TMI Blog2020 (11) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... t/ arecanut(broken/pulverised) is heated with Vegetable oil, menthol for the purpose of preserving and Sugar, glucose syrup, menthol and spices, viz., cardamom and cloves are added. As per the test reports furnished by the applicant, (from the excellence Laboratory dated 13.11.2019) the percentage content of betel nut is 92% the other ingredients are cardamom(0.9%),Sugar(Betel Nut)-1.9%; Vanaspati/EdibIe Oil-4.7%, which are the admissible ingredients as per Chapter Note 3 of Chapter 08 of the Customs Tariff. Also, the test report of Bureau Veritas India Pvt Ltd states that The sample is cut pieces Of dried edible Betelnut . Thus it is seen [hat the essential character of betel nut (arecanut) remains the same in the product supplied by the applicant. Therefore, following Rule 1 of General principles of Interpretation of the Tariff, the product merits classification under Chapter head 080280 and not under CTH 2106. Rate of GST - HELD THAT:- The rate of CGST is notified vide Notification No. 01/2017-C.T.(Rate) dated 28.06.2017 as amended in respect of goods and that of SGST is notified vide Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Betel nut, under the name and style Nizam Pakku and the said brand name is owned and registered in favour of the Applicant. Pakku is a tamil word for betel nut . The said Nizam Pakku is manufactured by M/s. Azam Laminators Pvt. Ltd. who sells the Nizam Pakku exclusively to the Applicant, which is marketed by them through Dealers and Distributors network. The manufacturing process of Nizam Pakku submitted by the applicant is as below: Dried betel nut is procured and broken into pieces of smaller sizes, pulverized and then gently heated with Vanaspati, so as to ensure that vanaspati is spread evenly on the surface of the betel nuts; Sugar, glucose syrup, menthol and spices, viz., cardamom and cloves are also added; the use of glucose syrup and sugar which contains moisture can form fungus and hence a meager quantity of saccharin to the extent of 1000 Parts per million is added purely for preservation purposes; the resultant product is packed in small pouches under the name and style of NIZAM PAKKU. The same is used by people for chewing either along with betel leaves or as such. The essential character of betel nut is preserved as such and the product has not ceas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms Department has drawn sample of the product and tested by the Chemical Examiner in the Customs House Laboratory which observed that The sample is in the form of brown coloured small betel nut pieces together with sugar, menthol, cardamom; It is dried edible betel nut . Accordingly, the Applicant as well as other similar exporters has been classifying the same under Chapter 0802. Also, the Tamil Nadu Food Safety and Drug Administration Department has granted license to the Applicant to deal with the subject Nizam Pakku as Distributor, Wholesaler and Transporter. It may be observed from the license that the subject product, Nizam Betelnut is classified under HSN 0802 9013 (corresponding to 0802 8030 prior to the amendments with effect from 2011). 2.3. Further, the Applicant submitted that the issue of classification of the subject goods, under Kerala VAT Act has arisen and culminated in Order No.C3/7632/13/ CT Dt. 03.03.2015 passed by the Commissioner of Commercial Taxes, Kerala, where the product has been held to be falling under HSN Code 0802 9013. The applicant has stated that Central Excise Tariff is also aligned to Customs Tariff and HSN, but for certain differences. Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter of being betel nut. The various process undertaken, as narrated above, did not at all dilute the essential character of the product and the product remains as betel nut and consumed as betel nut. Further, the processes undertaken by the applicant were the ones which are contemplated in Note 3 (b) of Chapter 8 only. With effect from the entry under Chapter 21, which read as betel nut powder known as supari has been changed to Betel nut product known as supari and both these phrases have been defined in same manner, which indicates that there is no difference between these phrases. It may be observed from the definition that betel nut product known as supari is first of all a preparation containing betel nut, i.e. apart from betel nut, there would be further ingredients in the preparation. Further, the said preparation should not contain lime, katha and tobacco, in which case, it cannot be called as betel nut product known as supari . But the presence or absence of other ingredients such as cardamom, copra and menthol are not at all relevant to call a product as betel nut product known as supari . The applicant argued that the product in question contained only betel nut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to apply Note 6 of Chapter 21, 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 6 can be applied, Once the product is classifiable under Chapter 8, the said Note 6 in Chapter 21 is not at all relevant. The subject product is not a preparation containing betel but, but betel nut itself, which has been subjected only to processes envisaged in Note 3 (b) of Chapter 8 and retained its character as betel nut. The only ingredient present in the product was betel nut and addition of Vanaspati, glucose syrup, menthol, spices and saccharin were only for purposes of preservation, sweetening and perfumery. It was not a preparation containing betel nut and other products. In view of the foregoing, it was argued that the subject product was classifiable only under Chapter 0802 9013 and not under 2106 9030, in as much as, The subject product retained its essential character as betel nut, Dried betel nut was subjected only to moderate heat treatment, application of Vanaspati, addition of small quantities of sugar, glucose, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reate fused product. They also stated that they sell only upto ₹ 2 pouches (25p, 50p, Re. 1) with the words Nizam Pakku /Nizam betelnut. They stated that the correct classification should be 0802 80 30 as they are permitted to do the above process as per the Chapter Note. They also submitted various Tribunal/ S.C. Judgments to support their stand. They submitted purchase and sale invoices. They undertook to submit detailed manufacturing process giving the proportion of all ingredients used to manufacture, latest test report, difference between Supari and their product within 3 weeks. 3.2 As undertook in the Personal hearing the applicant filed the following on 21.11.2019. i. Detailed manufacturing process followed in Areca/betel nuts by Nizam Pakku - The ripened areca/ betel nuts are harvested and cut into two equal halves and boiled in the water and then sun dried for many days to make them edible by farmers/ sellers. The sun-dried areca/ betel nuts are bought by them and cut into small pieces. The cut small pieces of Areca/ betel nuts are mildly heated with vegetable oil and vanaspati and after the heat is reduced, it is coated with cardamom/ menthol/ saccharin/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Arecanut and ingredients. 4.1 Effective 19.05.2020, there was change in the authority and Shri. B. SenthiIveIavan, Additional Commissioner was appointed as CGST Member of the Authority. In view of change in the Authority and due to the prevailing pandemic, the applicant was offered to be heard through Digital media and the applicant acceded to the same. The applicant was heard on 15.10.2020. The Authorised representative of the applicant participated in the hearing process. He reiterated the written submissions and stated that the classification issue of their product based on the Central Excise Tariff is settled by the Hon ble Supreme Court in the case of Azam Laminators, who are their suppliers as falling under CETH 0802 They requested an early ruling. 5.1 The applicant is under the administrative Jurisdiction of State Tax Officer and the comments of the state jurisdictional officer on the issue raised by the applicant in the Advance ruling Application is given below: The applicant is engaged in making scented betel nut. Dried betel nut is procured and broken into pieces, pulverized and heated with vanaspathi, added with sugar, glucose syrup, menthol and spices li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N code as adopted in the GST Act is only aligned with the Customs Tariff Act, the purposed/ allowances which are narrated in Note No. 3 of Chapter 8 can squarely be applied under the GST Act also. There is clear indication as narrated in the explanations given at the bottom of the rate of tax schedule which goes to say that the Tariff item , sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) only. Moreover the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of the notification issued under the GST Act also. The Honorable Supreme Court has decided in the case of Crane Betel Nut Powder Works Vs. CCE - reported in 6 VST 532 (S.C.) = 2007 (3) TMI 6 - SUPREME COURT that the end product would fall under 0801. In the dealer s own case also the same product Nizam Pakku manufactured by them, in their earlier name of A.R.S Company Ltd., and also by Azam Laminators (p) Ltd., on appeal, the Hon ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lassifiable under CTH 0802 8030 and the applicable rate of CGST is 2.5% as per S.No. 28 of schedule 1 of Notification No. 01/2017-C.T.(Rate) dated 28.06.2017. 7.2 From the submissions, it is seen that the product is marketed as NIZAM PAKKU . From the Tax Invoice furnished [Invoice No.783 cit. 12-Nov-2019,729 dated 24-0ct-2019,680 dated 29.10.20191, it is seen that the description is NIZAM BETELNUT GRADE II , BETELNUT GRADE 11 250 PCSX20PKTS, LOOSE BETELNUT 100X50, etc, the HSN code is specified as 0802 and the rate of tax charged is CGST @ 2.5% SGST @ 2.5%. The product is said to be used for chewing with or without betel leaves. 7.3 Under GST, the applicable rates of CGST are notified by Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 and explanation (iii) and (iv) to the said Notification, states as follows: (iii) Tariff item , sub-heading heading and Chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or bitter), hazelnuts or filberts, walnuts, chestnuts (Castanea spp.), pistachios, pecans and pignolia nuts (seeds of the Pinus pinea). This heading also covers areca (betel) nuts used chiefly as a masticatory, cola (kola) nuts used both as a masticatory and as a base in the manufacture of beverages, and an edible, nut-like, spiny-angled fruit of the species Trapa natans, sometimes referred to as a water chestnut. CTH 2106: 2106 9030 Supplementary Notes to Chapter 21 1. .. 2. In this Chapter betel nut product 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 or menthol. 2106 FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED 21061000 - Protein concentrates and textured protein substances 210690 - Other : --- Soft drink concentrates : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter 21(21069030-Betel nut product known as Supari ) of Central Excise Tariff(CET) as claimed by the Department. CESTAT relying on the decision of Hon ble Supreme Court in respect of the very same product NIZAM PAKKU manufactured by Azam Laminators in their earlier name (A.R.S. Company Ltd), has held that the product is classifiable under CET heading 08028090 of the Central Excise Tariff entry prevailing from 01.03.2012. Following the ratio of the said CESTAT decision which has been accepted by the Department, the demands raised on M/s. Azam Laminators (P) Ltd for the subsequent periods of 01/2015 to 06/2017 has been dropped by the Jurisdictional Commissioner who also held that the product is classifiable under CETH 08028090. The entries in Central Excise Tariff prevailed during the period of dispute for which the Hon ble CESTAT has decided the classification and the entries in the prevailing Customs Tariff relating to the entries of Chapter 0802 08 are similar. Further, the applicant has not stated that the product for which clarification on classification is sought is different from the one for which the classification stands decided in the case of M/s. Azam Laminators, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s minuted under (xxxviii) of Annexure I of Para 15.9, the same is reproduced under: xxxviii) Areca nut : The Hon'ble Minister from Karnataka stated that fresh areca nut harvested from trees was proposed to be taxed at Nil rate, the dry and processed areca nut was proposed to be taxed at the rate of 12%. He stated that the weighted average of the combined tax incidence today would not be more than 5%. He stated that farmers sold dried areca nut and its rate of tax should not be more than 5%. The Hon'ble Minister from Meghalaya stated that areca nut was a perishable agricultural product and green areca nut should be taxed at zero per cent and dried areca nut should be taxed at 5%. The Secretary stated that in Chapter 8 of the HSN, a carve out could be considered for dried, unprocessed areca nut to be taxed at 5% which should not be called betel nut. Accordingly, it was proposed that dried areca nuts, whether or not shelled or peeled, might be kept at 5%. The Council agreed to this proposal. From the above, it is evident that only those dried areca nut, not called as betel nut is subjected to 5% GST under Sl. No. 28 of Schedule I. The product in hand being bete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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