Custom, Excise & Service Tax Tribunal
Goldmuhor Agrochem & Feeds Ltd. vs Commissioner,Central Goods And ... on 29 July, 2022
1 E/1325/2012 & E/85069/2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 1325 of 2012
(Arising out of Order-in-Original No. 10/CEX/COMMR/KOP/2012 dated
28.03.2012 passed by the Commissioner of Central Excise, Kolhapur)
M/s Goldmuhor Agrochem & Feeds Ltd. .... Appellant
(Earlier know as Bahar Agrochem & Feeds Ltd.)
E-24, MIDC, Lote Parshuram, Taluka - Khed,
Ratnagiri, Maharashtra
Versus
Commissioner of Central Excise, Kolhapur .... Respondent
Vasant Plaza Commercial Complex, 4th & 5th Floor, Rajaram Road, Bagal Chowk, Kolhapur - 416001 WITH Excise Appeal No. 85069 of 2013 (Arising out of Order-in-Original No. 14/CEX/COMMR/KOP/2012 dated 18.09.2012 passed by the Commissioner of Central Excise, Kolhapur) M/s Goldmuhor Agrochem & Feeds Ltd. .... Appellant E-24, MIDC, Lote Parshuram, Taluka - Khed, Ratnagiri, Maharashtra Versus Commissioner of Central Excise, Kolhapur .... Respondent Vasant Plaza Commercial Complex, 4th & 5th Floor, Rajaram Road, Bagal Chowk, Kolhapur - 416001 Appearance:
Shri V. Sridharan, Sr. Advocate a/w Payal Nahar, Adv. for the Appellant Shri Sydney D'Silva, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. A/85667-85668/2022 Date of Hearing: 17.05.2022 Date of Decision: 29.07.2022 2 E/1325/2012 & E/85069/2013 Per: P. Anjani Kumar The appellants (M/s Goldmuhor Agro-chem & Feeds Ltd) are engaged in the manufacture of Fertilizers or Plant Growth Regulators; the appellants manufactured, inter alia, the product called "ZP-770 Kg." and classified the same as 'fertilizer' under CETH 3101; the Department disputed this classification and sought to classify the same as 'plant growth regulator' under CETH 3808. Two show-cause notices dated 28.01.2011 (covering the period November, 2006 to September, 2010) and show-cause notice dated 13.10.2011 (covering the period October, 2010 to June, 2011) were issued to the appellants and were confirmed vide impugned orders dated 28.03.2012 and 18.09.2012. The appellants are in appeal against these impugned orders.
2. Learned Counsel for the appellants submits that the SN proposing to re-classify the product Zymegold Plus as 'Plant Growth Regulator' under CTH 3808 whereas the Commissioner has dropped the allegations made in the SCN and proceeded to decide the classification on a different footing by invoking Rule 3(c) of General Interpretation Rules. He submits that the general rule for interpretation was never invoked in the show-cause notice to decide classification of the product Zymegold Plus; it is a settled principle of law that the adjudicating authority cannot go beyond the grounds specified in the SCN; as held in Ballarpur Industries Ltd. - 2007 (215) ELT 489 (SC) and Champdany Industries Ltd. - 2009 (241) ELT 481 (SC). The order passed beyond the scope of the show-cause notice is bad in law.
2.1 Learned Counsel for the appellants further submits that essential character of impugned part of Zymegold Plus is contributed by Seaweed Extract Powder, which is also classifiable under CETH 3101; Seaweed 3 E/1325/2012 & E/85069/2013 Extract Powder is of organic plant origin derived from the plants growing in the Sea. It comprises of proteins, amino acids and carbohydrates which are made up of plant nutrient elements like carbon, hydrogen, nitrogen, phosphorous, sulphur and oxygen; it was held in Leads Kem Vs. CCE - 2001 (134) ELT 294 (T) that a formulation based on seaweed extract powder is classifiable under CETH 3101 due to the fact that it contains growth promoting hormones like Gibberllins, auxins and cytokinins; he submits that the Tribunal has followed the above decision in the case of Jai Shree Rasayan Udyog Ltd. Vs. CCE - 2015 (316) ELT 338 (T). 2.2 Learned Counsel further submits that the impugned Zymegold Plus is not plant growth regulator; plant growth regulator stimulates plant growth without providing any nutrients to the plant; plant growth regulator is like a tonic which promotes or inhabits growth by affecting the structure at the physiological level; in contrast, fertilizers provide the necessary nutrients; the impugned product is plant origin based product and provides nutrient for growing the plants in a healthy and productive manner; the test report of the independent laboratory confirms the same. The show-cause notice is silent whether the impugned product alters the physiological properties of the plants; there is no evidence to show that the product Zymegold Plus is promoting or inhibiting growth by affecting the structure at the physiological level. He submits that only case of Revenue is that as per the Chemical Examiner's report, the product contains 6-BA, 4-CPA which are plant growth regulator; in this regard it is pertinent to note that test report dated 03.09.2010 issued by CRCL, New Delhi shows that none of plant growth regulator was detected in the sample; the said test report states that the impugned product contains 6- BA, 4-CPA merely on the basis of product write up provided by the appellants; report given by CRCL, New Delhi is inconclusive that does not 4 E/1325/2012 & E/85069/2013 indicate the quantitative percentage of various ingredients and therefore, the same is not reliable. CESTAT in the case of Safex Chemical India Ltd. - 2017 (7) GSTL 234 (T) held that it cannot be ruled out that ingredients like Auxin and Cytokinins may be present in small traces in the impugned samples and the same can be found in the fertilizers also. 2.3 Learned Counsel in addition submits that it is well settled that plant growth regular excludes nutrients as classified by CBEC in Circular No. 1022/10/2016 dated 6.4.2016; Hon'ble Supreme Court in Karnataka Agro Chemicals - 2008 (227) ELT 12 (SC) held that plant growth regulator are organic compounds other than nutrients. He submits that HSN Explanatory Notes of Chapter 38 defines that 'Plant Growth Regulator 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'; the show-cause notice and Order-in-Original admitted that the impugned Zymegold Plus contains nutrients like seaweed extract, therefore, in view of the Board's Circular cited above, the product Zymegold Plus being a nutrient is excluded from the definition of plant growth regulators. He relies on the following cases: -
(i) Northern Minerals Ltd. Vs. CCE - 2001 (131) ELT 355 (T)
(ii) CCE Vs. Chemcel Bio-Tech Ltd. - 2007 (211) ELT 414 (T)
(iii) Aries Agrovet Inds. Ltd. - 2017-TIOL-2635-CESTAT-HYD
(iv) Aries Agrovet Inds. Ltd. - 2018 (6) TMI 1070-CESTAT-MUM 2.4 Learned Counsel for the appellants submits that the Department has relied upon the test report of Chemical Examiner, wherein it is stated that Zymegold Plus contains 6-BA, 4-CPA, which are plant hormones; he submits that these ingredients were being added by the appellant prior to 03.07.2010 and that to in miniscule proportion, which could not give 5 E/1325/2012 & E/85069/2013 essential characters of the plant growth regulator to the Zymegold Plus;
research conducted worldwide and results thereof show that to be classified as plant growth regulator and 6-BA, 4-CPA should be at least 100 times the existing levels; the test report dated 03.09.2010 shows that none of the plant growth regulator was detected in sample of Zymegold Plus relied by them; it is pertinent to note that even the impugned order observes that 6-BA, 4-CPA were added in the product prior to July, 2010 in small proportion and their removal from the product w.e.f. 03.07.2010 does not in any manner affect the nature and use of the product; Zymegold Plus contains nutrient as well as micro-nutrients only; essential character as given by the nutrients only; therefore, classification under Chapter 38 by relying on Rule 3(c) of General Interpretation Rules is perverse, as the same is not applicable in the facts of the present case. He submits that the learned adjudicating authority relied the test reports showing the presence of 6-BA, 4-CPA for the period before 01.07.2010 for which no samples were drawn; the findings are legally not tenable in view of the judgment in the case of Shalimar Paints Ltd. Vs. CCE - 2001 (134) ELT 285 (T).
2.5 Learned Counsel for the appellants further submits that in the appellant's own case for the previous period, the Department proposed to re-classify the product Zymegold Plus as plant growth regulator, whereas the appellant classified the same as fertilizer; CESTAT vide Final Order No. A/87962/2018 dated 06.01.2018 held that since the product Zymegold plus contains nitrogen and chlorine; the same would be classifiable as 'fertilizer' and not plant growth regulator. He submits that the composition of the impugned product is not changed; therefore, the decision of the Tribunal is binding. He submits that in the case of Northern Minerals Ltd. Vs. CCE - 2001 (131) ELT 355 (T), the Tribunal held that the product 6 E/1325/2012 & E/85069/2013 'Dhanzyme' is classifiable as fertilizer for the reason that it can only promoting the growth of plant and cannot inhibit the same; impugned product is based on seaweed extract and cannot inhibit the same; the impugned product is based on the seaweed extract and Hydrolyzed protein complex and both of which are classifiable under CETH 3101; the above said judgment in the case of Northern Minerals is upheld by Hon'ble Supreme Court as reported in 2003 (156) ELT A161 (SC). Lastly, he further submits that even if the product is classified under CETH 3105, it was eligible for exemption under Notification 4/2006-CE dated 1.3.2006. Learned Counsel submits that appellants vide letter dated 31.10.2006 informed the ingredients and classification of the impugned product; there was no fraud attempt with intent to evade payment of excise duty as the facts are very much in the knowledge of the Department in 2006 itself and the SCN cannot be issued for extended period. Therefore, the major portion of the demand does not sustain. He relies on Anand Nishikawa Co. Ltd. Vs. CCE - 2005 (188) ELT 149 (SC) and Yashanand Filaments Pvt. Ltd. Vs. CCE - 2011 (268) ELT 234 (T). He also submits that the appellants were under bona fide belief that they have rightly classified the product Zymegold Plus during the period of dispute; therefore, no elements of fraud, collusion, willful mis-statement or suppression of facts are contravention of any provision with intent to evade payment of duty can be alleged.
3. Learned AR for the Revenue reiterates the findings of the impugned order.
4. Heard both sides and perused the records of the case.
5. It is the case of the appellant that the product manufactured by them i.e. Zymegold Plus - fertilizer falling under CETH 3101 of Central 7 E/1325/2012 & E/85069/2013 Excise Tariff Act, 1985 whereas the impugned order has classified them under Chapter 38 relying on Rule 3(c) of General Interpretation Rules of the Tariff Act. The appellants' argument is based mainly on the following points: -
(i) The impugned product is a seaweed extract and consists about 27% of the same. It does not inhibit or promote the plant growth and, therefore, it cannot be called a 'plant growth regulator'.
(ii) The Interpretation Rule 3(c) was not invoked in the show-
cause notice and hence, the learned Commissioner's order is beyond the scope of the show-cause notice and in clear violation of Hon'ble Apex Court's judgment in the case of Ballarpur Industries Ltd. (supra).
(iii) The impugned order attempted to rely on test report, which is not a conclusive and merely says that the impugned product has traces of 6-BA and 4-CPA, however, the percentage of the same has not been specified. Mere presence of the enzyme would not qualify the impugned product to be classified as 'plant growth regulator'.
(iv) As they have submitted the entire information of the product in 2006 itself, extended period cannot be invoked and as such substantial portion of the demand is liable to be set aside.
6. We find that the learned adjudicating authority has classified the product as 'plant growth regulator' on the basis of the General Rules for Interpretation i.e. 3(c), the General Rules for Interpretation of Central Excise Tariff Act, 1985 are reproduced herein for ease of reference: -
8 E/1325/2012 & E/85069/2013 "3. when by application of rule 2(b) 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 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 put up for retail sale, 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) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall he classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
(c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration."
On going through the above, it is seen that the emphasis of the rule is on the heading which provides the most specific description. The goods are to be classified as per their description and the general description should not be preferred before the specific description. Moreover, in terms of Rule 3(b), mixture consisting of different materials is to be classified with reference to the major component which gives it the essential character. We find that in the case of impugned product, the major constituent is seaweed powder extract. The learned adjudicating authority has not appreciated the provisions of Rule 3(a) and (b) correctly and has jumped directly to Rule 3(c) of the General Interpretation Rules, which is not correct to our understanding. The classification of the goods should be done by the reference of the heading and chapter note. If needed, the help of Explanation Notes of HSN needs to be taken. HSN Notes of heading 3101 refers to animal or vegetable fertilizers, whether or not mixed together or chemically treated, fertilizers produced by the mixing or chemical treatment of animal or vegetable products. It is also stated that the heading covers animal or vegetable products converted into fertilizers 9 E/1325/2012 & E/85069/2013 by mixing together or chemical treatment (other than Superphosphates of Heading 3103). It is pertinent to note the Explanation given in Chapter 12.12 of HSN, seaweed and other algae and it says that this Heading covers all seaweeds and other algae whether or not edible, they may be fresh, chilled, frozen, dried or ground. Seaweeds and other algae are used for various purposes (e.g. pharmaceutical products, cosmetics, human consumption, animal feeding, and fertilizers) and other that should be as such that this heading excludes Fertilizers of Heading 31.01 or 31.05. A plain reading of this note indicates that seaweed and other algae should also be used as fertilizer and when done so, they fall under Heading 3101 or 3105 and even otherwise by referring to Note 3(b) of General Interpretation Rules, the product in dispute falls under CETH 3101.
7. The Department appears to rely upon the Fertilizers Control order. We find that Director of Central Fertilizer Quality Control and Training Institute, Faridabad vide letter dated 25.04.2007 opined that as per Fertilizers Control Order, 1985, only three products have been notified as Organic fertilizers namely, City Compost, Vermi Compost and Press mud and any products other than these three are not organic fertilizers and its manufacture and sale is prohibited under the provisions of Fertilizers Control Order. We find that the purpose of classification, the Fertilizers Control Order is of no consequence as we held above goods have to be classified under their respective headings as per the provisions of Central Excise Tariff Act. We find that in the case of Jai Shree Rasayan Udyog (supra), the Tribunal's observation as follows: -
6. It is seen that the chemical examiner has not conducted any tests and has given an opinion based on appellants' literature. We find that for similar product 'plantozyme' (also containing cytokinin) CESTAT in case of Leeds Kem (supra) had considered the issue of classification in great detail and held that the product is a biofertilizers and mere presence of small amounts of cytokinin would not detract from its character of bio fertilizer classifiable under Heading 31.01' and not under Heading 38.08.
10 E/1325/2012 & E/85069/2013 Similarly, another similar product known as Dhanzyme, CESTAT in the case of Nothern Minerals v. Comm. C. Excise (supra) relied upon the judgment in the case of Leeds Kem (supra) to come to same finding (holding it to be classifiable as bio fertilizer). Appeal against the said judgment was dismissed by Supreme Court on merit - 2003 (156) E.L.T. A161 (S.C.).
7. Thus the issue of classification of the impugned product is no longer res integra and stands settled in favour of the appellants.
8. We find that it was held by the Tribunal in the case of Safex Chemical Industries Ltd. (supra) that though the chemical examination report indicates the presence of ingredients like, Auxin and Cytokinins are known to find use as Plant Growth Regulator, percentage compositions of these ingredients have not been ascertained. It cannot be ruled out that these ingredients can be present in the small traces in the sample; the same can be called as fertilizer also.
"6. We find that the report of the Chemical Examiner states that the impugned product is essentially composed of sulphates, borates, silicates of potassium, ammonium and iron together with organic compound. Report also mentions on basis of literature of the product that it contains auxins and cytokinins in addition to other ingredients. Auxin and cytokinins are known to find use as plant growth regulator. The report is clearly inconclusive as it does not indicate the quantitative composition or percentage of various ingredients. We have also seen the literature of the product Shakti which mentions that it is mixture of micro nutrients, Cytokins, Auxins, Enzymes, Amino acids and Hydrolysed proteins. However, from the accompanying literature too, percentage of auxin and cytokinins cannot be found ascertained. The literature says that it increases the yield and product quality of Rice, Wheat, Cotton, Sugarcane, Potato, Vegetables and Fruits. It increases the growth activities of plants like vegetative growth, flowering and fruit bearing. It acts as a Bio-stimulant which increases chemical activities in plant cells resulting in increased photosynthesis and protein building. It is also mentioned that Shakti granules are for soil application.
7. We find that the ld. Commissioner (Appeals) has elaborately and correctly analyzed the issue in Paras 7, 8 and 9 of his order. We find no reasons to disagree with his conclusion in Para 9, which are reproduced below :-
"9. From the above discussion and by applying the method of elimination, it can be concluded whether the impugned product is PGR or not. I. The Chemical Examination Report has confirmed presence of sulphates, borates, silicates of potassium, ammonium and iron together with organic compounds in the impugned sample. All these ingredients are used for replenishment of nutrients in the soil and the same are the ingredients in most of the fertilizers.
II. The chemical Examination Report says that the ingredients 'Auxin' and 'Cytokinins' are known to find use as PGR. However, percentage composition of these ingredients has not been ascertained. It cannot be ruled out that these ingredients may be present in small trances in the impugned sample and that the same can be found in fertilizers also.
III. Literature of the impugned product which is always for information and knowledge of the consumer and normally which is termed as authentic information does not suggest that the impugned product is for specific use or is to 11 E/1325/2012 & E/85069/2013 be used to achieve specified results of regulating the plants. On the other hand the leaflet contains information normally contained for fertilizers. It does not suggest that the impugned product is to be applied directly on the plant. IV. Most of the ingredients found to be contained by the Chemical Examiner are incapable of altering life process of the plant by inducing internal changes and are only capable in providing nourishment to the plant. Such ingredients cannot qualify to be PGR in terms of definition provided by International Coding System discussed in Para 8 above.
V. The Chemical Examination Report does not suggest that the impugned product can be termed as separate chemically defined element or compound which is pre-requisite of a PGR in terms of Chapter note discussed in Para 7 above."
8. As it is indicated in literature that it is a mixture of different micronutrients and auxin and cytokinins, it cannot be termed as a chemically defined element or compound as is required in Chapter Note 1 of Chapter 38 of Central Excise Tariff."
9. We find that the appellants have submitted the composition of the product in question before 03.07.2010 and after 03.07.2010 as follows: -
"Pre 03.07.2010 S. Raw Material Qty. (Kg) % No. 1 Seaweed Extract 35 10.58 2 Ferrous Sulphate Heptahydrate 35 10.58 3 Zinc Sulphate Heptahydrate 35 10.58 4 Urea Tech/ Magnesium Sulphate 105 31.75 heptahydrate 5 0.5 N HC1 (Hydrochloric Acid) 9 2.72 6 6-BA *** 0.875 0.26 7 4-CPA *** 1.75 0.53 8 Methanol 58 17.54 9 Methyl Praban 0.70 0.21 10 Polysorbate 20 35 10.58 11 Proteins Soya 7.70 2.33 12 Proteins Casein 7.70 2.33 Total :- 330.72 100 The balance i.e., 770-331=339 Kg. is water.
With effect from 03.07.2010
S. Raw Material Qty. %
No. (Kg)
1 Seaweed Extract 40 15.0
2 Ferrous Sulphate Heptahydrate 10 3.7
3 Zinc Sulphate Heptahydrate 35 13.1
4 Magnesium Sulphate 125 46.7
5 0.5 NHC1 9 3.4
6 Methanol 5 1.9
7 Methyl Paraban 0.75 0.3
8 Polysorbate-20 35 13.1
9 Proteins Casein 7.75 2.9
Total :- 267.50 100
The balance i.e., 770-268=502 Kg. is water."
12 E/1325/2012 & E/85069/2013
On going through the above, it is seen that such enzymes help in plant growth regulation are present but in only small traces i.e. 0.26% and 0.53% prior to 03.07.2010. For the period after 03.07.2010, even the traces are absent. Therefore, in view of the case laws cited above, we find that the impugned goods cannot be classified as plant growth regulator just because small trace of 6-BA and 4-CPA are present.
10. Moreover we find that the appellants have contested that the manner of determination of classification arrived at by the adjudicating authority is beyond the scope of the show-cause notice. We find that in Ballarpur Industries (supra) and Champdany Industries Ltd. (supra), the Hon'ble Apex Court held that show-cause notice is foundation of the case, Revenue cannot argue on a point not raised in the show-cause notice. We also find that the appellants have submitted some Rulings issued by US Customs considering the products which have seaweed based fall under 3101.00. Though it can be argued that the said rulings are not relevant for the classification of goods manufactured and cleared in India, we find that the rulings will have persuasive value as to how the said commodity is traded and classified internationally, particularly in the context of universal standardization of classification. For this reason also, we find that impugned product cannot be treated as plant growth regulator.
11. The appellants have stated that they have submitted their items and given all the details to the Department in 2006 itself and as such, no intent to evade payment of duty by way of suppression, concealment, mis- representation etc. can be alleged and, therefore, the extended period cannot be invoked. We are in total agreement with the contentions of the appellants, however, as we held that the appellant's submissions are acceptable on merits, the issue of classification will not alter the position of the case in any manner.
13 E/1325/2012 & E/85069/2013
12. In the light of the above discussions and the case laws mentioned therein, we allow the appeals with consequential relief, if any, as per law.
(Pronounced in open court on 29.07.2022) (S.K. Mohanty) Member (Judicial) (P. Anjani Kumar) Member (Technical) Sinha