2018 (12) TMI 1304 - AT - Customs

Export of imported consignments - classification of goods - green pepper - Held that - Spice is a traded commodity and has been for centuries with the implication that it must necessarily be in a desiccated form for it to last and to preserve the characteristic that is so tempting to the human race. Spice is therefore not the produce of a plant but the product of processing of such produce The inclusion in note 2 with corresponding exclusion in note 4 in chapter 7 of the First Schedule to Customs Tariff Act 1975 is a deliberate inclusion to eliminate any doubts that may be entertained of the headings appropriate for classification of genus Capsicum and genus Pimenta. The absence of a specific heading for these varieties enlightens us as to the intent. By this specific inclusion of fruits i.e. whose seeds are capable of germination not generally known in the country as pepper there would be no attempt to classify them in the heading considered appropriate to that class of plants. There was therefore no need to bring the other class in the dichotomous distribution of producing plants specifically for coverage in this chapter. The misconception that green pepper is a spice and that until it is processed is not a vegetable that appears to have been the basis for initiating proceedings against the appellant should no longer stand in the way of endorsing the declaration of the appellant in the bills of entry. The impugned orders lack the mantle of logic and the sanctity of law - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of 'green pepper' under the Customs Tariff Act, 1975.
2. Applicability of penal consequences for incorrect declaration.
3. Appropriateness of the re-classification by the assessing authority.

Detailed Analysis:

1. Classification of 'Green Pepper' under the Customs Tariff Act, 1975:

The appellant, M/s Herbal Isolates Pvt Ltd, classified their import of 'green pepper' under heading no. 0709 99 10 of the First Schedule to the Customs Tariff Act, 1975, which pertains to 'Other Vegetables, Fresh or Chilled.' However, the assessing authority re-classified it under heading no. 0904 11 90 as 'other pepper (genus Piper), neither crushed nor ground' under the chapter titled 'Coffee, Tea, Mate and Spices.'

The appellant argued that 'green pepper' in its raw form should be classified under chapter 7, as it is imported in bunches from Sri Lanka and processed before export. They emphasized the specific entry for 'green pepper' in the Indian Customs Tariff Act and the principle of 'most specific description' in rule 3 of the General Rules for the Interpretation of the Harmonised System. The appellant also cited previous imports classified under chapter 7 and a Tribunal decision in Collector of Customs, Cochin v. Mermaid Foods, which held that 'green pepper in brine' is not subject to cess under the Spices Board Act, 1986.

The respondent contended that chapter 9 is exclusively for spices and that 'green pepper' from a spice plant is excluded from chapter 7. They argued that the essential oils and aromatic principles in 'green pepper' classify it as a spice.

The Tribunal found that the tariff item used by customs authorities is a residuary and that the appellant's classification is unambiguous. The Supreme Court's decision in Dunlop India Ltd & Madras Rubber Factory Ltd v. Union of India and Others was cited, emphasizing that a product should be classified under a specific heading rather than a residuary clause. The Tribunal concluded that 'green pepper' should not be classified as a spice in chapter 9 but as a vegetable in chapter 7, consistent with the legislative intent and common understanding.

2. Applicability of Penal Consequences for Incorrect Declaration:

The Tribunal noted that the import consignments were processed for export, and any alteration in duty from re-classification would be academic. Even if the advance authorization were invalid, the export consignments would be entitled to neutralization of all duties involved in production. Therefore, the penal consequences for incorrect declaration were not pressed or agitated before the Tribunal.

3. Appropriateness of the Re-classification by the Assessing Authority:

The Tribunal scrutinized the rationale behind the re-classification by the assessing authority. They found that the inclusion in note 2 of chapter 7, with corresponding exclusion in note 4, was a deliberate measure to eliminate doubts about the classification of genus Capsicum and genus Pimenta. The absence of a specific heading for these varieties indicated the legislative intent to classify 'green pepper' as a vegetable until processed. The Tribunal concluded that the misconception that 'green pepper' is a spice until processed should not obstruct endorsing the appellant's declaration in the bills of entry.

Conclusion:

The Tribunal set aside the impugned orders, finding them lacking logic and legal sanctity. The appeals were allowed with consequential relief, to the extent applicable, affirming the classification of 'green pepper' under chapter 7 as a vegetable and not a spice.