2022 (1) TMI 621 - AAR - Customs

Classification of import goods - preparation of betel nut commonly known as Supari - API supari, Chikni supari, unflavoured supari, boiled supari and boiled cut supari together - whether or not containing added ingredients such as food starch spices, mulethi. menthol (flavours), perfume etc. - not containing lime or katha (catechu) or tobacco - goods classifiable under Chapter/Heading 2106 90 30 as Food Preparation or not - HELD THAT - It is admitted that boiling is an irreversible process, a boiled betel nut would be distinct from unboiled betel nut, and a boiled betel nut cannot be unboiled in reverse. However, it is equally obvious that boiling 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 judgments, 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 irreversible 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, 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 goods 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 - In a recent judgment of the CESTAT, Chennai, in the case of S.T. Enterprises 2021 (3) TMI 27 - CESTAT CHENNAI , the Hon ble Tribunal has noticed that the question is whether by mere boiling and drying whole betel nut it would merit classification under 2106 90 30 and observed that it is needless to say that the earlier decision of the Authority of Advance Rulings are binding and applicable to the parties to the litigation only. The Hon ble Tribunal has also observed that since the imported goods are betel nuts whole, these would merit classification under Chapter 8. It is concluded that all the six goods placed before me for consideration, i.e. API supari, chikni supari, unflavoured supari, flavoured supari, boiled supari, boiled cut supari merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the Heading 0802 - the said six goods are not classifiable under sub-heading 2106 90 30, as contended by the applicant, since they have not attained the character of preparations of betel nut, which is sine qua non for a goods to be so considered.

Summary

Issues Involved:
1. Validity of the application for advance ruling.
2. Classification of six different types of Supari (betel nut preparations).

Detailed Analysis:

1. Validity of the Application for Advance Ruling:
The application filed by M/s. Great Nuts Impex Private Limited on 23-9-2020 was initially processed by the Advance Ruling Authority (AAR). However, due to the establishment of the Customs Authority for Advance Rulings (CAAR) on 4-1-2021, the application was transferred to CAAR, New Delhi. The application was deemed time-barred under Section 28-I(6) of the Customs Act, 1962. Nevertheless, the applicant was given an opportunity to affirm the validity of their declarations or resubmit the application under the new CAAR Regulations, 2021. The applicant affirmed the declarations on 23-2-2021, which was taken as the relevant date for processing the application.

2. Classification of Six Different Types of Supari:
The primary issue revolves around the classification of six types of Supari—API Supari, Chikni Supari, Unflavoured Supari, Flavoured Supari, Boiled Supari, and Boiled & Cut Supari. The applicant contended that these items should be classified under Chapter 21, specifically under Heading 2106 90 30 as "Food Preparation." The applicant argued that the processes involved in preparing these items, including boiling, slicing, drying, and adding ingredients like food starch and flavors, transformed them into preparations of betel nuts.

The concerned Principal Commissioners of Customs provided comments suggesting that the goods should be classified under Chapter 8, specifically under Heading 0802, as the processes involved were primarily for preservation and improving appearance, which do not change the essential character of the betel nuts.

Detailed Findings:
- API Supari, Chikni Supari, Unflavoured Supari, Boiled Supari, Boiled & Cut Supari:
The processes involved in these types of Supari include cleaning, boiling, drying, slicing, and adding food starch. These processes are covered under Chapter Note 3 to Chapter 8, which allows for such treatments as long as the nuts retain their essential character. The ruling concluded that these processes do not transform the betel nuts into a new product or preparation of betel nuts. Therefore, these items should be classified under Chapter 8, Heading 0802.

- Flavoured Supari:
The addition of flavoring agents to betel nuts was examined in light of the Supreme Court judgment in the case of M/s. Crane Betel Nut Powder Works and the CESTAT, Chennai decision in M/s. Azam Laminators Pvt. Ltd. These judgments indicated that the addition of flavoring agents does not change the essential character of the betel nuts. Therefore, Flavoured Supari also does not qualify as a preparation of betel nuts and should be classified under Chapter 8, Heading 0802.

Conclusion:
All six types of Supari—API Supari, Chikni Supari, Unflavoured Supari, Flavoured Supari, Boiled Supari, and Boiled & Cut Supari—are to be classified under Chapter 8, Heading 0802 of the Customs Tariff Act, 1975. The processes involved do not materially change the essential character of the betel nuts, and therefore, they do not meet the criteria for classification under Chapter 21 as preparations of betel nuts. The ruling aligns with the Supreme Court's decision in M/s. Crane Betel Nut Powder Works and the CESTAT, Chennai's decision in the case of S.T. Enterprises.