2017 (9) TMI 876 - AT - Central Excise

Classification of goods - Plant Vitalizer with a brand name ABDA - clearance from EOU to DTA - appellant have claimed the classification of the said product under Central Excise Tariff Heading 3101.00.99 as Animal or Vegetable Fertilizers whereas Revenue objected to the said classification and initiated proceedings to reclassify the product under Chapter 38 as Miscellaneous Chemical Products and more specifically as Plant Growth Regulators under CETH 38089340 - Held that - ABDA is marketed as Plant Vitalizer and the usage indicated in the literature clearly shows that they are not plant growth regulators. They will be more in the nature of plant growth promoter / fertilizer - the product is rightly classifiable under Chapter Heading 31010099 as Other Animal or Vegetable Fertilizer. Eligibility of the appellant for concessional rate when cleared to DTA - N/N. 23/2003-CE - Held that - It is clear that paraffin wax is used as a raw material in the process and the claim of the appellant that it is only consumable is misplaced - Even in the technical literature given by the appellant it is clearly stated that paraffin wax is used for coating so that the plant extracts and the dye do not get removed from the base material. The paraffin wax loses its identity as soon as it is coated over the sand. It is apparently a raw material in the manufacture of ABDA. Simply because it loses its identity as a wax does not make it a consumable item. As such for non-fulfilment of the condition of using goods manufactured or produced in India the appellant-assessee is not eligible for the concession under N/N. 23/2003-CE. Extended period of limitation - Held that - The intimation given by the appellant-assessee is categorical and specific. As such no suppression of fact can be invoked against the appellant-assessee on this issue relating to classification of ABDA. ABDA manufactured and cleared by the appellant-assessee is correctly classifiable under Heading 31010099 - claim for exemption under N/N. 23/2003-CE wherever duty is payable is not sustainable in view of violation of condition No.3 (i) of the notification - demand upheld only for normal period - appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
1. Correct classification of the product ABDA.
2. Dutiability of ABDA when cleared from EOU to DTA.
3. Applicability of limitation and liability to penalty.
4. Eligibility for concessional rate under Notification No. 23/2003-CE.
5. Liability to additional Education Cess.

Issue-wise Detailed Analysis:

1. Correct Classification of the Product ABDA:
The appellant-assessee classified ABDA under Central Excise Tariff Heading 3101.00.99 as "Animal or Vegetable Fertilizers." The Revenue objected, seeking reclassification under Chapter 38 as "Miscellaneous Chemical Products," specifically as "Plant Growth Regulators" under CETH 38089340. The Tribunal found that ABDA contains Nitrogen, Phosphorous, and Potassium, making it more akin to a fertilizer. The Tribunal referenced Northern Minerals Ltd. vs. CCE New Delhi, concluding that plant growth promoters like ABDA should not be classified as plant growth regulators. Consequently, ABDA was correctly classified under Heading 31010099 as "Other Animal or Vegetable Fertilizer."

2. Dutiability of ABDA When Cleared from EOU to DTA:
The Tribunal examined the eligibility of ABDA for concessional rates when cleared to DTA under Notification No. 23/2003-CE. The exemption was denied because the appellant used imported paraffin wax, violating condition No. 3(i) of the notification, which requires goods to be produced or manufactured wholly from raw materials produced or manufactured in India. The Tribunal determined that paraffin wax used in the manufacturing process was a raw material, not a consumable, thus disqualifying the appellant from the exemption.

3. Applicability of Limitation and Liability to Penalty:
The Tribunal addressed whether the demands invoking the extended period were barred by limitation. The appellant had informed the department on 1.8.2005 about the composition and classification of ABDA. The Tribunal noted that the department did not act on this information until November 2006. Given the appellant's transparency and the technical nature of the classification dispute, the Tribunal found no justification for invoking the extended period for demand and penalties, agreeing with the appellant's submission on limitation.

4. Eligibility for Concessional Rate Under Notification No. 23/2003-CE:
The Tribunal upheld the denial of the concessional rate under Notification No. 23/2003-CE due to the use of imported paraffin wax. The Tribunal clarified that paraffin wax was a raw material in the manufacturing process, not merely a consumable, thus violating the notification's condition requiring the use of domestically produced raw materials.

5. Liability to Additional Education Cess:
The Tribunal addressed the calculation of the correct amount of cess payable on goods cleared to DTA. The original authority had ruled that once education cess is added to customs duty, it should not be charged again. The Tribunal referenced the Supreme Court's affirmation in Meghmani Dyes and Intermediates Ltd., concluding that the appellant's additional liability for education cess was not sustainable.

Conclusion:
The Tribunal held that ABDA is correctly classifiable under Heading 31010099. The appellant is not eligible for the exemption under Notification No. 23/2003-CE due to the use of imported paraffin wax. The demand for differential duty, if any, is applicable only for the normal period, and the additional liability for education cess is not sustainable. The appeals by both the appellant-assessee and the Revenue were disposed of accordingly.