2023 (11) TMI 1366 - AAR - Customs

Roasted areca nuts classified under Chapter 20 not Chapter 8 as roasting exceeds permitted processes

M/s Shree Durga Traders Versus Principal Commissioner of Customs, Chennai-II (Import)

The AAR ruled that roasted areca nuts/betel nuts should be classified under Chapter 20 (CTH 2008 19 20) rather than Chapter 8. The Authority determined ... Classification of Roasted Areca Nuts / Betel Nuts intended to be imported - to be classified under Chapter 8, which includes edible fruits and nuts, or under Chapter 20, which covers preparations of vegetables, fruits, nuts, or other parts of plants? - HELD THAT:- The processes mentioned in Chapter 8 include chilling, steaming, boiling, drying and provisionally preserving. It does not specifically include the process of roasting. Here it is important to understand the difference between the processes of moderate heat treatment & dehydrating/drying referred in chapter 8 and processes of dry roasting, oil-roasting and fat-roasting referred in chapter 20. The terms dry-roasting, oil roasting and fat-roasting however are not defined in the Customs Tariff Act, 1975 - 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. While examining the scope of CTH 2008, it is found that as per HSN Explanatory Notes, heading 2008 covers fruit, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter. Specifying what is included in this heading, the explanatory note states that almonds, ground nuts, areca (or betel) nuts and other nuts, dry-roasted, oil-roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. Dry-roasting, oil-roasting & fat-roasting, as a process, are very much a part of chapter heading 2008 by virtue of HSN Explanatory Notes. It is also pertinent to observe that none of these processes are mentioned in the chapter note 3 to Chapter 8 of the Customs Tariff Act, 1975 as well as HSN Explanatory Notes to Chapter heading 0802. The Honourable High Court of Madras in its recent judgement on 01.08.2023 [2023 (8) TMI 492 - MADRAS HIGH COURT], has upheld the classification of Roasted Betel Nuts under CTH 2008 19 20. Conclusion - The Roasted areca/betel nuts fall under Custom Tariff Heading 2008, specifically under CTI 2008 19 20 'Other roasted nuts & seeds' of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment revolve around the classification of 'Roasted Areca Nuts' under the Customs Tariff Act, 1975. The primary issue is whether the roasted areca nuts should be classified under Chapter 8, which includes edible fruits and nuts, or under Chapter 20, which covers preparations of vegetables, fruits, nuts, or other parts of plants. A secondary issue involves whether the process of roasting constitutes a preparation that would classify the nuts under Chapter 20 rather than Chapter 8.2. ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe classification of goods under the Customs Tariff Act, 1975, is guided by the Harmonized System of Nomenclature (HSN) Explanatory Notes and the General Rules for the Interpretation of the Harmonized System. Chapter 8 covers edible fruits and nuts, while Chapter 20 pertains to preparations of vegetables, fruits, nuts, or other parts of plants. The HSN Explanatory Notes and various precedents, including Supreme Court rulings, play a crucial role in interpreting these classifications.Court's Interpretation and ReasoningThe Court examined the differences between the processes mentioned in Chapter 8, such as drying and moderate heat treatment, and the roasting process described in Chapter 20. It emphasized that roasting involves a severe heat treatment that alters the chemical and physical characteristics of the nuts, distinguishing it from the processes covered under Chapter 8.Key Evidence and FindingsThe applicant provided evidence, including test reports and previous rulings, to support the classification of roasted areca nuts under Chapter 20. The moisture content and the method of roasting were critical factors considered by the Court. The applicant's contention was supported by test reports indicating a moisture content of less than 6%, achieved through intense roasting.Application of Law to FactsThe Court applied the HSN Explanatory Notes to determine that the process of roasting is distinct from the processes outlined in Chapter 8. It concluded that the roasted areca nuts should be classified under Chapter 20, specifically under CTH 2008 19 20, which includes other roasted nuts and seeds.Treatment of Competing ArgumentsThe Customs Department argued that the roasting process was akin to moderate heat treatment covered by Chapter 8. However, the Court found that the roasting process, as described, involved a higher degree of heat treatment, aligning more closely with the processes described in Chapter 20. The Court also addressed concerns about the packaging and moisture content, ultimately determining that these factors did not preclude classification under Chapter 20.ConclusionsThe Court concluded that roasted areca nuts are correctly classifiable under CTH 2008 19 20 of Chapter 20, as the process of roasting is not covered by the processes outlined in Chapter 8.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning'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.'Core Principles EstablishedThe Court established that the process of roasting, involving severe heat treatment, is distinct from moderate heat treatment and other processes described in Chapter 8. This distinction is crucial for determining the correct classification under the Customs Tariff Act, 1975.Final Determinations on Each IssueThe final determination was that roasted areca nuts fall under Custom Tariff Heading 2008, specifically under CTI 2008 19 20 'Other roasted nuts & seeds' of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975. This classification aligns with the HSN Explanatory Notes and relevant Supreme Court judgments.