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TMI Blog2008 (10) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... the microbes as biofertilizers in the classification lists filed under Rule 173B of the erstwhile Central Excise Rules, 1944. Biocontrol fertilizers falling under CSH 310100 attracted 'nil' rate of duty. On 2-4-2001, a Show Cause Notice was issued invoking larger period (covering the period from 9-4-96 to 28-2-01) and 15 other periodical Show Cause Notices covering the subsequent period upto 30-9-2006. The Show Cause Notices had alleged that the microbes were biofungicides biopesticides, correctly classifiable under CSH 3808 10 of the Central Excise Tariff. The original authority found that the impugned products did not contain any chemicals and they did not kill any pests directly. After examining the manner in which the microbes worked on insects and pests, he found that the microbes were live cultures of fungi or bacteria basically used for the, purpose of plant growth through biocontrol of insects and pests. Many organisms survived in nature by feeding on insects, parasites and pests. The microbes were used to control and manage pest population. This was biocontrol. Therefore the microbes were not pesticides/insecticides/fungicides of CH 3808 of the Central Excise Tariff (tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... characteristics from biological examination. 4. Following the remand directions, relying on the test reports received from the department of Agricultural Microbiology, Tamil Nadu Agricultural University (TNAU), Coimbatore, in Order-in-Original No. 5/07-ADC dated 23-3-07, the original authority confirmed the classification of the microbes under CH 3002 of Central Excise Tariff. In the Order-in-Original No. 6/07-ADC dated 26-3-07, disposing Show Cause Notices issued for the subsequent period, the original authority dropped the proposal to classify the microbes under CH 3808. 5. The impugned products and their process of manufacture were furnished by Stanes as follows: • Bio-Cure (F) is based on fungal spores in a medium (culture based on the fungal spores), namely, Trichoderma viridie, Trichoderma hamaturn and Trichoderma harzianum. These living microbial cultures are prepared in a solid medium like tapioca powder, maize powder or oats powder, where these fungal produces spores (seeds) of the respective fungus which is allowed to multiply by natural growth. Then these microbial spores are collected by scraping the medium in a sterilized environment and impregnated into an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the growth of harmful pathogens; thus aided the plant growth. In other words, the microbial cultures contained in the goods multiplied in geometrical progression and competed for the substrate against the harmful pathogens thereby leaving the harmful pathogens short of nutrition and thus causing their starvation and consequential extinction. In goods like entomopathogens, like Bio-power, the spores of microbial cultures grew into a filament and entered the insects through their cuticles and created a pathogenic disease symptoms to the cells of such insects causing starvation to the cells and consequential extinction. 6.2 Under CSH 3002 90 30 of the tariff there was a specific entry which included "cultures of micro-organisms (excluding yeast)". In HSN explanatory note under CH 3002, it was mentioned that cultures of micro under CH 3002 would include cultures of micro for technical purposes. (eg.: for aiding plant growth). As per the test report of the Department of Agricultural Microbiology, TNAU, the impugned goods were used for biocontrol of disease in crops. It showed that the impugned goods had inherent medicinal characteristics such as therapeutic property of controlling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e microbes was under 3002, as cultures of micro-organisms. 6.8 In the assessee's website a comparative table was given for the information of the farmers (users of the products) as to how much of the impugned goods could be mixed with other chemical based pesticides and in what proportion. The Commissioner (A) had erroneously concluded that Bio-Cure (F) contained chemicals i.e. Mancozeb, Carbendazim and Copper oxychloride. The table had indicated compatibility with chemical pesticides. 6.9 The Commissioner (A) had travelled beyond original direction given in the remand order by the Commissioner (A) by browsing the internet and using the information to arrive at, the impugned findings. The website advertised the product which was for consumption by customers such as farmers. This information could not be relied upon to determine the classification. In Blue Star Ltd. v. UOI another [1980 (6) E.L.T. (280) (Bom.)], the Hon'ble High Court of Bombay observed thus "In any event what the petitioner may advertise by way of attracting customers can be no criterion for adjudicating upon the issue whether the duty is payable under a particular tariff item. In other words payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act on pests like conventional pesticides. As per HSN notes the microbes had to be classified under CH 3002. 9. SDR brings to our notice the material on the website of Stanes i.e.www.tstanes.com and submits that the microbes are advertised unambiguously as insecticides/fungicides by the assessee. 10. We have studied the case records and submissions by both sides. The issue involved is classification of five products namely, Bio-Cure (F), Bio Cure (B), Bio-Catch), Priority and Bio-Power. These are cultures of microbes (bacteria and fungi) prepared and sold on carriers such as tapioca powder and oats. Department had initially sought to classify them as fertilizer under CH 3101. The original authority decided them to be not fertilizer as the entry CH 3101 covered only chemical fertilizers. These preparations had no chemicals present in them. Vide Order-in-Appeal No. 40/25 dated 28-2-05 passed in appeal against the above order, Commissioner (A) had observed as under: "It is seen that in the appellant's case, the end products were in fact spores of fungus and was removed as carrier based microbes. Whether it is for plant growth is a moot point, which could be decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y means of biotechnological processes; vaccines, toxins, cultures of micro-organisms (excluding yeasts) and similar products 3002 10 - Antisera and other blood fractions and modified immunological products, whether or not obtained by means of biotechnological processes: ................................................... 3002 90 -- Other: 3002 90 10 -- Human blood 3002 90 20 -- Animal blood prepared for therapeutic, prophylactic or diagnostic uses 3002 90 30 -- Cultures of micro-organisms (excluding yeast) HSN Explanatory notes to Chapter 3002 clarifies that the heading includes 'cultures of micro for technical purposes (eg. for aiding plant growth). 'Whether the microbes aided plant growth was a biological question, the Commissioner (Appeals) had left to the original authority when he had passed the Order-in-Appeal No. 40/05 dated 28-2-05. This is answered in the affirmative by the original authority. We note that his finding is correct. It is significant that the note on coverage of microbes under CH 3002 does not restrict it to those that serve as fertilizer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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