TaxTMI 
TaxTMI 
2024 (11) TMI 1620
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....he firm 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 app....
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....Packaging 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,....
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....ods, the 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 fa....
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....iquorice (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. Ch....
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....egard is 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: "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....
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.... these 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 essen....
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....d and 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 particula....
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.... water for cleaning and also to remove the bacterial count if any Step-5: The washed betel nuts are again sun dried or oven dried to remove the moisture content Step-6: The dried whole betel nuts are then cut into several pieces by using cutting machines Step-7: The cut betel nuts are then mixed with 'menthol flavor' to make it readily consumable Step 8: The cut menthol scented betelnut product known as 'supari' is then packed according to the requirement of the buyer. By virtue of the processes detailed above, the Importer submitted that 'Menthol Scented Supari proposed to be imported by them would fall under the HS Code 21069030 as 'Betel Nut Product known as Supari' in terms of the supplementary Notes (2) to the Chapter 21: SUPPLEMENTARY NOTES: (1). 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 process of cutting the betel nut into small ....
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....nce contains something, that thing is a part of it'. f. 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 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 fruit or dried nuts. g. Whereas, the processes listed out by the Importer for arriving at the impugned goods are squarely covered under the scope of Dried Nuts as defined under Chapter 8, except for adding of Menthol to the goods. Further, the addition of the Menthol does not alter the character of the goods viz., dried Areca/Betel Nut. 2.5. CLASSIFICATION OF THE IMPUGNED GOODS I. Legal Framework and Interpretative Rules A. General Rules for the Interpretation (GRI): The classification process is guided by six Gener....
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....y." This indicates that the intended use as a masticatory does not preclude classification in Chapter 8. E. Exclusionary Principles: While Chapter 21 covers miscellaneous edible preparations, it generally excludes products more specifically described elsewhere. The specific mention of areca nuts in 08.02 creates a strong ground against classification in 21.06. IV. Counter-Arguments A. Food Preparation Argument The Importer contests that the addition of menthol constitutes a form of preparation, potentially shifting classification to 21.06. However, this argument is weakened by the allowances made in Chapter 8 for minor treatments and the principle of specificity favouring 08.02. B. Supplementary Note on "Supari": The supplementary note defining "betel nut product known as Supari" under 21.06 appears to target more substantially prepared products, and not simply scented whole nuts. 2.6. In view of the above, it can be deduced that any preparation containing betel nuts should be read as any specially prepared substance which has betel nuts as constituent part in it. a. In accordance with Rule 1 of the General Rules ....
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....l-nut-pieces- lended-with-saffron-40-g). purposes, representative images are reproduced below: For illustrative b. As evidenced by the aforementioned example, commodities marketed as scented betel nuts routinely incorporate a complex mixture of ingredients, including but not limited to Vegetable Oil, Tarbuz, Menthol, Borneol, Clove Oil, Natural Spices, a blend of Saccharin, Cardamoms, permitted flavors, and preservatives. This compositional complexity stands in stark contrast to the impugned product under consideration. Consequently, it becomes apparent that the good in question is fundamentally distinct from the multi-ingredient Scented Betel Nuts that legitimately fall under CTH 2106. Thus, from both a trade and common parlance perspective, it is evident that the impugned goods do not conform to the characteristics of Supari under CTH 2106, but rather align more closely with the category of other Areca Nuts of CTI 0802 8090. c. Furthermore, it is noteworthy that the Importer appears to possess cognizance of the fact that their goods do not fall within the scope of food preparations as defined in Chapter 21. The strategic deployment of the descriptor "menthol sce....
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...., the personal hearing conducted physically on 24.10.2014 wherein the authorized representative of the applicant has reiterated the same which has already been submitted with the file at the time of filing of application for rulings. Additional submission of the applicant 4. The A.R. of the applicant, has further submitted additional submission / rebuttal to the comments of the customs port authority, which is under: a. That it is submitted that comments on the application filed by the respondent customs port Ld. Commissioner of Customs, Chennai-II, wherein it opposed the advance ruling sought by the applicant for the goods i.e. "Menthol Scented Supari " under CTH 2106 90 30 is without any justification. b. That it is submitted that in India, there exists a vast market for Betel Nut-based products, commonly known as Supari. This flavored preparation consists of crushed or cut betel nuts combined with various ingredients, including menthol, Nagarmotha oil, gulab oil, cardamom, clove oil, pacholi oil, liquorice (mulethi), sweeteners, and edible colors. Supari is sold across retail counters and serves as a mouth freshener. c. According to the Supplemen....
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....o. 163/19/2021-GST dated October 6, 2021, clarifies the classification of scented supari. - The GST Council's 45th meeting recommendations support classification under 2106.90.30 with an 18% IGST rate. i. Classification under Customs Tariff: - Contending classifications are Chapter 8 (dried fruits/nuts) and Chapter 21 (miscellaneous edible preparations). - Chapter 8's relevant notes do not apply since the processes exceed partial rehydration or preservation. - Chapter 21's supplementary note 2 defines "betel nut product known as Supari" as preparations containing betel nuts without lime, katha, or tobacco. In view of the above it can be concluded that Menthol scented supari is appropriately classified under 2106.90.30 as a betel nut preparation and the CBIC Circular and GST Council recommendations support this classification. j. Value Addition and Manufacturing Process: - The manufacturing process involves skilled labour and enhances the value of raw materials. - The resultant product is distinct and different from it ingredients. k. Legal Framework: - Section 3(7) of the ....
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..... q. That for the correct classification of 'Menthol Scented Supari', we may refer to some of the relevant statutory provisions and supplementary notes. Chapter 08 (02) deal with 'other nuts, fresh or dried, whether or not shelled or peeled. Chapter Note 3 to Chapter 8 reads thus: "3. 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, or 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." Chapter 21 (06) deals with 'Food preparations not elsewhere specified or included'. The Supplementary Note 2 in Chapter 21 runs thus: '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....
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....regard it is submitted that Supplementary Note 2 specifically deals with 'Supari' and states that it is any preparation containing betel nuts, but not containing lime, katha (catechu) and tobacco, whether or not containing cardamom, copra or menthol. Therefore, Supplementary Note 2 placed under Chapter 21would certainly cover the product in question, viz., 'Menthol Scented Supari'. Respondent is nowhere saying that the product in question contains lime, katha(catechu) or tobacco. Only if any of these 3 ingredients are used, then the betel nut product known as 'Supari' would fall outside the purview of Chapter 21. t. Thus, reading Chapter 21 as a whole, harmoniously with Supplementary Note 2, it is evident that the legislature has specifically carved out an entry for "Menthol - Scented Supari" which contains betel nut pieces, menthol added to it and does not include any of the 3 items viz., lime, katha (catechu) or tobacco. u. Applying the 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 ....
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....any 'manufacture' or not and in that context it was held that the process of boiling, slicing etc. and adding flavours to the betel nut would not result in altering the nature and characteristics of the product and therefore the classification would have to be made under Chapter 8. It is submitted that post this judgment, two important subsequent factors have intervened. Firstly, vide Finance (No.2) Act, 2009 dated 19th August, 2009, there has been an insertion of Note 6 in Chapter 21, which specifically relates to Tariff Item 2106 90 30 relating to 'supari' and stating that the process of adding or mixing cardamom, copra, menthol, spices, sweetening agents or any such ingredients other than lime, katha (catechu) or tobacco to betel nut, in any form, shall not amount to "manufacture". Secondly, w.e.f. 1-7-2017, the GST Act was introduced and the concept of taxation itself has undergone a change from 'manufacture' to 'supply'. The Supplementary Note 2 in Chapter 21 of CGST Tariff is also verbatim the same as Supplementary Note 2 under Chapter21 of the Customs Tariff Act, 1975. This only exemplifies the intention of the legislature to have always treat....
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....s on which the decision was rendered. It is also trite law that a decision is onlyan authority for what is decided and it cannot be extended to something which has not been decided by applying the process of a logical deduction. In P.Rajendran v. The Assistant Director, in Crl.O.P. No. 19880 of 2022 dated 14-9-2022, the Division Bench of Madras High Court, in fact, one of us being a part of the Bench (Justice. RMT.TEEKAA RAMAN) held that "a case is only an authority for what it decides". As observed by Lord Halsbury in Quinn v. Leathem, reported in 1901 AC 495, quoted hereunder for easy reference: " ... that every judgment must be read as applicable to the particular facts proved or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but are governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that 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. Thu....
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....ot 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". In this Chapter, the related entry, with respect to betel nuts, is the sub- heading 21069030, i.e. betel nut products known as supari. On the other hand, Chapter 8, covers Edible fruit and nuts; peel of citrus fruit or melons. In Chapter 8, areca nuts, whole, 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," 5.4 Further, it is seen that with respect to Chapter 8, the explanatory notes to HSN pres....
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....) and Ayush Business Overseas-2021 (378) E.L.T. A142 (S.C.), wherein CESTAT had held that boiled betel nuts are appropriately classifiable under Chapter 8, and not Chapter 21 relying on the principles observed in the Hon'ble Supreme Court's decision in case of Crane Betel Nut Powder Works case- 2007 (210) E.L.T. 171 (S.C.) 5.8 Furthermore, Hon'ble Supreme Court had held the following principle 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." 5.9 Further, it could be seen that there are multiple Rulings being issued by 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, 197....
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....e 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 Customs and Excise, Tirupathi & Anr. (supra) (supra) squarely covers the issue involved in the present cases." 5.11 The claims made by the applicant and the ruling sought is devoid of merits and legally untenable on the following grounds: As per the Indian Customs Tariff, CTH 2106 is applicable for "Food preparations not elsewhere specified or included". Therefore, to get classified under CTH 2106 two tests have to be satisfied. i. Firstly, it 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 ar....
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....n under 0802. The applicant's point is that the addition of menthol constitutes a form of preparation, potentially shifting classification to 21.06, however, this argument is weakened by the allowances made in Chapter 8 for minor treatments and the principle of specificity favouring 08.02. 5.14 Also, the supplementary note defining "betel nut product known as Supari" under 21.06 appears to target more substantially prepared products, and not simply scented whole nuts. In view of the above, it can be deduced that any preparation containing betel nuts should be read as any specially prepared substance which has betel nuts as constituent part in it. In accordance with Rule 1 of the GRI of the HSN, the goods in question appear to be most appropriately classifiable under Customs Tariff Item (CTI) 0802 8090. This classification is predicated on the principle that goods should be classified according to the terms of the headings and any relative Section or Chapter Notes. In this case, the specificity of heading 08.02, which explicitly covers "Other nuts, fresh or dried, whether or not shelled or peeled," provides a more precise description of the goods than alternative headings. ....