2023 (3) TMI 80 - HC - Customs

Classification of the goods proposed to be imported - preparation of Betel Nuts known as Boiled Supari packed in consumer packing and bulk packing - to be classified under sub-heading 2106 90 30 in Chapter 21 of the First Schedule to the Customs Tariff Act or not - HELD THAT - The question of classification of the products in question is squarely covered by the decision of the Supreme Court in CRANE BETEL NUT POWDER WORKS VERSUS COMMR. OF CUS. C. EX. TIRUPATHI 2007 (3) TMI 6 - SUPREME COURT . Although the said decision was rendered in the context of the question whether the goods in question could be cleared under the Tariff heading in the entry 21 07 of the Central Excise Act 1944 which read as Betel nut powder known as Supari ; the said decision continues to be applicable because by virtue of the Supplementary Note 2 to Chapter 21 of the Customs Tariff the definition of the goods Betel nut product known as Supari is identical to the definition of Betel nut powder known as Supari . It is clear from a plain reading of the judgment in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise Tirupathi Anr. that the Supreme Court was of the view that the product in question sweetened betel nut powder did not fall within the definition of Betel nut powder known as Supari - Accordingly the Supreme Court held that the product in question is covered by sub-heading 0801 00 under Chapter 8 of the First Schedule of the Central Excise Tariff Act 1985. The Supreme Court s view that the products in question did not fall within the classification under Chapter 21 but under Chapter 8 of the First Schedule to the Central Excise Tariff Act 1985 would squarely cover the controversy in this case as well. Given the definition of the sub-heading Betel nut product known as Supari read in the context of the main title of Chapter 21 and sub-heading 0802 read in the context with the title of Chapter 8 of the Customs Tariff ( Edible fruits and nuts; peel of citrus fruit or melons ); it would not be apposite to classify the products in question as those covered under Chapter 21 of the Customs Tariff. Appeal dismissed.

Issues Involved:
1. Classification of "Boiled Supari" under the Customs Tariff Act, 1975.
2. Applicability of the Supreme Court's decision in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr.
3. Interpretation of Chapter 8 and Chapter 21 of the Customs Tariff.
4. Relevance of Note 3 to Chapter 8 and Supplementary Note 2 to Chapter 21 of the Customs Tariff.

Detailed Analysis:

1. Classification of "Boiled Supari" under the Customs Tariff Act, 1975:
The primary issue revolves around whether the various forms of "Boiled Supari" should be classified under Chapter 8 (heading 0802) as "Areca nuts" or under Chapter 21 (sub-heading 2106 90 30) as "Betel nut product known as 'Supari'". The appellants argued that their products, including API Supari, Chikni Supari, Unflavoured Supari, Flavoured Supari, and Boiled and Cut Supari, should be classified under Chapter 21 due to the distinct and irreversible processes they undergo, which transform them into market-recognized products distinct from raw betel nuts.

2. Applicability of the Supreme Court's Decision in Crane Betel Nut Powder Works v. Commissioner of Customs and Excise, Tirupathi & Anr.:
The court held that the Supreme Court's decision in Crane Betel Nut Powder Works is applicable. The Supreme Court had concluded that the process of cutting betel nuts and adding ingredients did not transform the betel nuts into a new product; hence, they remained classified under Chapter 8. The court found that this reasoning applies to the present case as well, despite the slight difference in the language of the tariff headings.

3. Interpretation of Chapter 8 and Chapter 21 of the Customs Tariff:
Chapter 8 covers "Edible fruit and nuts; peel of citrus fruit or melons," while Chapter 21 covers "Miscellaneous Edible preparations." The court noted that the processes described by the appellants for preparing various types of supari (e.g., boiling, drying, polishing) are essentially for cleaning, preservation, and enhancing appearance, which fall under the scope of Chapter 8. The court emphasized that the products in question do not lose their identity as betel nuts and thus should be classified under Chapter 8.

4. Relevance of Note 3 to Chapter 8 and Supplementary Note 2 to Chapter 21 of the Customs Tariff:
The court referred to Note 3 of Chapter 8, which allows for certain processes like rehydration and preservation, provided the nuts retain their character. The CAAR had relied on this note to classify the supari under Chapter 8. Additionally, Supplementary Note 2 to Chapter 21 defines "betel nut product known as 'Supari'" as any preparation containing betel nuts but not lime, katha, or tobacco. The court found that this definition does not alter the classification under Chapter 8 because the products in question still retain their character as betel nuts.

Conclusion:
The court dismissed the appeals, affirming that the classification of the products in question falls under Chapter 8 of the Customs Tariff, not Chapter 21. The decision of the CAAR, which relied on the Supreme Court's ruling in Crane Betel Nut Powder Works, was upheld. The processes described for preparing the various types of supari were deemed insufficient to transform the betel nuts into a new product for classification under Chapter 21.

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