2022 (12) TMI 1049 - AT - Central Excise

Demand of differential duty - reliance on statement of employee - significant , statement - Classification of goods manufactured and cleared by appellant - presence of fertilizing element - Vasundhara - Jalpurti - Purti - Rasna Chelated - Rasna Plus - other fertilisers - examination of statement / employee in accordance with section 9D of Central Excise Act, 1944 - HELD THAT - It is seen from the test report there is no doubt about the presence of the said fertilizing elements in the impugned goods. Though it is the contention on behalf of Revenue that the statement of the employee is clear enough evidence that presence is questionable which, according to Learned Senior Counsel, required that the statement of the said employee, being in total variance with the test reports that indicate presence of the fertilizing elements, should be discarded. It is his submission that the relevancy of the said statement had not been examined by the adjudicating authority in the manner mandated in section 9D of Central Excise Act, 1944. Section 9D of Central Excise Act, 1944 appears to have been observed in its breach and must be remedied. To enable that, we set aside the impugned order and remand the matter back to the original authority for subjecting the statement of Mr Sanjay Shembekar, considered to be of particular relevance in determining the outcome of the impugned order, to the prescriptive mandate of section 9D of Central Excise Act, 1944. Needless to say, the adjudicating authority shall afford the appellant herein sufficient opportunity, in accordance with the principles of natural justice, to rebut the contents of the show cause notice both by submission as well as through documents. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Classification of manufactured items.
2. Applicability of lower duty rates.
3. Validity of employee statements.
4. Relevance of test reports.
5. Examination under section 9D of Central Excise Act, 1944.

Detailed Analysis:

1. Classification of Manufactured Items:
The primary issue revolves around the classification of forty items manufactured by the appellant. The adjudicating authority classified thirty-one items under various tariff items such as 2833 2990, 2834 2990, etc., denying them the lower duty rate prescribed for heading no. 3105, which corresponds to 'other fertilizers.' Four other products were cleared at rates prescribed for tariff items 2833 2990 and 2922 5090. This classification led to a differential duty liability of Rs. 18,74,59,366/- under section 11A of the Central Excise Act, 1944.

2. Applicability of Lower Duty Rates:
The appellant contended that the classification should align with heading no. 3105 for 'other fertilizers,' which would attract a lower duty rate. The argument was supported by the inclusion of the products in the Fertilizer Control Order (FCO), indicating their use as fertilizers. The Tribunal noted that fertilizers, including micronutrients, are essential for agriculture and should be classified under chapter 31 if they contain nitrogen, phosphorous, or potassium, even in trace amounts.

3. Validity of Employee Statements:
The appellant challenged the reliance on the statement of their employee, Mr. Sanjay Shembekar, who denied the presence of nitrogen, phosphorous, or potassium in the products. The appellant argued that the statement was not examined in accordance with section 9D of the Central Excise Act, 1944, and contradicted the test reports indicating the presence of these elements. The Tribunal emphasized that the statement's validity must be scrutinized as per the legal requirements.

4. Relevance of Test Reports:
Test reports played a crucial role in determining the classification. The Tribunal observed that the test reports confirmed the presence of fertilizing elements, which supported the appellant's claim for classification under heading 3105. The Tribunal highlighted that the presence of nitrogen, even in negligible quantities, is sufficient to classify the products as fertilizers.

5. Examination under Section 9D of Central Excise Act, 1944:
The Tribunal found that the adjudicating authority did not comply with section 9D of the Central Excise Act, 1944, in examining the employee's statement. The Tribunal set aside the impugned order and remanded the matter back to the original authority for a proper examination of the statement as per the prescribed legal mandate. The original authority was directed to afford the appellant an opportunity to rebut the show cause notice's contents.

Conclusion:
The Tribunal concluded that micronutrients and macronutrients are fertilizers essential for agriculture. The classification should be based on intended use, and micronutrients are not plant growth regulators. The presence of nitrogen in chelates justifies classification under heading 3105. The appeal was allowed by way of remand for re-examination under section 9D of the Central Excise Act, 1944, ensuring compliance with legal procedures and principles of natural justice.