Custom, Excise & Service Tax Tribunal
Bahar Agrochem & Feeds Pvt Ltd vs Commissioner Of Central Excise, Pune on 10 February, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.E/3163/05, E/3416/06, 3441/06, E/1017 & 1018/07 (Arising out of Order-in-Original No.10/CEX/2005 dated 20/06/2005 dated passed by Commissioner of Central Excise, Pune) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Bahar Agrochem & Feeds Pvt Ltd., Appellant Vs. Commissioner of Central Excise, Pune Respondent Appearance:
Shri.Yogesh Patki, Advocate for appellant Shri.P.K.Agarwal, Jt. CDR, for respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 10/02/2011 Date of Decision : /05/2011 ORDER NO Per: P. R. Chandrasekharan
1. Briefly stated the facts of the case are as follows:-
2. There are five appeals under consideration of this case. Of the five appeals, three appeals namely, appeal No. E/3163/05, E/3416/06 & E/3441/06 are consequent upon the Honble Supreme Courts remand order dated 22/11/2007 whereby the Honble apex Court had set aside the following two orders passed by this Tribunal and remanded the same back to the Tribunal, (i) Order No.A/158/2007/C-II(EB) dated 23/01/2007 and (ii) Order No.A/422 & 423/07/C-I/EB dated 23/05/2007. In the above orders, this Tribunal had upheld the classification of the product Vipul Booster as a Plant Growth Regulator under tariff heading 3808.20 as contended by the appellant as against the departments contention that the product is classifiable as an insecticide under heading 3808.10 of the Central Excise Tariff. The other two appeals, namely appeal No.E/1017 & 1018/08 are the appeals filed by the department against the orders of the Commissioner (Appeals) wherein the Commissioner (Appeals) had allowed the parties appeal following the Tribunals order dated 06/03/2007, which has now been set aside by the Honble Supreme Court.
2.1. The issue involved in all these five appeals is the same, namely, the classification of the product Vipul Booster whether as a Plant Growth Regulator under tariff heading 3808.20 as claimed by the appellant M/s.Bahar Agrochem & Feeds Pvt Ltd., (Bahar in short) or as an insecticide under tariff heading 3808.10 as claimed by the department. When the matter was heard by the Tribunal earlier, the issue before the Tribunal was whether the product was classifiable under heading 3808.20 of the Central Excise Tariff as claimed by the appellant manufacturer or classifiable under heading 3808.10 as claimed by the department and consequently the valuation of the product should be arrived at in terms of Section 4A of the Central Excise Act, 1944, on MRP basis, or under section 4 of the said Act. Consequent to the classification of the product as an insecticide under heading No. 3808.10, the product became chargeable to excise duty on MRP basis under section 4A of the Act and a differential duty demand of Rs.1,39,92,608/- for the clearances effected during the period from March 2002 to September 2004 was confirmed and an equal amount of penalty was imposed on the appellant company. The appellant had contended that though their product Vipul Booster contained Triacontanol, which is an insecticide, it cannot be classified as insecticide because it contains only 0.1% w/w of Triacontanol, the other ingredients being emulsifiers and preservatives. They had also contended that their product was not marketed as an insecticide but only as a Plant Growth Regulator and they had declared these particulars before the Central Insecticide Board. After considering the submission, it was held by the Tribunal that the department had no proof that the Vipul Booster containing of a small quantity of Triacontanol can function as an insecticide and as on the burden to prove that the product is classifiable as insecticide is on the department, which obligation of department had not discharged, the appeal of M/s Bahar was allowedby the Tribunal with consequential relief.
2.2 Against this order, the department went in appeal before the Honble Supreme Court and the Honble apex Courts order dated 22/11/2007 held as follows:-
We have gone through the judgement of the Tribunal. It has been pointed out on behalf of the department, rightly, that the assessee has registered the above mentioned product as insecticide with the Directorate of Plant Protection, Ministry of Agriculture, Faridabad and that they have been regularly following all procedures and formalities stipulated under the Insecticide Act, 1968 (see page 87 of the paper book). The Tribunal has also failed to consider the effect of the issuance of such a certificate under the Insecticide Act, 1968. It is argued on behalf of the assessee that one of the ingredients of the above product is insecticide and the certificate issued under the Insecticide Act is only with reference to that ingredient only. All these questions will require fresh consideration in accordance with law by the Tribunal.
Accordingly, the impugned judgement is set aside and the matter is remitted to the Tribunal for fresh consideration in accordance with law.
3. The appellants contentions are that the registration under the Insecticide Act is not determinative of its classification under Central Excise Tariff and the law on this point is well settled as has been held in Sujanil Chemo Industries Vs. CCE 2000 115 ELT 546, which was upheld by the Honble apex Court in the same case vide judgement dated 10/02/2005 reported in 2005 (181) ELT 206. It is their contention that mere registration of a product as an insecticide under the Insecticide Act, 1968 will not give a classification as an insecticide under the Central Excise Tariff Act. It was further argued that the Central Excise Tariff itself classified various products, which are registered under the Insecticides Act, 1968 not as insecticides under the Excise Tariff but under various other headings. For example, boric acid though classified as insecticide under the Insecticide Act, would be classifiable under heading 2810.0020 as an inorganic chemical. Similarly, gibberellic though classified as an insecticide under the Insecticide Act is classified under heading 3808.3030 and not as an insecticide under heading 3808.10. It is their submission that meaning attributed to a term under one particular statute cannot be the basis for interpreting the said term in another statute and they rely on the following judgements in support of this contention:-
i) MSCO Vs. UOI reported in 1985 (19) ELT 15.
ii) Richardson Hindustran Vs. CCE, reported in 1988 (35) ELT 234 and
iii) Naturalle Health Products Vs. CCE, reported in 2003 (158) ELT 257.
3.1 In all the, above judgements, it has been consistently held that while construing a word in a statute, in the absence of any definition of that word in that statute, it must be given the same meaning which it receives in ordinary parlance or understood in the sense in which people conversant with the subject matter of the statute understand it. In the light of the above, it is their submission that registration under the Insecticide Act, cannot by itself be a cause for classification as insecticide under the Central Excise Tariff.
3.2 They also rely on CBEC Circular No.360/76/97-CX dated 03/12/1997 wherein the Board had clarified that for the purpose of classifying products under the Central Excise Tariff, the meaning given under the Drugs & Cosmetics Act, 1940 cannot be considered since the object of the two Acts are different.
3.3 The advocate for the appellant further submitted that they had produced voluminous evidence by way of affidavits filed by farmers and dealers and scientists from where it may be seen that the product Vipul Booster manufactured and marketed by them are known as Plant Growth Regulator and is not known as an insecticide in the commercial parlance. The affidavits of the scientists are supported by voluminous research papers, which shows that Triacontanol is used worldwide as a Plant Growth Regulator. None of the evidences produced by them have been rebutted by the department and hence their contention has to be accepted and they rely on the following judgements:-
i) UOI Vs. Garware Nylons 1996 (87) ELT 12
ii) Puma Ayurvedic Vs. CCE, 2006 (196) ELT 3
iii) Colgate Palmolive Vs. UOI, 1980 (198) ELT 268 3.4 It is their contention that since the department has not discharged the onus placed on them for change in classification, the classification as claimed by Bahar cannot be disturbed. They further submit that in matters of classification, commercial parlance test has to be followed and cited the following case laws:-
i) Naturalle Health Products Vs. CCE, 2003 (158) ELT 257
ii) Ramavatar Budhaiprasad AIR 1961 SC 1325
iii) CCE Vs. Vicco Laboratories 2005 (179) ELT 17 (SC)
iv)Shri Baidhyanath Ayurved Bhavan Ltd., Vs. CCE, Nagpur 1996 (83) ELT 492 (SC)
v) GS Auto International Ltd., Vs. CCe, Chandigarh 2003 (152) ELT 3 (SC) 3.5 The appellant further argues that the findings of the Commissioner that end use of the product is not relevant for classification is incorrect because the tariff heading under consideration insecticides and Plant Growth Regulator by itself incorporate end use and, therefore, end use is a relevant factor for determination of classification.
3.6 It was further submitted that the demand for the period March 2003 to November 2003 is barred by limitation as the notice has been issued after a lapse of one year on 28/12/2004 and the department was fully aware that Bahar was classifying the product Vipul Booster as a Plant Growth Regulator even before 1996 (when the product came under the purview of the Insecticide Act) and they continued to classify the product as Plant Growth Regulator even after 1996. They had also informed the department about the contents/constitution of their product Vipul Booster as early as in 1985 and the classification lists/declarations filed by them classifying the product as a Plant Growth Regulator were duly approved by the department at the relevant time and, therefore, the question of invoking the extended period of time does not arise and they place reliance on the following judgements:-
i) CCE, Delhi Vs. Ishaan Research Lab (P) Ltd., 2008 (230) ELT 7 (SC)
ii) Balsara Extrusion 131 ELT 586 3.7 They further contend that since duty is not payable, penalty is also not sustainable as has been held in the following judgements:-
i) CCE Vs. HMM Ltd., 1995 (76) ELT 497 (SC)
ii) H. Guru Investment (North India) Pvt. Ltd., Vs. CEGAT, New Delhi 1998 (104) ELT 8 (All.)
iii) Godreaj Soaps Vs. CCE,Mumbai 2004 (174) ELT 25 (Tri-LB) 3.8 It was further submitted since there is no suppression on their part, no penalty can be imposed and the issue being a classification dispute, penalty is not imposable as was held in the following cases:-
i) UOI Vs. Rajasthan Spinning & Weaving Mills 2009 (238) ELT 3 (SC)
ii) CCE, Nasik Vs. Jyoti Structures Ltd., 2009 (247) ELT 55 (Tri-Mumbai)
iii) Gujarat Raffia Industries Ltd., Vs. CCE, Ahmedabad-II 2004 (165) ELT 331 (Tri-Del)
iv) S Narendra Kumar & Co. Vs. CCE, Mumbai-I 2003 (156) ETL 1001 (Tri-Mumbai)
v) Methodex System Ltd., Vs. CCE, Indore 2004 (173) ELT 299 (Tri-Del).
4. The Ld. Jt. CDR on the other hand would submit as follows:-
(1) In the remand order of the Supreme Court, it has been directed that the effect of issuance of certificate under the Insecticides Act, 1968 and all the procedures and formalities stipulated under the Insecticide Act, 1968 being regularly followed by the assessee are relevant and these issues which were not examined earlier by the Tribunal were required to be examined afresh. The assessee had not challenged the order of the Tribunal before the Honble apex Court and, therefore, they are bound by the above law laid by the Honble apex Court. According to the Ld. Jt. CDR, the appellant Bahar are prevented from taking a plea that registration of the product under Insecticides Act as an insecticide cannot be relevant for deciding the classification under Central Excise.
(2) He further contends that the product Vipul Booster has been manufactured by using Triacontanol 0.1% w/w (which is registered as insecticide with Directorate of Plant Protection Quarantine and Storage and having Registration No.CIR-136/2002 (210)-Triacontanol (EW-135). Triacontanol is the active ingredient in Vipul Booster and other raw constituent materials are emulsifiers and preservatives. Therefore, the product has been considered as an insecticide because of the nature of the active ingredient.
(3) The Ld. Jt. CDR would further submit that as per the provisions of Insecticide Act, the appellant has been indicating on the package of Vipul Booster as under:-
The package containing the formulated grade insecticide should be stored in original containers in separate room or almirah under lock and key, away from the reach of the children, food stuffs, animal feeds and other articles and kept in cool and dry place.
The description on the package of Vipul Booster clearly indicates that Triacontanol 0.1% w/w sold as Vipul Booster, is a formulated grade insecticide only and what is being marketed is Triacontanol and the other materials mixed with Triacontanol are only emulsifiers and preservatives. The leaflet and the label for the impugned products have also been approved by the registration authority and the said registration has been issued with certain specific conditions mentioned at column No.5 thereof in terms of Section 9/367 of the Insecticides Act, 1968.
(4) From the above, it is amply clear that the product Vipul Booster wherein the active ingredient is Triacontanol is not only manufactured as an insecticide but also marketed as an insecticide under the brand name of Vipul Booster. The said product has been marketed as per the procedures prescribed under Insecticides Act, 1968, such as sale or distribution of the impugned product in packed and labeled condition, approval of package and label by the Central Insecticide Board and Registration Committee, leaflet to mention precautions of usage, storage and disposal, symptoms of poisoning, anti-dote, warning logo etc. He further submits that where any statutory provision prescribes any particular manner for doing a particular act, then that thing or act must be done in accordance with the manner prescribed. Since the assessee has sold the impugned products as an insecticide, they cannot now claim that the product is not being sold as an insecticide but sold as Plant Growth Regulator as legally the assessee is bound by the dictum of the Insecticides Act, 1968.
(5) The various affidavits filed by the assessee are contrary to their own admissions. The classification of a product has to be determined in terms of the description under chapter heading read with relevant chapter notes/section notes and the impugned product satisfied the criteria for classification as an insecticide. Therefore, no extraneous materials/affidavits can be relied upon when the impugned product is marketed as an insecticide only.
(6) In view of the above, the Ld. Jt.CDR submits that the product has to be classified as an insecticide under sub-heading 3808.10 and not as a Plant Growth Regulator. Since the product is rightly classifiable under 3808.10 its valuation has to be done as per the provisions of section 4A of Central Excise Act, 1944.
(7) The Ld. Jt.CDR further relies on the following judgements in support of his contention:-
i) Travancore Chemicals 1997 (89) ELT 136
ii) Aero Industries 2006 (204) ELT 61 (Tri)
iii) Essen Synthetics Pvt Ltd., 1987 (32) ELT 759 (Tri.) (8) The Ld. Jt.CDR further argues that though the appellant has claimed the classification of their product as a Plant Growth Regulator, the product has been described and marketed as Plant Growth Promoter as can be seen clearly from the copy of the leaflet and also from the label affixed/printed on the package. The product only promotes and does not regulate. Regulator means both the promoting as well as retarding. This Tribunal in the case of Northern Minerals Ltd., 2001 (131) ELT 355 had clearly made a distinction between a plant growth promoter and a plant growth regulator and had held that both these are not synonymous. A plant growth promoter will only promote the growth of a plant and will not inhibit it. On the other hand, a plant growth regulator can inhibit, promote or otherwise alter physiological processes in plants. The said judgement of the Tribunal has been affirmed by the Honble Supreme Court.
(9) The Ld. Jt.CDR further submits that the end use of a product cannot necessarily be determinative of its classification under a fiscal statute like the Central Excise Tariff. If the broad description of the product fits in with the expression mentioned in the Tariff, the product shall be classifiable therein. He relies on the judgement of the apex Court in the case of Indian Aluminium Cables 1985 (21) ELT 3 (Tri.), of the Tribunal in the case of Luman Metal Industries 2001 (130) ELT 338 (Tri.) and Bombay Chemicals Pvt Ltd., 1995 (77) ELT 3 (SC).
(10) As regards the contention of the appellant assessee that once the classification is done, the Revenue cannot change the classification for the subsequent period is not legally tenable. The Honble apex Court in the case of Elson Machines Pvt Ltd., 1988 (38) ELT 571 had held that excise authorities are not estopped from taking a view different view than the approved classification list as there is no estoppel against the law. The Ld. Jt. CDR relies on the judgement on the Apex Court in the matter of Plasmac Machines 1991 (51) ELT 161 (SC) and also by the Tribunal in the case of Paushak Ltd., 2000 (116) ELT 251 (Tri.) in support of this contention.
(11) The Ld. Jt. CDR also refers to Section 38 of the Insecticides Act, 1968, provides for exemption from the provisions of the Insecticide Act in respect of goods, if such goods are intended for the purposes other than preventing, destroying, repelling or mitigating any insects, rodents, fungi, weeds and other forms of plant or animal life not useful to human beings . In the instant case, if the appellant was of the view that their product is not being used as an insecticide or is not capable of being used as an insecticide, they could have sought exemption under Section 38 of the Insecticides Act, which they have failed to do. Therefore, he submits that the product Vipul Booster with Triacontanol which is notified as an insecticide as the active ingredient is classifiable as an insecticide under the central excise tariff , and not as a Plant Growth Regulator and, therefore, the said product is liable to excise duty under the provisions of Section 4A of the Act. Accordingly, he submits that the duty demand confirmed by the Ld. Commissioner of Central Excise in his order dated 17/06/2005 is correct in law and therefore, needs to be upheld.
5. We have carefully considered the submissions made by both the sides and our findings are discussed below.
6. The direction of the Honble apex Court is that as the assessee has registered the above mentioned product as an insecticide with Directorate of Plant Protection, Ministry of Agriculture, Faridabad and that they have been regularly following all procedures and formalities stipulated under the Insecticide Act 1968, the effect of issuance of such a certificate has to be considered by the Tribunal which has not been done in the order passed earlier by this Tribunal.
6.1 The issue relates to classification of a product sold under the brand name Vipul Booster which contained Triacontanol 0.1% w/w which is an insecticide as the active ingredient and its consequent valuation under the Central Excise Act, 1944, that is on the basis of transaction value under section 4 of the said Act or on MRP basis under section 4A of the said Act. The competing entries for classification are heading Nos. 3808.10 and 3808.20 of the Central Excise Tariff Act. At the relevant time, the entries read as follows:
38.08 Insecticides, rodenticides, fungicides herbicides, anti-sprouting products and plant growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly-papers) 3808.10 - Insecticides, fungicides, herbicides, weedicides and pesticides 16% 3808.20 Plant growth regulators 16% 3808.90 Other 16% 6.2 As per Section 3 (e) of the Insecticides Act, 1968 insecticide means
(i) any substance specified in the Schedule; or
(ii) such other substances (including fungicides and weedicides) as the Central Government may, after consultation with the Board, by notification in the official gazette, include in the schedule from time to time; or
(iii) any preparation containing any one or more of such substances.
In the said schedule which contains the list of insecticides, at Sl.No.565, the product Triacontanol is specified. Since Triacontanol is specified as an insecticide, any preparation containing Triacontanol will also be treated as an insecticide for the purposes of the said Act. Accordingly, Vipul Booster, which has Triacontanol as the active ingredient will be an insecticide as per the provisions cited supra for the purpose of Insecticides Act, 1968. Prior to 1996 the Triacontanol was not notified as an insecticide and only vide Notification GSR No.1(E) dated 03/01/96, Triacontanol was brought under the purview of the Insecticides Act and included as an insecticide vide Sl.No.24 of the table annexed to the said notification. As per the product composition (as seen from the records) Vipul Booster contains the following:
1. Triacontanol - 0.1% w/w (min)
2. emulsifier (ethoxylated esters of fatty acids) - 0.5% w/w/ (max)
3. preservatives -0.1% w/w (max)
4. dematerialized aqua O.S.
5. Total - 100% w/w.
Thus going by the composition, the active ingredient of the product is Triacontanol, which gives the product its essential character. The other substances such as emulsifiers, preservatives and demineralized aqua contained in the product do not give the product its essential character Triacontanol by itself is an insecticide specified in the Schedule to the Insecticides Act, 1968. That being so, the product which contains the active ingredient will also have the characteristics of Triacontanol. Therefore, the essential nature of product is derived from the nature of the active ingredients, which is Triacontanol, an insecticide and this position is not in dispute at all.
6.3 In the certificate of registration for the said product issued by the Directorate of Plant protection, quarantine and storage, Ministry of Agriculture, Government of India, vide Registration No. CIR-136/2002(219) Triacontanol (EW) -135, it has been stated as follows:-
Certified that the insecticide/herbicide/ fungicide/rodenticide - Triacontanol 0.1% E.W for indigenous manufacture - has been registered under Section 9 (3b) of the Act. It is further stated that technical/material should have the chemical composition as indicated below:-
i) Triacontanol A.I - 0.1% w/w (1000 ppm) min.
ii) Emulsifiers (Ethoxylated esters of fatty acids) 0.5% w/w (max)
iii) Preservatives (Esters of benzoic acid) - 0.1% w/w (max)
iv) Demineralised Aqua - Q.S.
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100.0% w/w
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6.4 In the conditions relating to packing, specified in the registration certificate issued to the appellant, it has been stated as follows:-
(viii) The insecticide shall be packed in the containers of such size as specified by the registration committee.
(ix) Packaging specifications shall conform to the standard of specification submitted to the registration committee for its approval. The insecticide shall further conform to ISI specification on requirements for package of pesticides and as and when the same are formulated the sample package/containing the label thereby and the leaflet accompanying therewith are to be submitted to the registration committee and also to the licensing officials of the concerned state/Union Territory before marketing the product but not later than three months from the date of issue of this certificate or within such further time as may be extended by the registration committee on sufficient cause being shown.
(x) A copy, each of approved label and leaflet is enclosed in English and Hindi. No change, addition, alteration, modification or deletion with respect to the inscription on the label/leaflets shall be done without the prior approval of the registration committee. Copies of the labels and leaflets is approved in English and Hindi shall also be printed in regional languages of the area where the product is likely to be marketed and the same shall accompany the insecticide package as required under rule 19 (7) of the Insecticides Rules, 1975.
The labels and leaflets shall be printed by using letters that are bold enough for a man of ordinary/normal vision to read them without any external help. 6.5 In the approved leaflet, which is available in the records, it is written as follows:-
Recommendation for use: Triacontanol EW 0.1% a Plant Growth Promoter to increase the yield of crops like cotton, chilies, tomato, rice and groundnut.
Storage: The package containing the formulated grade insecticide should be stored in original containers in separate room or almirah under lock and key, away from the reach of children, food stuffs, animal feeds and other articles and keep in cool and dry place. The premises for storage should be well built, well lit, sufficient in dimension and well ventilated.
Disposal of empty containers: The empty containers should never be reused and should be destroyed and buried in a safe place. Dispose off packages or surplus material and washings in safe manner so as to prevent environmental and water pollution.
Precaution: Avoid contact with skin, eyes and mouth. Wash the affected areas before eating, drinking or smoking. Avoid contamination of environment and water.
Symptoms of poisoning: Eyes and skin irritation, nausea, headache may occur. Fist aid: In case of accidental ingestion give 1-2 glass of water. Do not induce vomiting. Contact a doctor. In case of skin contact toxicity is not likely but wash skin thoroughly with soap and water. Remove contaminated clothing and shoes. In case of splashes in the eyes, hold eyes open and flush immediately with clean running water for at least 15 minutes. See a doctor if irritation persist.
Drug therapy/antidotes: Antidote not known. Treat symptomatically. Read enclosed leaflet carefully before use.
6.6 Similarly, in the approved label, the product is described as-
Triacontanol 0.1% w/w (1000 ppm) min.
Godrej VIPUL Booster Plant Growth Promoter There is also a caution that the formulated grade insecticide should be stored in original containers in separate room or almirah under lock and key, away from the reach of children. Approval of the label and the packages are in terms of the provisions of the Insecticide Act and the statutory warning has also been indicated in the packages and the labels in terms of the provisions of said Insecticide Act. Even on the label which is affixed on the container, the above details are indicated along with statutory warning and the product is described as plant growth promoter for bumber yield of cotton, taur, tea, soyabean, mango, etc.
7. There is no dispute about the fact that Triacontanol is the active ingredient of the product under consideration and Triacontanol is an insecticide. The other ingredients are only emulsifiers, preservatives and demineralized water. Therefore we need to know what is the meaning of the term active ingredient.
7.1 According to Wikipedia, An Active Ingredient (AI) is the substance in a pharmaceutical drug or a pesticide that is biologically active. It is further stated that the biological activity of a pesticide, be it a chemical or biological nature, is determined by its active ingredient (AI- also called active substance). Pesticide products very rarely consists of pure technical material. The AI is usually formulated with other materials and this is the product as sold, but it may be further diluted in use. Formulation improves the properties of a chemical for handling, storage, application and may influence effectiveness and safety. 7.2 Thus it is the active ingredient which imparts the properties to the product. Therefore, any preparation wherein Triacontanol is the active ingredient has to necessarily have the characteristic of Triacontanol, which is an insecticide. That is the reason why under the Insecticides Act not only Triacontanol is included but also the preparations containing Triacontanol. Thus the composition of the product matters a lot in determining the classification, especially with respect to the active ingredient in the product. From that perspective it would appear that the product Vipul Booster which contains Triacontanol has to be a insecticidal preparation and not something else.
7.3 In the case of UOI Vs. Vicco Laboratories 2007 (218) ELT 647 (SC) while considering the classification of Vicco Turmeric cream under the central excise tariff, the Honble apex Court came to the conclusion that the essential character of medicine and the primary function of the medicine is derived from the active ingredients contained therein and it has certainly a bearing on the determination of the classification under the Act. The same principle was applied by the Honble apex Court in the case of Amrutanjan Ltd., Vs. CCE 1995 (77) ELT 500 (SC). Even in the case of Naturalle Health Products (P) Ltd., 2003 (158) ELT 257 (SC, while considering the classification of Vicks medicated cough drops and Vicks vaporub throat drops, the apex Court held that since the active ingredients contained in these products are pudhina arka, which has medical properties as per the Ayurvedic texts, the product has to be classified as an Ayurvedic medicine and not as a allopathic medicine. Applying the ratio of these judgments to the facts case under consideration, the classification of Vipul booster, which is claimed to be a plant growth promoter and which has its active ingredient Triacontanol (which is an insecticide) has to be under the category of insecticides falling under heading No.3808.10 of the central excise tariff and we hold accordingly.
7.4 The appellants have contended that as per the affidavits given by the farmers and dealers, the experts opinion on the subject matter and also as per the scientific literature, the use of Triacontanol is as a Plant Growth Promoter, which position has not been disputed by the department; therefore, the product merits classification under the category of Plant Growth Regulator. It has also been stated that Vipul Booster, which contains Triacontanol has been classified as a plant growth regulator as the same is capable of only regulating the growth of a plant and not capable of killing insects. Therefore, product is not an insecticide but a plant growth promoter. It is intended to be used to improve the plant growth in order to get more crop yield. In the affidavits filed by the farmers, which is available on record, the deponents therein have stated that they have been using Vipul Booster as an excellent plant growth promoter for getting higher crop yield. Therefore, the product should be considered as a Plant Growth Regulator in terms of the usage of the product as certified by the people who are using the product. However, there is a fallacy in this argument. A product, especially chemicals, can have multiple uses. For example, many medicinal products have applications as cosmetics or toilet preparations but merely because they have usage as cosmetics or toilet preparations, can it be held that they are liable to classification under cosmetics and toilet preparation and not as medicines? This was the issue in the case of Sujanil Chemo Industries heavily relied upon by the appellants. The question which arose for consideration in that case was whether a product by name Licel, which is used for the purpose of killing lice on the human head/hair should be classified as insecticide falling in heading No. 3808.10 or as a medicine falling under heading No. 3003.10. The Honble apex Court in that case held that the product has to be classified under heading Nos. 3003 or 3004 as medicaments, in view of the fact that the product has prophylactic and therapeutic properties. The apex Court also took into the consideration the fact that Chapter note 1 (c) of Chapter 38 specifically provided that Chapter 38 would not cover medicaments under heading No.3003 or 3004 and Chapter 30 defined medicaments, inter alia, as a product comprising of two or more constituents which have been mixed or compounded together for therapeutic or prophylactic use. Thus, even though, in normal parlance, a product may be considered to be an insecticide, if that product has any therapeutic and prophylactic property, then for purposes of classification that product cannot fall under chapter 38. In the instant case, there are no such issues as far as Triacontanol is concerned. There is no specific exclusion of Triacontanol or its preparation from the category of insecticides falling under heading No. 3008.10 and for its classification under heading No. 3008.20 as a Plant Growth Regulator.
7.5 In the pre-amble to the Insecticides Act, 1968 (46 of 1968), it is stated as follows:-
An Act to regulate the import, manufacture, sale, transport, distribution and use of insecticides with a view to prevent risk to human beings or animals, and for matters connected therewith Thus the Act regulates not only manufacture or import of insecticides, but also sale, transport, distribution and use. In other words, the marketing of the product and the use of the product is completely regulated by the Insecticides Act. That is the reason why there are stipulations regarding labeling, packaging, storage, etc. in respect of the product. Once the entire gamut of operations from manufacture to ultimate use are governed by the statutory provisions relating to insecticides, can it be said that the usage of the product is different and it is not known in the market not as an insecticide but something else ? In our view such a claim is illogical and contrary to statutory provisions. From this point of view, we do not find any substance in the appellants argument that the product is known as a plant growth promoter and not as an insecticide among the people who use it. In view of this, the documents submitted by the appellant by way of affidavits from farmers or dealers or expert opinion from scientists have no evidentiary value at all because by law the product has been deemed to be an insecticide in public interest not only for the purpose of its manufacture but also for the purposes of sale, transportation, distribution and use. Therefore, in the absence of any definition of insecticides under the Central Excise Act, its classification under the Insecticides Act has definitely a strong bearing and relevance for its classification under the Central Excise Tariff unless its classification is specifically excluded from the category of insecticides either by way of Section notes or Chapter Notes, which is not the case in the case under consideration.
7.6 In all the literature and labels relating to the product, the appellant has declared the product to be a Plant Growth Promoter and not as a Plant Growth Regulator. There is a substantial difference between a Plant Growth Promoter on the one hand and Plant Growth Regulator on the other. In the case of Northern Minerals Ltd., Vs. CCE, New Delhi 2001 (131) ELT 355 (Tri-Del), this Tribunal had occasion to examine the difference between a Plant Growth Promoter and a Plant Growth Regulator. The Tribunal observed in the said case that Plant Growth Regulator is a natural or synthetic compound, other than nutrients, which can inhibit, promote or otherwise alter physiological processes in plants, whereas a plant growth promoter only promotes plant growth and would not inhibit it. Accordingly, they held that a plant growth promoter cannot be considered as a plant growth regulator. The said conclusion was derived by this Tribunal based on the HSN explanatory notes and also based on the technical literature on the subject, namely, Kirk-Othmer Encyclopedia of Chemical Technology, Plant Physiology by Robert M Devlin & Francis H Witham and J.C. Johnsons Plant Growth Regulators and Herbicide Antagonists Recent Advances. Based on the technical literature and the HSN explanatory notes, this Tribunal held that plant growth promoter and plant growth regulator are distinct and different and they cannot be classified under the same heading in the Central Excise tariff. The said decision of the Tribunal was also upheld by the apex Court in the same case reported in 2003 (156) ELT A161 (SC). In the labels affixed on the product and the various affidavits submitted by the appellant, it is clear that the product Vipul Booster is used as a plant growth promoter. Therefore, it is distinct and different from the plant growth regulator specified in the Central Excise tariff falling under heading 3808.20 and, therefore, the appellants claim that their product has to be categorized as plant growth regulator does not have much force or merit.
7.7 There is also a claim that Vipul Booster, which contains Triacontanol as the active ingredient cannot kill insecticides or pests and, hence, cannot be classified as an insecticide. There is no requirement in the excise tariff that an insecticide should necessarily kill. In the Aero Industries case reported in 2006 ELT (204) 61 (Tri-Mum), this Tribunal had held that there cannot be any distinction between insecticides that kill and insecticides that repel but does not kill. In the said case, the issue related to classification of a product wherein the active ingredient was allethrin 0.5% (which is an insecticide) and it was held that the product is an insecticide. So this claim has no relevance or bearing for classification of the product as an insecticide.
7.8 It is an admitted fact that Triacontanol has been notified as an insecticide and all the procedures prescribed under the Insecticide Act, 1968 and Rules made there under are applicable not only to Triacontanol but also to the preparations containing Triacontanol and the appellant has been complying with those provisions of the Insecticides Act, 1968. Section 38 of the Insecticide Act specifically provides that the provisions of said Act will not apply to any substance specified or included in the schedule or preparation containing any one or more substances, if such substance or preparation is intended for the purpose other than preventing, destroying, repelling or mitigating any insects, rodents, fungi, weeds and other forms of plant or animal life not useful to human beings. If the appellants contention is that Vipul Booster is not used or capable of being used as an insecticide, they could have claimed exemption under Section 38 of the Insecticides Act and they need not have followed any of the procedures prescribed under the said Act or the Rules made there under. However, they have not exercised this option available under the law. This clearly shows that the appellants, by their very conduct, have agreed that their product is an insecticide coming within the purview of the Insecticides Act. If they did not want to market their product as an insecticide at all they should have sought exemption under Section 38 of the said Act rather than following the procedures, such as, registration, labeling, packing, providing statutory warning, etc. applicable to insecticides and preparations thereof in respect of said product. So from this angle also, it is clear that the product under consideration merits classification as an insecticide and not as a plant growth regulator.
7.9 The appellants have also contended that a number of products such as boric acid, copper sulphate, sodium chlorate, gibberellic acid etc. (which are insecticides) are classified not under heading No. 3808.10 but under various other headings in Chapter 28 or 38 of the excise tariff. However, it has to be borne in mind that in those cases there was a specific heading covering those products and, therefore, the classification of the product was made under those heads, as per the rules of interpretation of the tariff. In the case of Triacontanol or preparations thereof there is no such specific heading covering the product and, therefore, taking into account the essential nature of the product, it has to be classified as falling under the category of insecticides only and not as anything else.
7.10 The appellants have relied upon a number of judicial pronouncements in support of their various contentions. We, however, find that the appellants have not made out any strong case in their favour to show that the facts of those case were similar or identical to the facts involved in the present case. On the contrary, we find that the facts of the present case are substantially different from the cases relied upon by the appellant. In view of this position, we are unable to agree with the appellant that the case laws cited by them have any bearing or relevance.
7.11 In the light of the above, we are of the view that the product Vipul Booster, which has as its active ingredient, Triacontanol, which is an insecticide merits classification as an insecticide under heading No. 3808.10 of the Central Excise tariff and not as a plant growth regulator under heading No. 3808.20. Since heading No. 3808.10 has been notified under section 4A of the central excise act, its valuation for the purpose of charging excise duty has to be done under the provisions of the said section and we hold accordingly.
8. The next issue for consideration is whether there is any suppression or willful mis-statement of facts on the part of the assessee with an intent to evade duty. The allegation in the show cause notice is that the appellant failed to bring to the notice of the department the fact that Triacontanol is an insecticide under the provisions of the Insecticides Act, 1968, which is a material fact to decide the classification of the said product and they also failed to submit to the department copies of the certificate of registration obtained under the Insecticides Act. In view of these omissions, they have suppressed the facts and willfully mis-stated the facts with an intent to evade duty.
8.1 The composition of product was known to the department right from 1989 onwards. The product Triacontanol, which is the active ingredient was brought under the Insecticide Act, 1968 vide gazette notification dated 3-1-1996. Thereafter, the appellants took registration under the said Act and started complying with the procedures specified thereunder. Merely because they did not inform the department of their product registration under the Insecticides Act, 1968, it cannot be held that they have suppressed the facts with an intent to evade payment of duty. So long as the constitution of product was known to the department and the notification of Triacontanol under the purview of the Insecticides Act was made under a Gazette notification, which is a public document, it was the responsibility of the department to take note of the changes in the law and reclassify the product accordingly. As has been held in a number of judicial pronouncements which have been relied upon by the appellant as mentioned in paras 3.6 to 3.8 (supra), mere omission to inform the department of the registration of the product under the Insecticides Act, 1968 can not be held as suppression or willful mis-statement of facts with an intent to evade duty. The department has not adduced any evidence to prove the charge of suppression on the part of the appellant. Therefore, no suppression of facts can be alleged in the instant case and hence the demand of duty invoking the extended period of time has to be necessarily set aside.
9. As regards the imposition of penalty equal to the duty demanded, once there is no suppression, there cannot be any imposition of penalty under Section 11AC of the Central Excise Act. Further, the issue relates to classification of the product where different views are possible and it is an accepted legal position that imposition of penalty is not warranted in disputes relating to classification.
10. In sum, we hold that the product Vipul Booster manufactured by the appellant, which has Triacontanol 0.1% w/w as its active ingredient is classifiable under heading No.3808.10 as an insecticide under the Central Excise tariff. Accordingly, the valuation of the product has to be done in accordance with the provisions of Section 4A of the Central Excise Act, 1944. However, as the department has failed to prove any suppression or willful mis-statement of facts with an intent to evade duty on the part of the appellant, the demand of duty has to be restricted to the normal period of one year from the relevant date as per the provisions of section 11A of the Central Excise Act, 1944. In the instant case the show cause notice has been issued on 28th December, 2004 demanding differential excise duty for the period from March, 2003 to September, 2004. Therefore, the duty demand for the period from March, 2003 to November, 2003 will be beyond the normal period of one year and is liable to be set aside and we do so. Consequential interest liability under section 11AB of the said Act will also accrue. As the matter essentially relates to a classification dispute, imposition of penalty is not warranted and accordingly we set aside the same. The appeal is disposed of in the above terms.
(Pronounced in Court on ) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 2