2017 (5) TMI 1186 - AT - Central Excise

Classification of goods - Magnesium Sulphate - eligibility to exemption as Fertilizer/Micronutrient - classified under Chapter 28 as in organic chemical compound or under CETH 3105 as other fertilizers - Held that - It is stated that in trade parlance sale of micronutrient as micronutrient fertilizer would not lead to classification thereof under Chapter 31 as fertilizers for the purposes of Central Excise Tariff. For classification under Chapter 31, at least one of the elements, mainly nitrogen, phosphorous or potassium should be an essential component of the fertilizer as per note 6 of Chapter 31. It was further clarified there is no specific heading in the tariff for classification of micronutrient. However, where the micronutrient is a separate chemically defined compound, it will be classifiable under the heading for that chemically defined compound, under Chapter 28 or Chapter 29. There is no evidence that they were filing any returns during the relevant time. On claim regarding registration made by the appellant, we have seen the registration in form R-2. The said registration stipulates Magnesium Sulphate Micronutrient fertilizer for the purpose of procurement of excisable goods used for special industrial purpose under erstwhile Rule 192. In any case registration certificate was issued by the Department, based on the application made by the appellant, before starting the manufacture. This by itself does not decide the correct classification of the product. In respect of repeat SCN for subsequent period, we find no justification for invoking provisions of Section 11A (1) proviso, for extended period and also for imposing penalty u/s 11AC of the CEA, 1944. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues: Classification of Magnesium Sulphate under Central Excise Tariff and eligibility for exemption as Fertilizer/Micronutrient.

Issue 1: Correct Classification under Central Excise Tariff:
The dispute in the appeals revolves around the classification of Magnesium Sulphate under the Central Excise Tariff. The Revenue contended that it falls under Heading 2833.90 or 283321.00, while the appellants claimed classification under Heading 3105 as "other fertilizers." The lower Authorities ruled that the product cannot be classified under Chapter 31 as it lacks essential fertilizing elements like Nitrogen, Phosphorous, or Potassium. They classified it as an inorganic chemical compound under Chapter 28. The Tribunal noted that Magnesium Sulphate does not contain the required elements for classification under Chapter 31, as per Note 6 of the chapter. The Board's Circulars clarified that micronutrients without the essential elements should be classified under Chapter 28 or 29, not Chapter 31. The Tribunal emphasized that trade parlance or naming in invoices does not determine classification, which should align with tariff entries and relevant chapter notes.

Issue 2: Eligibility for Exemption as Fertilizer/Micronutrient:
The appellants argued that they are covered by the Fertilizer Control Order and labeled the product as fertilizer in their invoices. However, the Tribunal found these facts irrelevant for classification under the Central Excise Tariff. The registration certificate provided by the Department does not dictate the correct classification of the product. The Tribunal also addressed the issue of limitation raised by the appellants, noting the late filing of statutory returns and lack of evidence of timely filing during the relevant period. The Tribunal found no justification for invoking penalty provisions under Section 11A (1) proviso and Section 11AC of the Central Excise Act, 1944, for the extended period. As a result, the penalty under Section 11AC imposed in subsequent proceedings was set aside, with the appeals dismissed except for this modification.

This detailed analysis of the judgment highlights the key issues of classification under the Central Excise Tariff and eligibility for exemption as Fertilizer/Micronutrient, providing a comprehensive understanding of the Tribunal's decision.