2008 (10) TMI 109 - AT - Central Excise

Cultures of micro-organisms for biocontrol (microbes) namely, Bio-Catch, Bio-Cure (F), Bio-Cure (B), Bio-Power and Priority microbes were live cultures of fungi or bacteria used for plant growth through biocontrol of insects/pests CH 3808 covers insecticides, fungicides & rodenticides - therefore CH 3808 doesn t cover insecticides & fungicides with cultures of microbes as basis - impugned microbes were cultures of micro-organisms which aided growth of plants and were classifiable u/ch 3002

Summary

Issues Involved:
1. Classification of the products (Bio-Cure (F), Bio-Cure (B), Bio-Catch, Bio-Power, and Priority) under the Central Excise Tariff.
2. Determination of whether the products are biofertilizers, fungicides, pesticides, or cultures of micro-organisms.
3. Applicability of the 'larger period' for issuing Show Cause Notices.
4. Allowance of cum-duty benefit and re-quantification of the demand.

Issue-Wise Detailed Analysis:

1. Classification of the Products:
The primary issue was whether the products should be classified under Chapter Heading (CH) 3002 as "cultures of micro-organisms" or under CH 3808 as fungicides/pesticides. The original authority classified the products under CH 3002 based on expert opinion from the Department of Agricultural Microbiology at TNAU, which identified the products as live fungal/bacterial cultures used for biocontrol of pests and aiding plant growth. The Commissioner (Appeals) later reclassified the products under CH 3808, asserting they were fungicides/pesticides. However, the tribunal found that the products, being cultures of micro-organisms, fit more specifically under CH 3002 as they were used for technical purposes such as aiding plant growth.

2. Determination of Product Nature:
The tribunal examined the nature of the products and their manufacturing process. Bio-Cure (F) and Bio-Cure (B) were found to be based on fungal and bacterial cultures, respectively, and used for biocontrol of pests. Bio-Power, Bio-Catch, and Priority were also identified as fungal cultures used similarly. The tribunal noted that these products did not contain chemicals and did not act directly like conventional pesticides but rather worked through biological processes to control pests, thus supporting their classification under CH 3002.

3. Applicability of 'Larger Period' for Show Cause Notices:
The Show Cause Notices (SCNs) issued covered an extended period from 9-4-96 to 30-9-2006. The tribunal upheld the Commissioner (Appeals)'s decision that invoking the larger period was not legally sustainable, aligning with the observation that the initial SCN's proposal to classify the microbes under CH 3808 was not justified.

4. Allowance of Cum-Duty Benefit and Re-Quantification of Demand:
The Revenue challenged the allowance of cum-duty benefit and the order for re-quantification of the demand. The tribunal referenced the Supreme Court's decision in the case of M/s. Amrit Agro Industries Ltd., which supported the view that the sale price could not be considered inclusive of duty if the goods were cleared on the basis that no duty was payable. Consequently, the tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
The tribunal concluded that the products Bio-Cure (F), Bio-Cure (B), Bio-Catch, Bio-Power, and Priority should be classified under CH 3002 as "cultures of micro-organisms" rather than under CH 3808 as fungicides/pesticides. The appeals filed by the assessee were allowed, and those filed by the Revenue were dismissed. The tribunal's decision was based on the specific nature of the products, expert opinions, and relevant legal precedents.