Case: COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, AMRITSAR (PUNJAB) Vs. M/S D.L. STEELS ETC

2. For brevity, we will only refer to the specific facts in the case of M/s. D.L. Steels, wherein the respondent had imported two consignments of anardana (Hereinafter referred to as the goods) from Pakistan, vide Bills of Entry dated 15th December 2005 and 9th March 2006. For taxation they classified the goods under the tariff sub-heading 1209.99.90, attracting basic custom duty at the rate of 5% plus education cess at the rate of 2%. However, the customs authorities contend that the goods must fall under sub-heading 0813.40.90, and accordingly, are liable for basic custom duty at the rate of 30% plus education cess at the rate of 2%.3. To this end, the Office of the Assistant Commissioner, Rail Cargo, Amritsar (Hereinafter referred to as adjudicating authority), issued a show-cause notice dated 27th March 2006, which inter alia stated that fresh pomegranate falls under the Heading 0810, and the goods, being nothing but the dried form of fresh pomegranate fruit seeds, would fall under Heading 0813, an entry which covers the dried form of all items falling under Headings 0807 to 0810. Consequently, sub-heading 0813.40.90 would be applicable to the goods.4. The goods were released provisionally by the customs authorities on the execution of a bond. By assessment order dated 31st May 2006, the adjudicating authority confirmed the differential duty of Rs.82,136/- under Section 28(2) of the Customs Act, 1962, and imposed a personal penalty of Rs.82,000/- under Section 114-A read with Section 112 of the Customs Act on the respondent. Levy of interest under Section 28AB was directed.5. Similar orders based on identical grounds classifying the goods under sub-heading 0813.40.90, imposing differential duty, interest, and penalty were passed in the cases of the other respondents as well.6. First appeals preferred by the respondents were allowed by the Commissioner (Appeals), Central Excise, Jalandhar, on the ground that the goods were the dried form of a type of pomegranate which, when fresh, is not consumed as a fruit. Accordingly, Heading 0810, which applies to the type of pomegranate which is consumed as a fruit, would have no relevance to the type of pomegranate from which the goods are obtained. Additionally, it was observed that the respondents contention would also prevail in light of the policy condition attached to sub-heading 1209.99.90 of the Indian Export/Import Policy (Import Policy, for short), which specifically states – import of pomegranate seeds will be free (The word free here denotes that the import of pomegranate seeds is not subject to licencing restrictions. It does not imply that custom duty is not payable. Reference to the sub-heading is relevant).7. Aggrieved, the Revenue preferred appeals before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT, for short), which, in the case of the respondent, was dismissed vide order dated 18th July 2008 inter alia citing the certificate of Dr. Y.S. Parmar University of Horticulture and Forestry, Solan, to hold that the goods do not fall under the ambit of Heading 0813. The CESTAT observed that words in a taxing statute must be construed in the same sense as understood in common or trade parlance, and the Revenue had failed to lead any evidence to support its contention that in trade parlance, the goods are understood as dried fruits. Reference was made to the observation in the Import Policy which had classified the goods under the sub-heading 1209.99.90. Adverting to the Explanatory Notes to the Heading 1209, it was held that as the goods did not fall in the list of items expressly excluded from sub-heading 1209.99.09, they very well stood included in the sub-heading 1209.99.90. Accordingly, sub-heading 0813.40.90 was not applicable, and the appeal was dismissed.8. Similar orders were passed by the CESTAT in the cases of other respondents as well. Resultantly, the Revenue is in appeal before us.

Court's reasoning:
12. We would, at this stage, take on record the well-settled principle that words in a taxing statute must be construed in consonance with their commonly accepted meaning in the trade and their popular meaning (See Dunlop India Ltd. v. Union of Indian and Ors. (1976) 2 SCC 241,  and Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant Private Ltd., New Delhi (2012) 13 SCC 639) . When a word is not explicitly defined, or there is ambiguity as to its meaning, it must be interpreted for the purpose of classification in the popular sense, which is the sense attributed to it by those people who are conversant with the subject matter that the statute is dealing with. This principle should commend to the authorities as it is a good fiscal policy not to put people in doubt or quandary about their tax liability. The common parlance test is an extension of the general principle of interpretation of statutes for deciphering the mind of the law-maker. However, the above rule is subject to certain exceptions, for example, when there is an artificial definition or special meaning attached to the word in a statute, then the ordinary sense approach would not be applicable Collector of Central Excise, Kanpur v. Krishna Carbon Paper Company, (1989) 1 SCC 150 .18. In favour of the appellants claim, it must be highlighted that pomegranates, along with some other fruits, are expressly included in clause 7 to the Explanatory Notes to sub-heading 0810.90. Consequently, it can be argued with some merit that dried pomegranate, if prepared by drying in the Sun or by industrial processes, would fall under sub-heading 0813.40.19. However, pomegranates are rather unusual fruits and their structure is unlike other fruits. The outer most layer is a hard and inedible shell. The edible part consists of the seeds and arils. Arils are the sweet, juicy, and crunchy covering that encase the seeds. However, the finding of the CESTAT is that wild pomegranates from which anardana is made are different from the pomegranate fruit. This finding of fact is supported by considerable literature which states that anardana is prepared by dehydrating the arils of wild pomegranates, and not from the pomegranate which is eaten as a fresh fruit (Refer to: J. S. Pruthi and A. K. Saxena......curing a number of ailments) The conventional utilization of the wild pomegranate fruit lies in drying the seeds along with pulp to make anardana. The wild pomegranate fruit is widely found on the hilly slopes of the Himalayas. It contains high acid content along with other quality characteristics, which distinguishes it from the pomegranate fruit which is consumed as a fresh fruit. The dried wild pomegranate arils have a distinct tart and sour flavour, owing to the high acid content, which gives it the commercial value. Anardana, therefore, can be defined as Sun-dried seeds of ripe sour pomegranate, and is predominantly used as an acidulant in Indian and Persian cuisines, and for its health benefits in the Ayurvedic system of medicine.21. We will now proceed to examine Heading 12.09, and in particular, sub-heading 1209.99, along with the applicable Notes. 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.22. We will now examine the Explanatory Notes to Heading 12.09. The first paragraph of the Explanatory Notes to Heading 12.09 states that the Heading covers all seeds, fruits and spores of a kind used for sowing. It includes such products even if they are no longer capable of germination. This statement has to be read in conjunction with Chapter Note 3, which states that for the purpose of Heading 12.09, seeds of fruit trees are to be regarded as seeds of a kind used for sowing. However, the paragraph does not apply to the products which are mentioned at the end of the Explanatory Note even when the seeds mentioned therein are used for sowing as they were classified elsewhere in the nomenclature. The exclusion vide clauses (a) to (h) confirms and validates the first paragraph of the Explanatory Notes to the Heading 12.09. The second paragraph of the Explanatory Notes, in addition to the seeds already excluded by Chapter Note 3, also excludes the seeds and fruits which are primarily used in perfumery, pharmacy or for insecticidal, fungicidal or similar purposes, as they are covered under Heading 12.11. This is reiterated by clause (g) of the Explanatory Note which states that seeds and fruits, which are themselves of a kind primarily used in perfumery, pharmacy or for insecticidal, fungicidal or similar purposes would be covered under the Heading 12.11.23. Heading 12.11 states that the plants and parts of plants including seeds and fruits, of the kind used primarily in perfumery, pharmacy or for insecticidal, fungicidal or similar purposes, fresh or dried, whether or not cut, crushed or powdered would be covered by the said Heading. We need not refer to this Heading in detail, except noticing the details of the products included in the said heading, which include seeds as in the case of Ambrette, Angelica, Burdock, etc., among others. After enumerating the list, the Explanatory Notes state that the list is not exhausted and is given to assist in the identification of the plants. Mention of botanical names of a particular species does not necessarily indicate that other species of the same plant family are not classified in the Heading. It is further stated that products of this Heading which are regarded as narcotic drugs under international instruments, are indicated in the list at end of Chapter 29.25. In the context of the present case, once we accept the finding of fact recorded by the CESTAT 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. The submission of the learned counsel for the Respondent is correct that when the Revenue challenges the classification made by the assessees, the onus is on the Revenue to establish that the item in question falls in taxing category as claimed by them [See HPL Chemicals Ltd. v. Commissioner of Central Excise, Chandigarh (2006) 5 SCC 208,  Parle Agro Pvt. Ltd. v. Commissioner of Commercial Taxes, Trivandrum (2017) 7 SCC 540,  Union of India & Ors. v. Garware Nylons Ltd. & Ors. (1996) 10 SCC 413] . The burden is on the Revenue to adduce proper evidence to show that the goods are classifiable under a different heading than that claimed by the assessee. The finding of fact as recorded by CESTAT gets reinforced by the policy condition attached to the sub-heading 1209.99.00 of the Import Policy which specifically states - import of pomegranate seeds will be free. Without any doubt, 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.