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TMI Blog2024 (8) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh. 1. Background of the Case: * The applicant, M/s. Zuari Farmhub Limited is engaged in manufacturing trading and marketing of chemical Fertilisers, water soluble Fertilisers, seeds, pesticides and supply of allied services, all used in agriculture. * The process procures various raw materials generally known as micronutrients, such as Zinc, Manganese, Ferrous and so on, by way of imports or domestic purchases and prepares a mixture, to make it a micronutrient Fertiliser, by way of blending, as approved by Ministry of Agriculture of the particular State. It is understood that the mixture varies based on the soil culture. Currently, the Applicant is in the process of manufacturing two different sets of products, the composition of which is detailed in tabular format herein below: Product 1: Mangala Borosan Composition Product 2: MangalaGl Composition Items: Items: Zinc Sulphate Monohydrate (ZnSO4.H2O) 32.50% Zinc Sulphate Monohydrate(ZnSO 4.H2O) 17.00% Iron (II) sulphate (FeSO4) 28.00% Iron (II) sulphate (FeSO4) 13.00% Manganese (II) sulphate (MnSO4) 08.00% Manganese (II) sulphate (MnS04) 04.00% Borax 04.00% Borax 11.00% Dolomite 20.00% Dolomite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notified in Schedule-I under sub-heading "Ig MICRONUTRIENTS" of said Order. (iii) "Mixture of Fertiliser" is defined in Section 2(n) of the FCO, 1985 as a mixture of Fertilisers made by physical mixing of two or more fertilisers with or without inert material in physical or granular form and includes a mixture of NPK fertilisers, a mixture of micronutrient fertilisers and a mixture of NPK with micronutrient fertilisers; * In this backdrop, Appellant would like to mention that the products of the Appellant are covered under the Andhra Pradesh state government notification approving the standards of various grades of manufacturing the mixtures of micronutrients to be used as fertilisers. Concurrent reading of both definition and state notification establishes that products supplied by the Appellant are nothing but Fertilisers as per FCO, 1985 B. Most appropriate classification of the Fertilisers will be under chapter 31 of the First Schedule to The Customs Tariff Act, 1975. * The outset, the Appellant invites attention to the provisions of Chapter 31 to the First Schedule to the Customs Tariff Act, 1975, which prescribes for the classification of "Fertilisers". Further, releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 090 - as referred in Note 6 to Chapter 31 of the Customs Tariff Act, 1975. Therefore, the same would be most appropriately classifiable under HSN 3105 9090. * Further, the said fact has been accepted by various tribunal decisions, which confirms that micronutrients used as Fertilisers are classifiable under Chapter 31 and in specific 3105 9090. Details of ruling along with relevant extracts is provided below for immediate reference:- (a) In the case of CIBA India Ltd. Versus Commissioner of Customs, Chennai - 2009 (237) E.L.T. 207 (Tri. -Chennai); (b) Commissioner of Customs, Chennai Versus SLV Fertichem - 2018 (363) E.L.T 847 (Tri. -Chennai). C. Resorting to classification under Chapter 38 which provides for classification of miscellaneous chemical products, and includes preparations of chemical industry or allied industries, would be inappropriate. * At the outset, Appellant herein brings to the attention of this Authority that the product in the instant case is being made of multiple chemicals and is being looked up as preparations of chemical industry and resort to classification under Chapter 38, in specific heading 3824, which provides for classification of chemical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product is a blend of inorganic chemicals but failed to appreciate the fact that, it is a blend of such inorganic chemicals, which are specifically included in FCO, 1985 as micronutrients and hence more they cannot be merely said to be mixture of inorganic chemicals and classify under HSN 2833 29 90. Here, LAAR has failed to appreciate the inclusion of set of micronutrients in FCO, 1985 which are to be used as fertilizers only and nothing else. E. Product being a fertilizer should attract GST at the rate of 5% under HSN 3105 90 90. However, without prejudice to the said submissions, even if the product is to be considered as mixture of micronutrient as per FCO order, then rate of GST should be 12% under Chapter 38. * Basis the reading of the above facts and extracts of the judgements cited supra, the Appellant is of the view that products proposed to be manufactured and sold as micronutrient fertilizers are classifiable under Chapter 31 of the Customs Tariff Act, 1975 and specifically would bear an 8-digit code as 3105 9090. * Assuming that, the classification to be adopted for the products referred supra is 3105 9090, the rate of GST would be applicable as tabulated below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and would therefore attract rate of GST at 12%. SI.No Chapter / Heading / Subheading / Tariff Item Description of Entry Schedule and Rate of GST 182D 3105 Mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium; other fertilisers; goods of this Chapter in tablets or similar forms or in packages of a gross weight not exceeding 10 kg; other than those which are clearly not to be used as Fertilisers Schedule I - 5% (CGST - 2.5% and SGST - 2.5% or IGST - 5%) 45 3105 Mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium; other fertilisers; goods of this Chapter in tablets or similar forms or in packages of a gross weight not exceeding 10 kg, which are clearly not to be used as Fertilisers. Schedule III - 18% (CGST - 9% and SGST - 9% or IGST -18%) SI. No Chapter / Heading / Subheading / Tariff Item Description of Entry Schedule and Rate of GST 56 28 or 38 Micronutrients, which are covered under serial number 1(g) of Schedule 1, Part (A) of the Fertilizer Control Order, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Zuari Farm Hub Limited, having its registered office at No.74, Prestige Feroze, 3rd Floor , Cunningham Road, Vasant Nagar, Bengaluru - 560 052, Karnataka., to analyse the composition of the products referred in, meant to be used as fertilisers and confirm whether the said product comprises or it is made up of "Micronutrients" or " Mixture of Micronutrients". MCFL performed analysis and confirm that the composition of the products is as tabulated below: SI.No Parameter Mangala Borosan Mangala G1 Specification Result Specification Result 1 Zinc as Zn, per cent by weight, minimum 10.0 10.3 5.0 5.7 2 Iron as Fe, per cent by weight, minimum 5.0 5.2 2.0 2.4 3 Manganese as Mn, per cent by weight, minimum 2.0 2.3 1.0 1.4 4 Boron as B, per cent by weight, minimum 0.3 0.4 1.0 1.2 5 Copper as Cu, per cent by weight, minimum - - 0.5 0.6 Mangala Borosan Composition (by Qty) Mangala G1 Composition (by Qty) Items: items: Zinc Sulphate Monohydrate (ZnSO4.H2O) 32.50 Kg Zinc Sulphate Monohydrate (ZnSO4.H2O) 17.00 Kg Iron (II) sulphate (FeSO4) 28 00 Kg Iron (II) sulphate (FeSO4) 13.00 Kg Manganese (II) sulphate (MnS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. Therefore, in order to arrive at a conclusive classification of the product - "Mangala Borosan" / "Mangala Gl", the relevant Section Notes and Chapter Notes of Chapter 31 of the Customs Tariff Act are reproduced hereunder.- Chapter - 31 Chapter Notes ... 6. For the purposes of heading 3105, the term other fertilisers applies only to products of a kind used as fertilisers and containing, as an essential constituent, at least one of the fertilising elements nitrogen, phosphorus or potassium. 4. It is clearly evident that as per said Chapter Notes, for a product to be classified under Heading 3105 as Other Fertilisers, the same should contain at least one of the fertilizing elements namely - Nitrogen (N), Phosphorus (P), or Potassium (K). Further, in all the headings referring to Fertilizers, there is a clear necessity t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification, the description for Other Fertilisers is clearly mentioned and there is a pre-requisite that such products must contain one or more of the fertilizing elements viz.,Nitrogen, Phosphorous or Potassium. Further, while Fertilizers are classified under Chapter 31 of the Tariff, however, classification of a product is a function of not only the description of the Entries therein, but the inclusion / exclusions mentioned in the Section Notes and Chapter Notes further read with the General Rules of Interpretation. 7. The appellant submitted further that "in the instant case, products manufactured by the appellant though does not involve direct application of nitrogen, phosphorous or potassium (N, P, K as they are referred to in the chemical terminology), it is relevant to take note that, in the process of application of the product by the end user, one of the trace elements, viz. nitrogen gets emanated, with help of which i.e. nitrogen, it becomes possible to deliver the metal ions or micronutrients to the plant system. Therefore, though not directly, in the mixture of chemicals (micronutrients)". However, the Chapter Notes 6 to Chapter 31 of Customs Tariff Act, 1975 speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt material in physical or granular form and includes a mixture of NPK fertilisers, a mixture of micronutrient fertilisers and a mixture of NPK with micronutrient fertilisers. 9. In the "Explanation" under the said Section 2(h) it is clarified that for the purpose of Fertilizer, Essential plant nutrients include Primary Nutrients (Nitrogen, Phosphorous and Potassium) ... It may be noted that in the definition under Section 2(h) cited, "Fertiliser" means any essential substance used or intended to be used to provide "essential plant nutrients". As per the Explanation, such essential plant nutrients should contain Nitrogen, Phosphorous and Potassium. Relying on this definition does not change the ingredients required under the Customs Tariff / GST Rate Notification for determination of a product as Other Fertilizer / Fertilizer. It may be a fact that micronutrients mentioned by the Appellant are those Notified by the State Government, However, this does not change the classification of the product under the GST law. 10. In view of the above, we are in agreement with the Ruling of the Authority for Advance Ruling, Andhra Pradesh passed in Order AAR No. 11/AP/GST/2023 Dtd. 15.12.2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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