2018 (7) TMI 162 - AT - Central Excise

Classification of manufactured goods - Kelp-G Purakelp EC, K-Humate 3% Granules- K-Humate and Multiplex-G-Purakelp & K-Humate - The Department felt that the products manufactured by the appellants were plant growth regulators (PGRs), whereas the appellants maintained that they were manufacturing vegetable bio-fertilizer - Held that - The report of the Chemical Examiner, which was admittedly done in respect of only one of the three products in question, merely states that the product is answering the test of amino acids. However, their exact profile and composition could not be ascertained. On the basis of the literature, which states that one of the ingredients is plant growth hormone, the report concludes that the product is a plant growth regulator. Clearly, the report is inconclusive and the conclusion that the product is plant growth regulator has been made on the basis of literature without paying attention to other ingredients and the nature of application and mode of action of the product. Board had issued a Circular dt. 06.04.2016 on the subject of classification of fertilizers, micronutrients and plant growth regulators in which it was clarified that notifications issued under the Fertilizer (Control) Order 1985 are not relevant for deciding the classification of Central Excise Tariff. Revenue has not been able to rebut the contention of the appellants that the products are not applied directly to the plant and are mixed with soil or clay to make them useable - also, Chapter 38 covers the plant growth regulators which are separate chemically defined elements or compounds . The CRCL test report has failed to establish that the product is a separate chemically defined element or compound and the same is not forthcoming from the literature as well. The conclusion in the impugned order that the products are plant growth regulators is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of products as plant growth regulators (PGRs) or vegetable bio-fertilizers.

Analysis:
The appellants manufactured three products, and a dispute arose regarding whether they were PGRs or bio-fertilizers. The department alleged they were PGRs, while the appellants claimed they were bio-fertilizers. A sample was tested, and a show cause notice was issued for Central Excise duty. The Commissioner (Appeals) upheld the demand, leading to this appeal.

The appellants argued that the testing was incomplete and inconclusive, emphasizing the products' composition containing nitrogen, phosphorus, and potassium. They contended that the products were not applied directly to plants but mixed with soil. Reference was made to a Board Circular and previous Tribunal judgments supporting their position.

The Revenue reiterated the findings of the Commissioner (Appeals). Upon examination, it was found that the chemical testing report was inconclusive, and the conclusion of the products being PGRs was based on incomplete information. The products' composition and mode of application indicated they were fertilizers, falling under Chapter Note 6 of the Central Excise Tariff.

A Board Circular clarified the classification of fertilizers and PGRs, stating that products like the appellants' were considered fertilizers. The products' application method and composition supported this classification. The Revenue failed to counter the appellants' argument that the products were mixed with soil, not applied directly to plants.

Further, Chapter 38 covered PGRs as separate chemically defined elements or compounds, which was not established by the testing report or literature. Consequently, the conclusion that the products were PGRs was deemed unsustainable, leading to setting aside the Commissioner (Appeals) order and allowing the appeal.

In conclusion, the products were classified as fertilizers, not PGRs, based on their composition and application method. The appeal was allowed, overturning the Commissioner (Appeals) decision.