2024 (9) TMI 1655 - AT - Central Excise

Classification of goods - Siapton 10L - Isabion - classifiable under ETI 3101 00 99 as a fertilizer or under ETI 3808 93 40 as a plant growth regulator? - whether the mode of usage of the product through soil or foliar application is a determinative test for classifying the goods under ETI 3101 00 99 or ETI 3808 93 43? - HELD THAT - ETI 3101 00 99 and ETI 3808 93 40, when read with the relevant section and Chapter Notes and the HSN Explanatory Notes, do not provide a distinction based on the mode of usage of such elements. It needs to be noted that water-soluble fertilizers are used for soil and foliar applications. When plant nutrients are applied by foliar application, smaller quantities of fertilizer materials are required when compared to application through the soil. Upon foliar application of the macronutrient fertilizer, the nutrients enter the leaves through the stomata, correct the disorders, and improve the yield and quality of the produce. Urea is generally suitable for foliar application owing to its high solubility, ease, and quick absorption by the plant tissue - It is an undisputed fact that plants absorb nutrients through their roots or foliage. Generally, in situations where soil conditions are not favorable, it is desirable to make foliar applications of the plant nutrients. It is also important to notice that plant growth regulators are also used for soil and foliar applications. The EU Explanatory Note to ETI 3808 93 90 makes it aptly clear that the plant growth regulators can be applied to the whole plant or parts of the plant or to the soil - the test based on mode of application would not be a correct test. Whether the two products, namely, Siapton 10L and Isabion are fertilizers or plant growth regulators? - HELD THAT - P.I. Industries has stated that the product Siapton 10L has amino acids alone. It has clarified that 54% of the product is pure amino acids and the remaining ingredients are peptides and micronutrients, which are short chain amino acids. Dr. R. Uma Shankar in his opinion dated 08.01.2013 has confirmed that amino acids and peptides can be regarded as bio-stimulants and should be treated as organic nutrients or organic fertilizers and not as classical plant growth regulators. Isagro SPA, Italy which supplied the product to P.I. Industries has specifically stated that Siapton 10L is a product based on organic nitrogenous compounds (amino acids and peptides) and so should be considered as nitrogen based fertilizer with nitrogen in organic form only, incorporated in amino acids and peptides. It has also stated that Siapton 10L is not a plant growth regulator as it does not modify or control or alter any physiological process - SICIT, the company which supplied Isabion to Syngenta in bulk, has also in its communication dated 28.08.2012 stated that Isabion is an organic bio-stimulant and contains a well balanced and optimal ratio between short chain peptides, long chain peptides and free amino acids. The product label of Isabion also mentions that Isabion contains a well balanced and optimal ratio between short chain peptides, long chain peptides and free amino acids. It needs to be noted that bio-stimulants , being a fertilizer, was brought under this Control Order by Order dated 23.02.2021 issued by Ministry of Agriculture and Farmers Welfare. The definition of bio-stimulants contained in the aforesaid Order excludes plant growth regulator, which have been stated to be regulated under the Insecticides Act, 1968. It is true that the aforesaid definition of bio-stimulants was included in the Fertilizer Order by Order dated 23.02.2021 of the Ministry, but as the Ministry has clearly expressed that bio-stimulants would exclude plant growth regulators, the definition would certainly provide guidance - It can, therefore, be said that fertilizers provide essential nutrients for plant growth and health, while plant growth regulators are chemicals that influence specific aspects of plant growth and development by regulating physiological processes. Both are vital tools in modern agriculture to optimize plant growth and maximize crop yields. The two products, namely, Siapton 10L and Isabion merely provide nutrients to the plant. They do not alter the physiological processes in a desired direction. In other words, the amino acids and the nitrogen present help in cell building exercise, and thereby, help the plant grow using the nutrients (nitrogen, phosphorus and potassium). Therefore, the two products Siapton 10L and Isabion are in the nature of fertilizers (bio-stimulants) and not plant growth regulators. The aforesaid discussion leads to the inevitable conclusion that the Division Bench, while referring the matter to the Larger Bench, was not justified in distinguishing the earlier decision of the Tribunal in Northern Minerals 2001 (5) TMI 74 - CEGAT, COURT NO. III, NEW DELHI . The two products, namely, Siapton 10L and Isabion deserves classification as fertilizers under ETI 3101 00 99 and not as plant growth regulators under ETI 3808 93 40. The reference is answered, accordingly. The papers may be placed before the Division Bench of the Tribunal to decide the appeals on merits.

Summary

Issues Involved:

1. Classification of products "Siapton 10L" and "Isabion" under the Central Excise Tariff: whether as "fertilizers" under ETI 3101 00 99 or as "plant growth regulators" under ETI 3808 93 40.
2. Determination of whether the mode of application (soil vs. foliar) affects classification.
3. Distinction between "plant growth promoters" and "plant growth regulators."

Detailed Analysis:

1. Classification of Products:

The primary issue in the appeals was whether "Siapton 10L" and "Isabion" should be classified as "fertilizers" under ETI 3101 00 99 or as "plant growth regulators" under ETI 3808 93 40. P.I. Industries and Agro Pack classified their products as fertilizers, arguing that they provide nutritional support to plants without altering physiological processes. The Tribunal examined the composition and usage of both products. "Siapton 10L" consists mainly of amino acids and peptides, while "Isabion" contains a mixture of amino acids and peptides with nitrogen, phosphorus, and potassium. Both products were described as bio-stimulants, which are recognized as fertilizers by the Ministry of Agriculture. The Tribunal concluded that these products provide essential nutrients, thereby promoting plant growth, and do not alter physiological processes, thus classifying them as fertilizers under ETI 3101 00 99.

2. Mode of Application:

The Division Bench initially considered the mode of application-whether the products were applied to soil or directly to plants-as a potential determinant for classification. However, the Tribunal found that the mode of application (soil vs. foliar) is not a valid criterion for distinguishing between fertilizers and plant growth regulators. Both fertilizers and plant growth regulators can be applied through soil or foliar methods. The Tribunal emphasized that the classification should be based on the product's function and composition rather than the application method.

3. Distinction Between Plant Growth Promoters and Plant Growth Regulators:

The Tribunal clarified the distinction between "plant growth promoters" and "plant growth regulators." A plant growth promoter, such as a fertilizer, provides nutrients that promote plant growth without inhibiting or altering physiological processes. In contrast, a plant growth regulator can inhibit, promote, or otherwise alter physiological processes in plants. The Tribunal concluded that the products in question do not alter physiological processes and are therefore not plant growth regulators. The Tribunal rejected the Division Bench's view that a plant growth promoter could be equated with a plant growth regulator.

Conclusion:

The Tribunal concluded that "Siapton 10L" and "Isabion" are fertilizers classified under ETI 3101 00 99, not plant growth regulators under ETI 3808 93 40. The Tribunal emphasized that plant growth promoters and plant growth regulators serve different functions, and the products in question merely provide nutrients without altering physiological processes. The reference was answered accordingly, and the appeals were directed to be decided on merits by the Division Bench.