2021 (11) TMI 1194 - AAR - Customs

Classification of goods - Various types of betel nut products (Supari) - Determination of whether the products fall under Chapter 8 or Chapter 21 of the Customs Tariff - seeking advance ruling u/s 28-14 - HELD THAT - The processes involved in obtaining Unfavoured Supari and Cutting Supari include multi-stage cutting, but no addition or mixing of any other substance. In the case of API supari and Chikni supari, the processes include mixing of food starch. In determining the classification of these four supari items, viz. Unfavoured Supari, Cutting Supari, API supari and Chikni supari , the basic question is whether the process of cutting or slicing, and mixing of food starch change the substantive character of the betel nuts and result in products that should appropriately be considered as preparations of betel nut and not betel nut, albeit with certain degree of processing. In case, it is considered that the said processes and mixing of food starch are substantive enough for the products to be considered as preparation of betel nut that would make them classifiable under Chapter 21 by virtue of Supplementary note 2 of Chapter 21. The appropriate guideline for determining the nature and impact of these processes or act of addition of food starch is found in Note 2 to Chapter 8 of the Customs Tariff Act. The said note prescribes that dried nuts of this Chapter may be partially rehydrated, or treated for the following purpose (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. Guided by the letter and spirit of the said Chapter Note, I find that the processes and mixing of food starch that the said four supari have been subjected to fall in the category of processes carried out on the same for cleaning, preserving and making them more attractive to certain tastes/ preferences. More specifically, these supari items retain the essential character of dried nuts. The last betel nut product included in the application is flavoured supari. In obtaining this product, in addition to various processes, betel nuts are subjected to flavouring in large size automatic blenders with flavouring materials like spices/or mulethi etc., are mixed in automatic blenders with outsourced liquid flavours such as perfumes etc. In deciding the classification of flavoured supari, in addition to the scope of aforesaid Note 2 to Chapter 8 and Supplementary Note 2 to Chapter 21 (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, menthol), I need to also take into account the implications of the judgment of the Hon'ble Supreme Court of India in the case of M/S Crane Betel Nut Powder Works, 2007 (3) TMI 6 - SUPREME COURT and decision of CESTAT, Chennai in the case Azam Laminators Pvt. Ltd. 2019 (3) TMI 782 - CESTAT CHENNAI relying, inter alia, on the M/s Crane Betel Nut case. Thus, The classification of whole boiled supari remains under sub-heading 0802 80 10 as per the CESTAT, Chennai ruling. The remaining five betel nut products are classified under Chapter 8, sub-heading 0802 80, and not under Chapter 21, sub-heading 2106 90 30.

Summary

Issues Involved:
1. Classification of various types of betel nut products under the Customs Tariff Act.

Summary:

1. Classification of Whole Boiled Supari:
The applicant sought to classify various betel nut products, including whole boiled supari. The Hon'ble CESTAT, Chennai has already ruled that whole boiled supari is classifiable under sub-heading 0802 80 10. Therefore, by virtue of proviso 1 (b) to section 28-1 (2) of the Customs Act, this matter is disallowed by the Authority.

2. Classification of Unflavoured Supari and Cutting Supari:
The processes for Unflavoured Supari and Cutting Supari include multi-stage cutting without any addition or mixing of other substances. The Authority determined that these processes do not change the substantive character of the betel nuts and thus, these products retain the essential character of dried nuts. Consequently, they are classifiable under Chapter 08, sub-heading 0802 80.

3. Classification of API Supari and Chikni Supari:
API Supari and Chikni Supari involve mixing food starch in addition to other processes. The Authority concluded that the mixing of food starch and the processes involved are not substantive enough to consider these products as "preparations of betel nuts." Therefore, these products are also classifiable under Chapter 08, sub-heading 0802 80.

4. Classification of Flavoured Supari:
Flavoured Supari undergoes additional processes including flavouring with spices, mulethi, and perfumes. The Authority considered the implications of the Hon'ble Supreme Court's judgment in M/S Crane Betel Nut Powder Works and the decision of CESTAT, Chennai in Azam Laminators Pvt. Ltd. The Authority ruled that the processes do not result in a new product, and thus, Flavoured Supari retains the character of dried nuts. Therefore, it is classifiable under Chapter 08, sub-heading 0802 80.

Conclusion:
The Authority ruled that except for whole boiled supari, which is already classified under sub-heading 0802 80 10, the remaining betel nut products (Unflavoured Supari, Cutting Supari, API Supari, Chikni Supari, and Flavoured Supari) are classifiable under Chapter 08, sub-heading 0802 80. They do not qualify as "preparations of betel nuts" under Chapter 21, sub-heading 2106 90 30.