2017 (7) TMI 846 - AT - Central Excise

Classification of goods - micronutrients - classified under CTH 3105 of CETA or under CTH 3808 of CETA? - Department took the view that micronutrient products remain excluded from classification under CET 3105 and that the products should be classified only as Plant Growth Regulator under CETA 3808.20 - Held that - similar issue decided in the case of CCE & ST Hyderabad-IV Vs Aries Agrovet Industries Limited, 2017 (7) TMI 289 - CESTAT HYDERABAD wherein it was held that micronutrients will require to be classified as other fertilisers in CETH 3105 - since the issue per se relates to a dispute on interpretation of classification, there cannot be any imposition of penalty or for that matter confiscation of goods, land & machinery and the orders imposing such penalties or confiscating such goods etc. in the impugned order is set aside - appeal allowed in toto - decided in favor of Appellant.

Summary

Issues:
Classification of micronutrients under Central Excise Tariff, classification of "Master Neem" insecticide, penalty imposition under Central Excise Rules.

Analysis:

1. Classification of Micronutrients:
The dispute revolved around the classification of micronutrients under the Central Excise Tariff. The appellants were clearing micronutrients as other fertilizers at a 'Nil' rate of duty under Chapter Heading 3105. The Department argued that micronutrient products should be classified as Plant Growth Regulator under CETA 3808.20. The Tribunal referred to a previous decision where it was held that micronutrients should be classified as "other fertilizers" in CETH 3105. The Tribunal analyzed circulars issued by the CBEC over the years, noting the presence of essential nutrients like iron, manganese, zinc, copper, and boron in micronutrients. Ultimately, it was concluded that micronutrients containing nitrogen and other essential nutrients should be classified as other fertilizers under CETH 3105.

2. Classification of "Master Neem" Insecticide:
Regarding the classification of "Master Neem" as an insecticide, it was determined that this product falls under CETH 3808.10. The Tribunal noted that the product being an insecticide would attract duty liability under this classification. However, the issue was primarily a dispute on interpretation of classification, leading to a remand for calculating the differential duty liability and interest payment without imposing penalties or confiscation of goods.

3. Penalty Imposition:
The Tribunal ruled that penalty could not be imposed on the Managing Director of the appellant in this case. The penalty under Rule 209A of the Central Excise Rules, 1944, was set aside, and the appeal was allowed. The decision highlighted that penalties or confiscation of goods could not be imposed solely based on a dispute over interpretation of classification.

In conclusion, the Tribunal allowed the appeals related to the classification of micronutrients and the penalty imposition, while partially allowing and remanding the appeal concerning the classification of "Master Neem" insecticide. The judgment emphasized the correct classification of products under the Central Excise Tariff based on their composition and intended use, ensuring compliance with the relevant tariff headings and explanatory notes.