Customs, Excise and Gold Tribunal - Bangalore
Karnataka Agro Chemicals And Ors. vs The Commissioner Of Central Excise And ... on 26 February, 2007
Equivalent citations: 2007(120)ECC25, 2007ECR25(TRI.-BANGALORE)
ORDER T.K. Jayaraman, Member (T)
1. In all the appeals, the main issue is relating to the classification of Micronutrient Fertilizers. Excepting in one case, where the Commissioner (Appeals) has decided the issue in favour of the assessee, in all the cases, Revenue has classified the impugned goods as "Plant Growth Regulators" under CH 38.08. However, the assessees contend that the impugned goods fall under CH 31.05 as "Other Fertilizers".
2. S/Shri G. Shiva Dass and M.S. Srinivasa, the learned Advocates appeared for the assessees and S/Shri K. Sambi Reddy and Anil Kumar, the learned JDRs represented the Revenue.
E/1043/200, E/589 to 591/2005 Karnataka Agro Chemicals, Shri Mahesh G. Shetty and Dr. G.P. Shetty v. The Commissioner of Central Excise, Bangalore-III
3. The learned Advocate urged the following points:
(i) The Micronutrient Fertilizers manufactured by the assessees are of two types viz. (a) Fertilizers meant for soil application; and (b) Fertilizers meant for foliar application. Moreover, the State Government has issued necessary Licence to manufacture and market the Micronutrient Fertilizer in various States. The trade recognizes the impugned product as Fertilizers.
(ii) The Micronutrient compounds are basically mixtures of Zinc, Ferrous, Manganese, Boron etc. and all these elements are present in various percentages but, within the limit specified in the Fertilizer (Control) Order, 1985.
(iii) The question of classification of the impugned items was raised as early as in 1989. In fact, in 1994, proceedings were initiated in respect of Karnataka Agro Chemicals to classify the impugned goods as 'Plant Growth Regulators'. But, the Assistant Commissioner held that the Micronutrient Fertilizer was classifiable under CH 31.05 as "Other Fertilizers" attracting NIL rate of duty. As the department has accepted the above order dated 26.06.1995, the matter has reached finality. The following case-laws were relied on:
a. Birla Corporation Ltd. v. CCE 2005 (186) ELT 266(SC) b. Indian Oil Corporation Ltd. v. CCE, Baroda 2006 (202) ELT 37(SC) c. CCE, Navi Mumbai v. Amar Bitumen & Allied Products Pvt. Ltd. 2006 (202) ELT 213(SC) d. CCE, Mumbai v. Bigen Industries Ltd. 2006 (197) ELT 305(SC) e. Jyothy Laboratories Ltd. and Anr. v. CCE, Calicut 2007 (78) RLT 276 (CESTAT.-Ban.)
(iv) Samples of 19 Micronutrient Fertilizers were tested. The Chemical Examiner, broadly opined that most of the products contained Nitrogen but, in different percentages. The Chemical Examiner stated that the Nitrogen so present is a Chelating agent and not present as a Fertilizing element. The assessees contended that the source of Nitrogen used by them in the Micronutrient Fertilizer is only Urea and requested for re-testing of the samples for confirmation that Nitrogen is present as a fertilizing element. When the matter was referred to the Chemical Examiner, Chennai, he opined that whenever Urea was used as a source of Nitrogen, it could be considered to be present as a fertilizing element. However, department opined that the impugned items are 'Plant Growth Regulators' and, therefore, proceedings were initiated against the assessees. The Commissioners have passed the Orders-in-Original dated 11.05.2005 and 02.11.2005 in respect of M/s. Karnataka Agro Chemicals & Others. In respect of Multiplex Fertilizers Ltd., OIA No. 138/2004 dated 10.11.2004 has been issued against the assessee. As regards K.V.M. Organic Products, the Commissioner (Appeals) decided the issue in favour of the assessees. But, the department has come in appeal against the Commissioner (Appeals)'s decision.
(v) The Chief Chemist, New Delhi, had opined that the products were Micronutrients and contains Nitrogen.
(vi) The Collector of Central Excise (Bangalore), in Trade Notice dated 12.01.1995, had clarified that Micronutrient Fertilizers would be classified under CH 31.05 as 'Other Fertilizers'.
(vii) Identical dispute arose in the case of M/s. Aries Agrovet Industries Ltd. The Commissioner of Central Excise, Hyderabad, vide his OIO dated 30.11.2005, had dropped the proposal to classify Micronutrient Fertilizers as 'Plant Growth Regulators' under CH 38.08 and ordered classification under CH 31.05 as 'Other Fertilizers'.
(viii) The learned Advocate referred to the following authoritative books to contend that 'Plant Growth Regulator' is a chemically defined compound and in the present case, the impugned product is a mixture.
1. Technical Dictionary of Kirk Othomer
2. The Hawley's Condensed Chemical Dictionary
3. 'Micronutrients in Soils, Crops and Fertilizers' by Dr. H.L.S. Tandon
(ix) Note 1 to Chapter 38 states that for a 'Plant Growth Regulator' to be classifiable under Chapter Note 38.08, it should be a 'separately defined chemical element or compound'.
(x) Since the impugned product is a mixture, it does not satisfy the test laid down in Chapter Note-1 to Chapter 38 and consequently, it cannot be classified under CH 38.08. The following case-laws are relied on:
a. Leeds Kem v. CCE, Aurangabad b. Northern Minerals Ltd. v. CCE, New Delhi (Affirmed by Supreme Court in .
(xi) The Department's contention is that the impugned products do not contain Nitrogen, as a fertilizing element, which is present only as a Chelating component and, therefore, the product cannot be classified under CH 31.05. Another ground for rejecting classification under Chapter 31 is that the presence of Nitrogen as compared to the total consumption of Urea (the source of Nitrogen) is not more than 0.31% of the total urea consumed. With the help of authoritative books, the learned Advocate explained the terms 'chelation' and 'chelating agent'. Further he stated that Dr. Gaur, in his expert opinion, has clearly stated that whether the source of Nitrogen as present is from a Chelating source or from Urea, it acts as a fertilizing element only. Further, neither the Chapter Notes of Chapter 31 nor the HSN Explanatory Notes specify the minimum percentage of presence of Nitrogen in the product to enable its classification under CH 31.05. In any case, the Chemical Examiner, in the further clarification dated 12.07.2001, has opined that whenever Urea was used as a source of Nitrogen, Nitrogen could be considered to be present as a fertilizing agent.
(xii) A similar dispute or classification of Micronutrient Fertilizers was considered by the Canadian International Trade Tribunal in the case of Phosyn PLC v. Deputy Minister of National Revenue. The Tribunal, after taking note of the presence of Nitrogen in the form of Urea, held that the classification of the products would be under CH 31.05.
(xiii) The classification of the Micronutrient Fertilizers is dealt with in Board's Circulars dated 25.04.1990, 21.11.1994 and 19.05.1998. A harmonious reading of the above Circulars would show that the Board, by the last Circular dated 19.05.1998, after the decision of the Apex Court in the case of Ranadey Mirconutrients v. CCE , has prescribed two tests to decide the classification of Micronutrient Fertilizers.
1. Whether these are separate chemically defined compounds. If so, classification under CH 31.05 is ruled out; and Whether the product contains atleast one of the fertilizing elements viz. N, P or K. Since the impugned product is a mixture and not a separate chemically defined compound and also in view of the fact that they contain one of the fertilizing elements N, P or K, the test for classification under Chapter 31.05 in terms of the Board's Circular is fulfilled.
(xiv) The Ministry of Agriculture considers the impugned product as Fertilizer in terms of Section 2(h) of the Fertilizer (Control) Order read with Part-A of Schedule-I to that Order. When the authority competent to grant registration to a product as a Fertilizer has certified the products to be Fertilizers, it would not be open to the Central Excise Authorities to take a view that the products are not fertilizers. The Apex Court's decision in Bigen Industries Ltd. 2006 (195) ELT 195 is relied upon.
(xv) The Department was aware of all the facts as the Assistant Commissioner dropped the proceedings in 1995. Therefore, longer period is not invokable and the demand for the period prior to 26.08.2001 is barred by limitation. The following case-laws were relied on:
a. Nizam Sugar Factory v. CCE, A.P. 2006 (197) ELT 465 (SC) b. CCE, Bangalore-III v. Bripanil Synthetics (P) Ltd.
(xvi) Another issue for which demand has been raised is on account of alleged re-packing and re-labeling of goods classifiable under CH 38.08 which has been held to be a process of manufacture by the Commissioner in terms of Chapter Note-2 to Chapter 38. The two products are Multiplex Samras and Multiplex Sulphur. The product Multiplex Samras was received in tankers and repacked into retail quantities of 100ml, 250ml, 500ml, etc. Chapter Note 2 to Chapter 38 would be attracted only if the Tanker in which the product is received is a bulk pack. The Tribunal, in the following decisions, has held that tankers are not bulk packs:
a. Ramkishore Chemical (Pvt.) Ltd. and Ors. v. CCE, New Delhi 2001 (47) RLT 300 (CEGAT-Del.) b. Ammonia Supply Company v. CCE, New Delhi Therefore, re-packing of Multiplex Samras into retail pack would not be considered as manufacture in the light of Note-2 to Chapter 38.
(xvii) As regards Multiplex Sulphur, it is submitted that once the value of Micronutrient Fertilizers and Multiplex Samras is excluded from the aggregate value of clearance for the purpose of computing the exemption limit under the SSI Notification, the value of re-packed liquid sulphur would be well within the initial exemption limit. Further, once the Department relies on a manufacturer's invoice for classification as adopted then, the appellants would be entitled to Modvat credit and also to the benefit of cum-duty-price.
4. The learned JDR took us through the Chapter 31 of the CE Tariff and said that the impugned products cannot fall under the Heading Nos. 31.01, 31.02, 31.03 and 31.04 as seen from the description given. In order to come under the Heading 31.05, Note-6 of Chapter 31 should be satisfied. As per that Note, the term "Other Fertilizers" applies only to products of a kind used as fertilizers and containing as an essential constituent at least one of the fertilizing elements Nitrogen, Phosphorous or Potassium. He said that in the impugned goods, it cannot be said that Nitrogen is an essential constituent considering its very meager proportion. He took us through the Explanatory Notes under CH 38.08 and maintained that 'Plant Growth Regulators' can be mixtures also and it is not necessary that they should be only compounds. Further, he reiterated the impugned Orders-in-Original and Orders-in-Appeal.
5. We have gone through the records of the case carefully. The point at issue is the correct classification of 'Micronutrient Fertilizers'. The Adjudicating Authority has held that the Micronutrient Fertilizers manufactured by the appellants cannot be considered as "Other-Fertilizers" under CH 31.05 in view of the fact that the Nitrogen present is insignificant and also does not act as a fertilizing agent, in other words, according to the Adjudicating Authority, Note-6 of Chapter 31 is not being fulfilled in the case of the impugned product so as to qualify them as "Other Fertilizers." The fact that the impugned products contained Nitrogen is not in doubt. We do not find any prescribed proportion of N, P or K in Chapter 31. The appellants have contended that the only source of Nitrogen is Urea. According to expert opinion, even if Nitrogen is present as a chelating agent, it can act as a fertilizing element. Therefore, the ground for rejecting the impugned product as 'Other Fertilizer' is not sound. The Adjudicating Authority has come to the conclusion that the impugned item is 'Plant Growth Regulator' falling under Chapter 38. There is no proper examination of the issue. She has taken the definition of Plant Growth Regulator from A.B. Sarkar's Publication Words and Phrases of Excise & Customs', II Edition- Pages 1157 and 1158 and has come to the conclusion that the goods' manufactured by the assessee satisfy those definitions and, therefore, has concluded that the item is a 'Plant Growth Regulator'. Just for the reason that the impugned item cannot be called as 'Other Fertilizers' falling under Chapter 31.05, one cannot conclude that it would be classified as 'Plant Growth Regulator'. The appellants have cited a large number of authoritative sources to clarify as to what is known as 'Plant Growth Regulator'. If we see the Tariff, 'Plant Growth Regulator' is classified under CH 38.08 along with Insecticides, Fungicides, Herbicides, etc. A perusal of literature on the subject indicates that 'Plant Growth Regulators' come under the category of Pesticides in the United States. The HSN Explanatory Notes has the following information on Plant Growth Regulators:
Plant-growth regulators are applied to alter the life processes of a plant so as to accelerate or retard growth, enhance yield, improve quality or facilitate harvesting, etc. Plant hormones (phytohormones) are one type of plant-growth regulator (e.g. gibberellic acid). Synthetic organic chemicals are also used as plant-growth regulators.
Hawley's Condensed Chemical Dictionary defines Plant growth regulator as follows:
An organic compound either natural or synthetic that modifies or controls one or more specific physiological processes within the plant. If the compound is produced by the plant, it is called a plant hormone e.g. auxin which regulates the growth of longitudinal cells involved in bending of the stem one way or another. Substances applied externally also bring about modifications such as improved rooting of cuttings, increased rate of ripening (ethylene) and easier scission (separation of fruit from stem). A large number of chemicals tend to increase the yield of certain plants such as sugarcane, corn, etc. All these, as well as plant-produced hormones, are included in the term plant growth regulator.
According to the Encyclopedia of Chemical Technologies (Kirk Othmer), Volume-18, Plant-growth regulators, other than nutrients, usually are organic compounds. They are either natural or synthetic compounds and are applied directly to a plant to alter its life processes or structure in some beneficial way so as to enhance yield, improve quality or facilitate harvesting. Plant harmones, i.e phytohormones are plant-produced growth regulators and, therefore, are naturally occurring plant substances. Plant growth regulators, however, apply to phytohormones as well as synthetic compounds.
A harmonious reading of the information relating to 'Plant Growth Regulators' reveals that they are generally organic compounds. They can be either natural or synthetic. In other words, they are chemically well-defined compounds. This is very clear from Chapter Note 1(a) of Chapter 38 wherein it is stated that
1. This Chapter does not cover:
(a) Separate chemically defined elements or compounds with the exception of the following:
(1) ...
(2). Insecticides,... and plant-growth regulators,....
The above Note means that Chapter 38 does not cover chemically defined elements or compounds other than plant-growth regulators. The inference drawn is plant-growth regulator should be a chemically defined element or compound. This has also been held by the Tribunal in the case of Leeds Kem v. CCE, Aurangabad . In the present case, it is not the case of the Revenue that the impugned products are chemically defined compounds. In fact, the impugned products are mixtures of various inorganic substances. Therefore, we do not find adequate grounds for classifying the impugned products under Chapter 38.
5.1 The classification of Micro Nutrients is a subject matter of three Circulars issued by the CBEC. The first Circular is dated 24.05.1990. In that Circular, it was clarified that the appropriate classification of Micro Nutrients would be under Chapter Heading 38.08 of CET. The reasoning given is that the said Micro Nutrients do not contain Nitrogen, Phosphorous or Potassium and they are only a heterogeneous mixture of inorganic salts viz. sulphate of iron, copper, zinc, molybdenum, boron. While corning to such a conclusion, the CBEC has not examined the issue properly. They have given the reasoning for not classifying the impugned products as "Other Fertilizers" under Chapter 31. However, they have not taken into consideration that a Plant-growth Regulator should be chemically well defined compound. Just for the fact that the impugned Micro Nutrients are essential for plant growth in small amounts, a conclusion has been reached that they are Plant-growth Regulators. In any case, the above circular was withdrawn in 1994. This shows that the CBEC itself was not very clear about the issue and, therefore, we want to hold that in such matters, it is not proper to demand duty invoking longer period. The second Circular was issued on 21.11.1994. While issuing the second Circular, the CBEC consulted the Ministry of Agriculture and the Chief Chemist. It was stated that the Micro Nutrients with or without N, P, K, have been recognized as Fertilizers under the Fertilizer (Control) Order, 1985. Rule (4) of the Interpretative Rules of the Central Excise Tariff was invoked to hold that the Micronutrients would be classified as 'Other Fertilizers' under CH 31.05.
The Board re-examined the entire issue in its Circular dated 19.05.1998. Para 5, 6 & 7 of the above Circular are extracted below:
5. Fertilizers are materials added to soil and, sometimes to foliage to supply nutrients to sustain plants and promote their abundant and fruitful growth. The elements that constitute these plant foods are divided into three classes- (1) Primary-Nitrogen (N), Phosphorous (P) and Potassium (K), (2) Secondary-Calcium (Ca), Magnesium (Mg) and Sulphur (S) and (3) Minor or so called micronutrients - Iron (Fe), Manganese (Mn), Copper (Cu), Zinc (Zn), Boron (B) and Molybdenum (Mo). However, for the purpose of classification of micronutrients as 'Other fertilizers' in Heading 31.05 CET, the scope of the term 'Other Fertilizers' has to be determined in the light of Note 6 of Chapter 31. Further, the specific exclusion of separate chemically defined compounds as laid down in the HSN Explanatory Notes to Heading 3105.90, must also be borne in mind. If, the micronutrient is a separate chemically defined compounds, it will be classifiable under Chapter 28/29. If not so, and if in accordance with Note 8 to Chapter 31, it contains N, P or K, it will be classifiable under Chapter Heading 31.
6. Further it is also stated that notification under F. C. O. is irrelevant for deciding classification under the Central Excise Tariff and regardless of such notification, the appropriate consideration should be:
(i) whether or not the micronutrient in question is a separate chemically defined compound. If it is, then classification under 31.05 is ruled out; and
(ii) if it is not, whether it contains N, P or K as laid down in the Explanatory Notes.
7. Therefore, it is clarified that classification of micronutrients may be done in accordance with the above guidelines.
The tests laid down are mentioned in para 6. The first question to be asked is whether the impugned product is a separate chemically defined compound. If it is so, then its classification under Chapter 31 is ruled out. If it is not, whether the impugned product contains N, P or K as laid down in the Explanatory Notes. We have to note that there is no prescribed percentage of any of the above elements in the impugned product. The Explanatory Notes also make it clear that 'Other Fertilizers' would not include separate chemically defined compounds. There is no specific mention of Micronutrients in the Explanatory Notes. Perhaps, this is the reason why so much confusion has been caused in the minds of every one. In any case, the 1998 Circular, in para 3, makes a reference to the Apex Court's decision in the case of Ranadey Micronutrients v. CCE . We note that the said decision of the Apex Court relies on the 1994 Circular, which, by invoking Rule (4) of the Interpretative Rules, comes to the conclusion that Micronutrients fall under Chapter 31.
5.2. The appellants have cited a decision of the Canadian International Trade Tribunal in the case of Phosyn PLC v. The Deputy Minister of National Revenue. The issue before the Canadian Tribunal was also, the correct classification of Micronutrient Fertilizers. There the dispute was between Tariff Item No. 3824.90.90 as 'Other Chemical Preparations' and 3105.90.00 as 'Other Fertilizers'. It was held that the goods must be classified as 'Other Fertilizers' for the reason that the goods contained as an essential constituent a fertilizing element, Nitrogen, in the form of Urea or Ethanolamine. Regarding Note 6 to Chapter 31, the following observations have been made.
The Tribunal agrees with the appellant that Note 6 to Chafer 31 sets out two sets. The tests foreseen by Note 6 are that the products must be used as fertilizers and must contain, as an essential constituent, at least one of the fertilizing, elements, namely, nitrogen, phosphorous or potassium. The Tribunal is satisfied, based on the evidence presented, that the goods in issue are fertilizers and that they contain at least one of the fertilizing elements.
It has further been observed that Note 6 does not prescribe minimum value in terms of the content of the fertilizing element nor does it prescribe any specific function for the fertilizing element beyond the fact that it has to be essential to the product.
5.3. Similar issue was the subject matter of adjudication before the CCE, Hyderabad-IV Commissionerate. The said Commissioner, in his OIO 25/2005 dated 30.11.2005, has held that the impugned micronutrient fertilizers should be classified under Chapter 31 and not under Chapter 38.
5.4. Another point raised by the Revenue is the Nitrogen found in the samples of the impugned products, is present as a chelating agent and not as a fertilizing element. In the light of Note 6 to Chapter 31, we do not find it necessary to elaborate on chelation and chelating source. The appellant has produced the following opinion of Dr. G.S. Gaur, Professor & Head of the Department of Horticulture, Chandra Shekhar Azad University of Agriculture & Technology, Kanpur. The following query has been raised to him.
If Nitrogen is from a chelating source, does it cease to act as a fertilizing element?
Nitrogen present in a product performs the same functions irrespective of its source. Nitrogen irrespective of its source is one of the essential elements for the growth and development of plants. Even if Nitrogen is from a chelating source, it does not cease to function as a fertilizing element Nitrogen from any source including from chelating source will undergo mineralisation which means organic compounds are broken down into simple substances of inorganic forms. Nitrogen is changed into Ammonical or nitrate which are inorganic forms, which are directly absorbed by the plants for growth.
5.5. In view of the above opinion from an Agricultural Expert, we are of the view that once the test reveals that Nitrogen is present, the impugned item should be considered as 'Other Fertilizers' even if the nitrogen is from a chelating source. The appellants have also stated that they have been using Urea in all their products. It is well known that Urea is a good source of Nitrogen. In these circumstances, we hold that the impugned product of the appellant viz. Micronutrient Fertilizers which contain Nitrogen as one of the constituents are indeed to be classified as 'Other Fertilizers' under Chapter Heading 31.05 of CET and not as Plant Growth Regulators under Chapter Heading 38.08. Thus, the classification is decided in favour of the appellants.
5.6. It has been pointed out that the Show Cause Notice dated 26.08.2002 issued to Karnataka Agro Chemicals, Bangalore is time barred. The above mentioned Show Cause Notice covers the period from 01.08.1997 to 28.02.2002.
5.7. The duty involved for the above period is Rs. 10,09,06,438/-. Even though, the other three Show Cause Notices issued to the appellant are within the normal period, in view of our finding with regard to classification, the confirmation of duty cannot be sustained. While holding that longer period cannot be invoked, we take into account the fact that the department itself earlier decided the issue in favour of the appellant and further that the CBEC itself was not very clear on the issue.
5.8. A part of the demand is on account of alleged re-packing and re-labelling of the following goods.
(i) Multiplex Samras and
(ii) Multiplex Sulphur The appellants have stated that in respect of the first product, they are received in tankers and re-packed into retail quantities and the Tribunal, in the decisions cited by the learned Advocate, has held that the activity of re-packing from tankers to retail packs would not be covered by the expression re-packing from bulk pack to retail pack in terms of Note 2 to Chapter 38 and consequently, that activity in respect of Multiplex Samras would not amount to manufacture.
As regards the demand on account of re-packing of Multiplex Sulphur is concerned, it has been submitted that if the value of micronutrient fertilizers and multiplex samras is excluded from the aggregate value of clearance for the purpose of computing the exemption limits under SSI Notifications, then the value of repacked liquid sulphur would be well within the initial exemption limit. Further, there is a prayer for giving the benefit of Modvat and also the benefit of cum duty price.
5.9. As we have held that the Micronutrient Fertilizers fall under CH 31.05 and hence not dutiable and also accepted the appellants contention that repacking of Multiplex Samras would not amount to manufacture, we accept their prayer for excluding the values of Micronutrient Fertilizers and Multiplex Samras for computing the exemption limits. The party's contention that they would come within the exemption limit can be verified by the original authority. In case, the clearances exceed the exemption limit, while computing duty, Cenvat/Modvat benefit should be extended. The sale price should be considered as cum-duty price only. Subject to the above verification, we allow the request of the appellants.
5.10. In view of our above finding, the penalties imposed under Section 11AC on the appellant company and also under Rule 25 are not justified at all. The penalties on Shri G.P. Shetty, Managing Partner and on Shri Mahesh G. Shetty are also not sustainable. Hence, we set aside the Orders-in-Original No. 08/2005 dated 11.05.2005 and 15/2005 dated 02.11.2005. Thus, we allow the appeals with consequential relief.
E/103/2005: CCE. Guntur v. KVM Organic Products Ltd.
6. This appeal is by Revenue. The respondent M/s. K.V.M. Organic Products manufactured Micronutrient Fertilizers. Revenue officers proceeded against the respondent, in view of Board's Circular dated 19.05.1998. From the OIO, we find that the impugned products were not at all tested. The Adjudicating Authority has decided the issue based only on his cross-examination of the Chemist working with the Respondent unit. There is no basis for the conclusions reached by the Adjudicating Authority. The respondents appealed to the Commissioner (Appeals). The Commissioner (Appeals) decided the issue based on Board's Circular dated 21.11.1994, Revenue has come in appeal against the Commissioner (Appeals)'s order. The Grounds of Appeal of the Revenue indicate that as per Apex Court's decision in the Ranadey Micronutrients -1996 (87) ELT 19(SC), the relevant Circular is the one dated 19.05.1998 and not the one relied upon by the Commissioner (A). We do not find any substance in the above contention of the Revenue as, at the time of the decision of the Apex Court, Board's Circular dated 19.05.1998 was not in operation. Therefore, we reject the Revenue's appeal.
E/164 & 165/2005: M/s. Multiplex Fertilizers Pvt. Ltd. and Shri Mahesh G. Shetty
7. The impugned product is Muliplex Multinol manufactured by the appellant. The appellants have contended that the impugned product is a Micronutrient Fertilizer containing Nitrogen. They have referred to the test report of the sample by Chemical Examiner which says that the product is composed of organic matter containing Nitrogen. However, in a Note appended to the Report, the Chemical Examiner has stated that from the literature supplied by manufacturer that the sample (Multinol) is manufactured from Rice bran, Potassium Hydroxide and Ethyl Alcohol. Based on the above and laboratory findings, the sample is free from fertilizing elements - Nitrogen, Phosphorous and Potassium. The test report is rather contradictory. The learned Advocate has pointed out that the above test report relates to samples drawn from M/s. Karnataka Agro Chemicals and not from M/s. Multiplex Fertilizers Pvt. Ltd. He has drawn our attention to Annexure C.1.2 at page 38. Multiplex Multinol is mentioned at Sl. No. 5 under Group B. Against B, it is clearly mentioned that the samples of the 14 products mentioned in the said group are drawn at the factory premises of M/s. Karnataka Agro Chemicals. Even the test memo indicates at pg. 45 of the paper book, that the samples are drawn at M/s. Karnataka Agro Chemicals. The samples drawn at M/s. Karnataka Agro Chemicals cannot be the basis for deciding the classification of the product manufactured by the appellant. On this ground alone, we cannot sustain the demand on Multiplex Multinol and its classification under CH 38.08 as 'Plant Growth Regulator'.
7.1. Further, the appellants have pointed out that the other products Multiplex Samras, Multiplex Sulphur and Multiplex Multilaxin are not manufactured by the appellants. They are only re-packed goods. In respect of Multiplex Samras, we have already decided in M/s. Karnataka Agro Chemicals that the activity of repacking from tankers to smaller packs does not amount to manufacture. Therefore, the demand on account of re-packing of Multiplex Samras is not sustainable.
7.2. It has been further pointed out that in respect of Multiplex Sulphur and Multiplex Multilaxin, the duty requires re-computation after extending the benefit of cum duty and cenvat credit. We do not find that Revenue should have any objection in acceding to the request for extending cum duty benefit and cenvat credit. The duty liability in respect of Multiplex Sulphur and Multiplex Multilaxin should be re-computed after giving the benefit of cenvat credit and cum duty price.
7.3. As regards the penalty on the MD of Multiplex Fertilizes Pvt. Ltd., in view of our above findings, the same cannot be sustained and we set aside the penalty imposed. Therefore, we set aside the impugned Order-in-appeal and allow the appeals in the above terms.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)