2018 (5) TMI 533 - AT - Central Excise

Whether the appellant Shivashakthi Bio Planteec Limited is required to discharge duty on micronutrient fertilisers for the period July 2007 to March 2013 or otherwise? - duty on repacking of single micronutrients - penalties - Held that - the said micronutrient fertilisers would fall under chapter heading No. 3105 - demand of duty cannot be confirmed. Demand of duty on repacking of single micronutrients - Held that - appellant would have been entertaining a bonafide belief as to the repacking would not amount to manufacture and no excise duty is payable as the larger pack which were procured by the was cleared by manufacturers without discharging excise duty as non excisable and repacked products being same are also non excisable. This bonafide belief needs to be accepted. The demand within the limited period for this activity of repacking needs to be upheld alongwith interest - penalty set aside. Appeal disposed off.

Summary

Issues:
Classification of micronutrient fertilisers under chapter headings 3105 or 3808, duty liability on repacking of single micronutrients under chapter headings 2833 and 2840, imposition of penalties.

Analysis:

Issue 1: Classification of Micronutrient Fertilisers
The primary issue in the appeals was the classification of micronutrient fertilisers manufactured by the appellant. The Revenue disputed the classification under chapter heading 3105, arguing for classification under chapter heading 3808. Show cause notices were issued for duty demand, which were adjudicated, confirming demands with interest and penalties. The appellant argued that previous decisions favored classification under chapter heading 3105. The Tribunal, following similar cases, held in favor of the appellant, setting aside demands and penalties related to micronutrient fertilisers.

Issue 2: Duty Liability on Repacking of Single Micronutrients
Another issue was the duty liability on repacking single micronutrients from larger packs to smaller packs. The adjudicating authority invoked the extended period for duty demand, classifying the activity under chapter headings 2833 and 2840. The appellant contended that they believed in good faith that repacking did not amount to manufacture, supported by a relevant CBEC circular. The Tribunal accepted the appellant's belief, setting aside demands confirmed under the extended period. The demands within the limited period were upheld, with interest, but penalties were set aside due to the issue being a matter of classification interpretation.

Judgment Details:
The Tribunal referenced previous cases where similar issues were decided in favor of the assessee, leading to the setting aside of demands related to micronutrient fertilisers. For the appeals filed by individual directors against penalties, no demand of duty was confirmed against the main appellant, resulting in the setting aside of personal penalties. Regarding the demand of duty on repacking single micronutrients, the Tribunal agreed with the classification under chapter 28 but set aside demands confirmed under the extended period, acknowledging the appellant's genuine belief. The demands within the limited period were upheld, penalties were set aside, and the appeals were disposed of accordingly.

This detailed analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision reached by the Appellate Tribunal CESTAT Hyderabad in a comprehensive manner.