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TMI Blog2018 (9) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... t Schedule to the Central Excise Tariff Act, 1985, attracting the excise duty at the rate of 12.36% to 12.50%, as shown in the order. 3. The claim of the petitioners is that all 36 products manufactured and marketed by them contain at least one of the fertilising elements of Nitrogen, Phosphorus or Potassium as an essential constituent and the products are known as 'PGP'. According to the petitioners, these products are covered by the term 'other fertilizers' in Note 6 under Chapter Heading 3105 in the First Schedule to the Central Excise Tariff Act, 1985, attracting the duty at the rate of 1%, which they have paid. According to the petitioners, the absorption of micronutrient and other elements is not possible without the presence of at least one of the elements of Nitrogen, Phosphorus or Potassium as an essential constituent called as N P K. 4. The composition of products manufactured by the petitioner is scrutinized on the basis of the Test Reports and the guidelines given in Circular No.1022/10/2016CX, dated 642016. The argument advanced by the petitioners, based on the Test Reports, that miniscule quantity of Nitrogen (N), Phosphorus (P) or Pot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id Act") to enlarge the definition of 'other fertilizers' by construing the 'essential constituent' means the 'essential character'. According to him, the circular offends the language employed in Note 6 under Chapter Heading 3105. The Department as well as the Appellate Authority are bound by the circular, leaving no scope to accept any other interpretation in conformity with the plain language of the provision. Reliance is placed upon the decision of Delhi High Court in the case of Vistar Construction (P) Ltd. v. Union of India, reported in 2013(31) S.T.R. 129 (Del), the decision of Punjab & Haryana High Court in the case of Vardhman Polytex Limited v. Union of India, reported in 2001(135) E.L.T. 17 (P & H), and the decision of the Apex Court delivered on 6122017 in Civil Appeal No.137 of 2009 in the case of Assistant Commissioner, Commercial Taxes & Ors. v. LIS (Registered). 7. Shri Bhattad, the learned counsel appearing for the Department, submits that in terms of Proviso (b) to Section 37B of the said Act, the circular issued would not interfere with the discretion of the Commissioner of Central Excise (Appeals) in exercise of his appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, instructions and directions of the said Board: Provided that no such orders, instructions or directions shall be issued (a) so as to require any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner of Central Excise (Appeals) in the exercise of his appellate functions." The purpose of conferring power upon the Central Board of Excise and Customs ("CBEC") under Section 37B of the said Act to issue orders, instructions and directions is to maintain uniformity (i) in the classification of excisable goods, or (ii) with respect to levy of duties of excise on such goods. The proviso therein is crucial and couched in the negative language incorporating the important principles of administrative law to prohibit - (a) requiring any Central Excise Officer to make a particular assessment or to dispose of a particular case in a particular manner, or (b) interfering with the discretion of the Commissioner of Central Excise (Appeals) in the exercise of his appellate functions. 10. In our view, the proviso statutorily restrains CBEC from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssification of micronutrients, multimicronutrients, plant growth regulators and fertilizers is explained in the paragraphs of the circular. 13. It is thus apparent that the object of issuing the said circular is to clarify the issue of classification of micronutrients, multimicronutrients, plant growth regulators, and fertilisers, which, according to CBEC, remained a disputed area. The classification on the issues of micronutrients, such as - what constitutes micronutrients, its usage, distinction from plant growth regulators, if any, etc., is on the basis of the opinion of Experts IARI. The said circular issues detailed guidelines to classify not only the tariff item heading in Chapter 31, but also in Chapters 28, 29 and 38. 14. Paragraph 2.1 of the said circular explains what is meant by micronutrients as essential nutrients required in small quantities for the normal growth and development of plants, which consist of Iron (Fe), Manganese (Mn), Zinc (Zn), Copper (Cu), Boron (B), Molybdenum (Mo), Nickel (Ni), and Chlorine (Cl). It states that though these elements are called as 'minor' or 'trace' elements, this does not mean that they are less important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the said circular and reading Note 6 in Chapter 31 in the light of it, we are of the opinion that the said circular extensively provides guidelines to classify the products covered by various headings in Chapters 28, 29, 31 and 38. Not only that, but the circular interprets, clarify and declare what is meant by the term 'other fertilizers' in Note 6 of Chapter 31, which applies only to the products of a kind used as fertilizers and containing, as an essential constituent, at least one of the fertilizing elements Nitrogen or Phosphorus or Potassium. It holds that in the trade parlance, the sale of micronutrients as 'micronutrient fertilizers' would not lead to classification thereof under Chapter 31 as 'fertilizers' for the purposes of the Central Excise Tariff. It clarifies that for any product to merit classification under CETH 3105 as 'other fertilizers', the product must have Nitrogen or Phosphorus or Potassium or their combination as an essential constituent providing essential character to the product. Thus, the circular explains the term 'essential constituent' to mean essential character, which is broader in nature than the earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreclosing the discretion conferred upon the quasi judicial authority, leaving no scope to deal with the question and take a view different from the one contained in the circular. The circular requires the Central Excise Officers to make a particular assessment or to dispose of a particular case in a particular manner. In our view, therefore, the said circular cannot be sustained and has to be set aside on the ground that it travels beyond the scope of the authority under Section 37B of the said Act and violates the restraint or prohibition statutorily imposed under the proviso therein. The question No.(1) is, therefore, answered accordingly. 21. Now coming to the question No.(2) as to whether the Appellate Authority is bound by the circular having no jurisdiction to set it aside, we would like to refer to certain decisions, relied upon by Shri Arshad Hidayatullah. The Division Bench of Punjab & Haryana High Court in the case of Vardhman Polytex Limited v. Union of India, reported in 2001 (135) E.L.T. 17 (P & H), has held in paragraph 8 as under : "8. In our opinion, the twofold objection raised by the respondents to the maintainability of the writ petitions deserves t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "9. In course of hearing it was also contended that since the writ petition has been filed at the stage of show cause, such writ petition is premature. Since the notice itself was issued on the basis of the circular, it is obvious that such circular is likely to be followed by the concerned Authorities, and therefore, filing of the writ petition cannot be said to be premature and such circular, which is contrary to the provisions of the Finance Act, cannot be sustained. For the aforesaid purpose, the decision of this Court in (1995) 216 ITR 240 (Mad.) (Madras Bar Association v. CBDT) is applicable." It is held that by issuing circular under Section 37B of the said Act, the Board cannot shut down the quasi judicial power of the Authorities under the Excise and Tariff Act, and since the notice of show cause was issued on the basis of the circular, it is obvious that such circular is likely to be followed by the concerned Authorities and, therefore, filing of the writ petition cannot be said to be premature. The circular was quashed. 23. The judgment of the Apex Court in the case of Union of India v. Karvy Stock Broking Ltd., reported in 2015 (39) S.T.R. 705 (S.C.), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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