2024 (1) TMI 1450 - AAR - Customs

Classification of Roasted Areca/Betel Nuts (whole or cut) intended to be imported - to be classified under Chapter 8 which covers edible fruits and nuts or under Chapter 20 which covers preparations of vegetables fruit nuts or other parts of plants? - HELD 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. 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 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. 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. The Honourable High Court of Madras in its recent judgement on 01.08.2023 2023 (8) TMI 492 - MADRAS HIGH COURT has upheld the classification of Roasted Betel Nuts under CTH 2008 19 20. 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

ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is the classification of "Roasted Areca Nuts" under the Customs Tariff Act, 1975. Specifically, the issue is whether these goods should be classified under Chapter Sub-Heading 20081920, which covers "Other roasted nuts and seeds," or under a different classification, such as Chapter 8, which includes dried fruits and nuts.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The classification of goods under the Customs Tariff Act is governed by the terms of the headings, any relevant Section or Chapter Notes, and the Harmonized System Nomenclature (HSN) Explanatory Notes. The applicant argued that the goods should be classified under Chapter 20, specifically under Sub-Heading 20081920, based on the HSN Explanatory Notes, which include roasted nuts. The applicant relied on several case laws and prior rulings to support this classification.

Court's Interpretation and Reasoning

The Court examined the processes involved in the preparation of roasted areca nuts, noting that roasting involves high heat treatment, which is distinct from the moderate heat treatment mentioned in Chapter 8. The Court referenced the HSN Explanatory Notes, which include dry-roasted, oil-roasted, and fat-roasted nuts under Chapter 20, supporting the classification under Sub-Heading 20081920.

Key Evidence and Findings

The applicant described the roasting process, which involves heating the areca nuts to 130-150 degrees Celsius, cooling, and repeating the cycle until the moisture content is reduced to below 6%. The Court noted that this process results in significant chemical and physical changes, distinguishing roasted areca nuts from dried nuts covered under Chapter 8.

Application of Law to Facts

The Court applied the legal framework and precedents to the facts, determining that the roasting process is not covered by the processes specified in Chapter 8. Instead, it falls under the processes described in Chapter 20, which includes roasting as a method of preparation or preservation not specified in other chapters.

Treatment of Competing Arguments

The Customs Department argued that the goods should be classified under Chapter 8, as the roasting process does not significantly alter the character of the nuts. However, the Court found that the roasting process, as described, involves substantial changes that align with the processes covered under Chapter 20, specifically under Sub-Heading 20081920.

Conclusions

The Court concluded that roasted areca nuts are correctly classifiable under Sub-Heading 20081920 of Chapter 20, as the roasting process is distinct from the moderate heat treatment described in Chapter 8.

SIGNIFICANT HOLDINGS

The Court held that "roasted nuts find specific mention in Chapter 20 of the Customs Tariff Act, 1975, as well as corresponding HSN Explanatory Note." The judgment emphasized the importance of the HSN Explanatory Notes as a guide in classification matters, citing the Supreme Court's reliance on these notes in previous rulings.

The Court also referenced the recent judgment of the Madras High Court, which upheld the classification of roasted betel nuts under CTH 20081920, reinforcing the principle that specific entries prevail over general entries in tariff classification.

Final Determinations on Each Issue

The Court ruled that roasted areca nuts should be classified under Sub-Heading 20081920 of Chapter 20, aligning with the HSN Explanatory Notes and previous judicial rulings. The request for confidentiality by the applicant was denied, as similar rulings are already in the public domain.