TaxTMI 
TaxTMI 
2007 (2) TMI 95
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (i) The Micronutrient Fertilizers manufactured by the assessees are of two types viz. (a) Fertilizers meant for soil application; and (b) Fertilizers meant for foliar application. Moreover, the State Government has issued necessary licence to manufacture and market the Micronutrient Fertilizer in various States. The trade recognizes the impugned product as Fertilizers. (ii) The Micronutrient compounds are basically mixtures of Zinc, Ferrous, Manganese, Boron etc. and all these elements are present in various percentages but, within the limit specified in the Fertilizer (Control) Order, 1985. (iii) The question of classification of the impugned items was raised as early as in 1989. In fact, in 1994, proceedings were initiated in respect of Karnataka Agro Chemicals to classify the impugned goods as 'Plant Growth Regulators'. But, the Assistant Commissioner held that the Micronutrient Fertilizer was classifiable under CH 31.05 as "Other Fertilizers" attracting NIL rate of duty. As the department has accepted the above order dated 26-6-1995, the matter has reached finality. The following case-laws were relied on :- (a) Birla Corporation Ltd. v. CCE - 2005 (186) E.L.T. 266 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is a chemically defined compound and in the present case, the impugned product is a mixture. 1. Technical Dictionary of Kirk Othomer 2. The Hawley's Condensed Chemical Dictionary 3. 'Micronutrients in Soils, Crops and Fertilizers' by Dr. H.L.S. Tandon (ix) Note 1 to Chapter 38 states that for a 'Plant Growth Regulator' to be classifiable under Chapter Note 38.08, it should be a 'separately de fined chemical element or compound'. (x) Since the impugned product is a mixture, it does not satisfy the test laid down in Chapter Note I to Chapter 38 and consequently, it cannot be classified under CH 38.08. The following case-laws are relied on :- (a) Leeds Kern v. CCE, Aurangabad - 2001 (134) E.L.T. 294 (Tri.-Del.) (b) Northern Minerals Ltd. v. CCE, New Delhi - 2001 (131) E.L.T. 355 (Tri.-Del.) [Affirmed by Supreme Court in 2003 (156) E.L.T. A161 (S.C.)]. (xi) The Department's contention is that the impugned products do not contain Nitrogen, as a fertilizing element, which is present only as a Chelating component and, therefore, the product cannot be classified under CH 31.05. Another ground for rejecting classification under Chapter 31 is that the presence of Nit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....certified the products to be Fertilizers, it would not be open to the Central Excise Authorities to take a view that the products are not fertilizers. The Apex Court's decision in M/s. Bigen Industries Ltd. - 2006 (197) E.L.T. 305 (S.C.) is relied upon. (xv) The Department was aware of all the facts as the Assistant Commissioner dropped the proceedings in 1995. Therefore, longer period is not invokable and the demand for the period prior to 26-8-2001 is barred by limitation. The following case-laws were relied on (a) Nizam Sugar Factory v. CCE, A.P. - 2006 (197) E.L.T. 465 (S.C.) (b) CCE, Bangalore-III v. Bripanil Synthetics (P) Ltd. - 2006 (20 E.L.T. 11 (Kar.) (xvi) Another issue for which demand has been raised is on account of alleged re-packing and re-labeling of goods classifiable under CH 38.08 which has been held to be a process of manufacture by the Commissioner in terms of Chapter Note 2 to Chapter 38. The two products are Multiplex Samras and Multiplex Sulphur. The product Multiplex Samras was received in tankers and repacked into retail quantities of 100 ml, 250 ml, 500 ml, etc. Chapter Note 2 to Chapter 38 would be attracted only if the Tanker in which the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....31 is not being fulfilled in the case of the impugned product so as to qualify them as "Other Fertilizers." The fact that the impugned products contained Nitrogen is not in doubt. We do not find any prescribed proportion of N, P or K in Chapter 31. The appellants have contended that the only source of Nitrogen is Urea. According to expert opinion, even if Nitrogen is present as a chelating agent, it can act as a fertilizing element. Therefore, the ground for rejecting the impugned product as 'Other Fertilizer' is not sound. The Adjudicating Authority has come to the conclusion that the impugned item is 'Plant Growth Regulator' falling under chapter 38. There is no proper examination of the issue. She has taken the definition of Plant Growth Regulator from A.B. Sarkar's Publication Words and Phrases of Excise & Customs', II Edition- Pages 1157 and 1158 and has come to the conclusion that the goods manufactured by the assessee satisfy those definitions and, therefore, has concluded that the item is a 'Plant Growth Regulator'. Just fat the reason that the impugned item cannot be called as 'Other Fertilizers' falling under Chapter 31.05, one cannot conclude that it would be classified ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be either natural or synthetic. In other words, they are chemically well-defined compounds. This is very clear from Chapter Note 1(a) of Chapter 38 wherein it is stated that "1. This Chapter does not cover: (a) Separate chemically defined elements or compounds with the exception of the following (1) ………………… (2) Insecticides,………. and plant-growth regulators,………." The above Note means that Chapter 38 does not cover chemically defined elements or compounds other than plant-growth regulators. The inference drawn is plant-growth regulator should be a chemically defined element or compound. This has also been held by the Tribunal in the case of Leeds Kem v. CCE, Aurangabad - 2001 (134) E.L.T. 294 (Tri.-Del). In the present case, it is not the case of the Revenue that the impugned products are chemically defined compounds. In fact, the impugned products are mixtures of various inorganic substances. Therefore, we do not find adequate grounds for classifying the impugned products under Chapter 38. 5.1 The classification of Micro Nutrients is a subject matter of three Circulars issued by the CBEC. The first Circular is dated 24-5-1990. In that Cir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cally 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 compounds, 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 Heading 31. 6. Further it is also stated that notification under F.C.O. is irrelevant for deciding classification under the Central Excise Tariff and regardless of such notification, the appropriate consideration should be :- (i) whether or not the micronutrient in question is a separate chemically defined compound. If it is, then classification under 31.05 is ruled out; and (ii) if it is not, whether it contains N, P or K as laid down in the Explanatory Notes. 7. Therefore, it is clarified that classification of micronutrients may be done in accordance with the above guidelines." The tests laid down are mentioned in Para 6. The first question to be asked is whether the impugned product is a separate chemically defined com pound. If it is so, then its classification under Chapter 31 is ruled out. If it is not, whether the impugned produ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the impugned micronutrient fertilizers should be classified under Chapter 31 and not under Chapter 38. 5.4 Another point raised by the Revenue is the Nitrogen found in the samples of the impugned products, is present as a chelating agent and not as a fertilizing element. In the light of Note 6 to Chapter 31, we do not find it necessary to elaborate on chelation and chelating source. The appellant has produced the following opinion of Dr. G.S. Gaur, Professor & Head of the Department of Horticulture, Chandra Shekhar Azad University of Agriculture & Technology, Kanpur. The following query has been raised to him. "If Nitrogen is from a chelating source, does it cease to act as a fertilizing element? Nitrogen present in a product performs the same functions irrespective of its source. Nitrogen irrespective of its source is one of the essential elements for the growth and development of plants. Even if Nitrogen is from a chelating source, it does not cease to function as a fertilizing element Nitrogen from any source including from chelating source will undergo mineralisation which means organic compounds are broken down into simple substances of inorganic forms. Nitrogen ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x samras is excluded from the aggregate value of clearance for the purpose of computing the exemption limits under SSI Notifications, then the value of repacked liquid sulphur would be well within the initial exemption limit. Further, there is a prayer for giving the benefit of Modvat and also the benefit of cum duty price. 5.9 As we have held that the Micronutrient Fertilizers fall under CH 31.05 and hence not dutiable and also accepted the appellants contention that repacking of Multiplex Samras would not amount to manufacture, we accept their prayer for excluding the values of Micronutrient Fertilizers and Multiplex Samras for computing the exemption limits. The party's contention that they would come within the exemption limit can be verified by the original authority. In case, the clearances exceed the exemption limit, while computing duty, Cenvat/Modvat benefit should be extended. The sale price should be considered as cum-duty price only. Subject to the above verification, we allow the request of the appellants. 5.10 In view of our above finding, the penalties imposed under Section 11AC on the appellant company and also under Rule 25 are not justified at all. The....