2020 (3) TMI 908 - AT - Central Excise

Mis-classification of goods - Plant Growth Regulators (Micronutrients) - Bio-fertilizers - Bio-pesticides - whether Plant Growth Regulators under Chapter Heading 3808of Chapter 38 to the First Schedule of the Central Excise Tariff Act? - HELD THAT - The issue is no more res integra as this very Bench of the Tribunal has settled the issue in favour of the assessee in the case of DR K.R.K. REDDY, DIRECTOR, SRI BIO TECH LABORATORIES LTD VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, HYDERABAD I (VICE-VERSA) 2019 (8) TMI 1251 - CESTAT HYDERABAD where it was held that the demand raised by the department classifying them as Plant Growth Regulators under 3808 cannot sustain - demand set aside. Bio-pesticides of microbial origin - Whether classified under Chapter Heading 3808 as against tariff item 3002of the Central Excise Tariff Act? - HELD THAT - This Bench has followed the decision of T. STANES CO. VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE 2008 (10) TMI 109 - CESTAT, CHENNAI to hold that the demand of duty classifying the said products under Chapter Headings 3105 and 3808 cannot sustain and consequently, the same were set aside. The Bench further held that the current classification of the products are under Chapter Heading 3002 attracting nil rate of duty. Bio-fertilizers of plant and animal origin and Bio-pesticides of plant/vegetable origin - HELD THAT - The re-classification on this having been accepted by the assessee under Chapter Headings 3105 1000 and 3808 9910 respectively, the duty demand on this is sustained. Demand of interest and penalty - HELD THAT - Since the issue is with respect to classification and interpretation of tariff headings, we are of the view that penalties may not be warranted and hence, the same are set aside. The interest, however, since mandatory, is also sustained. Appeal allowed in part.

Summary

Issues:
Classification of Plant Growth Regulators, Bio-fertilizers, and Bio-pesticides under Central Excise Tariff Act; Re-classification proposed in Show Cause Notice; Appeal against re-classification; Interpretation of tariff headings for classification; Demand of duty on repacking of micronutrients; Applicability of penalties and interest.

Detailed Analysis:

1. Classification of Micronutrient fertilizers/Plant Growth Regulators:
The issue revolved around the classification of Micronutrient fertilizers by the assessee under Chapter Heading 3105, while the department proposed classification under 3808 as Plant Growth Regulators. The Tribunal referred to the HSN Explanatory note to define Plant Growth Regulators and cited Circular No. 1022/10/2016-CX to differentiate between Plant Growth Regulators and nutrients. Previous decisions like CCE v. Aries Agrovet Industries Limited were cited to support classification under Chapter Heading 3105. The Tribunal upheld the classification under 3105, setting aside the demand raised under 3808.

2. Classification and demand of duty on Bio-fertilizers/Bio-pesticides:
The Tribunal followed the decision of M/s. T. Stanes & Co. Vs. Commissioner of Central Excise to rule that the demand of duty on Bio-fertilizers and Bio-pesticides of microbial origin under Chapter Headings 3105 and 3808 cannot be sustained. The current classification under Chapter Heading 3002, attracting nil rate of duty, was upheld. As the Revenue did not present contrary decisions, the Tribunal applied its previous ruling in the assessee's case, setting aside the demands in this regard.

3. Demand on Bio-fertilizers of plant and animal origin and Bio-pesticides of plant/vegetable origin:
The re-classification of Bio-fertilizers of plant and animal origin and Bio-pesticides of plant/vegetable origin under Chapter Headings 3105 1000 and 3808 9910, respectively, was accepted by the assessee. The Tribunal sustained the duty demand following its earlier order. However, considering the issue related to classification and interpretation of tariff headings, penalties were deemed unwarranted and set aside, while the mandatory interest was upheld.

In conclusion, the appeal was partly allowed based on the above analysis, with the demands on certain products being set aside, penalties being waived, and interest being sustained as per the Tribunal's interpretation of the relevant legal provisions and precedents.