2022 (12) TMI 1413 - AAR - Customs

Classification of goods proposed to be imported - Roasted Areca Nuts - to be classifiable under CTH 2008 19 20 of the Customs Tariff Act, 1975 or not - HELD THAT - The processes mentioned in Chapter 8 include chilling, steaming, boiling, drying and provisionally preserving. It does not specifically include the process of roasting. Here it is important to understand the difference between the processes of drying and roasting. The terms, however, are not defined in the Customs Tariff Act, 1975. Therefore, these terms have to be understood in a commonly accepted sense. The Hon'ble Apex Court in the case of Alladi Venkateswarlu v. Government of Andhra Pradesh 1978 (2) TMI 184 - SUPREME COURT held that the commonly accepted sense of a term should prevail in construing the description of an article of food . In common trade parlance, drying is a method of food preservation by the removal of water. On the other hand, roasting means the excess or very high heat treatment that produces fundamental chemical and physical changes in the structure and composition of the goods, bringing about a charred physical appearance. Therefore, drying is a moisture removal process involving methods such as dehydration, evaporation, etc., whereas roasting is a severe heat treatment process. The impugned goods i.e. roasted betel nuts, find specific reference in the chapter 20 of the schedule I of the Customs Tariff Act 1975 as well as corresponding HSN Explanatory Note. It is important to pay attention to the fact that in the above explanatory note a process of roasting is not specifically mentioned as a process of preservation or stabilisation or a process to improve or maintain the appearance. This corroborates the finding that the process of roasting is not covered by Note 3 to Chapter 8 and hence these products, roasted betel nuts complete as well as cut are not classifiable under chapter 8 of the Tariff. The relevance of Chapter 21 is already discussed in para 5.1. Supplementary note 2 to Chapter 21 states 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. Betel nut product known as Supari is mentioned in Subheading 21069030. Heading 2106 covers food preparations not elsewhere specified or included. Those food preparations not specified or included elsewhere in the tariff being preparations for human consumption are to be classified under this heading. Therefore, it appears that it is a residuary entry in respect of edible food preparations. As a result, edible preparations shall be classified under this entry only if the same is not classifiable under any of the other specific entries for edible preparations. As the goods under consideration are already included in Heading 2008 of the Customs Tariff Act, 1975, they stand excluded from the scope of Chapter 21. Roasted Areca Nuts whole as well as cut - merit classification under Heading 2008 and specifically under subheading 2008 19 20 of the First Schedule of the Customs Tariff Act, 1975.

Summary

Issues Involved:
1. Classification of "Roasted Areca Nuts (Whole) and Roasted Areca Nuts Cut" under the Customs Tariff Act, 1975.
2. Applicability of Chapter 8, Chapter 20, and Chapter 21 of the Customs Tariff Act, 1975.
3. Relevance of previous case laws and rulings on the classification.
4. Examination of the processes involved in preparing roasted areca nuts.

Issue-wise
Detailed Analysis:

1. Classification of "Roasted Areca Nuts (Whole) and Roasted Areca Nuts Cut" under the Customs Tariff Act, 1975:
The applicant sought an advance ruling on the classification of roasted areca nuts, proposing that they should be classified under CTH 2008 19 20. The applicant argued that the process of roasting alters the physical and chemical characteristics of the nuts, making them suitable for immediate consumption and distinct from raw or dried areca nuts.

2. Applicability of Chapter 8, Chapter 20, and Chapter 21 of the Customs Tariff Act, 1975:
- Chapter 8: Covers edible fruits and nuts, including dried fruits and nuts. The jurisdictional Commissionerate argued that roasted areca nuts should be classified under Chapter 8, as the roasting process does not change the essential character of the nuts.
- Chapter 20: Covers preparations of vegetables, fruits, nuts, or other parts of plants. The ruling found that roasted areca nuts fall under this chapter because roasting is a process that prepares the nuts for immediate consumption, distinct from the processes mentioned in Chapter 8.
- Chapter 21: Covers miscellaneous edible preparations, including "betel nut product known as Supari." The ruling noted that Chapter 21 is a residuary entry and applies only if the product is not classifiable under any other specific entry. Since roasted areca nuts are classifiable under Chapter 20, they are excluded from Chapter 21.

3. Relevance of previous case laws and rulings on the classification:
The ruling examined several case laws, including M/S. Crane Betelnut Powder Works and various rulings by the Customs Authority for Advance Rulings. It was noted that the Supreme Court judgment in M/S Crane Betelnut Powder Works was rendered infructuous due to subsequent amendments. The ruling emphasized that none of the cited cases specifically dealt with roasted areca nuts, making their applicability limited.

4. Examination of the processes involved in preparing roasted areca nuts:
The applicant detailed the processes involved, including de-husking, drying, roasting at high temperatures, and cooling. The ruling acknowledged that these processes result in significant changes in the physical and chemical characteristics of the nuts, differentiating them from raw or dried areca nuts. The ruling also noted that roasted areca nuts are fit for immediate consumption and are marketed as such, supporting their classification under Chapter 20.

Conclusion:
The ruling concluded that roasted areca nuts (whole and cut) merit classification under Heading 2008 and specifically under subheading 2008 19 20 of the First Schedule of the Customs Tariff Act, 1975. This decision was based on the specific processes involved in roasting, the distinct characteristics of the final product, and the relevant legal framework, including HSN Explanatory Notes and General Rules of Interpretation.