Chilly Seeds Imported For Sowing Cannot Be Classified As 'Spices': CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) at New Delhi has held that chilly seeds imported exclusively for sowing cannot be treated as “spices” under the Customs Tariff and must instead be classified as seeds used for sowing under Chapter 12.

A coram led by President Justice Dilip Gupta and Technical Member Hemambika R. Priya set aside a 2016 order of the Commissioner (Appeals) that had upheld a higher duty on such imports.

For context, spices attract a 70% basic customs duty, while seeds for sowing are taxed at a concessional 5% rate with exemption from special additional duty.

The tribunal said the chemically treated chilly seeds in question were not edible and could not be used as condiments. “The Chilly Seeds imported by the appellant do not satisfy the definition of spice. They are seeds for sowing,” the tribunal observed.

The case involved Nunhems India Pvt. Ltd., which had imported chilly seeds between 2008 and 2013. The seeds were treated with chemicals before import, clearly labelled as poisonous, and carried warnings stating they were not meant for food, feed, or oil purposes. They were sold only to farmers in small packets for cultivation. The company classified the imports under Heading 1209, which covers seeds of a kind used for sowing, and claimed exemption from special additional duty.

The authorities objected, arguing that chilly seeds were specifically covered under Heading 0904 as spices and even barred spices from being classified as seeds even if meant for sowing.

It was also alleged that the chilly seeds were deliberately misclassified to claim tax benefits.

Rejecting this, the tribunal held that Chapter 9 of Customs Tariff covers spices “mainly used as condiments,” while the imported seeds were “neither edible nor fit for human consumption” and were meant solely for sowing.

It also relied on a CBEC circular clarifying that chilly seeds of the genus Capsicum imported for sowing fall under Heading 1209.

The tribunal further ruled that the extended limitation period could not be invoked, noting that mere wrong classification does not amount to suppression or willful misstatement. The appeal was accordingly allowed. 

Case Title: Nunhems India Pvt. Ltd. v. Commissioner of Customs, (Appeals)

Citations: 2026 LLBiz CESTAT (DEL) 13

Case Number: Customs Appeal No. 50492 of 2017

For Appellant: Advocates Nupur Maheshwari, Kruti Parashar, Shobhit Jain and Ananya Prakash

For Respondent: Advocates Rajesh Singh