Chilly Seeds for Sowing Classified Under CTH 1209, Not CTH 0904: CESTAT Rules Chemical-Treated Seeds Not Classifiable as Spices [Read Order]

The Principal Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) at New Delhi, held that chilly seeds imported solely for sowing are classifiable under CTH 1209 and not under CTH 0904 as spices. Chemically treated seeds unfit for human consumption cannot be treated as “spices” under Chapter 9 meant for condiments. Thus, it also ruled that extended limitation was wrongly invoked, as mere misclassification does not amount to suppression or willful misstatement.

The Appellant, M/s. Nunhems India Pvt. Ltd. (formerly M/s Bayer Seeds Private Limited) filed this appeal against the order dated 01.11.2016 of the Commissioner of Customs (Appeals), New Delhi, which rejected the appellant's appeal against the Additional Commissioner's order dated 13.06.2014.

The Additional Commissioner had concluded the proceedings under section 28(6)(ii) of the Customs Act, 1962, after the appellant paid the demanded duty with interest and penalty at 25% of duty under section 28(5) of the Customs Act.

The Appellant who was engaged in importing and trading vegetable seed varieties, imported 32 consignments of Chilly Seeds during 01.09.2008 to 30.09.2013. The seeds were chemically treated by the supplier to ensure fitness for sowing, making them unfit for human consumption. The appellant classified the goods under CTH 1209, paying 5% basic customs duty and claiming exemption from SAD under applicable notifications.

The DRI issued a summons dated 03.10.2013 requiring production of import documents. The DRI informed the appellant that the classification was incorrect and directed payment of differential duty with interest. On 25.02.2014, the appellant admitted the goods were seeds of spices falling under Chapter 9 and requested closure of the matter after paying the differential duty, interest, and penalty.

Subsequently, after consulting technical experts, the appellant filed a supplementary reply on 26.05.2014 asserting that the original classification under CTH 1209 was correct and requested withdrawal of the earlier submission. The Additional Commissioner concluded the proceedings under Section 28(6)(ii) of the Customs Act on 13.06.2014.

The Commissioner (Appeals) rejected the appellant's appeal, holding that Chilly Seeds have a specific entry under CTI 0904 22 12 and Note 3(b) of Chapter 12 excludes spices from classification under Chapter 12 even if for sowing.

The Counsel for the Appellant, Nupur Maheshwari, Kruti Parashar, Shobhit Jain and Ananya Prakash, submitted that Chilly Seeds did not merit classification under CTH 0904 as they must first satisfy the single dash level (0904 20 - "fruits of genus Capsicum"), but the imported goods are seeds, not fruits. Being chemically treated and unfit for human consumption, they cannot be classified as spices under Chapter 9, which covers products mainly used as condiments.

Further, the Counsel stated that the goods were correctly classifiable under CTH 1209 as seeds for sowing, supported by Board Circular No. 03/2002-Cus. Rule 3(a) of General Rules for Interpretation is inapplicable. The extended period of limitation could not be invoked as wrong self-assessment does not constitute willful mis-statement, and the Bills of Entry were physically examined by the department. Interest and penalty were not leviable.

On the other hand, the Authorised Representative for the Respondent, Rajesh Singh, submitted that the appellant, by letter dated 15.04.2014, exercised the option to close proceedings under section 28(6) of the Customs Act and accepted the wrong classification. Chilly Seeds were specifically included under Heading 0904, and Note 3 to Chapter 12 categorically excludes spices from classification under CTH 1209 even if intended for sowing. Reliance was placed on Arun Agencies, Madras vs. Collector of Customs, Madras 1983 (12) E.L.T. 158 (C.E.G.A.T.).

The Tribunal consisted of Justice Dilip Gupta, President and Technical Member, Hemambika R. Priya, heard and reviewed the matter.

The Tribunal, after considering the submissions made, held that Chilly Seeds did not merit classification under CTH 0904 as goods must first satisfy the single-dash level (0904 20) covering "fruits of genus Capsicum." The imported seeds were seeds, not fruits, and were neither dried, crushed, nor ground.

Further, the Tribunal stated that the Chapter 9 defines "spice" as products mainly used as condiments. The chemically treated Chilly Seeds are poisonous, unfit for human consumption, used solely for sowing, and labeled "TREATED WITH POISON - DO NOT USE FOR FOOD."

They require permits under the Seeds Act, 1996, unlike food products requiring FSSAI compliance. Hence, they cannot be classified as spices under Chapter 9. The seeds merit classification under CTH 1209 as seeds for sowing, supported by Board Circular No. 03/2002-Cus.

Accordingly, the Tribunal set aside the impugned order dated 01.11.2016 and allowed the appeal filed. The Order was Pronounced on 07.01.2026.

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