Custom, Excise & Service Tax Tribunal
Hindustan Pulverising Mills vs Cc (Import) Nhavasheva on 12 October, 2018
C/523/2010 & C/606/2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH
MUMBAI
Appeal Involved:
C/523/2010
[Arising out of Order-in-Original No. 2/2010-11/CC(1), JNCH
dt.15.4.2010 passed by Commissioner of Customs (Import),
Jawaharlal Nehru Customs House, Nhavasheva, Tal-Uran, Raigad
Dist. Maharasthra.]
M/s. Hindustan Pulverising Mills
209-210, Anupam Bhawan,
Azadpur Commercial Complex, Appellant (s)
Azadpur, New Delhi - 110 033.
Versus
Commissioner of Customs (Imports)
Jawaharlal Nehru Custom House, Sheva,
Respondent (s)
Tal-Uran, Dist. Raigad - 400 707.
Appeal Involved:
C/606/2010 [Arising out of Review Order No.2/2010-11 dated 16.7.2010 passed by the Commissioner of Customs, Mumbai Zone-II, Jawaharlal Nehru Custom House, Nhavasheva, Tal-Uran Dist. Raigad, Maharashtra.] Commissioner of Customs (Imports) Jawaharlal Nehru Custom House, Sheva, Appellant (s) Tal-Uran, Dist. Raigad - 400 707.
Versus M/s. Hindustan Pulverising Mills 209-210, Anupam Bhawan, Azadpur Commercial Complex, Azadpur, New Delhi - 110 033.
Shri Nikhil Aggarwal, Director, Respondent(s) Marketing M/s. Hindustan Pulverising Mills 209-210, Anupam Bhawan, Azadpur Commercial Complex, Azadpur, New Delhi - 110 033.
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C/523/2010 & C/606/2010 Appearance:
Shri Jayant Kumar, Advocate For the Assessee Shri P. V. Sekhar, For the Revenue Joint Commissioner (AR) Date of Hearing: 21/06/2018 Date of Decision:12.10.2018 CORAM:
HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER HON'BLE SHRI P. ANJANI KUMAR, TECHNICAL MEMBER Final Order No. A/87651-87652/2018 PER: P. ANJANI KUMAR M/s. Hindustan Pulverising Mills, the appellants, have imported the consignment of goods declared as plant extracts (bio fertilizer) and classified the same under CTH 3101 0099. No marking was found on the packing showing the impugned goods to be bio fertilizer. The representative sample was forwarded to the Regional Centre for Organic Farming, Nagpur who reported, vide report dated 20.02.2009 that the samples of Plant Extract (2 No) sent......are not Bio fertilizers; the Centre carried out the quality control testing of only biofertilizer samples like Rhizobium, Azotobacter, Axospirillum, PSB as per the fertilizer Control Order;
samples do not come under the purview of bio fertilizers and that 2 C/523/2010 & C/606/2010 as such they are not able to analyze and sent the analysis report of the same."
2. Vide letter dated 30.03.2009 National Centre for Organic Farming, Ghaziabad confirmed that the product does not confirm to any of the requirements of any bio fertilizer as per FCO; as per FCO 1985 'bio fertilizer' means a product containing carrier based (solid or liquid) living microorganisms which are agriculturally useful in terms of nitrogen fixation, phosphorous solubilization or nutrient mobilization to increase the productivity of the soil or crop. The goods imported vide Bill of Entry No. 74088 dated 06.01.2009 were seized.
3. A show-cause notice dated 20.07.2009 was issued to the appellants proposing to classify the goods imported under CTH 1302 1990; demanding differential duty of Rs. 72,37,601/- and proposing to confiscate the impugned goods while seeking to impose fine in lieu of confiscation in respect of goods imported earlier under 5 Bills of Entry. Commissioner of Customs vide order dated 15.04.2010 has confirmed the finalization of assessment of Bill of Entry No. 740088 dated 06.01.2009 classifying the product under CTH 1302 1990 as 'plant extract'. Aggrieved by the above, the appellants have filed Appeal No. 3 C/523/2010 & C/606/2010 C/523/2010. The Department has also filed an Appeal No. C/606/2010 praying that the Commissioner has erred in dropping all other charges; not confirming duty on a goods already cleared; not confiscating the goods and in not imposing penalty. Both the appeals have been taken together for decision.
4. Ld. Counsel for the appellant submitted that as per section notes or chapter notes CTH 31010099, there is no condition that the product needs to supply primary nutrients N,P,K and that it needs to be covered under Fertilizer Control Order (FCO); FCO does not define vegetable fertilizer as such; FCO is a piece of social legislation under Section 3 of the Essential Commodities Act, 1955 to regulate trade and prices of certain fertilizers for the benefit of farming community; products do not cease to be fertilizer merely because, it is not covered under FCO; it simply means that in respect of fertilizers not included in FCO the control mentioned in FCO cannot be exercised by government; only a subset of bio fertilizers and organic fertilizers has been included in Schedule III and IV of FCO to regular their market and prices.
4.1 Definition of fertilizer under FCO has a functional definition and a list specific definition; Under FCO, Fertilizer 4 C/523/2010 & C/606/2010 should satisfy two conditions which are joined by the conjunction 'and' in above definitions.
(i) It should be a substance used or intended to be used as a fertilizer of the soil and/or crop (basic functional definition); and
(ii) It should be specified in either Part A of Schedule I or Schedule III or Schedule IV. (Out of the fertilizers which qualify the functional definition, only the fertilizers which are listed in schedule shall be subjected to controls under FCO) 4.2 Dr. M.S. Kairon, an agricultural expert, gave an opinion that the product in question is a "Plant based fertilizer supplying nutrients to the crops; 'Dealers and Farmers' in an affidavit confirmed that they were using it as fertilizer to maximise crop yield.
4.3 So called "test reports" referred in para 19(2) of Order- in-Original are irrelevant to decide the issue of classification; Report of Regional Centre of Organic Farming Nagpur is basically not a test report; they have not tested anything and they have returned the sample saying that they test samples only in respect of fertilizer which are covered under FCO; It's also not Appellant 5 C/523/2010 & C/606/2010 claim that the product is a bio fertilizer under FCO; As per Shriram Institute for Industrial Research, an ISO 9001:2000 certified institute, the product is a liquid organic fertilizer containing nitrogen, phosphate, potassium and other organic of amino acids having nutritional value for the crops; certificate of analysis submitted by them also states that the imported product contains 25% organic matter and 1.5% minerals; National Centre of Organic Farming (NCOF), Ghaziabad do not dispute the appellant's submission that the product is an extract of various plants /herbs meant for use in agriculture; vide report No. 10(8)2007NCOF/3399 dated 21.05.2009, NCOF , Ghaziabad confirmed s that the product is a organic fertilizer derived from plants.
4.4 Supreme Court, in the case of O.K. Play (India) Ltd. V. CCE - 2005 (180) E.L.T. 300 (S.C), prescribed the following for determination of classification.
(i) HSN along with explanatory notes provide a safe guide for interpretation of an entry.
(ii) Rules of interpretation will decide preference for one heading over other 6 C/523/2010 & C/606/2010
(iii) Functional utility, design, shape and predominate usage have also got to be considered.
4.5 Supreme Court, in the case of CCE & Cus Surat-II Vs Nirmala Dyechem - 2007 (207) E.L.T. 161 (SC), held that principal use of the product needs to be seen.to decide classification 4.6 Heading 1302 covers, by and large, extracts in purer form which are used as a raw material for preparation of end products down the line in products meant for human consumption either as a drug or medicine or in food preparations. Further the end products prepared from the raw material of these headings are not classified here rather they are classified in more specific entries based on their usage. The chapter note of Chapter 13 makes this abundantly clear that 13.02 covers only those plant extracts which are in the form of raw material and it does not cover end products made out of these raw materials; the impugned product is not a raw material but an end product itself to be used as a fertilizer and not going to be used as an input in any product meant for human consumption; therefore, cannot be 7 C/523/2010 & C/606/2010 covered under CTH 13.02; it is class apart from the products which are covered under CTH 13.02.
4.7 The six-digit entry 13021 at - level falling under "vegetable Saps and extracts" has been divided into following four entries at ---level which are mutually exclusive.
---extracts
---Cashew shell liquid (CNSL), crude
---Purified and distilled CNSL (Cardanol)
---Other (1302 1990) 4.8 Ld. Commissioner has confirmed the classification under the CTH 1302 1990 where a product will fall if and only if it is not a plant extract because 13021990 is a residual entry. Therefore as per the departmental understanding also, the product cannot be classified under CTH 13021990. The explanation given to entry 13.02 in HSN makes it clear that saps and extracts are covered under heading 1302, provided they are not specified or included in more specific headings of the nomenclature. It is also mentioned that vegetable saps and extracts of this heading (1302) are generally raw materials for various manufactured products.
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C/523/2010 & C/606/2010 4.9 Under Rule 3(a) of the General Rules for the Interpretation of Import tariff, it is provided that the heading which provides a specific description shall be preferred to a heading having a more general description. Plant extract appearing in 1302 is a more general description to encompass all sorts of plant extract, whereas the entry appearing in 31.01 is more specific and includes only a subset of plant extracts which are used as fertilizer. Therefore the entry 31.01 being more specific, the product in question must be classified under 31.01. 4.10 It is submitted that under Rule 3(c) of the General Rules for the Interpretation of Import tariff, it is provided that when goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. 4.11 It is submitted that under Rule 4 of the general rules for the interpretation of Import tariff, that Goods which cannot be classified in accordance with Rule 2 or Rule 3 shall be classified under the heading appropriate to the goods to which they are most akin. Since, the impugned goods are most akin to other 9 C/523/2010 & C/606/2010 organic fertilizers and are organic fertilizers they are classifiable under 31.01.
4.12 The show-cause notice does not propose classification under CTH 3808 and thus classification under 3808 is out of the scope of present appeal and thus ruled out. It is to be noted that product cannot be classified under Chapter 13 and thus Order-in- Original needs to be set aside. They further submitted as to why the product cannot go to CTH 3808 and why it should be classified under CTH 3101, as follows:
Fertilizers Plant Growth Regulators
Tariff Heading Tariff Heading
31.01: Animal or vegetable 3808: Insecticides, rodenticides,
fertilizers, whether or not fungicides, herbicides, anti-sprouting
mixed together or chemically products and plant growth regulators,
treated; fertilizers produced disinfectants and similar products, put up
by the mixing or chemical in forms or packings for retail sale or as
treatment of animal or preparation s or articles (for example,
vegetable products. sulphus-treated bands, wicks and
candles, and fly-papers)
HSN Explanatory Notes HSN Explanatory Notes
This heading covers:
(a) Animal or vegetable The heading further covers anti-sprouting
fertilizers, whether or not products and plant growth regulators
mixed together or chemically intended to inhibit or promote
treated; physiological processes in plants .....
(b) Animal or vegetable Plant Growth Regulators are applied to
products converted into alter the life processes of a plant so as to
fertilizers by mixing together accelerate or retard growth, enhance
or chemical treatment (other yield, improve quality or facilitate
than bone superphosphates harvesting, etc....
of heading 31.03)
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C/523/2010 & C/606/2010
Note: The products covered under Chapter
Note: The products covered 38 are intended to inhibit or promote
under chapter 31 are only physiological changes in plants, i.e.,
intended for enhanced altering or modifying the plant's structure
growth and not intended for and life processes. PGRs particularly bring
adverse growth as in case of hormonal changes in the plants. PGRs
PGRs. effect both accelerated and retarded
growth.
Chapter Note in CTA, 1975 Chapter Note in CTA, 1975
This Chapter covers most This Chapter covers a large number of
products in general uses as chemical and related products.
natural or artificial fertilizers. It does not cover separate chemically
On the other hand, the defined elements or compounds (usually
Chapter does not cover classified in Chapter 28 or 29), with the
products which improve rather exception of the following:
than fertilize the soil, such as: Note: Chapter note to Chapter 38 states
Note: Chapter Note to Chapter that it covers only chemical products and
31 states that it covers chemical related products.
products used as natural or
artificial fertilizers and does
not cover products which
improve soil rather than
fertilizing the soil.
Dictionary Meaning Dictionary Meaning
1. Illustrated Oxford 1. It is submitted that Kirk-Othmer
Dictionary, OUP, 2003 "Encyclopedia of Chemical
rd
defines fertilizer as: Technology" (3 Edition - Volume
"A chemical or natural 18) introduces PGRs as follows:
substance added to soil to "Plant-growth regulators, other than
make it more fertile" nutrients, usually are organic compounds.
2. Wikipedia defines fertilizer They are either natural or synthetic
as: compounds and are applied directly to a
'Fertilizer (or ertilizer) is any plant to alter its life processes or structure
organic or inorganic material in some beneficial way so as to enhance
of natural or synthetic origin yield, improve quality, or facilitate
(other than liming materials) harvesting. Plant hormones i.e., phyto-
that is added to a soil to hormones, are plant-produced growth
supply one or more plant regulators and therefore, are naturally
nutrients essential to the occurring plant substances,
growth of plants."
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C/523/2010 & C/606/2010
1. Merriam Webster online Plant-growth regulators, however, apply to
Dictionary defines fertilizer as; phytohormones as well as synthetic "one that fertilizes; compounds."
specifically: a substance (as manure or a chemical 1. "Plant Physiology" (4th Edition) by mixture) used to make soil Robert M. Devlin & Francis H. Witham more fertile" gives the following description for Plant Growth Regulators:-
Note: The fertilizers are
usually natural substances 2. "Plant regulators are organic
used to improve the fertility of compounds other than nutrients that in
the soil by supplying small amounts promote, inhibit, or
nutrients. otherwise modify a physiological process
in plants."
Note: The PGRs do not provide nutrients
to plants rather promote or inhibit growth of specific parts of plants.
From the above definitions, HSN Explanatory Notes, it can be said that the fertilizers help in overall growth of the plants. It is inferred that fertilizers provide nutrients to soil making it more fertile and thus provide overall growth of plants. From the above definitions, HSN Explanatory Notes, it can be said that the PGRs help in selective growth of the plants. It is inferred that PGRs do not provide nutrients to the plants rather promotes or inhibits growth of a selected part of plants. 4.13 It is submitted that the difference between Fertilizers of Chapter 31 and Plant Growth Regulator of Chapter 38 is that products of Chapter 31 work by providing nutrients to the plant 12 C/523/2010 & C/606/2010 for its overall growth while a Plant growth regulator works by physiologically affecting the plant so that there is a selective growth of a particular part of the plant compared to other part and that is why it is called Regulator. It is submitted that in Northern Minerals Ltd. [2001 (131) E.L.T. 355 (Tri.-Del.) further affirmed in [2003 (156) E.L.T. A161 (Supreme Court)], the Hon'ble CESTAT held that Plant Growth Regulators are natural or synthetic organic compounds other than nutrients and that they can promote, inhibit or alter physiological processes in plants. Therefore, for the purpose of classification of products as a plant growth regulator under the heading 3808, it is to be seen that the product has a functional ability to inhibit or alter or modify plant processes. Therefore in the line of the aforementioned judgment it can be said that the products should possess a functional ability of inhibiting or altering the plant processes to be classified under heading 3808. Since the products are natural fertilizers and are not plant growth regulators will be covered under a more specific heading 3101 in the nomenclature and they will not get covered under 3808 as plant growth regulators.
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C/523/2010 & C/606/2010 4.14 The impugned product provides nutrients to the soil to improve the fertility of soil and thereby helping overall growth of the plants. The impugned product neither affects any selective part of plants nor affects any specific structure or life processes of plants. It is therefore submitted that the impugned product falls under CTH 3101 as vegetable fertilizer.
5. Ld. Authorized Representative, for the revenue has reiterated the findings of OIO as far as the classification of impugned goods is concerned and the grounds of appeal as far as confiscability and penalty on the impugned goods are concerned. He submitted that Sri Ram institute from where the appellants have obtained test report is not a notified institution; the samples were not drawn legally and the test report was submitted after adjudication. Therefore cannot be relied upon. In view of the Chapter Note (b) the impugned goods do not fall under Chapter
31. He relied upon Weston components Ltd. vs. CC, New Delhi: 2000 (115) ELT 278 (SC) wherein it was held that redemption fine is imposable on goods even when they were provisionally released. He submitted copies of extracts of Chapter Notes, Section Notes and HSN Explanatory Notes. 14
C/523/2010 & C/606/2010
6. Heard both sides and perused the records of the case. The brief issues for consideration before us are
(i) Whether the impugned goods are 'plant extract' classifiable Under CTH 13021990 or as 'bio fertilizer' under CTH31010099;
(ii) Whether the Ld. Commissioner erred in not imposing fine in lieu of confiscation and penalty.
6.1 We find that the appellants have classified the product under chapter 31. They have submitted that the impugned product is manufactured out of herbs like sopnora, fiavescnes, milleazevacarh, stemona, tuberos etc. which are collected during the typhoon period in China and crushed to get extracts which are further processed to get the product under consideration. They also submitted that the imported product helps healthy growth of plant free from diseases, thereby increasing the yield. These extracts of the herbs processed form liquid fertilizers for folic application in agriculture are in natural form and chemically untreated. After import the material is repacked without any processing in small containers of 100 ml. to 5 liters and are marketed by the importer under the brand name of 'Nikku' which is purchased by the farmers to use as nutrients/fertilizers for 15 C/523/2010 & C/606/2010 increasing their yield. The imported product in regard to manufacturing process, characteristics and composition is not different from the products classified under CTH 3101 as fertilizer.
6.2 Ld. Commissioner has given a finding that manufacturing process of the product, its characteristics and composition itself distinguishes it from the product covered under 3101, which inter alia includes excreta, dung, manure, waste, rotten vegetable products, residue, stabilized sewage sludge. He also found that Webster's Dictionary of English Language defines "fertilizers" as any substance such as manure or a chemical compound used to enrich the soil. Accordingly, for a product to qualify as a fertilizer, it should contain primary nutrients like nitrogen, phosphorous, potassium etc. in various forms which would give nutrition to the plant by way of enriching the soil. The product under import judged from this yardstick is not a fertilizer. For a proper appreciation of the findings of the Commissioner, we need to have a look at the classification of the goods under Chapter 31.
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C/523/2010 & C/606/2010 31.01. 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.
This heading covers:
(a) Animal or vegetable fertilizers, whether or not mixed together or chemically treated;
(b) Animal or vegetable products converted into fertilizers by mixing together or chemical treatment (other than bone superphosphates of heading 31.03).
However, these products fall in heading 31.05 when put up in the forms or packages described in that heading. The heading includes, inter alia:
(1) Guano, which is an accumulation of the excreta and remains of sea birds, found in large quantities on certain islands and coasts. It is both nitrogenous and phosphatic, and is usually a yellowish powder with a strong ammoniacal odour.
(2) Excreta, dung, soiled fleece waste and manure, unsuitable for use other than as fertilizers. (3) Rotted vegetable products, unsuitable for use other than as fertilizers.17
C/523/2010 & C/606/2010 (4) Disintegrated guano.
(5) Products resulting from the treatment of leather with sulphuric acid.
(6) Compost consisting of rotted waste vegetable and other matter where decay has been accelerated or controlled by treatment with lime, etc. (7) Wool scouring residues.
(8) Mixtures of dried blood and bone meal.
(9) Stabilised sewage sludge from urban effluent treatment plants. Stabilised sewage sludge is obtained by screening the sewage effluent to remove large objects and settling out grit and heavy non-biological constituents; the remaining sludge is then allowed to air dry or is filtered. The Stabilised sludge so obtained contains a high proportion of organic matter and also contains some fertilising elements (e.g., phosphorus and nitrogen). However, such sludge containing other materials (e.g., heavy metals) at a high concentration, which make the Stabilised sludge unfit for use as fertilizers', is excluded (heading 38.25).
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C/523/2010 & C/606/2010 6.3 From the above, it can be seen that the impugned product cannot be grouped under Chapter 31 due to the genesis of the product and characteristics. Moreover, the National and Regional Centre for Organic Farming have given a categorical report that the subject goods do not conform to any of the requirements of any biofertilizers listed under FCO. Therefore, the impugned products are not biofertilizers. We find that the Commissioner has correctly held that when there is a legal definition available on the subject defining an item, no other definition can be adopted in this regard to the same. Moreover, we find that the appellants themselves have mentioned the product to have been extracted from different plants grown in China. This being the case, one should have no hesitation or doubt in categorizing the impugned product as 'Extracts'. We find that Chapter 13 refers to 'Plant Extracts' only. We find that HSN Note for 13021990 refers to "Others derived from vegetable products". The arguments of the appellants that the 'Extracts' of Chapter 1302 are raw materials in nature for further processing for ultimate consumption or use by human beings, is not convincing. We find that nowhere in the Chapter Notes or the HSN Notes for Chapter 13 refer to the products being of edible nature. As it is not denied that the impugned product is an 19 C/523/2010 & C/606/2010 extract of plants, it is correct to classify the same under Chapter 13 of CTH. Moreover, as the goods were certified not to be biofertilizers, the classification claimed by the appellants under Chapter 31 is squarely excluded. Therefore, we find that Ld. Commissioner has a point in arriving at the conclusion that the impugned product is classifiable under CTH 13021990. The importer further contended that his previous consignments were cleared under CTH 31 and has similar goods are being cleared in other ports under same heading, the department cannot contend to classify the goods under Chapter 13. We find that there is no estoppel in taxation matters and that Revenue was well within its rights to revise the classification. The importer has raised the issue of classification under Chapter 38 vis-à-vis Chapter 31. However, as the impugned show-cause notice of the order has not raised the issue, we are not going to deal with the same. 6.4 Coming to the applicability of extended period, we find that the appellants have filed 5 Bills of Entry from 27.5.2008 to 6.1.2009. Out of which, Bill of Entry No.894541/01.07.2008 and 740088/6.1.2009 were provisionally assessed. The Revenue has taken a plea that the Bills of Entry were filed under the self- assessment regime, therefore, the onus to classify correctly was 20 C/523/2010 & C/606/2010 on the importer; the importer described the goods as 'biofertilizers' to mislead the department and to evade payment of duty; and as the importer has not declared the true nature of the goods and has not classified the goods correctly, extended period is invokable as the importer has suppressed the material fact. We find that of all the six Bills of Entry, the goods imported under 740088 dt.6.1.2009 were seized and provisionally released. Revenue claimed that the assessment was done by the importer himself and the Bills of Entry were cleared under RMS, department has no knowledge of the wrongful doings of the importer. However, we find that 894541 dt.1.7.2008 was provisionally assessed by the Group pending test report. Therefore, it is very clear that the department was very much aware of the impugned products and has sent for test. However, the results of such test reports are not forthcoming in the records. Having assessed that Bill of Entry provisionally, it was open to the department to keep an alert in the system to interdict subsequent Bills of Entry. Having failed to do so, department cannot allege suppression on the part of the importer. Therefore, the demand needs to be restricted to the normal period. We rely on ratio of the Tribunal's decision in EID Parry (India) Ltd. vs. 21 C/523/2010 & C/606/2010 CCE vide Final Order No.42067 - 42073/2017 dated 15.9.2017.
6.5 The Revenue in their appeal contended that goods in respect of Bill of Entry 740088 dt.6.1.2009 were seized and were provisionally released and therefore, in view of the Hon'ble Supreme Court's decision in the case of Weston Components Ltd. vs. CC: 2000 (115 ELT 78 (SC), the adjudicating authority should have imposed redemption fine. We find that the argument of the department is correct.
6.6 In view of the above, we find that:
(i) The demand be restricted to the normal period. The show-cause notice issued on 20.07.2009. Therefore, demand needs to be restricted for Bills of Entry filed on or after 21.7.2008. Therefore, the demand of differential duty of Rs.12,89,395/- in respect of Bill of Entry 846452 dt. 27.5.2008 is upheld.
(ii) The impugned order of the Commissioner is upheld so far as finalization of Bill of Entry No.740088 dt.6.1.2009 classifying the product under CTH 13021990 as 'Plant Extract' is concerned. 22
C/523/2010 & C/606/2010
(iii) We impose a redemption fine of Rs.1,00,000/- on the goods imported by Bill of Entry No.740088 dt.6.1.2009.
7. In view of the above, both the appeals are partially allowed.
(Order was pronounced in open Court on 12.10.2018) (P. ANJANI KUMAR) (S.K. MOHANTY) Member (Technical) Member (Judicial) 23