TaxTMI 
TaxTMI 
2024 (2) TMI 767
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....her for hearing and disposal. Sl. No. Appeal No. Impugned Order No. Period Amount involved 1 to 12 E/1364 1375/2010 to OIO No. 06-17/2010 dated 31.03.2010 August 2001 To 31.12.2009 Rs.2,89,64,308/-, Rs.23,26,36,443/- +interest and penalty of Rs.1,50,00,000/- 13 to 14 E/20087/2015 and E/20088/2015 OIO No. 15/2014-15 dated 17.10.2014 January 2010 To August 2013 Rs.31,33,73,346/- +interest +Rs.31,33,73,346/- as penalty Rs.3,15,00,000/- penalty on Shri Mahesh G Shetty 15 to 16 E/21306/2015 and E/21307/2015 OIO No. BLR-EXCUS- 003-COM-27-14-15 dated 27.02.2015 September 2013 To June 2014 Rs.9,81,15,243/- +interest +Rs.98,00,000/- as penalty Rs.10,00,000/- penalty on Shri Mahesh G Shetty 17 to 18 E/20236/2016 and E/20237/2016 OIO No. BLR-EXCUS- 003-COM-13-15-16 dated 20.11.2015 July 2014 To March 2015 Rs.9,74,30,425/- +interest +Rs.97,00,000/- as penalty Rs.10,00,000/- penalty on Shri Mahesh G Shetty E/20246/2017 and E/20247/2017 OIO No. BLR-EXCUS- 003-COM-20-16-17 dated 25.11.2016 April 2015 To September 2015 Rs.8,58.83,708/- +interest +Rs.8,58,83,371/- as penalty Rs.10,00,000/- penalty....
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.... the appellants submits that this is the second round of litigation before this Tribunal pursuant to the remand order by the Hon'ble Supreme Court. He submits that subsequent to the order of Hon'ble Supreme Court, remanding the matter to the adjudicating authority to examine the process of manufacture of the goods in question, a committee was appointed by the Commissioner to visit the appellant"s factory for verification of the process of manufacture. Consequently, the committee visited the factory of the appellant on 06.01.2009 and report was submitted by the committee on 08.05.2009 after conducting necessary verification of manufacturing process at the factory of the appellant. On 10.06.2009, the appellant sought copy of the report furnished by the committee before attending the personal hearing allowed by the Commissioner. Thereafter, on 12.09.2009, the departmental officer visited the factory to collect the samples of the goods and on 16.10.2009, a letter from Commissioner was written to the Director, Department of Agriculture, Govt. of Karnataka requesting for testing the samples to ascertain percentage of each mineral and whether the same is a PGR/micronutrient/fertilizer. Th....
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....re clearly not organic compounds and thus, they may not be called plant growth regulators. 3.4 The learned Advocate for the appellants has further submitted that by not accepting the report the Order of the Supreme Court has not been followed. The order of the Supreme Court should have been strictly followed in the remand proceedings. In support, he placed reliance on the decision of Hon'ble Gujarat High Court in the case of Indian Oil Corporation Ltd vs. UOI - 2010 (262) ELT 94 (Guj.) and the decision of Hon'ble Supreme Court in the case of UOI vs. Kamlakshi Finance Corporation Ltd - 1991 (55) ELT 433 (SC).] 3.5 He has further submitted that the Revenue/Respondent was bound to follow the specific directions of the Hon'ble Supreme Court and by failing to do so, the Respondent has violated the principle of judicial discipline. 3.6 He has further submitted that the finding of the Commissioner that Nitrogen has been added to the subject products only from the year 2000 onwards and not an essential constituent, is contrary to facts and law. The fact of presence of Nitrogen in the micronutrients cleared by the appellant, has been consistently recorded in the proceedings. The qu....
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....) ELT A161 (SC) (iv) Ranadey Micronutrients vs. CCE - 1996 (87) ELT 19 (SC) (v) CCE, Hyderabad-IV vs. Aries Agrovet Industries Ltd - 2017 (7) GSTL 317 (Tri. Hyd.) (vi) San Industry vs. CCE, Hyderabad-I - 2018 (11) GSTL 320 (Tri. Hyd.) (vii) Shivshakti Bio Plantec Ltd vs. CCE, Hyderabad - 2019 (20) GSTL 243 (Tri. Hyd.) (viii) Sree Ramcides Chemicals Pvt Ltd vs. CCE, Trichy - 2016 (337) ELT 412 (Tri. Che.) (ix) Narmada Bio Chem Pvt Ltd vs. CCE, Vadodara-I - 2019 (370) ELT 1276 (Tri. Ahmd.) (x) KPR Fertilizers Ltd vs. CCE, Vishakhapatnam-II - 2023 (384) ELT 216 (Tri. Hyd.) 3.12 Further, it is his submission that the subject micronutrient fertilizers with pre-determined proportions of various micronutrients and containing 5% to 7% Nitrogen and Potassium during the relevant period of dispute are classifiable as "other fertilizers" under Chapter Heading 3105 of CETA, 1985. 3.13 Further, he has submitted that the process of mixing of micronutrients, does not amount of "manufacture". It is submitted that the manufacturing activity concerning soil application powder is mainly manual, whereas that of powder foliar spray is ....
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.... commodity. In order to attract duty, the goods must emerge as a result of manufacture and must be marketable. The twin tests need to be satisfied. In support, he relied on the following judgments of Hon'ble Supreme Court: (i) UOI vs. Delhi Cloth and General Mills Co Ltd - 1977 (1) ELT J199 (SC) (ii) South Bihar Sugar Mills Ltd vs. UOI - 1978 (2) ELT J336 (SC) (iii) UOI vs. J G Glass Industries - 1998 (97) ELT 5 (SC) (iv) CCE vs. Tarpualin International - 2010 (256) ELT 481 (SC) (v) Metflex (I) Pvt Ltd vs. CCE, New Delhi - 2004 (165) ELT 129 (SC) (vi) Crane Betel Nut Powder Works vs. CCE, Tirupati - 2007 (210) ELT 171 (SC) 3.16 It is his submission that the re-packing and re-labeling of Multiplex Samras does not amount to "manufacture" being accepted in the impugned orders. Regarding the re-packing of Multiplex Sulphur, it was held by the Tribunal vide its order dated 26.02.2007 that if the value of micronutrient classified under Chapter Heading 3105 is excluded, the aggregate value of clearance would come within the exemption limit under SSI Exemption Notifications. 3.17 Further, he has submitted that the imposition of pe....
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.... raw materials in a fixed ratio and packing. (v) Most part of the manufacturing process is manual and the only level of sophistication involved is in packing the foliar spray. (vi) The products are mixtures of organic and inorganic substances and not distinct compounds. (vii) Nitrogen is added in the form of Urea. 4.5 The adjudicating authority, on the basis the study conducted, reached the following conclusions : (a) The process of manufacture of impugned products is devoid of any chemical reaction. The Nitrogen content is not due to any chemical reaction but due to the addition of Urea, which can be done even at the time of final use. Thus, the method of manufacture adopted by the appellant has no bearing on the classification of impugned products. (b) It is not mandatory to include Nitrogen or Phosphorus or Potassium in micronutrients. Nitrogen is not a basic/fundamental constituent element in the impugned products. Nitrogen is not the element, which makes the impugned products what they are. Conversely, the presence of Nitrogen in the impugned products does not qualify the goods to be classified as "other fertilizers" under Headin....
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.... 4.8 Further, analyzing the cost worksheets in respect of some of the impugned products, it is recorded that Nitrogen was not shown to be present prior to year 2000. The department also not raised the classification of the products during that period. It was only after the appellant commenced adding Urea to the micronutrients to seek classification of the impugned products under Chapter Heading 3105, which was a pretence to show the presence of Nitrogen in the impugned products. Consequently, following the judgment of Hon'ble Supreme Court and examining the issue accordingly, it is held that the impugned products are to be classified under Chapter Heading 3808 and not under Chapter Heading 3105 of the CETA, 1985. 4.9 Responding to the arguments of the appellant on the objection of non-acceptance of the report of the committee of the officers constituted, it is submitted that the adjudicating authority had initially constituted a committee to study the aspects indicated by the Hon'ble Apex Court in its judgment. The committee submitted its report. Thereafter, a doubt arose whether in terms of the order of the Hon'ble Apex Court, it was permissible to set up the committee without ....
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....uding PGR, put up as described in heading 38.08. Further, this chapter covers a wide range of chemicals and related products including both organic and inorganic products and also mixtures of chemicals. Further, he submits that therefore, the correct classification of the impugned products be concluded as under Heading 3808. 5. Heard extensively both sides, considered the written submissions and perused the records. 6. This is the second round of litigation before this Tribunal. In the earlier round, this Tribunal has decided the issue viz., classification of Micro Nutrient Fertilisers manufactured by the appellants classifiable as "Other Fertilisers" under Chapter Subheading 31.05 of Central Excise Tariff Act, 1985. 7. Revenue"s contention all along has been that the products in question are classifiable as Plant Growth Regulator (PGR) falling under Chapter Subheading 38.08 of Central Excise Tariff Act, 1985. Hence, aggrieved by the order of the Tribunal, the Revenue approached Hon'ble Supreme Court. The Hon'ble Supreme Court while disposing Revenue"s appeal analysed the issues in detail and remanded the matter to the adjudicating authority with certain observation/direct....
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....opinion, the Commissioner himself visited the factory premises of the appellant on 16.12.2009 and examined the process of manufacture of the impugned products. 12. The procedure adopted by the learned Commissioner in carrying out the direction/observation of the Hon'ble Supreme Court, in the denovo proceeding has been assailed by the appellant. The appellant"s contention is that the report of the Committee of Superintendents has been discarded without any basis; it is vehemently argued that the report is not accepted by the Ld. Commissioner as the same is not to the desired expectation of the department. Therefore, such an approach of the Commissioner is pre determined and bad in law. 13. We find that the Ld. Commissioner while analyzing the said allegations of the appellant held that since his predecessor after receiving the report of the Committee of officers neither commented nor recorded his opinion on the report, therefore, with a change of adjudicating authority, a reference was made to the departmental standing counsel seeking legal opinion on delegation of the task of examination of method of manufacture to the Committee of officers. The opinion of the learned Standin....
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....the Hon'ble Supreme Court in the de novo proceedings, it is necessary to analyze the context and the observations of the Supreme Court in remanding the case to the adjudicating authority. 16. The Hon'ble Supreme Court in the said judgement examined the issue in detail, that is, whether the impugned products be classifiable as Plant Grow Regulator (PGR) under Chapter Subheading 3808.20 alleged by the Revenue or under Chapter Subheading 3105.00 as "Other Fertilizers" claimed by the appellant. The observations are reproduced as below: ........................................................... "17. The issue involved in this civil appeal is : whether the impugned product(s) is a PGR or a fertilizer? 18. The contention of the Department in its show cause notice is that the micronutrient compounds manufactured by the respondent-assessee were liable to be classified under CSH 3808.20 and not under CSH 3105.00 on account of absence of N, P or K in the impugned product(s). According to the Department, there is 0.31% of nitrogen in the impugned product as a chelating agent and not as a fertilizing element and that even if it is a fertilizing agent, its quantity....
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....uld not amount to an essential constituent under explanatory note 6 of chapter 31. 18. Therefore, it is clear from the said observation of Apex court is that to verify the categorical claim of the appellant that Nitrogen is an essential constituent of the products (multi micronutrients) in question, it is said at para 23 of the judgement that to an answer to the said question, the method of manufacture of "multi-micronutrient" becomes relevant. 19. Thus, the direction of the Hon'ble Supreme Court is to examine the process of manufacture, so as to ascertain the claim of the appellant that Nitrogen is present as an "essential constituent" of the impugned product, hence fall under Chapter Subheading 3105.00. This is further clear, when we read the observation at para 24; the department"s allegation that N, P or K not an essential constitute of a "Multi Micro Nutrient" has been agreed by their Lordships as a general argument, but proceeded in observing that the impugned product is "Multi Micro Nutrient", which the assessee claims to be a mixture of various inorganic substances. Thereafter, referring to the Circular which laid down two tests, it is observed that if the subject pro....
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....hemical reaction emerging during the course of manufacture, but introduced artificially as chemical urea at the time of mixing. Further, he has held that adding urea to the products at any point of time is not going to change the nature of this product i.e., whether it is added at the beginning, during or at the end of the process of mixing. In this context, he has held that the method of manufacture as directed to be examined by the Hon'ble Supreme Court found to have no bearing on the issue of determination of classification. In other words, the method of manufacture could not help to determine the presence of "Nitrogen" as an essential constituent of the disputed products. 22. The said finding of the learned Commissioner has been assailed by the Appellant submitting that it is contrary to the observation/direction of the Hon'ble Supreme Court. It is submitted that the Supreme Court in the order has held that it is the method of manufacture which has a strong bearing on the question, whether the product needs to be classified under Chapter Subheading 3808 or 3105, which aspect was not examined by the adjudicating authority in the first round of litigation. Accordingly, directi....
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....ces on record to examine whether presence of Nitrogen in the form of urea is an "essential constituent" of the products. The learned Commissioner examined the cost sheet of each of the products and the value of nitrogen in the total cost in accordance with the percentage of nitrogen present. Also, he has examined the Notification of the Government of Karnataka setting out standard in respect of micro nutrient fertilizers to conclude that the elements which make up micro nutrients are Zinc, Manganese, Boron which constitute as an essential constituent of the impugned product. Further, he has analyzed that by adding Nitrogen in the form of urea whether it would make nutrient an essential constituent and recorded that there is no mandatory requirement of adding a particular percentage of Nitrogen to the micro nutrient, hence, nitrogen is not a basic and fundamental constituent element for the products manufactured by the appellant. Also, he has considered the literature/ labels marketing the micro nutrient of these products by the appellant. After analyzing the said documents, he has held that these are all marketed as micro nutrient without any emphasis on the presence of Nitrogen as....