Gujarat High Court
Novozymes South Asia Pvt Ltd vs Joint Commissioner Of State Goods And ... on 1 August, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/1182/2023 ORDER DATED: 01/08/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 1182 of 2023
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NOVOZYMES SOUTH ASIA PVT LTD
Versus
JOINT COMMISSIONER OF STATE GOODS AND SERVICES TAX & ORS.
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Appearance:
MR ANAND NAINAWATI(5970) for the Petitioner(s) No. 1
MS HETVI H SANCHETI(5618) for the Respondent(s) No. 3
MR RAJ TANNA, AGP for the Respondent No.1
NOTICE SERVED BY DS for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 01/08/2024
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1.Heard learned advocate Mr.Anand Nainawati for the petitioner and learned Assistant Government Pleader Mr.Raj Tanna for the respondent no.1 and learned advocate Ms.Hetvi Sancheti for respondent no.3.
2.By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following reliefs: Page 1 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024
NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined "(a) That this Hon'ble Court be pleased to issue a writ of mandamus or certiorari any other writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioner's case and after going into the validity and legality thereof to quash and set aside the impugned ruling dated 08.03.2021 passed by the Ld. GAAAR read with the ruling dated 02.07.2020 passed by the Ld. GAAR;
(b) That this Hon'ble Court be pleased to issue a writ of mandamus or any other writ order or direction under Article 226 of the Constitution of India to determine the classification of the products in question "RhizoMyx" and "RhizoMyco" under Chapter Heading 3101 at Sr.No.182 of Schedule-I of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 as "All goods i.e. animal or vegetable fertilisers or organic fertiliser"
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NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined
(c) That pending the hearing and final disposal of this Petition, the Respondents by themselves, their officers, subordinates, servants and agents be restrained by an interim order and injunction of this Hon'ble Court from taking any steps or proceedings in pursuance of and/or in furtherance of and/or in implementation of advance ruling dated 02.07.2020 passed by the GAAR and impugned ruling dated 08.03.2021 passed by the GAAAR to the extent that they are adverse to the Petitioner;
(d) For any other ad interim relief as this Hon'ble Court may deem fit over and above the relief prayed for at clause (c) above;
(e) For costs of the Petition;
(f) For such further and other relief as the nature and circumstances of the case may warrant."Page 3 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024
NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined
3.The brief facts of the case are that the petitioner is engaged in supply of the products 'RhizoMyx' and 'Rhizo Myco since 2012. The Petitioner has been supplying the products, 'RhizoMyx' and 'Rhizo Myco', by classifying them under Chapter Heading 3002 of the First Schedule to the Customs Tariff Act, 1975 with the tax rate of 12% (6% CGST + 6% SGST) under Sr. No. 61 of Schedule II of the Rate Notification.
3.1. The products 'RhizoMyco' and 'RhizoMyx' are marketed by the Petitioner as a mycorrhizal biofertilizer designed to enhance the growth potential of crops. These products are uniquely formulated with endomycorrhizal fungal spores and other organic-based ingredients (including humic acids, cold water, kelp extracts, vitamins and other ingredients) to provide superior nutrient and water absorption properties to the plant, Page 4 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined provide necessary root stimulating properties and to help plants cope with environmental stress. The constituting elements of the products along with their percent bandings are listed below:
RhizoMyco Constituting Elements Percentage Potassium Humate (Humic 28.95 Acid) Soluble Seaweed Extract 18.00 Amino acids 10.56 Vitamins 16.7 Surfactant 2.50 Endo Mycorrhizae powder 22.97 Ectomycorrhizal Powder 0.32 Total 100.00 RhizoMyx Constituting Elements Percentage Potassium Humate(Humic 28.70 Acid) Soluble Seaweed Extract 18.00 Amino acids 7.75 Vitamins 15.5 Surfactant 2.50 Mycorrhizae 27.55 Total 100.00 Page 5 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined 3.2. Thus according to the petitioner products "RhizoMyco" and "RhizoMyx" are a mixture of various components which are helpful in increasing the productivity of the soil and crop.
3.3. The petitioner filed an application dated 13.07.2018 before the Gujarat Authority for Advance Ruling for Goods and Service Tax (GAAR) to seek an Advance Ruling on the question whether the aforesaid products are classifiable:
(a) Under Chapter Heading 3101 (hereinafter referred to as 'CTH 31.01') chargeable to GST at 5% under Sr. No. 182 of Schedule I of the Rate Notification as "All goods i.e. animal or vegetable fertilizers or organic fertilizers put up in unit containers and bearing a brand name", OR Under Chapter Heading 3002 (hereinafter referred to as 'CTH 30.02') chargeable to GST at 12% under Page 6 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined Sr. No. 61 of Schedule - III of Rate Notification as "Animal blood prepared for therapeutic, prophylactic S or diagnostic uses; antisera and other blood fractions and modified immunological products, whether or not obtained by means of biotechnological processes; toxins, cultures of micro-organisms (excluding yeasts) and similar products".
3.4. The GAAR vide Advance Ruling dated 02.07.2020 held that the products manufactured by the petitioner qualify as bio-fertilizers and further observed that the bio-fertilizers produced by culturing of micro-organisms, which would be covered by the entry 'Cultures of mirco-organisms (excluding yeast)' under the Tariff Item No.30029030 and chargeable to GST at the rate of 12% under Serial No.61 of Schedule II of Rate Notification.
3.5. The petitioner being aggrieved Page 7 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined challenged the Advance Ruling before the Appellate Authority by preferring an appeal. The Appellate Authority by the impugned order dated 08.03.2021, rejected the appeal filed by the petitioner and affirmed the classification decided by the GAAR in Advance Ruling dated 02.07.2020 and holding as under:
"(a) The products supplied by the Petitioner are biofertilizers as no chemicals are contained in the products and there is presence of endomycorrhiza and ectomycorrhiza, which are microorganisms.
(b) On comparing the definitions as well as the use of biofertilizers vis- à-vis animal fertilizer/organic fertilizer/vegetable fertilizer, it can be seen that biofertilizers are completely distinct in nature and use to these fertilizers. Thus, biofertilizers are not covered under the Chapter Heading 3101 of the First Schedule to the Customs Tariff Act, 1975.
(c) As per Vikaspedia definition, biofertilizers are produced by culturing of microorganisms packed in some carrier material for easy application. Tariff Page 8 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined Entry 30029030 of the First Schedule to the Customs Tariff Act, 1975 covers 'cultires of microorganisms excluding yeasts)'. Further, the HSN Explanatory Notes for Chapter Heading 3002 specifically mentions 'cultures of microorganisms for technical purposes (e.g. for aiding plant growth)'. Since the products in question are also used for aiding plant growth, the same are classifiable under Chapter Heading 3002 and taxable at 12% under Sr. No. 61 of Schedule II of the Rate Notification.
(d) The issue in the judgment of the Hon'ble Supreme Court in the case of Northern Minerals Ltd. is not applicable to the present case. In the case of Northern Minerals Ltd., the issue was whether biofertilizer warrants classification as fertilizer under Chapter Heading 3101 or under Chapter Heading 3808 as plant growth regulator, whereas the issue in the present case is whether the products are classifiable under Chapter Heading 3101 or 3002."
3.6. The petitioner being aggrieved has preferred this petition.
4.Learned advocate Mr.Anand Nainawati for the petitioner submitted that the impugned Page 9 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined decision of the Appellate Authority was rendered on 08.03.2021 and thereafter on the same issue, the Appellate Authority rendered a contradictory decision in case of M/S.GB Agro Industries wherein after holding the products manufactured by the said company as bio-fertilizers, held that the same is to be classified under Chapter 3105 as under:
"18. We also find that the impugned order of Advance Ruling of GAAR has already decided the classification of 'Organic manure' since the appellant had sought Advance Ruling in respect of the classification of their product 'Organic manure' vide their application for Advance Ruling dated 12.03.2019(revised on 15.08.2020). It therefore follows, that the contents of their product 'Organic manure' (for which they had sought classification) as well as that of the input 'Organic manure' (which forms a major constituent of the products i.e. Phosphate Solubilising Bacteria and Potassium mobilizing Biofertilizer), will obviously be the same. We also find that the Gujarat Authority for Advance Ruling(GAAR) vide the impugned order dated 17.09.2020 had Page 10 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined classified the product Organic manure' of the appellant under Chapter sub- heading No.31059090 of the First Schedule to the Customs Tariff Act, 1975(51 of 1975) which was 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 on the following grounds:
(i) Chapter heading 3101 00 which reads as 'Animal or vegetable fertilisers, whether or not mixed together or chemically treated; fertilisers produced by the mixing or chemical treatment of animal or vegetable products' clearly indicates 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 Page 11 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined 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, whether mixed together and chemically treated or otherwise and those obtained by mixing or chemical treatment of animal or vegetable products. The said interpretation finds support in the technical definition of the term 'organic fertilizer' which reads as 'Organic fertilizers are fertilizernd derived from animal matter, animal Orgeta (manure), humanering organic fertable matter (e.g. compost and crop exsidues). Naturally occurring organic fertilizers include animal wastes from meat processing, peat, manure, slurry and guano. In contrast, the majority of fertilizers used in commercial farming are extracted from minerals (e.g. phosphate rock) or produced industrially (e.g. ammonia).
(iii) The definition in the trade parlance also clearly indicates that Page 12 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined Organic Fertilisers are solely obtained from animal or vegetable matter and no other ingredients are present in them.
In the instant case, the composition of the 'Organic Fertilizers' as provided by the applicant reveals that it is a mixture of various elements and as such the same should be examined in light of the fact whether the mixture consists of animal or vegetable products or otherwise. The above analysis of the individual ingredients of the product claimed to be 'organic fertilizers' indicates that the same is derived from a mixture of animal products, vegetable products, minerals and chemically synthesised molecules i.e. the product is not exclusively a mixture of animal or vegetable products and hence cannot be covered under the Chapter Heading 3101 of the first schedule to the Customs Tariff Act.
(iv) The composition of the product contains Amino Acids(Bio-culture amino acids) and the key elements of an amino acid are Carbon(C), Hydrogen(H), Oxygen (O) and Nitrogen(N), although other elements are found in the side chains of certain amino acids, hence presence of nitrogen is visible. Further, it contained potassium humate, hence presence of potassium is also visible. Rock phosphate which is also one of the components of the product is a non- detrital sedimentary rock that contains Page 13 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined high amounts of phosphate minerals, hence product also contains phosphate elements. In addition, the product also contains minerals viz. sulphur powder and bentonite. Thus, the product is a mixture of animal or vegetable products, minerals, nitrogen, phosphate and potassium and hence merits classification under Chapter sub- heading 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 2000. 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 Ammontum dihydrogen ortho phosphate (monoammonium phosphate) and mixtures thereof with diammonium hydrogen orthophosphate (diammonium Page 14 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined 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 fertilising elements namely nitrogen and potassium 3105 90 90 - Other
(v) On going through the entry of the above product in the Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended vide Notification No.18/2017-Central Tax (Rate) dated 30.06.2017), it is found that the same appears at Entry No. 182D of Schedule-
1(on which effective rate of GST is 5%(2.5% SGST + 2.5% CGST) which reads as under:
S.No. Chapter/ Description of Goods.
Heading/ Sub-
heading/ Tariff item Page 15 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined 182D 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, other than those which are clearly not to be used as fertilizers.
"
4.1. It was therefore submitted that the Appellate Authority has taken a contradictory view in case of the petitioner and in case of M/S.GB Agro Industries vide order dated 20.07.2021 within a period of four weeks. 4.2. It was therefore prayed that the matter may be remanded back to the Appellate Authority to reconsider the facts of the case of the petitioner and decide the same de novo in accordance with law after giving an opportunity of hearing to the petitioner and Page 16 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined considering the reasons assigned by the Appellate Authority in case of M/S.GB Agro Industries.
5.On the other hand learned AGP Mr.Raj Tanna as well as learned advocate Ms.Sancheti would not controvert the above submissions of the learned advocate Mr.Nainawati about the contradictory decisions arrived at by the Appellate Authority with regard to the classification of bio-fertilizers.
6. Having heard learned advocates for the parties and considering the facts of the case, it is apparent from the impugned order dated 08.03.2021 that the bio-fertilizers produced by the petitioner are held to be classified under Chapter 3002 whereas in the order dated 20.07.2021, passed by the Appellate Authority, the bio-fertilizers are held to be classified under Chapter 3105 in case of M/S.G.B.Industries. Thus, there are Page 17 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined contradictory findings arrived at by the Appellate Authority pertaining to the classification of the bio-fertilizers produced by the petitioner and the other manufacturer i.e. M/S.GB Agro Industries.
7.It is also pertinent to note that the GST rate applicable for the Chapter 3105/3101 is 5% whereas the rate applicable for Chapter 3002 is of 12%. Thus the petitioner is at loss by approaching before the Advance Ruling Authority, more particularly, when the Appellate Authority in the case of M/S.GB Agro Industries has taken a contradictory view than that in case of the petitioner by applying Chapter 3105/3101 having GST rate of 5% whereas in case of the petitioner the bio- fertilizers are held to be classified under Chapter 3002 having GST rate of 12%. Thus there is an anomaly in the impugned order passed by the Appellate Authority of the Page 18 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024 NEUTRAL CITATION C/SCA/1182/2023 ORDER DATED: 01/08/2024 undefined Advance Ruling.
8.In view of the foregoing reasons, the impugned order dated 08.03.2021 passed in case of the petitioner by the Appellate Authority is hereby quashed and set aside and the matter is remanded back to the Appellate Authority to consider de novo afresh in accordance with law after giving opportunity of hearing to the petitioner and after considering the subsequent order dated 20.07.2021 passed in case of the M/S.GB Agro Industries vis-a-vis the facts of the case of the petitioner.
9.With the aforesaid observation, the petition is disposed of. Notice is discharged.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) URIL RANA Page 19 of 19 Downloaded on : Thu Aug 08 20:32:26 IST 2024