2019 (8) TMI 1251 - AT - Central Excise

Tribunal reclassifies fertilizers, drops duty demand, and overturns penalties in landmark decision.

Dr K.R.K. Reddy, Director, Sri Bio Tech Laboratories Ltd Versus Commissioner of Customs, Central Excise & Service Tax, Hyderabad – I (Vice-Versa)

The Tribunal ruled that Multi Micro Nutrient Fertilizers should be classified under CETA 3105 as fertilizers, not as Plant Growth Regulators under CETA ... Classification of goods - Multi Micro Nutrient Mixtures etc. - classified under 3105 of Central Excise Tariff Act 1985 or under Chapter heading 3808 9340 attracting higher rate of duty, as Plant Growth Regulators - HELD THAT:- The issue as to the classification of Micronutrients has been clarified by the Board vide Circular No. 1022/10/2016-CX dated 06.04.2016. It is explained in the circular that Plant Growth Regulators are different from nutrients (Micronutrients) - The Tribunal in the case of N SREENIVASA RAO, DIRECTOR, SHIVASHAKTHI BIO TECHNOLOGIES LIMITED VERSUS CCEC AND ST, HYDERABAD-I [2018 (5) TMI 533 - CESTAT HYDERABAD] had occasion to analyze the very same issue and observed that Micronutrients are properly classifiable under Chapter heading 3105 of CETA 1985 and not under heading 3808 - thus, the Micronutrients (single/multi) have to be classified under 3105 only - demand raised by the department classifying them as Plant Growth Regulators under 3808 cannot sustain and requires to be set aside. Bio-pesticides/bio-fertilizers of microbial origin - classified under 3105 or under 3002? - HELD THAT:- The Tribunal in the case of T. STANES & CO. VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE [2008 (10) TMI 109 - CESTAT, CHENNAI] has analyzed the said issue and held that the correct classification of these items is under 3002 and not 3808 - correct classification of these products are under 3002, attracting nil rate of duty - the demand of duty classifying the said products under 3105 and 3808 cannot sustain and requires to be set aside. Bio-pesticides / bio-fertilizers of plant / animal origin - classified under 3105 or under 3808 of CETA, 1985? - penalties - HELD THAT:- The original authority has set aside the demand beyond the normal period observing that the issue is of classification as well as interpretation - the entire issue is with respect to classification and interpretation of Tariff headings, we are of the considered opinion that the penalties imposed are unwarranted and require to be set aside. Appeal allowed in part. Issues Involved:1. Classification of Multi Micro Nutrient Fertilizers.2. Classification and duty demand on Single Micro Nutrient Fertilizers.3. Classification and duty demand on Bio Fertilizers/Bio-pesticides of Microbial origin.4. Classification and duty demand on Bio Fertilizers and Bio-pesticides of Plant/Animal origin.5. Imposition of penalties on the Managing Director.Detailed Analysis:1. Classification of Multi Micro Nutrient Fertilizers:The primary issue was whether Multi Micro Nutrient Fertilizers should be classified under CETA 3105 as fertilizers or under CETA 3808 as Plant Growth Regulators (PGRs). The department argued that these products do not contain fertilizing elements like N, P, or K, and thus should be classified as PGRs. However, the assessee contended that these products are recognized as fertilizers under the Fertilisation (Control) Order, 1985, and supported their argument with CBEC Circular No. 1022/10/16-CX dated 06.04.2016, which clarified that Micro Nutrient Mixtures are not PGRs. The Tribunal referenced previous decisions in similar cases, concluding that Multi Micro Nutrient Fertilizers should be classified under CETA 3105, not 3808. Consequently, the demand, interest, and penalties imposed by classifying these products under 3808 were set aside.2. Classification and Duty Demand on Single Micro Nutrient Fertilizers:The original authority had dropped the duty demand for Single Micro Nutrient Fertilizers, classifying them under Chapter 28. The Tribunal upheld this decision, noting that the same rationale applied to Multi Micro Nutrient Fertilizers would apply here. The department's appeal against this classification was dismissed.3. Classification and Duty Demand on Bio Fertilizers/Bio-pesticides of Microbial Origin:The department classified these products under 3105 and 3808, while the assessee argued for classification under 3002, which attracts nil duty. The Tribunal referred to the case of T. Stanes & Co., which held that such products should be classified under 3002 as they are cultures of micro-organisms aiding plant growth. Following this precedent, the Tribunal set aside the duty demand and reclassified these products under 3002.4. Classification and Duty Demand on Bio Fertilizers and Bio-pesticides of Plant/Animal Origin:The assessee accepted the classification proposed by the department under 3105 1000 and 3808 9910 and agreed to pay the duty for the normal period. However, the penalties imposed were contested. The Tribunal, considering the issue as one of classification and interpretation, set aside the penalties while upholding the duty demand for the normal period.5. Imposition of Penalties on the Managing Director:The penalties imposed on the Managing Director were challenged. The Tribunal noted that the entire issue revolved around the interpretation of law and classification of products. Given this context, the penalties imposed on the Director were deemed unwarranted and were set aside.Conclusion:- The appeal filed by the Managing Director was allowed.- The appeal filed by the assessee regarding Multi Micro Nutrient Fertilizers was partly allowed.- The appeal filed by the department was dismissed.- The penalties imposed in relation to Bio Fertilizers and Bio-pesticides of Plant/Animal origin were set aside.