Custom, Excise & Service Tax Tribunal
Meghmani Organics Ltd vs Ahmedabad-Ii on 6 September, 2019
Customs, Excise & Service Tax Appellate Tribunal,
West Zonal Bench : Ahmedabad
REGIONAL BENCH - COURT NO. 3
Excise Appeal No. 280 of 2012
[Arising out of OIA-21/2012-AHD-II-CE/MM/COMMR-A-/AHD passed Commissioner of
Central Excise-AHMEDABAD-II]
M/s Meghmani Organics Ltd .... Appellant
Block No. 403, 404 And 452, Village-Chharodi,
Tal-Sanand, Ahmedabad
Gujarat-382210
VERSUS
C.C.E.-Ahmedabad-ii .... Respondent
Custom House, First Floor, Old High Court Road, Navrangpura, Ahmedabad, Gujarat-380009 APPEARANCE:
Sh. Amal Dave, Advocate for the Appellant Sh. G. Jha, Authorized Representative for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) FINAL ORDER NO. A/_11703 / 2019 DATE OF HEARING: 19.08.2019 DATE OF DECISION: 06.09.2019 RAJU This appeal has been filed M/s Meghmani Organics Ltd against denial of refund claim.
2. Ld. Counsel for the appellant pointed out that the appellant had paid the duty under protest on the product 'Megaboost' cleared during the period 11.08.2010 to 31.12.2010 on the ground that the said goods did not attract duty. The said refund claim was rejected by the lower authority after issuance of SCN. It was asserted in the SCN that the appellant had imported these goods and during the import of goods, the said goods were clarified under Chapter31 of Customs Tariff Act. The said goods were re-packed in smaller packs under brand name 'Megaboost'. It was alleged by the Excise Authority that the said goods were not fertilizer as claimed by them before Customs Authority but are classifiable under Chapter 29 therefore, were liable to be assessed to duty. The appellant paid the said duty under protest.
2|Page E/280/2012-DB 2.2 The samples of the goods were taken and send for chemical examination. The chemical examiner, Central Excise Laboratory, Vadodara vide his letters F. No. RCL/AH/C.Ex./10 and No. RCL/AH.C.Ex./11 both dated 16.12.2008 communicated the test result as under:
(A) Megaboost FE ―The sample is in the form of light brown powder. It is ethylene Diamine Tetra Acetic Acid Di-Sodium-Iron Complex. It is a co-ordination compound. It is having following characteristics:
Iron (chelated by EDTA) =11.9% PH (1%) =4.00 Noter-Co-ordination Compound are finds mentioned in Chapter29 Noters 5 (c) (3)‖.
(B) Megaboost ZN ―The sample is in the form of light brown powder. It is ethylene Diamine Tetra Acetic Acid Di-Sodium-
Zinc Complex. It is a co-ordination compound. It is having following characteristics:
% Zinc (chelated by EDTA) =13.6% PH (1%) =4.00 Noter-Co-ordination Compound are finds mentioned in Chapter29 Noters 5 (c) (3)‖.
The test report was challenged by the appellant and retest report was received from the Director (Revenue Laboratories), Central Revenue Control Laboratory, New Delhi vide their letter F. No. 75-Exo/C- 18/2009-10 dated 26.03.2010. The test result is as under:
MEGABOOST Fe Lab No. CLR/28,dated.24.02.2010 ―The sample is in the form of light brown powder. It is ethylene Diamine Tetra Acetic Acid Disodium (EDTA) - Iron (Fe) Complex. It is a co-ordination compound.
Iron content in the same under reference is more than 12% by wt (on sample as such). It does not contain any nitrogen, phosphorous and potassium (NPK) based fertilizer.
Regarding the classification of the sample under reference, attention is invited to Notification No.: Central Excise Circular No. 392/1998, dated 19.05.1998 issued by the Central Board of Excise & Customs.‖ MEGABOOST Zn Lab No. CLR/29,dated.24.02.2010 ―The sample is in the form of whte powder. It is ethylene Diamine Tetra Acetic Acid Disodium (EDTA) - Zinc (Zn) Complex. It is a co-ordination compound.
3|Page E/280/2012-DB Zinc content in the sample under reference is more than 12% by wt. It does not contain any nitrogen, phosphorous and potassium (NPK) based fertilizer.
Regarding the classification of the sample under reference, attention is invited to Notification No.: Central Excise Circular No. 392/1998, dated 19.05.1998 issued by the Central Board of Excise & Customs.‖ The appellant were not satisfied with that test report and sought for retest of the sample in the Office of Assistant Director of Agriculture Fertilizer Testing Laboratory. The said request was forwarded by Revenue to CRCL, New Delhi for examination in terms of para 8.10 of Chapter11 of the CBEC's Excise Manual of Supplementary Instruction- 2005 which reads as under:
―Where an assessee requests for retest in a laboratory other than a Control Laboratory (hereinafter in this paragraph referred to as ―Outside Laboratory‖) whether on the remnant or the duplicate or triplicate sample, such request may be allowed for testing the sample from an outside Government or semi-Government laboratory with the prior permission of the Commissioner or the Appellant or the Reversionary Authority, as the case may be after Director (Revenue Laboratories) has confirmed that the departmental laboratories does not have the facilities for performing the particular test in question. The request for retest in outside laboratories will be conditional upon the party concerned meeting the cost of retest.‖ The DGCRCL, New Delhi vide letter dated 29.12.2010 replied the clarification as under:
―In this connection, it is to inform you that each of the two samples under reference was received in a unit packing in a printed Carton.
As such each is a Ethylene Diamine Tetra Acetic Acid Disodium (EDTA)-Iron (Fe) and Zinc (Zn) Complex- a co-ordination compound. It is true that each of the two samples contains Nitrogen, but this nitrogen is from EDTA only. Each is free from Mineral or chemical fertilizers-Nitrogenous covered under Chapter31 which is evident from the Iron and Zinc contents in the samples as mentioned under Chapter31. EDTA chelates are not covered under nitrogenous fertilizers. Therefore each merits classification under Chapter29 of Central Excise Tariff.
Further, as per Central Excise Circular No. 392/1998, it is also stated that Notification under FCO covering micronutrients is irrelevant for deciding classification under the Central Excise Tariff and regardless of such notification, the appropriate consideration should be ―whether or not the micronutrient in question is a separate chemically defined compound, if it is, the classification under Chapter31.05 is rules out‖
4|Page E/280/2012-DB On the basis of report it was alleged by the Revenue that the product i.e. Megaboost is 'Coordination Compound' which finds mention in Note 5 (c) (3) of Chapter 29 and therefore it appears that the product is rightly classified under Chapter29 of the Central Excise Tariff Act, 1985 and chargeable to duty accordingly.
3. It was also noticed that test reports of appellant contained the word 'Chelated Fe' and 'Chelated Zinc'. Ld. Counsel was asked to explain the meaning of word 'Coordination Compound' and the word 'Chelated'. Ld. Counsel refuse to assist and stated that the matter should be decided only on the basis of decision given in case of Ciba India Ltd 2009 (237) ELT 207 (Tri.Chennai) and in their own case reported in 2010 (254) ELT 172 (Tri.Bang.).
4. Ld. Counsel argued that matter has been settled by the decision of this Tribunal in the case of Ciba India Ltd (Supra). He argued that in Ciba India Ltd relying on Note 6 of Chapter 31, Tribunal has held that product would be classifiable under Chapter 31. The para 1 & 2 of the said decision reads as under:
1. The issue in this appeal relates to classification of ―LIBREL Brand Micronutrients‖ imported by the appellants herein for agricultural use --
whether under Customs Tariff Heading 29.22 as held by the Commissioner or under CTH 31.05 as claimed by the importers. The imported item contains Ethylene Diamine Tetraacetic Acid (EDTA) which is a chelating agent and also contains nitrogen, zinc, manganese and iron. There is no dispute that it is used as a fertilizer. As per Note 6 to Chapter 31 of the CETA, 1985, the term ―other fertilizers‖ applies only to products of a kind used as fertilizers containing, as an essential constituent (emphasis applied) at least one of the fertilizing elements nitrogen, phosphorous or potassium. The department has relied upon clarification issued by the Regional Fertilizer Control Laboratory, Chennai under cover of letters dated 30-10-2006 and 4-1-2007 that the products are micronutrient fertilizers under the Fertilizer Control Order and incidentally contained small quantities of nitrogen because of the chemical composition and cannot be claimed as primary source of nitrogen, to hold that nitrogen is not an essential constituent so as to classify the goods under Chapter 31. However, we note that the International Institute of Biotechnology and Toxicology (IIBAT) has certified on 19-12-2006 that during the process of supply of potential micronutrients for the plant growth, once the micronutrients are delivered at the plant system EDTA breaks out resulting in elemental nitrogen which further helps to promote the plant growth and that without nitrogen it is not possible to deliver the metal ions or micronutrients to the plant system. This certificate was placed by the appellants before the authorities below. Further reliance placed by the Revenue on the specific exclusion of separate chemically defined compounds from Heading 3105.90 in the HSN Explanatory Notes (the EDTA chelate is separate chemically defined compound) is also misplaced for the reason that HSN Explanatory Notes to Chapter 29 clearly state that separate chemically defined compounds containing other substances deliberately added during or after their manufacture are excluded from Chapter 29 and the product in dispute contains zinc/manganese/iron which is deliberately added. In the light of the above discussion, we hold that the imported item falls for classification under CTH 3105.90 of the Customs Tariff Act, 1975 as micronutrient and not
5|Page E/280/2012-DB under CTH 29.22, that the benefit of the exemption from payment of CVD and SAD under Notification 4/2006 (S. No. 63) and 20/2006 (S. No. 4) is available to the goods, set aside Order-in-Original No. 7114/2008 dated 30-1-2008 challenged in Appeal No. C/88/2008 and allowed the Customs appeal.
2. Appeal No. E/96/2008, E/103, 104 and 105/2008 which arise out of Order-in-Original No. 33/2007 dated 30-11-2007 holding that the product falls under Chapter Heading 29.22 of the CETA and confirming duty demand of Rs. 86,93,511/- together with Education Cess of Rs. 1,73,870/- on micronutrients repacked and relabelled by M/s. Swathi Organics & Chemicals (P) Ltd. and imposing penalties of Rs. 88,67,381/- on M/s. Swathi Organics & Chemicals (P) Ltd. and Rs. 9 lakhs and Rs. 4.5 lakhs respectively on its Managing Director and Executive Director and Rs. 7.50 lakhs on M/s. Ciba India Ltd. are also allowed, in the light of our finding on classification of the product under Chapter Heading 31.05 of the Customs Tariff as there is no deeming fiction in Chapter 31 of the CETA, 1985 that repacking and relabelling amounts to manufacture so as to give rise to duty liability of M/s. Swathi Organics & Chemicals (P) Ltd. (such deeming fiction is contained in Chapter 29 of the CETA, 1985). In the result, the impugned orders are set aside and the appeals allowed.
He further argued that the said decision relied in their own case reported in 2010 (254) ELT 172 to hold that same product would fall under chapter 31. After hearing on 19.08.2019, on the next day Ld. Counsel sought permission to submit written submission and the same were submitted on 28.08.2019. In the said written submission again he relied on these aforesaid decisions of Tribunal in case of Ciba India Ltd and in their own case. He also relied on the fact that the Gujarat Government has given the permission to sale the product as fertilizer. It has been also argued that once the Customs had done the classification under Chapter 31, it is not open for Central Excise Authority to change the classification to Chapter 29. The Ld. Counsel has however not provided any assistance by giving meaning of words 'Coordination Compound' and 'Chelated'.
5. Ld. AR relies on the impugned order.
6. We have gone through arguments of both the sides. We find that the issue under consideration is if the product sold by the appellant is classifiable under chapter 31 as fertilizer or under chapter 29 specifically defined chemical. It is seen that the decision in case of Ciba India Ltd (Supra) was taken without considering Chapter Note 5 of Central Excise Tariff Act, 1985 which reads as under:
―(C) Subject to Note 1 to Section VI and Note 2 to Chapter28:
(1) Inorganic salts of organic compounds such as acid-, phenol- or enolfunction compounds or organic bases, of sub-
Chapters I to X or heading 2942, are to be classified in the heading appropriate to the organic compound; and
6|Page E/280/2012-DB (2) Salts formed between organic compounds of sub- Chapters I to X or heading 2942 are to be classified in the heading appropriate to the base or to the acid (including phenol- or enol-function compounds) from which they are formed, whichever occurs last in numerical order in the Chapter.
(3) Co-ordination compounds, other than products classifiable in sub Chapter XI or heading 2941, are to be classified in the heading which occurs last in numerical order in Chapter29, among those appropriate to the fragments formed by "cleaving" of all metal bonds, other than metal- carbon bonds.‖ The earlier decision of Tribunal in the appellant's own case was based essentially relying on the decision of Tribunal in the case of Ciba India Ltd (Supra). In the said decision also the Chapter Note 5 of the Chapter 29 was not examined.
7. The term 'Coordination Compound' is defined in Wikipedia as follows:
―A coordination compound is a compound containing one or more coordinate bonds, which is a link between a pair of electrons in which both electrons are donated by one of the atoms. In other words, it is a compound that contains a coordination complex.‖ From the above definition, it is seen that the 'Coordination Compound' is a molecule consisting of metal item with numbers of other items or groups, thus it is separately defined chemical and not amixture of different items. In this context, Ld. Counsel for the appellant was asked to assist by providing the meaning of words 'Coordination Compound' and the word 'Chelated' appearing in Chapter Note 5 to Chapter 29 and in test report which Ld. Counsel refuse to give.
8. Perusal of the Test Report No. C/619/08/08/S of Gujarat Laboratory produced by appellant themselves, describes the product as Iron Chelated. Similarly the Test Report No. C/620/08/08/S of Gujarat Laboratory produced by appellant also describes the product as Zinc Chelated. The certificate of analysis appearing in page 42 of the appeal from Sichuan Jiannachun International Economic & Trade Co. Ltd also describes the product as Zinc Chelated. The letter of Micronutrient Project (ICAR) appears at page 49 of the appeal describes the product as 'chelated Iron' and 'Chelated Zinc'. The Term Chelated is defined in website Free Dictionary.com as follows:
7|Page E/280/2012-DB ―A chemical compound in the form of a heterocyclic ring, containing a metal ion attached by coordinate bonds to atleast two nonmetal ions.‖ From the above, it is apparent that the chelate is specifically separately defined chemical and not a mixture. The chemical examiner report clearly points out that the Chapter Note 5 (c) is relevant for the classification of the product as the said product has been describes by the chemical examiner as 'Coordination Compound'.
9. It is also seen that the Ld. Counsel has claimed that the product is mixture of goods whereas the test report describes the product as 'Coordination Compound' and not as a mixture. The literature of foreign supplier as well as the test reports produced by the appellant also describe prodyuct as 'chelated Iron' or Chelated Zinc'. It is seen that the decision in case of Ciba India Ltd (supra) was taken in respect of Ethylene Diamine Tetraacetic Acid (EDTA) which is on chelating agent and also contains Nitrogen, Zinc, Manganese and Iron. In the said case, the reliance has been placed on Note 6 of Chapter 31 of Central Excise Tariff Act, 1985 which reads as under:
―6. For the purposes of heading 3105, the term ―other fertilizers‖ applies only to products of a kind used as fertilizers and containing, as an essential constituent, at least one of the fertilizing elements nitrogen, phosphorus or potassium.‖ It fails to notice that the Chapter 31 does not include separate chemically defined compounds. Chapter Note 1 to Chapter 31 reads as under:
―1. This Chapterdoes not cover: (a) Animal blood of heading 0511; (b) Separate chemically defined compounds (other than those answering to the descriptions in Noter 2(a), 3(a), 4(a) or 5, below); or
(c) Cultured potassium chloride crystals (other than optical elements) weighing not less than 2.5 g each, of heading 3824; optical elements of potassium chloride (heading 9001).‖ In respect of separately defined chemical, the chapter Notes permits classification under Chapter 31 only with reference to chapter 2(a), 3(a), 4(a) or 5 to Chapter 31. It is apparent that separately define chemical which may also answered to Note 6 to Chapter 31 would not be covered under Chapter 31. Moreover, it is seen that Chapter 29 covers all
8|Page E/280/2012-DB separate chemical define organics compound. The Note 2 of Chapter 29 excludes only Urea falling under heading 3102 or 3105 from the purview of Chapter 29. On combine reading of Chapter Note 1 of Chapter 29 and Chapter Note 2(e) of chapter 29, Chapter Note 1 (b) of Chapter 31 and Chapter Note 6 of Chapter 31 shows that separately define compound which might answer to Chapter 6 would not be classifiable under Chapter
31. It is seen that the decision in case of Ciba India Ltd (Supra) and Meghmani Organics Ltd (Supra) are per incurium as they have fail to examine the aforesaid Chapter Notes before reaching to conclusion.
10. The second issue relates to the appellant's claim that it is open to Central Excise Authority to change the classification made by the Customs Authority. It is apparent that two authorities i.e. Customs and Excise Authority are totally independent authority and mistake by one need not be carried out or followed by another.
11. In view of above, we do not find any merit in the appeal and the same is dismissed.
(Pronounced in the open court on 06.09.2019) (Ramesh Nair) Member (Judicial) (Raju) Member (Technical) Seema