2008(11)LCX0211

BEFORE THE COMMISSIONER OF CUSTOMS (APPEALS), MUMBAI-II

Shri R.K. Jain

In Re: Mahafeed Speciality Fertilizers (I) Pvt. Ltd.

Order-in-Appeal Nos. 361-372(AC/2A)/2008(JNCH), dated 27-11-2008

Cases Quoted -

Assam Co. Ltd. v. Commissioner - 2001(01)LCX0243 Eq 2001 (133) ELT 0110 (Tribunal) - Relied on [Paras 6,7,9]

Commissioner v. Assam Co. Ltd. - 2001(08)LCX0370 Eq 2002 (146) ELT A218 - Relied on [Para 6]

Commissioner v. Pioneer Agritechnoscan and Exports Pvt. Ltd. - 2007(02)LCX0017 Eq 2007 (210) ELT 0680 (Tribunal) - Distinguished [Paras 4,6,9]

Commissioner v. Ratan Melting and Wire Industries - 2008(10)LCX0001 Eq 2008 (231) ELT 0022 (S.C.) = 2008 (012) STR 0416 (S.C.) - Relied on [Paras 6,9]

Union of India v. Kamlakshi Finance Corporation Ltd. -1991(09)LCX0044 Eq 1991 (055) ELT 0433 (S.C.) - Relied on [Para 6]

Departmental Clarification Quoted-

C.B.E. & C. Circular No. 44/2001, dated 6-8-2001 [Paras 6,8,9]

Advocated By -

Dr. Swapnil M. Bachchav, CMD Richfield, Dr. T.T. Patil, M.D., Mahafeed, Mr. Ashok Auti, Business Manager, Solufeed, Mr. B.M. Rao, Representative,
Mr. Sujay N. Kantawala Advocate and Mr. Ganesh Kanchan, M/s. Rajita, clearing Agencies (P) Ltd., for the Appellant.

[Order]. -

All these 12 appeals filed by these three appellants, being Mahafeed Specialty Fertilizers (India) Pvt Ltd., Richfeild Fertilizers Ltd., and Soloufeed Plant Products & Service Pvt., Ltd., (hereinafter referred to as appellants) are being disposed off by this Common Order as the issue to be decided by me is the common issue as regards classification of the goods as claimed by the respective appellants under CTH 3105 60 00.


2. In 6 appeals, the appeals have been filed in respect of assessments which were originally made granting the benefit under lesser rate of duty and the relevant exemption notification and the consignments were assessed as fertilizers. Less charge demands were issued and confirmed by the loser authority by separate adjudication orders and in view of the determination of classification under CTH 2835 24 00, the demands were confirmed and the appellants were directed to pay the differential duty along with applicable interest as per Section 28 AB of the Customs Act, 1962.


3. The balance 6 appeals have been filed in respect of excess duty paid under protest pursuant to the denial of reduced rate of duty. In all these 12 appeals, the goods have been declared as Mono Potassium Phosphate or Calcium Nitrate and the benefit for fertilizer under CTH 3105 60 00 has been claimed. The view of the department is that the imported goods are not fertilizers and are classifiable under chapter 28 which covers different types of chemical compounds and nitrates. Hence, I am proceeding to decide all the 12 appeals together by way of a Common Order.


4. Broadly, the contention of the appellants in the body of the appeal memos appears to be, that the chemical composition of the imported goods clearly indicates their end use as fertilizer, because they are deliberately modified or impurities are left behind and hence, they can only be used as fertilizers. They contend that end use is very important for classification. The analysis also proves that the goods are conforming to the criteria of fertilizers in the encyclopedia dictionaries. They appear to suggest that a separate chemically defined compound has completely different characteristic property and fertilizer is not or rather can never be classified as a separate chemically defined compound. On the other hand, the view of the adjudicating authority appears to be that the Hon'ble CESTAT in the case of Pioneer reported in 2007 (210) ELT 680 has decided the issue in favour of the Revenue and the Board Circular read with the HSN notes hold the imported goods as classifiable under chapter 28.


5. The personal hearing was attended by Dr. Swapnil M. Bachchav, CMD, Richfield, Dr. T.T. Patil, M.D., Mahafeed Mr. Ashok Auti, Business Manager, Solufeed, Mr. B.M. Rao, Representative, Mr. Sujay N. Kantawala, Advocate and Mr. Ganesh Kanchan, M/s. Rajita Clearing Agencies (P) Ltd.


6. It was submitted before me, that apart from the averments made in the respective appeals, written submissions, in the form of a compilation of documents which was filed toady may also be taken into consideration. The Ld. Counsel submitted that the lower authority had simply relied upon the decision reported in 2007 (210) ELT 680, in the case of Pioneer Limited, which clearly was not a binding precedent as it was rendered per incurriam. The decision in the case of Assam Company Limited reported in 2001 (133) ELT 110, which was a very detailed order and contained great wealth of material and which was subsequently upheld by the Hon'ble Apex Court, as reported in 2001(08)LCX0370 Eq 2002 (146) ELT A218 was clearly binding on the appellate authority and should be followed unreservedly while deciding this batch of appeals. As far as the Board's Circular dated 6-8-2001 is concerned, the Board Circular is subsequent to the decision of the CESTAT in the case of Assam Company Limited as well as Hon'ble Apex Court and in view of the recent decision of the Hon'ble Apex Court in the case of Ratan Melting and Wire Industries reported in 2008(10)LCX0001 Eq 2008 (231) ELT 0022 (S.C.) = 2008 (012) STR 0416 (S.C), the Hon'ble Apex Court has inter alia held that when the Supreme Court or the High Court declared the law, any departmental clarification in conflict thereto, would have not existence in law. The decision in the case of Kamalakshi Finance Corporation report in 1991(09)LCX0044 Eq 1991 (055) ELT 0433 (S.C.) inter alia lays down that all orders/decisions of higher appellate authority are binding on loser authorities. The Apex Court decision in the case of Assam Company Limited appears to not have been noticed by the West Zonal Bench of the CESTAT at Mumbai. Thus the Supreme Court decision apparently over the decision in the case of pioneer. He further stated that the goods imported under the bills of entry, in the present appeal, all have been sold to farmers for use as fertilizer. The end use is a necessary criteria and therefore this clearly proves that the goods cannot be classified anywhere else but under chapter 31.05. Substantial documentary evidence was undertaken to be filed within one week from the date of hearing. Dr. Patil, advanced submissions on the technical/scientific aspects of the goods. He stated that hundreds of bills of entry had been assessed, prior to the impugned assessments and various persona have enjoyed the benefit of lesser rate of duty payable under 31.05 as fertilizers. He stated that under the Fertilizer (Control) Order 1985, state-wise licences are issued as these goods are notified as essential commodities under the Control Order and hence, even statutory requirement prevails, to sell the imported goods only as fertilizer. Documentary evidence was produced in this regard. Written submissions have been filed along with annexures subsequently on 25th November, 2008 and these support the contention that classification should be as fertilizers only. These evidences are showing that the goods imported by them are controlled by them are controlled by the Agricultural department of the government being fertilizers. The booklets and packs of the impugned goods show that they are fertilizers. The website e.g. www.mahafeedwsf.nt also confirm the fact of the impugned goods being fertilizers FINDINGS.


7. I have carefully perused the appeal files and records and it clearly appears that the impugned orders deserve to be set aside as the consignments deserved to be classified under chapter 31. Based on my personal knowledge of chemistry and experience of work in an agricultural research institute, I can understand that the impugned goods are fertilizers and used as fertilizers for trying to improve the yield of a variety of agricultural products. The chemical composition clearly proves that they are nothing but fertilizers. Chemical compounds for laboratory use or for use in manufacture have to conform to the purity standards to get the desired result in the laboratory or get the desired reaction and chemical products as per the process of manufacture for desired end products. On the other hand the impugned goods are not separate chemically defined components whose use in chemical reactions would be split by impurity while the impugned goods have impurity which help in their use as fertilizers. The chemical dictionary supports the appellants' case. It is the appellant's case that, the phrase, "Separate Chemically Defined Compound" in note no. 1 (b) to Ch. 31, lays down that it must be separate, it must have a chemical definition and it must be a compound, i.e. an individual chemical. In the case of Assam Company Limited, the Hon'ble CESTAT has considered the rival entries and has come to a conclusion that is the product contains sodium and chlorine they are suitable for use as fertilizers. It would appear from the HSN Explanatory Notes that a separate chemically defined compound is a single chemical compound of known structure which does not contain other substances deliberately added during or after its manufacture (including purification). Such separate chemically defined compounds may contain impurities such as unconverted starting materials, impurities present in the starting materials, re-agents used in the manufacturing process (including purification) and by-products. However, if a particular substance is deliberately left in the product with a view to rendering it particularly suitable for specific use rather than for general use, it is not regarded as a permissible impurity. He laid emphasis on a certain portion of the observations of the CESTAT in Assam Company Limited which are reproduced as follows. "Hence, the presence of sodium as sodium nitrate in fact renders the imported product particularly suitable for specific use as fertilizer. It is submitted that Brine (sodium chloride) is deliberately added (process flow chart) and sodium nitrate and chlorine are deliberately left in the manufacture of the imported product. The Assistant Commissioner has accepted that the goods in question also contain sodium nitrate. The presence of sodium nitrate makes the product hygroscopic. Because of this hygroscopic property the imported product cannot be used as a constituent of fire work or gun powder. The Fertilizer (Control) Order, 1985 specifically mentions that potassium nitrate for use as fertilizer contains sodium and chlorine". Read with these observations and the fact that the analysis results conform to the specification of Mono Potassium Phosphate Fertilizers as mentioned in the Fertilizer (Control) Order; there is merit in the appellants submission. The appellants have submitted that a comparison between the constituents of the imported fertilizers and the separate chemically defined compound set out in the Merck Index (ibid) shows that the imported fertilizers have almost double the potassium and phosphate contents and also have other ingredients which are absent in the definition mentioned in the Merck Index. Hence, it is crucial to the entire case to note the three important points of the phrase "separate chemically defined compound" It must be separate, must have a chemical definition, and must be a compound. It must be separate, distinct and identifiable individual substance and, therefore, it must have characteristics of its own, as distinct and different from its constituent elements. Hawleys (ibid) explains the definition of compound as a substance composed of atoms or ions of two or more elements in chemical combination. The constituents are united by bonds or valence forces. "A Compound, a homogeneous entity where the elements have definite proportions by weight and are represented by a chemical formula". It has characteristic properties quite different from those of its constituent elements. that is why, it is submitted, such compounds are mentioned as separate chemically defined compounds.


8. No substance containing any of the aforesaid fertilizing elements can be classified there under in view of the contentions raised in Order-In-Original that these substances are not covered by the four exclusion notes of chapter 31. The implication is that the substances containing any of these fertilizing elements are separate chemically defined compounds and therefore, have to be classified under Chapter 28. This will lead to an absurd situation. The basic flaw therefore, I to treat these fertilizer grade calcium nitrate, potassium phosphate, etc., as separate chemically defined compounds. The aforesaid Circular No. 44/2001 cannot be relied upon the fact of vast technical evidence and the law laid down by the Apex Court.


9. Hence, in view of the decision of the Hon'ble CESTAT, in the case of Assam Company Limited, also upheld by the Hon'ble Supreme Court of India and respectfully following the ratio and guidelines of the Hon'ble Supreme Court in the case of Ratan Melting and Wire Industries, I am left with no other option but to follow the ratio laid down in the case of Assam Company Limited which is squarely binding on me. The Board Circular being in conflict with the Supreme Court view upholding the decision in Assam Company Limited and the CESTAT order having merged in the Supreme Court Order, the plea of the assessee deserves to be upheld. I have carefully perused the plethora of discussions and reasons which have been reflected in the CESTAT decision of Assam Company Limited upheld by the Supreme Court. The later decision of CESTAT, Mumbai has not considered the decision of the East Regional Bench and to that extent it is not having presidential value. A decision is a reliable precedent when it has considered all past decisions and aspect. The decision in the case of Pioneer to that extent has been rendered per incuriam. I also cannot ignore the fact that for the last many years, the benefit of lesser duty was being allowed and that these goods are sold also as per the statutory mandate and requirement of the Fertilizer (Control) Order, 1985, only as fertilizers.


10. Hence, there cannot be any other view adoptable in these appeals and hence all the assessment orders determining the classification under CTH 28352400 are set aside and the respondent is ordered to classify under CTH 31056000 and grant consequential reliefs, in accordance with law.


11. Appeals are allowed to the extent as stated above.

Equivalent 2009 (237) ELT 0627 (Commr. Appl.)