2012 (11) TMI 865 - AT - Central Excise

Waiver of pre-deposit - Classification - as Plant Growth Regulators (PGRs) under SH 3808.20 or as Other Fertilizers under heading 31.05 of the CETA Schedule attracting nil rate of duty - According to the assessee, the impugned product(s) is a mixture of various inorganic substances whose essential constituent is nitrogen which makes it a fertilizer Held that - Chemicals, barring urea, potassium nitrate and calcium nitrate, are not recognized as fertilizers - appellant is yet to show as to why chemicals like zinc sulphate, manganese sulphate, ferrous sulphate and boric acid, were admixed with fertilizers to manufacture the so-called other fertilizers - appellant was not showing the presence of Nitrogen at all prior to 2001 - they were not manufacturing and marketing the goods as fertilizers - it was added as a pretence for claiming classification of the products under heading 31.05 product is classified as Plant Growth Regulators (PGRs) under SH 3808.20 - no part of the demand of duty is beyond the normal period of limitation - appellant directed to pre-deposit

Summary

Issues Involved:
1. Waiver of pre-deposit and stay of recovery.
2. Classification of products as 'Plant Growth Regulators' (PGRs) or 'Other Fertilizers'.
3. Examination of the presence of Nitrogen as an essential constituent.

Issue-wise Detailed Analysis:

1. Waiver of Pre-deposit and Stay of Recovery:
The applications sought waiver of pre-deposit and stay of recovery for duty amounts totaling Rs. 26,16,00,751/- and a total penalty of Rs. 1.5 crores. The Tribunal directed the appellant to pre-deposit an amount of Rs. 5,00,00,000/- within eight weeks, considering the appellant's sound financial position as evidenced by their financial statements as of 31-3-2011.

2. Classification of Products:
The primary issue was the classification of the appellant's products under the Central Excise Tariff Act, 1985. The Commissioner classified the products as 'Plant Growth Regulators' (PGRs) under SH 3808.20, rejecting the appellant's claim that they should be classified as 'Other Fertilizers' under heading 31.05, which attracts a 'nil' rate of duty. The Tribunal noted that the Supreme Court had previously remanded the issue, emphasizing the need to examine whether the presence of 0.31% Nitrogen changed the product classification.

3. Examination of Nitrogen Presence:
The Tribunal observed that the Commissioner had examined the process of manufacture and concluded that the presence of 0.31% Nitrogen was not sufficient to classify the product under SH 3105.00. The Commissioner found that Nitrogen was not an essential constituent but was added artificially. The Tribunal referred to Note-6 in Chapter 31, which requires the presence of Nitrogen, Phosphorus, or Potassium as essential constituents for classification under heading 31.05. The Tribunal concurred with the Commissioner's finding that the minuscule presence of Nitrogen did not meet this requirement.

The Tribunal also noted that the products were manufactured by mixing various chemicals, many of which were not recognized as fertilizers. The appellant had not shown why non-fertilizer chemicals were included. The Tribunal found that the appellant had not successfully rebutted the Commissioner's findings and emphasized that the Supreme Court had indicated that the product was essentially a PGR.

Conclusion:
The Tribunal concluded that the appellant did not have a prima facie case against the classification of the products under heading 38.08 and the consequential demand of duty. The Tribunal directed the appellant to pre-deposit Rs. 5,00,00,000/- and granted waiver of pre-deposit and stay of recovery for the penalty and the balance amount of duty, subject to compliance.