2008(12)LCX0129

IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI

Ms. Jyoti Balasundaram, Vice-President and Shri P. Karthikeyan, Member (T)

Ciba India Ltd. & Ors.

Versus

Commissioner of Customs, Chennai & Anr.

Final Order Nos. 1458-1462/2008, dated 17-12-2008 in Appeal Nos. C/88/2008 and E/96,103-105/2008

Advocated By -

S/Shri M. Balagopal and N. Prasad, Advocates, for the Appellant.
Shri V.V. Hariharan, JCDR,for the Respondent.

[Order per: Jyoti Balasundaram, Vice-President]. -

The issue in this appeal relates to classification of "LIBREL Brand Micronutrients" imported by the appellants herein for agricultural use - whether under Customs Tariff Heading 29.22 as held by the Commissioner or under CTH 31.05 as claimed by the importers. The imported item contains Ethylene Diamine Tetraacetic Acid (EDTA) which is a chelating agent and also contains nitrogen, zinc, manganese and iron. There is no dispute that it is used as a fertilizer. As per Note 6 to Chapter 31 of the CETA, 1985, the term "other fertilizers" applies only to products of a kind used as fertilizers containing, as an essential constituent (emphasis applied) at least one of the fertilizing elements nitrogen, phosphorous or potassium. The department has relied upon clarification issued by the Regional Fertilizer Control Laboratory, Chennai under cover of letters dated 30-10-2006 and 4-1-2007 that the products are micronutrient fertilizers under the Fertilizer Control Order and incidentally contained small quantities of nitrogen because of the chemical composition and cannot be claimed as primary source of nitrogen, to hold that nitrogen is not an essential constituent so as to classify the goods under Chapter 31. However, we note that the International Institute of Biotechnology and Toxicology (IIBAT) has certified on 19-12-2006 that during the process of supply of potential micronutrients for the plant growth, once the micronutrients are delivered at the plant system EDTA breaks out resulting in elemental nitrogen which further helps to promote the plant growth and that without nitrogen it is not possible to deliver the metal ions or micronutrients to the plant system. This certificate was placed by the appellants before the authorities below. Further reliance placed by the Revenue on the specific exclusion of separate chemically defined compounds from Heading 3105.90 in the HSN Explanatory Notes (the EDTA chelate is separate chemically defined compound) is also misplaced for the reason that HSN Explanatory Notes to Chapter 29 clearly state that separate chemically defined compounds containing other substances deliberately added during or after their manufacture are excluded from Chapter 29 and the product in dispute contains zinc/manganese/iron which is deliberately added. In the light of the above discussion, we hold that the imported item falls for classification under CTH 3105.90 of the Customs Tariff Act, 1975 as micronutrient and not under CTH 29.22, that the benefit of the exemption from payment of CVD and SAD under Notification 4/2006 (S. No. 63) and 20/2006 (S. No. 4) is available to the goods, set aside Order-in-Original No. 7114/2008 dated 30-1-2008 challenged in Appeal No. C/88/2008 and allowed the Customs appeal.


2. Appeal No. E/96/2008, E/103, 104 and 105/2008 which arise out of Order-in-Original No. 33/2007 dated 30-11-2007 holding that the product falls under Chapter Heading 29.22 of the CETA and confirming duty demand of Rs. 86,93,511/- together with Education Cess of Rs. 1,73,870/- on micronutrients repacked and relabelled by M/s. Swathi Organics & Chemicals (P) Ltd. and imposing penalties of Rs. 88,67,381/- on M/s. Swathi Organics & Chemicals (P) Ltd. and Rs. 9 lakhs and Rs. 4.5 lakhs respectively on its Managing Director and Executive Director and Rs. 7.50 lakhs on M/s. Ciba India Ltd. are also allowed, in the light of our finding on classification of the product under Chapter Heading 31.05 of the Customs Tariff as there is no deeming fiction in Chapter 31 of the CETA, 1985 that repacking and relabelling amounts to manufacture so as to give rise to duty liability of M/s. Swathi Organics & Chemicals (P) Ltd. (such deeming fiction is contained in Chapter 29 of the CETA, 1985). In the result, the impugned orders are set aside and the appeals allowed.

(Operative portion of the order was pronounced in open court on 17-12-2008)

Equivalent 2009 (237) ELT 0207 (Tri. - Chennai)

Equivalent 2009 (091) RLT 0943 (CESTAT-Che.)