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TMI Blog2024 (2) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Commissioner on 08.5.2009. Based on the said legal advice/opinion, the Commissioner himself visited the factory premises of the appellant on 16.12.2009 and examined the process of manufacture of the impugned products - The procedure adopted by the learned Commissioner in carrying out the direction/observation of the Hon ble Supreme Court, in the denovo proceeding has been assailed by the appellant. The Ld. Commissioner while analyzing the said allegations of the appellant held that since his predecessor after receiving the report of the Committee of officers neither commented nor recorded his opinion on the report, therefore, with a change of adjudicating authority, a reference was made to the departmental standing counsel seeking legal opinion on delegation of the task of examination of method of manufacture to the Committee of officers. The opinion of the learned Standing Counsel was that constitution of a Committee without express permission of the Hon ble Supreme Court would be ultra vires of the direction of the apex court. It is found that reading the Committee s Report on the process of manufacture and that of recorded by the Ld. Commissioner after visit to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 20087, 20088, 21306, 21307 of 2015 , Excise Appeal No. 20236 , 20237 of 2016 , Excise Appeal No. 20246 . 20247 of 2017 , Excise Appeal No. 21212 , 21215 of 2018 , Excise Appeal No. 20011 , 20012 of 2021 Hon ble Dr. D. M. Misra , Member ( Judicial ) And Hon ble Mr. Pullela Nageswara Rao , Member ( Technical ) For the Appellants : Sh. G. Shivadass , Sr. Advocate Sh. M. S. Nagaraja , Advocate For the Respondent: Sh. P. R. V. Ramanan , Special Counsel , A. R. ORDER Per : Dr. D. M. Misra These appeals are filed against respective Orders-in-Original passed by the Commissioner of Central Excise, Bangalore, since involve common issues are taken up together for hearing and disposal. Sl. No. Appeal No. Impugned Order No. Period Amount involved 1 to 12 E/1364 1375/2010 to OIO No. 06-17/2010 dated 31.03.2010 August 2001 To 31.12.2009 Rs.2,89,64,308/-, Rs.23,26,36,443/- +interest and penalty of Rs.1,50,00,000/- 13 to 14 E/20087/2015 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Heading 3105 of Central Excise Tariff Act, 1985. On the basis of intelligence and investigation initiated in the year 2000, and on completion of the same, show cause notice was issued to the appellant alleging that the product micronutrient is classifiable as Plant Growth Regulator (PGR in short) falling under chapter sub-heading 3808.20 of CETA, 1985 and duty with interest demanded invoking extended period. On adjudication, demands were confirmed with interest and penalty. Aggrieved by the said orders, the appellant approached the Tribunal. This Tribunal vide Final Order No. 341-347/2007 dated 26.02.2007 set aside the adjudication order and allowed the appeals. The Revenue challenged the said order before the Hon ble Supreme Court and vide its order dated 15.05.2008, the Hon ble Supreme Court setting aside invoking the extended period, remanded the matter to the adjudicating authority for de novo adjudication. In de novo proceeding, the learned Commissioner re-examined the issue and concluded the classification under chapter sub-heading 3808.20 as PGR and confirmed the demands for the normal period. Also, periodical show cause notices issued from time to time for normal peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted the adjudicating authority to examine the process of manufacture for determination of the classification of micro-nutrient. Pursuant to the said direction, the committee was constituted, who in its report dated 05.05.2009 made the following findings: (a) Nitrogen is used in the form of Urea, Potassium Nitrate and Calcium Nitrate and Potassium is contained in the form of Potassium Nitrate; such compounds are added at the beginning of the manufacturing process itself and are mixed thoroughly, inferring that the compounds of Nitrogen and Potassium are an integral part of the manufacturing process and not used as a pretence for the purpose of classification. (b) There is a presence of Nitrogen to the extent of 5% to 7% as had already been declared by the appellant, although the percentage of a compound in the product does not have any bearing regarding the essentiality of compound. (c) As per the Circular No. 392/25/98-CX dated 19.05.1998, for classification under Chapter 31, the micro-nutrients must be separate chemically defined compounds and it should contain Nitrogen. The micronutrients in the instant case adhere to both the conditions. (d) The Hon ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Nitrogen or otherwise in the micronutrients manufactured by the appellant. 3.9 He has also submitted that the Fertilizer (Control) Order, 1985 held to be irrelevant for determination of classification under Central Excise in the Circular No. 392/25/98-CX dated 19.05.1998. 3.10 Further, he has submitted that the Commissioner is bound to follow the Board s Circular, which is binding on him. In support, he has placed reliance on the decision of Hon ble Supreme Court in the case of CCE ST, Rohtak vs. Merino Panel Products Ltd - 2023 (383) ELT 129 (SC). 3.11 Referring to Note 6 of Chapter 31, HSN Explanatory Notes and Note 1 to Chapter 38 of the CETA, 1985, the ld. Advocate for the appellant has submitted that the subject goods are mixtures of micronutrients containing Nitrogen and Potassium, and are not separate chemically defined compounds, which are not classifiable as plant growth regulator under Chapter Heading 3808 of the CETA, 1985. In support, he referred to following case-laws: (i) Leeds Kem vs. CCE, Aurangabad 2001 (134) ELT 294 (Tri. Del.) (ii) CCE, Rohtak vs. Safex Chemicals (I) Ltd 2017 (7) GSTL 234 (Tri. Chan.) (iii) Northern Minerals L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tritive value to the soil or plant. It is submitted that in the absence of a new commodity emerging as a result of the process, no manufacture of the goods took place in terms of Section 2(f) of the Central Excise Act, 1944. 3.15 Further, he has submitted that the individual micronutrients do not undergo any change in their nutritional character or nutritive value and their function as fertilizing element. The purpose of mixing different micronutrients in providing each nutrient in the required proportion, dose or quantity as per the requirement of the plant and soil conditions. The process of mixing does not alter or change the basic character or utility of each constituent of the mixture of micronutrients. Each micronutrient retains its original nutrition value for soil and plant. They have not lost their identity and combined with other micronutrients to form a different commodity with different identity, character and use. The mixture of micronutrients is marketed based on the proportion of each constituent micronutrients. There is no chemical reaction or transformation of micronutrients into a different commodity. The process of mixing duty paid organic and inorganic chem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing on the question of determination of classification. 4.3 Further, he has submitted that the Hon ble Apex Court observing that the impugned product being essentially PGR, directed the adjudicating authority to go into the composition and find out whether 0.31% of Nitrogen would convert PGR into a nutrient falling under Chapter Heading 31.05 and whether with the addition of 0.31% of Nitrogen, PGR becomes other fertilizers under the same Chapter Heading. 4.4 Further, he has submitted that pursuing the said direction of the Hon ble Supreme Court, the adjudicating authority visited the factory of the appellant and conducted a detailed study of the raw materials required and the manufacturing process. Summarizing the findings of study conducted, he has submitted as follows: (i) Basically, the raw materials necessary for the manufacture of the impugned products are mixed in a required proportion and then mixed, ground and packed. (ii) Raw materials required namely Zinc Sulphate, Calcium Nitrate, Ferrous Sulphate, Urea, Borax, Manganese Sulphate etc., are procured from various manufacturers. (iii) The process of manufacture is devoid of any chemical reaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned products contain in principle Zinc Salts, Boric Acid, Ferrous Salts, Manganese Salts, Calcium, Magnesium and Urea. The absence or presence of Nitrogen in the impugned products has no bearing on the classification of the goods under the Fertilizer Control Order. In the instant case, the presence of Nitrogen whether at 0.31% or 5% is not altering the nature of the subject goods, namely, micronutrients. Hence, the addition of Nitrogen in the form of Urea to PGR. (f) Nitrogen is not an essential constituent of the impugned products. Its addition in the form of Urea was pretence/ non-essential additive, so that the impugned products could be classified as other fertilizers falling under Heading 3105.00. 4.6 The learned Commissioner examining the issue in the light of Notifications/Registration Certificates issued by the State Agriculture Department, recorded his findings that elements other than Zn, Fe, Mn and B are not mandatory but optional. In the impugned product, Nitrogen is not the basic or fundamental constituent element. 4.7 Further, referring to the printed labels on the impugned products, it is held that Nitrogen is not indicated as constituent element of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the assessee, he has submitted that the issue in the said case was determination of classification between the headings 29.22 and 31.05 and the claim that the subject product was used as fertilizer was not disputed. Hence, reliance cannot be placed on the said decision. Besides, in the first round of litigation, the Hon ble Apex Court itself have opined that the impugned product is essentially a PGR. 4.12 Also, responding to the argument that the products are not classifiable under Chapter Heading 38.08, since mixtures of individual chemicals or other elements, cannot be considered as PGR, he has submitted that the judgment cited by the appellant would have little value since the Hon ble Supreme Court has considered all the issues in the context of the impugned products and has observed that the products are essentially PGR after referring to several technical literatures on the subject. 4.13 Further, he has submitted the as per Note 1 to Chapter 38, what is excluded from that chapter, are separate chemically defined elements or compounds, usually classified under Chapter 28 or 29, other than such elements and compounds used as insecticides, rodenticides, fungicid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion dated 7.12.2009 communicated as: On a plain reading of the Hon ble Supreme Court s order it becomes clear that the question of determination of whether with the addition of 0.31% of nitrogen, the PGR becomes Other Fertilizers in CSH 3105.00 is the question which needs to be examined by the Adjudicating Authroity as it is the case of the Department that the assessee had added nitrogen only as a pretence so that the impugned product(s) could be classified as other fertilizer under CSH 3105.00. Further, their Lordships have expressed that in their view, essentially the impugned product is PGR. However, assessee contends that the impugned product (s) is a mixture of various inorganic substances and therefore. It is therefore the opinion of the undersigned that constitution of a expert committee without the express permission of the Hon ble Supreme Court would be ultravires the directions of the apex Court. The issue in question would necessarily have to be determined by the Commissioner/adjudicating authority by duly verifying and by considering and taking into account all determinants that would go to decide the issue in question. 11. Based on the said legal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that of recorded by the Ld. Commissioner after visit to the factory premises of the appellant, we do not see any material difference on the facts. What is noticed is that in addition to stating the process of manufacture, the committee of officers in its report proceeded further by interpreting the order of the Hon ble Supreme Court, applicability of Note 6 of Chapter 31 and Circular dated 19.5.1998 observing that the goods are rightly classifiable under Chapter 31.05 and the products may not be called as Plant Growth Regulator. In our view, the interpretation of the Circular, Order of the Hon ble Supreme Court and applying the same to the facts of the present case, by the Committee of officers is beyond the scope of authority delegated to the Committee whose only task is to physically verify the process of manufacture by visiting the factory and report the same to Commissioner. Therefore, the report of the Committee of officers commenting on the classification dispute and deciding the classification cannot stand the scrutiny of law and rightly rejected by the learned Commissioner. 15. Now, before analyzing the finding of the adjudicating authority in carrying out the directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xture of various inorganic substances. It is the method of manufacture which has a strong bearing on the question whether the product(s) needs to be classified under CSH 3808.20 or under CSH 3105.00. This aspect has not been examined by the Adjudicating Authority. 24. It is alleged by the Department that N, P or K are not the essential constituents of micronutrient(s). We agree. However, in this case, the impugned product(s) is multi micronutrient which the assessee claims to be a mixture of various inorganic substances. In this connection it is important to note that two tests have been formulated in the circular of CBEC dated 19-5- 1998, namely, whether the subject-product(s) is a chemically defined compound, if so, it goes out of CSH 3105.00. If not, whether the said product(s) contains N, P or K as constituent element in terms of explanatory note 6. 17. Their Lordships analysing the scope of the terms micronutrient, PGR and other fertilizers, in the backdrop of rival claims, observed that admittedly nitrogen is present as a chelating agent, not as a fertilizing agent; even if it is a fertilizing agent, would not amount to an essential constituent under explanator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trogen would make the PGR in the impugned product classifiable as other fertilizers in CSH 3105.00. In our view, essentially the impugned product is PGR. However, assessee contends that the impugned product(s) is a mixture of various inorganic substances and, therefore, it is for the Adjudicating Authority to go into composition and find out whether 0.31% of nitrogen would convert PGR into nutrient falling under CH 31.05. Whether with addition of 0.31% of nitrogen, the PGR becomes other fertilizers in CSH 3105.00 is the question which needs to be examined by the Adjudicating Authority as it is the case of the Department that the assessee has added nitrogen only as a pretence so that the impugned product(s) could be classified as other fertilizer under CSH 3105.00. ( emphasis supplied ). 21. Analyzing the process of manufacture, the learned Commissioner came to the conclusion that the entire process is devoid of any chemical reaction and the source of nitrogen is urea which is added at the time of mixing various raw materials. He has inferred that the Nitrogen found in the product are not due to any chemical reaction emerging during the course of manufacture, but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e held that it is purely a physical process of mixing of various constituents; the Nitrogen which is added in the form of urea does not undergo any chemical reaction with any of the constituent of the impugned product, it remains as it is, therefore, adding the same at the beginning or at the end of the process of physical mixing would not make any difference. Accordingly, he has concluded that the process of mixing undertaken by the appellant could not lead to their claim that adding Nitrogen containing chemical urea converts PGR into nutrient falling under Chapter 31.05. 25. In our considered opinion, the said finding of the Ld. Commissioner answers/satisfies the question raised by the Hon ble Supreme Court in remanding the case to ascertain whether process of manufacture would demonstrate the presence of Nitrogen as an essential constituent though present as a chelating agent . 26. But, instead of concluding the classification on the outcome of the verification of the manufacturing process, in furtherance of the compliance of the Order of Hon ble supreme court, the leaned Commissioner analysed other evidences on record to examine whether presence of Nitrogen in the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their submission that no percentage is prescribed in the Chapter Note, it is submitted that presence of Nitrogen in the product of fertilizer element is sufficient to classify the item under Chapter Subheading 3105. He has referred to the judgment of the Tribunal in the case of Commissioner of Central Excise Service Tax, Hyderabad-IV Vs. Aries Agrovet Industries Ltd.: 2017 (7) GSTL 317 (Tri.-Hyd.); KPR Fertilizers vs. CCE and Service Tax, Visakapatnam: 2023 (384) ELT 216 (Tri.-Hyd.) 28. We do not find substance in the submissions advanced on behalf of the appellant in as much as the Hon ble Supreme Court in its judgment noted the said arguments and observed that presence of Nitrogen as chelating agent is not sufficient to classify the products as Fertilizer, rather the presence of Nitrogen should be as an essential constituent to satisfy the Chapter Note 6of Chapter 31. Thus, it is directed for examination of the process of manufacture so as to ascertain whether Nitrogen is present as an essential constituent . The learned Commissioner after analyzing the process of manufacture and other aspects discussed above held that Nitrogen is not an essential constituent of the produ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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