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TMI Blog2012 (11) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant directed to pre-deposit - E/1364-1375/2010, - E/Stay/785-796/2010, 187-198/2011 - Dated:- 2-2-2012 - S/Shri P.G. Chacko, B.S.V. Murthy, JJ. REPRESENTED BY : Shri M.S. Srinivasa, Advocate, for the Appellant. S/Shri P.R.V. Ramanan, Special Counsel and R.K. Singla, JCDR, for the Respondent. [Order per : P.G. Chacko, Member (J)]. These applications seek waiver of pre-deposit and stay of recovery in respect of duty amounts totaling to Rs. 26,16,00,751/- and total penalty of Rs. 1.5 crores. In adjudication of show-cause notice dated 26-8-2002 pursuant to the Hon ble Supreme Court s remand order dated 15-5-2008 [2008-TIOL-117-SC-CX = 2008 (227) E.L.T. 12 (S.C.)], the learned Commissioner has demanded duty of Rs. 2,89,64,308/- from the assessee for the period 2001-02 and, in adjudication of nine periodical show-cause notices issued during February 2003 to January 2010, the Commissioner has demanded duty of Rs. 23,26,36,443/-. These demands totaling to Rs. 26.16 crores arise out of classification of the assessee s products as Plant Growth Regulators (PGRs) under SH 3808.20 (3808 93 40 under the eight-digit system of classification) of the First Schedule t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. He submitted that it was required to be determined whether Nitrogen was present as an essential constituent or whether it was added as a pretence. It was argued that the mere presence of Nitrogen (N), Phosphorus (P) or Potassium (K) would take away the product from Chapter 38. The learned counsel referred to Note-1 in Chapter 38 and submitted that, for a PGR to be classifiable under heading 38.08, it should be a separate chemically defined element or compound . The products in question were manufactured by mixing various inorganic and organic chemical compounds and therefore such mixtures could not be considered as chemically defined elements or compounds. Therefore, in his view, the products stood excluded from Chapter 38. The learned counsel further submitted that there was no material on record to support classification of the goods under heading 38.08. He argued that the products could only be classified under heading 31.05. In this connection, he referred to Note-6 in Chapter 31, which reads thus : Note 6 : For the purposes of heading No. 31.05, the term other fertilizers applies only to products of a kind used as fertilizers and containing, as an essential constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was added only as a pretence to claim classification under heading 31.05. The panel of officers appointed by the adjudicating authority clearly found, upon examination of the process of manufacture of the goods, that no separate chemically defined compound came into existence and the end-product remained a mixture of various organic and inorganic compounds and that Nitrogen was present in the form of nitrates. The committee further noted that Nitrogen was used by the assessee in the form of urea, potassium nitrate and calcium nitrate and that these compounds of Nitrogen formed an integral part of the manufacturing process and that they were not used as a pretence for the purpose of classification. According to the learned counsel, these findings of the committee, which were recorded after detailed study of the process of manufacture of the goods, were conveniently rejected by the adjudicating authority without any valid reason. In this manner, the learned counsel claimed prima facie case on merits in favour of classification of the production under heading 31.05 and against the demand of duty. He also pleaded financial hardships on the strength of balance sheet and allied accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions, we are not impressed with the arguments of the learned counsel with regard to classification of the goods. Both sides are ad idem that the very same products were the subject matter of the classification dispute considered by the Hon ble Supreme Court in its judgment dated 15-5-2008. That dispute had arisen out of the first of the series of show-cause notices involved in the present case. Their lordships recorded significant findings in para 25 of their judgment. 25. In the show-cause notice, no allegation was made by the Department that the impugned product(s) is a distinct chemical compound. Therefore, the only question is whether the impugned product(s) contains nitrogen as an essential constituent . According to the assessee, the impugned product(s) is a mixture of various inorganic substances whose essential constituent is nitrogen which makes it a fertilizer. It is this point which arises for consideration, viz., whether 0.31% of nitrogen found to exist in the impugned product(s) would make it a fertilizer. In this connection, the aforestated scientific study indicates that PGRs are organic compounds, other than nutrients. As compared to nutrients which play a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to Note-1 (a) of Chapter 38. This chapter note clearly indicates that PGRs in the form of separate chemically defined elements or compounds are not covered by Chapter 38. It cannot be construed so as to mean that all PGRs are fertilizers. Obviously, those PGRs which are not separate chemically defined elements or compounds can be covered by Chapter 38. Indeed, Chapter Heading 38.08 and SH 3808.20 expressly cover PGRs of this Kind. We are not impressed with the submissions made by the learned counsel on the basis of the report of the committee of officers. That report was apparently considered and rejected by the adjudicating authority in a fair and reasonable exercise of discretion. The adjudicating authority itself inspected the factory and examined the relevant aspects of the manufacture of the goods. We have also perused the report of the committee. The factual findings in that report are not at variance with the factual findings recorded by the Commissioner himself after inspection of the factory. What was rejected by the Commissioner was the recommendation of the committee for classifying the goods as fertilizers. In our view, the findings independently recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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