TaxTMI 
TaxTMI 
TaxTMI 
2024 (11) TMI 1595
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.... 2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) on which advance ruling is required with the CAAR-1 application: 2.1 The Applicant is a firm in the name and style of M/s. Adon Agro Commodities Pvt. Ltd bearing 1E Code AAWCA4258M . The applicant intends to import "Roasted Areca Nuts (Whole) And Roasted Areca Nuts Cut" from Burma, Indonesia, Sri Lanka and Singapore. As per the present scheme of Classification of commodities under the Customs Tariff Act, 1975 reproduced below, Fruits, Nuts and other edible parts of plants are classified under the Chapter Heading 2008, while roasted nuts are particularly and specifically classified under the Tariff Item 20081920: 2008 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 - Nuts, ground-nuts and other seeds, whether or not mixed together : 2008 11 00 -- Ground-nuts 2008 19 -- Other, including mixtures: 2008 19 10 --- Cashew nut, roasted, salted or roasted and salted 200....
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....an be broadly seen. Further to the above, there would be a substantial change in the chemical characteristics of the betel nut product on account of roasting process. It has been established through researches (copy enclosed) that the tannin and arecoline content of raw betel nut/areca nut gets substantially reduced by subjecting the same to roasting and boiling. Following Table gives an approximate detail of such changes: Description Tannin (Range/Average in %) Arecoline (Range/Average in %) Raw Betel Nut (N.A)/ 25% (0-1.4%)/ 1.4% Boiled Betel Nut Product (N/A)/ 17% (N.A)/ 0.1% Roasted Betel Nut Product (5-41%) / 21.4% (0.85- 1.29%)/ 1.29% It may be noted from the above that the there is a substantial change in the physical and chemical characteristics of raw betel nut and roasted betel nut thus making the later a distinctive product of betel nut making it suitable for immediate consumption. 2.4 From the facts delineated above, it is respectfully submitted that by virtue of roasting, the betel nut product under consideration has undergone transformation much beyond the treatment or process aimed at additional preservation or stabilisati....
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....safe guide to interpret and classify the commodity under consideration. As per the HSN 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 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 alia: (1) 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. Hence from the above, the Applicant submits that the proposed item to be imported, 'roasted betelnut/ areca nut (whole/cut) are classifiable under the HS Code 2008 1920 by virtue of mere roasting as clearly given in the HSN Explanatory Note by the product name. Although the aspect of classification of 'roasted betelnut/ areca nut' is unambiguously clear by the scheme of classification as well as HSN Explanatory Note to the rele....
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....r the following purposes. (a) For additional preservation or stabilisation (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbet), (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. From the above, it is clear that the nuts classifiable under this Chapter should be treated only for the purpose of additional preservation or stabilisation or to improve or maintain their appearance. in effect, any treatment that is aimed at other than or beyond preservation/stabilisation or improve/maintain appearance automatically makes the product ineligible for classification under the Chapter 08 itself. This has been legibly brought out in the HSN General Explanatory Note to the chapter 08 reproduced below: GENERAL: This Chapter covers fruit, nuts and peel of citrus fruit or melons (including watermelons), generally intended for human consumption (whether as presented or after processing). They may be fresh (including chilled), frozen (whether or not previously cooked ....
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....from the above, the impossibility of classifying 'roasted betelnut/ areca nut' under the Chapter Heading 0802 can be further ascertained from the Exclusion Clause to the HSN General Explanatory Note to the Chapter 08 given below: This Chapter also excludes a number of vegetable products more specifically covered in other Chapters (even though botanically some of them are fruits, e.g.: a) Olives, tomatoes, cucumbers, gherkins, marrows, pumpkins, aubergines (egg-plant), fruits of the genus Capsicum or of the genus Pimenta (Chapter 7). b) Coffee, vanilla, juniper berries and other products of Chapter 9. c) Ground-nuts and other oleaginous fruit, fruit used primarily in pharmacy or in perfumery, locust beans, kernels of apricots or of similar fruit (Chapter 12). d) Cocoa beans (heading 18.01). The Chapter further excludes: (i) Fruit flour, meal and powder (heading 11.06). (ii) Edible fruit and nuts and peel of melons or citrus fruit, prepared or preserved otherwise than as described above (Chapter 20) (iii) Roasted fruit and nuts (e.g., chestnuts, almonds and figs), whether or not ground, generally used as cof....
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....e supplementary Notes (2) to the Chapter 21, further defines the term 'supari' to clearly make the distinction between 'betelnut' classifiable under the Chapters (Chapter 08 / Chapter 20) vis-a-vis Chapter 21. SUPPLEMENTARY NOTES: 2. In this chapter "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. The meaning and purport of the words 'any preparations' can be properly understood in the context of this Chapter vis-à-vis the contrasting requirement given in the General Notes to the Chapter 08 given below. This Chapter covers fruit, nuts and peel of citrus fruit or melons (including watermelons), generally intended for human consumption (whether as presented or after processing). They may be fresh (including chilled), frozen (whether or not previously cooked by steaming or boiling in water or containing added sweetening matter) or dried (including dehydrated, evaporated or freeze-dried); provided they are unsuitable ....
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....st as per the supplementary note to the Chapter 21." The second test for the item to qualify classification under Chapter 21 is that it should be a preparation for use directly for human consumption. It is well established from the above that the roasted betelnut/areca nut proposed to be imported can be consumed directly by merely cutting into pieces, thus succeeding in the second test too. In view of the fact that the item is a betelnut preparation within the meaning of the supplementary note and also a preparation that can be consumed directly, the item appears equally classifiable under the HS Code 21069030 also. 2.10 The Applicant submits that the Authority in its earlier Rulings rejected the classification of betelnut products under the HS Code 21069030 and confirmed the same under the Chapter Heading 0802 by holding that the processes such as boiling, slicing, removal of impurities, metal deflection, garbling, polishing, roasting, cutting and adding flavors to the betelnut do not alter the nature and characteristics of the product so as to take it outside the purview of the Chapter Heading 0802. This decision has been consistently taken by extensively relying o....
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.... Crane Betel nut powder works Vs Commissioner of Customs & C. EX, Thirupathi (2007 (210) ELT 171 (SC)) and hold the classification of processed betelnuts under the CTH 21069030. Most importantly, the Advance Rulings in the case of M/s. Excellent Betel Nut Products was passed by two member/full bench of the Authority and the legitimate expectation of the Applicant is that the Ruling of the full bench will prevail over the rulings passed by the single member bench. Till date the above referred Advance Rulings are not set aside by any appellate forum and the concerned parties till date import and clear the goods under the CTH 21069030 through various ports in India. It is further submitted that when two different judgements are available on the same issue the order of the larger bench has to be followed as held by the various higher forums. S.S. Upadhyay, Former District & Sessions Judge/ Former Addl. Director (Training) Institute of Judicial Training & Research, UP, Lucknow, in his book dealt with the applicability of precedential value vide Para 14 (A) reproduced below for ready reference: 14 (A). Larger bench decision binding on smaller benches In case of any conflict betw....
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.... Jurisdictional Customs Commissionerate i.e. The Commissioner of Customs (Import), Custom House, Tuticorin as submitted by the applicant calling upon them to furnish the relevant records with comments, if any, in respect of said application, The comments received from the Commissioner of Customs, Custom House Tuticorin are as following: 3.1. The applicant as provided under section 28E of CAAR and eligible to file the application. The item described as "Roasted Areca Nuts" are freely importable if the unit price of the goods is more than Rs. 351/kg and classifiable under CTH 080280. The claims made by the applicant and the ruling sought is devoid of any concrete evidence and legally untenable on the following grounds: 3.1.1 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 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, b....
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....ed purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut. Therefore, the process to which raw betel nuts have been subjected as per process flow submitted by the applicant is squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Notes. Hence at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as "preparations of betel nut, which is sine qua non for a good to be classifiable under Chapter 20. 3.1.5 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 Cambrid....
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....s heading are preparations of fruits or nuts presented in packaged condition after manufacturing, which need to be specifically stored and preserved before consumption. For example, roasted almonds or ground nuts need separate packings as specified by the HSN explanatory notes, otherwise these products are prone to deterioration after roasting. But the processes said to be performed on the areca nuts is only for the purpose of drying without any reference to packaging and any 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 are. Areca Nuts in the same form as those classified under Chapter 08 and hence, they are clearly excluded from the scope of the Chapter Heading" 2008. Hence, the purported roasted areca nuts clearly excluded from the scope of the chapter 20 and rightly classifiable under chapter 08. 3.1.8 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 or 2106 is unwarranted. 3. When b....
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....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 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 & and have nat 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-va) (2021(378) E.LT.514(Tri. Chennaill "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." 3.1.11 The applicant has relied upon the Hon'ble Apex Cour....
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....ts of the cases before them. Further, the Honourable High Court of Delhi in its order CUS AA 17/2022 dated 01-03-2023 has held that the order of CAAR in case of M/s Excellent betel nut is erroneous. The relevant portion of the judgment is reproduced below, "The decision of the learned AAR in Re: Excellent Betelnut Products 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 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/3/202 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 con....
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....modities Pvt. Ltd, Shri Vishal Raj Gautam, Accountant of the Company reiterated the contention of the applicant filed with the application and further submitted that the subject goods i.e. 'roasted betelnut/ areca nut (whole/cut) merit classification under CTI 2008 19 20. In support he relied upon the various case laws submitted in their application. Nobody appeared from the Jurisdictional Commissionerate 5. 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. I have gone through the response received from the Tuticorin Customs. I therefore proceed to decide the present applications regarding classification of "Roasted Betelnut/ Areca Nuts- Cut/Whole" on the basis of the information on record as well as the existing legal framework having bearing on the classification of the products in question under the first schedule of the Customs Tariff Act, 1975 (hereinafter to be referred as CTA). 5.1. It can be seen from the wording used, the processes mentioned in Chapter 8 include chilling, steaming, boiling, drying and provisionally preserving. It....
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....cifies certain treatments that could be carried out on the dried nuts for additional preservation or stabilization or to improve or maintain their appearance. Further, as per the above note, the processes that could be carried out are moderate heat treatment, sulphuring, and the addition of sorbic acid or potassium sorbate by the addition of vegetable oil or small quantities of glucose syrup. Roasting is different from all the processes mentioned above. 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. The ratio of Hon'ble Apex Court judgement in the case of Alladi Venkateswarlu v. Government of Andhra (cited supra) regarding differentiating the process of roasting and drying is very much relevant and applicable in this case. 5.4. I 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 ....
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....preparation of betel nut" or "betel nut as mentioned in Chapter 8". The Court's attention was never drawn to CTI 20081920 which covers roasted nuts including areca/ betel nuts in as much as the facts as set out by the Tribunal in its order was not concerned with the process of roasting. Where a question passes sub-silentio, then, it may have no precedential value. Further, the Applicant has relied upon the rulings passed by CAAR Delhi in the cases of M/s Vaibhav Enterprises (ruling no. CAAR/Del/Vaibhav/21/2021), M/s Sarveshwari industries (ruling no. CAAR/Del/Sarveshwari/11/2021) and M/s Naman Agri Impex Private Ltd (ruling no. CAAR/Del/Naman Agri/09/2021). In all these cases the issue pertains to the classification of API Supari, Chikni Supari, Boiled Supari, Boiled and Cut supari, unflavoured supari and flavored supari and not of the roasted betel nuts. The Case Laws relied upon by the department are not squarely applicable to this case. 6. 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 A....
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.... 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." 7. The Customs Tariff is aligned, up to the 6-digit level, with the Harmonized System of Nomenclature ('HSN') issued by the World Customs Organization ('WCO'). The HSN Explanatory Notes released by the WCO aid in the interpretation of the Headings of the Tariff and may be used as a safe guide for the same. It has been held so by the Supreme Court in the case of Collector of Customs, Bombay v. Business Forms Ltd. Thr. O.L., 2002 (142) E.L.T. 18 (S.C.). 8. In the CAAR, Mumbai Ruling No. CAAR/Mumbai/ARC/39,40,41/2023 in the case of M/s. Universal Impex, the Authority has stated his findings and has ruled accordingly- "in view of the specific CTH 2008 19 20: Other roasted nuts & seeds in chapter 20 of the first schedule to the Customs Tariff, HSN Explanatory note to CTH 2008, various Supreme Court rulings upholding guiding value of the HSN Explanatory notes for deciding classification under Customs Tariff Act, 1975 and previously mentioned two Supreme Court judgments ....
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....stayed by the Competent Court. 10. Now as far as judicial discipline and law is concerned the Hon'ble Supreme Court has held in the case of 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". The same view has been taken by the Hon'ble Supreme Court in the matter of M/s Godrej Sara Lee Ltd Vs. Excise and taxation officer-cum- assessing Authority, 2023 (384) E.L.T. 8 (SC). 11. It is evident from the processes specified in Chapters 7, 8 or 11 which mainly include freezing, steaming, boiling, drying, provisionally preserving and milling, thus, any vegetable, fruit, nut or edible parts of a plant which is prepared or preserved by any "other ....
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....s Ltd. Versus Collector of Customs, Cochin (2005 (188) E.LT. 365 (S.C.)) it was held that "Classification of goods-application of residuary entry to be made with extreme caution, being attracted only when no other provision expressly or by necessary implication applies to goods in question". 14. The classification of the goods under the Customs Tariff is governed by the principles as enumerated in the General Rules of Interpretation ('GRI') set out in the First Schedule to the Customs Tariff Act, 1975 ('Tariff'). As per Rule 1 of the GRI, classification of the imported products shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the remaining Rules of the GRI. GRI 1 stipulates that the goods under consideration should be classified in accordance with the terms of the Headings and any relevant Section or Chapter Notes. These Section or Chapter Notes and Sub-Notes give detailed explanation as to the scope and ambit of the respective Sections and Chapters. These Notes have been given statutory backing and have been incorporated at the....