2023 (8) TMI 1131 - AT - Central Excise

Classification of goods - Neem Blended Organic Manure Gronimix - classifiable under CETH 31010099 or under CETH 38089910? - extended period of limitation - penalty - violation of principles of natural justice - HELD THAT - The issue of classification is not free from doubts and it is a debatable one. In the same pamphlet of the product it describes the product as fertilizer and on the same pamphlet it also mentions that the product is pesticide. Moreover, only because the product Gronimix is made pre-dominantly by Neem, it cannot be conclusively said that because of this reason the good is fertilizer as there are pesticides/insecticides made of Neem/Neem oil. The details mentioned in the pamphlet/advertisement of the product were not considered properly. Though there are statements of dealers which states that the product is used as insecticide/pesticide but those dealers have not been cross examined as requested by the appellant. When there are evidence available in the case it becomes incumbent on the adjudicating authority to allow the cross examination of the witnesses. The adjudicating authority has seriously defied the mandatory provision of Section 9D of Central Excise Act, 1944. The appellant has relied upon the test report which states that the product Gronimix is not a pesticide. In the present case the statement of farmers were also recorded who have stated that the Gronimix is used as a fertilizer which was ignored by the Adjudicating Authority - the Adjudicating Authority grossly violated the principle of natural justice while passing the impugned order. The appeal is allowed by way of remand for passing a fresh de novo order after considering various materials available on record in proper prospective.

Summary

Issues Involved:
The classification of the product "Neem Blended Organic Manure Gronimix" - whether it falls under CETH 31010099 as other fertilizers claimed by the appellant or under CETH 38089910 as pesticides claimed by the department.

Classification Issue:
The appellant argued that the burden of proof lies with the department to show that the classification adopted by the assessee is incorrect, citing the judgment in HPL Chemicals Limited vs. Commissioner of C.Ex., Chandigarh. The department relied on documents like pamphlets, dealer statements, and a letter from the Director of Agriculture to classify the product as a pesticide. The appellant contended that these documents were insufficient for classification, especially since the dealers were not cross-examined, as per Section 9D of the Central Excise Act. Additionally, the appellant highlighted discrepancies in the department's interpretation of the product description and argued that the impugned order did not consider all relevant aspects. The appellant emphasized that the primary use of Gronimix is as a fertilizer, supported by affidavits from farmers, and test reports indicating the absence of pesticides.

Legal Precedents and Evidence:
The appellant referenced legal precedents such as Sardar Trading Co. vs. CCE & ST and Meera Pipes Pvt Ltd vs. CCE & ST to support their argument. They also pointed out that the impugned order relied on Wikipedia definitions and ignored crucial evidence like test reports and farmer statements. The appellant stressed that the product's composition and common understanding align with fertilizer classification, as affirmed in cases like Commissioner of Central Excise vs. Kishan Brothers. Furthermore, the appellant argued against the imposition of penalties under 11AC, citing cases like Densons Pultretaknik vs. Commissioner of Central Excise.

Adjudicating Authority's Decision:
The Adjudicating Authority's order was challenged due to its failure to consider all evidence and allowing cross-examination of witnesses. The appellate tribunal noted that the issue of classification was debatable, as the product was described as both a fertilizer and a pesticide. The tribunal found that vital materials supporting the appellant were disregarded, and the principle of natural justice was violated in the adjudication process. Consequently, the tribunal set aside the impugned order and remanded the case for a fresh decision, emphasizing the importance of considering all available evidence and granting the appellant a fair hearing.

Conclusion:
The appeal was allowed by way of remand to the Adjudicating Authority, with instructions to pass a fresh order within two months, considering all materials on record and ensuring the appellant's right to a personal hearing.