TMI Blog2021 (10) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... ing only two types of Bio-fertilizers namely Phosphate Solubilising Bacteria and Potassium mobilising Bio-fertilizers. Hence, it can be presumed that the composition of inputs submitted by them pertains to these two products only and therefore the classification to be decided is in respect of these two products only - in the instant case, the two products i.e. Phosphate Solubilising Bacteria and Potassium mobilising Bio-fertilizers contains a mixture of various inputs in which Organic manure is the main input since it constitutes 50% of the final product. Since the two products i.e. Phosphate Solubilising Bacteria and Potassium mobilising Bio-fertilizers contains a mixture of various inputs, reference will be required to be made to Rule 3(b) of the General Rules for the interpretation of Customs Tariff, in order to sort out the matter. As per Rule 3(b), mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as the criterion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utors in Maharashtra, Gujarat, Madhya Pradesh and Rajasthan. The appellant had filed an application on 15.08.2020 before the Gujarat Authority of Advance Ruling (hereinafter referred to as GAAR) seeking Advance Ruling on the classification of Organic Fertilizers, Bio-fertilizers, Nitrogeneous mixture fertilizers and Mixture fertilizers. GAAR vide order No. GUJ/GAAR/R/71/2020 dated 17.09.2020 classified the aforementioned products as under: (1) Organic manure was classified under Chapter sub-heading No.31059090 on which GST liability was 5% (2.5%SGST + 2.5%CGST). (2) Bio-fertilizers were classified under Chapter sub-heading No.30029030 on which GST liability was 12% (6%SGST + 6%CGST). (3) Nitrogeneous mixture fertilizers were classified under Chapter subheading No.31029090 on which GST liability was 5% (2.5%SGST + 2.5%CGST). (4) Mixture of fertilizers was classified under Chapter sub-heading No.31059090 on which GST liability was 5% (2.5%SGST + 2.5%CGST). 2. Aggrieved with the aforesaid ruling, the appellant has filed the present appeal on 28.10.2020 challenging the classification of Bio-fertilizers given as per the Advance Ruling of GAAR. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nulation drum. 3. Granulator Drum: During granulating, there is a water pump to offer water and makes fertilizer particles forming easily. The solid fertilizer powder after granulating will rise by the rotation of the cylinder and scroll down under the effect of gravity. After several times repetition of the same rotation, fertilizer materials gradually form. Next the conveying belt sends the materials to rotary drum drying machine and cooling machine. 4. Drier Drum: In this process, drier drum rotates and there is coal furnace to supply hot air to drying machine so as to increase the strength of granules after granulation from granulator drum. After drying, the conveyor belt sends the granules to cooling drum. 5. Cooler Drum: In this process, the cooler drum rotates and there are draught fans to supply normal air so as to further increase the strength of granules. After cooling, the conveyor belt sends the granules to vibrating screen. 6. Screening Process: In the process of screening, the qualified materials can be sent to packaging machine by conveyor, while others are conveyed back to crusher or granulator to be reprocessed. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , bio-fulvic acids, amino acids, potassium humate, rock phosphate. b. Carrier material such as gypsum, bentonite and dolomite. c. Bio-fertilizers(Micro organisms). Appellant submits that micro organisms are used along with various other components and are not sold as micro organisms for pharmaceutical use and therefore, their classification under chapter heading 30029030 is not valid. (iv) The Bio-fertilizers manufactured by the appellant are a mixture of various components used by buyers to increase the productivity of soil or crop. It has no purpose as a pharmaceutical product and thus it s classification under HSN 3002 is not valid and should be covered under chapter heading 3101. (v) Bio-fertilizers are also permitted to be used for Organic farming. The key elements of components are as follows: Component Key Element Organic manure Carbon, Nitrogen, Phosphorous and Potash. Coal powder Organic carbon. Bone meal Phosphorus, organic carbon and calcium. Bio-fulvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fertilizers under Chapter heading 3101 at applicable GST @5%, copy of which has been submitted. 6. The appellant vide additional submission dated 30.04.2021 has submitted as under: (i) the composition of the inputs in their product Bio-fertilizer is as under: Sr.No. Raw material Percentage 1. Organic manure 50% 2. Lignite/Coal powder 5% 3. Bio-Fulvic 2% 4. Potassium Humate 1% 5. Rock Phosphate Mineral 5% 6. Bio Culture 2% 7. Ball Clay Mineral Powder 30% 8. Gypsum(Carrier Material) 15% 9. Dolomite Mineral(Carrier Material) 5% Total input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fertilizers i.e. specification of contents and these specifications are strictly followed by the appellant. Relevant extract of FCO i.e. Page 177 to 182 has been attached. (v) As per FCO, it is mandatory condition to hold a license which permits manufacture and sale of the product as bio-fertilizers, that the appellant has obtained the license from the Deputy Director of Agriculture(Ext.), Bharuch and the products under question are listed as Bio-fertilisers in the license(copy of same submitted). Also, dealer who purchases Bio-fertilizer from appellant are also required to hold a License in order to sell the product to farmers as Biofertilizers. Copies of licenses held by few purchasers is also submitted. (vi) The aim and objective of issuing FCO is welfare of farmers and as appellant is following the specifications given in the FCO, it is clear that they are manufacturing a product intended to be used by the farmers. Further, the dealers who buy the Bio-fertilizers from the appellant also hold a license for sale of Bio-fertilizers and therefore it can be said that the goods are manufactured with intention of use for agriculture only. (vii) In order to substantiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the applicable rate of Goods and Services Tax on the said product. 10. The appellant has submitted that their product Bio-fertilizers are classifiable under Chapter Heading 3101 and stated that it is used for agriculture purpose and helps in increasing the productivity of the soil or crop. The appellant has also contended that the Advance Ruling Authority has relied on the definition of Bio-fertilizer as given in Vikaspedia and based on this definition, had classified their aforementioned product under Chapter Heading 30029030. So the main issue to be decided is whether the product Bio-fertilizer , manufactured and supplied by the appellant falls under Chapter Heading 3101 or 3002 or some other Chapter heading under the Customs Tariff Act, 1975(51 of 1975). 11. To begin with, a reference is required to be made to the definitions of biofertilizers. Definition of Bio-fertilizers as per Wikipedia and Vikaspedia are as under: As per Wikipedia, biofertilisers are defined as a substance which contains living micro-organisms which, when applied to seeds, plant surfaces, or soil, colonize the rhizosphere or the interior of the plant and promotes growth by increasin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or nutrient mobilization, to increase the productivity of soil or crop; that the micro organisms are used along with various other components and are not sold as micro organisms for pharmaceutical use and therefore, their classification under chapter heading 30029030 is not valid. The appellant has further submitted that the different types of bio-fertilizers that can be manufactured are Phosphate Solubilising Bacteria, Potassium Mobilizing Biofertilizers Rhizobium, Azatobacter, Azospirillium, Myccorhizal Bio-fertilizers, Zinc solubilising Bio-fertilizers, Acetobacter, Carrier Based Consortia, Phosphate Solubilising Fungal Bio-fertilizer and Liquid Consortia; that presently, they are producing Phosphate Solubilising Bacteria and Potassium mobilising Biofertilizers and the rest of the products can be manufactured as and when there is demand in the market and due to it s limited usage purpose i.e. agriculture use, end consumers are agriculturists. The appellant has submitted the composition of the inputs in their product Bio-fertilizer as under: Sr.No. Raw material Percentage 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely Phosphate Solubilising Bacteria and Potassium mobilising Bio-fertilizers. Hence, it can be presumed that the composition of inputs submitted by them pertains to these two products only and therefore the classification to be decided is in respect of these two products only. The appellant has also submitted that the main source of Organic manure is animal waste and that the key elements contained therein are carbon, nitrogen, phosphorus and potash. We, therefore, find, that in the instant case, the aforementioned two products i.e. Phosphate Solubilising Bacteria and Potassium mobilising Bio-fertilizers contains a mixture of various inputs in which Organic manure is the main input since it constitutes 50% of the final product. Therefore, in order to clarify the matter, we will be required to refer to the General Rules for the interpretation of Customs Tariff which reads as under: Classification of goods in this Schedule shall be governed by the following principles: The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fertilizers contains a mixture of various inputs, reference will be required to be made to Rule 3(b) of the General Rules for the interpretation of Customs Tariff, in order to sort out the matter. As per Rule 3(b) above, mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as the criterion is applicable. Since the two products, as discussed earlier are mixtures that constitute of 50% organic manures, it can be construed that organic manure is the main component in the mixture and therefore, it is Organic manure which gives the mixture it s essential character. Therefore, in light of Rule 3(b) of the General Rules for the interpretation of Customs Tariff, the aforementioned products of the appellant would be rightly classifiable under the Chapter Sub-heading applicable to Organic manure only. 18. We also find that the impugned order of Advance Ruling of GAAR has already decided the classification of Organic manure since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... together and chemically treated or otherwise and those obtained by mixing or chemical treatment of animal or vegetable products. The said interpretation finds support in the technical definition of the term organic fertilizer which reads as Organic fertilizers are fertilizers derived from animal matter, animal excreta(manure), human excreta and vegetable matter (e.g. compost and crop residues). Naturally occurring organic fertilizers include animal wastes from meat processing, peat, manure, slurry and guano. In contrast, the majority of fertilizers used in commercial farming are extracted from minerals (e.g. phosphate rock) or produced industrially (e.g. ammonia). (iii) The definition in the trade parlance also clearly indicates that Organic Fertilisers are solely obtained from animal or vegetable matter and no other ingredients are present in them. In the instant case, the composition of the Organic Fertilizers as provided by the applicant reveals that it is a mixture of various elements and as such the same should be examined in light of the fact whether the mixture consists of animal or vegetable products or otherwise. The above analysis of the individual ingredi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sphates - 3105 59 00 -- Other - 3105 60 00 - Mineral or chemical fertilisers containing the two fertilising elements phosphorus and potassium 3105 90 - Other : 3105 90 10 --- Mineral or chemical fertilisers containing two fertilizing elements namely nitrogen and potassium 3105 90 90 --- Other (v) On going through the entry of the above product in the Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(as amended vide Notification No.18/2017-Central Tax(Rate) dated 30.06.2017), it is found that the same appears at Entry No.182D of Schedule-I(on which effective rate of GST is 5%(2.5% SGST + 2.5% CGST) which reads as under: S.No. Chapter/Heading /Sub-heading/ Tariff item Description of Goods. 182D 3105 Mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium; oth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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