1993 (6) TMI 182 - AT - Central Excise

Summary

Issues:
Classification of micronutrients as plant growth regulators or fertilizers under the Central Excise Tariff.

Analysis:
The two appellants contested the classification of micronutrients they manufactured as plant growth regulators under Heading 3808.90, as asserted by the department, or as fertilizers, which they claimed were exempted. The appellants argued that historical trade practices and a test report from the Deputy Chief Chemist supported their stance that micronutrients were considered fertilizers and not plant growth regulators. They highlighted that micronutrients did not contain NPK and did not inhibit plant growth like pesticides or insecticides. They also denied any suppression or misdeclaration to warrant a longer period for penalty imposition.

The department, represented by Smt. Ananya Ray, opposed the appellants' contentions. She argued that under the new tariff, micronutrients did not meet the criteria for fertilizers as per Chapter Note 6, which required the presence of N, P, or K. She refuted the Deputy Chief Chemist's report, stating that it only provided chemical composition and not classification opinion. Ray cited the explanatory notes to HSN, indicating that products promoting plant growth fell under plant growth regulators, including micronutrients.

The tribunal deliberated on the issue and concluded that the tariff definition prevailed over trade practices. Since micronutrients did not contain major nutrients like N, P, or K, they were classified as plant growth regulators under the more specific heading. The tribunal referenced the Kirk-Othmer Encyclopedia, stating that plant growth regulators aimed to enhance crop yield by controlling competition from weeds, insects, and other factors. It noted that nutrients, including micronutrients, fell under plant growth regulators, as they facilitated plant growth and yield enhancement.

The tribunal acknowledged that while micronutrients could be considered fertilizers in a generic sense, they did not meet the specific criteria outlined in Chapter Note 6 for fertilizers under the Central Excise Tariff. Despite the department's merited classification of micronutrients as plant growth regulators, the tribunal found that historical ambiguity and the burden of reclassification under the new tariff shifted to the department. Citing the Apex Court decision in Padmini Products v. Collector of Central Excise, the tribunal ruled that mere non-declaration did not warrant a longer penalty period without additional positive acts. Consequently, the tribunal set aside the penalty and demand beyond six months from the show cause notice, partially allowing the appeals in favor of the appellants.