TaxTMI 
TaxTMI 
2024 (9) TMI 1901
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....Customs Act, 1962 (hereinafter referred to as the 'Act'). The applicant intends to import "Roasted Areca Nuts and Roasted Areca Nuts (Cut)" from Indonesia, Myanmar, Bangladesh, Sri Lanka, Thailand, Vietnam, Madagaskar, Nepal and West Africa. 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. The Areca nut, originating from the palm tree species, thrives in tropical regions. It is obtained from the fruit of the Areca Nut Palm and is commonly known as the Areca Nut or Betel Nut, referred to as "supari" in India. The raw betel nut undergoes a series of processes to yield various products. Depending on specific treatments, a variety of betel nut types are produced, including Boiled Betel Nut, Dried Betel Nut, Flavored Betel Nut, Unflavored Betel Nut, Roasted Betel Nut / Areca Nut, and more. The focus of this application ....
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....n the processed areca nuts falls below 4 percent. This reduction in water content causes the areca nut to shrink and become brittle. The purpose of repeatedly roasting and cooling the nuts is to quickly cool and shrink them after thermal expansion, resulting in roasted areca nuts that are easily chewable, crunchy and of higher quality. 2.6. Overview on Roasted Areca Nut: A. Roasted Areca Nut, a traditional and widely consumed product, has undergone significant changes in its processing and characteristics. In the past, the roasting process used to take approximately 7 to 8 days, but modern mechanization has reduced this time to about 2 to 3 days, enhancing efficiency. B. The roasting of areca nuts results in a remarkable transformation in both their appearance and chemical composition. During roasting, an brownish layer forms on the outer surface of the betel nut, and there are substantial alterations in its chemical properties. Research indicates that the levels of Tannin and Arecoline, key compounds in raw areca nuts, undergo significant changes as a result of the roasting process. C. Various studies and articles shed light on the chemical compositio....
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...." in the instant case the Chapter Headings, Chapter Notes, HSN Explanatory Notes and General Rules of Interpretations is being deciphered: 2.7.2. 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). As per the Chapter notes these goods 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 for immediate consumption in that state, they may be provisionally preserved (e.g., by sulphur dioxide gas, in brine, in sulphur water or in other preservative solutions). The said note specifies the physical status of the goods along with corresponding processes that could be carried on those goods under this chapter. Note 3 to Chapter 8, states that 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 s....
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....t a slightly 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. 2.7.7. Further, it cannot be stated that the term "roasted areca nut / betel nut" is not mentioned in the Customs Tariff Act and that "roasted betel nut" is a term used in common trade parlance. On the contra, the said term "Roasted" is mentioned in the Customs Tariff Act and has been dealt in detail in the HSN Explanatory Notes. 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 prese....
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....d that they are known in the trade and sold in the market as "Roasted Betel Nuts". Therefore, even if the term is not defined in the statute, the product needs to be recognized in terms of common trade parlance. It is a well-settled principle that words in a taxing statute must be construed in consonance with their commonly accepted meaning in the trade and their popular meaning as held by the Hon'ble Apex Court in the case of M/s. United Offset Process Pvt. Ltd. Vs. Asst. Collector of Customs, Bombay and Others 1989 Supp. (1) SCC 131, wherein the court held "If there is no meaning attributed to the expressions used in the particular enacted statute then the items in the customs entries should be judged and analysed on the basis of how these expressions are used in the trade or industry or in the market or, in other words, how these are dealt with by the people who deal in them, provided that there is a market for these types of goods". The roasted betel nut is an independent product, which is sold in the market in both packed and unpacked form. Further, the packed roasted betel nuts are labelled and marketed as roasted betel nuts/ roasted supari and carry the stamp of approval....
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....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. Therefore, it appears that it is a residuary entry in respect of edible food preparations. In the instant case the process of preparation does not involve cooking, dissolving, boiling in water or milk, further the impugned goods don't contain lime, Katha (catechu) and tobacco. As such, the impugned goods cannot classify under Chapter 21 or its sub-headings. As a result, edible preparations shall be classified under this chapter, 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 2008 of the Customs Tariff Act, 1975, they stand excluded from the scope of Chapter 8 and Chapter 21. 2.7.14. Further, since the impugned goods have undergone roasting which has not been categorized or classified in Chapter 8, while on the other hand Chapter 2008 19 20 categorically specified "Roasted Areca Nuts" in its explanation to HSN notes, the "Roasted ....
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....TH 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. 2008 19 20 --- Other roasted nuts and seeds As per CTH 2008, HSN Explanatory Notes, 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, is very much a part of chapter heading 2008 by virtue of HSN Explanatory Notes. It is pertinent to note 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. 2.7.16. In this regard the judgment of the Hon'ble Supreme Court in the case of M/s. Amrit Agro Industries Ltd as well as M/s Phil Corporation is squarely applicable to the impugned good "Roasted Betel Nut", wherein, the Apex Court clarified the doubts on the issue of whether a process....
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....tion for "Roasted Areca Nut" by its Ruling No. CAAR/Mum/ARD/44,45&46/2022 dated 07.12.2022, in the matter of M/s. Shahnaz Commodities International (P) Ltd, Chennai, and Ruling No. CAAR/ MUM/ ARC/ 39,40,41/2023 Dated 12-05-2023, in the case of M/s. Universal Impex, Mumbai, which would squarely apply to the Applicant in the instant case. 2.7.20. The Applicant further states that the Customs Department had challenged the aforesaid Advance Rulings of the CAAR, Mumbai of M/s. M/s. Shahnaz Commodities International (P) Ltd, Chennai, M/s. Neena Enterprises, Telangana and M/s. Universal Impex, Mumbai, by way of a Civil Miscellaneous Appeal in CMA No's. 600/2023, No. 1206/2023 and No.1750/2023, respectively before the Hon'ble Madras High Court. Wherein the Division Bench of the Hon'ble Madras High Court after elaborately hearing all the parties dismissed the CMA's of the Customs Department, thereby upholding the aforesaid Rulings of the CAAR, Mumbai. As such the findings of the Advance Ruling Authority on "Roasted Betel Nut" has been sustained. 2.7.21. Further, even as per General Rules of Interpretation (GIR) 3(a) of the Customs Tariff Act 1975, when the goods are cl....
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....nnexure I & Annexure II of the application are under: The claims made by the applicant and the ruling sought is devoid of any concrete evidence and legally untenable on the following grounds: 4.2.1. 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, 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. " 4.2.2 The applicant's claim that after repeated roasting of the area nuts at the temperature of more than 150 degrees Celsius in a roasting oven, the moisture content of the fresh areca nuts reduce....
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.... sine qua non for a good to be classifiable under Chapter 20. 4.2.4. 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 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. 4.3. The applicant has claimed that dry Roasted Areca (or Betel) Nuts are specifically covered under Chapter Heading 2....
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....ific 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. 4.5. 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. 4.6. 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, ....
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....tain 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.T.514(Tri. Chennai) 4.9. 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 ... The applicant has relied upon the Hon'ble Apex Court Judgments in the cases of the M/S. Amrit Agro industries Itd v/s Commissioner of Central Excise Ghaziabad (2007) 201 ELT 183(SC) and the Commissioner of Customs & Central Excise v/s Phil Corporation Itd 2008(223) E.L.T 9 (S.C). In both the cases, the Hon'ble Supreme Court upheld the classification of roasted nuts under chapter 20. It is pertinent to note here that the impugned goods in both the judgment are peanuts (ground nut). Peanuts and areca nuts both are squarely different commodities. ....
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....se, 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 Na 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" "In 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/01/2021 dated 16th March, 2021) "I find that the reference by the Principal Commissioner of Custom....
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.... Indonesia. The supplier is one M/s. PT. Gajamukha, Jalan Suka Bumi Lama Gang III, No.999 Dusun II, Desa Puji Mulyo, Kecamatan Sunggal, Kabupaten Deli Serdang-20351, North Sumatra Indonesia. The Indonesian supplier is in the business from the year 2018 and intends to export to the Applicant goods described as "Roasted Areca Nut/Betel Nut". In such circumstances the Applicant has made the present application to ascertain whether the product sought to be imported falls under CTH 2008 1920. 6.2. The Applicant along with its application had placed various material in the form of the suppliers profile @ page 76, product write-up page 77 - 79, photographs of the process undertaken in preparation of Roasted Betel Nut and its sale in the online portal @ page 80 - 89. 6.3. The Applicant has also given a detailed account and explanation in Annexure-2 @ page 14 - 29 as to how the classification under CTH 20081920 is justified and would be the appropriate chapter heading rather that falling under chapter 0802 of the CTH. 6.4. The Applicant in response to the reply / comments of the respondent Chennai & Tuticorin Commissionerates states that Chapter 8 of the CTH deals with "Edible Frui....
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....not fall under any of the above chapter 7, 8 or 11. * Therefore CTH 2008 specifies "Fruit, Nuts and other edible parts of the 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 19 ... other, including mixtures: 2008 19 20 ... other roasted Nuts and Seeds. 6.8. In this regard explanatory notes to Harmonized Commodity Description and Coding System (HSN) is very important, which would answer the query raised by the respondent Commissionerate. The process / preparation of "Roasting" has been specifically dealt with and explained in the explanatory notes to CTH 2008, wherein it states: * "This heading covers fruits, 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 proceeding headings of this Chapter. It includes, inter alia: (1) Almonds, ground-nuts, areca (or betel) nuts and other nuts, dry-roasted, oil- roa....
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....ocess and preparation of "Roasting" is discussed therein, which holds that the process of "Roasting" is different and deserves classification under chapter 20. * Further, the said judgment holds that "the HSN is a safe guide for the purpose of deciding issues of classification". In such a perspective Roasted Nut' will only fall under the classification CTH 2008. 6.11. It is further submitted that the aforesaid advance rulings passed by the CAAR, Mumbai in the case of M/s. Shahnaz Commodities International Pvt Ltd, Chennai and M/s. Universal Impex, Mumbai, has been upheld by the Hon'ble High Court, Madras in CMA No.600, 1206, 1750 of 2023 dated 01.08.2023. The division bench of the Hon'ble Madras High Court has dealt in detail about the classification of "Roasted Areca Nut" and held as under: (page 109 @ page 144) "16. To sum up: (a) 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. (b) Roasted betel/areca nut having been specifically classified under CTH 2008 19 20 the attempt to classify under CTH 08 02 80 would fall foul of the....
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....a yardstick to restrict imports of genuine commodities/goods. 6.15. Further, the contention of the respondent Commissionerate that Minimum Import Price (MIP) has been fixed for import of raw areca nut falling under Chapter 08, thereby paving way for mis-declaration and classification under other heading of Chapter 20 and 21, is biased and farfetched. Chapter 20 and 21 are distinct tariff headings in its own perspective. The legislature in its wisdom has thought it fit to describe the goods/commodities falling under each of the chapter to appropriate duty and other levies. If the legislature did not find it necessary to invoke/impose MIP for goods falling under these chapters, then the respondent Commissionerate cannot circumvent to impose the same. If a benefit accrues to the goods falling under Chapter 20, the same is applicable and eligible for such imports, the respondent Commissionerate cannot cry over it and deny the legitimate benefit applicable to it. 6.16. Further the contention that the 'roasted areca nuts' are packed in bags whereas "the product of this heading are generally put up in cans, jars or airtight containers, or in casks, barrels or similar contain....
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....; M/s S.T. Enterprises; M/s Excellent Betel Nut, M/s Crane Betel Nut Powder Works; M/s Samreen International P. Ltd. and M/s Dry Nut Enterprise, etc., which all pertains to various kinds of Supari i.e. API Supari, Chickni Supari, Flavoured Supari, Unflavoured Supari and Boiled Supari. In the present case, the goods in question is Roasted Areca Nut which is completely distinct from the above said various kinds of supari. Sine, the goods in question is totally distinct, the judgments / rulings in the above said matters do not squarely cover the instant goods and hence, the said judgments / rulings not applicable in the present case. 7.2. I note 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. Therefore, these terms have to be....
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.... potassium sorbate by the addition of vegetable oil or small quantities of glucose syrup. Roasting is different from all the processes mentioned above. Roasting, as submitted by the applicant, is carried out using roasting ovens due to which betel nuts are roasted in the range of 150 degrees Celsius then cooled in room temperature and the cycle is repeated until the moisture content is less than 6 %. This clearly indicates that the roasting is much more than mild heat treatment. 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. Therefore, the impugned goods do not satisfy Note 3 to Chapter 8. 7.5. While examining the scope of CTH 2008, 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 preceding headings of this Chapter. Specifying what is included in this heading, the explanatory note states that almonds, ground nuts, areca (o....