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TMI Blog2019 (3) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... of CETA and, in particular, sought to be classified under CETH 21069030 as betel nut product known as suprai. In consequence the product satisfying the requirements of Chapter Note 3 (b) of Chapter 8 will therefore necessarily fall under 08029019 as claimed by the assessee. The impugned order dt. 17.02.2012 upholding the classification of Scented Betel Nut under CETH 21069030 as against CETH 08029019 claimed by the assessee, cannot be sustained and is therefore set aside - appeal allowed - decided in favor of appellant. - E/243/2012, E/40791/2016 - FINAL ORDER No. 40455-40456/2019 - Dated:- 12-3-2019 - Ms. Sulekha Beevi, C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri G. Natarajan, Advocate For the Appellant Shri K. Veerabhadra Reddy, ADC (AR) For the Respondent ORDER Per Bench For the sake of convenience, the parties hereinafter are referred to as assessee and department. 2. The facts of the case involved in both the appeals being same they are taken up for common disposal. 3. M/s.Azam Laminators Pvt. Ltd. (hereinafter referred to assessee) are manufactures of Scented Betel Nut and had classified the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial character of betel nut is preserved as such and the product has not ceased to be a betel nut. It is still known only as betel nut (Pakku in Tamil) in the market. (ii) A careful reading of the relevant tariff headings would reveal that as per Note 3 (b) of Chapter 8, dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes; (a) for additional preservation or stabilisation (for example by moderate heat treatment, sulphating, the addition of sorbic acid or potassium sorbate); (b) to improve or maintain their appearance (for example by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nuts. but they will continue to be classified under Chapter 8, provided they retain the character of dried nuts. (iii) This Chapter note is present both prior to and post 07.07.2009. Hence, as per this note, even if moderate heat treatment, addition of vegetable oils, addition of glucose syrup are undertaken, the product will remain classified under Chapter 8, if the essential character of betel nut is retained. (iv) It is submitted that the product in question, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which lays down certain processes as amounting to manufacture, first of all the classification of the product has to be determined and only if the product can be classified under Chapter 2106 9030, the said Note can be applied. Thus the first issue to be decided is whether the product in question merit classification under Chapter 0802 9019 or Chapter 2106 9030. (viii) The stand of the assessee is fully supported by the following case laws : (i) CCE Vs Crane Betel Nut Powder Works, reported in 2005 (187) ELT 106 Tri-Bang. (ii) Crane Betel Nut Powder WorksVs CCE 2007 (210) ELT 171 SC. (iii) CCE Vs Crane Betel Nut Powder Works 2008 (221) ELT 99 Tri-Bang. (iv) CCE Vs Crane Betel Nut Powder Works 2010 (256) ELT A 17 SC. (v) CCE, Trichy Vs A.R.S. Company Ltd. 2006 (206) ELT 1027 Tri-Chennai. (vi) A.R.S. Company Ltd. Vs CCE. Trichy 2015 (324) ELT 30 SC. 5.3 In respect of Department Appeal E/40791/2016 (i) Once it is established that Nizam pakku namely, betel nut has to be classified as per the contentions made by assessee in respect of Appeal E/243/2012, the demand proposed in the related SCN/SODs cannot be sustained, hence dropping of proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified under Note 3(b) of Chapter No.8 would be covered under Note 6 to Chapter No.21 as deemed manufacture so as to be called as Betel Nut Products meriting classification under Tariff Item No.2106 90 30. (vi) Assessee themselves have admitted the processes carried out by them on the raw betel nut. They have not produced any evidence in the process of addition of vegetable oil, sweetening agent menthol etc., The Commissioner has stated in his order that these processes were covered under Note 3(b) of Chapter 8. But, the said Note 3(b) clearly states that if the addition of vegetable oil or small quantities of glucose syrup were done to improve or maintain their appearance and that the products retain their character of dried fruit or nut then such processed goods would fall under Chapter 8. In this case, the addition of sweetening agent, vegetable oil and menthol makes it scented betel nut which is generally known as Supari in Hindi. Thus, it did not retain the same characteristics of betel nut to merit retention under Chapter 8. (vii) In the judgement of the Hon ble Apex Court in the case of Crane Betel Nut Powder (supra), the Court has not gone in to the classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought in the competing tariff entries in relevant years. The Central Excise Tariff prior to introduction of 8 digit tariff with effect from 28.02.2005 stood as under : CHAPTER 8 EDIBLE FRUIT AND NUTS; PEEL OF CITRUS FRUIT OR MELONS Notes : Heading No. Sub Heading No. Description of goods Rate of duty 08.01 0801.00 Edible fruits and nuts; peel of citrus fruit or melons NIL 8.3 At the same time Chapter 21 of the CETA with specific chapter note 4 stood as under : CHAPTER 21 MISCELLANEOUS EDIBLE PREPARATIONS Notes : 4. In this chapter betel nut powder known as supari means any preparation containing betel nuts, but not containing any one or more of the following ingredients, namely, lime, katha (catechu) and tobacco, whether or not containing any other ingredients, such as cardamom, copra and menthol. Heading No. Sub Heading No. Description of goods Rate of duty 21.07 2107.00 Betel nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edients, such as cardamom, copra and menthol. Tariff item Description of goods Unit Rate of duty 2106 Food preparations not elsewhere specified or included 2106 9030 --- Betelnut product known as supari KG 16 % 8.5 With effect from 07.07.2009, certain amendments were made in the tariff entries and relevant entries stood as under : CHAPTER 8 EDIBLE FRUIT AND NUTS; PEEL OF CITRUS FRUIT OR MELONS Notes : 1. This Chapter does not cover : .. (b) betel nut product known as Supari of tariff item 2106 9030. 3. Dried fruits or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes. (a) for additional preservation or stabilisation (for example by moderate heat treatment, sulphating, the addition of sorbic acid or potassium sorbate); (b) to improve or maintain their appearance (for example by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.6 The department has taken a stand after amendment w.e.f. 7.7.2009, the impugned product would get classified under CETH 21069030 for the following reasons : (i) As per Note 1 (b) of Chapter 8, this Chapter does not cover betel nut product known as supari of item 2106 9030; and (ii) As per Note 6 to Chapter 21, In relation to product of tariff item 2106 9030, 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 amount to manufacture . 8.7 On the other hand, Ld. Advocate has been at pains to point out that a careful reading of the relevant tariff heading would reveal that as per note 3 (b) of Chapter 8 dried nuts, of that chapter may be partially rehydrated, or treated for the purposes inter alia : (b) to improve or maintain their appearance (for example by the addition of vegetable oil or small quantities of glucose syrup), provided that they retain the character of dried fruit or dried nuts. Thus, they will continue to be classified in Chapter 8 provided they retain the character of betel nut. Ld. Advocate has pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find credence in the contention of the Ld. Advocate that the impugned product is just betel nut and not betel nut products known as suprari . The betel nut per se would therefore come within the ambit of CETH 08.01 as Edible Fruit and Nuts; Peel of Citrus Fruit or Melons and not under 21.07 as Miscellaneous Edible Preparations 8.9 This being so, the classification of the product cannot be dragged into Chapter 21 of CETA and, in particular, sought to be classified under CETH 21069030 as betel nut product known as suprai. In consequence the product satisfying the requirements of Chapter Note 3 (b) of Chapter 8 will therefore necessarily fall under 08029019 as claimed by the assessee. In arriving at this conclusion, we also follow the ratio laid down by the Hon ble Apex Court in Crane Betel Nut Powder Works Vs CC CE Tirupathi - 2007 (120) ELT 171 (SC). The relevant portions of the said judgment are reproduced for ready reference : 21. Appearing for the Revenue, Mr. B. Datta, learned Addl. Solicitor General, reiterated the stand taken by the Department before the Tribunal as also the High Court. He reiterated that the very process of crushing the betel nuts into d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodity and is, therefore, excisable under Section 2(d) of the aforesaid Act. Dr. Padia referred to paragraph 11 of the said judgment which refers to the two clauses contained in Section 2(f) of the 1944 Act and instead of setting out the activities in respect of different tariff items, Sub-clause (ii) simply states that any process, which is specified, in Section/Chapter Notes of the Schedule to the Tariff Act, shall amount to manufacture . It was also held that under Sub-clause (ii), the Legislature intended to levy excise duty on activities that do not result in any new commodity. In other words, if a process is declared to be manufacture in the Section or Chapter Notes, it would come within the definition of manufacture under Section 2(f) and such process would become liable to excise duty. 25. Dr. Padia then referred to the decision of this Court in Kores India Ltd., Chennai v. Commissioner of Central Excise, Chennai, reported in (2005) 1 SCC 385, which involved the cutting of duty-paid typewriter/telex ribbons in jumbo rolls into standard predetermined lengths. It was held that such cutting brought into existence a commercial product having distinct name, charac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of treatment, labour and manipulation is apposite to the situation at hand. The process involved in the manufacture of sweetened betel nut pieces does not result in the manufacture of a new product as the end product continues to retain its original character though in a modified form. 31. In our view, the Commissioner of Customs and Central Excise (Appeals) has correctly analysed the factual as well as the legal situation in arriving at the conclusion that the process of cutting betel nuts into small pieces and addition of essential/non-essential oils, menthol, sweetening agent etc. did not result in a new and distinct product having a different character and use. 8.10 We further find that the Tribunal relying upon the aforesaid Supreme Court judgment in Crane Betel Nut Powder Works (supra) for the period after introduction of 8 digit classification, dismissed the appeal of Revenue against the order of Commissioner (Appeals) holding that the product betel nut pieces is rightly classified under CETH 08029012. In appeal, the Hon ble Apex Court affirmed the decision of the Tribunal reported in 2010 (256) A17 (SC). 8.11 In respect of the very same product Nizak Pakku ..... X X X X Extracts X X X X X X X X Extracts X X X X
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