TaxTMI 
TaxTMI 
TaxTMI 
2024 (11) TMI 1618
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.... M/s Betelnut Supplier LLP is duly registered with the respective statutory authorities viz. GST Department, Income Tax Department and DGFT Department, Kolkata. The Importer Exporter Code of the firm is AAUFB6072H and the GST number is 19AAUFB6072H1ZY.The applicant has been regularly filing its statutory returns with the concerned departments and authorities. The applicant is in the process of setting up its business of trading / import of Menthol Scented Supari (hereinafter referred to as the 'subject goods") in India for use in mouth freshener. The appellant intends to import the said goods mainly from Burma (Myanmar), Indonesia, Malaysia, Sri Lanka, Thailand, Cambodia, UAE and Singapore etc. in India. Therefore the applicant is approaching this Hon'ble Authority, seeking advance ruling qua the subject goods as mentioned in the following paras of this application as the applicant intends to import the same in India 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 nomenclature and details of the goods being sought to be imported by the applicant ....
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....ng in industrial packs of 5kgs to 80kgs as per requirement. (xiii) This process however, does not contain any materials like Lime, Katha (catechu) and tobacco. 1.5. That the raw material i.e. betel nut, thus undergoes a substantial change in its appearance as well as in its chemical characteristics on account of various processes mentioned herein above and thus the tannin and arecoline and other content of raw betel nut/areca nut get substantially changed and therefore, after process as mentioned herein above on the betel nut, it become a distinctive product of betel nut which is processed and prepared and thus making it suitable for immediate consumption also. 1.6. That as per the supplementary notes (2) of Chapter 21 of Customs Tariff Act, 1975, "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 and tobacco whether or not containing any other ingredients, such as cardamom, copra or menthol." From the process mentioned herein above, it is clear that the product though use the betel nut / areca nut as main raw material however, in the process, variou....
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....e Explanatory notes are guiding factors wherever any dispute arises while interpreting the classification of particulars chapters or in case of similar or competing entries and this has been held time and again in catena of judgments by the Hon'ble Courts in India in the matters of L.M.L. Ltd. Versus Commissioner of Customs Reported in 2010 (258) E.L.T 321 (S.C), Holostick India Ltd. Versus Commissioner of Central Excise, Noida Reported in 2015 (318) E.L.T 529 (S.C), Collector of Central Excise, Shillong Versus Wood Craft Products Ltd. Reported in 1995 (77) E.L.T. 23 (S.C.). 1.10. That the explanations (iii) and (iv) appended to IGST Rate Notification 01/2017- IGST (Rate) Dated 08-06-2021, the relevant text is reproduced hereunder: (iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as ma....
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....e (Mulethi), etc. Therefore, due to carrying out of such processes, this product is not classifiable under chapter 08 of the Customs Tariff Act, 1975. On the background of contending classifications, relevant chapter notes & supplementary notes, CBIC Circular referred herein above, explanations in the IGST Rate Notification amended from time to time, and the section 3(7) of Customs Tariff Act, 1975 instant product i.e. - Betel Nut product known as supari - Menthol scented is more appropriately classifiable as a Betel Nut preparation under chapter 21 i.e., CTH 2106 9030 than in any of the headings under chapter 08 and CBIC circular legally also supports this view. There cannot be a situation where same product is subjected to levy of basic customs duty under one CTH and levy of IGST under another CTH of the Customs Tariff Act, 1975. Hence, in view of Supplementary Note 2 of chapter 21 of schedule 1 of the Customs Tariff Act, 1975 read with para 7 of the CBIC Circular No. 163/19/2021- GST dated 06.10.2021 from F. No. 190354/206/2021-TRU and the provisions of section 3(7) of the Customs Tariff Act, 1975 the scented sweetened supari merits classification under CTH 2106 90 30. Chapter 2....
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....s invited to Agenda of 45th Meeting of GST Council and the recommendation of the fitment committee available at https://gstcouncil.gov.in/sites/default/ flies/Agenda/ Detailed Agenda Note - 45th GSTCM Vol. 2.pdf which confirms classification of the Sweet Supari under 2106.90.30 and IGST rate as 18%. Subsequently CBIC issued Circular No. 163/19/2021 -GST dated 06 October 2021 clarifies the position of the Union Government to be in conformity of the GST Council. RELEVANCE TO CUSTOMS TARIFF: 1.16. That kind reference is invited to the explanations (iii) and (iv) appended to IGST Rate Notification 01/2017- IGST (Rate), dated 08-06-201 which read as below: III "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). The rules for the interpretation of the First Schedule to the Customs Tariff, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. 1.17. That identical provisions have been in....
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....ese processes are not meant for partial rehydration or treating for additional preservation or stabilization or for improving or maintaining appearance of the original product. 1.21. Alternate classification for scented supari can be found in chapter 21. Chapter 21 includes within its ambit, miscellaneous edible preparations and tariff item 2106 covers Food preparations not elsewhere specified or included. Further, the supplementary note 2 to the said chapter lay down that, 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'. 21.06 - Food preparations not elsewhere specified or included. 2106.10 - Protein concentrates and textured protein substances 2106.90 - Other In this classification the word 'preparation' is a guiding factor. The applicant has explained the detailed process carried out on the raw product i.e., betel nut. These processes as described and carried out on the subject product are essentia....
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....nd hence, it becomes a preparation and a distinctive product of betel nut which is processed and prepared and thus making it suitable for immediate consumption also. For the said reasons these goods must be categorized under the chapter heading 21 and more particularly CTH 2106 90 30. d. That the process mentioned in Annexure I is a food preparation therefore it cannot be treated as only betel nut which is found mentioned under CTH 08 as the same only is for the raw betel nut and not for any processed and/or prepared betel nut hence, the goods in question must fall under CTH 21 and not under CTH 08. e. That in fact for the similar product, this Hon'ble Authority has already issued Ruling thereby declaring the above said goods falls under CTH 21 and not CTH 08. The said ruling has been given in the case of M/s BAG Industries, vide (2023) 2 Centax 213 (A.A.R. - Cus. - Mum.)/2023 (384) E.L.T. 119 (A.A.R. - Cus. - Mum.) on 31-10- 2022 by CAAR, MUMBAI. f. That the applicant has made the present application bonafide and seeks the kind indulgence of this Hon'ble authority thereby seeking the subject goods under classification CTH 21 and more particularly....
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....split, ground, and two residuary sub-headings are under 08028010, 20, 30, 90, and 08029000, respectively. Further, Note 3 to Chapter 8 reads as under: 3. Dried fruit or dried nuts of this Chapter may be partially rehydrated or treated for the following purposes: (a) for additional preservation or stabilisation (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 fruit or dried nuts," 2.4. Further, it is seen that with respect to Chapter 8, the explanatory notes to HSN prescribes the following as general guidelines: 'Fruit and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled. The addition of small quantities of sugar does not affect the classification of fruit in this Chapter.' 2.5. Thus, Chapter Note 3 of Chapter 8 read with explanatory notes to HSN clearly stipulates that even if the dried nuts are i rehydrated, or ....
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....le in case of Crane Betel Nut Powder Works case: "3.1. In our view, the Commissioner of Customs and Central Excise (Appeals) has correctly analysed the factual as well as the legal situation in arriving at the conclusion that the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent etc. did not result in a new and distinct product having a different character and use." 2.8. Evidently, the recent judicial pronouncements on matters identical to the present case by the CESTAT and the Hon'ble Supreme Court have established a fresh interpretation and appreciation of the law. Article 141 of the Constitution mandates that law declared by the Hon'ble Supreme Court is binding on all courts. As per the proviso (b) to Section 28I(2) of Customs Act, 1962, the Advance ruling Authority shall not allow the applications where the matter has been already decided by the Appellate Tribunal or any Court. The proviso (b) to Section 28I(2) of Customs Act, 1962 reads as follows: 28(I) (2) The Authority may, after examining the application and the records called for, by order, either allow or reject the appl....
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....it was ruled that the goods (i) API Supari; (ii) Chikni Supari; (iii) Unflavoured Supari; (iv) Flavoured Supari; and (v) Boiled and Cut Supari are classifiable under Chapter 8. The process involved in making flavoured supari in these cases were as those carried out in case of impugned ruling. The relevant extract of the aforesaid order is as follows: 23. The CAAR had ruled that that the processes for making API Supari, flavoured supari, unflavoured supari chikni supari, boiled supari, and boiled and cut supari are, essentially, the processes of cleaning, preservation and enhancing the appearance of presentation and thus, were covered under Note 3 of the Chapter 8 of the Customs Tariff. 24. Insofar as flavoured supari is concerned, the CAAR relied on the decision of the Supreme Court in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr. (supra) and held that the same would continue to be classified under Chapter 8 of the Customs Tariff. 25. We find no infirmity with the aforesaid view. As noted above, the decision in the case of Crane Betel Nut Powder Works v Commissioner of ....
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....acholi oil, liquorice (mulethi), sweeteners, and edible colors. Supari is sold across retail counters and serves as a mouth freshener. iii. According to the Supplementary Notes of Chapter 21, Note No. 2 of the Customs Tariff, "Betel Nut product known as SUPARI" refers to any preparation containing betel nuts, excluding lime, katha (catechu), and tobacco, and may include other ingredients like cardamom, copra, or menthol. iv. The manufacturing process for Menthol Scented Supari (Nut-based mouth freshener, FSSAI category - 5.2.4.1) involves: Drying betel nuts, Manual removal of large impurities, De-stoning and metal detection, Automatic garbling, Polishing, Sterilization, Cutting, Removing weightless particles, Gravity separation, Roasting in a fire gas rotary roaster, Adding scents, flavors, and spices, Mixing with liquid flavors and edible oil in automatic blenders, Packaging in industrial packs (5-80 kg) etc. v. That it can clearly be seen from the above explanation that this process transforms the raw betel nut's appearance and chemical characteristics, altering its tannin and arecoline content and therefore the resulting product is a distinct, proc....
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....r and enhances the value of raw materials. - The resultant product is distinct and different from it ingredients. xi. Legal Framework: - Section 3(7) of the CTA and Chapter notes of Chapters 8, 9, and 21 govern classification. - CBIC Circular No. 163/19/2021-GST dated October 6, 2021, clarify classification aspects. xii. That the judgements cited by the respondent are distinguished including the Apex Court ruling in Crane Betel Nut's case in view of the amendment to Chapter 21, of the Central Excise Act and the GST Supplementary Note 2 to Chapter 21, read with CBIC Circular No. 163/19/2021- GT dated 6-10-2021. xiii. That there has been a fundamental shift in the tax regime in view of Central Excise being replaced by Goods and Service Tax (GST), totally effacing the concept of manufacture in the area of tax and the product, 'Menthol Scented Supari' also no longer coming under the purview of Central Excise Tariff Act, 1985, no duty is chargeable under the Act. xiv. That the reference to the HSN Explanatory Note to Chapter 8 was wholly misplaced as Rule (1) of the General Rule for Interpretation of Import Tarif....
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....er "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." Rule 3 of General Rules for Interpretation of Import Tariff runs thus: "When by application of Rule2 (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 descriptions shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only the materials or substances contained in mixed or composite goods or to part only of the items in a set up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them give a more complete or precise description of the goods. b. Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by ref....
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.... General Rules for Interpretation of Import Tariff, when there is a specific entry for 'Menthol Scented Supari' found under Chapter 21, Supplementary Note 2, the same would prevail over the general description of the nut under Chapter 8. xxii. By a specific entry, when 'Supari' is added under supplementary Note 2 to Chapter 21, it is for a specific purpose of dealing with the said product 'Supari' under Chapter 21 alone. Giving any other interpretation to the inclusion of 'Supari' under Supplementary Note 2 to Chapter 21 would defeat the object and purpose of its inclusion under Chapter 21 specifically. xxiii. Further in the HSN under Chapter 8, set out as general guidelines, when dealing with addition of sugar in small quantities, consciously nuts have been excluded and reference is made only to fruits. Therefore, this is yet another pointer that the Legislature was very clear in bringing 'Supari', a betel nut product, only under Chapter 21 and not Chapter 8. xxiv. That the issue is also clinched from the fact that in Chapter 21, under the heading "Food preparations not elsewhere specified or included" also, under ....
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....pplementary Note 2 in Chapter 21 of CGST Tariff is also verbatim the same as Supplementary Note 2 under Chapter 21 of the Customs Tariff Act, 1975. This only exemplifies the intention of the legislature to have always treated 'supari' as a special entry and not as a betel nut under the general entry of 'nuts'. There being a specific entry for 'Supari' under Chapter 21 and it would take precedence over the general entry under Chapter 8, the question of applying the ratio laid down by the Apex Court would not even arise for the simple reason that the issue on hand is only revolving around classification of 'Supari' under Chapter 8 or Chapter 21 and the facts of the case before the Apex Court was entirely different and the issue was whether process involved in manufacture of sweetened betel nut pieces would result in a totally new product or not xxvii. That both the statutory enactments viz., Central Excise Tariff Act and the Customs Tariff Act operate in different spheres. In so far as the Central Excise Tariff Act, it deals with goods that are manufactured inside the Country and the tariffs applicable to various categories and products. In th....
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.... a case is only an authority for what it actually decides." In Rajendra Singh v. State of U.P. & others, reported in (2007) 7 SCC 328, also the Apex Court approved the said position, by citing the above passage as well. Thus viewed from these angles also, the ratio laid by the Apex Court in Crane Betel Nut Powder Work's case cannot be enlarged. xxx. That on the basis of foregoing it is submitted that the Menthol Scented Supari " should fall under Tariff heading 2106, specifically under Tariff entry 2106 90 30: of the first schedule of the Customs Tariff Act, 1975. In view of the above, it is requested that this Hon'ble Advance Ruling Authority may take the aforesaid additional submissions along with the Advance Ruling passed by the Authority of Advance Ruling New Delhi and Mumbai, into consideration while passing orders in the interest of justice. Findings, Discussion and Conclusion 5. I have taken into consideration of 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 also taken consideration of comments of Customs Port Commissionerate o....
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....rance (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," 5.4 Further, it is seen that with respect to Chapter 8, the explanatory notes to HSN prescribes the following as general guidelines: 'Fruit and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled. The addition of small quantities of sugar does not affect the classification of fruit in this Chapter.' 5.5 Thus, Chapter Note 3 of Chapter 8 read with explanatory notes to HSN clearly stipulates that even if the dried nuts are- i. rehydrated, or ii. imparted treatment of preservation or stabilisation by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbet etc., or iii imparted treatments like addition of vegetable oil or glucose syrup etc. to improve or maintain their appearance. They remain classified under Chapter 8 only. Thus, any treatment which is either one of the processes mentioned in the said Chapter note to Chapter 8 or, is akin to such processes, will not take the classification of Betel Nut ou....
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....y Advance Rulings Authorities both at Delhi and Mumbai, wherein flavoured supari obtained by performing same processes as mentioned in the application for menthol scented supari, has been ruled to merit classification under Chapter 8 of the Customs Tariff Act, 1975. S. No. Ruling No. Applicant's Name 1 CAAR/Del/Cosmos Int./06/2021 M/s. Cosmos International 2 CAAR/Del/Dry Nut/01/2021 M/s. Dry Nut Enterprises 3 CAAR/Del/Globe Impex/02/2021 M/s. Globe Impex 4 CAAR/Del/Great Nut/05/2-21 M/s Great Nut Impex P. Ltd. 5 CAAR/Del/Perfect/04/2021 M/s. Perfect Trading 6 CAAR/Del/PG International /22/2021 M/s.PG International 7 CAAR/Del/Sarveshwari/11/2021 M/s Sarveshwari Industries. 8 CAAR/Del/Star Spices/03/2021 M/s. Star Spices 9 CAAR/Del/UBS Exports/23/2021 M/s.UBS Exports International Pvt Ltd, 10 CAAR/Del/Vaibhav/21/2021 M/s. Vaibhav Enterprises 11 CAAR/Mum/ARC/3/2021 M/s Samreen International Pvt Ltd. 12 CAAR/Mum/ARC/5&6/2021 M/s SRG Enterprises & M/s SYM Company 13 CAAR/Mum/ARC/9 & 10/2021 M/s BMG Corporation, M/s Bhagwan Corporation. 14 CAAR/Mum/ARC/1....
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....ve to be satisfied. i. Firstly, it is should be a food preparation ii. Secondly, it should not be specified or included anywhere else in the nomenclature The introductory language of Explanatory Notes to CTH 2106 states: "Provided that they are not covered by any other heading of the Nomenclature ... ". Therefore, before classifying the products in Chapter 21, it must be first determined whether they can be classified in any other heading under the nomenclature. Further, supplementary note 2 to Chapter 21 of the Customs Tariff defines betel nut product known as Supari betel nut product in three pertinent parts: i. As any preparation containing betel nuts ii. But not containing lime, katha (catechu) and tobacco cardamom, copra or menthol." iii. May contain any other ingredients, such as cardamom, copra or menthol Further, as per Note 3 of Chapter 8, the ambit of the classification under Chapter 8 is defined as follows: "Dried fruit or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes: a. For additional preservation or stabilisation (for example, by moderate heat ....