2018 (9) TMI 248 – CESTAT CHENNAI – TMI – Classification of goods – Chelated Zinc as 12% – Chelated Iron as 12% Fe – mixture of Chelated substance – whether the said products are classifiable under 3105 as “other fertilizers or as “Plant Growth Regulators‟ under CETA 3808 9340? – benefit of N/N. 4/2006-CE dated 1.3.2006.
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Held that:- The issue of classification of “micronutrients‟ has been in confusion for a number of years – We find resonance in a recent decision of the Tribunal, in Commissioner of Central Excise, Hyderabad Vs. Aries Agrovet Industries Ltd. [2017 (7) TMI 289 – CESTAT HYDERABAD], where it was held that In view of presence of nitrogen, and also considering that they are mixtures and not separate chemically defined compounds, the said goods would therefore come under the ambit of micronutrient fertilisers and will then required to be classified as in other fertilisers in CETH 31.05.
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Appeal allowed – decided in favor of appellant. – Appeal No. E/41
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authority inter alia holding that the goods are classifiable only as Plant Growth Regulators‟ under CETA 38089340, confirming the differential duty of ₹ 14,95,381/-, along with interest thereon and imposition of equal penalty under section 11AC of Central Excise Act, 1944. In appeal, Commissioner (Appeals) vide impugned order dated 26.12.2014 upheld the orders of the original authority. Hence the appellants before this Tribunal. 2. Today, when the matter came up for hearing, on behalf of the appellant, ld. counsel Ms. L. Maithili made oral and written submissions, which can be broadly summarized as under:- 2.1 The issue involved in the present case, i.e. the classification of micronutrient mixtures is no longer res integra and stands covered by a number of binding precedents and Board Circulars. The Tribunal in the case of Hindustan Agro Insecticides – 2017-TIOL-3145-CESTAT-HYD, after taking into account the competing Tariff Entries, Chapter Headings, HSN notes, various Bo
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pter 31 read with Chapter note 6 to Chapter 31, there is no requirement for nitrogen or phosphate to be the dominant ingredient to qualify for classification under chapter sub-heading 31 05. No minimum percentage of Nitrogen, Potassium or Phosphate is stipulated in the Tariff Entries, chapter Notes or the HSN Notes the classification of a product as fertilizer. Moreover, the manufacturing process, as recorded in the show cause notice itself, shows the use of Ammonia (a compound of Nitrogen) as an essential ingredient for the manufacture of Chelates. The Nitrogen is retained in the final product and hence, is an essential constituent of the subject goods. 2.4 The Commissioner has made an unfounded assumption that that the subject goods are a type of plant growth regulators viz. Gibberellins which are plant hormones that promotes overall growth of plant, apart from being baseless also goes beyond the department‟s case in the show cause notice and in the Order-in-Original. There is
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eated clarifications by the CBEC and a number of judicial pronouncements. When the department itself had accepted in March, 2011 that the subject goods were used as fertilizers and had demanded 1% duty on that basis, there was no scope for invoking the extended period of limitation, that too after a lapse of two years thereof. 3. On the other hand, ld. AR Sh. B. Balamurugan supported the impugned order. He drew our attention to para 7 of the impugned order wherein the Commissioner (Appeals) after thorough analysis of CBEC Circular, HS Notes, Central Excise Tariff and Explanatory Notes of Chapter 38 of the HSN has concluded that the products are capable of altering the life processes of a plant and in enhance yield and accordingly they are correctly classifiable as Plant Growth Regulators‟; that further the content of nitrogen is of very low percentage which is not sufficient to be called fertilizing element and that nitrogen is used only as chelating agent; hence goods are nothin
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n earlier judgment, in Ranadey Micronutrients Vs. Collector of Central Excise – 1996 (87) ELT 19 (SC) had referred to the circular dated 21.11.1994 issued by the CBEC (withdrawing earlier circular dated 20.6.1990) and held that micronutrients are required to be classified under CETA 3015. Subsequent to the judgment in Ranadey Micronutrients, Board had issued one more circular on 19.5.1998. Yet another circular was issued on 6.4.2016 wherein inter alia it was clarified that for classification under Chapter 31, at least one of the elements namely Nitrogen, Phosphorous or Potassium should be an essential constituent of the fertilizer. 5.1 From the test reports of the Customs Laboratory found in the file, it is seen that the percentage of Nitrogen in chelated zinc has been found at 1.8%, in MNM chelated as 2.5% and in chelated iron it is 3.3% with regard to test report dated 1.4.2013. One of the main ground for the view taken in the impugned order is that though nitrogen is present in the
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all percentages are NOT an essential constituent‟ of the impugned goods. This being so, we are afraid that there is no other reason why the impugned goods cannot be classified under CETA 31.05 as clarified in the CBEC Circular dated 6.4.2016. 5.2 In arriving at this conclusion, we find resonance in a recent decision of the Tribunal, in Commissioner of Central Excise, Hyderabad Vs. Aries Agrovet Industries Ltd. – 2017 (7) GSTL 317 (Hyd.). The relevant portion of the said decision involving similar chelated fertilizers with brand names LEO Brand Chelated Zinc, Micnut and Iron with Nitrogen is reproduced as under:- 8. We find that on the imbroglio with respect to the classification of Micronutrients,‟ the CBEC themselves have been changing their stance thereon over the years. In a Circular No. 79/79/94-CX, dated 21-11-1994, the Board modified earlier Circular No. 26/90-CX.3, dated 26-6-1990 (which had advised appropriate classification of Micronutrients‟ under Heading No
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) Minor or so called micronutrients – Iron (Fe), Manganese (Mn), Copper (Cu), Zinc (Zn), Boron (B) and Molybdenum (Mo). However, for the purpose of classification of micronutrients as Other Fertilizers‟ in Heading 31.05 of CET, the scope of the term Other Fertilizers‟ has to be determined in the light of Note 6 of Chapter 31. Further, the specific exclusion of separate chemically defined compounds as laid down in the HSN Explanatory Notes to Heading 3105.90, must also be borne in mind. If the micronutrient is a separate chemically defined compound, it will be classifiable under Chapter 28/29. If not so, and if in accordance with Note 8 to Chapter 31, it contains N, P or K, it will be classifiable under Chapter Heading 31. 8.3 In the cases before us, proceedings have been initiated by department referring to these circulars and alleging that Nitrogen is present in the impugned goods of the respondents in smaller quantity only, in the form of diamine and the goods will not fu
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wicks and candles and fly-papers). CETH 31.05 Mineral or chemical fertilisers, containing two or three of the fertiliser elements, nitrogen, phosphorous and potassium; other fertilisers . 8.5 The HSN notes for these tariff headings will be very useful for determining the correct classification. Entry No. 38.08 is in fact is grouped in chapter for Miscellaneous Chemical Products . Under the Heading 38.08, which includes Plant Growth Regulators‟, it is indicated that the heading covers anti-sprouting products and Plant Growth Regulators‟ intended to inhibit or promote physiological process in plants. It is interesting to note that Plant Growth Regulators are grouped along with other insecticides, fungicides, herbicides and disinfectants, all of which are intended to destroy pathogenic germs, insects, mosses and moulds, weeds, pests and achieve their results as given in the notes by nerve poisoning, stomach poisoning by asphyxiation or by odour etc. . From the data on plant gr
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, Copper, Boron, Molybdenum, Nickel, etc. Board has also acknowledged that these micronutrients are sold in the market as micronutrient fertiliser. It has, however, clarified that for classification under Chapter 31, at least one of the elements viz; Nitrogen, phosphorous or potassium should be an essential constituent of the fertiliser. Board has also clearly differentiated plant growth regulators as organic compound other than nutrients which affect the physiological process of growth and development in plants. Board has further clarified, in para 6 therein, that its past circulars on the subject, viz; dated 21-11-1994 and 19-5-1998 are rescinded and that classification of micronutrients, etc., shall be governed by the present circulars. 8.7 As per the aforesaid C.B.E. & C. Circular dated 6-4-2016, plant growth regulators are defined as organic compounds other than nutrients that affect the physiological processes in plants, by hormonal action in promoting inhibiting or modifying
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