LexCOMMISSIONER OF CENTRAL EXCISE, BANGALORE versus M/S. KARNATAKA AGRO CHEMICALS
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[2008] 8 S.C.R. 983 COMMISSIONER OF CENTRAL EXCISE, BANGALORE v. M/S. KARNATAKA AGRO CHEMICALS (Civil Appeal Nos. 378-381 of 2008) MAY 15, 2008 (S.H. KAPADIA AND 8. SUDERSHAN REDDY, JJ) Central Excise Tariff Act, 1985- CSH 3808.20 or 3105.00 - Multi micronutrient compounds - Classification of - Case A B of assessee that the product is mixture of various inorganic c substances whose essential constituent is nitrogen, hence clas- sifiable as 'other fertilizers under CHS 3105.00- Department's case that product is a 'Plant Growth Regulator; thus classifiable under CHS 3808.20 and assessee added nitrogen only as a pretence to classify the product as 'other fertilizer' under CSH 0 3105.00 - Tribunal holding that presence of mere 0.31% nitro- gen sufficient to classify product as 'other fertilizers'- On ap- peal, held: Nitrogen (N), Phosphorus (P) or Potassium (K) are not essential constituent of micronutrients - Multi micronutri- ent is Plant Growth Regulator (PGR) which are organic com- E pound and do not contain N, P or K - However; in view of sub- missions of parties, Adjudicating Authority to examine whether presence of mere 0.31% of nitrogen would make PGR in prod- uct classifiable as "other fertilizers" in CSH 3105.00 - Hence, matter remitted back to the Adjudicating Authority F Central Excise Act, 1944 - s. 11A - Extended period of limitation - Invocation of - Show cause notice alleging misdeclaration by assessee that 'micronutrient' compounds contained nitrogen for classifying it under CSH 3105.00 and goods cleared without payment of duty - Demand of duty - G Held: Positive act of suppression is required for invoking larger period of limitation and not mere non-declaration - More so, controversy regarding classification of 'micronutrient' com- pound not settled - Thus, extended period of limitation not 983 H 984 SUPREME COURT REPORTS [2008) 8 S.C.R. A invokable nor penalty could be imposed - Order of tribunal to that extent upheld. The respondent-assessee was engaged in the manu- facturing of 'micronutrient' compounds for soil applica- tion and foliar application. It was registered as 'fertilizers' 8 in terms of s. 2(h) of the Fertiliser (Control) Order. The ap- pellant-Department issued show cause notice to asses- see alleging that it misdeclared that 'micronutrient' com- pounds contained nitrogen for classifying it under CSH 3105.00 of the Central Excise Tariff as 'other fertilizer, and C cleared the goods without payment of duty. According to the appellan.t-Department, in the 'micronutrient' com- pounds there was no N-nitrogen, P-phosphorus or K- potassium as essential constituents; that though in the product 0.31 % nitrogen did exist, it existed as a chelating D agent and not as a fertilizing element; that 'Plant growth regulator' is an item in CSH 3808.20 which is a specific item which would over~ide the item 'other fertilizers' in CSH 31"05.00, th•Js, was classifiable under CSH 3808.20. It was respondent-assessee's case that nitrogen was es- E sential constituent of 'micronutrient' and was classifiable under CSH 3808.20. The Adjudicating Authority held that the mere trace of nitrogen being 0.31 % in the product was net sufficient to classify the same under CSH 3105.00; that 0.31% of nitrogen was not sufficient to be called as F 'fertilizing element and nitrogen was used only as a chelating agent; that 'fertilizer' is a general entry whereas PGR is a specific entry and thus, the specific entry would override th~ general entry in the matter of classification. However, the tribunal held that the product was mixture G of various inorganic substances; that even a trace of ni- trogen in the product was sufficient to classify 'micronu- trient' as 'other fertilizers' under CSH 3105.00. Hence the present appeal. Partly allowing the appeals, the Court H ( ' COMMISSIONER OF CENTRAL EXCISE v. M/S. 985 KARNATAKAAGRO CHEMICALS I ' HELD: 1.1 In a generic sense "micronutrients" may A be a kind of fertilizer in the functional sense but for the purposes of Central Excise Tariff they are excluded from the scope of CH 31.05 (fertilizers) by virtue of Chapter Note 6 which requires the term "other fertilizers' to include only those products used as fertilizers and containing N-ni- B trogen, P-phosphorus or K-potassium as an essential constituent which is not the case in respect of micronu- trients. Therefore, one needs to ascertain the composi- tion of micron
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