2021 (3) TMI 27 - AT - Customs

Classification of imported goods - betel nut (Areca-nuts) - classified under CTH 21069030 or under CTH 08028010? - prohibited goods or not - According to appellants the raw betel nut obtained from tree has been subjected to boiling and made ready for human consumption - HELD THAT - The betel nuts which are whole nuts and classifiable under CTH 08028010 are prohibited for import if the CIF value of the goods is lesser than ₹ 251/- per kg. The declared quantity of the goods in appeal filed by Ayush Overseas is 79,520 tons valued at ₹ 89,63,892/- @ ₹ 112.75 per kg. Thus, if the classification is under Chapter 8, the import of these nuts would be against the provisions of law. It is not the case of the appellants that the betel nuts are not whole . In other words, appellants do not have a case that the imported goods are broken or crushed betel nut. They have imported betel nut in the whole form and only contention is that nuts have been subjected to certain processes of manufacture and therefore would fall out of Chapter 8. Though several stages/ process are claimed to be done in the write up given by supplier, during the argument the process undertaken was mainly confined to boiling in water and drying in sun light. Even if some stage of drying or rehydrating or treatment is done for preservation / stabilization or maintaining the appearance, as long as the nuts retain the character of dried nuts, they fall under Chapter 8. The counsel for appellants had placed before us samples of dried whole betel nut (without husks) as well as sample of the imported goods. We were able to see that the imported goods are also whole but more dried. It can be seen that CTH 21069030 takes in the items betel nut product known as suprai . To be more clear what is described therein is betel nut product and not betel nut whole as seen in Chapter 8. Chapter Note 2 of Chapter 21 also speaks about betel nut product and not betel nut whole . As per Chapter Note 2 of Chapter 21 betel nut product means any preparation containing betel nut, but not containing lime, katha and tobacco. It may or may not contain cardamom, copra, or menthol. The appellants do not have a case that their goods contain cardamom, copra or menthol or any additives. Counsel for appellants has made much effort to contend that after boiling though whole the betel nut becomes betel nut product . Since betel nut has retained its character of being whole and it does not contain any other ingredients such as cardamom, copra or menthol, it cannot be said that impugned goods are preparations containing betel nut or betel nut product/supari so as to fall under tariff heading 21069030. Hon ble Supreme Court in the case of Crane Betel Nut Powder Works Vs CC CE Tirupathi 2007 (3) TMI 6 - SUPREME COURT . The facts of the case before Hon ble Apex Court was that the assessee was marketing betel nuts after cutting into different sizes and adding essential / non-essential oils, menthol, sweetening agents etc. The assessee classified the items under Chapter 21 and cleared by paying excise duty. Later, they revised classification to be under Chapter 8 taking the view that crushing betel nuts and adding the above ingredients did not amount to manufacture . The Hon ble Apex Court reversed the Tribunal decision to hold that the said process would not amount to manufacture . The process involving manufacture does not always result in the creation of a new product and the classification was held to be under Chapter 8. Since the import goods are betel nuts whole , these would merit classification under Chapter 8 and specifically under Chapter 08028010 as classified by the department. We cannot refrain from stating that the Commissioner (Appeals) has made detailed discussion of facts and the law and arrived at the correct classification. Appeal dismissed - decided against appellant.

Issues Involved:

1. Classification of imported betel nuts.
2. Applicability of Chapter 8 vs. Chapter 21 of the Customs Tariff Act.
3. Validity of the Chemical Examiner's report.
4. Relevance of previous judicial decisions and advance rulings.
5. Impact of processing on the classification of betel nuts.

Issue-Wise Detailed Analysis:

1. Classification of Imported Betel Nuts:

The primary issue in these appeals is whether the imported betel nuts should be classified under CTH 21069030, as claimed by the appellants, or under CTH 08028010, as held by the department. The appellants argued that the betel nuts, after undergoing processes like boiling and drying, should be classified as a "betel nut product known as supari" under CTH 21069030. However, the department and the Commissioner (Appeals) classified the goods under CTH 08028010, as they were still considered "whole" betel nuts.

2. Applicability of Chapter 8 vs. Chapter 21 of the Customs Tariff Act:

The Tribunal examined the competing classifications under the Customs Tariff Act. Chapter 8 covers "Edible fruit and nuts; peel of citrus fruit or melons," while Chapter 21 covers "Miscellaneous edible preparations." The Tribunal noted that Chapter Note 3 to Chapter 8 allows dried nuts to be partially rehydrated or treated for preservation or appearance, provided they retain the character of dried nuts. The Tribunal concluded that the imported betel nuts, even after boiling and drying, retained their character as "whole" nuts and thus fell under Chapter 8.

3. Validity of the Chemical Examiner's Report:

The appellants challenged the Chemical Examiner's report, which stated that the sample received was in the form of whole betel nuts and not a preparation, thus classifying it under Chapter 8. The Tribunal held that the Chemical Examiner's role is limited to providing a factual report on the sample's physical and chemical properties, not on its classification. However, the Tribunal found no evidence supporting the appellants' claim that the betel nuts had undergone significant processing to change their classification.

4. Relevance of Previous Judicial Decisions and Advance Rulings:

The appellants relied on the Supreme Court's decision in M/s Crane Betel Nut Powder Works and several advance rulings to support their classification under Chapter 21. The Tribunal noted that the Supreme Court had previously held that processed betel nuts remained classified under Chapter 8. The Tribunal also acknowledged that advance rulings are binding only on the parties involved and not on other cases. The Tribunal found that the processes described in the advance rulings were more complex than those claimed by the appellants in this case.

5. Impact of Processing on the Classification of Betel Nuts:

The Tribunal examined whether the processes of boiling and drying the betel nuts were sufficient to change their classification from Chapter 8 to Chapter 21. The Tribunal concluded that these processes did not alter the essential character of the betel nuts as "whole" nuts. The Tribunal emphasized that even after boiling and drying, the betel nuts retained their character as dried nuts, thus falling under Chapter 8.

Conclusion:

The Tribunal dismissed the appeals, upholding the classification of the imported betel nuts under CTH 08028010 as "whole" betel nuts. The Tribunal found that the processes claimed by the appellants did not change the essential character of the betel nuts, and thus, they did not merit classification under CTH 21069030. The Tribunal also noted that the Commissioner (Appeals) had made a detailed and correct analysis of the facts and the law.

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