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TaxTMI 
TaxTMI 
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2026 (1) TMI 343
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.... @25% of duty in terms of section 28(5) of the Customs Act. 2. The appellant is engaged in the business of import and trading of various seed varieties for vegetable crops. The appellant imported 32 consignments of Chilly Seeds through various Bills of Entry during the period from 01.09.2008 to 30.09.2013. 3. According to the appellant, the supplier prior to exportation of the goods in question, undertakes certain standard treatment on the seeds by applying chemicals and fertilizers on the seeds to ensure that the seeds are fit for sowing in the country of importation. The appellant further contends that such treatment makes the goods unfit for human consumption and the seeds can be used for sowing only. The seeds are imported in bulk and thereafter sold by the appellant to farmers in small packets containing 100-150 seeds. 4. The appellant classified the goods under Customs Tariff Heading [CTH] 1209 on payment of 5% basic customs duty under Notification No. 21/2002-Customs dated 01.03.2002 and Notification 12/2012- Customs dated 17.03.2012, as the case may be, and paid nil rate of additional duty of customs [SAD] by virtue of exemption under Notification No. 20/2006-Custo....
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....l duty, interest and penalty. 10. Subsequently, the appellant formed a view that the classification adopted by it was correct and, therefore, in order to verify its understanding, the appellant approached technical experts. The technical experts confirmed that the classification adopted by the appellant was correct. 11. The appellant filed a supplementary reply dated 26.05.2014 before the Additional Commissioner and stated that the classification adopted by it for the seeds at the time of their importation was correct and that it rightly claimed exemption from the payment of SAD. The appellant also requested the Additional Commissioner to withdraw the written submission dated 25.02.2014 and the reply dated 04.04.2014 and to grant four weeks time to file a revised reply and also grant an opportunity for personal hearing so that it can present its case. 12. The Additional Commissioner, however, passed the order dated 13.06.2014 by which the proceedings in respect of show cause notice have been concluded in terms of section 28(6)(ii) of the Customs Act. 13. Subsequent to the passing of the order, the appellant filed an application for rectification of mistake on 14.08.2014....
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....s Piper; dried or crushed or ground fruits of the genus Capsicum or of the genus Pimenta 0904 20 - Fruits of the genus Capsicum or of the genus Pimenta, dried or crushed or ground: 0904 20 10 --- Chilly ........................ Kg. 70% - 0904 20 20 --- Chilly Powder ........................ Kg. 70% - 0904 20 30 --- Fruits of the genus capsicum. . kg. 70% - 0904 20 40 --- Chilly seed ........................ Kg. 70% - 18. With effect from 01.01.2012 Chapter 9 of the Customs Tariff is as follows: Chapter 9 Coffee, tea, mate and spices Notes: xxxxxxx Supplementary Notes: (1) Heading 0901 includes coffee in powder form. (2) 'Spice' means a group of vegetable products (including seeds, etc.), rich in essential oils and aromatic principles, and which, because of their characteristic taste, are mainly used as condiments. These products may be whole or in crushed or powdered form. (3) xxxxxxxxx Tariff Item Description of goods Unit Rate of duty Standard Preferential Areas (1) (2) (3) ....
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..... Kg. 10% - 1209 91 30 --- Of Onion ..................... Kg. 10% - 1209 91 40 --- Of pea ..................... Kg. 10% - 1209 91 50 --- Of Radish. ..................... Kg. 10% - 1209 91 60 --- Of Tomato. ..................... Kg. 10% - 1209 91 90 --- Other ..................... Kg. 10% - 1209 99 --Other: 1209 99 10 --- Fruit seeds for planting or sowing..................... Kg. 10% - 1209 99 90 --- Other ..................... Kg. 10% - 20. The Commissioner (Appeals) has classified the Chilly Seeds imported by the appellant under CTI 0904 22 12 and not under CTI 1209 99 90 for the following reasons: "5.3 For classification of Chilly seeds, the Central Board of Excise and Customs had issued Circular No. 03/2002-Cus., dated 08.01.2002, clarifying that "............... sub-heading 0904.20 does not cover the seeds of the fruits of genus Capsicum or of the genus Pimenta, the two main groups of which are the Chillies or paprikas. Seeds of genus Capsicum (Chilly seeds) imported for sowing or otherwise are appropriately classifia....
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....CTH 12.09, it has been clearly enunciated that it does not include products such as those mentioned at the end of this Explanatory Note, which although intended for sowing, are classified elsewhere in the Nomenclature because they are normally used other than for sowing. ............... ............... The heading excludes: a) ............. b) ............. c) ............. d) spices and other products of Chapter 9." 21. Regarding the extended period of limitation, the Commissioner observed: "5.7 I find that appropriate Customs duty of Rs. 1,66,365/- payable on the import of the "Chilly Seeds" imported from 01.09.2008 to 19.03.2009, alongwith interest of Rs. 1,21,215/-, which was beyond limitation period of five years to issue a demand notice, was short paid or short levied due to willful mis-statement and suppression of facts by the appellant, in the declaration made under the Bills of Entry filed for clearance of the said goods. Realizing the mistake made by them, the appellant came forward and voluntarily paid Rs. 43,64,951/- including Rs. 1,66,365/- plus interest Rs. 1,21,215/- for period beyond five yea....
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.... 23. Ms. Nupur Maheshwari, learned counsel appearing for the appellant assisted by Ms. Kruti Parashar, Shri Shobhit Jain and Ms. Ananya Prakash, made the following submissions: (i) The Chilly Seeds imported by the appellant do not merit classification under CTH 0904; (ii) The Headings read with relative Section Notes and Chapter Notes are of paramount importance to determine the classification of goods; (iii) Thus, for any article to be classified or covered under three dash "---", it has to first fall under the immediately preceding single dash '-' . The impugned order fails to take the general Explanatory Notes in account and directly classifies the subject goods as chilly seeds covered under CTI 0904 22 12. The impugned order does not consider the single or double dash levels of the subject goods. The Chilly Seeds remain outside the scope of single dash 0904 20; (iv) The Chilly Seeds imported by the appellant are neither edible nor fit for human consumption; (v) The Chilly Seeds imported by the appellant have been correctly classified under CTH 1209; (vi) Rule 3(a) of General Rules for the Interpretation would not be applic....
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....ssional rate of basic customs duty and also availed complete exemption from payment of SAD under the Exemption Notification. 28. The appellant claims that it imported different varieties of Chilly Seeds of the genus Capsicum and the exporter of these seeds undertakes standard chemical treatment on the goods by applying chemicals and fertilizers on the seeds to ensure that they are fit for sowing. Such treatment makes the Chilly Seeds unfit for human consumption and they can be used only for sowing. The Chilly Seeds imported by the appellant required permits issued by the Ministry of Agriculture and the Bills of Entry filed by the appellant were physically assessed and duly examined by the customs department before clearing the consignments. The appellant also claims that it imports the Chilly Seeds in bulk and, thereafter, sells it to farmers in small packets containing 100-150 seeds. 29. It will be useful to examine, at this stage, the principles contained in the 'General Rules for Interpretation of the First Schedule' appearing under the 'General Rules for the Interpretation of Schedule-I' that provide for classification of goods and they are as follows:- "Classification....
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....he heading appropriate to the goods to which they are most akin." 5. xxxxxxxxxx 6. xxxxxxxxxx GENERAL EXPLANATORY NOTES 1. Where in column (2) of this Schedule, the description of an article or group of articles under a heading is preceded by the said article or group of articles shall be taken to be a sub-classification of the article or group of articles covered by the said heading. Where, however, the description of an article or group of articles is preceded by the said article or group of articles shall be taken to be a subclassification of the immediately preceding description of the article or group of articles which has "-". Where the description of an article or group of articles is preceded by "---" or "----", the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has "-"or "--"." 30. Thus, for any article to be classified or covered under three dash "---", it has to first fall under the immediately preceding single dash "-". This is clear from the aforesaid General Explanatory Notes which state that where the description of an artic....
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....Coffee, tea, mate and 'spice'. 37. It is seen that supplementary Note 2 to Chapter 9 defines 'spice' "as a group of vegetable products (including seeds, etc.), rich in essential oils and aromatic principles, and which, because of their characteristic taste, are mainly used as condiments. These products may be whole or in crushed or powdered form." The scope of Chapter 09, is under 'spice' is, therefore, limited to items that are mainly used as 'condiments'. 38. 'Condiment' as defined by New Lexicon Webster's Dictionary, means "seasoning used to flavor food". Therefore, scope of Chapter 09 is further limited to spices that are edible additives. 39. Chilly Seeds are not mainly used as a condiment in contrast with mustard seeds or pepper seeds. Subject goods are neither edible nor fit for human consumption. As stated before, the subject goods are solely used for sowing purposes. The goods are treated and laced with poisonous chemicals, making them unfit for consumption. 40. The following facts clarify the Chilly Seeds cannot be used as 'condiments' but is limited for sowing only: a. The packaging of the Chilli Seeds clearly bears the label "CAUTION: - TREATED WITH....
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....regarding classification of Chilly Seeds. It is reproduced below: "Circular: 3/2002-Cus. dated 08.01.2002 Circular No. 3/2002-Cus., dated 08.01.2002 Governments of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Subject: Classification of 'hot pepper seeds (chilli seeds) in the Customs Tariff and its eligibility for benefit of Notification No. 17/2001-Cus., (SI. Nos. 7 and 24 of the Table). Reg. I am directed to refer to the subject mentioned above and to state that a doubt has been raised regarding classification of hot pepper seeds (chili seeds) in the Customs Tariff and its eligibility for the benefit of notification No. 17/2001-Cus., (SI. No. 7 and Sl. No. 24 of the Table). Some Custom Houses are reported to have denied the benefit of the notification to "hot pepper seeds". 2. The matter has been examined. Vide Circular No. 51/2001-Customs, dated 25-9-2001 [2001 (133) E.L.T. T26], it was clarified that pepper seeds imported for sowing purposes would merit classification under heading 09.04 and not under Chapter 12. It was also clarified that if such products (oth....
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.... Bills of Entry. This is what has also been held by the Commissioner (Appeals) in the impugned order. Neither the show cause notice nor the impugned order mentions that there was deliberate attempt to evade payment of service tax. Mere suppression of fact is not enough. The Courts have time and again held that mere suppression of fact is not enough and there has to be a deliberate attempt to evade payment of excise duty. The show cause notice must specifically deal with this aspect and the adjudicating authority is also obliged to examine this aspect in the light of the facts stated by the assessee in reply to the show cause notice. In the absence of any finding having been recorded that suppression was with an intent to evade payment of duty, the extended period of limitation could not have been invoked. 50. It will also be relevant to reproduce portion of the order of the Tribunal in Midas Fertchem Impex Pvt. Ltd. vs. Principal Commr. of Cus., Acc (Import), New Delhi [2023 (384) E.L.T. 397 (Tri.-Del.)] . The Tribunal observed: "50. In practice, the importer makes an entry under Section 46 and also self-assesses duty under Section 17(1) by filing the Bill of Entry. The....