2022 (7) TMI 471 - SC - Customs

Classification of imported goods - dried pomegranate seeds/anardana - to be be classified under Heading 0813 of the Tariff entries issued under the Customs Tariff Act 1975 or under Heading 1209 as claimed by the importers? - HELD THAT - 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 . 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 . In the context of the present case once the finding of fact recorded by the CESTAT is accepted 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 - 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. 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. Petition dismissed.

Summary

Issues Involved:
1. Classification of dried pomegranate seeds ('anardana') under the Customs Tariff Act, 1975.
2. Application of the Harmonized System of Nomenclature (HSN) and General Rules of Interpretation (GRI).
3. Interpretation of 'edible' in the context of Chapter 8 of the Customs Tariff Act.
4. Analysis of sub-headings 0813.40.90 and 1209.99.90.
5. Burden of proof in classification disputes.

Detailed Analysis:

1. Classification of Dried Pomegranate Seeds ('Anardana'):
The core issue is whether 'anardana' should be classified under Heading 0813 as claimed by the Revenue or under Heading 1209 as claimed by the importers. The Revenue argues that 'anardana' falls under sub-heading 0813.40.90, attracting a higher duty, while the importers contend it should fall under sub-heading 1209.99.90, attracting a lower duty.

2. Application of the Harmonized System of Nomenclature (HSN) and General Rules of Interpretation (GRI):
The HSN, adopted by India through the Customs Tariff Act, 1975, is used to classify goods. The classification process involves selecting the appropriate Chapter, Heading, and sub-heading. The General Rules of Interpretation (GRI) guide this process. GRI 1 states that classification should be based on the terms of the Headings and any relative Section or Chapter Notes. If classification under GRI 1 is not clear, GRI 3 provides further rules, prioritizing specific descriptions and essential characteristics.

3. Interpretation of 'Edible' in the Context of Chapter 8:
The term 'edible' is crucial for classification under Chapter 8. The court emphasized that 'edible' should be interpreted using the common parlance test, meaning how it is commonly understood in trade. The court cited various sources to conclude that 'anardana' is made from wild pomegranates, which are not consumed as fresh fruit, thus differentiating it from the pomegranates under Heading 0810.

4. Analysis of Sub-headings 0813.40.90 and 1209.99.90:
- Sub-heading 0813.40.90: This covers dried fruits that are fresh under Headings 08.07 to 08.10. The court noted that 'anardana' is made from wild pomegranates, which are not typically consumed fresh, thus not fitting this sub-heading.
- Sub-heading 1209.99.90: This covers seeds, fruits, and spores used for sowing. The court found that 'anardana' fits this description better, supported by the Import Policy stating that "import of pomegranate seeds will be free," indicating no licensing restrictions.

5. Burden of Proof in Classification Disputes:
The court reiterated that when the Revenue challenges the classification by the assessee, the burden is on the Revenue to prove that the goods fall under a different heading. The CESTAT's finding that 'anardana' is a dried product of wild pomegranates, not consumed as fresh fruit, was supported by substantial evidence, including certificates from horticultural authorities and scientific studies.

Conclusion:
The court dismissed the Revenue's appeals, upholding the classification of 'anardana' under sub-heading 1209.99.90. The court suggested that the Revenue might consider a policy decision or specific customs duty for 'anardana' to avoid future litigation. The appeals were dismissed without costs.