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TMI Blog2021 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... rtilizers and Mixture fertilizers. GAAR vide order No. GUJ/GAAR/R/71/2020 dated 17.09.2020 classified the aforementioned products as under: (1) 'Organic manure' was classified under Chapter sub-heading No.31059090 on which GST liability was 5% (2.5%SGST + 2.5%CGST). (2) 'Bio-fertilizers' were classified under Chapter sub-heading No.30029030 on which GST liability was 12% (6%SGST + 6%CGST). (3) 'Nitrogeneous mixture fertilizers' were classified under Chapter subheading No.31029090 on which GST liability was 5% (2.5%SGST + 2.5%CGST). (4) 'Mixture of fertilizers' was classified under Chapter sub-heading No.31059090 on which GST liability was 5% (2.5%SGST + 2.5%CGST). 2. Aggrieved with the aforesaid ruling, the appellant has filed the present appeal on 28.10.2020 challenging the classification of Bio-fertilizers given as per the Advance Ruling of GAAR. However, the appellant has not challenged the Advance Ruling given in respect of the products Organic manure, Nitrogeneous mixture fertilizers and Mixture of fertilizers. The appellant has submitted that as per the Fertilizer Control Order 1985, Bio-fertilizer means the product containing carrier based (solid or liquid) living m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm. Next the conveying belt sends the materials to rotary drum drying machine and cooling machine. 4. Drier Drum: In this process, drier drum rotates and there is coal furnace to supply hot air to drying machine so as to increase the strength of granules after granulation from granulator drum. After drying, the conveyor belt sends the granules to cooling drum. 5. Cooler Drum: In this process, the cooler drum rotates and there are draught fans to supply normal air so as to further increase the strength of granules. After cooling, the conveyor belt sends the granules to vibrating screen. 6. Screening Process: In the process of screening, the qualified materials can be sent to packaging machine by conveyor, while others are conveyed back to crusher or granulator to be reprocessed. 7. Coating: After granules are manufactured, they do coating of different types of Bio-fertilizers as per FCO, 1985 guidelines. In process of coating, cylindrical drum rotates and granules are feeded and spray of required Bio-fertilizer as per requirement is done. 5. The appellant has submitted that looking to the above facts, question arises in their mind as to how their product 'Bio-fertilizers' c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant are a mixture of various components used by buyers to increase the productivity of soil or crop. It has no purpose as a pharmaceutical product and thus it's classification under HSN 3002 is not valid and should be covered under chapter heading 3101. (v) Bio-fertilizers are also permitted to be used for Organic farming. The key elements of components are as follows: Component Key Element Organic manure Carbon, Nitrogen, Phosphorous and Potash. Coal powder Organic carbon. Bone meal Phosphorus, organic carbon and calcium. Bio-fulvic Potassium Nitrogen and Potassium. Amino acids Carbon, Hydrogen, Oxygen and Nitrogen. Potassium humate Potassium. Rock phosphate Phosphorous. (vi) The Regional Director, Regional Centre of Organic Farming published a booklet on "Organic Manures" in January, 2005 wherein it was mentioned that carbon present in soil is in form of organic manure. The components used for manufacturing of Bio fertilizers are rich in carbon content. Thus, it can be used as organic manure and therefore, can be used in agriculture. Sr.No. of Part II i.e. microbiological of Table 13 on page 42 of the published Booklet permits the use of Bio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials are used. The appellant has also submitted that the main ingredient in the output is organic manure, the main source of which is animal waste. They have also submitted that they use organic manure as main ingredient because their intention is to sell the Bio-fertilizers to the agriculturists for agricultural purpose only. (ii) The appellant has relied on the Advance Rulings of (a) Rajasthan Authority for Advance Ruling in Rhizo Organic-2018 (14) GSTL. 600 (AAR-GST) and (b) Uttarakhand Authority for Advance Ruling in M/s. Elefo Biotech Pvt. Ltd. -15/2018-19 to support their contention stating their final products are sold for agricultural purpose only and therefore the above rulings support their contention and therefore bio-fertilizers will be covered under Chapter Heading 3101. (iii) The manufacturing and coating process is done on above mentioned raw materials in accordance with Fertilizers Control order, 1985 and depending on the kind of final output, the composition varies. However, organic manure is always the main ingredient. The different types of bio-fertilizers that can be manufactured are Phosphate Solubilising Bacteria, Potassium Mobilizing Biofertilizers Rhiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y mentioned on the packaging or containers of the Biofertilizers. Copy of Packaging of Bio-fertilizers is also submitted. 7. The appellant has concluded his submission by stating that the Biofertilizers manufactured by them are intended to be sold to farmers for Agricultural use only and thus should be classified under chapter heading 3101 i.e. All goods i.e. animal or vegetable fertilizers or organic fertilizers put up in unit containers and bearing a brand name. FINDINGS :- 8. We have considered the submissions made by the appellant in the appeal filed by them, their contentions during the course of personal hearing as well as evidences available on record. We have also gone through the Ruling given by the GAAR. 9. The Advance Ruling was sought for by the appellant for appropriate classification and applicable rate of Goods and Services Tax for their products Organic Fertilizers, Bio-fertilizers, Nitrogeneous mixture fertilizers and Mixture fertilizers.'. GAAR vide Advance Ruling No. GUJ/GAAR/R/71/2020 dated 17.09.2020 ruled that (i) 'Organic manure' was classified under Chapter subheading No.31059090 on which GST liability was 5% (2.5%SGST + 2.5%CGST). (ii) 'Bio-fertili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packed in some carrier material for easy application in the field are called bio-fertilisers. Thus the critical input in Biofertilisers is the microorganisms. 12. The appellant has submitted that as per the Fertilizer Control Order 1985, Bio-Fertilizer means the product containing carrier based (solid or liquid) living microorganisms which are agriculturally useful in terms of nitrogen fixation, phosphorus solubilisation or nutrient mobilization, to increase the productivity of soil or crop. 13. As per Vikaspedia, benefits/uses of Bio-fertilisers are as under: Bio-fertilisers are living microorganisms of bacterial, fungal and algal origin. Their mode of action differs and can be applied alone or in combination. * Biofertilizers fix atmospheric nitrogen in the soil and root nodules of legume crops and make it available to the plant. * They solubilise the insoluble forms of phosphates like tricalcium, iron and aluminium phosphates into available forms. * They scavenge phosphate from soil layers. * They produce hormones and anti metabolites which promote root growth. * They decompose organic matter and help in mineralization in soil. * When applied to seed or soil, bio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used. The appellant has also submitted that the main ingredient in the output is organic manure, the main source of which is animal waste. They have also submitted that they use organic manure as main ingredient because their intention is to sell the Bio-fertilizers to the agriculturists for agricultural purpose only. It is also observed that the aforementioned composition of inputs (percentage wise) for 'Bio-fertilizers' (which they have submitted now) was never brought to the notice of the Advance Ruling Authorities by the appellant but has been submitted only after the hearing of the appeal filed by them, which was held on 15.04.2021. 16. From the above submission of the appellant, especially the composition of the inputs contained in their products i.e. 'Bio-fertilizers' and comparing the same to the definitions of 'Bio-fertilizers' mentioned in paras-11 to 13 above, it does not appear to meet the criteria of 'bio-fertilizer' particularly because 'Organic manure' (main source of which is animal waste) is a major input constituting 50% of the mixture whereas Bio culture contained therein is only 2%. Further, the appellant themselves have submitted that they are presently manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as the criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration." 17. Since the aforementioned two products i.e. Phosphate Solubilising Bacteria and Potas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that it covers fertilizers produced by mixing or chemical treatment of animal or vegetable products. The ingredients used for manufacture of 'organic fertilizers' as per the applicant are poultry manure, organic ash, compost, cow dung, bone meal, vegetable waste, sulphur powder(mineral), rock phosphate(mineral) and Bentonite(Mineral), Gypsum(for neutralisation), bioculture amino acid, bio-fulvic and potassium humate. Of the said ingredients, poultry manure, organic ash, compost, cow dung, bone meal are within the scope of 'animal or vegetable products' but sulphur powder, rock phosphate, bentonite and gypsum are admittedly minerals whereas potassium humate is a chemically synthesised element which is extracted from brown coal and the process involves alkaline reaction. Bio-fulvic is also commercially known as Bio Potassium fulvate. (ii) The above indicates that the ingredients viz. Sulphur powder, rock phosphate, bentonite, gypsum, potassium humate and bio-fulvic are certainly not covered under the Animal or vegetable products. For the product to be covered under Chapter head 3101, the product should necessarily be either direct animal or vegetable fertilizers such as manure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubheading 31059090 which reads as under: 3105 MINERAL OR CHEMICAL FERTILISERS CONTAINING TWO OR THREE OF THE FERTILISING ELEMENTS NITROGEN, PHOSPHORUS AND POTASSIUM; OTHER FERTILISERS; GOODS OF THIS CHAPTER IN TABLETS OR SIMILAR FORMS OR IN PACKAGES OF A GROSS WEIGHT NOT EXCEEDING 10 KG 3105 10 00 - Goods of this Chapter in tablets or similar forms or in packages of a gross weight not exceeding 10 kg. 3105 20 00 - Mineral or chemical fertilisers containing the three fertilising elements nitrogen, phosphorus and potassium 3105 30 00 - Diammonium hydrogen ortho phosphate(diammonium phosphate) 3105 40 00 - Ammonium dihydrogen ortho phosphate (monoammonium phosphate) and mixtures thereof with diammonium hydrogen orthophosphate (diammonium phosphate) - Other mineral or chemical fertilisers containing thetwo fertilising elements nitrogen and phosphorus : 3105 51 00 -- Containing nitrates and phosphates - 3105 59 00 -- Other - 3105 60 00 - Mineral or chemical fertilisers containing the two fertilising elements phosphorus and potassium 3105 90 - Other : 3105 90 10 --- Mineral or chemical fertilisers containing two fertilizing elements namely ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here that decisions of Advance Ruling Authorities cannot be relied upon by the appellant, since, as per the provisions of Section 103 of the CGST Act, 2017, the Advance Ruling pronounced by the Advance Ruling Authority or the Appellate Authority shall be binding only on the applicant who had sought it in respect of any matter referred to in sub-section(2) of Section 97 for Advance Ruling and the concerned officer or the jurisdictional officer in respect of the applicant. 21. In view of the foregoing, we modify the Advance Ruling No. GUJ/GAAR/R /71/2020 dated 17.09.2020 issued by the GAAR in respect of 'Bio-fertilizers', by holding that the two products namely 'Phosphate Solubilising Bacteria' and 'Potassium mobilising Bio-fertilizers' manufactured and supplied by the appellant M/s. G.B. Agro Industries, Bharuch are classifiable under Chapter sub-heading No.31059090 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) and liable to GST at 5% in terms of Sl.No.182D of Schedule-I of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 (as amended from time to time) for the reasons discussed hereinabove. Also, the classification of the aforementioned products is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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