2023 (6) TMI 1011 - AAR - Customs

Classification of goods proposed to be imported - Processed API Betel-nut product known as Supari - Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split) - classifiable under Chapter heading 0802 80 or 2106 90 30? - HELD THAT - In this chapter, the entry 0802.80 refers to areca nuts, used chiefly as a masticatory. Thus the Explanatory Notes to Chapter-I indicate that chapter I covers nuts intended for human consumption (whether as presented or after processing); whether they are fresh, frozen (whether or not previously cooked by steaming or boiling in water) or dried (including dehydrated, evaporated or freeze-dried) and whether the nuts could also be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled. The processes to which the subject goods would be subjected to, as described in their submission, appear more of a process for additional preservation or stabilization and/or to improve or maintain their appearance only and they retain their original character. In this context the decision of the Hon'ble Calcutta High Court in the case of Killing Valley Tea Co. v/s Secretary to State 1920 (5) TMI 1 - CALCUTTA HIGH COURT is worth mentioning, wherein it was held that a tea leaf remains the same even after being subjected to mechanical processes like withering, crushing, roasting, fermenting etc. is a definite pointer to the principle that needs to be applied for classification in such matters. he observations of the Hon'ble Supreme Court in the case of M/S. Crane Betelnut Powder Works 2007 (3) TMI 6 - SUPREME COURT , that the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent etc. did not result in a new and distinct product having a different character and use also an extension of the same line of reasoning. However, after amendment by insertion of a note in chapter 21 of Central Excise Tariff these decisions are of no relevance at present in deciding classification matters under the Customs law. The claim of applicant that these processes are very crucial for changing the essential characteristics of raw tendered betel nuts with the resultant betel nut product which, as argued by the applicant, is chemically processed and is most appropriately classifiable under CTH 2106 90 30 falls flat solely due to the fact that these are carried out to preserve or to stabilize and/or to improve or maintain their appearance, and in fact they aid to retain the character of betel nut. In my opinion the applicant has failed to substantiate their claim that the subject goods are chemically processed. Notwithstanding the claim of the applicant to any chemical process discussed above it is observed that the resultant product remains the same betel nut may be with variation in arecoline and tannin contents. Due to this no preparation of betel nut has come in to existence requiring classification under chapter 21. Hence it is not found that the applicant's recourse to and reliance placed on the research paper as legally acceptable for deciding the classification of subject goods. HSN Explanatory Note under heading General to chapter 8 provides that fruit and nuts of this Chapter may be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled. Further, it is also provided that the addition of small quantities of sugar does not affect the classification of fruit in this Chapter.' Thus, the HSN explanatory notes to Section I indicate that chapter 8 covers nuts intended for human consumption (whether as presented or after processing); whether they are fresh, frozen (whether or not previously cooked by steaming or boiling in water) or dried (including dehydrated, evaporated or freeze-dried) and whether the nuts could also be whole, sliced, chopped, shredded, stoned, pulped, grated, peeled or shelled - it is thus concluded that the processes described by the applicant do not necessitate the subject goods to be moved from the purview of chapter 8 to bring under the ambit of chapter 21 for the purpose of classification. Thus, the subject goods placed before me for consideration, i.e., 1) Processed API Betel-nut product known as Supari and 2) Processed Betel-nuts unflavoured chemically processed Supari in small cut- pieces (not split) merit classification under chapter 8 of the Customs Tariff, and more appropriately, under the heading 0802, as under Processed API Betel-nut product known as SUPARI (Not Prepared) 0802 80 10. Processed Betel-nuts unflavoured chemically processed SUPARI in small cut pieces (Not split) 0802 80 90.

Summary

Issues Involved:
1. Classification of Processed API Betel-nut product known as Supari.
2. Classification of Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split).

Detailed Analysis:

Issue 1: Classification of Processed API Betel-nut product known as Supari

The applicant sought an advance ruling on the classification of Processed API Betel-nut product known as Supari. The applicant described the manufacturing process, which includes several stages such as collection, cleaning, boiling with areca nut extract, drying, and sorting. The applicant argued that these processes change the character of the original product and should classify it under CTH 2106 90 30.

The jurisdictional commissionerate, however, contended that the processes described are primarily for preservation or stabilization and do not change the essential character of the betel nut. They argued that the product should be classified under Chapter 8, specifically under CTH 0802 80 10, as the processes do not constitute a "preparation" as defined in Chapter 21.

The ruling noted that the processes described by the applicant are aimed at improving or maintaining the appearance and stability of the betel nuts, which aligns with the guidelines provided in Chapter 8 of the Customs Tariff Act. The ruling also referenced case laws, including the Supreme Court decision in M/S Crane Betel Nut Powder Works Vs CC & CE Tirupathi, which held that even after undergoing certain processes, the betel nut remained classified under Chapter 8.

Conclusion:
The Processed API Betel-nut product known as Supari is classified under CTH 0802 80 10.

Issue 2: Classification of Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split)

The applicant also sought an advance ruling on the classification of Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces. The process described includes collection, cleaning, soaking in chemicals, fermentation, drying, and cutting into small pieces. The applicant argued that these processes involve chemical treatments that change the characteristics of the betel nuts, thus meriting classification under CTH 2106 90 30.

The jurisdictional commissionerate argued that these processes are for preservation and stabilization and do not constitute a "preparation" under Chapter 21. They suggested classification under Chapter 8, specifically under CTH 0802 80 90.

The ruling examined the processes and found that they are primarily for preservation and stabilization, aimed at improving the quality and appearance of the betel nuts. The ruling referenced the same case laws and principles as in the first issue, concluding that the processes do not change the essential character of the betel nuts to warrant classification under Chapter 21.

Conclusion:
The Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split) is classified under CTH 0802 80 90.

Final Ruling:
1. Processed API Betel-nut product known as Supari: Classified under CTH 0802 80 10.
2. Processed Betel-nuts unflavoured chemically processed Supari in small cut-pieces (not split): Classified under CTH 0802 80 90.