2024 (12) TMI 1467 - AAR - Customs

Classification of goods - Provisionally preserved Areca nut (whole) and Provisionally preserved Areca nut (split) - to be classified under heading 2008 19 20, which pertains to Other Roasted Nuts and Seeds, or under Chapter 8, which covers dried fruits and nuts? - HELD THAT - As per HSN Explanatory Notes, Heading 2008 covers fruit, nuts and other edible parts of plants, whether whole, in pieces or crushed, including mixtures thereof, prepared or preserved otherwise than by any of the processes specified in other Chapters or in the preceding headings of this Chapter. Specifying what is included in this heading, the explanatory note states that almonds, ground nuts, areca (or betel) nuts and other nuts, dry-roasted, oil-roasted or fat-roasted, whether or not containing or coated with vegetable oil, salt, flavours, spices or other additives. Dry-roasting, oil-roasting fat-roasting, as a process, are very much a part of Chapter Heading 2008 by virtue of HSN Explanatory Notes. It is also pertinent to observe that none of these processes are mentioned in the Chapter Note 3 to Chapter 8 of the Customs Tariff Act, 1975 as well as HSN Explanatory Notes to Chapter Heading 0802. It is an established fact that in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Tariff Act. The case of Commissioner of Customs Central Excise v. Phil Corporation Ltd. 2008 (2) TMI 3 - SUPREME COURT is directly relevant and applicable in the instant case of the applicant. In the judgment of the said case Honourable Supreme Court has held a number of cases, this Court has clearly enunciated that HSN is a safe guide for the purpose of deciding issues of classification. In the present case, the HSN Explanatory Notes to Chapter 20 categorically state that the products in question are so included in Chapter 20. The HSN Explanatory Notes to Chapter 20 also categorically state that It s products are excluded from Chapter 8 as they fail in Chapter 20. From the Apex Court s foregoing judgments, it is observed that the roasted nuts find specific mention in the then Chapter 20 of the then Central Excise Tariff Act and the Chapter 20 of the Schedule I of the Customs Tariff Act, 1975 as well as corresponding HSN Explanatory Note. It is important to pay attention to the fact that, in the above referred HSN explanatory note, a process of roasting is not specifically mentioned as a process of preservation or stabilization or a process to improve or maintain the appearance - Hon ble Apex Court s conclusions corroborate the finding that the process of roasting is not covered by Note 3 to Chapter 8 and hence these products, roasted betel nuts are not classifiable under Chapter 8 of the Tariff. Conclusion - The Roasted areca/betel nuts fall under Custom Tariff Heading 2008, specifically under CTI 2008 19 20 Other roasted nuts seeds of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question in this judgment is the classification of Roasted Areca Nuts (Whole, Split, and Cut) under the Customs Tariff Act, 1975. Specifically, the issue is whether these goods should be classified under Chapter 20, Heading 2008 19 20, which pertains to "Other Roasted Nuts and Seeds," or under Chapter 8, which covers dried fruits and nuts.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The classification of goods under the Customs Tariff Act, 1975, is governed by the Harmonized System of Nomenclature (HSN) and the General Rules for the Interpretation of the Harmonized System. Chapter 20 of the Customs Tariff Act deals with "Preparations of Vegetables, Fruit, Nuts or Other Parts of Plants," while Chapter 8 covers "Edible Fruit and Nuts; Peel of Citrus Fruit or Melons." The HSN Explanatory Notes and previous rulings by the Authority for Advance Rulings (AAR) and the courts provide guidance on classification.

Court's interpretation and reasoning:

The court examined the processes involved in roasting areca nuts, noting that roasting involves severe heat treatment that changes the chemical and physical characteristics of the nuts, making them suitable for immediate consumption. The court distinguished between moderate heat treatment (as mentioned in Chapter 8) and the roasting process, which involves temperatures well beyond 150 degrees Celsius.

Key evidence and findings:

The court considered the applicant's submissions, including the chemical changes in the nuts due to roasting, and the HSN Explanatory Notes, which include roasted nuts under Chapter 20. The applicant argued that the roasted nuts should not be classified under Chapter 8, as the processes described in Chapter 8 do not include roasting.

Application of law to facts:

The court applied the HSN Explanatory Notes and previous rulings to determine that the roasting process results in a product that falls under Chapter 20, Heading 2008 19 20. The court noted that the specific entry for roasted nuts in Chapter 20 should prevail over the general entry in Chapter 8.

Treatment of competing arguments:

The court addressed the jurisdictional Commissionerate's argument that the nuts should be classified under Chapter 8, as roasting is a form of moderate heat treatment. The court rejected this argument, stating that roasting is distinct from the processes mentioned in Chapter 8 and that the roasted nuts do not retain the character of dried nuts as defined in Chapter 8.

Conclusions:

The court concluded that the roasted areca nuts should be classified under Chapter 20, Heading 2008 19 20, as they are prepared or preserved by a process not specified in Chapter 8.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"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."

"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."

Core principles established:

The judgment establishes that the specific entry for roasted nuts in Chapter 20 should prevail over the general entry in Chapter 8. The court emphasized the importance of the HSN Explanatory Notes in determining the classification of goods under the Customs Tariff Act.

Final determinations on each issue:

The court ruled that the roasted areca nuts are correctly classified under Chapter 20, Heading 2008 19 20, as "Other roasted nuts & seeds." The court rejected the argument that the nuts should be classified under Chapter 8, as the roasting process is not covered by the processes specified in Chapter 8.