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TMI Blog2021 (10) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... omprising of 'List of Goods at 2.5% Rate' or Chapter 3002-Animal blood prepared for therapeutic, prophylactic or diagnostic uses; antisera and other blood fractions and modified immunological products, whether or not obtained by means of biotechnological processes; toxins, cultures of micro-organisms (excluding yeasts) and similar products- Entry 61 of ScheduleII of rate of GST on Goods, comprising of 'List of Goods at 6% Rate' 3. The appellant had contended that their products were rightly classifiable under chapter 3101 of the Customs Tariff Act, 1975. The Advance Ruling Authority vide order bearing No. GUJ/GAAR/R/23/2020 dated 02.07.2020 ruled that their products are classifiable under Heading No.3002 of the Customs Tariff Act, 1975 based on the findings as mentioned below: (i) From the details submitted by the applicant and comparing the same to the definitions and benefits of biofertilisers described in para-9 of the order, it can be seen that the above products manufactured and supplied by the applicant are biofertilisers. (ii) In para 9 of the order, the definitions and benefits of biofertilisers were mentioned as under: (a) As per dictionary, biofertilisers are def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of vegetable fertilisers is not available anywhere, hence it would have to be construed in generic terms. In generic terms, vegetable fertilisers would be the fertilizers derived from vegetable matter like compost and crop residues. (iv) As can be seen from the definitions, animal fertilizers and organic fertilizers are similar in definition whereas vegetable fertilizers are those obtained from vegetable matter like compost and crop residues. Further, these fertilizers are mixed directly in the soil and can improve the soil structure(aggregate) so that the soil holds more nutrients and water, and therefore becomes more fertile. However, biofertiliser consists of living microorganisms which, when applied to seeds, plant surfaces or soil, colonize the thizosphere or the interior of the plant and promotes growth by increasing the supply or availability of primary nutrients to the host plant. Besides as per Vikaspedia, biofertilizers are produced by culturing of microorganisms and that such cultured micro organisms are packed in some carrier material for easy application in the field. Thus on comparing the definition as well as the uses of Biofertilizers vis-a-vis Animal fertiliser/o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same nature as that of vegetable fertilizers. (iii) The impugned order has not considered the explanatory notes to HSN. The appellant wishes to draw attention of the Hon'ble Appellate Authority that HSN notes clarifies that chapter 3101 inter alia covers compost consisting of rotted waste vegetable and other matter where decay has been accelerated or controlled by treatment with lime, etc. The humic acid which is an ingredient of the product is complex organic acid by decomposition of dead vegetable matter. In common parlance, it can be called as compost. Further mycorrhizza which is an active ingredient contains live animals. Therefore, the Appellant submits that the products in question are classifiable as other fertilisers of heading 3101(Sl.No.182 of Schedule-I to the GST rate schedule). (iv) Further in this connection, the appellant wishes to submit that in an Hon'ble Rajasthan Advance Ruling authority vide its order bearing no. RAJ/AAR/2018-19/04 dated 16.06.2018 has dealt with similar product and has given a ruling that Bio fertilizer is a substance which contains living micro-organisms which, when applied to the seed, plant surfaces or soil colonizes the rhizophere or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the delay be considered in light of the merits of the case since the delay is not intentional. The appellant has placed reliance on Apex Court's decisions in the case of (i) Collector, Land Acquisition vs. Mst.Katiji [1987] 66 STC 228 (SC) and (ii)West Bengal Infrastructure Dev. Fin. Corpn.Ltd., reported in 2012 (279) ELT 3 (SC) wherein it was held that in case of high stake matters the appeals should not be disposed off on ground of delay and there could be cost imposed and delay condoned in the case of revenue appeals. 6. The appellant concluded their submission with a request that the Appellate Authority be pleased to hold that the products in question being bio fertilizers are classifiable under heading 3101. FINDINGS :- 7. We have considered the submissions made by the appellant in the appeal filed by them, their contentions during the course personal hearing as well as evidences available on record. We have also gone through the Ruling given by the GAAR. 8. The Advance Ruling was sought for by the appellant for appropriate classification and applicable rate of Goods and Services Tax for their products namely Rhizomyx and Rhizomyco. GAAR vide Advance Ruling No. GUJ/G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax regime and there may be bona-fide mistake on the part of a registered person. Therefore, the delay in filing of appeal in this case is condoned in exercise of the powers contained in proviso to the sub-section (2) of Section 100 of the Central Goods and Services Tax Act, 2017 (herein after referred to as the 'CGST Act, 2017') and the Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the 'GGST Act, 2017'). 10. On going through the submission given by the appellant, they have contended that the products manufactured by them are rightly classifiable under Heading 3101. However, we find that the appellant has not submitted any supporting documents to support their claim. We therefore proceed to decide the issue of classification of the products of the appellant viz. Rhizomyx and Rhyzomyco based on the evidences available on records. Before deciding the classification of the above products, we need to find out whether the products of the appellant i.e. Rhyzomyx and Rhyzomyco are biofertilisers as stated by the appellant. For that we are required to find out the definition of biofertilisers: * As per Wikipedia, biofertilisers are defined as a substance which con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... role of the fungus in the plant's rhizosphere, its root system. Mycorrhizae play important roles in plant nutrition, soil biology and soil chemistry. (b) Humic acid: A group of molecules that bind to, and help plant roots receive, water and nutrients. High humic acid levels can dramatically increase yields. Humic acid deficiency can prevent farmers and gardeners from growing crops with optimum nutrition. Further, brief of the details as per the brochures of Rhizomyco and Rhizomyx, is as under: (a) Rhizomyco: Rhizomyco is uniquely formulated with Novozymes proprietary blend of microbes and growth promoting substances containing eighteen species of endo and ectomycorrhizae in a soluble/injectable form to provide broad spectrum application for increased nutrient update and enhances root systems. It increases nutrient and water absorption, improves plant disease resistance, greatly extends the root system and improves stress tolerance. The said product is applied on Direct sown crops, transplanted crops and horticultural/tree crops as detailed below: (i) Application on Direct sown crops(oilseeds, cotton, melons, cucumber etc): First application-seed treatment: * 5 to 10 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il drenching or fertigation. * At the time of fertilizer application. * 250 grams per hectare: 0 to 6 year old crop. * 500 grams per hectare>6 year old crop. Second application: soil drenching or fertigation * 40 to 45 days after first application. * 250 grams per hectare: 0 to 6 year old crop. * 500 grams per hectare>6 year old crop. From the above details and comparing the same to the definitions and benefits/uses of biofertilisers described in para 10 above and also taking into consideration the fact that no chemicals are contained in the aforementioned products and there is the presence of endomycorrhiza and ectomycorrhiza (which are microorganisms), it can be seen that the said products manufactured and supplied by the appellant are biofertilisers. 12. In order to determine the classification and tax liability on the supply of the products RhizoMyx and Rhizomyco by the appellant and to decide as to whether these products are correctly classifiable under Subheading no.3101 or otherwise, we will be required to refer to the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 containing the headings, sub-headings as well as the rates of Central Tax GST ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her matter where decay has been accelerated or controlled by treatment with lime, etc. (7) Wool scouring residues. (8) Mixtures of dried blood and bone meal. (9) Stabilised sewage sludge from urban effluent treatment plants. Stabilised sewage sludge is obtained by screening the sewage effluent to remove large objects and settling out grit and heavy non-biological constituents; the remaining sludge is then allowed to air dry or is filtered. The stabilized sludge so obtained contains a high proportion of organic matter and also contains some fertilizing elements (e.g., phosphorus and nitrogen). However, such sludge containing other materials (e.g. heavy metals) at a high concentration, which make the stabilized sludge unfit for use as fertilizers, is excluded (heading 38.25). The heading also excludes: (a) Animal blood, whether liquid or dried (heading 05.11) (b) Powdered bone, horn or hoof, or fish waste (Chapter 5). (c) Flours, meals and pellets of meat or meat offal of fish or of crustaceans, mollusks or other aquatic invertebrates, unfit for human consumption (heading 23.01), and other products covered by Chapter 23(oil cakes, brewing or distilling drugs, etc.) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen applied to seeds, plant surfaces, or soil, colonize the rhizosphere or the interior of the plant and promotes growth by increasing the supply or availability of primary nutrients to the host plant. 14.1 Vikaspedia defines biofertilisers as under: In nature, there are a number of useful soil micro organisms which can help plants to absorb nutrients. Their utility can be enhanced with human intervention by selecting efficient organisms, culturing them and adding them to soil directly or through seeds. The cultured micro organisms packed in some carrier material for easy application in the field are called bio-fertilisers. Thus the critical input in Biofertilisers is the microorganisms. 14.2 As can be seen from the above definitions, animal fertilizers and organic fertilizers are similar in definition whereas vegetable fertilizers are those obtained from vegetable matter like compost and crop residues. Further, these fertilizers are mixed directly in the soil and can improve the soil structure (aggregation) so that the soil holds more nutrients and water, and therefore becomes more fertile. However, biofertiliser consists of living micro-organisms which, when applied to seeds, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ---- For measles, mumps and rubella (MMR). 3002 20 24 ---- For typhoid-paratyphoid (TAB) or typhoid paratyphoid-cholera (TABC) 3002 20 29 ---- Other. 3002 30 00 - Vaccines for veterinary medicine. 3002 90 - Other : 3002 90 10 --- Human blood. 3002 90 20 --- Animal blood prepared for therapeutic, prophylactic or diagnostic uses 3002 90 30 --- Cultures of micro-organisms (excluding yeast). 3002 90 40 --- Toxins. 3002 90 90 --- Other Relevant portion of Explanatory notes to HSN of Heading 3002 above reads as under: This heading covers: (A) Human blood. (B) Animal blood prepared for therapeutic, prophylactic or diagnostic uses. (C) Antisera and other blood---------- (D) Vaccines, toxins, cultures of microorganisms (excluding yeasts) and similar products. These products include: (1) Vaccines: ---- (2) Toxins: ----- (3) Cultures of micro-organisms(excluding yeasts). These include ferments such as lactic ferments used in the preparation of milk derivatives (kephir, yogurt, lactic acid) and acetic ferments for making vinegar; moulds for the manufacture of penicillin and other antibiotics; and cultures of micro-organisms for technical purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the soil and environment. Similarly, the products of the appellant helps/aids plant growth as it provides increased nutrient update and enhances root systems, increases nutrient and water absorption, improves plant disease resistance, greatly extends the root system and improves stress tolerance. In view of the above, looking to the process of manufacture/production of biofertilizers, their uses, the specific subheadings covered under the above heading as well as the explanatory notes to HSN of the above heading, it can be concluded that the biofertilizers namely Rhyxomyx and Rhyxomyco manufactured and supplied by the appellant are classifiable under Tariff item No.30029030 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), is covered under Sr.no.61 of Schedule-II of Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time ) and is liable to GST at 12% (6%SGST + 6% CGST). 17. The appellant has relied upon the decision of Supreme Court which has upheld the decision of CESTAT in the case of Northern Minerals ltd. v/s. Commissioner reported in 2001 (131) ELT. 355 (Tri.) in Civil Appeal Nos. 4970-72 of 2002 filed by Commissioner of Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they consisted of the material or component which gives them their essential character, in so far as the criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration." 17.1 As per Rule3(a) above, we find that where goods are, prima facie, classifiable under two or more headings, the heading which provides the most specific description shall be preferred to headings providing a more general description. The appellant has not given any specific grounds other than the reference to the aforementioned judgement to support their contention that their products are classifiable under Heading 3101. However, we find that Sub-heading 3002 provides the most specific description to the biofertilisers manufactured and supplied by the appellant, for the following reasons: (1) Biofertilisers are defined under Vikaspedia as 'cultured micro organisms packed in some carrier material for easy application in the field'. The products manufactured by the appellant are 'culture of microorganisms'. (2) Sub-heading 30029030 specifically mentions 'C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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