2024 (3) TMI 807 - AAR - Customs

Classification of goods intended to be imported - API Supari - Chikni Supari - Unflavoured Supari - Flavoured Supari - Boiled Supari - classifiable under Chapter/Heading 2106 90 30 as food preparation or under Chapter Heading 0802 80 90 or any other sub-heading of 0802 80 as areca nut? - HELD THAT - In the instant case, betel nuts after being boiled are dried and this fact per se would not exclude the end-products from the scope of dried nuts . Further, boiling or mere addition of certain additives for the purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut - the processes to which raw betel nuts have been subjected to obtain API Supari Chikni Supari, Unflavoured Supari, Flavoured Supari and Boiled Supari are squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN. 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 - HELD THAT - The question to be answered is whether the addition of special flavouring agents would render the betel nuts into preparations of betel nuts, classifiable under Chapter 21. In this regard, the judgment of the Hon ble Supreme Court of India in the case of M/s. Crane Betel Nut Powder Works 2007 (3) TMI 6 - SUPREME COURT and of the CESTAT, Chennai in the case of M/s. Azam Laminators Pvt. Ltd. 2019 (3) TMI 782 - CESTAT CHENNAI where scented betel nut was being manufactured by cracking of dried betel nut into small pieces, and thereafter, gently heating it with addition of vanaspati oil, sweetening and flavouring agents and marketed in small pouches as Nizam Pakku (in Tamil)/Betel Nut (in English), the Hon ble CESTAT held the resultant product classifiable under sub-heading 0802 90 19 of Central Excise Tariff and not under 2106 90 30 as supari for period after 7-7-2009 are relevant. Put simply, these decisions clearly imply that addition of flavouring agents do not change the character of the goods, meaning in the present case betel nut would continue to remain betel nut and not become preparation of betel nut. All the five goods placed before me for consideration, i.e., API Supari, Chikni Supari, Boiled Supari, Unflavoured supari, and Flavoured supari, merit classification under Chapter 8 of the First Schedule to the Customs Tariff Act, and more precisely, under the sub-heading 0802 80. This is so in view of the fact that the processes to which raw green fresh betel nuts have been subjected to obtain the said five goods are squarely in the nature of processes mentioned in Note 3 to Chapter 8, and have not materially changed the essential character of betel nuts. Further, the said five goods are not classifiable under sub-heading 2106 90 30, 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. Classification of imported betel nut preparations under the Customs Tariff Act, 1975.
2. Determination of whether the processed betel nuts qualify as "preparation of betel nut" under Chapter 21 or remain classified under Chapter 8.

Summary:

Issue 1: Classification of imported betel nut preparations under the Customs Tariff Act, 1975
The applicant, M/s. Shreehari Ananta Overseas Private Limited, proposed to import various types of processed betel nuts, namely API Supari, Chikni Supari, Unflavoured Supari, Flavoured Supari, and Boiled Supari. They sought an advance ruling on the classification of these goods under the Customs Tariff Act, 1975. The applicant argued that these processed betel nuts should be classified under Chapter Heading 2106 90 30 as food preparations, rather than under Chapter Heading 0802 80 90 as areca nut.

Issue 2: Determination of whether the processed betel nuts qualify as "preparation of betel nut" under Chapter 21 or remain classified under Chapter 8
The applicant described the processes involved in preparing the betel nuts, which included cleaning, boiling, drying, polishing, and packaging. They contended that these processes did not alter the essential character of the betel nuts, and thus, the products should not be classified as "preparation of betel nut" under Chapter 21. Instead, they should remain classified under Chapter 8, specifically sub-heading 0802 80.

The Authority for Advance Rulings (AAR) examined the processes and the nature of the products. They referred to Chapter Note 3 to Chapter 8 and the Harmonized Commodity Description and Coding System (HSN) guidelines, which state that processes like cleaning, boiling, drying, and adding minor ingredients do not change the essential character of the betel nuts. The AAR also considered relevant judgments, including the Supreme Court ruling in the case of Crane Betel Nut Powder Works, which supported the classification of processed betel nuts under Chapter 8.

Conclusion:
The AAR concluded that the processes to which the raw betel nuts were subjected did not materially change their essential character. Therefore, the five products'API Supari, Chikni Supari, Unflavoured Supari, Flavoured Supari, and Boiled Supari'should be classified under Chapter 8 of the Customs Tariff Act, specifically under sub-heading 0802 80. They do not qualify as "preparation of betel nut" under Chapter 21, as they have not attained the character required for such classification. The ruling was made accordingly.