2018 (6) TMI 1070 - AT - Central Excise

Classification of goods - plant growth regulators - Agromin - Chelamin - Chelafir - whether classifiable under heading no. 3808 20/3808 30 40 of First Schedule of the Central Excise Tariff Act, 1985 or under heading no. 3105/3105 90 90 of the Schedule? - Held that - There is no dispute that the three products are micronutrients . It is also clear that micronutrient is not a specific entry in the Schedule. Therein lies the nub owing to privileged treatment accorded to fertilizers , manufacturers would prefer to classify micronutrients as fertilisers with Revenue preferring to deny them that privilege. The dispute is not about the fitment of the description of the goods over the description in the Schedule and is characterised by culling out aspects of rival descriptions, circulars and judicial decisions to suit the claims on the rate to be adopted. Considering the unwillingness of the executive to notify its intentions and our conclusion that it is not the conformity with the description that has led to the dissonance, we take it upon ourselves to go to the root of the issue. The fertilizers and pharmaceuticals are favoured enough to merit separate chapters on their own, justified by their importance for the human race. At the same time, they, being chemicals, are ensconced in section VI of the Schedule to the Central Excise Tariff Act, 1985, i.e. PRODUCTS OF CHEMICAL AND ALLIED INDUSTRIES reflecting strict adherence to the arrangement of goods in the Schedule. The section, commencing with organic chemicals and inorganic chemicals, recognises that fertilizers and pharmaceuticals may fall under either and acknowledges that they are to be distinguished from their doppelganger in the other two chapters. We are unable to approve of the proposition made on behalf of Revenue that the classification claimed should have been rejected. Rejection of a claimed classification is not an end in itself as duty liability can be computed only after application of the rate legislated by Parliament to the appropriate value. The presence of nitrogen in chelates is sufficient to bring it within the ambit of heading 3105 of First Schedule of the Central Excise Tariff Act, 1985 owing to its indispensability despite the negligibility of the quantity. Classification under heading 3105 claimed by the manufacturer cannot be denied to them. We find no merit in the challenge to classification of Agromin , Chelafer and Chelamin and dismiss the appeal of Revenue to that extent - appeal disposed off.

Issues Involved:
1. Classification of 'plant growth regulators' versus 'other fertilizers'.
2. Determination of appropriate duty liability.
3. Examination of the presence of nitrogen in chelated micronutrients.
4. Validity and interpretation of circulars issued by the Central Board of Excise & Customs.
5. Applicability of judicial precedents and General Rules for Interpretation of the First Schedule of the Central Excise Tariff Act, 1985.

Issue-wise Detailed Analysis:

1. Classification of 'plant growth regulators' versus 'other fertilizers':
The appeal by Revenue challenged the classification of products 'Agromin', 'Chelamin', and 'Chelafer' as 'other fertilizers' under heading 3105/3105 90 90, arguing they should be classified as 'plant growth regulators' under heading 3808 20/3808 30 40. The tribunal noted that 'micronutrients' are not explicitly listed in the Schedule, leading to manufacturers preferring their classification as 'fertilizers' due to privileged treatment. The tribunal concluded that 'micronutrients' are essential for agriculture and should be classified based on their intended use, not as 'plant growth regulators'.

2. Determination of appropriate duty liability:
The tribunal emphasized that rejection of a claimed classification is not an end in itself, as duty liability requires application of the appropriate rate legislated by Parliament. The onus is on tax authorities to determine the correct rate if they disagree with the claimed classification, as supported by precedents in Hindustan Ferodo Ltd v. Commissioner of Central Excise and HPL Chemicals v. Commissioner of Central Excise, Chandigarh.

3. Examination of the presence of nitrogen in chelated micronutrients:
The tribunal examined whether the presence of nitrogen in chelated micronutrients is essential for their classification as 'other fertilizers'. It was found that chelates, which contain nitrogen, are necessary to prevent micronutrients from becoming insoluble and unusable by plants. The tribunal concluded that the presence of nitrogen, even in negligible quantities, is sufficient to classify these products under heading 3105.

4. Validity and interpretation of circulars issued by the Central Board of Excise & Customs:
The tribunal reviewed various circulars issued by the Central Board of Excise & Customs, noting inconsistencies and changes in classification advice over time. Circular no. 1022/10/2016-CX, which rescinded earlier circulars, directed classification of 'micronutrients' based on the presence of macronutrients or as 'separate chemically defined compounds'. The tribunal highlighted that circulars should not override statutory mandates and judicial precedents, referencing decisions in Naffar Chandra Jute Mills Ltd v. Assistant Commissioner of Central Excise and Maestro Motors Ltd.

5. Applicability of judicial precedents and General Rules for Interpretation of the First Schedule of the Central Excise Tariff Act, 1985:
The tribunal referred to several judicial precedents, including Commissioner of Central Excise v. Mannampalakkal Rubber Latex Works and Ranadey Micronutrients v. Collector of Central Excise, to support its findings. It emphasized the importance of intended use in classification, as inferred from the Schedule's scheme. The tribunal also noted the relevance of the Fertilizer (Control) Order, 1985, in determining classification.

Conclusion:
The tribunal dismissed the Revenue's appeal, upholding the classification of 'Agromin', 'Chelafer', and 'Chelamin' as 'other fertilizers' under heading 3105. It directed the original authority to proceed with re-classification of the other nine products only if 'diethylamine' has not been deployed and if the substitute does not contain nitrogen. The tribunal's decision was pronounced in court on 31/05/2018.

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