2025 (1) TMI 960 - AT - Customs

Classification of imported goods - Liquid Seaweed Concentrate (Crop Plus) - to be classified under Customs Tariff Item (CTI) 3101 0099 as claimed by the appellants or under CTI 3808 9340 as determined by the Department? - benefit of concessional rate of Basic Customs duty under Serial No. 196 of Notification No. 12/2012-Cus. dated 17.03.2012 - HELD THAT - It is found that in the SCN the Department has stated that Seaweed extract is used as Liquid Organic Bio Fertilizer because of its organic micro nutrient NPK and Natural Growth Hormones content such as Cytokinins Alginic Acid Mannitol Gibberellins Seaweed is used as Plant Growth Promoter for all kinds of plants. However the proceedings were initiated in the said SCN to change the classification of the imported goods as Plant Growth Regulator under CTI 3808 9340 as mentioned in paragraph 5 therein. In support of change in classification of the imported goods the SCN had not specifically assigned any reason as to why the classification of the said product was changed from CTI 3101 00 99to CTI 3808 9340. Further it is also found that in support of the classification of imported goods under CTI 3808 93 40, the authorities below have stated the reason that the said goods contains very negligible percentage of Nitrogen/Phosphorous/Potash (NPK) and micro nutrients and thus the vital role played in respect of the imported goods is towards plant growth regulator and the same is appropriately be classified under CTI 3808 9340. However on perusal of the certificate of analysis available in the case file it is found that the said certificate had specifically stated the chemical composition of the goods as organic components derived from Ascophyllum nodosum seaweed as 28.000% as also Nitrogen (N) Phosphorus (P2O5) and Soluble Potash (K2O)as 9.8%. Since the majority of the components of the said goods constitute Fertilizers the same cannot be termed as Plant Growth Regulator in order to classify the same under CTI 3808 9340. The Larger Bench of the Tribunal in the case of M/S. P.I. INDUSTRIES LIMITED (FORMERLY M/S. ISAGRO (ASIA) AGROCHEMICALS PVT. LTD.) ; M/S. AGRO PACK; SHRI PARTH H. PATEL VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS SURAT-II SURAT 2024 (9) TMI 1655 - CESTAT AHMEDABAD (LB) has made the distinctive features between the Fertilizer and Plant Growth Regulator where it was held that plant growth regulators are chemicals that influence plant growth and development by affecting physiological processes like cell division elongation and differentiation. They can regulate plant growth by promoting or inhibiting certain functions such as flowering fruit setting and root development. In a nutshell fertilizers provide essential nutrients for plant growth while plant growth regulators control specific aspects of plant growth and development. In the present case since the chemical analysis report submitted by the Research and Development Unit of the manufacturer-exporter had confirmed that the composition would constitute as Fertilizer and as per the order of the Larger Bench of the Tribunal the imported goods cannot be considered as Plant Growth Regulator for classification under CTI 3808 9340. Conclsuion - Fertilizers provide essential nutrients for plant growth while plant growth regulators control specific aspects of plant growth and development. There are no merits in the impugned order insofar it has upheld the classification of the disputed product under CTI 3808 9340 and resultant confirmation of the adjudged demands on the appellants. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the imported goods, "Liquid Seaweed Concentrate (Crop Plus)," should be classified under Customs Tariff Item (CTI) 3101 0099 as claimed by the appellants or under CTI 3808 9340 as determined by the Department.
• Whether the concessional rate of Basic Customs duty under Serial No. 196 of Notification No. 12/2012-Cus. dated 17.03.2012 is applicable to the imported goods.
• Whether the penalty imposed under Section 114A of the Customs Act, 1962, is justified.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Imported Goods

• Relevant Legal Framework and Precedents: The classification of goods under the Customs Tariff Act is guided by the Harmonized System of Nomenclature (HSN) and relevant judicial precedents. The decision in M/s P.I. Industries Ltd. et al. provided a distinction between fertilizers and plant growth regulators.
• Court's Interpretation and Reasoning: The Tribunal examined the chemical composition of the imported goods, which primarily consisted of organic components derived from seaweed and essential nutrients like Nitrogen, Phosphorus, and Potash.
• Key Evidence and Findings: The certificate of analysis indicated that the goods contained 28% organic components from seaweed and 9.8% essential nutrients, suggesting they function as fertilizers rather than plant growth regulators.
• Application of Law to Facts: The Tribunal applied the legal distinction between fertilizers and plant growth regulators, concluding that the goods were more appropriately classified as fertilizers under CTI 3101 0099.
• Treatment of Competing Arguments: The Department's argument for classification under CTI 3808 9340 was based on the negligible percentage of NPK and micro-nutrients. However, the Tribunal found this reasoning insufficient against the evidence of the goods' primary function as fertilizers.
• Conclusions: The Tribunal concluded that the goods should be classified under CTI 3101 0099, aligning with the appellants' original classification.

Issue 2: Applicability of Concessional Duty Rate

• Relevant Legal Framework and Precedents: Notification No. 12/2012-Cus. provides concessional duty rates for certain goods, contingent upon their classification under specific CTIs.
• Court's Interpretation and Reasoning: Since the goods were classified as fertilizers, the concessional rate under Serial No. 196 was applicable.
• Key Evidence and Findings: The classification under CTI 3101 0099 was pivotal in determining the eligibility for the concessional rate.
• Application of Law to Facts: The Tribunal applied the notification's provisions, confirming the goods' eligibility for the concessional duty.
• Treatment of Competing Arguments: The Department's position was contingent on the classification under CTI 3808 9340, which was not upheld.
• Conclusions: The concessional duty rate was applicable as per the appellants' classification.

Issue 3: Justification of Penalty under Section 114A

• Relevant Legal Framework and Precedents: Section 114A of the Customs Act, 1962, deals with penalties for duty evasion.
• Court's Interpretation and Reasoning: The penalty was contingent on the classification dispute, which was resolved in favor of the appellants.
• Key Evidence and Findings: No evidence suggested intentional misclassification by the appellants.
• Application of Law to Facts: With the classification under CTI 3101 0099 upheld, the basis for the penalty was invalidated.
• Treatment of Competing Arguments: The Department's imposition of the penalty was linked to its classification stance, which was not supported by the Tribunal's findings.
• Conclusions: The penalty under Section 114A was unjustified and was set aside.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "Fertilizers provide essential nutrients for plant growth, while plant growth regulators control specific aspects of plant growth and development."
• Core Principles Established: The distinction between fertilizers and plant growth regulators is critical in determining the correct classification under the Customs Tariff Act.
• Final Determinations on Each Issue: The Tribunal set aside the impugned order, upheld the classification under CTI 3101 0099, affirmed the applicability of the concessional duty rate, and invalidated the penalty imposed under Section 114A.