Vardhaman Fertilizers & Seeds Pvt. Ltd. Versus COMMISSIONER OF CUS., PUNE>2016(09)LCX0157

2016(09)LCX0157

IN THE CESTAT, WEST ZONAL BENCH, MUMBAI

S/Shri M.V. Ravindran, Member (J) and C.J. Mathew, Member (T)

Vardhaman Fertilizers & Seeds Pvt. Ltd.

Versus

COMMISSIONER OF CUS., PUNE

Final Order Nos. A/90300-90309/2016-WZB/CB, tinted 8-9-2016 in Appeal is. C/928-930, 940-941/2004, 229, 263-265/2007 and 667/2004-NZB

Cases Quoted -

Assam Co. Ltd. v. Commissioner - 2001(01)LCX0243 Eq 2001 (133) ELT 0110 (Tribunal) - Referred [Para 3]
Collector \ Indian Organics - 1996 (088) ELT 0680 (Tribunal) - Referred [Para 5]
Collector v. Tetragon Chemie Pvt. Ltd. - 2001(07)LCX0006 Eq 2001 (132) ELT 0525 (S.C.) - Referred [Para 2]
Commissioner v. Karnataka Agro Chemicals - 2008(05)LCX0017 Eq 2008 (227) ELT 0012 (S.C.) - Referred [Para 4]
Commissioner v. Pioneer Agritechnoscan and Exports Pvt. Ltd- 2007(02)LCX0017 Eq 2007 (210) ELT 0680 (Tribunal) - Distinguished [Paras 5, 8]

Departmental Clarification Quoted-

C.B.E. & C. Circular No. 44/2001-Cus., dated 6-8-2001 [Paras 5, 7]

Advocated By -

S/Shri R.S. Paranjape, CA, J.H. Motivani with
Sachin Kulkarni, Advocates, for the Appellant.
Shri Ahibaran, Addl. Commissioner (AR), for the Respondent.

[Order per : C.J. Mathew, Member (T)]. -

This set of appeals is in consequence of the reclassification of goods imported by the appellant from Dubai. It appears that the importers, M/s. Vardhaman Hi-Tech Agro Products and M/s. Vardhaman Fertilizers & Seeds Pvt. Ltd. procured what they claimed to be "fertilizers" classified under Heading 3105.60 of the First Schedule to the Customs Tariff Act, 1975 and Heading 3105.00 of the Schedule to the Central Excise Tariff Act, 1985. One of the consignments imported against bill of Entry No. 7770045, dated 27th April, 2002, and declared as WSS NPK 02:50:34, was subjected to chemical tests and reported to be "mono potassium phosphate" with purity of 99.6%. The finding of the adjudicating authority was that these goods are separate chemically defined compound classifiable under Chapter 28 and hence liable for duty. It is also held that it appeared from the correspondence requiring the goods to be described by the overseas suppliers as fertilisers that the importers were well aware of the substantive difference intended by the two entries.

2. The contention of the appellant is that the goods are not specifically defined chemical compound owing to the presence of other substances in addition to potassium and phosphate. To this end, they pointed out that the heading which the department intends to fasten on the goods for classification is of the phosphates of potassium. On the contrary, the heading claimed by the appellant is that of "mineral or chemical fertilizer" containing two fertilizing elements, phosphorous and potassium. A further ground of appeal is that Note 6 of Chapter 31 of First Schedule to the Customs Tariff Act, 1975 defines the term "other fertilisers" to be products used as fertilizer and containing as essential constituent at least one of the fertilizing elements, namely, nitrogen, phosphorous or potassium, which the imported goods conform to. It is also contended that the adjudicating authority has overlooked the fundamental fact that there is no allegation to the effect that the goods imported are not used as fertilizers and that once it is a fertiliser, classification under Chapter 28 is ruled out. It is also contended that the Heading 31.05 is also specific and hence would prevail over the general heading in Chapter 28. Reliance was placed on the ratio of the decision of the Hon'ble Supreme Court in Commissioner of Central Excise v. Tetragaon Chemie Pvt. Ltd. [2001 (132) ELT 525] and that the test report relied upon is not conclusive whereas the test report of the earlier consignment of 2000 goods had reported the result as "PK fertilizer". The failure of the adjudicating authority to take note of the registration certificate issued by the Director of Agriculture of various States, which is mandatory for sale of fertilizer, has also been pointed out to us. It was also submitted that "mono potassium phosphate" has been described as a fertilizer in the Fertiliser (Control) Order dated 12th October, 1995. The sales invoices also indicate that the imported goods are sold as "fertilizers." It is also argued that there is no misdeclaration because the compound has, in addition to the description as fertilizer, indicated the percentage of each constituent.

2. Learned Counsel for the appellant furnished various specifications of fertilizer under the order issued by the Central Government and drew attention to Item No. 12 among the fortified fertilizers and Item Nos. 3 and 12 in the list of 100% water soluble fertilizers to drive home the point that these are recognized as fertilizer by the Government of India. The National Import Data Base data for the period from November, 2012 to April, 2013 furnished by the appellant was indicative of the imports of NPK under the Heading 31.05 at other customs gateways. Reliance is placed on the decision of the Tribunal in Assam Company Ltd. v. Commissioner of Customs, Calcutta [2001(01)LCX0243 Eq 2001 (133) ELT 0110 (Tri.-Kolkata)] :

"6.3 We also note that the appellant's enquiry with their foreign supplier was for Potassium Nitrate Agricultural Grade Fertilizer. The proforma invoice describes the goods as Potassium Nitrate Prilled Grade 13-0-45. Cer-tificates produced by Belgian Ministry of Agriculture in respect of the goods in question also show the same to be of Grade 13-0-45 Prilled and to be used as fertilizer. We find that Potassium Nitrate of Grade 13-0-45 Prilled has been mentioned in the Fertilizer (Control) Order. This fact establishes that the goods imported by the appellant are essential fertilizer and not Potassium Nitrate simpliciter, as a separately defined chemical compound. We may here observe that the prime factor required to be decided is as to whether the goods imported by the appellants are Potassium Nitrate in the shape of separate chemically defined compounds or the same, by presence of Sodium and Chlorine, has been converted into a fertilizer. We agree with the submission of the learned JDR that if the Potassium Nitrate, as a separate chemically defined compound, has been imported by the appellant, then the fact that the same has been used as fertilizer will not take it away from Chapter 28 and put the same under Chapter 28 inasmuch as Chapter 28 specifically mentions Potassium Nitrate. But as already discussed, the goods imported by the appellants are not Potassium Nitrate as a separate chemically defined compound, but are fertilizer, as evident from the various evidences produced and discussed. Accordingly, we hold that the Potassium Nitrate Grade 13-0-45 Prilled imported by the appellant, is properly classifiable under Chapter 31.

5.4 In arriving at the above conclusion, we have also taken note of various Notifications issued by the Government of India laying down the effective rate of duty in respect of Potassium Nitrate in a form indicative of its use for manurial purpose. In the said Notifications, the classification of the Potassium Nitrate to be used for manurial purpose, has been shown as under Chapter 31. Inasmuch as the goods imported by the appellant are specified as fertilizer in the Fertilizer (Control) Order, the same would properly fall under Chapter 31, as is also recognised by the Ministry of Finance, Government of India in the various Notifications referred to by the learned Advocate for the appellant."

3. Relying on the decision of the Hon'ble Supreme Court in Commissioner of Central Excise, Bangalore v. Karnataka Agro Chemicals [2008(05)LCX0017 Eq 2008 (227) ELT 0012 (S.C.)] the inappropriateness of invoking the extended period as expressed in the judgment was highlighted

"27. On the question of invocation of extended period of limitation, we are in agreement with the view expressed by the Tribunal that the larger period of limitation was not invokable by the Department. As stated above, three Circulars have been issued by the Department. Till today, the controversy regarding the classification of "micronutrient fertilizers" was not settled. There is even a conflict of views between Ministry of Finance and Min-istry of Agriculture. In the circumstances, question of invoking extended period of limitation does not arise. It is well-settled that mere non-declaration is not sufficient to invoke the larger period but some positive act of suppression is required for invoking larger period of limitation under Section 11A of the Central Excise Act, 1944 [See : Padmini Products v. Collector of Central Excise - 1989(08)LCX0031 Eq 1989 (043) ELT 0195 (S.C.) ]. Therefore, in the present case, there is no warrant to invoke larger period of limitation or to impose penalty and to that extent we uphold the order of the Tribunal."

4. Learned Authorised Representative drew our attention to Circular No. 44/2001-Customs, dated 6th August, 2001 of Central Board of Excise and Customs :

"3. Keeping in view the provisions explained above and the HS Explanatory Notes to concerned headings, the chemical compounds, viz., calcium nitrate, monopotassium phosphate and potassium magnesium phosphate will merit classification under Chapter 28 of the Customs Tariff, and not under Chapter 31 as fertilisers. Such compounds will, therefore, not be eligible for benefit of concessional duty prescribed for fertilisers under the relevant exemption notification. It may be noted that calcium nitrate specifically figures in the Explanatory Notes to heading 28.34 and potassium phosphate finds a mention in heading 28.35 itself."

and relied upon the HSN Explanatory Notes to Chapter 28 as well as the decisions of the Tribunal in Commissioner of Customs (Import), Mumhai v. Pioneer Agritechoscan [2007(02)LCX0017 Eq 2007 (210) ELT 0680 (Tri.-Mumbai)] and Collector of Central Excise, Bhubaneshiuar v. Indian Organics [1996 (088) ELT 0680 (Tribunal)].

5. Having heard both the sides, we find that the dispute lies within the narrow compass of ascertaining whether the imported goods are "fertilizers" within the meaning of Chapter 31 of the First Schedule of the Customs Tariff Act,1975. The two rival entries are "phosphate of potassium" and "fertilizers" con taining two fertilizing elements phosphorous and potassium. Note 1 of Chapter
28 indicates that the heading of that chapter would only apply to items listed in the said note among which are separate chemically defined compound. With reference to HSN Explanatory Notes under Heading 31.05 where it is stated :

"the heading does not include other chemically defined compounds not specified even if they could be used as fertilizers".

6. We note that the adjudicating authority has relied primarily upon the tariff entries, the circular of the Central Board of Excise and Customs and a decision of this Tribunal in 2001 to exclude from the list of fertilisers such goods by describing them as separate chemically defined compounds. The adjudicating Commissioner has not discounted the contentions of the importers that the goods are indeed fertilizers but has decided against the importers on the ground that these are individually chemically compounds which find a specific mention in the Tariff. There can be no doubt that the potassium phosphate finds specific mention in Chapter 28 and the HSN describes it in the following manner under Chapter 28 :

"The best known is potassium dihydrogenorthophosphate (monopotassium phosphate) obtained by treating phosphate chalk with orthophosphoric acid and potassium sulphate. Colourless crystals, soluble in water. Used as a yeast nutrient and as a fertilizer."

8. The decision relied upon by Revenue in re Pioneer Agritechoscan & Exports Pvt. Ltd. refers to calcium nitrate which was declared for import under 31.05 which is a residuary heading whereas the present import claimed classification under 3105.60 which is a heading as specific as in Chapter 28. In the referred decision, emphasis has been placed on the Chapter Note 1(b) which has certain exclusions that would enable classification within the ambit of Chapter 28. In the context of the present import, that particular line of reasoning may not provide the answer. The goods listed in Note 2(A), 3(A), 4(A) or 5 to which Note 1(b) refer are intended to restrict the applicability under one or other of Headings 31.02, 31.03, 31.04 as applicable. Note 6 of chapter in relation to the residuary category restricts classification under "other fertilizer" in 31.05 to goods to be used as "fertilisers" and containing one of the fertilizing elements. In view of the above arrangement of exclusions and inclusions in Chapter 31, it would appear that all of the headings preceding 31.05 are to be taken as "fertilizer" to the extent that these are also used as fertilizer and not excluded by Note 1(b). There is no averment in the note or impugned order that the imported goods are not fertilizer, lor the above reasons, we find that the classification of the imported goods should fall under Chapter 31 and not Chapter 28. The inclusions of the imported items in the Fertiliser (Control) Order, 1985, as amended in 1995, cannot but reinforce the opinion that these are indeed fertilisers as decided by the competent department of the Government of India.

9. Accordingly, the appeals are allowed with consequential relief, if any.
(Pronounced in Court on 8-9-2016)

Equivalent 2017 (345) ELT 0560 (Tri. - Mumbai)