M/s. Caress Industries Versus Commissioner of GST & Central Excise, Salem
Central Excise
2018 (9) TMI 248 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 4-9-2018
Appeal No. E/41190/2014 – Final Order No. 42339 / 2018
Central Excise
Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) And Hon'ble Shri Madhu Mohan Damodhar, Member (Technical)
Ms. L. Maithili, Advocate for the Appellant
Shri B. Balamurugan, AC (AR) for the Respondent
ORDER
Per Bench
The facts of the case are that the appellants are manufacturers of “Micronutrients” and availing SSI exemption. Pursuant to audit, it emerged that the appellants were also engaged in manufacture of Chelated Zinc as 12%, Chelated Iron as 12% Fe, mixture of Chelated substance. It emerged that appellants are manufacturing the said products under nil rate of duty vide Notification No. 4/2006-CE dated 1.3.2006 classifying the same under Central Excise Tariff Heading 3105 as “other fertilizers”. Department took a view that
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ts 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 Board circulars and Apex Court ruling in the Ranadey Micronutrients case, has held that micronutrient mixtures (like those manufactured by the Appellant) are classifiable under Chapter Sub-heading 3105.90 as Other fertilizers and not as Plant Growth Regulators. The Appellant craves leave to treat paras 8-8.8 and 9 of the said decision of the Tribunal as a part and parcel of these submissions. These findings have been adopted and followed in more recent decisions in the case of San Industries Vs. CCE – 2018-TIOL-570-CESTAT-HYD.
2.2 The classification claimed by the Appellant satisfies the requirement of Note 6 of Chapter 31 i.e.
a) The product must be of a kind used as fertilizers;
b) It must contain any one of the fertilizing elements viz. Nitrogen, phosphorous or potassium and
c)
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z. 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 no material on record to suggest that the subject goods contain any Gibberellins. In fact, there is no dispute that the subject goods are micronutrient mixtures containing Nitrogen. This fact stands established by the Test results of the technical analysis by the Chemical Examiner, Customs House Laboratory, Chennai relied upon by the department. 2.5 The classification of the subject goods under Chapter heading 3808 stands excluded by the operation of Note 1 to Chapter 38, which stipulates that the said Chapter heading will apply only to separate chemically defined compounds, which admittedly, the subject goods are not. Micronutrients manufactured by the Appellant by using chelating agents are mixtures and not chemically defined compounds.
2.6 Even otherwise the demand is su
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rowth 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 nothing but “Plant Growth Regulators‟ requiring classification under CETA 3808 and not as “other fertilizers‟ under 3105.
4. Heard both sides and have gone through the records.
5. The issue of classification of “micronutrients‟ has been in confusion for a number of years. The CBEC have revised their stance in respect of the classification in successive circulars. No doubt, the Commissioner (Appeals) has relied upon the judgment of the Hon'ble Supreme Court in the case of Karnataka Agro Chemicals – 2008-TIOL-117-SC-CX. However, we notice that the Hon'ble Supreme Court in that case has only remanded the issue back to the adjudicating authority to examine whether addition of 0.31% of Nitrogen would convert “Plant Growth Regulators‟ into nutrie
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en 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 impugned goods, it is present in very low percentage which is not sufficient to be called as essential constituent of the fertilizer. We, however, find that the ld. Advocate is correct in her assertion that there being no minimum prescribed percentage of Nitrogen etc. prescribed in Note 6 to Chapter 6 of the Central Excise Tariff Act, the requirements of that Note being classified as micronutrient in other fertilizers, CETA 31.05 are satisfied. We also, note that the Board‟s circular dated 6.4.2016 also does not specify any minimum percentages for such elements to be considered as “essential constituents”. Evidently, the essentiality of these elements is then to be decided by the “essential manner” that they act upon the soil or the “e
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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. 38.08 as “Plant Growth Regulator‟) and clarified that “Micronutrients listed under Sr. No. 1(F) of Schedule 1 part (A) of the Fertiliser (Control) Order, 1985 and their mixture (with or without N, P, K) as notified by the Central Government or a State Government would be appropriately classifiable under Heading No. 31.05 as “Other Fertilizers”.
8.2 Subsequent to the Supreme Court‟s judgment in the case of Ranadey Micronutrients [1996 (87) E.L.T. 19 (S.C.)], Board re-examined the matter and issued another Circular No. 392/25/98-CX, dated 19-5-1998. Referring to the HSN Explanatory Notes, Board advised therein as follows:
Fertilisers are materials added to soil and, sometimes to foliage to supply nutrients to sus
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er 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 function as nutrients since Nitrogen present does not function as a nitrogenous fertilizer as nitrogen is not released. Department also took the view that the impugned goods are one or more combination of micronutrients such as compound of zinc, boron, manganese, etc., which are required in smaller quantities to regulate plant growth to alter life process of the plant so as to accelerate growth yield and improve quality and hence the products are classifiable as plant growth regulators under Chapter 38.08 only. We find that the same arguments have been put forth by the department in the grounds of appeal.
8.4 For better understanding of various contending classifications, the CETA Heading Nos. 38.08 and 3105 are repro
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s, 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 growth regulators submitted by the appellant, we find that at least in some parts of the world, they are regulated as pesticides. Discernibly, micronutrients which are admittedly for promoting only growth and health of plant cannot logically find a place in this heading.
8.6 It is interesting to note that C.B.E. & C. found it necessary to issue yet one more Circular No. 1022/10/2016-CX, dated 6-4-2016, on the very issue of classification of micronutrients, plant growth regulators, etc. In the first para itself, the circular acknowledges that the issue of classification of these items remain a disputed area in Central Excise. On the basis of opinion obtained from Indian Agricultural Research Institute (I
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overned 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 growth and development. On the other hand, micronutrients, as explained in the very same circular, are essential nutrients, like iron, Manganese, Zinc, Copper, Boron etc., that are required in small quantities for the normal growth and development of plants. Micronutrients thus cannot modify inhibit retard the growth of plants like plant growth regulators, they only promote normal growth.
8.8 Applying the above findings, it clearly emerges that the impugned products definitely do contain more than one of the essential nutrients listed in the circular, they have also contain recognisable percentage of nitrogen. This being so, the disputed items are certainly micronutrients. In view of presence of nitrogen,
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