Micronutrient-Based Products Used for Soil Fertility are Fertilizers, Not Plant Growth Regulators: CESTAT Rules No Excise Duty Payable [Read Order]
CESTAT held that micronutrient-based products used for soil fertility are fertilizers and not plant growth regulators, ruling that no excise duty is payable on such goods
CESTAT Kolkata, CESTAT Rules, excise Duty
CESTAT Kolkata, CESTAT Rules, excise Duty
The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that micronutrient-based products used to improve soil fertility and supplement nutrients are fertilizers and not plant growth regulators (PGRs) and no excise duty is payable on such goods.
Total Agri Care Concern Pvt. Ltd., the appellant, is engaged in the manufacture of agricultural products such as micronutrients, bio-fertilizers, and plant growth promoters.
The department alleged that several products, including ACE, BLOOM F, and Totoroot, were wrongly classified as fertilizers under Chapter 31 of the Central Excise Tariff and should have been classified as PGRs under Chapter 38, resulting in excise duty demands of over Rs. 6 crore along with penalties.
The appellant’s counsel argued that the products were nutrient-based formulations intended to supply essential trace elements like zinc, boron, and iron to the soil. These products only promote natural growth by correcting soil deficiencies and do not alter or regulate plant physiology, which is a key feature of PGRs.
The counsel further argued that the essential character of the products is nutritional and that market perception and dealer certificates confirm they are sold and used as fertilizers. The counsel relied on decisions such as Karnataka Agro Chemicals v. CCE and Northern Minerals Ltd. v. CCE, which recognized the distinction between fertilizers and plant growth regulators.
The revenue counsel argued that the presence of plant growth substances and organic compounds in these products warranted their classification as PGRs under Chapter 38. They claimed that the appellant misclassified the goods to evade duty.
The two-member bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that the essential function of the products is to supply nutrients for soil fertility and plant growth.
The tribunal explained that mere presence of natural extracts or auxin-like compounds in negligible amounts does not change the fundamental nature of the products into PGRs. It pointed out that growth promoters aid natural processes, while PGRs regulate or alter them, and this distinction has been recognized in several judicial rulings.
The tribunal concluded that products like ACE, BLOOM F, and Totoroot are fertilizers classifiable under Chapter 31 and not plant growth regulators under Chapter 38. As a result, the excise duty demands and penalties imposed on the appellant were set aside.
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