products from the scope of “dried nuts”.

iv) Further, it is equally obvious that roasting or mere addition of certain additives for the limited purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut. Therefore, the process to which raw betel nuts have been subjected as per process flow submitted by the applicant is squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Notes. Hence at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as “preparations” of betel nut, which is sine qua non for a good to be classifiable under Chapter 20.

v) To be classified under Chapter 20 there should be some preparation as the Chapter heading reads as “Preparations of vegetables, fruit, nuts or other parts of plants”. Mere roasting of betel nut does not render the product to be distinctive as claimed by the applicant or does not alter the character of the original good. Roasting or mere addition of certain additives for the limited purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut. Hence it remains the betel nut and rightly classifiable under Chapter 08. According to Cambridge dictionary, “Preparation is a mixture of substances, often for use as a medicine”. According to Collins Dictionary “A preparation is a mixture that has been prepared for use as food, medicine, or a cosmetic”. However, in the process flow mentioned in para 2 it is evident that there is neither any mixture of products nor any change in the original good which tantamount to no preparation.

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

CTH 2008: Fruits, nuts and other edible parts of plants, otherwise prepared or preserved; whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included Nuts, ground nuts and other seeds, whether or not mixed together;

200819 — Other, including mixtures.
20081920 — Other roasted nut and seeds

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

1. This chapter does not cover:

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

b. Vegetable fats and oils (chapter 15);

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

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

e. Homogenized composite food preparations of heading 2104.

vii) Classification under chapter 20 is sought to be justified on the grounds that the HSN explanatory notes to heading 2008 provide for inclusion of areca nuts in chapter 2008. However, the explanatory notes also clearly specify that “the products of this heading are generally put up in cans, jars or airtight containers, or in casks, barrels or similar containers” This clause of the HSN explanatory notes clearly implies that the goods of this heading are preparations of fruits or nuts presented in packaged condition after manufacturing, which need to be specifically stored and preserved before consumption. For example, roasted almonds or ground nuts need separate packings as specified by the HSN explanatory notes, otherwise these products are prone to deterioration after roasting. But the processes said to be performed on the areca nuts is only for the purpose of drying without any reference to packaging and any manufacturing process. The importers have not submitted anything about the packing of the goods and generally these goods are imported in bulk in jumbo bags. The goods under dispute are Areca Nuts in the same form as those classified under Chapter 08 and hence, they are clearly excluded from the scope of the Chapter Heading 2008. Hence, the purported roasted areca nuts clearly excluded from the scope of the chapter 20 and rightly classifiable under chapter 08.

viii) Further, as per Rule 3(a) of General Rules for the Interpretation of the Harmonized System since the product is more specifically classified under CM 0802 classification under Chapter 2008 or 2106 is unwarranted.

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 affected as follows:

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

ix) The Chapter Note 1 of Chapter 20 says that this chapter does not cover: vegetables, fruit or nuts, prepared or preserved by the processes specified in chapter 7, chapter 8, or chapter 11. Chapter 20 heading reads “preparations of vegetables, fruit, nus or other parts of plants”. it is pertinent to mention that the Chapters are organised as per evolution, which is evident by the fact that the edible nuts and fruits are classified under Chapter 8, preparations of vegetables, fruits, nuts or other parts of plants under Chapter 20 and miscellaneous edible preparations under Chapter 21. Hence, the roasted betel nut which did not undergo any preparation is rightly classifiable under Chapter 8.

x) Further, reliance is placed on the following Advance Rulings, which have ruled classification of areca nuts under CTH 0802:

a. CAAR Delhi vide ruling no. CAAR/Del/ Vaibhav/21/2021 in the case of M/s Vaibhav Enterprises

“The CAAR rejects the application of M/s Vaibhav Enterprises by giving the ruling that: API Supari, Chikni Supari, Boiled Supari, Boiled and Cut supari, unflavoured supari and flavoured supari, Roasted betel nut, merit classification under chapter 8 of the 1 g schedule to the Customs Tariff Act and more precisely, under the heading 0802”

b. CAAR Delhi vide ruling no. CAAR/Del/Sarveshwari/11/2021 in the case of M/s Sarveshwari industries.

“the CAAR rejects applicant’s appeal by stating that the goods; API Supari, chikni supari, unflavoured supari, flavoured supari and supari are not classifiable under sub-heading 21069030, since they have not attained the character of ” preparations” of betel nut, which is sine qua non for a good to be considered”

c. CAAR Delhi vide ruling no, CAAR/Del/ Naman Agri/ 09/2021 in the case of M/s Naman Agri Impex Private Ltd.

“the CAAR rejects applicant’s appeal by stating that the goods; API Supari, chikni supari, unflavoured supari, flavoured supari and boiled supari, merit classification under chapter 8 of the first schedule to the Customs Tariff Act, and more precisely, under the heading 0802. This is so in view of the fact that the processes to which raw green fresh betel nuts have been subjected to obtain the said five goods are squarely in the nature of processes mentioned in Note 3 to Chapter 8, and have not materially changed the essential character of betel nuts, further these goods are not classifiable under sub-heading 21069030.

d. Chennai CESTAT order in M/s S.T. Enterprises v/s Commissioner of Customs (Chennai-vii) (2021(378) Et T.514(Tri. Chennai).

“The lionible Tribunal has addressed the question whether the mere boiling and drying whole betel nut it would merit classification under 21069030 and held that since the import goods are betel nuts whole, these would merit classification under Chapter 8.”

xi) The CESTAT judgement in case of M/s. S.T. Enterprises vs Commissioner of Customs (VII) in Customs Appeal No.40002 & 40003 of 2021 is applicable mutatis mutandis to the present case, wherein the question decided in the said case was classification of “boiled betel nuts” The importers submission is that the process roasting is not covered under the process mentioned under Chapter Note 3 of Chapter 8. It is pertinent to mention here that the process of boiling is also not mentioned in the Chapter Note 3 to Chapter 8 and the Tribunal has held that the goods under dispute “boiled areca nuts merit classification under CTH 08028010, which was affirmed by the Hon’ble Supreme Court vide judgment dated 19.03.2021 in Civil Appeal Nos. 850-851 of 2021. Though the process dealt with by the Hon’ble Tribunal was not exactly the same, the principle involved holds relevance. When the boiled supari can be classified under Chapter 08 on the grounds that boiling does not alter the original characteristics of the goods, the same would apply in the present case also as roasting alone would not alter the character of the goods and therefore, roasted areca nut should be classified under Chapter 08 even on this principle also.

xii) The applicant has relied upon the case of M/s Excellent Betel nut Products Pvt. Ltd. do cover the four goods, i.e., API supari, Chikni supari, Unflavoured supari and Flavoured supari. In the said ruling, the erstwhile AAR has concluded that the said products merit classification under sub-heading 21069030. In doing so, the erstwhile AAR has been of the view that on account of the positive language of the Supplementary Note 2 to Chapter 21, it is not necessary for betel nut (supari) to undergo a change of character for it to be classified under Chapter 21. The AAR had considered the contention of the department that the said four goods merit classification under Chapter 8, but rejected the same. However, while erstwhile AAR did not take any comment on implications of the Chapter Note 3 to Chapter 8 on the processes by which raw betel nuts were subjected to obtain the said four goods. Further, the erstwhile AAR was of the opinion that the decision Hon’ble Supreme Court in the case of M/s. Crane Betel Nut however works reported at 2007 (210) E.L.T. 171 (S.C.))

“The SC gives the decision that the Commissioner of Customs and Central excise has correctly analysed the factual as well as legal situation in arriving at the conclusion 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 use.”

And therefore, has no application in the facts of the cases before them. Further, the Honourable High Court of Delhi in its order CUS AA 17/2022 dated 01-03-­2023 has held that the order of CAAR in case of M/s Excellent betel nut is erroneous. The relevant portion of the judgment is reproduced below:

“The decision of the learned AAR in Re: Excellent Betelnut Products Put. 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”.

In order to arrive at the appropriate classification of the impugned goods, all originating from common source viz. raw green fresh betel nut, a more comprehensive view needs to be taken than in the aforesaid M/s Excellent Betel nut case, as has been done by AAR, Mumbai in the case of

a. M/s. Samreen International Put. Ltd. (Ruling No. CAAR/ Mum/ARC/3/2021 dated 15th of March, 2021)

 “I find the observations of the llotfble Supreme Court in the case of Crane Betel Nuts and the decision of I lon’ble Tribunal in the case of Azatn Laminators to be extremely enlightening”

“In view of the aforesaid discussions, I have reached the conclusion that all the five products placed before me for consideration, i.e., API supari, chikni supari, unflavoured supari, flavoured supari, and boiled supari merit classification under chapter 8 of the customs tariff, and more precisely, under the heading 0802, and not under sub-heading 21069030, as contended”

b. M/s Dry Nut Enterprises (Ruling No. CAAR/Del/ Dry Nut/ 01/2021 dated 16th March, 2021)

“I find that the reference by the Principal Commissioner of Customs to the Note 6 to chapter 21 of the Central Excise Tariff Act, which was essentially intended to deem certain processes as “manufacture” is inappropriate in the present context. This is particularly so, given the judgement of the Hon’ble Supreme Court of India in the case of M/s. Crane Betel Nut Powder Works and of the CESTAT, Chennai in the case of M/s. Azam Laminators Put. Ltd. Put simply, these decisions clearly imply that addition of flavouring agents do not change the character of the good, meaning in the present case betel nut would continue to remain betel nuts and not become preparations of betel nuts”.

From the various advance rulings quoted above, it is more than evident that the applicant’s submission of Honble Supreme Court’s decision in M/s. Crane Betelnut Powder works has been rendered infructuous post the amendments in 2009 is untenable and does not hold any water.

xiv) Several advance ruling applications are filed for betel nut to avoid classification under Chapter 08 as there is a Minimum Import Price as well as a tariff rate which is regularly revised by CBIC. It is pertinent to mention that the revision of tariff value is on a continuous upward trend and as on date the tariff value of the Areca nuts is USD 7765 Per Metric ‘Ton. These applications are being submitted to circumvent the minimum import price and increasing tariff values by legalizing betel nut import through mis- declaration and mis-classification. The CAAR may not entertain such applications considering that several advance rulings have already rejected the classification of betel nut under chapter 20 and 21 in the interest of the local areca nut farmers and to safeguard the interest of the revenue.

5. The applicant was provided the comments received from the jurisdictional Commissionerate. The applicant vide letter dated 23.02.2024 submitted their submissions on replying the comments of the concerned Commissionerate, which is as under: –

This is an additional reply to the views/comments received from the Office of Commissioner of Customs. Tuticorin.

Reply to Point no (i), (ii), (iii), (iv), (v) and (vi)-:

i) The vital question as to whether roasted nuts would fall under Chapter 0802 or Chapter 2008 was affirmatively answered in favour of Chapter 2008 by the Hon’ble Supreme Court in the case of Commissioner of Customs & Central Excise, Goa vs Phir Corporation Ltd. reported in 2008 (223) E.L.T 9 (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.

ii ) It is pertinent to mention and draw attention of the authority to the Lab Report No.173/MCH/10.08.2023 dated 24.08.2023 issued by CRCL Chennai in respect of import of Roasted betel nut by M/s Universal lmpex (lEC No. 0313014159) based on the CAAR ruling No. CAAR/Mumbai/ARC/39,40,41/2023dated 12.05.2023. To a specific test memo by the Customs department to ascertain whether the item under import was “roasted beetle nut” or not the Customs lab after testing the item reported as follows:

“The item is in the form of grey-brown whole nuts having cracks on the upper surface. It answers tests for areca nuts active ingredients, arecoline and Flomarecoline.”

Moisture content=3.92%
Carbohydrate content=1.2%

In view of reference available and as the moisture content and carbohydrate content of the  sample under reference is less than the raw areca nut, it may be considered as dry roasted areca nuts.

Based on the above test report, the Chennai Customs has cleared the consignment.

Reply to Point No. (vii)-:

iii) It is submitted that attention was drawn to the method of packing as indicated in the HSN explanatory to Chapter 20 to argue that in order to qualify the roasted betel nut under Chapter 2008, the proposed import item should also be in such packing. This arguments appears to have emanated from the non-appreciation of the word “generally” used in the said HSN reproduced before-:

“the products of this heading are generally put up in cans, jars or airtight containers, or in casks, barrels or similar containers”.

A dictionary meaning of generally is usually or commonly thereby indicating that there are exceptions to the packing methods mentioned therein. If understood in this context, the roasted betel nuts having moisture content less that 5% (3-4% in general) depending upon the duration and intensity of roasting, needs not packed in cans, jars or airtight containers or in casks, barrels or similar containers as the same is less susceptible to deterioration. These kinds of packing are required for products that are not roasted and are susceptible to deterioration due to exposure to atmospheric moisture. It is clear that except for roasted nuts other products may require the packing as indicated in the relevant HSN Explanatory note.

The packaging of a product, cannot decide the description of the goods, which would lead to absurdity. Further, the packaging is made to prevent the goods from deterioration and enable easy access to marketability. Whereas neither aspect have any bearing on ‘roasted areca nuts’ as roasting minimizes the moisture to the maximum level, thereby preventing insect infestation, damage and deterioration. Once, the product/goods are unaffected by outside parameters and vagaries of nature, the packaging need not be in airtight containers. Further, packaging is a means of convenience and no other significance can be attached to it.

The applicant further submitted that the last but not the least, it is respectfully submitted that the issue in hand has been unequivocally dealt with CAAR, Mumbai and CAAR, Delhi in various orders and the Rulings on the subject matter is endorsed by the Hon’ble Madras High Court in it order dated 01.08.2023 in respect of CMA No.-600, 1206 and 1750 of 2023. By leaving no stone unturned, all the aspects and grounds raised by the Chennai Customs is clearly answered by the Authority as well as the Hon’ble High Court in the said orders.

6. I have taken into consideration of all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. I have gone through the response from the Customs Port Commissionerate of New Harbour Estate of Tuticorin, Tamilnadu. However, as the matter and questions before the Authority being the same, 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,

7.1 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”.

7.2 I also note 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 I find that the processes mentioned in chapter 8 do not cover roasting process.

7.3 1 also note submissions of the applicant that 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.

7.4 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, flavours, 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.

7.5 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. The case of Commissioner of Customs & Central Excise vs Phil Corporation Ltd in Appeal (civil) 2215 of 2002 dated 07/02/2008, is directly mcvant and applicable in the instant case of the applicant. In the judgement of the said case, Honourable supreme Court has held, “a number of cases, this Court has clearly enunciated that IAN is a safe guide for the purpose of deciding issues of classification, hi the present case, the INN Explanatory Notes to Chapter 20 categorically stare that the products in question are so included in Chapter 20. The IISN Explanatory Notes to Chapter 20 also categorically state that its products are excluded from Chapter 8 as they fall in Chapter 20. In this view of the matter, the classification of the products in question has to be made under Chapter 20.” 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.”

From the ApexCourt’s foregoing judgments, it is observed that the roasted nuts find specific mention in the then Chapter 20 of the then Central Excise Tariff Act and the Chapter 20 of the Schedule I of the Customs Tariff Act. 1975 as well as corresponding HSN Explanatory Note. It is important to pay attention to the fact that, in the above referred HSN Explanatory Note, a process of roasting is not specifically mentioned as a process of preservation or stabilization or a process to improve or maintain the appearance. Specific attention is invited to the paras 10 & 11 of the SC judgment (M/s Phil Corporation) in which paras 6 & 7 of Supreme Court judgment in case of M/s Amrit Agro are relied upon. Para 6 inter alia reads as follows: “roasted peanuts are covered by Chapter 20. Even according to the Explanatory notes of HSN under Heading 20.08 ground- nuts, almonds, peanuts etc. which are dry- roasted, fat-roasted whether or not containing vegetable oil are the items which all would stand covered by the said Heading 20.08.” Honourable Apex Court’s conclusions corroborate the finding that the process of roasting is not covered by Note 3 to Chapter 8 and hence these products, roasted betel nuts are not classifiable under chapter 8 of the Tariff.

8.1 Further, in the CAAR, Mumbai Ruling No. CAAR/Mumbai/ARC/39,40,41/2023 in the case of M/s. Universal Impex, the Authority has stated his findings and has ruled accordingly-“in view of the 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″, 1 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 Tari B. Act, 1975.”

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

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

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

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

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

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

9. 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. Further, reliance is also placed on ruling of Advance Ruling Authority Mumbai in Ruling No. CAAR/CUS/APPL/95/2023 dated 16.10.2023 in the case of M/s. Shree Ganesh Traders, Chennai, on the classification of “Roasted Areca Nut” that has been classified under CTH 20081920.

10. 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/betel nuts 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.

11. I rule accordingly.

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