2018 (7) TMI 985 - AT - Central Excise

Classification of goods - various Bio-products namely, Azospirillum, Phosphobacterium, VAM, Beauvemet, Trichoderma Viride, Pseudomonas Fluorescens - whether these micro-organisms fall under classification 3808, as contended by the Department, or would fall under 3002, as claimed by the respondents? Held that - It can be seen that Chapter 38 deals with insecticides, rodenticides and other miscellaneous chemical products whereas 3002 deals with micro- organisms which are living organisms - The Tribunal in the case of T. Stanes and Co. 2008 (10) TMI 109 - CESTAT, CHENNAI has held that 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. The Commissioner (Appeals) has rightly classified the impugned goods under 3002 - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Classification of Bio-products.
2. Applicability of duty rates.
3. Reliance on expert opinions and previous judgments.

Issue-wise Detailed Analysis:

1. Classification of Bio-products:
The core issue revolves around whether the Bio-products produced by the respondents should be classified under CSH 380820 as 'Plant Growth Regulators' or under Heading 3002 as 'Cultures of Micro-organisms.' The Department argued that these Bio-products, which include Azospirillum, Phosphobacterium, VAM, Beauvemet, Trichoderma Viride, and Pseudomonas Fluorescens, are used to regulate plant growth by increasing soil fertility and controlling pests and diseases. They contended that these products are plant growth regulators and should be classified under CETH 38.08, attracting a duty of 16%, later reduced to 14% by notification No. 2/2008.

The respondents, on the other hand, argued that these Bio-products are microbial cultures that enhance soil microbial activities without containing any chemical fertilizers. They emphasized that these products should be classified under Heading 3002, which pertains to 'Cultures of Micro-organisms (excluding yeasts).' The Commissioner (Appeals) supported this classification, relying on expert opinions and previous judgments, including the case of T. Stanes and Co. Vs. C.C.E., Coimbatore.

2. Applicability of Duty Rates:
The duty rates applicable to the Bio-products hinge on their classification. If classified under CSH 380820 as 'Plant Growth Regulators,' the products would attract a duty of 16%, reduced to 14% post-01.03.2008. However, if classified under Heading 3002, they would be exempt from such duties, as this heading includes cultures of micro-organisms used for technical purposes, including aiding plant growth.

3. Reliance on Expert Opinions and Previous Judgments:
The Commissioner (Appeals) relied heavily on expert opinions and previous judgments to classify the Bio-products under Heading 3002. The impugned order referenced a certificate from Dr. K. Hari, Senior Scientist, Micro-Biology of the Sugarcane Breeding Institute (ICAR), Coimbatore, which detailed the use of these micro-organisms for field application to agricultural crops to maintain crop health, particularly at the root zone. The Assistant Director of Agriculture, Quality Control, Erode, also specified that these micro-organisms increase soil microbial activities without containing any chemical fertilizers.

The Tribunal in the case of T. Stanes and Co. had previously analyzed a similar issue and concluded that such microbial cultures should be classified under Heading 3002. The Tribunal noted that these cultures are living beneficial organisms that facilitate general soil conditions by increasing the population of beneficial micro-organisms in the soil/root zone, thus maintaining crop health. The Tribunal emphasized that Chapter 38 deals with insecticides, rodenticides, and other miscellaneous chemical products, whereas Chapter 3002 pertains to micro-organisms, which are living organisms.

Conclusion:
The Tribunal, after appreciating the facts and applying the ratio laid in the case of T. Stanes and Co., upheld the classification of the Bio-products under Heading 3002 as determined by the Commissioner (Appeals). Consequently, the appeals filed by the Department were dismissed. The Tribunal found no grounds to interfere with the impugned order, affirming that the Bio-products are indeed cultures of micro-organisms and should be classified under Heading 3002, exempting them from the duties applicable under CSH 380820.

Operative Part:
The appeals filed by the Department are dismissed, and the classification of the Bio-products under Heading 3002 is upheld.