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22. Chapter Note 1(a) makes an exception for separate Chemically defined elements or compounds which have pesticidal properties. Technical Grade pesticides are separate Chemically defined compounds. Formulations are mixtures and therefore can never be separate Chemically defined compounds. If the intention was to cover under the heading 38.08 only formulations then the Chapter Note would be rendered redundant. It is significant to note that there is no Chapter Note introduced in Chapter 28, 29 or 38 stating that Technical Grade pesticides or bulk formulations would not be covered in Chapter 38 but would be covered under Chapter 28 or 29. There was no dispute with regard to classification of Technical grade pesticides and formulations prior to the Finance Act, 1996. By way of the amendment the Technical Grade pesticides do not cease to be pesticides. The character of the product doesn't change and continues to remain in the heading 38.08. The amendment in Chapter Note by the Finance Act of 1997 also did not make any material change. The amendment was done apparently to bring in line the said tariff entry with the H.S.N. and the Chapter Note was introduced to broaden the net of taxation to bring within its ambit formulators who have claimed that their activity did not amount to manufacture. A plain reading of the Chapter shows that both the Technical Grade pesticides and formulations fall in Heading 38.08. The respondents have totally misconstrued the meaning of the amended entry and the Chapter Note. We are unable to read in the amendments that bulk pesticides or insecticides do not fall under the heading 38.08.

24. Technical Grade Pesticides in concentrated form cannot be used as insecticide or pesticide. They are Chemically defined compounds and cannot disqualify from being termed as pesticides. They possess pesticidal properties, which fact is not disputed by the respondents. The intention of the law makers was not to exclude fertilizers and plastics from Chapter 38 which are also Chemicals. If that was so then there was no need to place them in Chapter 38. They would automatically fall in Chapters 28 and 29 being Chemicals. The entry for insecticides and pesticides is a more specific entry whereas Chapter 28 and 29 which covers Chemicals is a general entry. In common parlance these products are known as pesticides and insecticides. Chapter note 1(a)(2) of Chapter 38 would be rendered otiose if the pesticidal Chemicals were to fall in Chapter 28 or 29 because they were separate Chemically defined compounds. The exception carved out in Chapter 38 for pesticides even though they are separate Chemically defined compounds cannot be nullified by the circular issued by the CBEC.

26. It is of interest to note that the H.S.N. Explanatory Notes relating to Chapter 28 or 29 exclude certain separate Chemically defined inorganic compounds from its purview even when they are pure. Certain other separate elements or separate Chemically defined compounds which would otherwise have been classified in Chapter 28 may be excluded when put up in certain forms or if they have been subjected to some treatment which leave the Chemical composition unchanged. Insecticides etc. put up as described in heading 38.08 are excluded specifically from Chapter 28 or 29.

27. If the H.S.N. Explanatory Notes are of persuasive value and a safe guide for determination of classification then it is clear that the circular issued by the respondents is an attempt to misconstrue the aforesaid provisions detailed above. The report given by the Commissioner, Central Board of Excise, Madras, the Central Insecticides Board and the Registration Committee conforms to the aforesaid view.

28. It matters little whether the pesticides/insecticides is put up in the forms or packings for retail sale or bulk packings, or preparations and intermediary preparations or articles as heading 38.08 covers all these items and this finds support from the H.S.N. Explanatory Notes which state that intermediary preparations requiring further compounding to produce ready for use insecticides etc. are also classified under heading 38.08 provided already possess pesticides /insecticidal properties. It is significant to note that prior to the Finance Bill of 1996 there was no distinction between the bulk packings, that is, Technical Grade pesticides/insecticides or retail packings and all the pesticide fell under heading 38.08. The amendments do not bring about any change and the only distinction that is made is between bulk packing and retail sale. There being no distinction between the bulk packing and retail sale prior to the Finance Bill, 1996 and admitted by the respondent we are unable to understand how the amendment could cease to be a pesticide and fall under Chapter 28 or 29 as separate Chemically defined compounds. The Chapter Notes exclude separate Chemically defined elements or compounds with the exception of insecticides, rodenticides, fungicides, herbicides etc.