TaxTMI 
TaxTMI 
2024 (12) TMI 1743
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..../7, Soi Nabg Linchi 6 Lane, 1 Babg Linchi RD, Thungmahamek, Sathan, Bangkok- 10120, Thailand is a registered company having its registered office at 140/7, Soi Nabg Linchi 6 Lane, 1 Babg Linchi RD, Thungmahamek, Sathan, Bangkok- 10120, Thailand and is represented herein by Mr. Phumravit Chaiyaponggosone. The company is a reputed company and based in Thailand and duly registered with the respective statutory authorities at Thailand and other tax departments. The company is in the business of trading, import and export of various items and commodities. 2. That the applicant is in the process of setting up its business of trading / export of (1) Menthol Scented Supari and (2) Flavored and coated Illaichi (hereinafter referred to as the 'subject goods") to India for use in mouth freshener. The appellant intends to export the said goods mainly from Burma (Myanmar), indonesia, Malaysia, Sri Lanka, Thailand, Cambodia, UAE and Singapore etc. to India. 3. That 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 export the same ....
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.... (xi) Adding scents and Flavors e.g., Menthol, Spices, sweetening agents etc. in desired quantities along with liquid flavours (as and if desired) and edible oil are mixed in automatic mega size Blenders, (xii) 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. 7. That thus, 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. 8. 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 toba....
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....ract GST at the rate of 18% (S. No. 23 of schedule III of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. Therefore, according to the limited knowledge and information of the applicant, the subject goods as stated herein above are covered and classifiable under CTH 2106 9030 of the Customs Tariff Act, 1975. 1.2.4. That in terms of the indicated additives like flavors and menthol etc., the product is classifiable under 2106.90.30 in terms of Supplementary Note 5(b) to Chapter 21 which reads as: Heading 2106 (except tariff items 2106 90 20 and 2106 90 30), inter alia, includes: (b) Preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption; However, as per the Explanatory Notes to Chapter 08, fruits and nuts of this Chapter remain classified here even if put up in airtight packing (e.g. dried prunes, dried nuts in cans). In most cases, however, products put up in 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 21).....
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.... sub-section (8) [or sub-section (8A), as the case may be]. This provision has been substituted (w.e.f. 01-07-2017 vide Notification No. 25/2017-Cus., dated 28-6-2017) by S. 4 of the Taxation Laws (Amendment) Act, 2017 (18 of 2017). Contents of the CBIC Circular No. 163/19/2021-GST dated 06.10. 2021 are applicable to the present case by virtue of legal framework as discussed herein above. Classification and applicable rate of duty under GST are clarified in the paras reproduced from the CBIC Circular No. 163/19/2021-GST dated 06.10.2021 from F. No. 190354/206/2021-TRU. By virtue of application of section 3(7) of the Customs Tariff Act, 1975 "any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty percent as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) for sub-section (8A), as the case may be. Based on the contents of the CBIC Circular No. 163/19/2021-GST dated 6th October, 2021, it is clear that the provision of section 3(7) of the Customs Tariff Act, 197....
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....value-added product of illaichi and also distinctly different from illaichi or cardamom classifiable under chapter 9 of the Customs Tariff Act, 1975. In view of the above supplementary note to chapter 21 read with para 7 of CBIC circular No. 163/19/2021-GST dated 06.10.2021, same merits to be classified under Tariff Heading 2106 9099. VALUE ADDITION 1.3. That it is submitted that for both the products e.g., (a) Menthol/Scented cutting supari and (b) Flavoured and coated Illaichi, the manufacturing process involves intricate and skilled manufacturing process on raw produce the value of the processed materials is enhanced at each and every stage. For example, the refining stage improves the quality of major inputs. The sweetening and blending stage require use of costly raw materials like fragrances and flavours which enhances the manufacturing cost. THE PREPARATION 1.4. That the process before blending mainly adds quality and shelf life. While blending, the fragrance imparts a distinct function and nature to the finished articles which have than the major function as suppression of bad mouth odour. In this process while the lipids of fragrances retai....
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....That identical provisions have been incorporated in CGST Rate notification No. 01/2017- CGST (Rate) dated 28-6-2017. In view of the acceptance of the fitment committee in GST Council, clarificatory acceptance of Central Government through its board circular and the homogenous adaptation of Customs Tariff Act for classification and interpretation makes it amply clear that the classification of any product under Customs and GST has to remain same for all purposes in both laws. This would also be required with a view that while filing a bill of entry, a product cannot be classified in two different headings for the purpose of charging basic customs duty and IGST. 1.7.3. That a legal framework governed by Customs Tariff Act, 1975, specifically section 3(7), Chapter notes of Chapters 8, 9 and 21, section notes, supplementary notes of chapter 8 of the Customs Tariff Act, 1975 and CBIC Circular No. 163/19/2021-GST dated 06.10.2021 issued based on the recommendations of the GST Council in its 45th meeting held on 17.09.2021 clarifying classification aspects related to both the products covered in the instant application and explanations (iii) and (iv) of the IGST rate notification vide ....
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....ied or included. 2106.10 - Protein concentrates and textured protein substances 2106.90 -- Other 1.12. 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 essential for the preparation of the subject goods as mouth freshener and goods after being subjected to such processes cannot be ordinarily used for any other purpose. The betel nut products, commonly known as supari is covered under sub-heading 21069030 of this chapter. In this regard CBIC Circular No. 163/19/2021-GST dated 06.10.2021 for its claim to the classification of scented supari. 1.13. Insofar, as flavoured and coated illaichi (cardamom) is concerned, the contending classifications can come from the chapters 09 and 21 of the Customs Tariff Act, 1975. Chapter 09 covers Coffee, Tea, Mate and Spices and Heading 0908 covers Nutmeg, Mace and Cardamoms. The relevant extract from the Tariff headings in chapter 09 is reproduced below: - Cardamoms: 0908 31 -- Neither crushed nor ground: 0908 31 10 ....
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....ations not elsewhere specified or included. The chapter notes mandate that: 1. - This Chapter does not cover: (a) Mixed vegetables of heading 07.12; (b) Roasted coffee substitutes containing coffee in any proportion (heading 09.01); (c) Flavoured tea (heading 09.02); (d) Spices or other products of headings 09.04 to 09.10; 2106 - Food Preparations Not Elsewhere Specified or Included 2106 10 00 - Protein concentrates and textured protein substances 2106 90 - Other : 2106 90 20 - Pan masala 2106 90 30 - Betel nut product known as "Supari" 2106 90 91 - Other: The Supplementary Note 5(b) to Chapter 21 reads as: "5. Heading 2106 (except tariff items 2106 90 20 and 2106 90 30), inter alia, includes: (b) preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption". 1.14. That in fact for similar product, the Hon'ble Authority of CAAR, Mumbai has already issued Ruling thereby declaring the above said goods falls under CTH 21 and not CTH 8. The said ruling has been given in th....
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....H 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 under the CTH 2106 90 30. Accordingly, it is prayed that this Hon'ble Advance Ruling Authority may kindly pass order for appropriate classification of the goods as explained herein above. 2. As per the provisions of CAAR Regulation, 2021, the complete application of the applicant was provided to the concerned custom port, i.e. Customs Port Commissionerate of ICD (PPG) & Others ICDs, Patparganj, New Delhi and requested to furnish the requisite comment in the instant matter. However, unfortunately, the response from the Customs Port Commissionerate, has not been received in spite of multiple re....
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....tant case, the personal hearing could not be taken place, as the port authority neither furnished any comments in the matter nor requested for opportunity of personal hearings, in spite of multiple reminders. The Authorized Representative (AR) of the applicant was informed the present status of their cases vide email dated 20.12.2024 and requested to intimate as to whether they want to avail opportunity of personal hearing in the matter. The AR of the applicant vides their email dated 22.12.2024 submitted additional submissions and informed that the applicant does not want any further opportunity of personal hearing in above said instant matters and requested for taken the additional submissions, on record. 4.2 The additional submissions of the applicant are as under: - i. 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 ....
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....entral Board of Indirect Taxes and Customs ("CBIC") Circular No. 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. viii. 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. ix. 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 ingredi....
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....ic clause under Chapter 20, the classification cannot be made under Chapter 8. xvi. 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 th....
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....y cannot fall back on Chapter 21 and classify the product under Chapter 21. In this 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 21 would 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. xix. 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. xx. Applying the General Rules for Interpretation of Import Tariff, when there is a specific entry for 'Menthol Scented Supari' ....
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.... the issue was relating to whether crushing of betel nut and adding ingredients to it would involve 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 Chapter 21 of the ....
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....er Chapter 8 does not even arise, especially when this was neither the issue before the Apex Court nor the basis on which the decision was rendered. It is also trite law that a decision is only an 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, repor....
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....gulation]and the applicant or the Principal Commissioner or Commissioner, as the case may be, applies within seven days of receipt of a copy of the order or advance ruling and the Authority is satisfied that there was sufficient cause for his non-appearance when the application was called for hearing, the Authority may, after allowing the opposite party a reasonable opportunity of being heard, make an order setting aside the ex parte order or advance ruling and restore the application for fresh hearing." 5.2 The applicant M/s. Lujee International Company Ltd is proposing import of "Menthol Scented Supari" under Customs Tariff Item 2106 9030 and "Flavoured and Coated Illaichi" under Customs Tariff Item 2106 9099 of the First Schedule of the Customs Tariff Act, 1975 and produced statement of relevant facts having bearing on the question raised and statement containing applicant's interpretation of law. A. Menthol Scented Supari 5.3 The applicant has sought the classification of the "Menthol Scented Supari" under Chapter 21 on the following, among other grounds: i. The raw betelnut/ areca nut is classifiable under the HS code 0802 80. ii. Edible preparat....
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....he 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 out of the purview of Chapter 8. It is also worthwhile to mention that the processes mentioned in Chapter notes 3(a) and 3(b), as reproduced in para above, are not exhaustive but only illustrative as the expression used in the bracket is "for example". Hence, all such processes, as are done for preservation or stabilization of Betel Nut or for maintaining or improving their appearance, will be covered under the ambit of Chapter Note 3 of Chapter 8 and, hence the betel nut, having undergone such processes, will continue to be covered under Chapter 8. 5.8 From the processes detailed in para 5.1 above, to obtain menthol scented....
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....AAR/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/12/2021 M/s Zaveri Enterprises 15 CAAR/Del/Morchhadi Traders/ 07/ 2021 M/s Morchhadi Traders 16 CAAR/Del/Naman Agri/09/2021 M/s Naman Agri Impex Pvt Ltd 17 CAAR/Del/The Nut/10/2021 M/s The Nut Company 18 CAAR/Del/Tirupati/12/2021 M/s Shri Tirupati Balaji Overseas 19 CAAR/Del/Shreedhra/07/2022 M/s Shreedhra Agro LLP 5.12 Also, Hon'ble Delhi High Court's vide its order dated 01.03.2023 in case of M/s Great Nuts Impex Pvt. Ltd & M/s The Nut Co Vs Commissioner of Customs Delhi & Ors. (CUSAA17/2022 & CUSAA18/2022 respectively) is noteworthy to mention. The Hon'ble Hig....
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.... 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 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." 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. 5.14 As far as the General Rules for....
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....e and Service Tax Appellate Tribunal (CESTAT) ruling in M/s S.T. Enterprises Versus Commissioner of Customs (Chennai VII) [2021 (378) E.L.T. 514 (Tri. - Chennai)] is particularly instructive. This decision, which relied upon the seminal case of M/s Crane Betel Nut Powder Works vs Commissioner - 2007 (210) E.L.T. 171 (S.C.), established that: "Imported betel nuts 'whole' that have undergone processes such as de- husking, cleaning, boiling, and drying are to be classified under Tariff Item 0802 80 10 of the Customs Tariff Act, 1975, as betel nut 'whole'. Significantly, such processing does not warrant classification under Tariff Item 2106 90 30 as a betel nut product known as 'supari'." The legal weight of this CESTAT order was further reinforced by its subsequent affirmation by the Hon'ble Supreme Court [2021 (378) ELT A142 (Supreme Court)], thus establishing a binding precedent on the matter. This classification is in compliance with principle of specificity, aligns with the allowances for minor treatments in Chapter 8, and recognizes that the essential character of the product remains that of a nut rather than a prepared food item. B. Fla....
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....r 9 of the Customs Tariff Act deals specifically with spices, and Heading 0908 is particularly reserved for cardamoms. Within this, subheading 0908 31 relates to cardamoms neither crushed nor ground, while subheading 0908 3190 refers to other cardamoms that do not fit into specified categories. 5.21 As far as the characteristics of the product is concerned, the product under discussion consists of cardamom seeds, coated with various ingredients like silver leaf, saffron, sweeteners, and aromatic additives. However, the core ingredient remains cardamom, with these additional elements meant to enhance the flavor and appearance for use as a mouth freshener. 5.22 Looking at the competing Chapter 9 vs. Chapter 21, Chapter 9 covers spices, with cardamom being one of the items classified under this heading. Chapter 9 permits minor treatments of spices, such as coating and adding flavouring, without altering their essential characteristics as spices. The relevant explanatory notes confirm that mixtures of spices, even if subjected to additional processing (e.g., coating), can still be classified within Chapter 9 as long as they retain their essential spice characteristics. Whereas, C....