In re Universal Impex (CAAR Mumbai)
CAAR perused a test report issued by ABC Techno Labs India Pvt. Ltd., Chennai dated 31.3.2023 on the samples of roasted areca nut whole & split in which the test result indicates the moisture content, a test parameter, of the samples in the range of 3.34% to 3.84%. Moisture content in raw areca nut is found to be generally in the rage on 10-15%. As per applicant this test report indicates that the products were subjected to the roasting process. This aspect of product testing is a part of Customs Compliance Verification (CCV) process on importation of goods. Jurisdictional Customs Commissionerate carry out process of testing of imported goods with the help of concerned government partner agencies (GPAs) to cross-examine accuracy of declaration of goods in the import documents namely a Bill of entry and it’s supporting documents before an out of charge (00C) is granted. Hence the utility of sample test report at this stage is limited to only support applicant’s contention that the goods were subjected to the process of roasting and not merely to a moderate heat treatment.
As per General Rules of Interpretation (GIR) 3(a) of the Customs Tariff Act, 1975 when by application of GIR 2(b) or for any other reason, the goods are, prima facie, classifiable under more than one Heading, the ‘most specific description’ is preferred. When the Chapter/Section notes along with terms of heading and explanatory notes are examined for both Headings 0802 and 2008, it is observed that roasted nuts which include roasted betel nuts find a specific description in Heading 2008. Therefore, on the application of GIR 3(b), the subject goods merits classification under Heading 2008 and more specifically under Subheading 2008 19 20 as “Other roasted nuts and seeds”.
I find that in view of 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 I hold 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.
On the basis of foregoing I rule that the Roasted betel nuts fall under Tariff heading 2008, specifically under Tariff entry 2008 19 20: ‘Other roasted nuts & seeds’ of chapter 20 of the first schedule of the Customs Tariff Act, 1975.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
M/s. Universal Impex, Navi Mumbai, Thane, Maharashtra (hereinafter referred to as `the applicant’) filed three applications for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR) as per provisions of Section 28 H (2) (a) OF THE Customs Act, 1962. The said applications, along with enclosures, were received in the secretariat of CAAR, Mumbai on 31.01.2023 in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant is seeking advance ruling on the classification “Roasted Areca Nuts” for imports through ports of Nhava Sheva, Dist, Raigad, Maharashtra, Chennai-II Customs Commissionerate, Chennai and Krishnapatanam port, Dist. Nellore falling under Custom Commissionerate Vijaywada, Andhrp. Pradesh. The applicant intends to import “Roasted Areca Nuts” from Indonesia.
2.1 Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 application:
The Areca nut is a tropical plant, belonging to the palm tree species. The kernel is obtained from the fruit of areca nut palm, known as the Areca Nut / Betel Nut or supari in India. 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, Chikni Supari, Boiled Supari, Dried Supari, Unflavoured Supari, Roasted Supari etc are obtained. The goods in the present application are “Roasted Areca Nuts and Roasted Areca Nuts Cut”.
The applicant intends to import “Roasted Areca Nuts / Betel Nuts” from Indonesia into India through the aforesaid seaports of Mumbai, Chennai and Tuticorin. Since the process of “Roasting” is not specifically defined in the Customs Tariff Act nor in the HSN explanatory notes or in its Chapter Notes, clarification is being sought from this Advance Ruling Authority.
The applicant states that the cultivation, harvesting and processing of the Roasted Areca Nut has undergone tremendous transformation, such that the involvement of labor 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.
Further, applicant has submitted that the following processes are involved in the Preparation of Roasted Areca Nut:
The raw/fresh areca nut undergoes various process of preparation for roasting, which are detailed below:
Firstly, the raw areca nut is de-husked and its outer shell is removed. Thereafter, the de-husked nut is scattered to check for any visible impurities and the same is cleaned, pursuant to which the raw de-husked areca nut/betel nut is left to dry.
Secondly, the cleared and dried de-husked areca nuts are fed into the seed roasting oven/machine and heated in the temperature of above 100 Degree Celsius. The roasting is done using firewood/ palm kernel-based ovens/machines and the temperature of the flames is around 400 to 600 degrees Celsius. As a result, the betel nuts would be roasted well beyond 100 degrees Celsius, usually in the range of 130-150 degrees Celsius.
Thirdly, the areca nuts are removed from the roasting oven and allowed to cool at normal room temperature, with the assistance of the cooling fans.
Fourthly, when the areca nuts have cooled and attained normal room temperature, 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 of the fresh areca nuts is reduced to 10 to 15 per cent. Thereby, the areca nut shrinks and becomes brittle. The process of repeatedly heating, roasting and cooling the areca nuts is to ensure that the areca nuts are k after thermal expansion, such that the roasted areca nuts have higher Abstract about Roasted Areca Nut submitted by the applicant is as follows:
1. The initial roasting time used to be around 7 to 8 days, but with mechanization the process of roasting and cooling is completed in about 2 to 3 days.
2. Pursuant to roasting, the areca nut undergoes a drastic change in its appearance as well as chemical characteristics on account of the roasting process. There is a visible deposition of an ash-like substance on the outer surface of the betel nut. There is a substantial change in the chemical characteristics of the betel nut product on account of the roasting process. It has been established through research that the Tannin and Arecoline content of raw areca nut gets substantially changed by subjecting the same to roasting.
3. Various research and articles throws light on the chemical composition of various forms of areca nuts. As per the article titled “Estimation of Arecoline content of various forms of areca nut preparations by high-pressure thin-layer chromatography” substances viz. Polyphenols (flavonols, tannins) constitute a large proportion of the dry weight of the nut, their content in areca nut vary depending on the degree of maturity and its processing method. The tannin content is highest in unripe areca nuts and decreases significantly with increasing maturity.
4. Roasting is not aimed at additional preservation or stabilization or to improve or maintain its appearance. Therefore, roasted areca nut is a distinctive product, more specifically classifiable under Chapter 20 of the Customs Tariff Act 1975 and Chapter Notes in HSN.
5. Roasted Areca Nut without the addition of any ingredients added to it is saleable in the Indian market in various forms like tukda (pieces) roasted betel nut as well as shredded roasted betel nut. These roasted betel nut products are sold in the market without any additives or without subjecting to any other preparation than the roasting process. These roasted betel nut variants are approved by government agency viz. FSSAI.
6. The “Roasted Areca Nut” is edible in its actual form and suitable for immediate consumption. It is masticatory and used for a variety of reasons such as stress reliever, mouth freshener, concentration improver and digestive following food intake.
Therefore, the process and the end product viz. “Roasted Areca Nut and Roasted Areca Nut Cut” is most suitable to be classified under Chapter 2008 19 20 of the Customs Tariff Act, 1975.
Statement containing the applicant’s interpretation of law and/or facts in respect of the issues on which the advance ruling is sought appears to be a complete reproduction of the CAAR, Mumbai’s ruling No. CAAR/Mum/ARC/44,45&46/2022 dated 07.12.2022 in the case of M/s. Shahnaz Commodities International (P) Ltd, Chennai, which applicant has thought would squarely apply to their instant case.
2.2 As per the submissions made by the applicant, Roasted areca nuts are specifically covered and are classifiable under CTH 2008 19 20 of the Customs Tariff Act, 1975. As per the HSN Explanatory Notes to Heading 2008 Dry Roasted Areca (or Betel) Nuts are specifically covered under Chapter Heading 2008. They have cited 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 goods under the Customs Act.
Applicant further stated that as per the HSN explanatory note to Chapter 8 fruit 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 applicant states that as 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’).
2.3 In respect of alternate CTH 2106, the applicant draws attention to Note 2 and explanatory note (A) to Chapter 21. As per Note 2 to Chapter 21, “betel nut product known as Supari” means any preparation containing betel nuts, but not containing any one or more of the following ingredients, namely: lime, Katha (catechu) and tobacco whether or not containing any other ingredients, such as cardamom, copra or menthol. 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, etc.), for human consumption. As per the applicant, the goods have undergone roasting, but they don’t contain lime, Katha (catechu) and tobacco. Further, roasted betel nuts 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.
2.4 In their application, the applicant also refers to the case law of M/s. Crane Betel Nut Powder Works reported in 2007 (210) E.L.T 171 (S.C) stating that this is not applicable to their case in view of AAR ruling in case of M/s Excellent Betel Nut and a recent CAAR ruling in case of M/s Shahnaz Commodities International Pvt Ltd., Chennai. In the context of their submissions, the applicant has requested to issue ruling by holding the classification of the roasted areca nuts under CTH 2008 19 20 of the Customs Tariff Act, 1975. They have invited attention to CAAR, Mumbai’s ruling CAAR/Mum/ARC/44,45 & 46/2022 dated 7.12.2022 on identical product.
3. Comments of the jurisdictional Customs Commissionerates namely Nhava Sheva, Dist, Raigad, Maharashtra, Chennai-II Customs Commissionerate, Chennai and Krishnapatanam port, Dist. Nellore falling under Custom Commissionerate Vijaywada, Andhra Pradesh were sought in response to the applicant’s advance ruling applications. Additional Commissioner Customs (Preventive), Custom House, Krishnapatanam port, Dist. Nellore under Custom Commissionerate Vijaywada, Andhra Pradesh has responded to the application and this response is verbatim reproduced below.
3.1 ‘Areca nut’, botanically known as • Areca catechu, is a tropical plant found all over South East Asia. This tree belongs to the palm tree species and is from the Arecaceae family. The fruit (nut) of this tree is popularly known as the betel nut or supari in India. The areca nut is an important commercial plantation crop. The fruit has a fibrous mesocarp, and seeds with a truncate base, endosperm deeply ruminates with a basilar embryo. It is also known as “betel nut” which is the kernel obtained from the fruit of areca nut palm. Chapter 8 covers fruit, nuts and peel of citrus fruit or melons (including watermelons) generally intended for human consumption (whether as presented or after processing).
3.2 Areca/ Betel nut is mentioned in Heading No.0802, specifically under CTH 080280.
3.3 Note 3 to Chapter 8 – Dried fruit or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes:
(a) For additional preservation or stabilisation (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate);
(b) To improve or maintain their appearance (for example, by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nuts. specifies certain treatments that could be carried out on the dried nuts for additional preservation or stabilization or to improve or maintain their appearance.
3.4 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.
3.5 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 by the processes specified in Chapters 7, 8 or 11 are not classifiable under Chapter 20. The processes specified in Chapters 7, 8 or 11 mainly include freezing, steaming, boiling, drying, provisionally preserving and milling.
3.6 CTH 2008 deals with 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:
3.7 CTH 2008 19 20 — Other roasted nuts and seeds. There is no specific description of Areca nut under this heading.
3.8 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.
3.9 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.
3.10 The 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. Further, every irreversible process does not result in a “preparation of the raw material”. Even after these processes the betel nuts retain the character of betel nut and do not qualify to be considered as preparation of betel nut. The goods do not change the essential character. Therefore, they do not merit a change in classification from Chapter 8 to Chapter 21.
3.11 Roasting is carried out using firewood/ palm kernel-based ovens and the temperature of the flames is around 600 degrees Celsius, due to which betel nuts are roasted well beyond 100 degrees Celsius, usually in the range of 130-150 degrees Celsius. This doesn’t necessarily indicate that the roasting brings any new item into existence or alter any new item into existence or alter the essential characteristic of areca nut. Further, excessive heat treatment or ,.._ is done only to remove the moisture and preserve the areca nut for a longer period. The above activity is squarely covered under Note 3 to Chapter 8, “preservation”.
3.12 As per General Rules of Interpretation (GIR) 3(a) of the Customs Tariff Act, 1975, when by application of GIR 2(b) or for any other reason, the goods are, prima facie, classifiable under more than one Heading, the ‘most specific description’ is preferred. When the Chapter/ Section notes along with terms of heading and explanatory notes are examined for both Headings 0802 and 2008, it is observed that areca nut / betel nuts find a specific description in Heading 0802 whereas Heading 2008 speaks only about other roasted nuts. Therefore, on the application of GIR 3(b), the subject goods merits classification under Heading 0802 and more specifically under Subheading 0802 80.
3.13 Supplementary note 2 to Chapter 21 states that in this Chapter “betel nut product known as Supari” means any preparations containing betel nuts, but not containing any one or more of the following ingredients, namely: lime, Katha (catechu) and tobacco whether or not containing any other ingredients, such as cardamom, copra or menthol.
3.14 Betel nut product known as “Supari” is mentioned in Subheading 21069030.
3.15 Heading 2106 covers food preparations not elsewhere specified or included. Those food preparations not specified or included elsewhere in the tariff being preparations for human consumption are to be classified under this heading. Therefore, it appears that it is a residuary entry in respect of edible food preparations. As a result, edible preparations shall be classified under this entry only if the same is not classifiable under any of the other specific entries for edible preparations. As the goods under consideration are already included in Heading 0802 80 of the Customs Tariff Act, 1975, they stand excluded from the scope of Chapter 21.
3.16 From the above it appears that Roasted Areca Nuts – whole as well as cut – merit classification under Heading 0802 80 of the First Schedule of the Customs Tariff Act, 1975.
3.17 Jurisdictional Customs Commissionerate of Chennai has submitted following comments in response to the application and the same are reproduced verbatim below:
1. 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.
“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.”
2. The applicant’s claim that after repeated roasting for 2-3 days under 130-150 degrees Celsius in a roasting oven due to which the water content is reduced to 10-15% is a complete misrepresentation of facts. It is evident by the fact available with this office vide test reports that a raw betel nut falling under Chapter 8 has a moisture content of less than 10% and the betel nut undergoing repeated roasting and severe heat treatment has a water content 10 to 15% appears incorrect.
3. In the process flow mentioned in para 2 to make roasted betel nut, one set of process are found to be intended for cleaning, the second set for heating and roasting. These processes are clearly covered by the Chapter Note 3 to Chapter 8 (reproduced in para 8). 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”.
4. 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.
5. Speaking more generally, in view of the design of the Schedule to the CTA 1975, HSN 080280 and plethora of judgements, besides common understanding and parlance, every irreversible process does not result in obtaining a new product with a distinct classification at the 8-digit level. Therefore, the process to which raw betel nuts have been subjected to roasted betel nut 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.
6. As per the applicant, the roasted betel nuts are fit for immediate human consumption without addition of any other ingredient, as evident from the FSSAI approved products available in market. The term “roasted betel nuts”, are packed, labelled and marketed for sale as roasted betel nuts on various online portals like Amazon, India mart, Flipkart etc. the samples available in market does not bear CTH on packets, hence mere sales and packing does not tell about CTH of the item.
1. The applicant has claimed that roasting changes the colour and reduces tannin and arecoline content which is superficial as even boiling will result in similar physical and chemical changes.
2. 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 as the betel nut which is rightly classifiable under Chapter 08.
3. 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.
4. The article quoted is superficial as the credibility of the article could not be verified. Mere quoting of a paper or article without any credible specific details like the year of publication, name of the author, University at which it is presented, etc is an attempt to mislead the CAAR.
5. Since the question relates to classification of goods proposed to be imported, guidance of the Harmonized Commodity Description and Coding System of the World Customs Organization, to which India is a signatory, would be useful. Even It is seen that with respect to Chapter 8, the HSN prescribes the following as general guidelines: –
Fruit and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled
The addition of small quantities of sugar does not affect the classification of fruit in this Chapter
20. The applicant has claimed that 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
21. This is another misrepresentation of facts since Chapter 20 cannot and does not cover any nuts or fruits prepared or preserved by the processes specified under Chapter 8. Since Chapter note 3 of Chapter 8 includes roasting under ‘moderate heat treatment’ the impugned goods cannot be classified under Chapter 20
22. 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.
22. Further as per Rule 3(a) of General Rules for the Interpretation of the Harmonized System since the product is more specifically classified under CTH 08020 classification under Chapter 2008 is unwarranted.
When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
a. The heading which provides the most specific 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
Further as per Rule 3(a) of General Rules for the Interpretation of the Harmonized System since the product is more specifically classified under CTH 08020 classification under Chapter 2016 is unwarranted
When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:
b. 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
24. 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, since the roasted betel nut which did not undergo any preparation is rightly classifiable under Chapter 8.
25. Further, reliance is placed on
a. CAAR Delhi vide ruling no. CAAR/Del/Vaibhav/21/2021 in the case of M/s Vaibhav Enterprises
” The CAA 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 first schedule to the Customs Tariff Act and more precisely, under the heading 0802.”
where the CAAR ruled that inter alia roasted betel nut merits classification under Chapter 8
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 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 CAA rejects applicant appeal by stating that the goods; API Supari, chikni supari, unflavoured supari, flavoured supari and boiled supari, merit classification underchapter 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. Enterprises v/s Commissioner of Customs (Chennai-vii)[ 2021(378) E.L.T514(Tri. Chennai)J.
“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.”
26. On perusal of the advance rulings given by the erstwhile AAR, New Delhi, which have been referred to by the applicant, 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 both these rulings, 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 erstwhile AAR was of the opinion that the decision of the 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 analyzed 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 honorable 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, Tirupathi & Anr. (supra), is erroneous”.
27. However, 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”
“ln 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/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 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”
28. 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.
29. On perusal of of M/s. Shahnaz Commodities International advance ruling which is relied upon by the applicant, the following are observed
a. Para 2.1 of the advance ruling mentions that the process of “roasting” is neither defined in customs tariff nor in the HSN Explanatory/sections/chapters note. In the chapter note 3 of chapter 8 ‘moderate heat treatment process’ is mentioned.
“….
3. Dried fruit or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes:
(a) for additional preservation or stabilization (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate)
……..”
b. It is pertinent to note that roasting is also a heat treatment. The process mentioned by the applicant is not clear and did not mention whether it is sundried before roasting. The applicant has claimed that after roasting water content comes down to 10-15 percent. However as per the test report available with this office, the moisture content is normally less than 10% (test report attached) for various consignments of raw betel nuts imported under Chapter 08. Applicant did not provide any test report even before Advance Ruling authority and there was no test in this regard before the decision is made by the authority. Hence it is clearly evident that the applicant did not provide the complete process before the CAAR and have mis represented the facts.
c. In para 2.2 applicant states that processes mentioned in chapter 8 are different from the processes performed on impugned goods. Since the claimed process by the applicant is devoid of any test report and roasting is well inclusive in heat treatment mentioned in Chapter note 3 of Chapter 8, the applicant’s contention does not hold any water. After roasting the end product remain dried areca nut which is well defined in chapter 8 up to 6-digit level.
d. In para 2.3 of the said order, applicant’s contention is that roasted betel nuts can be consumed directly by merely cutting them into pieces. Even raw betel nut can be consumed directly by merely cutting into pieces.
e. In para 4.1 of the said order, the CAAR is of the view that the process of roasting changes the chemical and physical characteristics of areca nut reducing. arecoline and tannin content as well as colour and moisture. However, CAAR did not order to test the goods and solely relied on the submissions by the applicant which is not backed by any empirical evidence. It is also noteworthy to mention that boiling will also change the chemical and physical characteristics of areca nut by reducing the arecoline and tannin content and even sun drying will also reduce the arecoline and tannin content.
f. Point 3 of para 4.2 of the said order states that roasting is not aimed at additional preservation or stabilization. In the absence of test report to ascertain such claim, the issue must be examined after due testing.
g. Point 4 of para 4.2 of the said order states about a research article to substantiate the claims of the Importer. However, there was no mention of the name of the author, university or institute where the article is published.
h. In para 5.1, M/s. Shahnaz Commodities International has stated to CAAR that the areca nuts are roasted at the temperature of 130-150 degrees Celsius and roasting changes the colour of the areca nut. For that matter, heating or boiling also change the colour of the product. Change of colour does not mean the essential characteristics of the product also changes and no test report has been provided to support their claim. The applicant has also further claimed that roasted supari variants are approved by FSSAI, a government agency. However, no FSSAI report was provided to back the claim. It is noteworthy to mention that even raw areca nut is also approved by FSSAI.
i. In para 5.2 of the said order, the CAAR states that under the present legal framework M/s. Crane’s case is futile. However, it is pertinent to mention that the M/s Crane’s case has been relied upon for plethora of advance rulings passed in the past.
j. In para 5.3 of the said order, the CAAR is of the view that none of the rulings referred by the jurisdictional Commissionerate dealt with Roasted betel nut. It is pertinent to mention that the earlier advance ruling in case of M/s Vaibhav enterprises vide Ruling no. CAAR/Del/Vaibhav/21/2021 dated 21.01.2021 have discussed about the roasted betel nut in para 3(iv) as ‘roasting in fire gas rotary roaster’ which is referred by the jurisdictional Commissionerate.
k. Para 5.4 of the said order states that GIR are provided for ease of reference only; for legal purpose classification shall be determined according to the terms and headings and any relative section or chapter notes. Chapters are organized as per the evolution of the goods and that is the reason for chapter 20 and chapter 21 discussing about preparation and they fall after chapter 8 which consists of raw/ single edible products. In Chapter 20, roasted nuts and seeds comes after the heading jams, fruit jellies. Even heading 2008 is all about ‘fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or sprit, not elsewhere specified or included”. Since the raw betel nut is already specified in chapter 08 under heading 080280, it cannot be classified under chapter 20. Roasting alone will not change the product from chapter 08 to chapter 20 to get classified with jam and marmalades.
l. In para 5.5 of the said order, CAAR states that the explanatory note to heading 0802
states that “this heading also covers areca (betel) nuts used chiefly as a masticatory”. It also states that roasted betel nut are fit for immediate human consumption without addition of any ingredients on the basis of examination of FSSAI approved samples. However, FSSAI samples are not provided to the Commissionerate and the applicant themselves has accepted in their submission that their product is also used for masticatory purposes.
m. In para 5.6 of the said order, CAAR gives reference of case of Alladi Venkateswarlu v/s Govt of Andhra Pradesh in which the Hon’ble Apex court held that “the commonly accepted sense of a term should prevail in constructing the description of an article of food”. CAAR also states that drying is moisture removal process involving methods such as dehydration, evaporation, etc. whereas roasting is a severe heat treatment process. The purpose of roasting inter alia is to reduce moisture water content and hence it is also a form of drying. Roasting supplements the preparation and by itself cannot be deemed to a preparation process.
n. Further it is observed based on test reports the moisture content even in case of Chapter 08 areca nuts is normally less than 10% but the applicant has claimed that the moisture content is 10-15% for the impugned goods which has undergone a ‘severe heat treatment process’ compared to the ‘moderate heat treatment’ mentioned in Note 3 of Chapter 8.
