2022 (8) TMI 103 - AT - Central Excise

Classification of goods - Fertilizers or Plant Growth Regulators (ZP-770 Kg.) - to be classified as fertilizer under CETH 3101 or as plant growth regulator under CETH 3808? - Rule 3(c) the General Rules for Interpretation of Central Excise Tariff Act 1985 - period November 2006 to September 2010 - period October 2010 to June 2011 - invocation of extended period of limitation - HELD THAT - The emphasis of the rule 3(c) is on the heading which provides the most specific description. The goods are to be classified as per their description and the general description should not be preferred before the specific description. Moreover in terms of Rule 3(b) mixture consisting of different materials is to be classified with reference to the major component which gives it the essential character. We find that in the case of impugned product the major constituent is seaweed powder extract. The learned adjudicating authority has not appreciated the provisions of Rule 3(a) and (b) correctly and has jumped directly to Rule 3(c) of the General Interpretation Rules which is not correct to our understanding. The classification of the goods should be done by the reference of the heading and chapter note. It is pertinent to note the Explanation given in Chapter 12.12 of HSN seaweed and other algae and it says that this Heading covers all seaweeds and other algae whether or not edible they may be fresh chilled frozen dried or ground. Seaweeds and other algae are used for various purposes (e.g. pharmaceutical products cosmetics human consumption animal feeding and fertilizers) and other that should be as such that this heading excludes Fertilizers of Heading 31.01 or 31.05. A plain reading of this note indicates that seaweed and other algae should also be used as fertilizer and when done so they fall under Heading 3101 or 3105 and even otherwise by referring to Note 3(b) of General Interpretation Rules the product in dispute falls under CETH 3101. Thus it was held by the Tribunal in the case of CCE ROHTAK VERSUS M/S. SAFEX CHEMICAL INDIA LTD. 2017 (9) TMI 140 - CESTAT CHANDIGARH that though the chemical examination report indicates the presence of ingredients like Auxin and Cytokinins are known to find use as Plant Growth Regulator percentage compositions of these ingredients have not been ascertained. It cannot be ruled out that these ingredients can be present in the small traces in the sample; the same can be called as fertilizer also. It is seen that such enzymes help in plant growth regulation are present but in only small traces i.e. 0.26% and 0.53% prior to 03.07.2010. For the period after 03.07.2010 even the traces are absent - the impugned goods cannot be classified as plant growth regulator just because small trace of 6-BA and 4-CPA are present. Invocation of extended period of limitation - HELD THAT - The appellants have stated that they have submitted their items and given all the details to the Department in 2006 itself and as such no intent to evade payment of duty by way of suppression concealment mis-representation etc. can be alleged and therefore the extended period cannot be invoked - the contentions of the appellants are agreed upon however as it is held that the appellant s submissions are acceptable on merits the issue of classification will not alter the position of the case in any manner. Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Classification of the product "Zymegold Plus" as either a 'fertilizer' under CETH 3101 or a 'plant growth regulator' under CETH 3808.
2. Validity of the adjudicating authority's reliance on Rule 3(c) of General Interpretation Rules.
3. Reliability of the test reports used by the Department.
4. Applicability of extended period for issuing show-cause notices.
5. Previous classification decisions and their binding nature.

Detailed Analysis:

1. Classification of Zymegold Plus:
The primary issue was whether Zymegold Plus should be classified as a 'fertilizer' under CETH 3101 or as a 'plant growth regulator' under CETH 3808. The appellants argued that Zymegold Plus, primarily composed of seaweed extract powder, provides nutrients to plants and should be classified as a fertilizer. They cited previous rulings, such as Leads Kem Vs. CCE and Jai Shree Rasayan Udyog Ltd. Vs. CCE, where similar products were classified under CETH 3101. The Department, however, contended that the presence of 6-BA and 4-CPA, which are plant growth regulators, justified its classification under CETH 3808.

2. Reliance on Rule 3(c) of General Interpretation Rules:
The appellants contended that the adjudicating authority's decision to classify Zymegold Plus under CETH 3808 by invoking Rule 3(c) of General Interpretation Rules was beyond the scope of the show-cause notice. They argued that the show-cause notice did not mention the application of these rules, making the order legally untenable. The judgment referenced the Supreme Court decisions in Ballarpur Industries Ltd. and Champdany Industries Ltd., which held that the adjudicating authority cannot go beyond the grounds specified in the show-cause notice.

3. Reliability of Test Reports:
The appellants challenged the reliability of the test reports used by the Department, stating that the reports were inconclusive and did not specify the quantitative percentage of ingredients like 6-BA and 4-CPA. They argued that the presence of these ingredients in small traces did not alter the essential character of Zymegold Plus as a fertilizer. The judgment cited the case of Safex Chemical India Ltd., which held that the mere presence of such ingredients in small traces does not qualify a product as a plant growth regulator.

4. Applicability of Extended Period for Issuing Show-Cause Notices:
The appellants argued that the extended period for issuing show-cause notices was not applicable as they had disclosed the composition and classification of Zymegold Plus to the Department in 2006. They cited the Supreme Court decisions in Anand Nishikawa Co. Ltd. Vs. CCE and Yashanand Filaments Pvt. Ltd. Vs. CCE, which held that extended periods cannot be invoked in the absence of intent to evade duty. The judgment agreed with the appellants, stating that there was no intent to evade payment of duty.

5. Previous Classification Decisions:
The appellants referenced a previous decision by CESTAT in their own case, where Zymegold Plus was classified as a fertilizer. They argued that the composition of the product had not changed, making the previous decision binding. The judgment also cited the case of Northern Minerals Ltd. Vs. CCE, where a similar product was classified as a fertilizer, a decision upheld by the Supreme Court.

Conclusion:
The judgment concluded that Zymegold Plus should be classified as a fertilizer under CETH 3101, not as a plant growth regulator under CETH 3808. It held that the adjudicating authority's reliance on Rule 3(c) was incorrect and beyond the scope of the show-cause notice. The test reports were deemed unreliable, and the extended period for issuing show-cause notices was found inapplicable. The appeals were allowed with consequential relief as per law.

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