CESTAT classifies Micronutrient Fertilizers Containing N, P, K as Fertilizers, Rejects Plant Growth Regulator Classification [Read Order]
This decision follows previous rulings affirming that micronutrients with essential fertilising elements cannot be reclassified as PGRs. The ruling upholds the position of M/s KPR Fertilizers Ltd., resolving a long-standing dispute on tariff classification.
The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has clarified the classification of micronutrient fertilisers containing nitrogen (N), phosphorus (P), and potassium (K). The tribunal rejected the Department’s claim that such products should be treated as Plant Growth Regulators (PGRs).
M/s KPR Fertilizers Ltd. filed appeals against the Order, challenging the classification of certain micronutrient fertilizers. The Commissioner (Appeals) had earlier upheld the classification but set aside the penalty imposed.
The key issue was whether the appellant’s products, cleared as Micronutrient Fertilizers (MNF), should be treated as fertilizers or as Plant Growth Regulators (PGRs).
The Department argued that the impugned goods did not qualify as fertilizers under Chapter 31 of the Central Excise Tariff Act because, under Chapter Note 6, N, P, or K must be “essential constituents.” Based on this, it contended that the products should be classified under Chapter 38 as PGRs.
The Adjudicating Authority relied on technical literature and Board circulars, highlighting the absence of sufficient quantities of N, P, or K, and the functional similarity of the products to PGRs, to justify the reclassification.
The appellant contended that the issue had already been conclusively addressed in earlier proceedings covering the period 2007–2011. The Tribunal, in Final Order, had rejected the Department’s classification for similar micronutrient fertilizers.
The appellant cited several coordinate bench rulings, including Shivashakthi Bio Technologies Ltd. vs CCE, Hyderabad and Valagro Biosciences Pvt Ltd. vs CCE, Hyderabad, which held that micronutrient fertilizers cannot be classified as PGRs.
Additionally, the appellant argued that the presence of N, P, or K, as confirmed in chemical examiner reports, was sufficient to qualify the products as fertilizers, regardless of whether these nutrients were present in “substantial” amounts.
The tribunal reviewed the composition of the impugned goods and noted that the products indeed contained nitrogen, phosphorus, and potassium. It also considered the Department’s argument that these elements were not “essential” but functioned merely as chelating agents.
The two-member bench comprising AK Jyotishi(Technical Member) and Angad Prasad (Judicial Member) observed that Chapter Note 6 does not restrict the role of N, P, or K in fertilizers to being “substantial” rather than essential, nor does it exclude their presence in chelated form.
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Consequently, the tribunal held that the products are rightly classified as fertilizers, and the alternative classification as PGRs was unsustainable.
The bench emphasized that the classification issue had already been examined and settled in previous orders and that no fresh justification existed to overturn those findings.
Relying on chemical composition reports and prior judicial pronouncements, the tribunal concluded that the appellant’s micronutrient fertilizers could not be treated as PGRs. Accordingly, the appeals were allowed, setting aside the part of the Commissioner (Appeals) order that upheld the PGR classification.
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