In the case of M/s. Sree Ramcides Chemicals Pvt. Ltd. Vs. CCE & ST, Tiruchirapalli, it was held that for the purpose of classification of fertilisers, it is important to see where the products consists of nitrogen phosphorous and potassium as laid down in the explanatory notes, it should be classified as “fertilizers”.
The brief facts of the case are that the appellant manufacture pesticides and plant growth materials and bio-fertilizers. The appellants in appeals No. E/510/10 and No. E/208/2010 are manufacturing Allwin Top powder, Allwin Wonder powder, Allwin gold 15 G Granules, Allwin XL granules, Rhino powder, Allwin gold-Liquid, Allwin XL-Liquid, Agrowet, Rishab-Liquid and Rock and classified them under CETSH 3101 0099 treating them as Animal/Vegetable fertilizers (or) bio-fertilizers. The department issued SCNs proposing to classify them under CETSH 3824 9090.
The Commissioner Central Excise confirmed the demand of Rs.1,63,92,339/- and also imposed equal penalty in his OIO No. 7/2010 dated 14.07.2010 in appeal E/508/10. For the subsequent period also he confirmed Rs.2,37,65,131/- and imposed a penalty of Rs. 25,00,000/- under Rule 25 of the Central Excise Rules, 2002, vide his order No. 1/2011 dated 27.01.2011 in appeal No. E/208/2011.
Contentions of the Assessee
The assessee submitted that the products manufactured by the appellant are classifiable as other fertilizers under chapter heading 3105 as all the items contain nitrogen, phosphorous and potassium or together. The adjudicating authority has not disputed the contents of the goods but only rejected the classification under CETH 3105 purely based on the reasoning that their goods are not covered under Fertilizers Control Order, 1995 (FCO). The Board’s Circular dated 24.05.1990, another Circular dated 21/11/1994 and Circular dated 19.05.1998. The assessee drew attention to chapter note 2 to chapter 61 and HSN explanatory note 6 and submits that as per note 6 for the purpose 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 element is nitrogen phosphorous or potassium.
Further it is submitted that these goods are not classifiable under 3824 and drew attention to the Explanatory Note sl.No. 47 and submitted that in order to classify the goods as plant growth regulators, the goods should be consisting of products classifiable under chapter 25 i.e. they are sand and clay, whether or not they contain small quantity of fertilizing elements nitrogen, phosphorous and potassium. Heading 3824 which relates to chemical products and preparations, not elsewhere specified or included in their case the products are not chemically defined products but are mixtures and they did not contain any soil or clay as media. It is only foliar spray applied on the plant. The assessee also drew attention to FCO and as per the definition, fertilizers means any specific use or intended to be used as fertilizer on the soil or rock and includes mix of fertilizer, bio-fertilizers and organic fertilizers. Therefore, these products are rightly classifiable under 3105 as they are other fertilizers as classified by Board’s Circular read with chapter note6.
Contentions of the Revenue
The revenue reiterated the findings of the OIO and SCN. As per FCO the definition of fertilizer means any substance used or intended to be used as a fertilizer of the soil and/or crop and specified in Part A or Schedule I and includes a mixture of fertiliser, the appellant’s products are not figuring in the schedule. Therefore, adjudicating authority has rightly held that these are not fertilizers as per FCO. The revenue relied on the Tribunal’s decision in the case of Himgiri Metals Pvt. Ltd. – 2014 (308) ELT 735 (Tri.-Del.) and in the case of CCE, Bangalore Vs. Karnataka Agro Chemicals – 2008 (227) ELT12 (S.C.). The revenue submitted that test report does not show that the goods are fertilizers. Whereas, she also submitted that in none of their packets, the appellants mentioned that they are fertilizers. The Revenue further drew attention to the order of the Hon’ble Supreme Court in the case of Karnataka Agro Chemicals (supra), wherein the Hon’ble Supreme Court remanded the case to the adjudicating authority to determine whether the presence of nitrogen to classify as fertilizer and pleaded for remand of the case to the adjudicating authority. Therefore, the adjudicating authority rightly classified the products as plant growth regulators under 3824. Dosth has been correctly classified under 3402 and in this regard she submits that the main pack Allwin wonder plus does not mentioned that Dosth is kept as free inside it. Therefore, they have not declared this Dosth as a combi-pack.
Held by Hon’ble CESTAT
The Hon’ble CESTAT stated that as plant growth regulators and rejected the classification under 31.05 purely on the ground that these products are not figuring under schedule to FCO, 1995. This was the sole ground for rejecting classification under Chapter 31. There is no dispute on the facts relating to the description of the contents, chemical composition etc., which has been admitted by the adjudicating authority as these goods are not mixtures and chemically defined. Having the department accepted the appellant’s plea that these are only mixtures but choose to classify them under 3824 as plant growth regulators. In this regard it is pertinent to see the chapter note 6 of chapter 31 and the corresponding HSN explanatory note to chapter 31.
HSN explanatory note and Chapter note 6 of chapter 31 is identically worded similar to chapter note 6 of chapter 31. It is seen from the above, in order to classify the goods under 3105 as other fertilizers, two condition are stipulated under chapter note the conditions to be satisfied i.e.
The period involved is October 2008 to 2012-13. During the relevant period, under heading 3105 the rate of duty was “Nil”. In this regard, it is pertinent to see the Board’s Circular dated 392/25/98-CX dated 19.05.98, wherein the Board has issued clarification on classification of Micronutrients.
It is seen from the above circular, Board has categorically clarified what is fertilizer and what is micronutrients. At para-6 of the Board’s Circular the Board has categorically stated that the Notification issued under FCO is irrelevant for deciding the classification under CET and also clarified FCO order the classification should be based on whether the goods are chemically defined compound only then the classification under 3105 is ruled out. Secondly, where the products consist of nitrogen phosphorous and potassium as laid down in the explanatory notes, it falls under other fertilizers. If these two conditions are not met only then the products can be excluded from chapter heading 31.05. As it is seen from the finding of the adjudicating authority and the test reports, the composition of the mixture contains either nitrogen, potassium or phosphorous, which has already been brought out in para-13 of the OIO dated 11.02.2015 and admitted that these products contain elements of N.P.K. single or combination. The Hon’ble CESTAT found that Allwin Wonder plus and Allwin wonder contains potassium and nitro benzene which has elements of both Nitrogen and potassium. In the case of Allwin Top plus and Allwin Top contains Mono ammonium phosphate, and potassium humate which contains both phosphorous and potassium. In the case of Allwin Legume and Allwin Elixier both products contain nitrogen, phosphorous etc., which clearly confirms as other fertilizers as stipulated under Chapter note 6 of chapter 31 and confirms Board’s Circular referred above.
As far as the second criteria is concerned, goods are used as fertilizer spray on the folio, which is not in dispute. As per the definition of the fertilizers, the fertilizers which are either mixed in the soil or also used externally in the form of spray. The Revenue relying on the citation of Hon’ble Karnataka and Himgiri Metals Pvt. Ltd. (supra) are distinguishable and not relevant to the facts of the present case. In that case, the Hon’ble High Court remanded the matter to the authority to confirm whether the products contain elements of nitrogen etc. Whereas, in the present case, there is no dispute on the composition as confirmed from the test reports and confirms that both nitrogen and phosphorous or nitrogen and potassium or either one of the above are present in these mixtures and the usage as folio spray is not under dispute. Therefore, the adjudicating authority relying Fertilizer Control Order (FCO) for deciding the classification under 3105 is not justified and not substantiated. Accordingly, the Hon’ble CESTAT hold that these products qualified to be considered as other chemical fertilizers and contain either nitrogen, phosphorous or potassium, which is the essential constituents to be classified under other fertilizers & these products are rightly classifiable under 3105 9090 and not under 3824 9090.
As regards Allwin Gold, the Hon’ble CESTAT found that the adjudicating authority proposed to classify it under 3808 9340. As already discussed above, the composition of the product contains nitro benzene (20%) and urea (3%) along with other chemicals, which is not under dispute. It is not the case here that the appellants are clearing nitro benzene as such but it is used as one of the raw materials for manufacture of the product which is Allwin Gold. Both urea and nitrobenzene contains nitrogen which is essential ingredient for fertilizers. Therefore, the Revenue classifying them as plant growth regulators is not justified. Therefore, the Hon’ble CESTAT hold that Allwin Gold is rightly classifiable under 3105 9090.
As regards the last item “Dosth”, this product was not declared by the appellant nor it was cleared separately but kept in the packets as a combi-pack. On perusal of the sample packet of Allwin wonder plus, it was found that Dosth is a wetting agent and kept inside the pack of Allwin wonder plus as 20 ml sachet. It is an option to the user to use this wetting agent comes with combi-pack. The Hon’ble CESTAT rely on the Tribunal’s decision in the case of Karamchand Appliances Pvt. Ltd. Vs. CCE, Chandigarh – 2012 (284) ELT 69, where the Tribunal dealt in the case of combi-pack the classification of the second item which contains in the main pack should be classified along with the main item.
The above citation squarely applicable to the present case. There is no dispute that that the appellants are not clearing the wetting agent separately. But it is packed inside Allwin Wonder plus and sell it as a combi-pack. Accordingly, the Hon’ble CESTAT hold that “Dosth” is rightly classifiable under 3105 9090 along with the main item.
In view of the above, the appeal is disposed of accordingly.