2021 (5) TMI 1066 - AAR - Customs

Classification of goods proposed to be imported - API supari - Chikni supari - unflavoured supari - Boiled supari - to be classifiable under chapter 8 or chapter 21? - HELD THAT - In the instant case, betel nuts after 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. Speaking more generally, in view of the design of the Schedule to the CTA, HSN and plethora of judgements, besides common understanding and parlance, every irreversible process does not result in obtaining a new product with a distinct classification even at the eight or ten-digit level; and every process does not result in coming into being of a preparation of the raw material . The processes to which raw betel nuts have been subjected to obtain API supari, Chikni supari, unflavoured supari and boiled 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. Flavoured supari - whether the addition of special flavouring agents would render the betel nuts into preparations of betel nuts, classifiable under Chapter 21? - HELD THAT - The addition of flavouring 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. The conclusion that all the five goods placed before me for consideration, i.e., API supari, chikni supari, boiled supari, unflavoured supari, and flavoured 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 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.

Summary

Issues Involved:
1. Classification of various types of processed betel nut products.
2. Applicability of Notification No. 50/2017-Customs dated 30.06.2017 for exemption.

Detailed Analysis:

1. Classification of Various Types of Processed Betel Nut Products:
The applicant, M/S Naman Agri Impex Private Ltd., sought an advance ruling on whether their processed betel nut products (API supari, Chikni supari, Unflavoured supari, Flavoured supari, and Boiled supari) should be classified under Chapter 8 or Chapter 21 of the Customs Tariff.

Applicant's Argument:
The applicant argued that the processes involved in making these products (such as boiling, mixing with food starch, drying, polishing, and packaging) transform the raw betel nuts into preparations, thus meriting classification under Chapter 21, specifically sub-heading 21069030.

Authority's Analysis:
The Authority examined the processes involved in making the five products and referred to Chapter Note 3 of Chapter 8, which allows certain processes (e.g., boiling, drying, adding preservatives) without changing the essential character of the nuts. It was noted that these processes do not constitute substantial transformation into a preparation.

Precedents Considered:
The Authority referred to previous rulings by the erstwhile AAR, which classified similar products under Chapter 21. However, it was emphasized that these rulings did not adequately consider the implications of Chapter Note 3 to Chapter 8. The Authority also reviewed the Supreme Court judgment in the case of M/S Crane Betel Nut Powder Works, which held that processes like boiling and adding flavor do not change the essential character of betel nuts.

Conclusion:
The Authority concluded that the processes applied to the betel nuts (boiling, drying, adding starch, etc.) are covered by Chapter Note 3 to Chapter 8 and do not transform the nuts into preparations. Therefore, all five products (API supari, Chikni supari, Unflavoured supari, Flavoured supari, and Boiled supari) are classifiable under Chapter 8, specifically heading 0802.

2. Applicability of Notification No. 50/2017-Customs dated 30.06.2017:
The applicant also sought a ruling on whether the processed betel nut products qualify for exemption under Notification No. 50/2017-Customs.

Authority's Ruling:
Since the products were classified under Chapter 8 and not Chapter 21, the exemption under Notification No. 50/2017-Customs, which applies to products classified under sub-heading 21069030, is not applicable to the betel nut products in question.

Final Ruling:
The Authority ruled that the processed betel nut products (API supari, Chikni supari, Unflavoured supari, Flavoured supari, and Boiled supari) are classifiable under Chapter 8, heading 0802, and not under Chapter 21. Consequently, the exemption under Notification No. 50/2017-Customs is not applicable to these products.