2024(05)LCX0290(AAR)

Exim Incorporation

decided on 27-05-2024

CUSTOMS AUTHORITY FOR ADVANCE RULINGS
O/o THE CHIEF COMMISSIONER OF CUSTOMS
NEW CUSTOM HOUSE, NEAR IGI AIRPORT, NEW DELHI-110037

[Email:cus-advrulings.del@gov.inl]

Present

Samar Nanda (Customs Authority for Advance Rulings, New Delhi)

F. No. VIII/CAAR/Delhi/Exim/33/2024

The day of 27^th May, 2024

Ruling No. CAAR/Del/Exim/18/2024 /897 to 901/27.05.2024

In application No. 25/2024 dated 30.04.2024

Ruling

M/s. Exim Incorporation. 278. Katra Peran. Tilak Bazar. Delhi-110006. the Applicant is currently engaged in Import and Local Trading of various items related to Food Industry like Dry Fruits, Spices, and Areca/Betel Nuts, having Import Export Code No. 0509088708 and GST Number (GSTIN) 07AAOPG0854E1ZV ('applicant'. in short) has filed an application (CAAR-I) for advance ruling before the Customs Authority for Advance Rulings, New Delhi (CAAR, in short). The said application was received in the secretariat of the CAAR, New Delhi on 30.04.2024 along with their enclosures in terms of Section 28H (I) of the Customs Act, 1962 (hereinafter referred to as the 'Act'). The applicant intends to import "Roasted Areca Nuts (Whole), Roasted Areca Nuts (Split) and Roasted Areca Nuts (Cut)" from Indonesia. Sri lanka and Myanmar into India through the port of Chennai-II (Import). Chennai-600001.

STATMENT OF FACTS AND QUESTION LAW

1.1 The Applicant intends to import the following goods and seek ruling of Hon'ble Authority in the matter of Classification of the goods under Customs Tariff Act, 1975 which in the opinion of the Applicant are classifiable under chapter heading 20081920.

1.2 The Process for involved in the manufacture of the above said goods is as under:

Roasted Areca Nut (Whole), Roasted Areca Nut (Split) and Roasted Areca Nut (Cut):

Following processes are conducted on raw Areca/Betel Nut: -

a. De- husking the raw betel/areca nut and drying the same before being fed into the roasting oven.

b. Feeding the fresh areca nuts into a seed roasting oven, heating up to 130-150 deg C and roasting the fresh areca nuts in an oven of the seed roasting machine.

c. Take the areca nuts out of the oven, cooling at room temperature and feeding back into the oven, heat and roast them again and perform this cycle until the moisture content of the fresh areca nuts goes below 6%.

d. The fresh areca nuts are repeatedly heated, roasted and cooled to ensure that the areca nuts are quickly cooled and shrunk after thermal expansion so that the roasted areca nuts have higher quality, the roasting time is around 2-3 days.

e. Packaging in Industrial packs of 50 Kgs to 80 Kgs as per requirement.

In India, areca nut is chewed for a variety of reasons such as mouth freshener, digestive following food intake, stress reliever and concentration improver.

1.3 The above-mentioned goods are specifically covered and are classifiable under CTH 20081920 of the Customs Tariff Act, 1975. As per the HSN Explanatory notes to Heading 2008, given below. Dry Roasted Areca (or Betel) Nuts are specifically covered under Chapter Heading 2008.

"CTH2008 - Fruits, Nuts and other Edible Parts of Plants, other wise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included-Nuts, ground nuts and other seeds, whether or not mixed together. ”

CTH 20081920 - Other Roasted Nuts and seeds.

Chapter Note (a) of Chapter 20 (PreParations of vegetables, fruits, nuts or other Parts of Plants) defines as under:

This Chapter does not cover:

a) Vegetables, Fruit or Nuts prepared or Preserved by the processes specified in chapter 7, chapter 8, or chapter 11:

-The product does not contain lime, katha (Catechu) or tobacco.

-In view of the roasting process carried out the imported good merit classification 20081920.

1.4 The applicant has further cited following case laws and has submitted that Hon’ble Supreme Court has decided and reiterated that the HSN Explanatory Note is the safe and dependable guide in the matters of classification of items:

i. L.M.L. Ltd. Versus Commissioner of Customs Reported in 2010 (258) E.L.T 321 (S.C).

ii. Holostick India Ltd. Versus Commissioner of Central Excise, Noida Reported in 2015 (318) E.L.T 529(S.C),

iii. Collector o fCentral Excise, Shillong Versus Wood Craft Products Ltd Reported in 1995 (77) E.L.T 23 (S.C)

1.5 As per the Explanatory Note to Chapter 8 of Customs Tariff Act, 1975 deals with 'edible fruits and nuts’ of this Chapter remain classified here even if put up in airtight packing (e.g. dried prunes, dried nuts in cans). In most cases, however, products put up in these packing have been prepared or preserved otherwise than as provided for in the headings of this chapter and are therefore excluding from Chapter 8 (and will fall under chapter 20). The processes mention in chapter 8 are different from the processes performed on impugned goods, they are excluded for the purpose classification from chapter 8 of the Customs Tariff Act, 1975 (hereinafter also referred as “TARIFF”).

1.6 In respect of alternate CTH 2106, we would draw attention to Chapter Note 2 and explanatory note (A) to Chapter 21. As per Note of Chapter 21:

"Betel Nut product know as Supari" means any preparation containing betel nuts but not containing any one or more of following ingredients, namely lime, katha (catechu) and tobacco whether or not containing any other ingredients such as cardamom copra or menthol.

As per the Explanatory note, the heading covers preparations for use, either directly or after processing (such as cooking, dissolving or boiling in water, milk or other liquids), for human consumption. The goods have undergone roasting, but they don’t contain lime, katha (cathechu) and tobacco. Further, roasted betel nut can be consumed directly by merely cutting them into pieces. Therefore, the goods are equally classifiable under Chapter 21 of Custom Tariff Act, 1975.

1.7 We would also refer to and discuss the case of M/s Crane Betel nut Powder works reported in 2007 (210) E.L.T 171 (S.C). In this case, Hon’ble Supreme Court purely went into the aspect whether crushing and adding other ingredients to betel nut would amount to manufacture or not. Upon convincing that crushing and mixing other ingredients to the betel nut into powder would not amount to manufacture, the court ruled in favour of the party thus permitting them to classify the item Under the CTH 0803. Based on the above, earlier ruling issued by the Customs Authority for Advance Rulings / rejected the classification of betel nut products under the HS code 21069030 and confirmed the same under the Heading 0802, by holding that the process of such as boiling, slicing, removal of impurities, metal- deflection, garbling, polishing, roasting, cutting and adding flavours to betel nut do not alter the nature and characteristics of the product so as to it outside the purview of the Heading 0802. However, after the subsequent amendment to the Central Excise Tariff Act, 1975 vide the finance (No.2) Act. 2009 (Act No. 33 of 2009 dates 19^th August 2009) with the insertion of Note to Chapter 21, the decision of the Hon’ble Supreme Court in the above-mentioned case law was rendered infructuous.

1.8 In support of the above, we would like to cite on the ruling issued the case of M/s Excellent Betel Nut Products by the Authority of Advance Rulings, wherein the authority took proper judicial notice and distinguished the decision in the case of M/s Crane Betel nut Powder Works Vs Commissioner of Customs & Central Excise, Thirupathi reported in 2007 (210) E.L.T 171 (S.C) and held the classification of processed betel nuts under 21069030.

1.9 The process of roasting has not been defined in the Tariff Act. However, the process of roasting is done using firewood/palm kernel-based ovens and the temperature of the flames is around 600 degrees Celsius, as a result, the betel nuts would be roasted well beyond 100 degrees Celsius, usually in the range of 130-150 degree Celsius. Roasted betel nut undergoes a change in its appearance as well as chemical characteristic on account of the roasting process. There is a visible deposition of an ash-like substance of the outer surface of the betel nut. there is a substantial change in the chemical characteristics of the Betel nut product on account of the roasting process, that the tannin and arecoline content of raw Betel nut/areca nut gets substantially changed by subjecting the same to roasting and boiling, therefore, roasted betel nut is a distinctive product of betel nut making it suitable for immediate consumption. Roasting is not aimed at additional preservation or stabilisation or to improve or maintain their appearance.

1.9.1 Roasted areca nuts are chewed for a variety of reasons such as stress reliever, mouth freshener, concentration improver and digestive following food intake. It is also used for eating (mukhwas) directly as well with paan (betel leaf). The process of Roasting changes the chemical and physical characteristics of the areca nut by reducing arecoline and tannin as well moisture. The tannin and arecoline content of raw betel nut/areca nuts get substantially changed by subjecting the same to roasting. Therefore, roasted betel nut is a distinctive product of betel nut making it suitable for immediate consumption.

1.10 In the conspectus of submission supra, the Applicant seeks a ruling by the Hon'ble Authority as under:

“ The goods sought to be imported namely " Roasted Areca Nuts (Whole), Roasted areca Nuts (Split), Roasted Areca Nats (Cut)” are classified under Customs Tariff Heading 20081920 of The First Schedule to the Customs Tariff Act, 1975”

In view of the above facts and legal provisions, the product “Roasted Areca Nuts (whole). Roasted Areca Nuts (Split) and Roasted Areca Nuts (cut)” merit classification under chapter heading 2008 19 20.

1.11 The Applicant respectfully relies on the following judgments-:

1. Ruling No. CAAR/Mum/ARC/39, 40&41/2023 dated 07.12.2022 of Hon’ble Authority passed in the matter of M/s. Universal Impex, Mumbai Vs. The Commissioner of Customs 11, Chennai, the Commissioner of Customs, Nhava Sheva & The Commissioner of Customs (Krishnapatnam), Andhra Pradesh in Application No. CAAR/CUS/APPL/19, 21,22/2023-O/o Commr-CAAR-MUMBAI, where identical goods are held classifiable under 2008 19 20, copy of judgment enclosed marked as Annexure -III.

II, The Customs Department had challenged the aforesaid Advance Ruling of the CAAR. Mumbai ot M/s Shahnaz Commodities International (P) Ltd. Chennai, M/s Neena Enterprises. Telangana and M/s Universal Impex, Mumbai by way of a Civil Miscellaneous Appeal (CMA) No's 600/2023, No. 1206/2023 and No. 1750/2023, dated 01.08.2023 respectively before the Hon'ble Madras High Court. Wherein the Division Bench of Hon’ble Madras High Court after elaborately hearing all the parties dismissed the CMA's of the Customs Department, thereby upholding the aforesaid ruling of the CAAR, Mumbai.

III. Ruling No. CAAR/Del/Shree Durga/26, 27 & 28/2023 dated 17.11.2023 of hon'ble authority passed in the matter of M/s. Shrec Durga Traders, Kolkata Vs. The Commissioner of Customs (Preventive) Kolkata, The Principal Commissioner of Customs, Chennai II (Import) & The Principal Commissioner of Customs Nagpur, M.P in Application No. 22,23 & 24/2023-DELHI O/o Commr-CAAR-NEW DELHI, where identical goods are held classifiable under 2008 19 20, copy of judgment enclosed marked as Annexure-lII.

IV. Ruling No. CAAR/MUM/ARC/67/2023 dated 16.10.2023 of Hon'ble Authority passed in the matter of M/s Shree Ganesh Traders. Chennai Vs. The Commissioner of Customs II (Import). Chennai, in Application No. CAAR/CUS/APPL/95/2023 under 2008 19 20, copy of judgment enclosed marked as Annexure-111.

1.12 As per the Explanatory Note to Chapter 8, fruits and nuts of this Chapter remain classified here even if put up in airtight packing (e.g. dried prunes, dried nuts in cans). In most cases, however, products put up in these packing have been prepared or preserved otherwise than as provided for in the headings of this chapter and are therefore excluding from Chapter 8 (and will fall under chapter 20). The process mention in chapter 8 are different from the process performed on impugned goods, they are excluded for the purpose classification from chapter 8 of he Customs Tariff Act, 1975 (hereinafter also referred as TARIFF).

1.13 The purpose of classification of goods the Explanatory notes are guiding factors wherever any dispute rise while interpretating the classification of particulars chapters or in case of similar or competing entries and this has been held time and again in catena of judgments by the Hon'ble Courts in India.

-L.M.L. Ltd. Versus Commissioner of Customs Reported in 2010 (258) E.L.T 321 (S.C), Holostick India Ltd. Versus Commissioner of Central Excise. Noida Reported in 2015 (318)E.L.T 529 (S.C), Collector of Central Excise, Shillong Versus Wood Craft Products Ltd Reported in 1995 (77) E.L.T 23 (S.C)

1.14 That in fact for similar product Hon'ble CAAR Mumbai has already issued Ruling hereby declaring the above said goods fall under CTH 20 and particularly under CTH 20081920 and not under CTH 8. The said ruling has been given in the case in Ruling dates 07.12.2022 having no. CAAR/Mum/ARC/44.45 & 46/2022 in Application no. CAAR/Cus/APPL/70,77 & 78/2022-O/o Commr-CAAR-Mumbai (applicant- M/s Shahnaz Commodities International, Chennai). Further, in fact, the Custom Authority challenged the said Advance Ruling before the Hon'ble High Court of Madras vide CMA No. 600,1206 and 1750 of 2023- The Commissioner of Customs Chennai Vs M/s Shahnaz Commodities International P. Ltd. However, the said cases were rejected by the Hon'ble High Court vide judgment dated 01.08.2023.

1.15 From the Above Process mentioned it is clear that the product clearly falls under the CTH Heading 20 and more particularly CTII 2008 19 20 as stated and not under CTH 08 of customs Tariff and more particularly CTH 0802 9000 which is for the product namely, Areca Nut. In the view of above we would like to have advance ruling on the following issue" whether the goods sough, to be imported i.e. Roasted Areca Nut (Whole), Roasted Areca Nut (Split) and Roasted Areca Nut (Cut)" is classified  under the CTH 20081920 and we request the Authority for Advance Rulings that the appropriate classification of the aforesaid goods may kindly be ruled under section 28H of the Custom Act, 1962.

2. The Comments of the Chennai-II (Import) Customs Commissionerate with regard to points raised in the application arc furnished as under:

i. No comments as provisions quoted.

ii. This Commissionerate has preferred appeals against advance rulings passed on the same classification dispute in respect ofthe applicants M/s. Shree Durga Traders, M/s. Shree Ganesh Traders and M/s. INS Consultancy vide CMA Nos. 280/2024,238/2024 & 390/2024 respectively.

iii. The classification sought by the applicant for the items described as “Roasted Areca nuts (Whole/Split/Cut)” under CTH 20081920 is clear attempt to circumvent to import policy conditions of the item “Areca Nuts/Betel Nuts” under Customs Tariff Heading 080280.

iv. Comments to points raised by the applicant vide Annexure I & Annexure II of the application are as below:

The claims made by the applicant and the ruling sought on the classification of the Roasted Areca nuts (Whole/Split/Cut) is devoid of any concrete evidence and legally untenable on the following grounds:

A. Though roasting as a process is not defined, it will fall under the moderate heat treatment' mentioned in Chapter Note 3 of Chapter 8 reproduced below for easy reference:

”3. Dried fruits or dried nuts of this Chapter may be partially rehydrated, or treated for the following purposes:

a) For additional preservation or stabilization (for example, by moderate heat treatment, sulphuring, 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 betel nut, fruit or dried nuts.”

B. The applicant in their application has submitted that raw Arecanuts after dehusking were subjected to repeated roasting in seed roasting oven for two to three days for the purpose of reducing water content. The reduced moisture content of 6%.upon repeated roasting at high temperatures, as claimed by the applicant does not hold much water as the maximum moisture of the dried areca nuts should be 7% as per standards set by the FSSAI Regulations. 2011 and the dried areca nuts with more than 7% are unfit for human consumption as per FSSAI regulations. Hence, the process mentioned by the importer appear to be only for the purpose ofd rying and hence roasted Areca nuts intended to import by the applicant are rightly classifiable under Chapter 08, specifically under CTH 080280.

C. The process to which raw betel nuts have been subjected as per process submitted by the applicant is squarely in the nature of processes referred to in the Chapter Note 3 to Chapter 8 and HSN Explanatory Notes. Hence 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 good to be classifiable under Chapter 20. To be classified under Chapter 20 there should be some preparation as the Chapter heading reads as "Preparations of vegetables, fruit, nuts or other parts of plants". Mere roasting of betel nut does not render the product to be distinctive as claimed by the applicant or does not alter the character of the original goods. Roasting or mere addition of certain additives for the limited purpose of enhancing preservation or appearance or ease of consumption per se does not result in obtaining a preparation of betel nut. Hence it remains the betel nut and rightly classifiable under chapter 08.According to Cambridge dictionary, “Preparation is a mixture of substances, often for use as a / medicine". According to Collins Dictionary “A preparation is a mixture that has been prepared for use as food, medicine, or a cosmetic". However, as per the processes mentioned by the applicant, it is evident that there is neither any mixture of products nor any change in the original goods and hence arecanuts after subjected to said processes still covered under Chapter 8 and more appropriately tails under CTH 080280.

D. The applicant has claimed that dry Roasted Areca (or Betel) Nuts arc specifically covered under Chapter Heading 2008. The relevant portion of the chapter heading 2008 is reproduced below:

CTH 2008: Fruits, nuts and other edible parts of plants, otherwise prepared or preserved: whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included- Nuts, ground nuts and other seeds, whether or not mixed together:

200819 --Other, including mixtures
20081920 — Other roasted nut and seeds

However, the Chapter 20 does not cover any nuts or fruits prepared or preserved by the processes specified under Chapter 8 as per the Chapter Note 1 of the Chapter 20. As the processes mentioned to be performed by the applicant are covered under the ‘moderate heat treatment, hence the impugned goods cannot be classified under Chapter 20. The said chapter note is reproduced below:

This chapter does not cover:

a. Vegetables, fruit or nuts, prepared or preserved by the processes specified in Chapter 7, Chapter 8, or Chapter 11;

b. Vegetable fats and oils (chapter 15);

c. Food preparations containing more than 20% by weight of sausage, meat, meat offal, blood, insects, fish or crustaceans, molluscs or other aquatic invertebrates, or any combination thereof (chapter 16):

d. Bakers’ wares and other products of heading 1905; or

e. Homogenized composite food preparations of heading 2104.

E. Even though the Roasted Areca nuts are not specifically covered under Chapter 20, the applicant has submitted that as per the HSN Explanatory Notes Roasted Arecanuts covered under CTH 20081920. However, the explanatory notes also clearly specify that “the products of this heading are generally put up in cans,jars or airtight containers, or in casks, barrels or similar containers”. This clause of the HSN explanatory notes clearly implies that the goods of this heading are preparations of fruits or nuts presented in packaged condition after manufacturing, which need to be specifically stored and preserved before consumption. For example, roasted almonds or ground nuts need separate packings as specified by the HSN explanatory notes, otherwise these products are prone to deterioration after roasting. But the processes said to be performed on the areca nuts is only for the purpose of drying without any reference to packaging and any specific manufacturing process. The applicant has submitted that after processing the raw areca nuts, goods will be stored in 50 kgs and 80kgs industrial packs (jumbo bags). Thus, the goods under dispute are Areca Nuts in the same form as those classified under Chapter 08 and they are clearly excluded from the scope of the Chapter Heading 2008. Hence, the purported roasted areca nuts clearly excluded from the scope of the chapter 20 and rightly classifiable under chapter 08.

F. Further, as per Rule 3(a) of General Rules for the Interpretation of the Harmonized System since the product is more specifically classified under CTH 108020 classification under Chapter 2008 or 2106 is unwarranted.

When by application of Rule 2 (b) or for any other reason, goods arc. prima facie, classifiable under two or more headings, classification shall be effected as follows:

a. The heading which provides the most specific description shall be preferred to headings pioviding a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

G. It is pertinent to mention that the Chapters in the Customs Tariff are organized as per evolution, which is evident by the fact that the edible nuts and fruits are classified under Chapter 8, preparations of vegetables, fruits, nuts or other parts of plants classified under Chapter 20 and miscellaneous edible preparations classified under Chapter 21. Hence, the roasted betel nut which did not undergo any preparation is rightly classifiable under Chapter 8. It can be seen from the other sub-headings of the chapter 20, all the food items covered under Chapter 20 can be directly consumable without any further processes. However, the goods “Arecanuts” which are heat treated for removal of water content cannot be consumed directly and it requires further manufacturing process to make it edible food preparation. It is natural that a heat treatment will change the colour of any food item, however, it does not mean that the essential characters of the item has been changed. In this case, even after such severe heat processes the end product remains arecanut with moisture content of6%, like normal sun-dried areca nuts. Hence, the proposed imported item described as “Roasted Areca nuts” rightly covered under CTH 080280.

H. The CESTAT judgement in case of M/s. S.T. Enterprises vs Commissioner of Customs (VII) in Customs Appeal No.40002 & 40003 of 2021 is applicable mutatis mutandis to the present case, wherein the question decided in the said case was classification of“boiled betel nuts". It is pertinent to mention here that the process of boiling is not mentioned in the Chapter Note 3 to Chapter 8 and the Tribunal has held that the goods under dispute “boiled areca nuts" merit classification under CTH 08028010, which was affirmed by the Hon’ble Supreme Court vide judgment dated 19.03.2021 in Civil Appeal Nos. 850-851 of 2021. Though the process dealt with by the Hon'ble Tribunal was not exactly the same, the principle involved holds relevance. When the boiled supari can be classified under Chapter 08 on the grounds that boiling docs not alter the original characteristics of the goods, the same would apply in the present case also as roasting alone would not alter the character of the goods and therefore, roasted areca nut should be classified under Chapter 08 even on this principle also.

1. Several advance ruling applications arc being filed seeking classification of the Roasted Areca/Betel nut to avoid classification under Chapter 08 as there is a Minimum Import Price as well as a tariff rate applicable which is regularly revised by CBIC. The current tariff value of the Areca nuts is USD 6033 Per Metric Ton. These applications are being submitted to circumvent the minimum import price and increasing tariff values by legalizing betel nut import through mis- declaration and misclassification. The CAAR may not entertain such applications considering that several advance rulings have already rejected the classification of betel nut under chapter 21 in the interest of the local areca nut fanners and to safeguard the imprest of the revenue.

J. It is to bring to the notice that on testing of the imported goods declared as "Roasted Areca nuts” imported by the M/s. Universal Impex & M/s. Neena Enterprises on the strength of the Advance Rulings, it is found that the goods are actually heat-treated areca nuts and not roasted as claimed by the applicants. Hence, it is conclusively proved that all these advance ruling applications are being filed to circumvent the policy conditions applicable under CTH 080280 and it is requested to consider the same before issuing the advance ruling on the classification of the “Roasted Areca nuts”. as it requires huge infrastructure to carry out the processes mention in their applications.

K. Further, it is to inform that this Commissionerate has preferred appeals with stay application in the Hon’ble High Court of Madras against CAAR Advance Rulings passed in similar applications seeking classification of the “Roasted Arecanuts” under CTH 20081920 in respect of the applicants M/s. Shree Durga Traders, M/s. Shree Ganesh Traders and M/s. INS Consultancy vide CMA Nos. 280/2024. 238/2024 & 390/2024 respectively. In this regard, it is to inform that as on date the Hon’ble High Court has not granted stay in these appeals.

In view of the above, il is requested to consider aforesaid submissions while deciding the classification of the goods “Roasted Areca Nuts (Whole/Split/Cut)”. Further, this Commissionerate wish to attend the personal hearing scheduled in the current application through virtual mode and the same may be considered by the authority.

3. A personal hearing in the matter was conducted on 16.05.2024. During the personal hearing, the authorized representative of the applicant reiterated the submissions already made in their application for advance ruling. He further slated that in their submissions, they have relied upon a few Advance Rulings, issued on classification of identical goods, in the recent past; these rulings have inturn relied upon judgement of the Hon’ble High Court. Replying to the questions posed by the Authority, he stated that goods shall be imported in bags of 50 to 80 kgs. He requested to keep the ruling confidential in the instant matter and mentioned that they are giving written request, in this regard.

4. ADDITIONAL SUBMISSIONS ON BEHALF OF THE APPLICANT

I. We wish to state that we had participated in the Personal Hearing granted by this Authority on 16.05.2024 and had put forth our submissions on behalf of the Applicant M/s. EXIM INCORPORATION , DELHI, further we had also placed a brief note of submissions touching upon the vital aspects concerning the ruling sought, with the relevant page no's in the Application Typeset filed by us.

II. Further, On the basis of comments received vide email dated 13.05.2024 from the officer of the respondent Jurisdictional Commissionerate, Chennai had primarily raised following aspects as objections with respect lo ruling on "Roasted Areca Nut" under CTH 2008 19 20. A) That Roasting process is not define it will fall under" Moderate heat Treatment". B) Goods are unfit for human consumption if Moisture more than 7% as per FSSAI Regulations,20l I. C)Justification of "Preparations" under CTH 20, D) Classification of goods falling under Chapter heading CTH 2008.19.20, E) That the HSN explanatory notes state that "the product of this heading are generally put up in cans,jars or airtight containers, or in casks, barrels or similar containers", whereas the 'roasted areca nuts' are packed in bags, F) Classification under CTH 2208 or 2106, H) Justification vide Judgement in case of M/s. S.T. Enterprises vs commissioner of customs (VII) in Customs Appeal No 40002 & 40003 of 2021, I) Justification on Testing failed on Previous Import By M/s. Universal Impex & M/s. Neena Enterprises on Strength of the Advance Ruling.

III. In this regard-

III. a) I « was submitted the tern, "Moderate heat Treatment” moisture content in 'Raw areca nut is anywhere between 10% ,o 15%. After, the process of drying the moisture content > is reduced to a maximum of6% to 7%. Further any amount of drying or moderate heal treatment f cannot remove the moisture content below the said level of 6%. Further, only by the process of roasting, by use of roasting ovens / furnace, the moisture content in "Roasted Areca Nut" is brought below 4%. Further, the contention of the respondent commissionerate that the moisture content has to be brought below 1.5%, cannot be sustained, &s it would only turn the 'areca nut' into ash.

111. b) 1 he process is not uncontrolled repeat roasting. The process is controlled to the extent of converting "Raw Areca Nut " to " Roasted Areca Nut " of given standard, the process is controlled as to not resulting in overcooking which would spoil the product. All imports are tested for FSSAI standards before clearance of home consumption and the applicants shall abide by all the laws of the land applicable on the products. The applicant has produced the photographs and video of the process with these submissions. It can be seen that the product under consideration is prepared with processes other than those Chapter Note 3 and is thus excluded from chapter 8 In terms of HSN General Exclusion Note 3 to Chapter 8. It is contended that the process of roasting cannot be equated with the term drying as this would render the heading description "Roasted Nuts" of 2008.19.20 of schedule I to Indian customs Tariff Act 1985, as otiose.

III. b.l) Chapter 20 of the Tariff covers the Preparations of vegetables, fruit, nuts or other parts of plants. As per Chapter Note 1 (a) to Chapter 20, the Chapter does not cover vegetables, fruits or nuts prepared or preserved by the processes specified in Chapters 7, 8 or II. Therefore, vegetable, fruit or nut products or preparations made other than by the processes specified in Chapters 7, 8 or 11 are classifiable in Chapter 20. The processes specified in Chapters 7, 8 or 11 mainly include freezing, steaming, boiling, drying, provisionally preserving and milling. Therefore, any vegetable, fruit, nut or edible parts of a plant which is prepared or preserved by any other process than these are liable to be classified under Chapter 20. Heading 2008 covers Fruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included. Roasting is a process used for bringing in to existence roasted nuts and as discussed earlier I find that the processes mentioned in chapter 8 do not cover roasting process.

III. b.2) The processes mentioned in Chapter 8 include chilling, steaming, boiling, drying and provisionally preserving. It does not specifically include the process of roasting. Here it is important to understand the difference between the processes of moderate heat treatment & dehydrating/drying referred in chapter 8 and processes of dry roasting, oil-roasting and fat roasting referred in chapter 20. The terms dry-roasting, oil roasting and fat- roasting however are not defined in the Customs Tariff Act. 1975. Therefore, these terms have to be understood in a commonly accepted sense. The Hon'ble Apex Court in the case of Alladi Venkateswarlu v. Government of Andhra Pradesh 1978 AIR 945 held that "the commonly accepted sense of a term should prevail in construing the description of an article of food In common trad6 parlance. "drying is a method of food preservation by the removal of water content. On the other hand, "roasting" means the excess or very high heat treatment that produces fundamental chemical and physical changes in the structure and composition of the goods, bringing about a charred physical appearance. Therefore, drying is a moisture removal process involving methods such as dehydration, evaporation, etc., whereas roasting is a severe heat treatment process.

III. b.3) Note 3 to Chapter 8 specifics certain treatments that could be carried out on the dried  nuts far additional preservation or stabilization or to improve or maintain their appearance. The  applicant in their application has declared that the objectives of the roasting are not as specified in the said note. Further as per the above note, the processes that could be carried out are moderate heat treatement, sulphuring, and the addition of sorbic acid or potassium sorbate by the addition of vegetable oil or small quantities of glucose syrup. Roasting is different from all the processes mentioned above. Roasting, as submitted by the applicant, is carried out using roasting ovens due to which betel nuts are roasted well beyond 150 degrees Celsius then cooled in room temperature and the cycle is repeated until the moisture content is less than 6%. This clearly indicates that the roasting is much more than mild heat treatment. Even in the generally understood meaning of the terms, it is understood that roasting involves severe heat treatment and is different from moderate heat treatment as well as dehydration. Therefore, the impugned goods do not satisfy Note 3 to Chapter 8.

III. b.4) While examining the scope of CTI 2008 I find 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.

IV. With respect to the another contention that the 'roasted areca nuts' needs to be 'generally put up in cans, jars or airtight containers, or in casks, barrels or similar containers', it is submitted that the term generally, has a broad connotation, as such the product need not be restricted to the aforesaid containers. Moreover, the packaging of a product, cannot decide the description of the goods, which would lead to absurdity. Further, the packaging is made to prevent the goods from deterioration and enable easy access to marketability. Whereas neither aspects have any bearing on 'roasted areca nuts' as roasting minimizes the moisture to the maximum level, thereby preventing insect infestation, damage and deterioration. Once, the product/goods is unaffected by outside parameters and vagaries of nature, the packaging need not be in airtight containers. Further, packaging is a means of convenience and no other significance can be attached to it.

V There is considerable force in the submission of the learned counsel for the applicant that the classification as far as possible must be in conformity, and in consonance with the HSN explanatory Notes. It is trite law that whenever there is specific entry, the same would prevail over general entry. The said general principal is statutorily incorporated in General Rules of Interpretation, in particular, under Rule 3(a) of the General Rules of Interpretation. CTH 2008 19 20 is a special entry covering nuts subject to the process of roasting when contrasted with CTH 08 02 90 which covers dried nuts. Having come to the conclusion that the classification of areca nuts is made on the basis of the process which it is subject to with a distinction between dried and roasted nut being maintained CTH 2008.19.20 which covers roasted nut including areca nut is a specific entry when contrasted with the entries/items covering nuts under CTH 08.

VI. In the decision of Tribunal in respect of the ease ST Enterprises, the question that arose for / consideration was as to the goods involved therein viz... boiled betel nuts would merit classification under CTH 21069030 or CTH 08028010. It was not concerned with CTH 2008 19 20 which covers "roasted nuts". While in the present case, the issue is with reference to classification of"roasted areca nuts". The process that was examined by the Tribunal in the case of S.T, Enterprises was confined to boiling and drying. Importantly, roasting was not one of the processes that was examined. The competing entries that were examined in the above case were CTH 21069030 vis-a-vis CTH 08028010. In other words, the question that was being examined was, whether the goods in question would qualify as "preparation of betel nut" or "betel nut as mentioned in CTH 08". The Court's attention was never drawn to CTH 2008.19.20 which covers roasted nuts including areca/betel nuts, inasmuch as the facts as set out by the tribunal in its order was not concerned with the process of roasting. Where a question passes sub-silentio. then it may have no precedential value.

Vll. In Regards of testing of the imported goods imported by M/s. Universal Impex & M/s. Neena Enterprises draw attention of the authority to the Lab Report No. 173/MCH/l 0.08.2023 dated 24.08.2023 issued by CRCL. Chennai in respect of import of Roasted betel nut by M/s Universal Impex (IEC No. 0313014159) based on the CAAR ruling No. CAAR/Mumbai/ARC/39.40.41/2023 dated 12.05.2023. To a specific test memo by the Customs department to ascertain whether the item under import was "roasted betel nut" or not the Customs lab after testing the item reported as follows:

"The item is in the form of grey brown whole nuts having cracks on the upper surface. It answers tests for areca nuts active ingredients, arecoline and Homarecoline.

Moisture content-3.92%/ Carbohydrate content 1.2%

In view of reference available and as the moisture content and carbohydrate content of the sample under reference is less than the raw areca nut, it may be considered as dry roasted areca nuts.

Based on the above test report, the Chennai customs has cleared the consignment, the truth and veracity of the same can be verified from the same customs representative who attended the personal hearing. This being the fact available on public record, suggesting moisture content to be 1.5% is nothing short of distorting the truth and in fact it tantamount to misguiding the Authority.

“Ifind that the issue dealt with i.e. Classification of "Roasted betel nuts" in the judgement of the Honourable High Court of Madras is of exactly the same Issue that is impugned in this application and therefore is squarely applicable to this case.

8. On the basis of foregoing, lam of the view that the Roasted areca/betel nuts Jail under Custom Tariff Heading 2008, specifcally under CTI 2008 19 20 Other roasted nuts & seeds of Chapter 20 of the First Schedule of the Customs Tariff Act, 1975.

9.1 rule accordingly.

"It is requested that this Hon'ble Advance Ruling Authority may take the aforesaid additional submissions along with the Advance Ruling passed by this Authority in Ruling No. No.CAAR/Mum/ARC/38,39 & 40/2024 DATED 12.03.2024, & CAAR/Del/Perfect/05/2024 dated 28.02.2024 into consideration while passing orders in the interest of justice?

5. I have taken into consideration of all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing I have gone through the response from the Customs Port Commissionerates of Chennai-I I (Imports). However, as the matter and questions before the Authority being the same, I therefore proceed to decide the present I application regarding classification of roasted Areca nut on the basis of the information on record as well as the existing legal framework having bearing on the classification of the roasted areca nut under the first schedule of the Customs Tariff Act. 1975.

5.1 1 note that the processes mentioned in Chapter 8 include chilling, steaming, boiling, drying and provisionally preserving. It does not specifically include the process of roasting. Here, it is important to understand the difference between the processes of moderate heat treatment & dehydrating/drying referred in chapter 8 and processes of dry roasting, oil-roasting and fat-roasting referred in chapter 20. The terms dry-roasting, oil roasting and fat-roasting however are not defined in the Customs Tariff Act, 1975. Therefore, these terms have to be understood in a commonly accepted sense. The Hon'ble Apex Court in the case of Alladi Venkateswarlu v. Government of Andhra Pradesh 1978 AIR 945 held that "the commonly accepted sense ofa term should prevail in construing the description of an article of food". In common trade parlance, "drying" is a method of food preservation by the removal of water content. On the other hand, "roasting" means the excess or very high heat treatment that produces fundamental chemical and physical changes in the structure and composition of the goods, bringing about a charred physical appearance. Therefore, drying is a moisture removal process involving methods such as dehydration, evaporation, etc., whereas roasting is a severe heat treatment process ’.

5.2 1 also note that Chapter 20 of the Tariff covers the Preparations of vegetables, fruit, nuts or other parts of plants. As per Chapter Note I (a) to Chapter 20, the Chapter does not cover vegetables, fruits or nuts prepared or preserved by the processes specified in Chapters 7, 8 or 11. Therefore, vegetable, fruit or nut products or preparations made other than by the processes specified in Chapters 7. 8 or 11 are classifiable in Chapter 20. The processes specified in Chapters 7. 8 or 11 mainly include freezing, steaming, boiling, drying, provisionally preserving and milling. Therefore, any vegetable, fruit, nut or edible parts of a plant which is prepared or preserved by any other process than these are liable to be classified under Chapter 20. Heading 2008 covers fruits, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included. Roasting is a process used for bringing in to existence roasted nuts and 1 find that the processes mentioned in chapter 8 do not cover roasting process.

5.3 1 also note submissions of the applicant that the Note 3 to Chapter 8 specifies certain treatments that could be carried out on the dried nuts for additional preservation or stabilization or to improve or maintain their appearance. The applicant in their application has declared that the objectives of the roasting are not as specified in the said note. Further, as per the above note, the processes that could be carried out are moderate heat treatment, sulphuring, and the addition of sorbic acid or potassium sorbate by the addition of vegetable oil or small quantities of glucose syrup. Roasting is different from all the processes mentioned above. Roasting, as submitted by the applicant, is carried out using roasting ovens due to which betel nuts are roasted in the range of 150 degrees Celsius then cooled in room temperature and the cycle is repeated until the moisture content is less than 6 %. This clearly indicates that the roasting is much more than mild heat treatment. Even in the generally understood meaning of the terms, it is understood that roasting involves severe heat treatment and is different from moderate heat treatment as well as dehydration. Therefore, the impugned goods do not satisfy Note 3 to Chapter 8.

5.4 While examining thc scope of CTH 2008, I find 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, groundnuts, 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 MSN 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.

5.5 Moreover, 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. While delivering Phil Corporation Judgment honourable Supreme Court has clearly spell out importance of HSN Explanatory notes in deciding the matters of classification placing reliance on the judgment of Supreme Court in the case of Collector of Central Excise, Shillong v. Wood Craft Products Ltd. (1995) 3 SCC 454. Honourable Supreme Court in paragraph 12 of the said judgment observed as under:

"Accordingly,for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure ofthe Central Excise Tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act."

5.6 Further, in the CAAR, Mumbai Ruling No. CAAR/Mumbai/ARC/39,40,41/2023 in the case of M/s. Universal Impex, the Authority has stated his findings and has ruled accordingly-"in view of the specific CTH 2008 19 20: Other roasted nuts & seeds in chapter 20 of the first schedule to the Customs Tariff HSN Explanatory note to CTH 2008, various Supreme Court rulings upholding guiding value of the HSN Explanatory notes for deciding classification under Customs Tariff Act, 1975 and previously mentioned two Supreme Court judgments classifying roasted nuts which include almonds, betel nut and other nuts under chapter 20 by taking recourse to HSN explanatory note to Tariff Heading 2008”, I rule that roasted betel nuts are correctly classifiable under the tariff item 2008 19 20 of chapter 20 of the first schedule of the Customs Tariff Act, 1975. ”

5.7 Also, the Honourable High Court of Madras in its recent judgement on Civil Miscellaneous Appeal (CMA) No's 600/2023, No. 1206/2023 and No. 1750/2023, dated 01.08.2023, had upheld the classification of Roasted Betel Nuts under CTH 2008 19 20. The Honourable High Court went on to analyse the various aspects in determining classification and summed up that:

(a) 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.

(b) Roasted betel/areca nut having been specifically classified under CTH 2008 19 20. the attempt to classify under CTH 08 02 80 would fall foul of the settled rule of construction that specific entry would prevail over general entry.

(c) HSN Explanatory Notes are normally a safe guide in determining classification under CTH. Roasted areca / betel nut having been mentioned in CTH 2008 19 20 under HSN.

(d) When there is a specific entry covering a product/commodity. the test of common parlance is irrelevant in determining classification.

(e) There is considerable force in the submission that the classification as far as possible must be in conformity and in consonance with the HSN Explanatory Notes

6. I find that the issue dealt with i.e. Classification of“Roasted betel nuts" in the judgement of the Honourable High Court of Madras is similar in nature to that of the impugned issue in this application  and therefore is squarely applicable to this ease. On the basis of aforesaid orders of Hon’ble Courts and also earlier CAAR Rulings in the matter. I am of the view that the “Roasted Areca Nuts (Whole). Roasted Areca Nuts (Split) and Roasted Areca Nuts (Cut)” fall under Custom Tariff Heading 2008. specifically under Sub-heading 20081920 covering “Other roasted nuts & seeds" of the first Schedule of the Customs Tariff Act, 1975.

7. I rule accordingly.

(SAMAR NANDA)           
Customs Authority for Advance Rulings
New Delhi                 

F.No. VUI/CAAR/Delhi/ Exim/ 33/2024                                                                                           Dated:-27.05.2024

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