ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 09.01.2026
CESTAT Delhi Resolves Chilly Seeds Classification Dispute
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.comor on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in New Delhi recently delivered a significant judgment in the case of M/s Nunhems India Pvt. Ltd. vs. Commissioner of Customs (Appeals), addressing the contentious issue of the classification of imported Chilly Seeds under the Customs Tariff Act, 1975. This case sheds light on the complexities of customs classification and the implications for importers in India.
Background of the Case
M/s Nunhems India Pvt. Ltd., formerly known as M/s Bayer Seeds Private Limited, is engaged in the import and trading of various seed varieties for vegetable crops. Between September 2008 and September 2013, the company imported 32 consignments of Chilly Seeds, which were chemically treated to make them fit for sowing and unfit for human consumption. The seeds were classified under Customs Tariff Heading (CTH) 1209, which pertains to seeds used for sowing, and the company availed a concessional rate of basic customs duty and exemption from payment of Special Additional Duty (SAD) under relevant notifications.
However, the Directorate of Revenue Intelligence (DRI) issued a summons in October 2013, alleging that the classification adopted by the appellant was incorrect. The DRI claimed that the Chilly Seeds should have been classified under CTH 0904, which pertains to spices, and that the appellant had evaded payment of SAD. The appellant initially admitted to the alleged misclassification and paid the differential duty, interest, and penalty under Section 28(5) of the Customs Act, 1962, requesting the proceedings to be concluded under Section 28(6)(ii). However, the appellant later contested the classification and sought a refund of the amount paid, arguing that the original classification under CTH 1209 was correct.
Key Issues in the Case
The primary issue before the Tribunal was whether the Chilly Seeds imported by the appellant should be classified under CTH 1209 99 90 (seeds used for sowing) or under CTH 0904 20 40 (up to December 31, 2011) and CTH 0904 22 12 (from January 1, 2012), as claimed by the department.
The appellant argued that the Chilly Seeds were chemically treated to make them fit for sowing and unfit for human consumption, and therefore, they should not be classified as spices under Chapter 9. Instead, they should fall under Chapter 12, which covers seeds used for sowing. The appellant also contended that the extended period of limitation for issuing a demand notice under Section 28(4) of the Customs Act was not applicable, as there was no deliberate attempt to evade duty.
On the other hand, the department argued that Chilly Seeds are specifically mentioned under Heading 0904 of the Customs Tariff and are excluded from classification under CTH 1209, even if intended for sowing purposes. The department also justified the invocation of the extended period of limitation, citing deliberate misclassification by the appellant.
Tribunal’s Observations and Decision
After considering the submissions from both parties, the Tribunal made the following key observations:
- Classification of Chilly Seeds: The Tribunal noted that Chilly Seeds imported by the appellant are chemically treated, making them unfit for human consumption and suitable only for sowing. The seeds are not edible and cannot be classified as spices under Chapter 9, which is limited to items used as condiments. The Tribunal emphasized that the seeds meet the definition of “seeds of a kind used for sowing” under Chapter 12 and are correctly classifiable under CTH 1209 99 90.
- Circular No. 03/2002-Cus: The Tribunal referred to the Central Board of Excise and Customs (CBEC) Circular dated January 8, 2002, which clarified that Chilly Seeds of the genus Capsicum are appropriately classifiable under CTH 1209 and not under CTH 0904. The Tribunal held that this circular was still valid and applicable, as the Chilly Seeds imported by the appellant were not covered under Heading 0904.
- Extended Period of Limitation: The Tribunal observed that the extended period of limitation under Section 28(4) of the Customs Act could not be invoked, as there was no evidence of deliberate misstatement or suppression of facts by the appellant. The Bills of Entry were physically assessed and examined by the customs department, which was fully aware of the facts. The Tribunal emphasized that mere suppression of facts is insufficient to invoke the extended period; there must be a deliberate intent to evade duty.
- Voluntary Payment and Section 28(6): The Tribunal noted that the appellant had initially requested the proceedings to be concluded under Section 28(6) of the Customs Act but later withdrew this request upon realizing the correct classification. The Tribunal held that the Commissioner (Appeals) was not justified in considering the appellant’s initial request as binding, especially when the appellant had subsequently provided a supplementary reply and sought a personal hearing.
Final Order
The Tribunal concluded that the Chilly Seeds imported by the appellant were correctly classifiable under CTH 1209 99 90 and not under CTH 0904. It set aside the impugned order dated November 1, 2016, passed by the Commissioner (Appeals), and allowed the appeal filed by M/s Nunhems India Pvt. Ltd.
Key Takeaways
This judgment highlights the importance of accurate classification of goods under the Customs Tariff Act, as it directly impacts the applicable duty rates and exemptions. It also underscores the significance of adhering to the principles of classification under the General Rules for the Interpretation of the First Schedule. Importers must ensure that their classification is supported by relevant circulars, explanatory notes, and legal precedents to avoid disputes with customs authorities. Additionally, the judgment reiterates that the extended period of limitation under Section 28(4) of the Customs Act can only be invoked in cases of deliberate misstatement or suppression of facts with the intent to evade duty.
Source: CESTAT Delhi
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