2014 (10) TMI 441 - AT - Central Excise

Classification of micronutrient fertilizers - Classification under CETH 31 or under CETH 3808 - Held that - The Junior Scientist had stated that micronutrients such as Iron, Copper, etc. are known as trace elements and are essential for plant growth in small amounts only. If these elements are made available in minor quantities, they regulate the formation of hormones etc. in the plants which in turn alter life process of the plant so as to accellerate growth, enhance yield and improve quality. Thus they internally contribute to regulate the plant growth. We cannot say that this supports the case of the Department. Moreover, in the pouches in which the products are sold, it is stated All these micronutrients play a very significant role in physiological growth and biochemical process of crop/plants . This label also does not support the case of the Revenue since it does not say that the products are plant growth regulators. In fact it supports the case of the appellant that is a mixture of micronutrients. Learned AR also relied upon the decision of this Tribunal in the case of Karnataka Agro Chemicals v. CCE, Bangalore 2012 (11) TMI 865 - CESTAT, BANGALORE . However, in that case the product contained Urea, Calcium Nitrate, Potassium Nitrate, Zinc Sulphate, Magnesium Sulphate, Manganese Sulphate, Ferrous Sulphate, Copper Sulphate, Borax, Boric acid and others. The products are not comparable. The sum and substance of the above observations is that the issue involved is classification of the product which requires a detailed study - appellant has been able to make out a case that the products cannot be called as plant growth regulators. Under these circumstances, the requirement of pre-deposit against the appellant-company of the entire dues is waived and stay against recovery is granted - Stay granted.

Summary

Issues: Classification of products as fertilizer or plant growth regulator; Demand for reclassification; Waiver of pre-deposit and stay against recovery.

Classification of products as fertilizer or plant growth regulator:
The appellant, a manufacturer of micronutrient mixtures, claimed that their products should be classified as fertilizers falling under CETH 31. However, the Revenue contended that the products should be classified as plant growth regulators under CETH 3808. The dispute arose due to this classification distinction, leading to a demand for reclassification. The tribunal reviewed multiple samples and reports from Chemical Examiner and Agricultural University, which did not conclusively categorize the products as plant growth regulators. The reports highlighted the presence of essential nutrients for plant growth in the products, but did not explicitly label them as plant growth regulators. The tribunal also noted that the labeling on the product pouches emphasized the role of micronutrients in physiological growth and biochemical processes of crops, supporting the appellant's claim. The tribunal distinguished a previous case cited by the Revenue, emphasizing the differences in product composition. Ultimately, the tribunal found that the appellant had successfully argued that their products should not be classified as plant growth regulators, warranting a waiver of pre-deposit and granting a stay against recovery.

Demand for reclassification:
The tribunal examined the demands raised by the Revenue, including a significant amount towards micronutrient fertilizers and another sum for repacking micronutrients. The appellant accepted and paid the demand related to repacking without contest. However, the demand for reclassification based on the products being plant growth regulators was disputed. The tribunal scrutinized the chemical tests, statements from experts, and product labeling to determine the appropriate classification. The lack of conclusive evidence from the reports and the supporting information on the product labels led the tribunal to rule in favor of the appellant, rejecting the classification as plant growth regulators.

Waiver of pre-deposit and stay against recovery:
After analyzing the details and arguments presented by both sides, the tribunal concluded that the appellant had successfully demonstrated that their products should not be classified as plant growth regulators. As a result, the tribunal waived the requirement of pre-deposit against the appellant and granted a stay against recovery of the entire dues. Additionally, a stay against recovery was also granted to the Managing Director of the appellant company, who had filed a stay application against the penalty imposed. The tribunal's decision to waive pre-deposit and grant a stay was based on the prima facie case made by the appellant regarding the classification of their products, indicating a favorable outcome for the appellant in this legal judgment.