1999 (5) TMI 105 - AT - Central Excise

Issues Involved:
1. Whether the product "PLANOFIX" is entitled to exemption under Notification No. 234/82-C.E. as an insecticide.
2. Applicability of the extended time limit for demanding duty under Section 11A(1) of the Central Excise Act.
3. Imposition of penalty on the appellants.

Issue-Wise Detailed Analysis:

1. Entitlement to Exemption under Notification No. 234/82-C.E. as an Insecticide:

The appellants, M/s. Rhone Poulenc (India) Ltd., manufactured a product named "PLANOFIX," a preparation of Alfa Naphthylactic Acetic Acid (ANA), and claimed exemption from duty under Notification No. 234/82 as an insecticide. However, during a factory visit on 30-8-1984, Central Excise Officers observed that the product was a "Plant Hormone." Consequently, a show cause notice was issued to deny the benefit of the notification and demand excise duty. The Collector, Central Excise, confirmed the demand and imposed a penalty, stating that the product was not an insecticide as per the definition in the Condensed Chemical Dictionary by G. Hawley, which describes insecticides as substances designed to control harmful insect life. The product was sold as a plant hormone used for increasing crop yield and was not intended to kill or eliminate insects.

The appellants argued that the product was listed as an insecticide under the Schedule to the Insecticides Act, 1968, and had been registered as such. They contended that the term insecticide has a broader modern usage, covering items like repellants and attractants, and that plant growth regulators, which kill bacteria, should be considered insecticides. They cited various tribunal decisions, including the Supreme Court's ruling in Bombay Chemical Pvt. Ltd. v. C.C.E., which held that the exemption notification should not be narrowly interpreted.

The Tribunal, however, found no substance in the appellants' submissions. The Supreme Court in Bombay Chemical's case held that products must have the property of killing germs and bacteria to qualify for exemption. The appellants failed to provide evidence that "PLANOFIX" could kill bacteria, fungi, or insects. The Tribunal, following its earlier decisions, concluded that plant growth regulators do not qualify as insecticides under Notification No. 234/82.

2. Applicability of Extended Time Limit for Demanding Duty:

The appellants had declared "PLANOFIX" as an insecticide in their classification list and claimed exemption under Notification No. 62/78. They had submitted leaflets and labels describing the product as a "plant hormone spray." The Tribunal observed that the appellants had not suppressed any material facts from the department. The Excise authorities had the opportunity to conduct inquiries or obtain chemical tests before approving the classification list. It is established law that if a classification list is filed without suppression, the extended period of limitation under Section 11A of the Central Excise Act cannot be invoked. The appellants had registered the product under the Insecticides Act following directives from the Central Insecticides Board, indicating no mala fide intention.

3. Imposition of Penalty:

Given that the appellants had not suppressed facts and had no mala fide intention, the Tribunal set aside the penalty imposed by the Collector. The demand for duty was confined to the standard limitation period, and the matter was remanded to the Commissioner for redetermining the duty amount payable.

Conclusion:

The appeal was disposed of by denying the exemption under Notification No. 234/82 for "PLANOFIX" on merits, limiting the duty demand to the standard period, and setting aside the penalty imposed on the appellants.

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