2021 (10) TMI 1397 - AAR - Customs

Classification of imported goods - API Supari - Chikni Supari - Unflavored Supari - Flavored Supari - Boiled Supari - Boiled Cut Supari - classifiable under heading 0802 90 00 or under heading 2106 90 30? - HELD THAT - The five goods, namely API supari, Chikni supari. unflavored supari, boiled supari and boiled cut supari together. In these cases, one set of processes are found to be intended for cleaning; the second set for enhancing preservation; and third set for enhancing appearance or presentation, in addition to cutting. Addition of starch would be included under such process. These processes are clearly covered by the Chapter Note to Chapter 8 as well as the HSN, it is found that in the instant case, betel nuts atter being boiled are dried and this fact per se would not exclude the end-products from the scope of dried nuts . Further, it is equally obvious to me that boiling 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. The processes to which raw betel nuts have been subjected to obtain API supari, Chikni supari, unflavored supari, boiled supari and boiled cut supari are squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Note. Therefore, at the end of the said processes, the betel nuts retain the character of betel nut and do not qualify to be considered as preparations of betel nut, which is sine qua non for a good to be classifiable under Chapter 21. Flavored supari - whether the addition of special flavoring agents would render the betel nuts into preparations of betel nuts, classifiable under Chapter 21? - HELD THAT - The judgment of the Hon'ble Supreme Court of India in the case of CRANE BETEL NUT POWDER WORKS VERSUS COMMR. OF CUS. C. EX., TIRUPATHI 2007 (3) TMI 6 - SUPREME COURT has held 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 - Put simply, this decisions clearly imply that addition of flavoring agents do not change the character of the good, meaning in the present case betel nut would continue to remain betel nut and not become preparation of betel nut. Thus, all the six goods placed before me for consideration, i.e., API supari, Chikni supari, boiled supari, boiled cut supari, unflavored supari, and flavored supari, merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the heading 0802. This is so in view of the fact that the processes to which raw green fresh betel nuts have been subjected to obtain the said six 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 - the said six goods are not classifiable under sub-heading 2106 9030, as contended by the applicant, since they have not attained the character of preparations of betel nut, which is sine qua non fora good to be so considered.

Summary

Issues Involved:
1. Classification of six types of betel nut products.
2. Interpretation of Chapter 8 and Chapter 21 of the Customs Tariff Act.
3. Applicability of Supplementary Note 2 to Chapter 21.
4. Consideration of previous rulings and judgments.

Issue-Wise Detailed Analysis:

1. Classification of Six Types of Betel Nut Products:
The applicant, M/s Vaibhav Enterprises, sought an advance ruling on the classification of six betel nut products: API Supari, Chikni Supari, Unflavored Supari, Flavored Supari, Boiled Supari, and Boiled & Cut Supari. The processes involved in the production of these products include removing impurities, boiling, mixing with food starch, drying, polishing, and packaging.

2. Interpretation of Chapter 8 and Chapter 21 of the Customs Tariff Act:
The applicant argued that the products, after undergoing significant processing, should be classified under Chapter 21, specifically under sub-heading 2106 90 30, as they become "preparations of betel nut." Chapter 8 covers edible fruits and nuts, including betel nuts, and allows processes like preservation and appearance improvement without changing the classification. Chapter 21 includes miscellaneous edible preparations, and Supplementary Note 2 defines "betel nut product known as Supari" as any preparation containing betel nuts but not containing lime, katha, or tobacco.

3. Applicability of Supplementary Note 2 to Chapter 21:
The applicant relied on Supplementary Note 2 of Chapter 21, which states that "betel nut product known as Supari" means any preparation containing betel nuts but not containing lime, katha, or tobacco. The applicant contended that the processed betel nut products fall under this definition and should be classified under Chapter 21.

4. Consideration of Previous Rulings and Judgments:
The applicant cited previous rulings by the erstwhile Authority for Advance Rulings (AAR) in the cases of M/s Excellent Betel Nut Products Pvt. Ltd., M/s Isha Exim, and M/s Oliya Steel Private Limited, where similar products were classified under sub-heading 2106 90 30. However, the Customs Authority for Advance Rulings (CAAR) noted that these rulings did not consider the implications of Chapter Note 3 to Chapter 8 and the processes involved.

In the case of M/s Crane Betel Nut Powder Works, the Supreme Court held that mere addition of flavoring agents does not change the character of betel nuts. Similarly, the CESTAT, Chennai, in the case of M/s Azam Laminators Pvt. Ltd., classified flavored betel nuts under Chapter 8, not Chapter 21.

Conclusion:
The CAAR concluded that the processes applied to the raw betel nuts for API Supari, Chikni Supari, Unflavored Supari, Boiled Supari, and Boiled & Cut Supari are intended for cleaning, preservation, and appearance enhancement. These processes do not result in a "preparation of betel nut" as required for classification under Chapter 21. Therefore, these products retain the character of betel nuts and are classifiable under Chapter 8, specifically heading 0802.

For Flavored Supari, the addition of flavoring agents does not change the essential character of the betel nuts. Based on the Supreme Court's judgment and CESTAT's ruling, flavored betel nuts remain classified under Chapter 8.

Final Ruling:
All six products—API Supari, Chikni Supari, Unflavored Supari, Boiled Supari, Boiled & Cut Supari, and Flavored Supari—are classified under Chapter 8 of the First Schedule to the Customs Tariff Act, heading 0802. They do not qualify as "preparations of betel nut" under sub-heading 2106 90 30.