2024 (4) TMI 85 - HC - Customs

Classification of imported goods - Menthol Scented Supari - to be classified under Chapter 21 as a product of betel nut known as Supari or under Chapter 8 as just areca nut? - HELD THAT - Firstly, vide Finance (No.2) Act, 2009 dated 19th August, 2009, there has been an insertion of Note 6 in Chapter 21, which specifically relates to Tariff Item 2106 90 30 relating to supari and stating that the process of adding or mixing cardamom, copra, menthol, spices, sweetening agents or any such ingredients other than lime, katha (catechu) or tobacco to betel nut, in any form, shall not amount to manufacture . However, this amendment was only under the Central Excise Tariff Act and not the Customs Tariff Act. Secondly, w.e.f. 1.7.2017, the GST Act was introduced and the concept of taxation itself has undergone a change from manufacture to supply . The Supplementary Note 2 in Chapter 21 of CGST Tariff is also verbatim the same as Supplementary Note 2 under Chapter 21 of the Customs Tariff Act, 1975. This only exemplifies the intention of the legislature to have always treated supari as a special entry and not as a betel nut under the general entry of nuts . There are force in the submission of the Learned Counsel for the Appellant that the Customs Tariff Act still continues to employ the same phraseology that was available under the unamended Central Excise Tariff Act and that too when the Apex Court had dealt with the same issue, the ratio laid down by the Apex Court in CRANE BETEL NUT POWDER WORKS VERSUS COMMR. OF CUS. C. EX., TIRUPATHI 2007 (3) TMI 6 - SUPREME COURT case would still hold the field and apply to the case on hand, it cannot be accepted that the said limb of argument, in view of our categorical finding that there being a specific entry for Supari under Chapter 21 and it would take precedence over the general entry under Chapter 8, the question of applying the ratio laid down by the Apex Court would not even arise for the simple reason that the issue on hand is only revolving around classification of Supari under Chapter 8 or Chapter 21 and the facts of the case before the Apex Court was entirely different and the issue was whether process involved in manufacture of sweetened betel nut pieces would result in a totally new product or not. Under the Customs Tariff Act, the question of manufacture loses its relevance since the Act deals only with the tariff applicable to the goods or products imported from outside the country, in an as is where is basis, or rather the product as imported in whatever form is the basis for levy of Customs Tariff. Thus, the judgment of the Hon'ble Supreme Court in Crane Betel Nut Powder Work's case cannot be said to be a bar U/s. 28(i) of the Customs Act. The findings of the CAAR are just and proper, applying the legal position in a proper perspective. The same does not warrant interference in appeal. There are no irregularity in the Advance Ruling issued by the Authority and the same is not hit by Clause B of sub-section 2 of Section 28-I of the Customs Act, 1962 as not being covered by earlier rulings on the same subject matter, by the Appellate Tribunal or Court. Appeal dismissed.

Summary

Issues Involved:
1. Classification of 'Menthol Scented Supari' under the Customs Tariff.
2. Applicability of previous rulings and statutory provisions.
3. Interpretation of Chapter 8 and Chapter 21 of the Customs Tariff Act.
4. Relevance of HSN Notes and General Rules for Interpretation of Import Tariff.
5. Impact of amendments and GST on classification.

Summary:

1. Classification of 'Menthol Scented Supari' under the Customs Tariff:
The primary issue was whether 'Menthol Scented Supari' should be classified under Chapter 21 as a product of betel nut known as 'Supari' or under Chapter 8 as just 'areca nut'. The Customs Authority for Advance Ruling (CAAR) classified it under Chapter 21, which was challenged by the Revenue.

2. Applicability of Previous Rulings and Statutory Provisions:
The Revenue argued that the CAAR should not have entertained the application for an advance ruling due to a statutory prohibition u/s 28-I(2)(B) of the Customs Act, 1962, as the subject matter had already been decided by the Appellate Tribunal or any Court. They relied on the Apex Court decision in Crane Betel Nut Powder vs. Commissioner of Customs and Central Excise, which classified similar products under Chapter 8.

3. Interpretation of Chapter 8 and Chapter 21 of the Customs Tariff Act:
The Court noted that Chapter 8 deals with 'other nuts, fresh or dried,' while Chapter 21 deals with 'Food preparations not elsewhere specified or included.' Supplementary Note 2 to Chapter 21 specifically includes 'betel nut product known as Supari,' which does not contain lime, katha (catechu), or tobacco but may contain ingredients like menthol.

4. Relevance of HSN Notes and General Rules for Interpretation of Import Tariff:
The Court found that the HSN Notes for Chapter 8, which mention that the addition of small quantities of sugar does not affect the classification of fruit, were not applicable to nuts. The General Rules for Interpretation of Import Tariff were applied, and it was determined that the specific entry for 'Menthol Scented Supari' under Chapter 21 would prevail over the general description under Chapter 8.

5. Impact of Amendments and GST on Classification:
The Court acknowledged that the Finance (No.2) Act, 2009, and the introduction of GST in 2017 had changed the tax regime, making the concept of 'manufacture' less relevant. The Supplementary Note 2 under Chapter 21 of the CGST Tariff, identical to the Customs Tariff Act, indicated legislative intent to classify 'Supari' under Chapter 21.

Conclusion:
The Court held that 'Menthol Scented Supari' should be classified under Chapter 21 of the Customs Tariff Act, 1975, as per Supplementary Note 2, and dismissed the appeal. The CAAR's ruling was found to be just and proper, not warranting interference. The Civil Miscellaneous Appeal was dismissed, and the connected civil miscellaneous petitions were closed.