1996 (9) TMI 124 - SC - Central Excise

Classification of micronutrients for the purposes of Excise duty - Held that - There can be no doubt whatsoever, in the circumstances, that the earlier and later circulars were issued by the Board under the provisions of Section 37B and the fact that they do not so recite does not mean that they do not bind Central Excise officers or become advisory in character. There can be no doubt whatsoever that after 21st November, 1994, Excise duty could be levied upon micronutrients only under the provisions of Heading 31.05 as other fertilisers . If the later circular is contrary to the terms of the statute, it must be withdrawn. While the later circular remains in operation the Revenue is bound by it and cannot be allowed to plead that it is not valid. The appeals are allowed. The judgment and order of the Tribunal under appeal is set aside. The micronutrients manufactured by the appellants being exempt from the payment of excise duty, no order in this regard is required.

Issues Involved:
1. Classification of micronutrients for Excise duty purposes.
2. Validity and binding nature of circulars issued by the Central Board of Excise and Customs under Section 37B of the Central Excises & Salt Act.
3. Retrospective application of circulars.

Issue-wise Detailed Analysis:

1. Classification of Micronutrients for Excise Duty Purposes:

The primary issue is the classification of micronutrients, which are mixtures of soluble salts of elements like calcium, magnesium, manganese, zinc, iron, copper, boron, and molybdenum, for Excise duty purposes. The appellants manufacture these micronutrients, which assist in plant growth. Initially, there was a dispute on whether these micronutrients should be classified as "plant growth regulators" under Heading 38.08.90 or as "residual products of chemical or allied industries, not elsewhere specified" under Heading 38.23.

2. Validity and Binding Nature of Circulars Issued by the Central Board of Excise and Customs:

The earlier circular issued on 20th June 1990, classified micronutrients under Heading 38.08 as "plant growth regulators." However, the later circular dated 21st November 1994, classified micronutrients under Heading 31.05 as "other fertilizers." The appellants argued that their micronutrients should be classified as per the later circular. The court examined whether these circulars were binding under Section 37B of the Central Excises & Salt Act, which empowers the Board to issue instructions for uniform practice in the assessment of excisable goods. The court concluded that both circulars were issued under Section 37B, making them binding on Central Excise officers.

3. Retrospective Application of Circulars:

The Revenue argued that the later circular could not apply retrospectively to periods already decided by the Tribunal. However, the court rejected this argument, stating that it is not open to the Revenue to raise a contention contrary to a binding circular issued by the Board. The court emphasized the importance of consistency and discipline in the application of circulars.

Conclusion:

The appeals were allowed, and the judgment and order of the Tribunal were set aside. The micronutrients manufactured by the appellants were classified under Heading 31.05 as "other fertilizers," exempting them from excise duty. The deposits made by the appellants were ordered to be withdrawn, and the bank guarantees were discharged. The Revenue was directed to pay the appellants Rs. 25,000/- as the aggregate costs of the appeals.

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