Customs, Excise and Gold Tribunal - Delhi
Rhone Poulenc (India) Ltd. vs Collector Of Central Excise on 11 May, 1999
Equivalent citations: 1999(65)ECC144, 2000ECR458(TRI.-DELHI), 1999(111)ELT384(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in the Appeal filed by M/s. Rhone Poulenc (India) Ltd. is whether the product "PLANOFIX" manufacture by them is entitled to the exemption under Notification No. 234/82-C.E., dated 1-1-1982 as an insecticide.
2. Briefly stated the facts are the Appellants manufacture a preparation of Alfa Naphthylactic Acetic Acid (ANA) sold under brand name PLANOFIX and claimed exemption from payment of duty under Notification No. 234/82 as an insecticide. During visit to their factory premises on 30-8-1984, the Central Excise Officers observed that the impugned product was a "Plant Harmone". Accordingly, a show cause notice dated 10-9-1984 was issued to them for denying the benefit of notification and for demanding excise duty for the past five years. A corrigendum dated 7-1-1985 was also issued in which duty demanded was specified to Rs. 41,78,006.71 for the period from 11-9-1979 to 10-9-1984. The Collector, Central Excise, under the impugned order confirmed the demand and imposed a penalty of Rs. 5 lakhs, holding that the impugned product was not insecticides as according to Condensed Chemical Dictionary by G. Hawley, insecticide is a type of Pesticide designed to control inspect life that is harmful to man either directly as disease vectors, or indirectly as destroyers of crops, food products or textile fabrics; that the appellants were selling the impugned product as a plant harmone used for increasing the yield or crops; that Naphthylactic Acid has been described in condensed Chemical Dictionary as "inducing rooting of plant cuttings; spraying of apple trees to prevent early drop"; that it is not mentioned anywhere as to what insects and in what dilution it kills or eleminates the insects. The Collector also mentioned in the impugned order that against Item 5 of the Application for registration regarding Plant disease, insects and other noxicus animals and weeds against which the product is intended to be used, the Appellants mentioned that the product was used as a plant harmone spray and has uses such as :
(i) inducing flowering and preventing shedding of buds, flowers and fruits;
(ii) enlarging fruit size;
(iii) increasing the yield per acre and improving the quality.
3. Shri S.N. Parikh, ld. Advocate, submitted that the impugned product is an insecticide as the same has been specified as insecticide under the Schedule to the Insecticides Act, 1968; that the said Schedule was amended on 9-1-1975 and Naphthylactic Acid and its derivatives was added; that the Central Board of Insecticides directed them to register their product under the Insecticides Act and to comply with the provisions of Insecticides Act; that Appellants in their letter dated 27-11-1975 urged that their product was not an insecticide as per Section 38 of the said Act; that, however, the Insecticides Board stated, under letter dated 24-1-1976, that ANA had been included in the Schedule on the advice of Pesticides Association of India and accordingly they were directed to apply for registration of the impugned product. Accordingly they applied for registration on 20-2-1976 and the impugned product was registered as insecticide. The ld. Counsel, further, submitted that it may be that the conventional meaning of the term insecticide or pesticide is a substance or an agent which kills insects or pests but in the present days the meaning and concept of the term is much wider; that in the modern usuage, the concept insecticide covers many other items such as repellants and attractants; that the impugned product contained ANA which is a recognised insecticide and as such is covered by the exemption notification. He also mentioned that plant growth regulator kills the bacteria and as such the impugned product is an insecticide. The Tribunal in the case of Agromore Ltd. v. C.C.E., Bangalore -1987 (28) E.L.T. 409 (T) has taken the view that term insecticide and pesticide in exemption Notification No. 62/78 were meant to cover particular formulation with well defined use and specially killing insect, etc.; that the Tribunal in that case followed its earlier decision in the case of Bombay Chemicals Pvt. Ltd. v. C.C.E. - 1986 (24) E.L.T. 373 (T) in which the Tribunal held that the word insecticide in the Notification is construed narrowly and it covers only that insecticide which kills insects and does not cover disinfectants; that accordingly in Agromore case, the Tribunal held that Plant growth regulators were not insecticides. The ld. Counsel, further, submitted that the Tribunal, in C.C.E. v. Panshak Ltd. -1991 (52) E.L.T. 420 (T), disagreed with the decision in Agromore case and held that even though the Appellants therein had good case that Plant growth regulator was covered under term pesticide, but it.had to follow Agromore decision; that the Supreme Court in Bombay Chemical Pvt. Ltd. v. C.C.E. -1995 (77) E.L.T. 3 (S.C.) overruled Tribunal's decision holding that the exemption notification should not be given narrow meaning i.e. the term insecticide covers only products that kill insects, but also cover disinfectants capable of killing bacteria, etc. The ld. Counsel thus contended that Agromore decision which followed Tribunal's decision in Bombay Chemicals' case is not a good law and the plant growth regulators are insecticides as per decision in Paushak case (supra). He referred specially to the observation of the Appellate Tribunal in para 8 of the Paushak case which is extracted below :
"In our considered opinion, therefore, there is a good case for holding that plant growth regulators are covered by the term "Insecticides or Pesticides" in the Central Excise Notification. However, the issue having been considered at great length by the Tribunal in Agromore case (supra) we should respectfully follow the said decision."
4. The ld. Counsel pointed out that as the Agromore decision was pronounced following the Tribunal decision in Bombay Chemical's case 1986 (24) E.L.T. 373 (T) which has been overruled by Supreme Court as reported in 1995 (77) E.L.T. 3 (S.C.), the view of the Tribunal in Paushak has become the law that Plant growth regulators are covered by the term insecticides and the Appellants are eligible to the benefit of Notification No. 234/82 in respect of the impugned product. He finally submitted that the demand is also hit by time limit specified in Section 11A(1) of the Central Excise Act as there was neither any suppression nor mis-declaration on the part of the Appellants; that they had filed a classification list dated 2-3-1978 classifying the impugned product as insecticide and claiming exemption under Notification No. 62/78; that they had submitted the leaflet and labels along with the classification list; that after making due inquiries and verification and visiting their factory, the Classification List was approved in March, 1978; that as such there was no mis-statement or suppression of the fact and for want of this ingredients, the larger period of five years could not be invoked; that Excise authorities were all throughout aware of the nature of the product; that, further as their product had been treated as insecticides by the Central Insecticides Board, they had rightly declared the impugned product as insecticides; that there was thus no mala fide intention to evade excise duty and accordingly demand for larger period is untenable. Finally, he submitted that when demand itself is prima facie not maintainable, penalty cannot be imposed on the appellants.
5. Countering the arguments, Shri A.M. Tilak, ld. DR, submitted that the Appellants themselves had contended before the Central Insecticides Board that their product was not an insecticide under Section 38(1)(b) of the Insecticides Act, according to which nothing in this Act shall apply to any substance specified or included in the Schedule or any preparation containing any one or more such substances, if such substance or preparation is intended for 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. He contended that it is thus apparent that their product does not kill any insect. Further their literature describes the impugned product as a plant harmone spray and it has uses such as :
(a) inducing flowering and preventing shedding of buds flowers and fruits,
(b) enlarging fruit size, and
(c) increasing the yield per acre and improving the quality.
He also mentioned that judgment of the Supreme Court in Bombay Chemical's case 1995 (77) E.L.T. 3 (S.C.) is not applicable as in that case the Tribunal had found that the impugned product disinfectant fluids were capable of killing various bacteria and fungi which is not so in the present case. Finally on merit he submitted that the Appellate Tribunal in the case of Bakul Chemicals Pvt. Ltd. v. C.C.E., Baroda - 1999 (30) RLT 269 has held that Alpha Naphthylactic Acid is a plant growth regulator classifiable under subheading 3808.90 of the Schedule to the Central Excise Tariff Act and not classifiable as insecticide/pesticide under sub-heading 3801.10 and the benefit of Notification No. 234/82 is not available to the product. On the question of applicability of extended time limit for demanding duty, the ld. DR reiterated the findings of the Collector according to which the Appellants had mis-described the product as insecticides whereas in the literature the same was described as plant harmone spray; that they had taken a deliberate and conscious decision at the time of submission of the classification list to evade duty by describing their product under wrong heading of insecticides and not under heading "Horticultural Products".
6. We have considered the submissions of both the sides. On merit, the Appellants' contention is that as Supreme Court had set aside the decision of the Tribunal in Bombay Chemicals case the decision in the case of Agromore, supra, is not a good law and the view of the Appellate Tribunal in Paushak case that plant growth regulators are covered by the term "insecticides" has to be followed. We do not find any substance in these submissions of the Appellants. The Supreme Court in Bombay Chemical's case 1995 (77) E.L.T. 3 (S.C.), has clearly held that "A disinfectant which, therefore, is used for killing may broadly be covered in the word "pesticide". Disinfectants may be of two types; one to disinfect and other to destroy the germs. The former, i.e. those products which are used as disinfectant for instance lavender etc. may not be covered in the expression "pesticides". But those products which are used for killing insects by use of substances such as high boiling tar acid have the same characteristic as "pesticide....Each of the words insecticides, pesticides, fungicides or weedicides are understood both in the technical and common parlance as having broad meaning. Therefore, if any goods or items satisfy the test of being covered in either of the expression, then it is entitled to exemption. The broad and basic characteristic for exemption under the notification is that the goods must have the property of killing germs and bacteria, insect or pest and it should be understood in the common parlance as well as being covered in one of the broad categories mentioned in the Notification." The Supreme Court thus proceeded to extend the benefit of Notification in Bombay Chemicals case as the goods were capable of killing bacteria and fungi. In the present matter before us, the Appellants have not adduced any evidence even to show that the impugned product is capable of killing bacteria or fungi or insect. Accordingly even on the basis of test laid down by the Supreme Court, their product which is a plant hormone spray, meant for inducing flowering, enlarging fruit size -,. and increasing yield per acre, is not covered by SI. No. 20 of Notification No. 234/82 which reads as under :
"Insecticides, weedicides and fungicides". Similar was the view of the Tribunal in the case of Bakul Chemicals, relied upon by ld. DR in which Tribunal held that "Since the relevant criterion laid down by the Supreme Court for considering something to be a pesticides or insecticides has not been fulfilled by the disputed product, ANAA cannot be held to be an insecticide or pesticide, therefore, it is not entitled to the benefit of Notification No. 234/82 at Sl. No. 18 of the Table appended thereto." Following the ratio of this decision, we hold that, on merit, the benefit of Notification No. 234/82 is not available to the impugned product of the Appellants.
7. Regarding limitation under Section 11A(1) of the Central Excise Act, we observe that the Appellants have declared their product PLANOFIX under the heading "Insecticides" in their classification list claiming exemption under Notification No. 62/78, dated 1-3-1978 (which amended Notification No. 55/75). According to the Appellants they had submitted the leaflet and label also which described the product as "plant hormone spray." This fact has not been denied by the Revenue. As such the Appellants had not suppressed any material fact from the department. Further if the Excise authorities had any doubt about the availability of the benefit of notification, it was open to them for causing enquiries or obtaining chemical test report of the impugned product before approving the classification list. It is settled law that if a classification list has been filed by the manufacturer without suppressing anything, extended period of limitation under Section 11A of the Central Excise Act for demanding the duty cannot be invoked. Further we observe that the Appellants had no mala fide intention in mentioning the impugned product under Heading "Insecticides" in the classification list as following the directives from the Central Insecticides Boards they had got registration under the provisions of Insecticides Act in April, 1976. In view of these facts and circumstances, we hold that proviso to Section 11A(1) of the Central Excise Act is not attracted in the present matter and the demand for Central Excise Duty has to confine for a period of six months preceding the date of show cause notice. We, therefore, remand the matter to the Commissioner for redetermining the duty amount payable by the appellants. The penalty imposed on the Appellants is also set aside.
8. The Appeal is thus disposed of in above terms.