2023 (8) TMI 492 - HC - Customs

Challenge to the rulings of the Customs Authority for Advance Rulings - classification of roasted areca nut / betel nut (whole/cut/split) - merit classification under Customs Tariff Heading (CTH), 2008, more particularly, sub heading 2008 19 20 of the First Schedule to the Customs Tariff Act, 1975, or not?. HELD THAT - A perusal of the relevant entries under CTH 08, 20 and 21 would show that while CTH 08 is meant to cover areca nut whole, split, grounded including dried nuts subject to the process of drying which is by way of additional preservation or stabilization by moderate heat treatment, sulphuring, the addition of sorbic acid or potassium sorbate, Chapter 20 covers roasted nuts. Apparently, legislature has for the purpose of classification treated drying and roasting as processes which are distinct / different and importantly, relevant in determining whether the nuts would fall under CTH 0802 or under 2008. It may be useful to rely on the decision of the Hon ble Supreme Court in case of STERLING FOODS VERSUS STATE OF KARNATAKA AND ANOTHER 1986 (7) TMI 109 - SUPREME COURT wherein, while dealing with the question, whether prawns, shrimps and lobsters locally purchased for export after subject to the process of cutting their heads and tails, peeling, deveining, cleaning, freezing and exporting was eligible to claim the benefit as a sale in the course of export under sub section (3) to Section 5. It was found that the benefit ought to be extended as prawns / lobsters even after being subject to the above processes do not lose their identity, but commercially remain the same. Importantly, an argument was advanced on the basis of the entries in the Schedule to the Karnataka Act and the amendments made thereto particularly in relation to classification of Shrimps, Prawns and Lobsters to suggest that enumeration of Items in different entries in the Tariff Schedule is by itself indicative of the fact that they are commercially different. However, the said contention was rejected by the Hon'ble Supreme Court in Sterling Foods v. State of Karnataka. From a reading of the above judgment, it is clear that the Hon ble Supreme Court had held that the legislature while classifying shrimps, prawns and lobsters and treating it differently / separately from frozen shrimps, prawns lobsters by placing it under different entries, has unconcerned as to whether the two products are commercially same. This is, in view of the fact that legislature was competent to classify the products separately/differently even though they are commercially one and the same. Thus, the question of examining whether arecanut/betel nut and roasted areca nut are commercially the same or otherwise, is an enquiry which is alien in determining the classification which ought to be made on the basis of the Tariff entries. CTH 2008 19 20 is a special entry covering nuts subject to the process of roasting, when contrasted with CTH 08 02 90 which covers dried nuts. Having come to the conclusion that the classification of areca nut is made on the basis of the process which it is subject to with a distinction between dried and roasted nut being maintained, CTH 2008 19 20 which covers roasted nuts including areca nut is a specific entry when contrasted with the entries/ items covering nuts under CTH 08. It is well established that when a general law / entry and a special law/ entry dealing with same aspect are in question, the rule adopted and applied is one of harmonious construction, whereby the general law to the extent dealt with by the special law, would yield to the Special Law/Entry. This principle finds its origins in the Latin maxim of generaliaspecialibus non derogant i.e. general law yields to special law should they operate in the same field on same subject. CTH 20 08 is a specific entry insofar as it covers roasted nuts and would thus prevail over CTH 08, in view of the above settled rule that specific entry would prevail over general. This is yet another reason that the conclusion of the Advance Rulings Authority does not warrant interference. Relevance of the judgment in S T Enterprises 2021 (3) TMI 27 - CESTAT CHENNAI - HELD THAT - Having found that roasted areca / betel nuts ought to be classified under CTH 20, let us examine the order of the Tribunal in the case of ST Enterprises on which reliance was placed by the appellant to see, if it would have any relevance / bearing on the issue. Reliance was sought to be placed by the learned counsel for the Revenue on the decision of the Tribunal in the case of S.T.Enterprises which on being carried in Civil Appeals, which came to be dismissed, to submit that the goods imported viz., roasted areca nut/ betel nut continues to remain betel nut and thus classifiable under CTH 08 - It is found that reliance on the above decision to determine the classification of roasted betel / areca nut under the Customs Tariff Act is wholly misplaced. Relevance of judgment in the case of C rane Betel Nut Powder Works - HELD THAT - In Crane Betel Nut powder's case, there importantly, the question was whether the process of boiling and drying would constitute manufacture. However, in the instant case, the question is not as to whether the activity of roasting of betel nut would constitute manufacture, but whether in view of a separate entry for roasted betel nut, it is permissible to continue to classify the roasted betel nut under CTH 08 02 80 which covers fresh or dried areca nuts - it is found that when there is a specific entry for roasted nut and HSN Explanatory notes specifically include roasted betel nuts under Chapter 20, the same cannot be classified under Chapter 8. The question as to whether the process of roasting would constitute manufacture and whether a new product would emerge as a result of the above process are questions that are alien, while determining the classification in terms of the Customs Tariff Headings. In view of the same, the reliance on the judgment of the Hon ble Supreme Court in the said case is misplaced and irrelevant. It is thus concluded that (a) Roasting is a process treated to be distinct from the process of boiling and drying, in fixing the classification in respect of betel/areca nut under CTH. (b) Roasted betel/areca nut having been specifically classified under CTH 2008 19 20, the attempt to classify under CTH 08 02 80 would fall foul of the settled rule of construction that specific entry would prevail over general entry. (c) HSN explanatory notes is normally a safe guide in determining classification under CTH. Roasted areca / betel nut having been mentioned in CTH 2008 19 20 under HSN, the impugned Ruling is in consonance with HSN classification. (d) When there is a specific entry covering a product/commodity, the test of common parlance is irrelevant in determining classification. The finding of the Advance Rulings Authority stands affirmed - Appeal dismissed.

Summary

Issues Involved:
1. Classification of roasted areca/betel nuts under the Customs Tariff Act.
2. Applicability of the Harmonized System of Nomenclature (HSN) Explanatory Notes.
3. Relevance of previous judgments and Advance Rulings.

Summary:

Issue 1: Classification of Roasted Areca/Betel Nuts
The Revenue challenged the ruling of the Customs Authority for Advance Rulings (CAAR) classifying "roasted areca nut/betel nut (whole/cut/split)" under Customs Tariff Heading (CTH) 2008, subheading 2008 19 20, arguing it should fall under CTH 0802. The respondents argued that the roasting process alters the physical and chemical characteristics of the nuts, making them distinct from unprocessed nuts.

Issue 2: Applicability of HSN Explanatory Notes
The court emphasized the importance of the HSN Explanatory Notes, which classify roasted nuts under Chapter 20. The court cited several Supreme Court judgments affirming that HSN Explanatory Notes are a reliable guide for tariff classification. It was noted that roasted areca nuts are explicitly mentioned in Chapter 20 of the HSN, supporting the CAAR's ruling.

Issue 3: Relevance of Previous Judgments and Advance Rulings
The court examined the relevance of previous judgments, particularly the case of S.T. Enterprises and Crane Betel Nut Powder Works. It found that these cases did not address the classification of roasted nuts specifically and were therefore not applicable. The court also reviewed various Advance Rulings cited by the appellant, noting that they dealt with boiled or dried nuts, not roasted nuts, and thus did not affect the current classification issue.

Conclusion:
The court upheld the CAAR's classification of roasted areca/betel nuts under CTH 2008 19 20, emphasizing that:
- Roasting is distinct from other processes like boiling and drying.
- The specific entry for roasted nuts in Chapter 20 prevails over the general entry in Chapter 8.
- HSN Explanatory Notes support the classification under Chapter 20.
- Previous judgments and Advance Rulings cited by the appellant were not relevant to the issue at hand.

All Civil Miscellaneous Appeals were dismissed, and the CAAR's ruling was affirmed.