TaxTMI 
TaxTMI 
2024 (9) TMI 1902
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.... intends to import "Roasted Areca Nuts (Whole), Roasted Areca Nuts (Split) and Roasted Areca Nuts (Cut)" from Myanmar, Indonesia, Sri Lanka, Thailand and Singapore etc. 2.1. That the applicant approached this Authority for seeking advance ruling qua the goods as mentioned in the following paras as applicant intends to import the same and hence would like to have a proper understanding and clarification as to whether the goods being imported shall be covered under a particular classification or the other. The applicant in the instant application submitted as under: - 2.2. That the nomenclature and details of the goods being sought to be imported by the applicant are as under: - (i) Roasted Areca Nuts (whole) (ii) Roasted Areca Nuts (Split) (iii) Roasted Areca Nuts (cut) 2.3. That the processes carried out on the Roasted Areca Nut (Whole), Roasted Areca Nut (Split) and Roasted Areca Nut (Cut) are as under: - a. De-husking the raw betel/ areca nut and drying the same before being fed into the roasting oven; b. Feeding the fresh areca nuts into a seed roasting oven, heating up the betel nuts would be roasted well beyond 100 degree C....
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....n 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 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"). 2.8. That further HSN explanatory note qua Chapter 20 explains as below: This Chapter includes: (1) Vegetables, fruit, nuts and other edible parts of plants prepared or preserved by vinegar or acetic acid. (2) Vegetables, fruit, nuts, fruit-peel and other parts of plants preserved by sugar. (3) Jams, fruit jellies, marmalades, fruit or nut purées, fruit or nut pastes, obtained by cooking, (4) Homogenized prepared or preserved vegetables and fruit. (5) Fruit or vegetable juices, neither fermented nor containing added alcohol, or of an alcoholic strength by volume not exceeding 0.5 % vol. (6) Vegetables, fruit, nuts and other edible parts of plants prepared or preserved by other processes not ....
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....mr-CAAR-NEW DELHI, where identical goods are held classifiable under 20081920. 2.13. That Ruling No. CAAR/Mum/ARC/67/2023 dated 16.10.2023 of Hon'ble Authority passed in the matter of M/s. Shree Ganesh Traders, Chennai Vs. the Commissioner of Customs II (Import), Chennai, in Application No. CAAR/ CUS/APPL/95/2023-0/0 Commr- CAAR-MUMBAI, where identical goods are held classifiable under 20081920. 2.14. That the process of roasting thus changes the chemical and physical characteristics of the areca nut by reducing arecoline and tannin as well moisture. In view of above the applicant would like to have advance ruling on the following issue: "Whether the goods sought to be imported i.e. Roasted Areca Nuts (Whole), Roasted Areca Nuts (Split) and Roasted Areca Nuts (Cut)" is classifiable under the CTH 200 19 20. 2.15. That the applicant requested the Hon'ble Authority for Advance Rulings that the appropriate classification of the aforesaid goods may kindly be ruled under section 28H of the Customs Act, 1962. 2.16. In the statement containing applicant's interpretation of law and / or facts, as the case may be, in respect of question (s)on which Advance Ru....
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....ether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. f. That so far as the goods sought to be classified i.e. roasted areca nuts. These goods are chewed for a variety of reasons such as stress reliever, mouth freshener, concentration improver and digestive following food intake. The subject goods 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. g. CHANGE IN THE BETEL NUT BY THE PROCESS OF ROASTING: With regard to the goods in question, it is submitted that during the process of roasting, the roasting is done using firewood / palm kernel-based ovens and the temperature of the flames is around 600 degrees Celsius and as a result, the betel nuts would be roasted well beyond 100 degrees Celsius, usually in the range of 130-150 degrees Celsius. The roasted betel nut undergoes a change in its appearance as well as in respect of its chemical characteristics on account of the roasting process. After the processing, there is a visible deposition....
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....as been given in the case of in Ruling dated 07.12.2022 no. CAAR/Mum/ARC/44, 45 & 46/ 2022 in Application no. AAR/Cus/APPL/70,77 & 78/2022 - 0/o Commr- CAAR-Mumbai (Applicant-M/s Shahnaz Commodities International, Chennai). k. Further, in fact, the customs authority challenged the said Advance Ruling before the Hon'ble High Court of Madras vide CMA No. 600, 1206 and 1750 of 2023 - The Commissioner of Customs Chennai Vs. M/s Shahnaz Commodities International P. Ltd. However, the said cases were rejected by the Hon'ble High Court vide its judgment dated 01.08.2023. The Hon'ble High Court has after considering all the other chapter including chapter 08, and chapter 21 of Customs Tariff and also considered the other rulings as submitted by the customs authority though qua other goods i.e. boiled areca nuts, API supari, unflavoured supari etc. l. It has been observed by the Hon'ble High Court that the Rulings of the Advance Ruling Authority did not deal with Roasted Areca Nut and thus would have no relevant to the issue on hand. Further, it has been held that Roasting is a process treated to be distinct from the process of boiling and drying, in fixing ....
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....atement of relevant facts bearing on the question raised (enclosed as Annexure-1) and a detailed statement containing the applicant's interpretation of the applicable law (enclosed as Annexure-2). i. It is pertinent to note that M/s. R V International has sought an advance ruling from the Customs Authority for Advance Rulings (CAAR), Mumbai, specifically addressing the question of classification of "Roasted Areca nuts" under CTI 2008 1920. ii. The Importer has put forth a series of arguments in favour of classifying the "Roasted Areca Nut/Betel Nut" under Chapter 20. The salient points of their argument, among others, are as follows: iii. The Importer contends that the term "roasting" lacks a precise definition in both the Customs Tariff and the Harmonized System Nomenclature (HSN) Explanatory Notes, including the Sections and Chapter Notes. Furthermore, the importer has delineated the following processes that are purportedly conducted on the proposed import item: PROCESS FLOW a. De-husking: The raw areca nuts are de-husked to remove the outer husk. b. Roasting: The de-husked areca nuts are then fed into a seed roasting oven....
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....rtially rehydrated, or treated for the following purposes: i for additional preservation or stabilisation (for example, by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate); ii 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. vii. It is crucial to note that the item "Areca Nut/Betel Nut" is specifically and unambiguously covered under CTSH 0802 80 of the First Schedule of the Customs Tariff Act, 1975. The chapter heading 0802 provides a clear and comprehensive description, which reads as "Other nuts, fresh or dried, whether or not shelled or peeled". This explicit inclusion undeniably encompasses Areca nuts in their dried form, regardless of whether they have been shelled or peeled, under the chapter heading 0802. viii The importer's assertion regarding the reduction of moisture content in fresh areca nuts to less than 6% through repeated roasting at temperatures ranging from 130-150 degrees Celsius in a seed roasting oven/machine appears to lack logical consist....
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....sistent with the nature of the product and the extent of processing it has undergone. xii. While it is acknowledged that the HSN explanatory notes do not provide for the inclusion of Areca Nuts in Chapter Heading 2008, it is imperative to consider these notes in their entirety and context. The explanatory notes clearly specify that the products falling under this heading are generally put up in cans, jars, or airtight containers, or in casks, barrels, or similar containers. This clause of the HSN explanatory notes is of paramount importance as it clearly implies that the goods of this heading are preparations of fruits or nuts presented in packaged condition after manufacturing, which necessitate specific storage and preservation methods before consumption. xiii. To illustrate this point, consider the example of roasted almonds or ground nuts, which require separate packing as specified by the HSN explanatory notes. Without such packaging, these products would be prone to deterioration after roasting. However, in the case at hand, the processes said to be performed on the areca nuts appear to be solely for the purpose of drying, with no reference to any specific p....
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.... for the removal of water content, without substantial change in their essential characteristics. Moreover, they do not necessarily require the packaging methods mentioned in the HSN explanatory notes. Consequently, the impugned goods are more accurately described as dried Areca/Betel nuts after heat treatment and are thus rightly classifiable under CTH 080280. xix. The importer has relied upon the judgment of the Hon'ble High Court of Madras in Appeal No. CMA No.600/2023, 1206/2023 & 1750/2023, which was preferred by the department against the advance ruling in cases of M/s. Shahnaz Commodities International (p) Ltd., M/s. Neena Enterprises, and M/s. Universal Impex respectively. In these cases, the Hon'ble High Court of Madras upheld the Advance Rulings passed in favour of the applicants. However, it is crucial to examine the subsequent developments and findings related to these cases. xx. The import consignments declared as "Roasted Areca Nuts" imported by M/s. Universal Impex & M/s. Neena Enterprises, on the strength of similar CAAR Advance Rulings affirmed by the Hon'ble Madras High Court, were subjected to thorough examination by the officers of ....
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....gation is both startling and significant: there appears to be no distinct category of 'Roasted Areca Nuts' that would justify classification under Chapter 20. Rather, it seems that the Advance Ruling was obtained with the sole purpose of importing sun-dried or moderately heat-treated Areca Nuts under the guise of 'Roasted Areca Nuts'. This misclassification would allow importers to avoid paying the higher duty rate applicable under CTSH 080280, thereby circumventing established trade regulations and potentially causing significant revenue loss to the exchequer. xxvi. Further investigation has revealed additional discrepancies that cast doubt on the importers' claims. It has been observed that the impugned goods are typically stuffed in brown colour gunny (jute) bags. However, this packaging method is inconsistent with established trade practices and commercial norms for truly roasted nuts. xxvii. According to well-established trade and commercial parlance, as corroborated by open-source information, only raw Areca Nuts or moderately heat-treated Areca Nuts are customarily stuffed in gunny bags. In contrast, genuinely roasted Areca Nuts, due to ....
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....nd shelf life of the product. xxxiii. Therefore, even from the perspective of trade parlance and common commercial practice, it is evident that the impugned goods are not Roasted Areca Nuts as claimed. Instead, they appear to be Moderately Heat Treated Areca Nuts, a conclusion that is strongly supported by the Test Reports issued by CRCL Chennai and New Delhi, as elaborated in the preceding paragraphs. xxxiv. The implications of this misclassification extend beyond mere taxonomic concerns and delve into significant regulatory and economic considerations. It is crucial to note that the import of goods classified as "Areca nuts" under Chapter Heading 080280 is subject to stringent regulations: a. As per DGFT Notification No. 57/2015-2020 dated 14.02.2023, the import of Areca Nuts is prohibited if the unit price falls below the Minimum Import Price (MIP) of Rs. 351/- per Kg. This MIP serves as a protective measure for domestic producers and helps maintain price stability in the market. The relevant portion of the said notification is reproduced below: ITC (HS) Codes Description Revised Import Policy Revised Policy Condition 08028010 -Areca ....
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....Integrated Goods and Services Tax (IGST): 5% d. Further, it is observed that the strategic deployment of the descriptor "Roasted Areca Nuts", by some unscrupulous Importers, leveraging the term "Roasted" mentioned in the Explanatory Notes of Chapter 20, even though the same was not provisioned in the Tariff, appears to be a calculated attempt to artificially situate the goods under CTH 2008. This linguistic manoeuvre seemingly aims to circumvent the Tariff Values imposed under CTSH 0802 80, raising questions about the good faith nature of the classification claim raised by the subject Importer. xxxv. Given these regulatory measures, it becomes apparent that the present application for advance ruling may be an attempt to circumvent these established safeguards. By seeking classification under a different heading, the applicant appears to be attempting to evade the minimum import price requirement, circumvent the tariff values, and potentially legalize Moderately Heat Treated Areca Nut imports through mis-declaration and misclassification as "Roasted Areca Nuts". xxxvi. In light of the comprehensive analysis presented above, and in strict adherence to Rule ....
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....ially misrepresentative of the actual facts. The importer has provided mere statements without producing any tangible evidence to substantiate the claim. The comments of the Ld. Commissioner, is totally, baseless and misrepresentation of the fact of roasting. d. Further, a Lab Report No.173/MCH/10.08.2023 dated 24.08.2023 issued by CRCL Chennai in respect of an import of Roasted betel nut by M/s Universal Impex (IEC No. 0313014159) on the strength of CAAR ruling having No. CAAR/Mumbai/ARC/39, 40, 41/2023 dated 12.05.2023, as the matter of a specific test memo was generated by the Customs department to ascertain whether the item under import was "roasted betel nut" or otherwise. The above said lab report are as under: - "The item is in the form of grey brown whole nuts having cracks on the upper surface. It answers tests for areca nuts active ingredients, Arecoline and Homarecoline. Moisture content - 3.92% Carbohydrate content - 1.2% In view of reference available and as the moisture content and carbohydrate content of the sample under reference is less than the raw areca nut, it may be considered as dry roasted areca nuts. It is submitt....
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....sh 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 completed in multiple cycles of process of heating and cooling. g. That on 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-....
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..... Commissioner raised question on the integrity of the importer and placed an example of consignments of M/s Universal Impex and M/s Neena Enterprises imported on the strength of CAAR Advance Rulings. On thoroughly examination of the consignments, it was found mixed variety of Areca Nuts which some appears sun dried and lack of uniformity. The representative samples drawn and sent to CRCL Chennai and New Delhi. The Test result of the goods was found to vary from the claim of the importer. In this matter, it is submitted that the instant applicant is going to set up a business for import of the goods in question. However, the Customs Port Commissionerate in respect of examination of goods mentioned above did not provide any specific import shipment (B/E No. and date), any specific Lab report for Test Memo Number and date, issued by which of the labs, etc. Contrary to this, a Lab Report No.173/MCH/10.08.2023 dated 24.08.2023 issued by CRCL Chennai in respect of import of Roasted betel nut by M/s Universal Impex (IEC No. 0313014159) on the strength of CAAR rulings having No. CAAR/Mumbai/ARC/39, 40, 41/2023 dated 12.05.2023 was issued, as in this matter a specific test memo wa....
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....n dried and roasted nut being maintained CTH 2008.19.20 which covers roasted nut including areca nut is a specific entry which opposed with the entries/items covering nuts under CTH 08. n. That the Hon'ble Tribunal in respect of the case of M/s. S.T. Enterprises, the question that arose for consideration was as to 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, Enterprises was confined to boiling and drying. Importantly, roasting was not one of the processes that were examined. The competing entries that were examined in the above case were CTH 21069030 vis-a-vis CTH 08028010. 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 CTH 08". The Court's attention was never drawn to CTH 2008.19.20 which covers roasted nuts including areca/betel nuts, inasmuch as the fac....
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....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", s. That it is submitted 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. In view of the above, it is submitted 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. t. That on the basis of foregoing it is submitted that the Roasted betel nuts fall under Tariff heading 2008, specifically under Tariff entry 2008 1920: "Other roasted nuts & seeds of chapter 20 of the first schedule of the Customs Tariff Act, 1975. In view of the above, it is requested that this....
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....r 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 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. Roasting is a process used for bringing in to existence roasted nuts and I find that the processes mentioned in chapter 8 do not cover roasting process. 6.3. I also note on the submissions of the applicant that the Note 3 to Chapter 8 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 ....
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....cts Ltd. (1995) 3 SCC 454. Hon'ble 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 HSN. 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." 6.6. I also find that the Customs Port Commissionerate of Chennai-II (Import), Custom House, Chennai, Tamilnadu placed reliance upon a number of judgements / orders / rulings passed by various Courts, Tribunals, and Customs authority for Advance Rulings which all pertains to various kinds of Supari (Areca Nut) i.e. Flavoured Supari, Unflavoured Supari, API Supari, Chickni Supari, Boiled Supari, etc. The goods in question in the instant matter is Roasted Areca Nut (Supari) which is totally different from the goods i.e. various kinds of Supari, mentioned above. Since, the judgements / orders / rulings on which reliance was placed by the Customs port Co....