2021 (8) TMI 729 - AAR - Customs

Classification of Supari Products under Customs Tariff Act: Ruling and Exemption Status

The ruling classified API supari, chikni supari, unflavoured supari, and flavoured supari under heading 0802 of the Customs Tariff Act, 1975, based on the ... Classification of betel nut products as areca/betel nuts under Chapter 8 (heading 0802) - betel nut products known as supari under Chapter 21 and supplementary note 2 to Chapter 21 - HSN/Explanatory Notes on treatment and processing of fruits and nuts - principle that mere processing which does not alter the original character is not manufacture (Crane Betel Nut principle) - proviso (b) to sub section 2 of section 28 I (bar on advance ruling where matter already decided by Tribunal or Court)Proviso (b) to sub section 2 of section 28 I (bar on advance ruling where matter already decided by Tribunal or Court) - classification of boiled supari - No advance ruling issued in respect of boiled supari because the question of its classification has already been decided by the Appellate Tribunal/Court. - HELD THAT: - The Chennai Bench of the CESTAT has held boiled supari classifiable under sub heading 08028010. Clause proviso (b) to sub section 2 of section 28 I prohibits entertaining an advance ruling on a matter already decided by the Appellate Tribunal or any Court. Applying that statutory bar, the Authority refrained from issuing any ruling on boiled supari despite its consideration of the products, and therefore did not decide classification on merits for boiled supari in these applications. [Paras 6, 8]Advance ruling is not given for boiled supari as the matter stands decided by the Appellate Tribunal/Court.Classification of betel nut products as areca/betel nuts under Chapter 8 (heading 0802) - betel nut products known as supari under Chapter 21 and supplementary note 2 to Chapter 21 - HSN/Explanatory Notes on treatment and processing of fruits and nuts - principle that mere processing which does not alter the original character is not manufacture (Crane Betel Nut principle) - API supari, chikni supari, unflavoured supari and flavoured supari are classifiable under heading 0802 (Chapter 8) and not under sub heading 21069030 of Chapter 21. - HELD THAT: - Examination of the processes (cleaning, destoning, cutting/slicing, drying, roasting/boiling, polishing, sterilisation, flavouring with small quantities of spices/perfumes, mixing of food starch) shows they are cleaning, grading or modest processing operations that do not change the essential character of the areca/betel nut. The HSN/explanatory notes permit that fruits and nuts may be sliced, chopped, roasted or boiled and that small additions (sugar, oil, glucose syrup) do not alter classification within Chapter 8. The Supreme Court's ratio in Crane Betel Nut - that mere reduction in size or addition of flavouring/sweetening which leaves the betel nut retaining its original character does not amount to manufacture of a new commodity - applies and was followed. In light of these chapter notes, HSN guidance and binding precedents, the Authority concluded that the subject products remain areca/betel nuts classifiable under heading 0802 rather than preparations under Chapter 21. [Paras 7, 8]API supari, chikni supari, unflavoured supari and flavoured supari are correctly classifiable under heading 0802 of the First Schedule to the Customs Tariff Act, 1975; they are not classifiable under sub heading 21069030.Final Conclusion: The Authority refrained from ruling on boiled supari because the issue is already decided by the Appellate Tribunal/Court; for API supari, chikni supari, unflavoured supari and flavoured supari the correct classification is under heading 0802 (Chapter 8) and not under sub heading 21069030 (Chapter 21). Issues Involved:1. Classification of API supari, chikni supari, unflavoured supari, flavoured supari, and boiled supari under the Customs Tariff Act, 1975.2. Applicability of previous legal precedents and rulings.3. Examination of processes undertaken on raw areca nuts to determine classification.4. Validity of the benefit of exemption under Notification No. 50/2017-Cus., dated 30.06.2017.Detailed Analysis:1. Classification of API supari, chikni supari, unflavoured supari, flavoured supari, and boiled supari under the Customs Tariff Act, 1975.The applicants sought classification of five products under sub-heading 21069030 of the Customs Tariff Act, 1975. The products in question have raw areca nut/betel nut as the primary ingredient, and the processes undertaken include boiling, slicing, drying, polishing, and adding flavors or spices. The Principal Commissioner of Customs argued that these products do not undergo significant changes and should remain classified under chapter 8, specifically under heading 0802.2. Applicability of previous legal precedents and rulings.The Principal Commissioner referenced previous rulings by the erstwhile AAR, New Delhi, and the Supreme Court decision in the case of M/s. Crane Betelnut Powder, which held that pure betel nut products do not merit classification under sub-heading 21069030. The applicants, however, cited the decision of the Hon’ble High Court of Madras in the case of M/s. Isha Exim and argued that the ruling of the erstwhile AAR in the case of M/s. Oliya should be followed. The Chennai Bench of the CESTAT also held that boiled supari merits classification under sub-heading 08028010.3. Examination of processes undertaken on raw areca nuts to determine classification.The processes undertaken on the raw betel nuts were examined to determine whether they result in products that can be described as preparations containing betel nut. The processes included cleaning, removal of impurities, cutting, slicing, drying, polishing, boiling, roasting, and adding flavors or spices. The ruling emphasized that these processes do not significantly alter the character of the raw material, i.e., areca or betel nuts, and thus do not warrant reclassification under chapter 21. The ruling referenced the Harmonized Commodity Description and Coding System (HSN) guidelines, which indicate that such processes do not change the classification of the product under chapter 8.4. Validity of the benefit of exemption under Notification No. 50/2017-Cus., dated 30.06.2017.The ruling concluded that the products in question, namely API supari, chikni supari, unflavoured supari, flavoured supari, and boiled supari, do not merit classification under sub-heading 21069030. Consequently, the benefit of the exemption contained at Sr. No. 103 of the Notification No. 50/2017-Cus., dated 30.06.2017, would not be available to these products.Conclusion:In conclusion, the ruling determined that the correct classification for API supari, chikni supari, unflavoured supari, and flavoured supari is under heading 0802 of the first schedule to the Customs Tariff Act, 1975. The ruling refrained from issuing any classification for boiled supari due to existing decisions by the Appellate Tribunal or any Court. The benefit of the exemption under Notification No. 50/2017-Cus., dated 30.06.2017, is not available for these products.