2004(04)LCX0042

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

Ms. Jyoti Balasundaram, Member (J) and Shri Moheb Ali M., Member (T)

GANESH INTERNATIONAL

Versus

COMMISSIONER OF CUSTOMS, NAGPUR

Order Nos. A/638-639/2004-WZB/C-I, dated 23-4-2004 in Appeal Nos. C/909-910/2003-Mum.

Cases Quoted

Arun Agencies v. Collector — 1982(12)LCX0014 Eq 1983 (012) ELT 0158 (Tribunal) — Distinguished ........... [Para 13]

ITO v. Maniram — 1969 (72) ITR 203 — Referred ............................................................... [Para 7]

Advocated By :        S/Shri V. Sridharan with J.C. Patel, Advocates, for the Appellant.

Shri Ajay Saxena, SDR, for the Respondent.

[Order per : Moheb Ali M., Member (T)]. - The appellants imported fruits of long pepper and described them as pippali (pipal longum/pipal retrofactum). The issue involved in both the appeals is the same and so have been taken up for decision together.

2. The issue revolves round classification of pepper long. The rival contentions are long pepper, according to the appellants, is classifiable under Chapter Heading 12.11 and according to the department, is classifiable under Chapter Heading 09.04 of the Customs Tariff. There are also a few minor irritants to the issue is such as undervaluation and misdeclaration of goods. The latter is an often enough acquisition hurled against unsuspecting importers when they describe the goods under import in words which are unfamiliar to Customs officers. In the present case, the importers invited displeasure by declaring the goods as pippali, a Sanskrit word for long pepper though both mean the same according to the authorities on the subject. We also agree that pippali and long pepper mean the same.

3. Chapter Sub-headings 09.04 and 12.11 are the rival entries in the Customs Tariff. The rival entries in the tariff are annexed to this order along with Chapter Note 2 and supplementary note of Chapter 9.

4. Learned Advocate Shri V. Sridharan along with Shri J.C. Patel, Advocate, appeared for the appellants and Shri Ajay Saxena, SDR, for the Revenue.

5. Heard both sides.

6. We would examine the coverage under Chapter sub-heading 09.04 read with supplementary note and Chapter Note 2 of the heading and see whether pepper longum (long pepper) falls under this chapter. The supplementary note to Chapter 9 clarifies what the legislature means by the word ‘spices’ appearing in the chapter heading. One can safely substitute the word ‘spices’ with the supplementary note to understand the purport and the meaning of this word. Having defined the spices so, the legislature goes on to mention pepper long under chapter sub-heading 090411.10 leaving nobody in doubt that the law makers consider long pepper as a spice. It is neither safe nor desirable to question the infinite the infinite wisdom of the legislature by throwing books on Ayurveda at them. But then, even according to these books, long pepper is used as a condiment by those who fancy it. In India long pepper is used in pickles. Since Song pepper is more pungent than black pepper, it must be used with care unless one likes fiery food. It is advisable to crush the rod before use. We are also told that long pepper is not so rich in essential oils but is aromatic. Now, whether it is mainly used as a condiment or not is at best debatable. According to the great chefs in the hotels and experts on Ayurveda, it is not widely used as a spice. But the legislators think it is used as a condiment as otherwise long pepper itself could not have been one of the entries under Chapter 9 of the Customs Tariff. Further it is not possible to determine as to how much of this plant product is going into making irritating snuffs, how much is used in making pickles, garam masalas and medicinal preparations. The learned Advocate has produced several authorities who are mostly experts in Ayurvedic system of medicine to say that long pepper is basically used as a medicine. But the legislature knows best.

7. It is also argued that it is erroneous on the part of the legislature to mention long pepper under Chapter 9 after having defined a spice under the supplementary note in a particular manner. The courts have held that beliefs or assumptions of those who frame acts of Parliament cannot make law (ITO v. Maniram, 1969 (72) ITR 203). The Hon’ble Supreme Court is no doubt competent to say that. We are not. And lo suggest that the legislator may have made a mistake in this matter is beyond our competence.

8. Note 2 to Chapter 9 as quoted supra clearly says that cubeb pepper or other products of Heading 12.11 are not covered under Chapter 9. Cubeb is the dried, unripe fruit of the climbing vine of pepper cubeba of Indonesia, India and West Indies. The berries resemble those of black pepper but have a strong, peculiar odour and a bitter aromatic taste. Cubeb is used in medicines and cigarettes (Materials Handbook 4th edition by George S. Brady, Henry R. Clauser and John A. Vaccari). The same edition also says that long pepper is used in some countries for preserves and curries, is more aromatic and is sweeter than common pepper. Pepper cubeba being what it is, is excluded from Chapter 9 whereas long pepper is not. But India Materia Medica by Dr. K.M. Nadkarni says that pepper cubeba is used as a condiment and as carminative spice. Opinions differ. What is condiment to some is medicine to others. The second part of this chapter note says the products of Heading 12.11 are excluded from Chapter 9. We will examine the products covered under Chapter Heading 12.11 a little later.

9. A point is also made by the learned Advocate that HSN Explanatory Notes under Chapter 9 says “certain fruits, seeds and parts of plants which although they can be used as spices are more often employed in perfumery or in medicines (Heading 12.11) e.g., cassia pots, basil, borage, hyssop, all spices of mint rue and sage. This exclusion clause read with Chapter Note 2, the learned Advocate argues, clearly points out that products falling under Heading 12.11 are excluded from Chapter 9. We observe that these two notes (Chapter Note 2 and exclusion note) cannot be read to mean that the chapter excludes even those products which are specifically mentioned under Chapter Heading 9. It cannot be the intention of the legislature to first mention a product under one of the entries and then exclude it by a chapter note. These notes, therefore, should be read to mean that the legislature is speaking of those products which are not specifically mentioned under the heading. Since long pepper, the product under import, is specifically mentioned in Chapter 9, it cannot be argued that it is excluded from the chapter. We will be going in circles otherwise.

10. We now examine the other leg of the learned Advocate’s arguments that Chapter Heading 12.11 covers all plants and parts of plants including seeds and fruits of a kind primarily used in pharmacy. A lot of emphasis is put on the word ‘primary’. So if a plant is primarily used in pharmacy, it has to fall under Heading 12.11. In support of his argument that long pepper is used primarily in medicinal preparations of Ayurvedic hue, the learned Advocate filed several authorities on the subject. We have perused the various entries under this heading in the tariff. They cover roots, leaves, seeds, flowers, pods specifically and fruits are relegated to the entry ‘others’. This is not to suggest that the residuary entry is less important than the specific ones. The HSN notes under Chapter Heading 12.11 gives a list of products covered under Heading 12.11. The list does not show that fruits of long pepper are covered under this heading. The list speaks of roots and underground stems of long pepper, it is argued that the list showing the products under Heading 12.11 is not exhaustive. True, it is not exhaustive insofar as the plants are concerned, but it is exhaustive insofar as the products of the plants mentioned therein are concerned. We notice that the list mentions fruits of some other plants and not of long pepper. It is for this reason we consider that the entry ‘others’ under Chapter Heading 12.11 of the Customs Tariff may not be referring to fruits of long pepper.

11. Further, the Explanatory Notes at page 96 under Heading 12.11 makes a reference to exclusion therefrom certain vegetable products which reads “it should also be noted that vegetable products more specifically described in other headings of the nomenclature are excluded from this heading even if they are suitable for use in perfumery, pharmacy etc.” It goes on to give certain examples to clarify this position. The important ingredient of this note is that specifically described products in other headings even if suitable for use in perfumery and pharmacy are excluded from Chapter Heading 12.11. It is nobody’s case that long pepper is specifically not included in Chapter Heading 09.04. Once it is so, they have to be classified there only.

12. The case law cited by the learned Advocate has been considered by us. None of it is on the subject of classification of long pepper, though some of it certainly says that classification should be decided on what the people in the region understand a product to be (toffees and mithais etc.). It is highly debatable as to what the public opinion is about this product (long pepper) in the absence of any opinion poll on the subject. A few experts in Ayurveda may know the significance of pepper longum and its medicinal properties, but a considerable number of people in India may think it to be a condiment even though it is beyond their reach. What, with the price of long pepper declared at US $ 700 PMT and loaded to US $ 835 PMT with 70% import duty. Not within the reach of a common man or even uncommon one for that matter.

13. Way back however, a Bench of this Tribunal consisting of three members decided a similar issue 1983 (012) ELT 158. In that case someone imported caraway seeds (zera shahi) cleared it when assessed under Chapter Heading 09.04 and then applied for reassessment and consequent refund of the excess duty paid claiming classification under Chapter Heading 12.07 on the plea that it is a plant product primarily used in pharmacy. Nothing new here. Those days Flock India and the rest of the decisions were nowhere is sight. One thing led to the other and the matter came up before CESTAT. The Tribunal’s decision was that the goods were correctly classifiable under Heading 09.04 of the Customs Tariff. The ratio does not apply here as the facts of the case are different but the principle laid down does. The Bench observed “Rule 3A of the Interpretative Rules requires that the heading which provides a more specific description shall be preferred to heading providing more general description. The Bench has also considered the argument advanced before it that the Exim Policy considered it as a crude drug but discarded it saying that classification of goods under Customs Tariff is a different cup of tea (para 8). We follow this wisdom rather than finding fault with the legislature.

14. It is also argued that the legislature may have had a different long pepper in mind pepper chhaba under Entry 090411.13. This product, according to the literature filed by the learned Advocate, is generally used as a condiment. We observe that Heading 09.04 says pepper of the genus piper which expression covers both piper chhaba and long pepper according to us.

15. For the reasons enumerated above, we hold that the goods under import are correctly classifiable under Chapter Heading 09.04 of the Customs Tariff. We, therefore, agree with the Commissioner’s finding in this regard.

16. Now we take up the issue of valuation. In appeal C/910/03, four Bills of Entry are involved. In appeal C/909/03, three consignments. The invoices are on Ganesh International (909/03) which has sold the consignments on high sea sales basis to Khushi International. The sale contract number is reflected in the invoice of supplier on Ganesh International.

17. The department’s ground is that in cases where invoices did not indicate sale contract, the consignments under clearance cannot be correlated with the sale contract. Hence Rule 10A of the Valuation Rules is invoked. It was also suggested in the show cause notice, that as per NIDB of Directorate of Valuation a similar consignment was imported and cleared under Bill of Entry, dated 7-1-2003 for US $ 1150. During the course of adjudication however, the Commissioner discarded this value and adopted US $ 835 as that value has been accepted by the present importers even though they declared US $ 700 PMT. The appellants’ contention is that such an enhanced value, US $ 835 cannot be treated as transaction value of identical goods and so cannot be the basis of determination of value under Rule 5.

18. We have examined the rival contentions. The Commissioner rejected the transaction value, proceeded to invoke Rule 10A and determined the value as US $ 835 for two reasons. The first is that the sale contracts which were produced by the appellants in response to a query memo cannot be correlated to the invoices under dispute. Secondly, the value of US $ 835 was accepted as the transaction value by the appellants in previous imports which were proximous to the present imports. In our view the Commissioner was right in rejecting the transaction value in the case of the appellants when he had data available with him indicating US $ 835 PMT for the same goods. As per the contention, that the Commissioner ought not to have taken the loaded value of the previous consignment for determining the value of the present one, we observe that the Commissioner adopted only that value which, on a previous occasion, was said to be the correct transaction value. If the argument is that loaded value should not have been the basis for the assessment of the impugned goods, the Commissioner could have still adopted the same price taking recourse to Rule 8 (best judgment method). In any case, the appellants’ plea that a declared value always represents the transaction value may not be correct in all cases. The Commissioner determined the value in the present case on the basis of accepted value for identical goods. We, therefore, uphold this finding of the Commissioner.

19. The Commissioner confiscated the goods on two counts, misdeclaration of description and misdeclaration of value. He argues “therefore, that by declaring other than the regular description of the goods the importer resorted to misdeclaration of goods and thereby rendered the goods liable to confiscation under Section 111(m).” If someone imports water and describes it as H₂O in the Bill of Entry, the Commissioner would consider it as misdeclaration. We do not.

20. The Commissioner also held that the goods are undervalued and are therefore liable to confiscation. We have come across a number of instances where the assessing officers rejected the transaction value and determined it under Rule 5 or 6 of the Valuation Rules. On all those occasions, the charge of undervaluation however is not made. In the present case, the Commissioner redetermined the value of the goods on the basis of contemporaneous imports but pressed the charge of undervaluation as well. These importers appeared to have been discriminated in this regard. We do not consider that there are enough grounds to sustain the charge of undervaluation in this case. We, therefore, set aside this finding of the Commissioner. The goods are not liable to confiscation under Section 111(m).

21. Thus, we pass the following orders:

(a)        We uphold the classification of fruits of long pepper plant under Tariff sub-heading 09.04 of the Customs Tariff.

(b)        We uphold the value of US $ 835 PMT as determined by the Commissioner.

(c)        We set aside the confiscation of the goods under Section 111(m) and the penalties imposed under Section 112 of the Customs Act.

22. The appeals are thus partly allowed.

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Equivalent 2004 (169) ELT 0284 (Tri. - Mumbai)

Equivalent 2004 (095) ECC 0334 (Tri.-Bom)