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2023 (6) TMI 906 - AAR - CustomsClassification of goods intended to be imported - Menthol Scented Sweet Supari - Flavoured and coated Illaichi - classifiable under CTH 0802 or under CTH 2106 - HELD THAT - By virtue of application of Section 3(7) of the Customs Tariff Act, 1975 any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent as is leviable under Section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) or sub-section (8A), as the case may be. Based on the contents of the C.B.I. C. Circular No. 163/19/2021-GST, dated 6th October, 2021, it is clear that the provision of Section 3(7) of the Customs Tariff Act, 1975 applies to scented supari classifiable under CTH 2106 90 30 and flavoured and coated illaichi classifiable under CTH 2106.90.99. In the instant case menthol scented sweet supari does not contain lime, katha (catechu) and tobacco. It will specifically contain menthol. Due to carrying out of such processes this product is not classifiable under Chapter 8 of the Customs Tariff Act, 1975. On the background of contending classifications, relevant chapter notes supplementary notes, C.B.I.C. Circular, explanations in the IGST Rate Notification amended from time to time, and the Section 3(7) of Customs Tariff Act, 1975 instant product - betel nut product known as supari - menthol scented and sweet - is more appropriately classifiable as a betel nut preparation under Chapter 21 i.e., CTH 2106 90 30 than in any of the headings under Chapter 8. C.B.I. C. circular legally supports this view. There cannot be a situation where same product is subjected to levy of basic customs duty under one CTH and levy of IGST under another CTH of the Customs Tariff Act, 1975. Hence, in view of Supplementary Note 2 of Chapter 21 of Schedule 1 of the Customs Tariff Act, 1975 read with Para 7 of the C.B.I. C. Circular No. 163/19/2021-GST, dated 6th October, 2021 from F. No. 190354/206/2021-TRU and the provisions of Section 3(7) of the Customs Tariff Act, 1975 the scented sweetened supari merits classification under CTH 2106 90 30 - Due to processes of coating with edible colours, silver, menthol and adding of artificial sweeteners and aromatic additives to which illaichi is subjected to in the instant case the emerging product is definitely a value-added product of illaichi and also distinctly different from illaichi or cardamom classifiable under Chapter 9 of the Customs Tariff Act, 1975. In view of the above supplementary note to Chapter 21 read with Para 7 of C.B.I. C. Circular No. 163/19/2021-GST, dated 6th October, 2021, same merits to be classified under Tariff Item 2106 90 99. The product namely Menthol Scented Sweet Supari merits classification under CTH 2106 90 30 - Flavoured and coated Illaichi merits classification under CTH 2106 90 99, of the First Schedule to the Customs Tariff Act, 1975.
Issues Involved:
1. Classification of Menthol Scented Sweet Supari. 2. Classification of Flavoured and Coated Illaichi. Issue-wise Detailed Analysis: 1. Classification of Menthol Scented Sweet Supari: The applicant, engaged in trading Pan Shop spices and betel nuts, sought an advance ruling on the classification of Menthol Scented Sweet Supari. The applicant proposed to import this product and provided detailed information on its manufacturing process, which includes drying, impurity removal, garbling, polishing, sterilization, cutting, blowing, gravity separation, roasting, adding scents and flavors, and packaging. The product does not contain lime, katha (catechu), or tobacco. The applicant argued that the product should be classified under CTH 2106 90 30, which covers "Betel Nut Product known as Supari." The classification was supported by Supplementary Note 2 of Chapter 21, which defines "Betel Nut Product known as Supari" as any preparation containing betel nuts but not containing lime, katha, or tobacco, and may include other ingredients like cardamom, copra, or menthol. The ruling examined the contending classifications under Chapters 8 and 21 of the Customs Tariff Act, 1975. It was determined that the processes applied to the product before importation were not for partial rehydration, preservation, or stabilization, thus making classification under Chapter 8 unsustainable. Chapter 21, which includes miscellaneous edible preparations, was deemed more appropriate. The product, after processing, is used as a mouth freshener and cannot be used for any other purpose. The ruling also referred to C.B.I. & C. Circular No. 163/19/2021-GST, dated 6th October 2021, which classified scented sweet supari under CTH 2106 90 30 with an 18% GST rate. The ruling concluded that the menthol scented sweet supari merits classification under CTH 2106 90 30, supported by the legal framework, relevant chapter notes, supplementary notes, and the circular. 2. Classification of Flavoured and Coated Illaichi: The applicant also sought an advance ruling on the classification of Flavoured and Coated Illaichi, intended to be imported and used as a spice-based mouth freshener. The manufacturing process includes removing impurities, killing bacteria, adding aromatic spices, silver leaf, artificial sweeteners, and packaging. The product is used as an input for further processing or packing in branded packs for wholesale and retail. The applicant argued that the product should be classified under CTH 2106 90 99, supported by Supplementary Note 5(b) to Chapter 21, which includes preparations for human consumption. The ruling examined the contending classifications under Chapters 9 and 21 of the Customs Tariff Act, 1975. Chapter 9 covers spices, including cardamom, but the addition of substances that change the essential character of the product would classify it under Chapter 21. The processes applied to the illaichi, such as coating with edible colors, silver, menthol, and adding artificial sweeteners, made it a value-added product distinct from raw cardamom. The ruling referred to C.B.I. & C. Circular No. 163/19/2021-GST, dated 6th October 2021, which classified flavoured and coated illaichi under sub-heading 2106 with an 18% GST rate. The ruling concluded that flavoured and coated illaichi merits classification under CTH 2106 90 99, supported by the legal framework, relevant chapter notes, supplementary notes, and the circular. Conclusion: (a) Menthol Scented Sweet Supari merits classification under CTH 2106 90 30. (b) Flavoured and Coated Illaichi merits classification under CTH 2106 90 99.
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