Chilli Seeds for Sowing Not ‘Spices’: CESTAT Rejects Customs Demand

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has ruled that chemically treated chilli seeds imported exclusively for sowing purposes cannot be classified as spices under Chapter 9 of the Customs Tariff, setting aside a long-standing customs demand and penalties raised against the importer. The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that the seeds are correctly classifiable under Chapter 12 as “seeds of a kind used for sowing” and are therefore eligible for the corresponding customs exemptions. The case arose from imports of 32 consignments of chilli seeds made between September 2008 and September 2013. The importer had classified the goods under Customs Tariff Heading (CTH) 1209, paid concessional basic customs duty, and claimed exemption from Special Additional Duty (SAD). Following an investigation by the Directorate of Revenue Intelligence (DRI), customs authorities alleged that the seeds were wrongly classified and should instead fall under CTH 0904, which covers spices, including dried fruits of the genus Capsicum. On this basis, the department alleged evasion of SAD and issued a show cause notice invoking the extended period of limitation. Although the importer initially deposited differential duty, interest, and penalty and sought closure of proceedings under Section 28(6) of the Customs Act, it later withdrew its admission after consulting technical experts, contending that the original classification under Chapter 12 was correct. The customs department argued that chilli seeds were specifically covered under tariff entry 0904 22 12 and that Note 3(b) of Chapter 12 expressly excludes spices or products of Chapter 9 from being classified as seeds for sowing, even if intended for agricultural use. It also defended the invocation of the extended limitation period, alleging suppression and wilful misstatement. After an extensive examination of tariff headings, chapter notes, explanatory notes, and prior circulars, the Tribunal rejected the department’s position. The Bench noted that Chapter 9 applies to “spices” that are mainly used as condiments and are fit for human consumption. In contrast, the imported chilli seeds were chemically treated, labelled as poisonous, and clearly marked “not for food, feed or oil purposes.” They were imported only after obtaining agricultural permits and were sold in small packets to farmers strictly for sowing. Crucially, the Tribunal held that the tariff entry under Chapter 9 at the single-dash level refers to “fruits of the genus Capsicum,” not seeds. Since the goods in question were neither fruits nor edible, classification could not be extended to the sub-heading covering chilli seeds under Chapter 9. The Tribunal also relied on an earlier CBEC Circular dated 8 January 2002, which clarified that chilli seeds of the genus Capsicum are classifiable under Heading 1209 and not under Heading 0904. It rejected the Commissioner (Appeals)’ view that this circular had become redundant after later tariff amendments. CESTAT further held that the extended period of limitation was wrongly invoked. It observed that classification disputes arising from self-assessment cannot automatically be equated with suppression or wilful misstatement, especially when bills of entry were physically examined by customs authorities at the time of import. The Tribunal emphasized that a wrong classification claim, by itself, does not amount to misdeclaration, and in the absence of evidence of intent to evade duty, extended limitation, interest, and penalties were unsustainable. Setting aside the order of the Commissioner (Appeals), the Tribunal allowed the appeal in full. It held that chemically treated chilli seeds meant exclusively for sowing are not “spices” under Chapter 9. Such seeds are correctly classifiable under CTH 1209 as seeds for sowing. The customs demand, interest, and penalties were not legally sustainable. Case Details Case Title: Nunhems India Pvt Ltd Vs Commissioner Of Customs-New Delhi Case No.: C/50492/2017 Date: 07.01.2026 Counsel For Appellant: Nupur Maheshwari Counsel For Respondent: Rajesh Singh Click Here To Read Order Read More: IRS Prabha Bhandari 1st One Toi File Bail Application In Rs. 70 Lakh Bribe Case

Chilli Seeds for Sowing Not ‘Spices’: CESTAT Rejects Customs Demand

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