Custom, Excise & Service Tax Tribunal
E I Dupont India Pvt Ltd vs Ahmedabad on 11 October, 2018
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Appeal No. C/10879/2016-DB
[Arising out of OIA-AHD-CUSTM-000-APP-001-16-17. dated 06.04.2016 passed by
Commissioner of CUSTOMS-AHMEDABAD]
M/s E I Dupont India P Ltd Appellant
Vs
C.C., - Ahmedabad Respondent
Represented by:
For Appellant: Shri Saurabh Dixit (Advocate) For Respondent: Shri Sameer Chitkara (A.R.) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing/Decision:26.07.2018 Date of Hearing/Decision:11.10.2018 Final Order No. A/ 12147 /2018 Per: Raju
1. This appeal has been filed by M/s E I Dupont India Pvt. Ltd against demand of custom duty on the import of Rynaxypyr Tech which consist of compound namely Chlorantraniliprole (approx 93%) by change in classification claimed by the appellant under chapter heading 2933 39 90 to chapter heading 380891, by Revenue.
2. Ld. Counsel for the appellant pointed out that they had imported Rynaxypyr Tech which is essentially compound namely Chlorantraniliprole. The said compound is insecticide as per the Insecticide Act. However, in the Customs Tariff the same need to be classified as Organic chemicals falling under chapter heading 2933 39 90 as the same is essentially covered by the falling under that heading. He particularly relied on the decision of Tribunal in the case of M/s shakti Chemicals 2017 (357) ELT 522 (Tri.Mum) and in the case of M/s Parshwa
2|Page C/10879/2016-DB Associates 2017 (348) ELT 706 (Tri.Mum) to assert that even if the product is notified insecticide for the purpose of customs classification, the same would falling under chapter 29 as organic chemicals if the same consist of only as Pure Chemicals.
3. He further argued that chapter note 1(A)(2) of chapter 38 clearly prescribed as follows:
Notes:
1. This Chapter does not cover:
(a) Separate chemically defined elements or compounds with the exception of the following:
1) Artificial graphite (heading 3801);
2) Insecticides, rodenticides, fungicides, herbicides, anti-
spouting products and plant growth regulators, disinfectants and similar products, put up as described in heading 3808; He argued that the heading 38.08 covers only following items:
Tariff Description of goods Unit Rate of Duty Item Standard Preferential Areas (1) (2) (3) (4) (5) 3808 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and Similar products, put up in forms or packing for retail sale or as preparations or articles (for example, sulphur treated bands, wicks and candles, and fly-papers.
3.1) Ld. Counsel argued that only the items which are "put up in formation or packing for retail sale or as preparation or articles" would fall under heading 3808. He argued that in the instant case the items has been imported in bulk packing and is not in packing for retail sale. He also argued that what has been imported is Rynaxypyr Tech which not the articles. He also relied on the test report wherein it has been held that the item imported by them is not a preparation. He particularly relied on the report of joint director (Chem) dated 18.09.2015 wherein she has clarified as follows:
3|Page C/10879/2016-DB 1.1.1 Chlorantraniliprole (other name is Ryanaxypyr) is a pesticide (copy of the pesticide manual, is enclosed for your reference) 1.1.2 Chlorantraniliprole is a specified in schedule and placed at sr.
No. 764, covered under Insecticide Act, 1968 1.1.3 The pesticide under reference is covered under Schedule to Insecticide Act, 1968 1.1.4 It is not a preparation is a Technical Pesticide containing 93% purity. As per guideline of Registration, the product is registered for 93% minimum purity, in India.
1.1.5 The product chlorantraniliprole falls under Section 3 (e) , sub Section i and ii of the Insecticide Act, 1968 (Copy enclosed)
4. Ld. Counsel argued that apart from this opinion of joint director, there are other reports which have been all considered in the order in original and thereafter, the order in original concludes that the product imported is not a preparation but it is Chlorantraniliprole compound with Nitrogen and hydrogen items only. In this regard report was obtaining from institution of Pesticide Formulation Technology dated 29.04.2014 wherein following has been stated:
Test Method used: LC-MS/MS S.NO Test Quarry Results 1 Whether the sample confirm to Sample found to have the describtion"Rynaxypyr the molecule present in Tech" OR NOT WHETHER the Rynaxypyr i.e. item is an organic chemical of chlorantraniliprole 2 the type specified under CTSH organic chemical is 2933 (Heterocyclic compound more likely to be of type with N atom) or of the type specified under CTSH mentioned under CTSH 3808 2933 (Heterocyclic (Pesticides, Insecticide etc.) compound with N atom) chlorantraniliprole Technical.
5. In other report relied to his all test facility, Manager of International Institute of Biotechnology And Toxicology wherein, following has been clarified:
1. QUERY: Whether the sample conform to the description "RYNAXYPYR TECH" OR NOT reply:
The sample sent by Deputy Commissioner of Customs, Ahmedabad was analysed Cholorantraniliprole analytical standard by Liquid, Chromatography Mass Spectroscopy, a separation and characterization analytical test which unequivocally confirmed the test item (Rynaxypyr technical) is chlorantraniliprole technical. I would like to inform that Rynaxypyr is the trade name used for the chemical Chlorantraniliprole. The conformity and the characterization of the chemical was conducted by external standard method. A peak retention index in the High Performance
4|Page C/10879/2016-DB Liquid Chromatographic separation clearly indicates the product is Chlorantraniliprole and the molecular mass obtained form the Mass specific detector matches with the molecular weigh of the test item referred in your letter as Rynaxypyr Technical.
6. Ld. Counsel asserted that the product consists of only the compound of Chlorantraniliprole and thus is classifiable under chapter 29, though it is insecticide notified under Insecticide Act. He argued that the items Rynaxypyr tech is separate chemically defined organic compounds namely, Chlorantraniliprole and thus in terms of chapter note 1A to chapter 29 it will be classifiable under chapter 29 only. He further relied on explanatory notes to chapter 29 wherein following has been observed:
Notes:
"1. Expect where the context otherwise requires, the heading of this chapter apply only to:
(a). Separate chemically defined organic compounds, whether or not containing impurities;"
Relating to exclusion from chapter 29 of separate chemically defined organic compounds (chapter note 2 against entry 2 (h) following has been mention:
(2) Certain other separate chemically defined organic products, which would otherwise have been classified in Chapter 29, may be excluded when put up in certain forms, or if they have been subjected to certain treatments which leave their chemical composition unchanged, Examples are:
(h) Disinfectants, insecticides, etc, put up as described in heading 38.08.
6.1) He pointed out that the explanatory notes also support his argument that only the products which are put up as described in heading 38.08 would be classifiable under chapter 38.
7. Ld. Counsel also relied on the decision of Hon'ble Apex Court in case of Polyglass Acrylic Mfg. Co. Ltd. Vs. CC, Vishakhapatnam 2003 (153) ELT 276 (SC) wherein it has held that the report of export cannot be simply passed aside. He also relied on the decision of Hon'ble Apex Court in case of Reliance Cellulose Products Ltd. Vs. Collector of C.Ex,
5|Page C/10879/2016-DB Hyderabad 1997 (93) ELT 646 (SC) wherein it has held that opinion of Chief Chemist and Chief Examiner of the Government cannot be lightly pressed aside on the basis of opinion on same private obtained by the appellant. He also relied on the decision of Sunint Auto Pvt. Ltd Vs CC, New Delhi 2005 (183) ELT 209 (Tri.Del) wherein it has held that export opinion cannot be described on the basis of personal opinion. He relied on the decision of tribunal in the case of Chemetal Rai India Ltd Vs. CCE, Mumbai 2006 (200) ELT 569 (Tri.Mum) wherein it has held that classify done on the basis of its report receive from Deputy Chief Chemist which is not disputed than the opinion of Deputy Chief Chemist cannot be disregarded without challenging the same.
8. Ld. AR produced a lot of literature relating to the items from the internet to assert that the items Rynaxypyr Tech and Chlorantraniliprole are insecticide. He also pointed out that the same have been notified as insecticide under the only Insecticide Act.
9. Ld. AR relied on the decision of decision of Hon'ble Apex Court in case of Union of India Vs. Pesticides Mfg & Formulators Association of India 2002 (146) ELT 19 (SC) wherein it has held that pesticides technology would be classifiable under heading 38.08 of Central Excise Tariff Act, 1985 and not under chapter 28 and 29. He argued that though the tariff entry of central excise tariff at the material time was not the same as the tariff entry of customs at the time of import but the decision of Hon'ble Apex Court applies to the customs act as well. He pointed out that the said decision has been followed in number of cases. He particularly cited following judgments:
Hoechst Schering Agrevo Ltd Vs. CCE, Surat-I 2004 (169) ELT 289 (Tri-Mum) Krypto (New Chemi Inds Ltd) Vs. CCE, Mumbai 2004 (1710 ELT 278 (Tri.Mum) CCE, Ahmedabad- Vs. Dhariyal Chemicals 2014 (3090 ELT 727 (Tri.Mum)
6|Page C/10879/2016-DB
10. We have gone through rival submission. We find that the dispute is if the product imported by the appellant "Rynaxypyr" is classifiable under chapter 29 as separately defined chemicals under chapter 38 as pesticides. The relevant chapter notes are as follows:
CHAPTER 29-Customs Tariff Organic chemicals NOTES :
1. Except where the context otherwise requires, the headings of this Chapter apply only to :
a) separate chemically defined organic compounds, whether or not containing impurities;
b) mixtures of two or more isomers of the same organic compound (whether or not containing impurities), except mixtures of acyclic hydrocarbon isomers (other than stereoisomers), whether or not saturated (Chapter 27);
c) the products of headings 2936 to 2939 or the sugar ethers, sugar acetals and sugar esters, and their salts, of heading 2940, or the products of heading 2941, whether or not chemically defined; (d) the products mentioned in (a), (b) or
(c) above dissolved in water;
d) the products mentioned in (a), (b) or (c) above dissolved in other solvents provided that the solution constitutes a normal and necessary method of putting up these products adopted solely for reasons of safety or for transport and that the solvent does not render the product particularly suitable for specific use rather than for general use;
e) the products mentioned in (a), (b), (c), (d) or (e) above with an added stabiliser (including an anti-caking agent) necessary for their preservation or transport;
f) the products mentioned in (a), (b), (c), (d), (e) or (f) above with an added anti-dusting agent or a colouring or odoriferous substance added to facilitate their identification or for safety reasons, provided that the additions do not render the product particularly suitable for specific use rather than for general use; (h) the following products, diluted to standard strengths, for the production of azo dye: diazonium salts, couplers used for these salts and diazotisable amines and their salts.
Chapter 38- Customs Tariff Miscellaneous chemical products Notes:
1. This Chapter does not cover:
(a) Separate chemically defined elements or compounds with the exemption of the following:
(1) Artificial graphite (heading 3801);
(2) Insecticides, rodenticides, fungicides, herbicides, anti-
spouting products and plant growth regulators, disinfectants and similar products, put up as described in heading 3808;
(3) Insecticides, rodenticides, fungicides, herbicides, anti-
sprouting products and plant-growth regulators, disinfectants and Similar products, put up in fire- extinguishing grenades (heading 3813);
(4) Certified reference materials specified in Note 2 below;
7|Page C/10879/2016-DB (5) Products specified in Note 3(a) or 3(c) below; The chapter heading 3808 of Customs Tariff reads as under:
Tariff Description of goods Unit Rate of Duty Item Standard Preferential Areas (1) (2) (3) (4) (5) 3808 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and Similar products, put up in forms or packing for retail sale or as preparations or articles (for example, sulphur treated bands, wicks and candles, and fly-papers.
The relevant HSN chapter rules to chapter 29 and 38 reads as under:
HSN- Chapter 29 Organic Chemicals Notes.
"1. - Except where the context otherwise requires, the heading of this Chapter apply only to:
(a) Separate chemically defined organic compounds, whether or not containing impurities;"
(D) Exclusion from Chapter 29 of certain separate Chemically defined organic compounds (Chapter Note 2) " 2. Certain other separate chemically defined organic products, which would otherwise have been classified in Chapter 29, may be excluded when put up in certain forms, or if they have been subjected to certain treatments which leave their chemical composition unchanged, Examples are:"
(a) -------------------
(b) ------------------------
(c) --------------------
(d) --------------------
(e) --------------------
(f) --------------------
(g) ---------------------
(h) ----------------------
The HSN for the chapter 38 contains following:
HSN- Chapter 38 Miscellaneous Chemical Products Notes:
8|Page C/10879/2016-DB
"1. This Chapter does not cover:
(a) Separate chemically defined elements or compounds
with the exception of the following:
1) --------------------
2) Insecticides, rodenticides, fungicides,
herbicides, anti-spouting products and plant growth regulators, disinfectants and similar products, put up as described in heading 3808;"
GENERAL "38.08- Insecticides, rodenticides, fungicides, herbicides, anti-spouting products and plant growth regulators, disinfectants and similar products, put up in forms of packing for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles and fly-papers) (+)."
11. The impugned order essentially relies on the decision of Hon'ble Apex Court in the case of Union of India Vs. Pesticides MFG. & Formulators Association of India 2002 (146) ELT 19 (SC). It is seen that the decision of Hon'ble Apex Court in the said case was given while interpreted the Central Excise Tariff Act and not the Customs Tariff Act. Ld. Counsel has sought to distinguish the said decision of Hon'ble Apex Court on the ground that the said decision was influenced by chapter note 2 of chapter 38. For this assertion, he has relied on the para 9 & 10 of this decision. Para 9 & 10 of the order is reproduced below:
"9. It was to overcome the effect of the Tribunal‟s decision in Markfed Agro Chemicals that amendments were effected by the Finance Act, 1996 to Chapter 38 to incorporate statutorily the substance of the circular which had been struck down by the Tribunal. As far as the Chapter Notes were concerned Note 1 was left untouched but Note 2 was inserted which reads :
"In relation to products of heading No. 38.08, addition of chemicals and other ingredients like inert carriers or solvents, surface active, dispersing and stabilising agents, emulsifiers, wetting and dispersing agents, deodorant, masking agent, attractants and feeding stimulants to pesticidal chemicals in concentrated form, labelling or relabeling of containers intended for consumers and repacking from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumer shall amount to „manufacture‟."
10. Patently, Chapter Note 2 of Chapter 38 proceeds on the basis that TGP is covered by Chapter 38. Were it not so it was not necessary to provide that the addition of chemical pesticides and re- packing and labelling etc. of the product would amount to manufacture. The language in Chapter Note (2) that "addition of chemicals and other ingredients" to "products of heading No. 38.08"
and adoption of any other treatment to render the product marketable would amount to manufacture, plainly understood
9|Page C/10879/2016-DB means that (i) the product (without additives, or any treatment) as well as (ii) the product after administration of additives and (iii) the product after treatment for the purposes of retail sale were all but separately exigible to duty under the Chapter. The importance of the Chapter Notes in the matter of interpretation is manifest from Section 2(f)(ii) which defines „manufacture‟ to mean :"
He argued that no note similar to note 2 with the Central Excise Tariff is there in the Customs Tariff Act, 1975; therefore, the ratio of the decision of Hon'ble Apex Court cannot be applied in the instance case. An examination of the decision of Hon'ble Apex Court shows that the Apex Court has considered the Central Excise Tariff and the HSN notes relating to the said tariff entries. The said notes of Central Excise Tariff and Customs Tariff are identical except from chapter note 2 relating to concept of deemed manufacture. The Hon'ble Apex Court has examined all aspect before coming to the decision. It is seen that Hon'ble Apex Court has examined the rules of interpretation, the chapter notes & chapter heading and HSN notes in the said case as under:
"15. There is also substance in the submission of learned counsel for the respondent that classification of TGP, insecticides etc. in bulk form under Tariff Heading 38.08 would be in keeping with the Rules for interpretation of the Schedule to the 1985 Act.
The Rules in so far as they are relevant provide:
"2(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance."
3. When by application of sub-rule (b) of rule 2 or for any other reason, goods are prima facie, classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) .........
(c) When goods cannot be classified by reference to (a) or (b)
they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration."
10 | P a g e C/10879/2016-DB
22. The final position as it now stands is that Chapter Note 1(a)(2) and 2 of Chapter 38 read:
"1. This Chapter does not cover:
(a) Separate chemically defined elements or compounds with the exception of the following:
(1) ...............
(2) insecticides, rodenticides, fungicides, herbicides, anti-
sprouting products and plant-growth regulators, disinfectants and similar products, put up as described in Heading No. 38.08;
2 In relation to products of heading No. 38.08, addition of chemicals and other ingredients like inert carriers or solvents, surface active dispersing and stabilising agents, emulsifiers, wetting and dispersing agents, deodorant, masking agent, attractants and feeding stimulants to pesticidal chemicals in concentrated form, labelling or relabelling of containers intended for consumers and repacking from bulk pack to retail packs or the adoption or any other treatment to render the product marketable to the consumer shall amount to manufacture".
Tariff Heading 38.08 now reads as:
"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)"
25.The HS of Commodity classification which was developed by the World Customs Organisation, Brussels was adopted by India also in the ITC (HS) Classification of Export and Import items, 2002-2007 which was issued by the Government under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 read with paragraph 2.1 of the Export and Import Policy, 2002-2007. The ITC (HS) like the Schedule to the 1985 Act, also contains several chapters which correspond exactly with the Schedule to the 1985 Act at least as far as the relevant parts of Chapter 38 are concerned. Chapter Note 1(a)(2) and the Heading 38.08 of the ITC (HS) are identical with the Schedule to the 1985 Act. In the ITC (HS), under the several sub-headings to Heading 38.08, the different forms of insecticides, pesticides etc. have been provided for from which it is clear that insecticides etc. in their concentrated bulk forms are covered by the Heading 38.08 at least for the purposes of the Import/Export Policy. For example, sub-heading 3808.10.11 mentions „Aldrin‟ as a form of insecticide. Against that sub-heading, it is provided that it is freely importable/exportable "if registered and not prohibited for import under Insecticides Act, 1968 and formulations thereof". Similarly, 3808.90.10 provides for „pesticides, not elsewhere specified‟. It is treated as a free item under the policy "if registered and not prohibited for import under the insecticides Act, 1968 and formulations thereof." Undeniably insecticides, pesticides etc. in whatever form are covered by the Insecticides Act. The description demonstrates that bulk concentrates and formulations are covered by the sub-heading „Aldrin‟. The use of the same words in the Tariff Heading in the Schedule to the 1985 Act as has been used for the purposes of the Import Trade Control Policy is an additional reason for holding that insecticides, pesticides concentrates in bulk forms are includible within the Tariff Heading. (See Dunlop India Ltd. v. Union of India and Others 1976 (2) SCC 241.) 11 | P a g e C/10879/2016-DB From the above it is apparent that Hon'ble Apex Court has examined the issue from all aspects, contesting to the claim of Ld. Counsel.
12. He also argued that the decision of Hon'ble Apex Court is based on mistaken interpretation and word compound. He argued that compound is not mixture; he pointed out that the definition of compound and mixture as appearing in the chemical dictionary is as follows:
"Compound: A compound is a chemical species that is formed when two or more atoms join together chemically, with covalent or ionic bonds.
Mixture: combination of two or more substances which have been combined such that each substance retains its own chemical identity."
Ld. Counsel has relied on the definition of compound being wrongly interpreted by Hon'ble Apex Court. We find that in the oxford dictionary, the term compound is also defined as:
"A thing i.e. composed of two or more separate element; a mixture".
Thus when Hon'ble Apex Court describes a compound as mixture, it does not result in any error.
13. In view of above, we find that there are no grounds to deviate from the decision of the Hon'ble Apex Court in case of Pesticide MFG. & Formulators Association of India (Supra). Relying on the aforementioned decision, the appeal is dismissed.
(Pronounced in the open court on 11.10.2018) (Raju) (Ramesh Nair) Member (Technical) Member (Judicial) Seema