TaxTMI 
TaxTMI 
2025 (10) TMI 112
X X X X Extracts X X X X
X X X X Extracts X X X X
....956 of 2018 have been filed by M/s. Total Agri 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for their further investigation, which included two exercise 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r circulars and introduced new guidelines. It admitted classification of micronutrients remained a disputed area until 2016. Thus, the appellant submits that applying it retrospectively 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 trac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 'Totoroot' (i) The adjudicating authority classified Totoroot as a Plant Growth Regulator under Heading 3808. This classification is unsustainable for the following reasons: (ii) Totoroot is a bio-fertiliser-based product 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion show Biostar Plus is marketed and used as a bio-fertilizer. This commercial understanding supports Heading 3101. The adjudicating authority ignored these documents, rendering the order non-speaking and violative of natural justice. (xi) Department applied concessional duty @6% for 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 herew....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that it is settled law that adjudication cannot travel beyond the scope of the Show Cause Notice and in support of this contention, he relied on the decision in the case of Commissioner of C.Ex. v. Ballarpur Industries Ltd. [2007 (215) ELT 489 (SC)]. Thus, the Ld. Counsel for the appellant submits that the 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M F, Totoroot, Biostar Plus and Totozyme manufactured by the appellants; the appellants considered the products ACE, BLOOM F and Totoroot as fertilisers and classified the same under the CETH 3105, whereas, the impugned orders have considered these products as Plant Growth Regulators classifiable under the CETH 3808. The product Biostar 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 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... show ACE is bought and sold as a fertiliser supplement, not as a regulator. Thus, we find that classification of the product ACE under Chapter 31 is proper. Applying the 'essential character' test under the General Interpretative Rules, ACE derives its essential character from the nutrient content, not from incidental traces of plant growth substances. 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 na....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. Classification of the product 'Biostar Plus' 8.4. In respect of 'Biostar Plus', the ld. adjudicating authority has classified the same as a micronutrient mixture under Tariff Heading 3824. It is the appellant's submission that BioStar Plus is a bio-fertilizer classifiable under the Heading 3101. In this regard, we find the test report relied upon 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. We find that in support of their submissions on the classification of the above said products being under Chapter 31, the appellants have cited the decision in case of Commissioner Of C.Ex. & S.T., Hyderabad-IV v. Aries Agrovet [2017 (7) GSTL 317 (Tri. - Hyd.)], the Tribunal at Hyderabad has dealt with a similar issue. The relevant observations of the Bench in 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 Ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, herbicides, anti-sprouting products and plant growth regulators, disinfectants and similar products put up in form or packings for retail sale or as preparations on articles (for example, sulphur-treated bands, wicks and candles and fly-papers). CETH 31.05 Mineral or chemical fertilisers, containing two or three of the fertiliser elements, nitrogen, phosphorous and potassium; other fertilisers". 8.5 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, and also considering that they are mixtures and not separate chemically defined compounds, 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 formul....