2021 (10) TMI 50 - AAAR - GST

Classification of bio agricultural products - rate of GST - RhizoMyx - Rhizomyco - classifiable under Chapter 3101 or under Chapter 3002 of CETA - HELD THAT - Taking into consideration the fact that no chemicals are contained in the aforementioned products and there is the presence of endomycorrhiza and ectomycorrhiza (which are microorganisms), it can be seen that the said products manufactured and supplied by the appellant are biofertilisers. Since the definition of vegetable fertilisers is not available anywhere, hence it would have to be construed in generic terms. In generic terms, vegetable fertilisers would be the fertilizers derived from vegetable matter like compost and crop residues - Vikaspedia defines biofertilisers as under In nature, there are a number of useful soil micro organisms which can help plants to absorb nutrients. Their utility can be enhanced with human intervention by selecting efficient organisms, culturing them and adding them to soil directly or through seeds. The cultured micro organisms packed in some carrier material for easy application in the field are called bio-fertilisers. Thus the critical input in Biofertilisers is the microorganisms. On comparing the definition as well as the uses of Biofertilizers vis-a-vis Animal fertilier/organic fertilizer/vegetable fertilizer, it can be seen that Biofertilsers are completely distinct in nature and use to these fertilisers. In view of these facts, we conclude that biofertilisers are not covered under the Sub-heading 3101 of the First Schedule to the Customs Tariff Act, 1975(15 of 1975) - the entire portion of the description of goods except cultures of micro-organisms (excluding yeasts) pertains to the medical field. On going through the said Subheading 3002, it is seen that cultures of micro-organisms (excluding yeasts) appears at Tariff entry No.30029030 of the First Schedule of the Customs Tariff Act, 1975 (51 of 1975). Looking to the process of manufacture/production of biofertilizers, their uses, the specific subheadings covered under the above heading as well as the explanatory notes to HSN of the above heading, it can be concluded that the biofertilizers namely Rhyxomyx and Rhyxomyco manufactured and supplied by the appellant are classifiable under Tariff item No.30029030 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), is covered under Sr.no.61 of Schedule-II of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time ) and is liable to GST at 12%. As per Rule 3(a), it is found that where goods are, prima facie, classifiable under two or more headings, the heading which provides the most specific description shall be preferred to headings providing a more general description. The appellant has not given any specific grounds other than the reference to the aforementioned judgement to support their contention that their products are classifiable under Heading 3101. However, we find that Sub-heading 3002 provides the most specific description to the biofertilisers manufactured and supplied by the appellant. The products Rhyzomyx and Rhyzomyco manufactured and supplied by M/s. Novozymes South Asia pvt.ltd., are classifiable under Tariff item No.30029030 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), is covered under Sr.no.61 of Schedule-II of Notification No.01/2017-Central Tax (Rate) dated 28.06.2017(as amended from time to time ) and is liable to GST at 12% - appeal dismissed.

Summary

Issues Involved:
1. Classification of bio fertilizers RhizoMyx and RhizoMyco.
2. Applicable rate of Goods and Services Tax (GST) on RhizoMyx and RhizoMyco.
3. Delay in filing the appeal and its condonation.

Detailed Analysis:

1. Classification of Bio Fertilizers RhizoMyx and RhizoMyco:

The appellant, engaged in the supply of bio fertilizers in Gujarat, sought an advance ruling on whether RhizoMyx and RhizoMyco should be classified under Chapter 3101 or Chapter 3002 of the Customs Tariff Act, 1975. The Advance Ruling Authority (AAR) classified the products under Heading 3002, which pertains to "cultures of micro-organisms (excluding yeasts)."

The appellant argued that their products should fall under Chapter 3101, which includes animal or vegetable fertilizers. They contended that the inert materials in their products, like humic acid, are manures, and thus, the products should be classified under Chapter 3101. They also referenced a similar ruling by the Rajasthan AAR and a Supreme Court decision in the case of Northern Minerals Ltd., which classified a plant growth promoter under Heading 3101.

However, the appellate authority noted that biofertilizers are defined as substances containing living microorganisms that promote plant growth by increasing nutrient availability. The authority compared the definitions and uses of biofertilizers, animal fertilizers, and organic fertilizers, concluding that biofertilizers are distinct from the latter and do not fall under Subheading 3101.

The authority further examined Heading 3002, which includes "cultures of micro-organisms (excluding yeasts)" and noted that biofertilizers produced by culturing microorganisms fit this description. The explanatory notes to HSN for Heading 3002 include cultures of microorganisms for technical purposes, such as aiding plant growth, which aligns with the characteristics and uses of RhizoMyx and RhizoMyco.

Thus, the appellate authority upheld the AAR's classification of RhizoMyx and RhizoMyco under Tariff item No. 30029030 of the Customs Tariff Act, 1975.

2. Applicable Rate of Goods and Services Tax (GST) on RhizoMyx and RhizoMyco:

The AAR ruled that RhizoMyx and RhizoMyco are liable to GST at 12% (6% SGST + 6% CGST) as they fall under Heading 3002. The appellant challenged this, arguing that their products should be taxed at 5% under Chapter 3101.

The appellate authority referred to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, which lists the GST rates for various goods. Entry No. 61 of Schedule-II of the notification covers "cultures of microorganisms (excluding yeasts)" under Heading 3002, attracting a GST rate of 12%. Since RhizoMyx and RhizoMyco are classified under this heading, the appellate authority confirmed the applicable GST rate of 12%.

3. Delay in Filing the Appeal and Its Condonation:

The appellant filed the appeal on 10.09.2020, beyond the 30-day period from the receipt of the AAR order on 14.07.2020. The appellant cited COVID-19 related disruptions and reliance on CBIC notifications extending the time limit for filing appeals due to the pandemic.

The appellate authority acknowledged the delay but condoned it, considering the exceptional circumstances and the fact that the delay was unintentional. The authority referenced the Apex Court's decisions, which emphasize that appeals in high-stake matters should not be dismissed solely on the grounds of delay.

Conclusion:

The appellate authority confirmed the AAR's ruling that RhizoMyx and RhizoMyco are classifiable under Tariff item No. 30029030 of the Customs Tariff Act, 1975, and are liable to GST at 12%. The appeal filed by the appellant was rejected.