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2025 (10) TMI 112
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....i Concern Private Limited and Shri Mihir Dey, its Managing Director, respectively, challenging the demand of central excise duty of Rs.2,99,21,838/-, along with interest and imposition of penalty of Rs.2,99,21,838/- under Section 11AC of the said Act as well as the imposition of personal penalty of Rs.2,00,00,000/- under Rule 26(1) of the Central Excise Rules, 2002 read with Section 174 of the Central Goods and Services Tax Act, 2017, vide the Order-in-Original No. 29/COMMR/CGST & CE/HWH/Adjn/2017-18 dated 26.12.2017 passed by the Ld. Commissioner of Central Tax, G.S.T. Howrah Commissionerate, M.S. Building, Custom House, 15/1, Strand Road, Kolkata - 700 001. 2. The facts of the case are that M/s Total Agri Care Concern Pvt. Ltd. (herein after referred as the appellant) is a company engaged in the manufacture of agricultural inputs such as Bio-fertilisers, Chemical Fertilisers, Micronutrients, Multi-micronutrients, Plant Growth Regulators (PGRs), and Pesticides/Fungicides. These products are used by farmers to improve soil fertility, crop yield, and agricultural productivity.The appellants are having two manufacturing units. One is at Jessore Road, Pratapnagar, Ganadipayan, North ....
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....cise books where ingredients of various products of the appellant-company were recorded. 2.6. On completion of investigation, separate Show Cause Notices were issued to both the companies of the appellant inter alia demanding central excise duty, as under: - * Show Cause Notice F. No. 20/KZU/KOL/Gr.D/16/2813 dated 05.05.2017 has been issued inter alia demanding of total Central Excise duty to the extent of Rs.3,48,78,169/-, along with interest and penalty. The principal allegations in the Notice are as under: (a) Misclassification of products as fertilizers instead of under Chapters 28/29/38 as Micronutrients, Multi-micronutrients, Plant Growth Regulators or Fungicides (b) Suppression of facts by not obtaining registration before November 2015. (c) Misdeclaration of specific products like NECTAR, TOTOZYME, BIOSTAR PLUS and TV-100. (d) Non-maintenance of excise records for the earlier period. (e) Intent to evade payment of duty. * Show Cause Notice F.No.20/KZU/KOL/Gr.D/16 /2818 dated 05.05.2017 has been issued inter alia demanding of total Central Excise duty to the extent of Rs.2,99,21,838/-, along with interest and penalty. The principal allegations in the Notice ar....
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....etrospectively is perverse. (iii) In this regard, the appellant relied upon the decision of the Hon'ble Supreme Court in Karnataka Agro Chemicals [2008 (227) ELT 12 (SC)], wherein it has been held that despite earlier circulars, disputes continued. Further, the Tribunal in Aries Agrovet [2017 (7) GSTL 317] also noted CBEC's admission that disputes persisted. Thus, the appellant submits that the 2016 Circular cannot be treated as retrospective. (iv) The appellant also relied upon the decisions in the cases of Suchitra Components [2007 (208) ELT 321 (SC)] and Nakamichi Techo [2017 (352) ELT 216 (Tri -Del.)], wherein it has been held that circulars cannot operate retrospectively. Product-Specific Submissions 3.1. Detailed Submissions on 'ACE' (i) The adjudicating authority wrongly classified the product ACE under Chapter 3808 as a Plant Growth Regulator. This classification is unsustainable for the following reasons: (ii) ACE is essentially a micronutrient preparation containing trace elements such as Zinc, Boron, and Iron, intended to supplement soil fertility and correct deficiencies. These are nutrients, not regulators. (iii) As per the Fertiliser Control Order (FCO), ....
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....roduct promoting root initiation and growth. It aids the natural processes of root development, without altering, inhibiting, or regulating plant physiology. (iii) The adjudicating authority equated promotion with regulation, which is legally incorrect. A Plant Growth Promoter (PGP) like Totoroot supports plant processes; a PGR alters or regulates them. This distinction has been recognised in several judicial pronouncements: * Northern Minerals Ltd. v. CCE, 2001 (131) ELT 355 (Tri-Del.) - held that mere presence of auxins does not classify a product as a PGR. * Leeds Kem v. CCE, 2001 (129) ELT 548 (Tri.) - essential character of a product governs classification, not incidental presence of chemicals. * Jayashree Rasayan Udyog Ltd. v. CCE, 2015 (316) ELT 338 (Tri.) - distinguished growth promoters from regulators. (iv) Market perception and dealer certificates show Totoroot is a fertiliser product used to enhance rooting, not a PGR. The adjudicating authority ignored this vital evidence. (v) The test reports relied upon were inconclusive and did not establish PGR characteristics 3.4. Detailed submissions on 'Biostar Plus' (i) The adjudicating authority wrongly classified B....
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....or the product Biostar Plus considering it as a micronutrient / multi-micronutrient as per Notif. 16/2016-CE but failed to notice that only items under FCO Schedule 1, Part A, Sl. 1(f) qualified for the same, which evidently did not include any of the active ingredients of the product Biostar Plus. Thus, it may kindly be seen that Biostar Plus was is not a micronutrient/multi-micronutrient nor was it covered under FCO Schedule 1, Part A, Sl. 1(f) as sought to be made out in the SCN and confirmed in the OIO. (xii) The admitted constituent of Biostar Plus clearly indicated that the combination clearly fell in the category of bio-stimulant. Certificates obtained from the Ministry of Agriculture and Farmers Welfare, Govt. of India, New-Delhi and Deputy Director of Agriculture (Manures and Fertilizers), Govt. of West Bengal certifying that the product, Biostar Plus, is a bio-stimulant are attached herewith. (xiii) Report itself stated: 'Actual use may be ascertained. Laboratory is not equipped to test bio-fertilizers. No further tests were conducted at agricultural research institutes as recommended. Thus, reliance on such an incomplete report is perverse (xiv) Thus, classificati....
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....he similarity between the Show Cause Notice and findings establishes that the impugned order is non-speaking, mechanical, and unsustainable in law. 3.7. Submissions on Limitation The Ld. Counsel for the appellant has also made the following submissions on limitation: - (i) The impugned order demands central excise duty for the period 2012-13 to 2016-17, but it is based solely on Circular 2016. Therefore, demand before 06.04.2016 is time-barred. In support of this view, the appellant relied on the decisions of the Hon'ble Apex Court rulings in the cases of Padmini Products [1989 (43) ELT 195 (S.C.)], Cosmic Dye Chemical [1995 (75) E.L.T. 721 (S.C.)] and Uniworth Textiles [2013 (288) E.L.T. 161 (S.C.)] wherein it has been held that invoking extended period of limitation requires wilful suppression, which is absent in this case. (ii) Further, that the entire demand has been worked out from the records disclosed by them. Thus, the appellant submits that the bulk of demand (2012-2016) is unsustainable on limitation. 3.8. Penalty and Interest 3.8.1 It is the appellant's submission that for imposition of penalty under Section 11AC of the Act mens rea is mandatorily required; the....
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....star Plus has been classified by the adjudicating authority as a micronutrient mixture under CETH 3824 which the appellant has classified as a bio-fertilizer under CETH 3101; in respect of the product Totozyme, the adjudicating authority has adopted the classification under tariff heading 3103. 7.1. The main ground raised by the appellant against the reclassification of the goods manufactured by them is retrospective application of the Circular 1022/10/2016-CX dated 06.04.2016. we observe that classification of micronutrients and Plant Growth Regulators is a dispute going on many years. To resolve the long-standing disputes, Board has issued the Circular dated 06.04.2016. We observe that the 2016 Circular expressly rescinded earlier Circulars and introduced new guidelines. It admitted classification of micronutrients remained a disputed area until 2016. Thus, we are of the view that the said Circular can be applied prospectively. In the impugned orders, we find that the Ld. adjudicating authority has applied this Circular retrospectively for the past period and confirmed the demand of central excise duty for the period from 2012-13 to 2016-17, which is legally not permissible. 7.....
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....bstances. The test report relied upon was inconclusive and did not establish the presence of effective concentrations of hormones or regulators. Reliance on such reports is misplaced. We refer to the decision of the Hon'ble Supreme Court in Karnataka Agro Chemicals [2008 (227) ELT 12 (SC)] which recognised that micronutrient products should not be automatically treated as PGRs. We observe that the Ld. adjudicating authority has ignored this settled law. Therefore, we find that ACE is appropriately classifiable under the Heading 3105. Classification of the product 'BLOOM F' 8.2. It is seen that the Ld. adjudicating authority classified BLOOM F under Chapter 3808 as a Plant Growth Regulator. It is observed that the said BLOOM F is formulated with nutrients and organic substances that enhance flowering. It is a growth promoter that aids natural physiological processes and not a regulator that alters them. The essential function of BLOOM F is nutritional support. The presence of natural plant extracts or auxin-like substances in negligible amounts does not change its character into a regulator. Market evidence shows BLOOM F is perceived as a fertiliser supplement to enhance flowering....
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....to be inconclusive as the laboratory was not equipped to test bio-fertilizers, recommending forwarding to an Agricultural Research Institute. This crucial advice was ignored. The Test report described Biostar Plus as: 'an organic material based on Carboxylic Acid functional group coated/treated on inorganic substance (Carbonate, Calcium, Magnesium, Iron) The organic base is Humic Acid and Humus, derived from biodegraded organic matter. Carrier is Dolomite/Bentonite granules, used widely in the bio-fertilizer industry. Insignificant traces of Ca, Mg, Fe are inherent in the carrier material, not deliberately added. We are of the view that such incidental presence cannot determine classification. We agree with the submission made that as per law, classification is based on the predominant ingredient conferring essential character. Essential character here, in this context, is given by Humic Acid and Super Potassium Humate, which are well-recognized bio-fertilizers. Presence of potassium, one of the three primary plant nutrients (NPK), firmly places the product in Chapter 31 (Fertilizers) under Heading 3101. In this connection, we find that the list of micronutrients under Schedule....
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....n the said case are reproduced below: - "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. 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 sustain plants and promote their abundant and fruitful growth. The ele....
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....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 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 6-4-20....
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.... 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." 8.7. A similar view has also been expressed in the case of KPR Fertilizers Ltd. v. Commissioner of Cus., C.Ex. & S.T., Visakhapatnam-II [2023 (384) E.L.T. 216 (Tri. - Hyd.)]. The relevant paragraph of the said order reads thus: - "17. We further find that the formulations as presented before us and discussed above clearly show that the assessee's products indeed, had Nitrogen or Phosphorous or Potassium or more than one of these three as an ingredient in them. The argument of the Learned Authorized Representative is that although they were present in these formulations they were not essential. We do not find any basis to hold as to which of these elements in the products are essential and which are not. It is his submissions that they were only chelating agents. We find nothing in the Chapter Note 6 to Chapter 31 which says that Nitrogen, Phosphorous & Potassium cannot be part of chelating agents or the chelating agents are not essential ingredients. We do not find any reason to go merely by the assertion of the Learn....