COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, AMRITSAR (PUNJAB) VS M/S D.L. STEELS

COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, AMRITSAR (PUNJAB) VS M/S D.L. STEELS

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

Civil Appeal Nos. 2360-2376 of 2009 Page 1 of 26
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 2360-2376 OF 2009
COMMISSIONER OF CUSTOMS AND
CENTRAL EXCISE, AMRITSAR (PUNJAB)
..... APPELLANT
VERSUS
M/S D.L. STEELS ETC. ..... RESPONDENT(S)
J U D G M E N T
SANJIV KHANNA, J.
These appeals raise a common question – should dried
pomegranate seeds, domestically known as ‘anardana’, be
classified under Heading 0813 of the Tariff entries issued under the
Customs Tariff Act, 1975,
1 as claimed by the Commissioner of
Customs, Amritsar,
2 or under Heading 1209 as claimed by the
importers?3
2. For brevity, we will only refer to the specific facts in the case of M/s.
D.L. Steels, wherein the respondent had imported two
1
“the Act”, for short.
2
“the appellant” / “the Revenue”, for short.
3
“the respondent” / “the other respondents”, for short.
Civil Appeal Nos. 2360-2376 of 2009 Page 2 of 26
consignments of ‘anardana’
4
from Pakistan, vide Bills of Entry dated
15th December 2005 and 9th March 2006. For taxation they
classified the goods under the tariff sub-heading 1209.99.90,
attracting basic custom duty at the rate of 5% plus education cess
at the rate of 2%. However, the customs authorities contend that
the goods must fall under sub-heading 0813.40.90, and
accordingly, are liable for basic custom duty at the rate of 30% plus
education cess at the rate of 2%.
3. To this end, the Office of the Assistant Commissioner, Rail Cargo,
Amritsar,
5
issued a show-cause notice dated 27th March 2006,
which inter alia stated that fresh pomegranate falls under the
Heading 0810, and the goods, being nothing but the dried form of
fresh pomegranate fruit seeds, would fall under Heading 0813, an
entry which covers the dried form of all items falling under Headings
0807 to 0810. Consequently, sub-heading 0813.40.90 would be
applicable to the goods.
4. The goods were released provisionally by the customs authorities
on the execution of a bond. By assessment order dated 31st May
2006, the adjudicating authority confirmed the differential duty of
4 Hereinafter referred to as “the goods”.
5 Hereinafter referred to as “adjudicating authority’”.
Civil Appeal Nos. 2360-2376 of 2009 Page 3 of 26
Rs.82,136/- under Section 28(2) of the Customs Act, 1962, and
imposed a personal penalty of Rs.82,000/- under Section 114-A
read with Section 112 of the Customs Act on the respondent. Levy
of interest under Section 28AB was directed.
5. Similar orders based on identical grounds classifying the goods
under sub-heading 0813.40.90, imposing differential duty, interest,
and penalty were passed in the cases of the other respondents as
well.
6. First appeals preferred by the respondents were allowed by the
Commissioner (Appeals), Central Excise, Jalandhar, on the ground
that the goods were the dried form of a type of pomegranate which,
when fresh, is not consumed as a fruit. Accordingly, Heading 0810,
which applies to the type of pomegranate which is consumed as a
fruit, would have no relevance to the type of pomegranate from
which the goods are obtained. Additionally, it was observed that the
respondents’ contention would also prevail in light of the policy
condition attached to sub-heading 1209.99.90 of the Indian
Export/Import Policy,
6 which specifically states – “import of
pomegranate seeds will be free”.7
6
“Import Policy”, for short.
7 The word “free” here denotes that the import of pomegranate seeds is not subject to licencing
restrictions. It does not imply that custom duty is not payable. Reference to the sub-heading is relevant.
Civil Appeal Nos. 2360-2376 of 2009 Page 4 of 26
7. Aggrieved, the Revenue preferred appeals before the Customs,
Excise and Service Tax Appellate Tribunal,
8 which, in the case of
the respondent, was dismissed vide order dated 18th July 2008 inter
alia citing the certificate of Dr. Y.S. Parmar University of Horticulture
and Forestry, Solan, to hold that the goods do not fall under the
ambit of Heading 0813. The CESTAT observed that words in a
taxing statute must be construed in the same sense as understood
in common or trade parlance, and the Revenue had failed to lead
any evidence to support its contention that in trade parlance, the
goods are understood as dried fruits. Reference was made to the
observation in the Import Policy which had classified the goods
under the sub-heading 1209.99.90. Adverting to the Explanatory
Notes to the Heading 1209, it was held that as the goods did not
fall in the list of items expressly excluded from sub-heading
1209.99.09, they very well stood included in the sub-heading
1209.99.90. Accordingly, sub-heading 0813.40.90 was not
applicable, and the appeal was dismissed.
8. Similar orders were passed by the CESTAT in the cases of other
respondents as well. Resultantly, the Revenue is in appeal before
us.
8
“CESTAT”, for short.
Civil Appeal Nos. 2360-2376 of 2009 Page 5 of 26
9. The Harmonised System of Nomenclature,
9 developed by the World
Customs Organisation, has been adopted in India by way of the
Customs Tariff Act, 1975, though there are certain entries in the
Schedules to this Act which have not been assigned HSN codes.
The Harmonised System is governed by the International
Convention on Harmonised Commodity Description and Coding
System, which was adopted in 1983, and enforced in January,
1988. This multipurpose international product nomenclature
harmonises description, classification, and coding of goods. While
the primary objective of the HSN is to facilitate and aid trade, the
Code is also extensively used by governments, international
organisations, and the private sector for other diverse purposes like
internal taxes, monitoring import tariffs, quota controls, rules of
origin, transport statistics, freight tariffs, compilation of national
accounts, and economic research and analysis. In the present
times, given the widespread adoption of the Harmonised System
by over 200 countries, it would be extremely difficult to deal with an
international trade issue involving commodities, without adverting
to the Harmonised System. The Code is the bedrock of custom
controls and procedures. The HSN consists of over 5000
commodities groups, which are structured into 21 Sections and 97
9
“Harmonised System” / “HSN” / “the Code”, for short.
Civil Appeal Nos. 2360-2376 of 2009 Page 6 of 26
Chapters, which are further divided into four and six digit subheadings. Many custom administrations, like India, use an eight or
more digit commodity coding system, with the first six digits being
the HSN code.
10. Classification under the Harmonised System is done by placing the
good under the most apt and fitting sub-heading. This is done by
choosing the appropriate Chapter, Heading, and sub-heading
respectively. To facilitate interpretation and classification, each of
the 97 Chapters in the HSN contain corresponding Chapter Notes,
General Notes, and Explanatory Notes applicable to the Headings
and sub-headings within that Chapter. In addition, there are six
General Rules of Interpretation10 applicable to the Harmonised
System as a whole.
11. GRI 1 states that the titles of Sections, Chapters, and sub-Chapters
are provided for ease of reference only. Therefore, they have no
legal bearing on classification. Classification is to be effected: (a)
according to the terms of the Headings and any relative Section or
Chapter Notes; and, (b) provided the Headings or Chapter Notes
do not otherwise require according to the provisions thereinafter
10 “GRI”, for short. The GRIs were incorporated in the First Schedule to the Customs Tariff Act, 1975
vide the Customs Tariff (Amendment) Act, 2003.
Civil Appeal Nos. 2360-2376 of 2009 Page 7 of 26
contained, viz., GRIs 2 to 6. Thus, it is clear from the above that: (i)
the Headings, and, (ii) the relative Section or Chapter Notes must
be considered before classification is done. Only after this exercise
is done, if a conflict in classification still persists, the subsequent
GRIs are to be resorted to. GRI 2 is not germane to the present
case and therefore, we make no reference to it. GRI 3 provides for
classification in the event when the goods are classifiable under two
or more Headings. As per GRI 3, when by application of GRI 2(b)
or for any other reason, the goods are, prima facie, classifiable
under more than one Heading, then; (a) the ‘most specific
description’ is preferred, (b) a mixture of different goods will be
classified as that good which gives the mixture its ‘essential
characteristic’, and (c) when goods cannot be classified with
reference to (a) or (b), they should be classified under the Heading
which occurs last in the numerical order.11 The order of priority
11 The General Rules of Interpretation 1 and 3 are reproduced below without the Explanatory Notes:
“1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference
only; for legal purposes, classification shall be determined according to the terms of the
headings and any relative Section or Chapter Notes and, provided such headings or Notes
do not otherwise require, according to the following provisions:
xx xx xx
3. When by application of rule 2(b) or for any other reason, goods are, 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
providing 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.
Civil Appeal Nos. 2360-2376 of 2009 Page 8 of 26
therefore is; (a) specific description, (b) essential character, and (c)
the Heading which occurs last in numerical order. However, GRI 3
can only take effect provided the terms of the Heading or Section
or Chapter Notes do not otherwise require. GRI 4 states that when
the goods cannot be classified in accordance with the
aforementioned rules, they shall be classified under the heading
appropriate for the goods “to which they are most akin”. GRI 5
applies exclusively to cases and packing material, and therefore, is
not apropos. GRI 6 states that the classification of goods in the subheadings of a Heading shall be determined according to the terms
of those sub-headings and any related Notes, and mutatis mutandis
to the above GRIs, on the understanding that only sub-headings at
the same level are comparable.
12. We would, at this stage, take on record the well-settled principle
that words in a taxing statute must be construed in consonance with
their commonly accepted meaning in the trade and their popular
meaning.12 When a word is not explicitly defined, or there is
(b) Mixtures, composite goods consisting of different materials or made up of different
components, and goods put up in sets for retail sale, which cannot be classified by
reference to (a), shall be classified as if they consisted of the material or component which
gives them their essential character, in so far as this criterion is applicable.
(c) When goods cannot be classified by reference to (a) or (b), they shall be classified under
the heading which occurs last in numerical order among those which equally merit
consideration”.
12 See Dunlop India Ltd. v. Union of Indian and Ors. (1976) 2 SCC 241, and Commissioner of Central
Excise, New Delhi v. Connaught Plaza Restaurant Private Ltd., New Delhi (2012) 13 SCC 639.
Civil Appeal Nos. 2360-2376 of 2009 Page 9 of 26
ambiguity as to its meaning, it must be interpreted for the purpose
of classification in the popular sense, which is the sense attributed
to it by those people who are conversant with the subject matter
that the statute is dealing with. This principle should commend to
the authorities as it is a good fiscal policy not to put people in doubt
or quandary about their tax liability. The common parlance test is
an extension of the general principle of interpretation of statutes for
deciphering the mind of the law-maker. However, the above rule is
subject to certain exceptions, for example, when there is an artificial
definition or special meaning attached to the word in a statute, then
the ordinary sense approach would not be applicable.13
13. The two contesting Headings along with the relevant General,
Chapter and Explanatory Notes are extracted below:
“Chapter 8: Edible Fruit and Nuts; Peel of Citrus Fruit or
Melons
Chapter Notes.
1.- This Chapter does not cover inedible nuts or fruits.
xx xx xx
General:
This Chapter covers fruit, nuts and peel of citrus fruit or
melons (including watermelons), generally intended for
human consumption (whether as presented or after
processing).
xx xx xx
08.10 – Other fruit, fresh.
13 Collector of Central Excise, Kanpur v. Krishna Carbon Paper Company, (1989) 1 SCC 150.
Civil Appeal Nos. 2360-2376 of 2009 Page 10 of 26
081010 - Strawberries
081020 - Raspberries, blackberries, mulberries and
loganberries
081030 - Black, white or red currants and gooseberries
081040 - Cranberries, bilberries and other fruits of the genus
Vaccinium
081050 - Kiwifruit
081060 - Durians
081090 - Other
0810.90 Other
This heading covers all edible fruits not falling in any
preceding heading of this Chapter nor included in other
Chapters of the Nomenclature (see the exclusions in the
General Explanatory Note to this Chapter).
It therefore includes:
(1) – (6)
(7) Boysenberries, rowan berries, elderberries, sapodilla
(naseberries), pomegranates, cactus figs (prickly pears),
rose hips, persimmons (kakis), jujubes, medlars, longans,
litchi, soursops, sweetsops and fruit of the species Asimina
triloba also known as pawpaws.
xx xx xx
08.13 – Fruit, dried, other than that of headings 08.01 to
08.06; mixtures of nuts or dried fruits of this Chapter.
0813.10 - Apricots
0813.20 - Prunes
0813.30 - Apples
0813.40 - Other fruit
0813.50 – Mixtures of nuts or dried fruits of this Chapter
(A) Dried fruit.
This heading includes dried fruits which when fresh are
classified in headings 08.07 to 08.10. They are prepared
either by direct drying in the sun or by industrial processes
(e.g., tunnel-drying).
xx xx xx
However, the heading excludes such products consisting of
a mixture of one or more of the dried fruits of this heading
with plants or parts of plants of other Chapters or with other
substances such as one or more plant extracts (generally
heading 21.06).
xx xx xx
Civil Appeal Nos. 2360-2376 of 2009 Page 11 of 26
Chapter 12: Oil seeds and Oleaginous Fruits;
Miscellaneous Grains, Seeds and Fruit; Industrial or
Medicinal Plants; Straw and Fodder
Chapter notes.
(1.)-(2.)
3.- For the purposes of heading 12.09, beet seeds, grass
and other herbage seeds, seeds of ornamental
flowers, vegetable seeds, seeds of forest trees, seeds of fruit
trees, seeds of vetches (other than those
of the species Vicia faba) or of lupines are to be regarded as
"seeds of a kind used for sowing
Heading 12.09 does not, however, apply to the following
even if for sowing : (a) Leguminous vegetables or sweet corn
(Chapter 7); (b) Spices or other products of Chapter 9;
(c) Cereals (Chapter 10); or (d) Products of headings 12.01
to 12.07 or 12.11.
xx xx xx
12.09- Seeds, fruit and spores, of a kind used for sowing.
1209.10 Sugar beet seed
 -Seeds of forage plants:
1209.21 Lucerne (alfalfa) seed
1209.22 Clover (Trifolium spp.) seed
1209.23 Fescue seed
1209.24 Kentucky blue grass (Poa pratensis L.) seed
1209.25 Rye grass (Lolium multiflorum Lam., Lolium
perenne L.) seed
1209.26 Timothy grass seed
1209.29 Other
1209.30 Seeds of herbaceous plants cultivated principally
for their flowers
 - Other:
1209.91 Vegetable seeds
1209.99 - Other
This heading covers all seeds, fruit and spores of a kind
used for sowing. It includes such products even if they are
no longer capable of germination. However, 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 includes beet seeds, grass or other herbage
seeds (lucerne, sainfoin, clover, fescue rye grass, Kentucky
blue grass, timothy grass, etc.), seeds of ornamental
flowers, vegetable seeds, seeds of forest trees (including
pine cones bearing seeds), seeds of fruit trees, seeds of
vetches (other than those of the species Vicia faba, ie.,
broad beans and horse beans), seeds of lupines, tamarind
seeds, tobacco seeds, and seeds (not themselves used
Civil Appeal Nos. 2360-2376 of 2009 Page 12 of 26
primarily in perfumery, in pharmacy or for insecticidal,
fungicidal or similar purposes) of plants yielding the products
of heading 12.11.
xx xx xx
The heading excludes:
(a) Mushroom spawn (heading 06.02).
(b) Leguminous vegetables and sweet corn (Chapter 7).
(c) Fruit of Chapter 8.
(d) Spices and other products of Chapter 9.
(e) Cereal grains (Chapter 10)
(f) Oil seeds and oleaginous fruits of headings 12.01 to
12.07.
(g) Seeds and fruit which are themselves of a kind used
primarily in perfumery, in pharmacy, or for insecticidal,
fungicidal or similar purposes (heading 12.11)
(h) Locust beans (heading 12.12).
xx xx xx
12.11 – Plants and parts of plants (including seeds and
fruits), of a kind used primarily in perfumery, in pharmacy or
for insecticidal, fungicidal or similar purposes, fresh or dried,
whether or not cut, crushed or powdered.
1211.10 – Liquorice roots
1211.20 – Ginseng roots
1211.30 – Coca leaf
1211.40 – Poppy straw
1211.90 – Other
This heading covers vegetable products of a kind used
primarily in perfumery, in pharmacy or medicine, or for
insecticidal, fungicidal, parasiticidal or similar purposes.
They may be in the form of whole plants, mosses or lichens,
or of parts (such as wood, bark, roots, stems, leaves flowers,
petals, fruits and seeds (other than oleaginous fruits and oil
seeds classified in headings 12.01 to 12.07), or in the form
of waste resulting, in the main, from mechanical treatment.
They remain in the heading whether fresh or dried, whole,
cut, crushed, ground or powdered or (where appropriate)
grated or hulled. Products of this heading impregnated with
alcohol remain classified here.”
14. Though not cited or relied upon by either party, for completeness,
we would like to reproduce the relevant Headings of Chapter 9 and
the General and Explanatory Notes applicable:
Civil Appeal Nos. 2360-2376 of 2009 Page 13 of 26
“Chapter 9: Coffee, Tea, Mate and Spices
General:
This Chapter covers:
xx xx xx
(2) Spices, i.e., 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.
xx xx xx
This Chapter further excludes:
(a)-(c)
(d) Certain fruits, seeds and parts of plants which, although
they can be used as spices, are more often employed in
perfumery or in medicine (heading 12.11)(e.g., cassia pods,
rosemary, wild marjoram, basil, borage, hyssop, all species
of mint, rue and sage).
xx xx xx
09.09 - Seeds of anise, badian, fennel, coriander, cumin or
caraway; juniper berries.
0909.10 – Seeds of anise or badian
0909.20 – Seeds of coriander
0909.30 – Seeds of cumin
0909.40 – Seeds of caraway
0909.50 – Seeds of fennel; juniper berries
These fruits or seeds are used for consumption as spices,
for industrial purposes (e.g., in distilleries) and for medicinal
purposes. They remain in this heading even when, in case
of anise seeds in particular, they are put up (e.g., in sachets)
for making herbal infusions or herbal “teas”.
xx xx xx
09.10 – Ginger, saffron, turmeric (curcuma), thyme, bay
leaves, curry and other spices.
0910.10 – Ginger
0910.20- Saffron
0910.30 - Turmeric (curcuma)
0910.40 - Thyme; bay leaves
0910.50- Curry
- Other spices:
0910.91-- Mixtures referred to in Note 1 (b) to this Chapter
0910.99 -- Other
Civil Appeal Nos. 2360-2376 of 2009 Page 14 of 26
Thus, the seeds of anise, badian, fennel, coriander, cumin,
and caraway fall under the Heading 09.09. The Note is inclusive
and states that these seeds may be used for consumption as
spices, for industrial purposes and for medicinal purposes.
However, what is of relevance is the General Note 2 which refers
to a group of vegetable products including seeds etc. rich in
essential oils and aromatic principles, or which on account of their
characteristic taste are mainly used as condiments. However, the
Chapter excludes certain fruits, seeds, and parts of plants which
although used as spices are more often employed in perfumery or
in medicine and are classified under heading 12.11.
15. The first Chapter Note to Chapter 8 stipulates that inedible nuts and
fruits are not covered by the Chapter. Clearly, for the purpose of
classification, this Note draws a distinction between ‘edible’ and
‘inedible’ fruits. Etymologically, the word ‘edible’ derives from the
Latin word ‘edibilis’ which means ‘eatable’. The word ‘edible’ as per
Webster’s New International Dictionary means “fit to be eaten as
food; eatable; esculent.” The Concise Oxford English Dictionary
defines edible as “fit to be eaten”. The phrase ‘fit to be eaten’ can
imply an absence of harmful effects. However, while the word
‘edible’ seems simple, it warrants elaboration as over-simplification
Civil Appeal Nos. 2360-2376 of 2009 Page 15 of 26
will be problematic. Ben Baumgartner, in his article,
14 has referred
to several judgments of different courts in the United States of
America to argue that the decisions have culminated in the various
tests and parameters to determine the meaning of the word ‘edible’.
These are extracted below:
“Thus, courts have turned to, and parties have argued
for, various other tests to determine whether a good is
edible. Such tests include: (1) whether the good
appears edible to the senses, (2) whether the good
provides nourishment, (3) whether the good’s
constituent parts are edible, (4) whether the good is
principally used as food, (5) whether the good may be
eaten without harmful effects, (6) whether the good is
“habitually eaten”, and (7) whether the good is actually
eaten. This Comment argues that a good should be
considered edible if it can be eaten without harmful
effects, but that whether the good is “habitually eaten”
should control if testing the good is dangerous, and if
neither of these tests yields a result, the matter should
be resolved by whether the good is actually eaten.”
The author thereafter goes on to argue that an item should be
considered edible if it can be eaten without harmful effects,
however, the ‘habitually eaten’ test would apply if the testing of the
goods to check for harmful effects is dangerous. If neither of the
two tests yield a result, the matter should be resolved by
determining if the item was actually eaten. We need not discuss this
article in detail but for the purpose to record that the word ‘edible’ is
14 Ben Baumgartner. "Chewing it Over: Determining the Meaning of Edible In the Harmonized Tariff
Schedule of the United States". Kansas Law Review, Kansas Law Review Inc. November, 2015: vol.
64(1).
Civil Appeal Nos. 2360-2376 of 2009 Page 16 of 26
capable of diverse and multiple meanings, which are plausible. For
the purpose of the present case, the word ‘edible’ must be
construed using the principle of common parlance, which has been
discussed supra. The law-makers, while enacting statutes, are
cognizant of the way in which a word might be understood in
common or trade parlance. Thus, if a meaning different than that
attributed to it by people who are conversant in that subject matter
was intended to be attached to a word, the same would be
specifically delineated by way of a definition. The word ‘edible’ has
no such specific definition attached to it, and therefore, must be
interpreted using the common parlance test. The question which so
arises is whether the goods – ‘anardana’, are dried pomegranates,
which when fresh are understood as ‘edible’ fruits in common
parlance. Before we elaborate on the factual aspect, the
desideratum requires that we consider sub-heading 081340.90 in
Chapter 8.
16. The contention of the appellant is that the goods are covered by
sub-heading 081340.90. As mentioned in the title of the Heading
itself, the Heading does not include fruits which, when fresh, are
covered under Headings 08.01 to 08.06. If the dried fruits are
relatable to the fresh fruits classified under the Headings 08.07 to
08.10, they would fall in the category of ‘other fruits’ in 0813.40. The
Civil Appeal Nos. 2360-2376 of 2009 Page 17 of 26
dried fruits, for the purpose of this Heading, may be prepared either
by drying directly in the Sun or by industrial process like tunnel
drying. The last portion of the Explanatory Note to Heading 08.13
states that products consisting of mixtures of one or more of the
dried fruits of this Heading with plants or parts of plants of other
Chapters or with other substances, such as one or more plant
extracts, are excluded. Reference is made to Heading 21.06 in this
regard. This Note, however, is not applicable to the goods in
question, as they are not mixed with other plants or parts of plants.
17. It is also required to be noted that the Explanatory Note to Heading
08.10 states that the Heading covers all edible fruits not falling in
any preceding Heading of the Chapter, nor included in other
Chapters. Any fruit included in any other Chapter, is not to be
included under the sub-heading 08.10. Reference in this regard can
also be made to the exclusion in the General Note to this Chapter.
The General Explanatory Notes exclude a number of vegetable and
other products, even though botanically they are fruits, as they are
covered more specifically in other Chapters. Reference by way of
example is made to fruits that are primarily used in pharmacy or
perfumery, locust beans, kernels of apricots or of similar fruit
contained in Chapter 12. The Chapter Note also excludes from
Chapter 8, the products of Chapter 9.
Civil Appeal Nos. 2360-2376 of 2009 Page 18 of 26
18. In favour of the appellant’s claim, it must be highlighted that
pomegranates, along with some other fruits, are expressly included
in clause 7 to the Explanatory Notes to sub-heading 0810.90.
Consequently, it can be argued with some merit that dried
pomegranate, if prepared by drying in the Sun or by industrial
processes, would fall under sub-heading 0813.40.
19. However, pomegranates are rather unusual fruits and their
structure is unlike other fruits. The outer most layer is a hard and
inedible shell. The edible part consists of the seeds and arils. Arils
are the sweet, juicy, and crunchy covering that encase the seeds.
However, the finding of the CESTAT is that wild pomegranates from
which ‘anardana’ is made are different from the pomegranate fruit.
This finding of fact is supported by considerable literature which
states that ‘anardana’ is prepared by dehydrating the arils of wild
pomegranates, and not from the pomegranate which is eaten as a
fresh fruit.
15 The conventional utilization of the wild pomegranate
15 Refer to: J. S. Pruthi and A. K. Saxena. “Studies on Anardana”. Journal of Food Science and
Technology, September/October, 1984: vol. 21, and specific reference may be made to the first
paragraph which reads “Dried, sour, whole pomegranate (Punica granatum L) seeds popularly known
as Anardana, is used as an acidulant in Indian curries, chutneys, etc. in place of tamarind and amchur
(dried raw mango) in North India. It is also used in Ayurvedic system of medicine”.
The research paper by Amit Prashar, S. K. Gupta and Ashok Kumar. “Studies on separation techniques
of pomegranate seeds and their effect on quality of Anardana”. African Journal of Biochemistry
Research, October, 2009: vol.3(10) states “the dehydrated seeds of wild pomegranate fruits
(Anardana) are used as acidulent in culinary preparations and in making various medicines”.
Civil Appeal Nos. 2360-2376 of 2009 Page 19 of 26
fruit lies in drying the seeds along with pulp to make ‘anardana’.
The wild pomegranate fruit is widely found on the hilly slopes of the
Himalayas. It contains high acid content along with other quality
characteristics, which distinguishes it from the pomegranate fruit
which is consumed as a fresh fruit. The dried wild pomegranate arils
have a distinct tart and sour flavour, owing to the high acid content,
which gives it the commercial value. ‘Anardana’, therefore, can be
defined as Sun-dried seeds of ripe sour pomegranate, and is
predominantly used as an acidulant in Indian and Persian cuisines,
and for its health benefits in the Ayurvedic system of medicine.
20. The respondents, in support of their contention, have relied upon a
certificate issued by Dr. Y.S. Parmar University of Horticulture and
Forestry, Solan, which has been relied upon by the CESTAT and
reads:
To Whom It May Concern
This is to certify that Anaradana is dried product of local
Daru which grows in wild form in mid hill conditions. The
fruits of Daru are harvested in the month of July/August
and seeds after extraction are dried which is known as
Anardana. Whereas, Anar is used for fresh fruit purpose
Abhimanyu Thakur, N. S. Thakur, Hamid, Pradeep Kumar and Sunakshi Gautam. “Studies on Storage
Quality Evaluation of Dried Wild Pomegranate Arils (Anardana) Prepared in Mechanical Cabinet Drier”.
International Research Journal of Pure & Applied Chemistry, August, 2020: vol.21(11), the relevant
portion of which reads “the fruit (wild pomegranate) being highly acidic in nature is being processed
into its dried product known as anardana. Dried wild pomegranate arils with distinct sour or tart flavour
are commercially available in many West and East Asian countries. Anardana is a good source of
organic acids, sugars, vitamin C, phenols, flavonoids and have been used in formulations of various
ayurvedic medicines which are helpful in curing a number of ailments”.
Civil Appeal Nos. 2360-2376 of 2009 Page 20 of 26
and its seeds are consumed as such which has no
suitability to Anardana.
Anardana is sour in taste and is used in Ayurvedic
Pharacies. However, the botanical name of Daru
(Anardana) and Anar is some that is Punica granatum
and Anardana is not a dried produce”.
21. We will now proceed to examine Heading 12.09, and in particular,
sub-heading 1209.99, along with the applicable Notes. Chapter
Note 3 of Chapter 12 states that for the purpose of Heading 12.09,
the seeds specified therein, which include seeds of fruit trees, are
to be regarded as ‘seeds of a kind use of sowing’. Chapter Note 3,
therefore, creates a fiction when it stipulates that for the purpose of
Heading 12.09, seeds of fruit trees would be considered ‘seeds of
a kind used for sowing’. The Note, however, expressly excludes the
goods specified in clauses (a) to (d), even when they are for the
purpose of sowing. Clause (b) excludes spices and other products
of Chapter 9 from the purview of Heading 12.09. Further, the
Explanatory Notes to sub-heading 1209.99, also explicitly exclude
fruits of Chapter 8, which Chapter subject to the exclusions and the
principles of interpretation that apply to resolve conflict of
classification of entries, applies to ‘edible fruits’ and not ‘inedible
fruits’.
22. We will now examine the Explanatory Notes to Heading 12.09. The
first paragraph of the Explanatory Notes to Heading 12.09 states
Civil Appeal Nos. 2360-2376 of 2009 Page 21 of 26
that the Heading covers all seeds, fruits and spores of a kind used
for sowing. It includes such products even if they are no longer
capable of germination. This statement has to be read in
conjunction with Chapter Note 3, which states that for the purpose
of Heading 12.09, seeds of fruit trees are to be regarded as seeds
of a kind used for sowing. However, the paragraph does not apply
to the products which are mentioned at the end of the Explanatory
Note even when the seeds mentioned therein are used for sowing
as they were classified elsewhere in the nomenclature. The
exclusion vide clauses (a) to (h) confirms and validates the first
paragraph of the Explanatory Notes to the Heading 12.09. The
second paragraph of the Explanatory Notes, in addition to the
seeds already excluded by Chapter Note 3, also excludes the
seeds and fruits which are primarily used in perfumery, pharmacy
or for insecticidal, fungicidal or similar purposes, as they are
covered under Heading 12.11. This is reiterated by clause (g) of the
Explanatory Note which states that seeds and fruits, which are
themselves of a kind primarily used in perfumery, pharmacy or for
insecticidal, fungicidal or similar purposes would be covered under
the Heading 12.11.
23. Heading 12.11 states that the plants and parts of plants including
seeds and fruits, of the kind used primarily in perfumery, pharmacy
Civil Appeal Nos. 2360-2376 of 2009 Page 22 of 26
or for insecticidal, fungicidal or similar purposes, fresh or dried,
whether or not cut, crushed or powdered would be covered by the
said Heading. We need not refer to this Heading in detail, except
noticing the details of the products included in the said heading,
which include seeds as in the case of Ambrette, Angelica, Burdock,
etc., among others. After enumerating the list, the Explanatory
Notes state that the list is not exhausted and is given to assist in
the identification of the plants. Mention of botanical names of a
particular species does not necessarily indicate that other species
of the same plant family are not classified in the Heading. It is
further stated that products of this Heading which are regarded as
narcotic drugs under international instruments, are indicated in the
list at end of Chapter 29.
24. The word ‘seed’ in common parlance and in commercial sense
means the grains or ripened ovules of plants used for sowing. The
normal function of a seed is to germinate and produce a new plant.
Broadly, a seed includes a propagative structure such as a spore,
or a small dry fruit. Some fruit and vegetable seeds are edible and
are used by human beings as food or even as condiments.
However, as explained above, as per the Chapter Note 3 “seeds of
forest trees, seeds of fruit trees…….are to be regarded as seeds of
a kind used for sowing”.
Civil Appeal Nos. 2360-2376 of 2009 Page 23 of 26
25. In the context of the present case, once we accept the finding of
fact recorded by the CESTAT that ‘anardana’ is a dried product of
local ‘daru’ or wild pomegranate, which grows in mid hill conditions
and which fruit in its fresh form is different from the pomegranate
included in clause 7 to Heading 08.10, as this wild pomegranate is
not consumed as a fresh fruit, the contention of the Revenue must
fail. GRI 3, which in the absence of the Heading, Section or Chapter
Notes, prescribes the order of priority as - (a) specific description,
(b) essential character, and (c) the Heading that occurs last in
numerical order, and even GRI 4 – the heading appropriate for the
goods “to which they are most akin”, supports our conclusion and
finding. The submission of the learned counsel for the Respondent
is correct that when the Revenue challenges the classification
made by the assessees, the onus is on the Revenue to establish
that the item in question falls in taxing category as claimed by
them.16 The burden is on the Revenue to adduce proper evidence
to show that the goods are classifiable under a different heading
than that claimed by the assessee. The finding of fact as recorded
by CESTAT gets reinforced by the policy condition attached to the
sub-heading 1209.99.00 of the Import Policy which specifically
16 See HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh (2006) 5 SCC 208, Parle
Agro Pvt. Ltd. v. Commissioner of Commercial Taxes, Trivandrum (2017) 7 SCC 540, Union of India
& Ors. v. Garware Nylons Ltd. & Ors. (1996) 10 SCC 413.
Civil Appeal Nos. 2360-2376 of 2009 Page 24 of 26
states - ‘import of pomegranate seeds will be free’. Without any
doubt, sub-heading 1209.99.00 in the Import Policy correlates to
sub-heading 1209.99 to Chapter 12 of the HSN. The contention of
the Revenue that the Import Policy is in the nature of delegated
legislation albeit correct, would not make any difference in the
context of the present case as the policy condition in the
Export/Import Policy specifically includes pomegranate seeds – as
‘anardana’ under sub-heading 1209.99.00, whereas the Schedule
to the Customs Tariff Act, 1975 merely reproduces the Heading and
the sub-heading of the HSN, without specifically including or
excluding pomegranate seeds under the sub-heading 1209.99.
26. For the reasons stated above, the appeals by the Revenue must
fail and are liable to be dismissed. However, before parting, we
must advert to the reason why we have referred to and reproduced
Heading 12.11 and Heading 09.10 under Chapter 9. There are also
several sources which suggests that ‘anardana’ is primarily used as
condiment and in pharmacy for preparation of Ayurvedic
medicines.
17 However, we would not express any final opinion in
this regard as the Revenue has not relied upon said headings and
17 The main application of ‘Anardana’ as per the Council of Scientific & Industrial Research, Ministry of
Science & Technology, Government of India is in “food acidulent, digestive candies, traditional system
of medicine”. Further, the Spices Board of India, Ministry of Commerce and Industry, Government of
India states that “the (pomegranate) seed dried with pulp is used as a spice in many dishes”. Refer
also to supra footnote 15.
Civil Appeal Nos. 2360-2376 of 2009 Page 25 of 26
the show-cause notice which resulted in the adjudication orders and
the appellate orders was restricted and confined to claim that the
goods would be covered under the sub-heading 0813.40.90.
27. As a postscript, it is also worth mentioning that pomegranate seeds
are one of the items notified and recognised as a ‘spice’ under the
schedule of the Spices Board Act, 1986. Section 2(n) of this Act
states that a ‘spice’ means any of the items specified in the
schedule. Furthermore, the data available on the export of
‘anardana’ from India paints a very different picture and contradicts
the contention of the Revenue. As per the data available,
18 most of
the ‘anardana’ that is exported from India, is exported under the
sub-heading 0910.99.90 as ‘other spices’ or under the sub-heading
3004.90.11 as ‘medicaments of Ayurvedic system’. While we
express no opinion in this regard, it is surprising that, for the import
of the very same goods, the Revenue seek classification under
Heading 0813. We are conscious that the above observations may
lead to another round of litigation. The Revenue, it may be
advisable, should take a considered policy decision after examining
the data and ascertaining the views of the trade associations on
classification of ‘anardana’ or by fixing a specific customs duty. Till
18 The data is available on https://www.seair.co.in/anardana-hs-code.aspx.
Civil Appeal Nos. 2360-2376 of 2009 Page 26 of 26
the said exercise is undertaken, the classification as determined by
the CESTAT may be continued to avoid confusion and litigation.

28. Keeping in view the aforesaid, the appeals are dismissed without
any order as to costs.
......................................J.
(SANJIV KHANNA)
......................................J.
(BELA M. TRIVEDI)
NEW DELHI;
JULY 11, 2022.

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