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.