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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 ..... and Tariff Act, 1985? Held 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 earlier. Whether the circular can be issued to provide an extended meaning to the term 'essential constituent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT (PER R.K. DESHPANDE, J.) : 1. Rule, made returnable forthwith. Heard finally by consent of the learned counsels appearing for the parties. 2. The challenge in this petition is to the order dated 8 3 2018 passed by the Commissioner, CGST CX, Nagpur, in the proceedings of show cause notice, holding that 36 products of fertilizers marketed as 'Plant Growth Promoters' (PGP) manufactured and removed by the petitioners during the period from 1 12 2011 to 6 9 2016 are classifiable as excisable goods under different items of tariff in the First 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Regulators' and 'Plant Growth Promoters' so far as the definition of 'other fertilizers' employed in Note 6 under Chapter Heading 3105 is concerned. 6. According to Shri Arshad Hidayatullah, the learned Senior Advocate, assisted by Shri A.J. Bhoot, Advocate for the petitioners, the petitioners are constrained to approach this Court basically to challenge the circular No.1022/10/2016 CX, dated 6 4 2016, which travels beyond the scope of the provision of Section 37 B of the Central Excise Act, 1944 ( the said 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so to do for the purpose of uniformity in the classification of excisable goods or with respect to levy of duties of excise on such goods, issue such orders, instructions and directions to the Central Excise Officers as it may deem fit, and such officers and all other persons employed in the execution of this Act shall observe and follow such orders, 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 37 B 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lti micronutrients, plant growth regulators and fertilizers has remained a disputed area in Central Excise. To bring clarity to the issue of classification thereof, it was decided to take opinion of Indian Agricultural Research Institute (IARI) on various issues relating to micronutrients such as what constitutes micronutrients, its usage, distinction from plant growth regulator, if any, etc. in the light of the opinion received from IARI, Central Excise Tariff and explanatory notes of HSN, nature, usage and classification of micronutrients, multi micronutrients, 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, multi micronutrients, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CETH 3824 as chemical products not elsewhere specified or included. 17. Paragraph 6 of the said circular states that the past circulars of the Board on the subject issued on 21 11 1994 and 195 1998 stand rescinded and the classification of micronutrients, multi micronutrients, plant growth regulators and fertilizers shall be governed by the clarification contained in this circular to the extent the product under consideration is covered by the circular. 18. After going through the contents 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 classificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esents the understanding of the statutory provisions by the Department. It is for the Court to declare what the particular provision of the Statute says and it is not for the Executive. Apart from this, to construe the term 'essential constituent' as 'essential character' by issuing circular amounts to adding the words or altering the language of the Statute, which is the function of the Legislature only. If the interpretation placed upon Note 6 in the circular is to be accepted, it would amount to 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 37 B 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 qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that by issuing circular under Section 37B of t he Excise Act, the Board cannot shut down the quasi judicial power of the Authorities under the Excise Act and the Tariff Act. (see 1978 (2) E.L.T. (J345) (S.C.) = 1969 SC 48 (Orient Paper Mills Ltd. v. Union of India), (1994) 210 ITR 129 (Kerala Finance Corporation Ltd. v. CIT), and 1994 (73) E.L.T. 25 (Indian Rayon Industries Limited v. Union of India). In such view of the matter, the Circular must be taken to be illegal and ultra vires and is hereby quashed. 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 pre mature. 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 pre mature 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) i s applicable. It is held that by issuing circular under Section 37 B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the question of such circular being ultra vires the power conferred, cannot be gone into by the Tribunals constituted under the Act, even if it finds that it interfers with exercise of its discretion. It is not the question of applicability of circular which is involved in this case, but it is the question of interference with the exercise of discretion by the quasi judicial authority which is involved. The only remedy available is to challenge such circular by filing the writ petition by invoking the jurisdiction under Article 226 of the Constitution of India. The question No.(2) is, therefore, answered accordingly. 25. In the result, this petition is allowed and the order is passed as under : (1) The Circular No.1022/10/2016 CX, dated 6 4 2016 issued by the Central Board of Excise and Customs in exercise of its power under Section 37 B of the Central Excise Act, 1944, is hereby quashed and set aside, being ultra vires. (2) The parties are relegated back to the appellate jurisdiction where the appeal is pending for decision of the remaining questions in accordance with law. (3) The challenge on merits of show cause notice is left open to be decided by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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