1996(06)LCX0099

IN THE CEGAT, SPECIAL BENCH `C’, NEW DELHI

S/Shri Shiben K. Dhar, Member (T) and A.C.C. Unni, Member (J)

KISAN CHEMICALS

Versus

COLLECTOR OF CUSTOMS, NEW DELHI

Final Order No. 470/96-C, dated 18-6-1996 in Appeal No. C/473/93-C

Cases Quoted

Collector v. Gujarat State Fertilizers Co. Ltd. — 1996(01)LCX0114 Eq 1996 (083) ELT 0624 (Tribunal)                      [Paras 2, 6]

Mechanical Packing Industries Pvt. Ltd. v. U.O.I. — 1987(08)LCX0002 Eq 1987 (032) ELT 0035 (Bom.)                        [Para 2, 6]

International Packing Industry v. CBEC — 1987(07)LCX0049 Eq 1987 (032) ELT 0317 (AP)                                        [Paras 2, 6]

Collector v. Markfed Agro Chemicals — 1993(09)LCX0058 Eq 1993 (068) ELT 0848 (Tribunal)                                   [Paras 3, 7]

Kissan Chemicals v. U.O.I. — 1996 (014) RLT 0629 (Del.)                                                                      [Para 3]

Khandelwal Metal & Engg. Works v. U.O.I. — 1985(06)LCX0008 Eq 1985 (020) ELT 0222 (SC)                                         [Para 4]

Collector v. Roha Dyechem (P) Ltd. — 1989(03)LCX0059 Eq 1989 (041) ELT 0667 (Tribunal)                                             [Para 6]

Alkali & Chemicals Corpn. of India v. Collector — 1985(02)LCX0068 Eq 1987 (029) ELT 0635 (Tribunal)                     [Para 7]

Advocated By : Shri J.P. Kaushik, Advocate, for the Appellant.

 Shri J.M. Sharma , JDR, for the Respondent.

[Order per : Shiben K. Dhar, Member (T)]. - This appeal is directed against the order-in-appeal No. C3/190/92, dated 11-3-1993. The impugned goods claimed to be fungicides have been held as classifiable under Customs Tariff Heading 29.42 for the purpose of customs duty. For the purpose of countervailing duty (CVD), the goods have been held to be classifiable under Central Excise Tariff Heading 29.42. Hence this appeal.

2. Arguing for the appellants, learned Advocate submits that whereas for customs duty, Chapter Heading 29.42 is correct, for purpose of CVD, proper heading would be 38.08 since this entry specifically refers to `fungicides’. The authorities below have wrongly held that `Dodine’ imported by them as `fungicide’ is only a `fungicidal chemical’. The lower authorities have pressed into service Notification No. 33/91-C.E., dated 25-7-1991 to hold against them. This reliance is totally misplaced. Purpose of an exemption Notification is to exempt goods and not to supply the norms for classifying the goods. In support of his contention, he places reliance on the case of CCE, Vadodara v. Gujarat State Fertilizers Co. Ltd. [1996(01)LCX0114 Eq 1996 (083) ELT 0624 (Tri.) = 1996 (013) RLT 222], Mechanical Packing Industries Pvt. Ltd. v. Union of India and Another [1987(08)LCX0002 Eq 1987 (032) ELT 0035 (Bom.)] and International Packing Industry [1987(07)LCX0049 Eq 1987 (032) ELT 0317 (AP)]. In their case, it is true that they imported `Dodine’ technical grade of 98% purity. This by itself would not mean that what they imported is not fungicide. Drawing our attention to the Insecticides Act, 1968, he submits that `Dodine’ is specifically included in the Schedule to this Act as a fungicide. No purity percentage has been laid down. In other words, the impugned goods under Insecticide Act itself are not qualified by any conditions in regard to purity to be considered as fungicide. Customs Tariff Heading 38.08 specifically refers to fungicide and others put up in forms or packing for retail sale or as preparations or articles. Central Excise Tariff Heading 38.08 however, does not refer to these conditions as are found in the Customs Tariff Heading 38.08. This heading only refers to insecticide, fungicide etc. without any conditions attached thereto. Since the two headings are not aligned, the goods for the purpose of Customs duty have been correctly classified under Heading 29.42. The conditions as indicated earlier regarding packing for retail sale are not to be found in the Central Excise Tariff Heading 38.08. The goods are straightway covered by the specific entry of Central Excise Tariff Heading 38.08.

3. Percentage purity could not determine the nature of the product as such. In the case of B.H.C. technical grade, it was held by the Tribunal in the case reported in 1985 ECR 1392 that BHC is a pesticide. Similarly, dilution cannot be held to be a criterion as held by the Tribunal in the case of C.C.E. v. Markfed Agro Chemicals reported in 1993 (068) ELT 848. The Order No. 40/2/95-CX of CBEC issued under Sec. 37B of CESA, 1944 clarified that dilution of technical grade pesticides by addition of solvents etc. amounts to manufacture. This order was however quashed by the Hon’ble Delhi High Court in the case reported in 1996 (014) RLT 0629 (Del.). The High Court discussed the Tribunal’s order in the case of Markfed Agro Chemicals and in the light of that, quashed Board’s order. He submits that this fact alive, even assuming it is a chemical, would not take away the character of `fungicide’ from the goods since CBEC itself in the order issued under Sec. 37B in para 6 held that pesticide chemicals and formulations will both be classified under Heading 38.08 of CETA, 1985. Assuming therefore, as held by the lower authorities, that the impugned goods are `fungicide chemicals’, they would still attract classification under Heading 38.08 of CETA, 1985. He also draws attention to Madurai Collectorate Trade Notice No. 120/86, dated 27-10-1986. This Notice clarified that whatever be the mode of packing and whether or not of technical grade or constituting preparations and whether in bulk form or otherwise, the same would accordingly be eligible for `nil’ rate of assessment as provided in the Central Excise Tariff No. 3810.20. Similarly, the Chandigarh Collectorate Trade Notice No. 50/CE/91, dated 14-6-1991 held that DDT whether in bulk or for retail sale would merit classification under Heading No. 38.08 of the Schedule to the CET Act, 1985, if the same is meant for use as insecticides. The Board vide its File No. 112/11/91-CX. 3, Circular No. 7/91, dated 27-3-1991 clarified that benzene Hexa Chloride (Technical grade) whether in bulk or for retail sale if the same has been used would appropriately classifiable under Heading No. 38.08. He submits that all these clarifications which indicate contemporary exposition of law by CBEC would support the contention that “purity” or “packing” by itself cannot be pressed into service in taking away the impugned goods from Central Excise Tariff Heading No. 38.08 and pushing them under Heading 29.42.

4. Arguing for the Revenue, learned DR submits that what is relevant for the customs purpose is the form in which the goods are presented for assessment and whether subsequent process amounts to manufacture is not relevant. In support of his contention, he cites the case of Khandelwal Metal and Engineering Works and Another etc. v. Union of India and Others [1985(06)LCX0008 Eq 1985 (020) ELT 0222 (SC)]. In regard to Notification, he submits that while this would not be determinative of the issue, it could certainly be pressed into service as a guide in the given situation. This is what has been done where the lower authorities have said that the goods cannot be considered as fungicide.

5. We have heard both sides. For the sake of clarity, we are reproducing Customs Tariff Heading and Central Excise Tariff Heading 38.08 as under :

Customs Tariff Heading - 38.08 :

Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar product, put up in forms or packings for retail sale or as preparations or articles (for examine, sulphur-treated bands, wicks and candles, and fly-papers).

Central Excise Tariff Heading 38.08 :

Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant growth regulators, disinfectants and similar products.

It is clear that Headings 38.08 of Customs Tariff and Central Excise Tariff are not fully aligned. Customs Tariff Heading 38.08 refers to fungicides etc. put up in forms or packing for retail sale or as preparations or articles. For the purpose of Customs Tariff, they would straightway go to Item 29.42 as “Other organic compounds”. In the case of Central Excise Tariff Heading 38.08, we agree with the learned Advocate that no such conditions are attached to this Tariff Heading. This Tariff Heading refers to insecticides, fungicides, rodenticides etc. Since fungicides are specifically mentioned under the Tariff Heading without any condition, they would find their legitimate place only under this Heading. Since this Heading specifically refers to fungicides, the goods cannot be taken away from their legitimate parentage of 38.08 and consigned to an orphanage of a residuary item like 29.42.

6. What is contested by the authorities below is that these are `fungicides chemicals’ and not `fungicides’. A Reliance, in this connection, has been placed on Notfn. No. 33/91-C.E., dated 25-7-1991. This Notification exempts goods falling under Chapter 29 of Schedule Excise Tariff, 1985 when used within factory in the manufacture of specified goods annexed to Notification from the whole of duty of excise leviable thereon. The goods in the Table are, among others, the goods falling under sub-heading 3808.10. We do not find that this Notification in any way helps the Revenue. It says that raw material for the manufacture of goods under Heading 38.08 would be exempted in such a situation. It was argued by the learned Advocate for the appellants that mere dilution of this fungicide would not amount to manufacture and the percentage purity would depend upon the use to which it is put. Normally they use 65% purity Dodine; that percentage could vary depending upon the specific use for which insecticide is made. Mere dilution does not amount to manufacture and in this contest we agree that the reliance placed on this Notification by the Revenue is misplaced. In any case, the exemption Notification only exempts goods and that is what it is meant for. In the case of CCE, Vadodara v. Gujarat State Fertilizers Ltd. [1996(01)LCX0114 Eq 1996 (083) ELT 0624 (Tri.) = 1996 (013) RLT 0222 (T)], the Tribunal held that exemption Notification is not an indicator to correct classification. The Notification may be looked into but cannot be made the base for determining classification. This order relied upon earlier order of the Tribunal in the case of CCE, Bombay-III v. Roha Dyechem (P) Ltd. [1989 (040) ELT 0667 (Tri.) = 1989 (022) ECC 140]. The Tribunal held that it is a settled law that while statutory Notification may be looked up for the purpose of ascertaining the scope of entry in the Tariff Schedule it could not be used to determine or settle disputed classification of goods for which the relevant Headings and Section Notes and Chapter Notes read with relevant judgments, if any, are the guides. In the case of Mechanical Packing Industries Pvt. Ltd. v. Union of India and Another [1987(08)LCX0002 Eq 1987 (032) ELT 0035 (Bom.)], it was held by the Bombay High Court that exemption Notifications cannot provide norms or standard for classification of article. Similarly, the Andhra Pradesh High Court in the case of International Packing Industry v. CBEC, New Delhi and Others [1987(07)LCX0049 Eq 1987 (032) ELT 0317 (AP)] held that the contention that laminated jute bags having been described as falling under Item No. 68 and not under Item 22A in the Notification, dated 6-6-1979, it must be presumed that it falls under Item No. 68 and not under Item 22A has no merits. The object of the Notification was only to exempt from the whole of duty of excise leviable on laminated jute bags and the question whether it fell under any particular item was not of real consequence.

7. We also find that CBEC itself in the Order No. 40/2/95-CX issued under Sec. 37B clarified that the pesticide chemicals and formulations will both be classifiable under Heading 38.08 of CETA 1985. Madurai Collectorate Trade Notice No. 120/86, dated 27-10-1986 clarified that whatever be the mode of packing and whether or not of technical grade or constituting preparations and whether in bulk form or otherwise, and could accordingly be eligible for nil rate of assessment as provided under Tariff Item at the material time. Similarly, Chandigarh Collectorate Trade Notice No. 50/CE/91, dated 14-6-1991 informed that DDT whether in bulk for retail sale would merit classification under Heading No. 38.08 of the Schedule to the CET Act, 1985, if the same is meant for use as insecticides. Again, Madurai Collectorate basing on Trade Notice of CBEC F. No. 112/11/91-CX3 Circular No. 7/91-CX. 3, dated 21-3-1991 clarified that the product Benzene Hexa Chloride (Technical Grade) whether in bulk or for retail sale, if the same is meant for use as insecticide would appropriately be classifiable under Heading No. 38.08. All this indicates that the highest executive Authority administering the law itself held the view that even chemicals used as insecticide would remain classifiable under 38.08 irrespective of mode of packing or the percentage of purity. Whether BHC technical grade was a pesticide or not came up for consideration before the Tribunal in the case of M/s Alkali & Chemicals Corpn. of India v. CCE, Calcutta [1985(02)LCX0068 Eq 1987 (029) ELT 0635 (Tri.) = 1985 (ECR) 1392 (T)]. The Tribunal held that BHC technical formulation finds variety of uses as insecticide and pesticide. In the case of CCE v. Markfed Agro Chemicals [1993(09)LCX0058 Eq 1993 (068) ELT 0848 (T)], the Tribunal held that processing of concentrated basic pesticidal chemicals carried out through addition of inert carriers/solvent and dispersing and stabilising agents resulting in their dilution would not amount to manufacture as no new product having distinctive name, character and use came into existence. Considering the nature of the product, we are of the view that essentially it is a fungicide by itself and mere dilution subsequently depending upon the use would not take away the character of it being a fungicide. In the result, we hold that for CVD purpose, the impugned goods are correctly classifiable under Heading No. 38.08 of Central Excise Tariff. Apart from this, we note that the order of Collector (Appeals) is a completely non-speaking order and the impugned order is liable to be set aside on this ground alone.

8. In the result, we set aside the impugned order and allow the appeal.

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Equivalent 1996 (86) ELT 543 (Tribunal)

Equivalent 1996 (016) RLT 0160 (CEGAT-C)