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Case Law Details

Case Name : In re NBG International Private Limited (CAAR Mumbai)
Appeal Number : Ruling No. CAAR/MUM/ARC/38,39 & 40/2024
Date of Judgement/Order : 12/03/2024
Related Assessment Year :

In re NBG International Private Limited (CAAR Mumbai)

M/S. NBG International Pvt Ltd (having IEC No. AAICN7426L and hereinafter referred to as ‘the applicant’, in short) filed three applications (CAAR 1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said applications were received in the secretariat of the CAAR, Mumbai on 30.10.2023 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’ also).

The applicant is seeking advance ruling on the classification of “Roasted Areca Nuts” in all three applications for imports through the port of Nhava Sheva, Chennai and Tuticorin.

2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 applications:

2.1. That the applicant has observed that there is a huge demand and business potential in trading of Roasted Areca Nuts for various uses but mainly for sale as uses as sprinkled on the Paan as “pukki supari” or “bhuni Supari” or roasted Areca nut (hereinafter referred to as the Product under consideration or PUC) The raw betel nut obtained is subjected to various processes to produce various products. Depending upon the specific value additions different varieties of betel nut such as API Supari, Chikani Supari, Boiled Supari, Dried Supari, unflavoured Supari, Roasted Supari etc. have their distinct use. The goods in the present application are “Roasted Areca Nuts and Roasted Areca Nuts Cut”/ Split. The applicant states that the cultivation, harvesting and processing of the Roasted Areca Nut has undergone tremendous transformation, such that the involvement of labour and their dependency has reduced, by bringing about mechanization, which invariably increases the efficiency, reduces the wastage, enhances the quality and brings about uniformity in the final product. Further, the preparation time of “roasted Areca Nut” has also drastically reduced, in comparison with the manual method of preparation. The controlled roasting of the dried areca nuts causes major irreversible chemical changes in the dried areca nuts. Such changes occurring after the roasting of dried betel nuts result in a peculiar combination of cooked taste which is different than the raw dried betel nuts. It is further reported in Austin Journal of Nutrition and Food Sciences under the heading “Estimation of the major constituents of Areca nut in its Different Forms” Published in volume VIII — issue 1-2019 the chemical composition of Roasted Areca nut may be seen on entirely different from other forms.

2.2 The raw/fresh areca nut undergoes various process of preparation for roasting, which are detailed below:

a. DE-HUSKING: The raw areca nut is de-husked and its outer shell is removed. The de- husked nut is scattered to check and clean any visible impurities. Then the raw de-husked areca nut/betel nut is left to dry.

b. SUN DRYING- Generally, betel nut fruit is dried with sunlight around 3 weeks to reduce the moisture content. The dried betel nut fruit is sometimes cut, as per orders, to easy separate kernel and husk. This brings moisture to the tune of 12­15%. Dried kernel is stored in gunny bags.

c. ROASTINGThe arecanut / Betel Nut fed in a horizontal axis rotating chamber /clin/oven along with clean sand and then the oven is closed air tight. The oven is in the form of a circular rotating drum bottom of which is heated to around 400­600 degrees Celsius flame. The temperature is controlled in such a manner that internal temperature of betel nuts reaches in the range of about 150 degrees Celsius for proper cooking of the betel nut.

d. As the natural dried betel nut varies in moisture, the rustling time is to be controlled accordingly. For fear of overcooking and burn Out batch, the product, is frequently taken out for testing and cooled in water at room temperature and then air dried for 24 hours. Often undercooked batches are taken out and re roasted for desired results of taste and aroma.

e. The cooked and roasted betel nut undergoes a change in its appearance as well as chemical characteristics on account of the repeated roasting process. Lastly the areca nuts are removed from the roasting oven and allowed to cool at normal room temperature, with the assistance of the cooling fans.

f. when the areca nuts have cooled and attained normal room temperature, if found undercooked, they are again fed back into the oven at enormous heat, so as to evenly roast the areca nut. This process is performed repeatedly, until the water content is reduced to 5 -6%. Thereby, the areca nut shrinks and becomes brittle with change in colour. The process of repeatedly heating, roasting and cooling the areca nuts is to ensure that it is of desired roasted standards. This also results in a change of flavour.

g. There is a substantial change in the chemical characteristics of the betel nut/ Arecanut product on account of the roasting process. It has been established through research that the tannin and arecoline content of raw betel nut/ areca nut gets 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.

h. Roasting is not aimed at additional preservation or stabilization or to improve or maintain their appearance of areca nut.

i. The article titled Estimation of arecoline content of various forms of areca nut preparations by high-pressure thin-layer chromatography” throws light on the chemical composition of various forms of areca nuts. As per the article, Polyphenols (flavanols, tannins) constitute a large proportion of the dry weight of the nut. Its content in areca nut may vary depending on the degree of maturity and its processing method. As per the report the tannin content is highest in unripe areca nuts and decreases significantly with increasing maturity. The roasted nut possesses the highest average content of tannins, ranging from 5 to 41% (mean, 1.4%); the average tannin content of sun-dried nuts is 25%; and the lowest levels arc seen in boiled nuts, which contain 17%. The article further states that raw graces nut contains the highest concentration of arecoline (1.15 ÷ 0.008) followed by pan masala preparations (0.94 * 0.006). least content in boiled areca nut (0.79 # 0.009), while roasted variety exhibited an intermediate level (0.85 ÷ 0.007).

3. The applicant intends to import “Roasted Areca Nuts / Betel Nuts” from countries such as Vietnam, Cambodia, Thailand, Myanmar, Sri Lanka etc. into India. Since the process of “Roasting” is not specifically defined in the Indian Customs Tariff Act nor in the 1-ISN explanatory notes or in its Chapter Notes, clarification is being sought from this Advance Ruling Authority.

The applicants submit that Section -II (Chapter 6 to Chapter 14) of Schedule -1 covers VEGETABLE PRODUCTS. The vegetable products of Section II, subject to applicable section and chapter notes, are raw vegetable products (preserved or otherwise

Chapter 06 Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage
Chapter 07 Edible vegetables and certain roots and tubers
Chapter 08 Edible fruit and nuts; peel of citrus fruit or melons
Chapter 09 Coffee, tea, mate and spices
Chapter 10 Cereals
Chapter 11 Products of the milling industry; malt; starches; inulin; wheat gluten
Chapter 12 Oil seeds and oleaginous fruits, miscellaneous grains, seeds and fruit; industrial or medicinal plants; straw and fodder
Chapter 13 Lac; gums, resins and other vegetable saps and extracts
Chapter 14 Vegetable plaiting materials; vegetable products not elsewhere specified or included

It is further submitted that another distinguished and separate Section IV (Chapter 16 to Chapter 24) covers PREPARED FOODSTUFFS; BEVERAGES, SPIRITS AND VINEGAR; TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES; PRODUCTS, WHETHER OR NOT CONTAINING NICOTINE, INTENDED FOR INHALATION COMBUSTION; OTHER NICOTINE CONTAINING PRODUCTS INTENDED FOR THE INTAKE OF NICOTINE INTO THE I IUMAN BODY. Section IV is further subdivided into following chapters-

Chapter 16 Preparations of meat, of fish, of crustaceans, mollusks or other aquatic invertebrates, or of insects
Chapter 17 Sugars and sugar confectionery
Chapter 18 Cocoa and cocoa preparations
Chapter 19 Preparations of cereals, flour, starch or milk; pastry cooks’ products
Chapter 20 Preparations of vegetables, fruit, nuts or other parts of plants
Chapter 21 Miscellaneous edible preparations
Chapter 22 Beverages, spirits and vinegar
Chapter 23 Residues and waste from the food industries; prepared animal fodder
Chapter 24 Tobacco and manufactured tobacco substitutes;

products, whether or not containing nicotine, intended for inhalation without combustion; other nicotine containing products intended for the intake of nicotine into the human body.

In view of practices, court rules laid and general understanding of laws, in belief of the applicant, the roasted betel nut / roasted Arecanut are classifiable under CTII 2008 19 20 of the Customs Tariff Act, 1975 in view of following grounds which arc without prejudice to and arc independent to each other.

The process of roasting of areca nuts is not for maintaining the appearance of dried Arecanut. The process of roasting/ cooking of Arecanut does a complete Change Contents, in contents, constituents’ composition, aroma and taste and same is not for additional preservation or stabilization. Roasted Arecanut do not retain the character of dried fruit or dried nuts. Thus, roasting is not a process for preparation / preservation specified in Chapter 7, 8 or 11 and in terms of Chapter Note 1 to Chapter 20, roasted areca nuts arc included in Chapter 20. The heading 2008 covers FRUIT, NUTS AND OTHER EDIBLE PARTS OFPLANTS, OTHERWISE PREPARED OR PRESERVED, WHETHER OR NOT CONTAINING ADDED SUGAR OR OTHER SWEETENING MATI’ER OR SPIRIT, NOT ELSEWHERE SPECIFIED OR INCLUDED. First Single Dash as I leading 2008.20 covers – Nuts, ground­nuts and other seeds, whether or not mixed together and Sub head 2008.19.20 covers —Other roasted nuts and seeds.

The official interpretation of the I IS is given in the Explanatory Notes published by the WCO and offers a safe guide to interpret and classify the commodity under consideration. As per the JEN Explanatory Notes to the Chapter Heading 2008 given below. Dry Roasted Areca (or Betel) Nuts are specifically covered under the Chapter Heading 2008. This heading covers fruits, 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 process specified in other Chapters or in the preceding headings of this Chapter. It includes, inter alia.

Almonds, ground-nuts, areca (or betel) Nuts and other nuts, dry-roasted, oil-roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavors, spices or other additives.

The Applicant craves leave to cite following case laws wherein Hon’ble Supreme Court has decided and reiterated the HSN Explanatory Note is the safe and dependable guide in the matters of classification of items:

I. ALL. 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).

M/s Crane Betelnut Powder Works reported in 2007 (210) E.L.T. 171 (SC) are distinguishable on following grounds —In this case, Hon’ble SC purely went into the respect of whether crushing and adding other ingredients to betel nut. In present matters the process is roasting which changes the constituents and composition, character and aroma of the product by application of a process referred in Chapter 20 and which alters the basic character of the dry areca nuts. Subsequent amendment to the Central Excise Tariff Act, 1985 vide The Finance (No.2) Act, 2009 (Act No. 33 of 2009 dated 19th August 2009) with the insertion of Note to Chapter 21, the decision of Hon’ble SC in the above-mentioned case law was rendered inapplicable. Kind reference in this regard is invited to the ruling issued in the case of M/excellent Betel Nut Products by the Authority for Advance Rulings, wherein the authority took proper judicial notice and distinguished the decision in the case of Crane Betel nut powder works Vs Commissioner of Customs & C. EX. Thirupathi (2007 (210) ELT 171 (SC) and held the classification of processed betel nuts under the CTH 21069030.

Hon’ble Authority for Advance Ruling has ruled in favour classification of roasted areca nuts under 2008 in identical matters of M/s. Universal Impex, Ruling No. CAAR/Mum/ARC/39,40,41/2023 dated 12/5/2023 wherein it is held that-

In so far as argument whether goods resulting from a roasting process have attained the character of ‘preparation’ or not is concerned I find that two different Supreme Court judgments namely (1) Amrit Agro Industries Ltd. & Anr. v. Commissioner of Central Excise, Ghaziabad (2007) 201 ELT 183 (SC), and (2) Commissioner of Customs & Central Excise spoil Corporation Ltd in Appeal (civil) 2215 of2002 dated 07/02/2008 have held unequivocally that the roasting of nuts is a preparation. In paras 10 and 11 of Supreme Court judgment in case of Commissioner of Customs & Central Excise vs Phil Corporation Ltd para 6 and 7 of Supreme Court judgment in Amrit Agro Industries Ltd. & Anr. v. Commissioner of Central Excise, Ghaziabad have been relied upon and these paras are reproduced below.10. The learned Additional Solicitor General further submitted that the controversy involved in this case is no longer res integra. He placed reliance on the recent judgment of this court in Amrit Agro Industries Ltd & Am’. v. Commissioner of Central Excise, Ghaziabad(2007) 201 ELT 183 (SC), according to which roasted peanuts would fall under Chapter 20.Para 6 of the judgment reads as under: – “Having gone through the records and having examined the process undertaken by the assessee, we are in agreement with the view expressed by the Tribunal (“CEGAT”) regarding classification of roasted peanuts under Heading 20.01. The Tribunal had adopted a correct test when it says that the essential structure of the peanuts not changed by the process of roasting. The assessee merely applies salt to roasted peanuts which does not obliterate the essential character. Moreover, roasting is a process. That process has not been excluded in Note 1 to Chapter 20. Therefore, roasted peanuts are covered by Chapter20. 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.”11. The learned Additional Solicitor General has also drawn our attention to paragraph 7 of the said judgment which reads as under: -“As stated above, roasted peanut is also a preparation, however, it is a preparation of nuts like almonds, peanuts, ground-nuts etc. They are products which are prepared or preserved by processes like roasting. As stated above, roasting is not chilling, it is not freezing. As stated above, roasting is not one of the enumerated processes in Chapter Note No. 1 to Chapter 20. heading 20.01 specifically refers to preparations of vegetables fruit, nuts or plants. Sub-heading 2001.90 refers to the word ‘Other’. In the circumstances, we are in agreement with the view expressed by the Tribunal that roasted peanut falls under Chapter 20and not under Chapter 21.”

The aforesaid ruling has been upheld by Hon’ble Madras High Court in matters of The Commissioner of Customs Chennai-II Commissionerate Vs. M/s. Shahnaz Commodities International P. Ltd., M/s. Neena Enterprises, M/s. Universal Impex reported 2023 (8) TMI 492 – MADRAS HIGH COURT. The applicant submitted that similar rulings have been issued for two other competitors and same has been affirmed by Hon’ble High Court of Madras in matters of THE COMMISSIONER OF CUSTOMS CHENNAI II COMMISSIONR VERSUS M/S. SHAIINAZ COMMODITIES INTERNATIONL ENTERPRISES, MIS. UNIVERSAL IMPEX reported 2023 (8) -I’m 492 – MADRAS HIGH COURT.

The Said ruling and the Hon’ble Madras High Court decision has also been followed in CAAR Mumbai Ruling CAAR/MUM’/ARC/6712023 in matters of M/s Shri Ganesh Traders

In the context of their above-mentioned submissions, the applicant requests that the correct classification of the roasted areca nuts is under CTIH 2008 19 20 of the Customs Tariff Act,1975.

4. Tuticorin Customs has responded to the subject application vide letter dated 04.01.2024 and the same is reproduced as under:

The item described as “Roasted Areca nuts & Roasted Areca nuts cut” are freely importable if the unit price of the goods is more than Rs.351/kg and classifiable under CTH 080280. Tuticorin Customs has stated they have filed an appeal in Hon’ble High court of Madras (Madura’ Bench) vide CMA(MD) No.600 of 2003 and the same is pending for orders.

Further, 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 fail 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 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 betel nut, fruit or dried nuts.”

ii). The applicant’s claim that after repeated roasting of the areca nuts at the temperature of more than 100 degrees Celsius in a roasting oven, the moisture content of the fresh areca nuts 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 PSSAI Regulations, 2011 and the dried areca nuts with more than 7% are unfit for human consumption as per 17SSAI regulations. It implies that the moisture content in sun dried fresh areca nuts imported under CTI1 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 arc 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 arc 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. In the instant case, betel nuts after being roasted arc 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 IISN 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 arc specifically covered under Chapter Heading 2008. The relevant portion of the chapter heading 2008 is reproduced below:

CM 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 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 I 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:

I. 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, molluscs 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.

vi) 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 I ISN explanatory notes clearly implies that the goods of this heading arc 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 I-ISN explanatory notes, otherwise these products arc 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 specific manufacturing process. The importers have not submitted anything about the packaging of the goods and generally these goods are imported in bulk in jumbo bags. The goods under dispute arc Areca Nuts in the same form as those classified under Chapter 08 and hence, they arc clearly excluded from the scope of the Chapter Heading 2008. I 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 CTI I 08020 classification under Chapter 2008 or 2106 is unwarranted.

3. When by application of Rule 2 (b) or for any other reason, goods are, prima jack, classifiable under two or more headings, classification shall be effected 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 are 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 I 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 1 I. Chapter 20 heading reads “preparations of vegetables, fruit, nuts 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 arc 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 10802:

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

“The CAA rejects the application of Nils 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 first 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 CAA rejects applicant appeal by stating that the goods; API Supari, chikni supari, unflavoured supari, flavoured supari and boiled supari are not classifiable under subheading 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/Haman Agri/09/2021 in the case of Naman Agri Impex Private Ltd.

“the CAA rejects applicant 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 subheading 21069030.”

d. Chennai CESTAT order in M/S S.T EnterprisesV/s Commissioner of Customs (Chennai-vii) [2021 (378) E.L.T.514(Tri. Chennai]

“The Hon’ble 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 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 Hon’ble Apex Court Judgments in the cases of the M/s. Amrit Agro industries ltd v/s Commissioner of Central Excise Ghaziabad (2007) 201 ELT 183(SC) and the Commissioner of Customs & Central Excise v/s Phil Corporation ltd 2008(223) ELT 9 (S.C). In both the cases, the Hon’ble Supreme Court upheld the classification of roasted nuts under chapter 20. It is pertinent to note here that the impugned goods in both the judgment is peanuts (ground nut). Peanuts and areca nuts both are squarely different commodities. Peanuts arc botanically considered a legume. So technically peanuts are vegetables. As mentioned above, the heading 20.01 is “preparation of vegetable, fruits, nuts or plants”. Further CTII 2008 specifically mentioned “Ground nut”. In view of the above, the judgement in case of ground nut (peanut) cannot be applicable for the classification of roasted betel nut/areca nut.

xiii) The case of M/s Excellent Betel nut Products Pvt. Ltd. do cover the four goods, i.e., API supari, Chikni supari, Unflavored supari and Flavored 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 doing so, the erstwhile AAR did not take any comment on the 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 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 Pvt. Ltd. (supra) to the extent that it runs contrary to the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, 77rupathi &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 Pvt. Ltd. (Ruling No. CAAR/Mum/ARC/3/2021 dated 15th of March, 2021)

“I find the observations of the Hon’ble Supreme Court in the case of Crane Betel Nuts and the decision of Hon’ble Tribunal in the case of Azam 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. MIs My Nut Enterprises (Ruling No. CAAR/Del/Day 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 Crane Betel Nut Powder Works and of the CESTAT Chennai in the case of M/s. Azam Laminators Pvt. 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 Hon’ble 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). The applicant relied upon the judgment of Hon’ble High Court in CMA No.600/2023, 1206/2023 & 1750/2023 preferred by the department against the advance ruling in cases of M/s. Shahnaz Commodities International (p) ltd., Mis. Neena Enterprises and Wils. Universal Impel, wherein the Hon’ble court upheld the advance rulings passed in favor of the applicants. However, it is to inform that this office has filed an appeal before the Hon’ble High Court of Madras (Madurai Bench) against the CMA No.600/2023.

xv). Several advance ruling applications arc 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 arc being submitted to circumvent the minimum import price and increasing tariff values by legalizing betel nut import through mis- declaration and misclassification. 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. A personal hearing in the matter was conducted on 17.01.2024 in office of the CAAR, Mumbai. During the personal hearing the authorized representative of M/s. NI3G International Pvt Ltd, Shri Anil Kumar Mishra, Advocate reiterated their earlier submissions made in the applications to CAAR, Mumbai and contended that their product in question i.e. roasted betel/ areca nut merit classification under CTH-20081920. He submitted additional submission containing the chapter notes and various judgements of the Hon’ble Supreme Court in the matter of Holostick India Ltd. Versus C0171111iSSiOner of Central Excise, Noida, Ltd.
Versus Commissioner of Customs,
Commissioner of Customs & Central Excise vs Phil Corporation Ltd and rulings of the CAAR, Mumbai in the case of M/s. Universal Impex, Isha Exim (Bombay HC) , Madras I IC order 2023(8)TMI 492 etc. He submitted that there is not stay on the order of the Hon’ble High Court of Chennai. He also explained the differences between the physical appearance, flavour and aroma of the raw beetle nut and the roasted one and showed some samples of that.

Nobody joined either from Tuticorin, Nhava Sheva-I or Chennai II Commissionerate for Personal Hearing physically or through c-hearing mode.

Shri Anil Kumar Mishra, Advocate present for the applicant in the personal hearing also filed rebuttal on the reply of the Tuticorin Customs dated 04.01.2024 as below:

The term “moderate heat treatment” in the said chapter note 3 intended for additional preservation or stabilization cannot be equated with process of roasting of nuts which altogether changes the chemical and physical properties of the raw Areca Nuts of Chapter 8. Thus, the process of roasting of nuts which eliminate the basic character of the raw areca Nuts of Chapter 8 cannot be said to be a process of preservation or stabilization of raw dried areca nuts of Chapter 08.

The process is not uncontrolled repeat roasting. The process is controlled to the extent of converting “raw Areca Nuts” to “roasted areca nuts” of given standard. The process is controlled as to not resulting in overcooking which would spoil the product. All imports are tested for FSSAI standards before clearance of home consumption and the applicants shall abide by all the laws of the land applicable on the products. The applicant has produced the photographs and video of the process with these submissions. It can be seen that the product under consideration is prepared with processes other than those of Chapter Note 3 and is thus excluded from Chapter 8 in terms of IISN EN General Exclusion Note 3 to Chapter 8. It is contended that the process of roasting cannot be equated with the term drying as this would render the heading description “roasted nuts” of CTH 2008.19.20 of Schedule I to Indian Customs Tariff Act 1985, as otiose.

The observation of the Tuticorin Custom I louse refers to step of cooling of roasted nut as inclusive in the process of drying only. The observations are incorrect. It is a normal and known practice to trade in roasted nuts at normal temperature. It is difficult to understand as to how cooling of roasted nuts would turn entire process from “roasting” to “drying”. The objections are untenable and unsustainable.

The comments received arc incorrect to the extent of equating “roasted betel nuts” with “raw betel nuts” as both are known as two distinct products in trade parlance and are sold, purchased and consumed by the public under their distinct name for distinct taste and characters as is applicable for all nuts. The applicants reiterate that in terms of Chapter Note 1 (a) to Chapter 20 the process of “roasting” of nuts is a process of preparation and is other than the process specified in Chapter 7,8 or 11 and same cannot be covered under the term “moderate” heat treatment referred in Chapter Note-3 for its extent of heat treatment. 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.

Also, 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 into existence roasted nuts and as discussed the processes mentioned in chapter 8 do not cover roasting process.

Except for the process of roasting, there are no additives added in the products. The references of additives in the comments are thus irrelevant. The process of roasting is not for retaining the character of the raw betel nuts but it converts the product to a different product. The process is roasting is other that the process of moderate heat treatment as specified in

Chapter 3. It is further contended that the references for the term “preparation of nuts” as. appearing in main heading in Chapter 20 does not refer to preparation medicines, food or cosmetics which fall under their own merits under different chapters. It is to reiterate that article under consideration are roasted betel nuts of CTH 2008.19.20 which under HSN EN for CTH 2008 which reads as below-

This heading 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.

It includes, inter cilia:

(1) Almonds, ground-nuts, areca (or betel) nuts and other nuts, dry-roasted, oilroasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives.

Regarding comment from Tuticorin Commissionerate referring to explanatory note for cm 2008 interprets that the products of CTI 12008 generally need packaging in cans, jars or airtight containers, or in casks, barrels or similar containers. In this regard, it is contended that the explanatory note needs to be read in harmony with the description of the heading which reads as “WHETHER OR NOT CONTAINING ADDED SUGAR OR OTHER SWEETENING MATTER OR SPRIT”. The term “generally” is required to be read for a need of protection against deterioration. The article roasted areca nuts have a long shelf life and arc not prone to deterioration during transit or storage.

In view of submissions above, in view of the process of roasting and in view of specific mention of article in HSN EN for 2008, the raw areca nuts of Chapter 8 cannot be said to specifically cover roasted areca nuts of CTH2008.19.20.

Roasting is an irreversible process of cooking. It cannot be reversed to make articles as raw betel nut again. The process of cooking cooks the contents to a different characteristic. The theory devolution is adequately answered by exclusion of processes of Chapter 7,8 or chapter 11 and inclusion on roasted nuts in CTH 2008.

The Advance rulings referred in comments arc inapplicable in as much as the article is not- (1) API Supari (2) Chikni Supari (3) Boiled and / cut Supari (4) Unflavored supari or (5) Flavored supari.

The applications in above matters sought a classification under Chapter 21 and the rulings referred and relied in comments never discussed the effect of subsequent amendment to the Central Excise Tariff Act, 1985 vide The Finance (No.2) Act, 2009 (Act No. 33 of 2009 dated 19th August 2009) with the insertion of Note to Chapter 21. Thus the decision of I Ion1ble SC in the above-mentioned case law was rendered inapplicable. Kind reference in this regard is invited to the ruling issued in the case of M/s. Excellent Betel Nut Products by the Authority for Advance Rulings, wherein the authority took proper judicial notice and distinguished the decision in the case of Crane l3etel nut powder works Vs Commissioner of Customs & C. EX. Thirupathi (2007 (210) ELT 171 (SC).

The distinction between the process of boiling and roasting has already been settled by Hon’ble Supreme Court in various rulings as below-

i) In COMMISSIONER OF CUSTOMS & CENTRAL EXCISE, GOA VERSUS PHIL CORPORATION LTD. 2008 (2) TMI 3 – SUPREME COURT Other Citation: 2008 (223) E.L.T. 9 (S.C.) it was held that – Processing of cashew nuts, peanuts, almonds etc. by dry roasting, oil roasting, salting, seasoning and packs them in different containers is a manufacturing activity. These items are classifiable under chapter heading 2002.01 and not under 0801.00

ii) In AMRIT AGRO INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., GHAZIABAD 2007 (3) TMI 14 – SUPREME COURT Other Citation: 2007 (210) E.L.T. 183 (SC) it is held that – As stated above, roasted peanut is also a preparation, however, it is a preparation of nuts like almonds, peanuts, ground-nuts etc. They are products which are prepared or preserved by processes like roasting. As stated above, roasting is not chilling, it is not freezing. As stated above, roasting is not one of the enumerated processes in Chapter Note No. I to Chapter 20. Heading 20.01 specifically refers to preparations of vegetables fruit, nuts or plants. Sub-heading 2001.90 refers to the word ‘Other’. In the circumstances, we arc in agreement with the view expressed by the Tribunal that roasted peanut falls under Chapter 20 and not under Chapter 21.

The comments suggest that the court rules for peanuts would not apply for Areca Nuts is not substantiated. Since there is no such biological distinction arc inserted in the headings.

In view of the EN for heading 2008 all the nuts. While ground nuts and cashew nuts have specific entries, all other roasted nuts as areca nuts, Brazil nuts, hazelnuts, macadamias, pecans, pine nuts, pistachios, walnuts which are roasted are squarely covered under 2008.19.20.

The letter of comment admits that the earlier rulings by CAAR in identical matters of M/s Universal Impex etc. was ratified by Hon’ble Madras High Court, though matters have been appealed against in same high court.

In view of submissions above when the goods arc not at all classifiable under Chapter 08 and indicated MIP is one of the reason the applicant desires a correct ruling to avoid litigations and other costs, before commencement of the business.

6. In terms of provisions of the Section 28-1 (1) of the Customs Act, 1962 read with Sub- Regulation no. (7) of the Regulation no. 8 of the Customs Authority for Advance Rulings Regulations, 2021, on the receipt of the said applications, office of the CAAR, Mumbai forwarded copies of the said applications/submissions to the concerned Jurisdictional Commissionerate i.e. JNCI I, Chennai and Tuticorin as stated by the applicant at Sr. No. 13 of the CAAR-1 forms (Application form for advance rulings). Said copies were forwarded to the concerned Jurisdictional Commissioners of Customs calling upon them to furnish the relevant records with comments, if any, in respect of said applications, although, office of the CAAR, Mumbai received comments (supra) only from the Tuticorin Commissionerate and has not received any reply/records/comments from NS-I, JNCH and Chennai II Custom Commissionerate.

I have taken into consideration 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. 1 have gone through the response received from the ‘Tuticorin Customs and the rebuttal to that filed by the applicant. I therefore proceed to decide the present applications 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.

6.1. On going through the processes mentioned in Chapter 8, one can see that it 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 fimdamentai 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”.

6.2. Chapter 20 of the Tariff covers the Preparations of vegetables, fruit, nuts or other parts of plants. As per Chapter Note I (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 arc liable to be classified under Chapter 20. Heading 2008 covers Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included. Roasting is a process used for bringing in to existence roasted nuts and as discussed earlier I find that the processes mentioned in chapter 8 do not cover roasting process.

6.3. I have examined the scope of Note 3 to Chapter 8 and I find that it 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 arc not as specified in the said note. Further, as per the above note, the processes that could be carried out arc 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 well beyond 150 degrees Celsius then cooled in room temperature and the cycle is repeated. 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. It changes the constitution and composition character and aroma of the product which alters the character of dry areca nuts.

6.4. 1 have examined the scope of CTH 2008 and 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 I ISN Explanatory Notes and none of these processes are mentioned in the chapter note 3 to Chapter 8 ofthe Customs Tariff Act, 1975 as well as HSN Explanatory Notes to Chapter heading 0802.

6.5 There is considerable force in the submission of the learned counsel for the applicant that the classification as far as possible must be in conformity and in consonance with the USN Explanatory Notes. It is trite law that whenever there is specified entry, the same would prevail over general entry. The said general principle is statutorily incorporated in General Rules of Interpretation, in particular, under Rule 3(a) of the General Rules of Interpretation. CTH 2008 19 20 is a special entry covering nuts subject to the process of roasting, when contrasted with CTH 08 02 90 which covers dried nuts. Having come to the conclusion that the classification of areca nut is made on the basis of the process which it is subject to with a distinction between dried and roasted nut being maintained, CTH 2008 19 20 which covers roasted nuts including areca nut is a specific entry when contrasted with the entries/ items covering nuts under CTH 08.

6.6 In the decision of Tribunal in respect of the case ST Enterprises, the question that arose for consideration was as to whether the goods involved therein viz., boiled betel nuts would merit classification under CTH 21069030 or CTH 08028010. It was not concerned with CTH 2008 19 20 which covers “roasted nuts”. While in the present case, the issue is with reference to classification of “roasted areca nuts”. The process that was examined by the Tribunal in the case of S.T. Enterprise was confined to boiling and drying. Importantly, roasting was not one of the processes that was examined. The competing entries that were examined in the above case were CTH21069030 vis-a-vis CTH 108028010. In other words, the question that was being examined was, whether the goods in question would qualify as “preparation of betel nut” or “betel nut as mentioned in Chapter 8”. The Court’s attention was never drawn to CTH 20081920 which covers roasted nuts including areca/ betel nuts, inasmuch as the facts as set out by the Tribunal in its order was not concerned with the process of Where a question passes sub-silentio, then, it may have no precedential vane.

6.7 I have perused the decision in Crane Betel Nut powder’s case. There importantly, the question was whether the process of boiling and drying would constitute manufacture. However, in the instant case, the question is not as to whether the activity of roasting of betel nut would constitute manufacture, but whether in view of a separate entry for roasted betel nut, it is permissible to continue to classify the roasted betel nut under CTH 08 02 80 which covers fresh or dried areca nuts. It is already settled that when there is a specific entry for roasted nut and HSN Explanatory notes specifically include roasted betel nuts under Chapter 20, the same cannot be classified under Chapter 8.

6.8. The applicant has answered all the queries raised by the Jurisdictional Commissionerate Tuticorin. The queries raised regarding the method of packing of the goods in question and the moisture content have been logically answered by the applicant in its rebuttal submitted. I concur with the arguments submitted by applicant in its rebuttal at Para 5 above.

7. 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 relevant 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 HSN is a safe guide for the purpose of deciding issues of classification. In the present case, the HSN Explanatory Notes to Chapter 20 categorically state that the products in question are so included in Chapter 20. The HSN 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 USN 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 IISN. 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 apex court’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 SC judgment in case of M/s Amrit Agro arc relied upon. Para 6 inter alia reads as follows: “roasted peanuts are covered by Chapter 20. Even according to the Explanatory notes of IISN 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.

8. In most recent rulings passed in case of M/s. Shri Ganesh Traders and M/s. Shree Durga Traders Customs Authority for Advance Rulings has also relied upon Honorable apex court’s conclusions. These 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.

9. 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 CM 2008 19 20: Other roasted nuts & seeds in chapter 20 of the first schedule to the Customs Tariff; NSW Explanatory note to CM 2008, various Supreme Court rulings upholding guiding value of the IISN Explanatory notes for deciding classification under Customs Tarif f Act, 1975 and previously mentioned two Supreme Court judgments classifying roasted nuts which include almonds, betel nut and other nuts under chapter 20 by taking recourse to HSN explanatory note to Tariff Heading 2008″, I rule that roasted betel nuts are correctly classifiable under the tariff item 2008 19 20 of chapter 20 of the first schedule of the Customs Tariff Act, 1975.”

10. 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 betel/areca nut under CTH;

(b) Roasted betel/areca nut having been specifically classified under CTH 2008 19 20, the attempt to classify under CTH 108 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;

(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.”

In this judgement the Hon’ble High Court has stated about the relevance of CAAR Rulings relied on by the Jurisdictional Commissionerate. Relevant para of the said judgement is reproduced as follows:- “on perusal of the Rulings relied upon by the appellant, we find that the same did not deal with roasted areca / betel nuts, but boiled/ dried nuts and in some cases, the question was whether the commodity in issue was a preparation of betel nut. However, the cases did not deal with roasted betel/ areca nut nor was CTH 20 considered, Thus the above

Rulings may have no relevance.” The issue dealt with i.e. Classification of Roasted betel nuts” in the judgement of the Honourable High Court of Madras is of exactly the same issue that is impugned in this application and therefore is squarely applicable to this case. Further, the operation of the same has not been stayed by the Competent Court.

11. The concerned Jurisdiction Commissionerate, Tuticorin Custom House in their written submission dated 04.01.2024 submitted that stated they have filed an appeal in Hon’ble High court of Madras (Madurai Bench) vide CMA(MD) No.600 of 2003. The applicant during personal hearing drawn attention that apparently there is no stay granted in that matter. Further the jurisdictional commissionerate did not provide any details of stay in the matter.

Now as far as judicial discipline and law is concerned the Hon’ble Supreme Court has held in the case or UOI vs Kamalakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC), that “order of higher appellate authorities should be unreservedly followed by subordinate authorities. The mere fact that the order of the appellate authority is not “acceptable” to the department — in itself and objectionable phrase- and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assesses and chaos in administration of tax laws”.

Further, the Joint Secretary (Revision Authority) to Government of India in its Order No. 288/13-CX dated 25.03.2013 in the matter of The Commissioner of Central Excise, Thane-II Vs. M/s. P.D. Impex, Mumbai relied on the same. Para 9 of the said order is reproduced as under:-

“Government observes that the department in this second round of revisionary proceedings is mainly contesting that they are filing Writ Petition against GUI Order dated 25.08.2009. This office vide letter F. No. 198/69/2004-RA-Cx dated 22.10.2012 specifically asked department to state the present status of the said Writ Petition. The department vide letter F. No. V(PKS/357) Trb CTH-246/10/AP/M-111 dated 11.12.2012 stated the Writ Petition is at ‘Pre-admission stage’. As such, the said GOI order dated 25.08.2009 is neither set aside nor stayed by the Hon’ble Bombay High Court. Under such legal scenario the principle of judicial discipline demands that the order of higher authority is to be strictly implemented by the lower Authorities. Hon’ble Supreme Court has held in the case of UOI Vs. Kamalakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC), that orders of higher appellate authorities should be unreservedly followed by subordinate authorities unless operation of same has been stayed by competent court. Hence, Government finds no infirmity in the impugned Order-in-Appeal and therefore upholds the same.”

The Hon’ble SC has confirmed the same view already taken in the matter of UOI Vs. Kamalakshi Finance Corporation Ltd. 1991 (55) ELT 433 (SC) and passed the judgement on 01.02.2023 in the matter of M/s Godrej Sara lee Ltd. Vs. Excise and taxation officer-cum-assessing Authority, 2023 (384) E.L.T. 8 (S.C.). Para 34 of said judgement dated 01.02.2023 is reproduced as under”-

“In our view, the revisional authority might have been justified in exercising suo 1110lU power to revise the order of the Assessing Authority had the decision of the ‘Tribunal been set aside or its operation stayed by competent court. So long it is not disputed that the Tribunal’s decision, having regard to the framework of classification of products/ tax liability then existing, continues to remain operative and such framework too continues to remain operative when the impugned revisional orders were made, the Revisional authority !vas left with no other choice but to follow the decision of the Tribunal without any reservation. Unless the discipline of adhering to decisions made by the higher authorities is maintained, there would be utter chaos in administration of tax laws apart from undue harassment to assesses. We share the view expressed in Kamlakshi Finance Corporation Ltd. (supra).”

12. On the basis of foregoing discussions and findings, I have come to the conclusion that “Roasted Areca Nuts” fall under Custom Tariff Heading 2008, specifically under CTH 2008 19 20 ‘Other roasted nuts & seeds’ of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975.

13. I rule accordingly.

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