1. This appeal arises out of the order passed by the Collector of Central Excise, Baroda confirming a duty demand of Rs. 17.13.096.30 p.
on Alpha Napthyl Acetic Acid (ANAA) manufactured and cleared by the appellants herein during the period from 1.6.83 to 30.1.88 on the ground that the product though classifiable under TI 68 of the Schedule to the erstwhile Central Excise Tariff upto 28.2.86, was not eligible for the benefit of exemption from duty in terms of SI. No. 18 of Notification 234/82-CE dated 1.4.82 as the product was a plant growth regulator and not a pesticide or insecticide, and on the ground that, after 1.3.86, the product was classifiable as plant growth regulator under sub-heading 3808.90 attracting duty at the appropriate rate and not under sub-heading 3808.10 attracting nil rate of duty as claimed by the appellants. The Adjudiciating authority has also imposed a penalty of Rs. 7 lakhs upon the appellants for contravention of the relevant Rules.
2. The brief facts of the case are that on 30.1.88, the Central Excise officers visited the factory premises of the assessees as a result of intelligence received to the effect that the appellants were manufacturing ANAA which is a plant growth regulator and availing exemption by misdeclaring the same as insecticides/pesticides under sub-heading 3808.10 of the Central Excise Tariff Act, 1985 although the same was classifiable and chargeable to duty under sub-heading 3808.90.
The statement of Shri H.R. Patel, Plant Manager, in the assessees' factory was recorded wherein he deposed that their factory was manufacturing several speciality organic chemicals among them being ANAA (Tech.). He further stated that no duty was being paid on ANAA as the product was exempted from duty as pesticides/insecticides, that classification list had been filed for this product from time to time and that prior to 1.3.86. the product was classified under TI 68 and the benefit of exemption under Notification 234/82 had been claimed by the appellants; and subsequent to 1.3.86, the product had been classified by the appellants under sub-beading 3808.10 as insecticides/pesticides. He also clarified that while filing the classification list, the end use of the product had not been mentioned by the appellants. The details of the raw materials used in the manufacture of ANAA with manufacturing process and monthwise details of production and clearance from 1.1.83 to 30.1.88 were furnished by him.
He further categorically sated that the product was used as a plant growth regulator. A representative sample of ANAA was drawn and sent for chemical analysis of the Chemical Examiner of the Central Excise Laboratory at Baroda who reported in his letter dated 19.2.88 as under: The sample is in the form of off-white powder. It is Alpha Napthyl Acetic Acid an organic chemical. It is described in technical literature as 'Plant Growth Regulator'.
3. Based upon the above, a show cause notice was issued to the appellants on 28.6.88 alleging that the appellants had wrongly availed of the benefit of exemption from payment of duty under Notification 234/82 prior to 1.3.86 and for the period subsequent thereto, they had intentionally misdeclared/mis-classified this product as pesticides/insecticides under sub-heading 3808.10 of the Central Excises Tariff Act,' 1985 and proposing recovery of duty of Rs. 17,40,599.30 p. on 7,393 kgs. of Alpha Napthyl Acetic Acid and also proposing imposition of penalty.
4. The Adjudicating authority upheld the charges levelled in the show cause notice; he excluded the demand of duty of Rs. 27,503/- for the period 1..1.83 to 31.5.83 as being beyond the five year period of limitation and hence confirmed the duty demand (as set out in the opening paragraph of this order) for the period 1.6.83 to 30.1.88 and further imposed penalty as above mentioned. Hence this appeal.
5. We have heard Shri C.S. Lodha, learned Counsel for the appellants and Shri J.M. Sharma, learned DR for the Revenue. The issues that arise for determination in this case are (1) classification of ANAA under the Central Excises Tariff Act, 1985 (there is no dispute about its classification under TI 68 of the Schedule to the erstwhile Central Excise Tariff upto 28.2.86); (2) the eligibility of ANAA to the benefit of exemption from duty in terms of SI. No. 18 of Notification 234/82 dated 1.11.82; (3) applicability of the extended period of limitation.
6. There is no dispute that the product is a plant growth regulator; however, the contention of the appellants is that the expression "insecticides, pesticides, weedicides and fungicides" occurring in Notification 234/84 and the expression "Inseticides, fungicides, weedicides and pesticides" contained in sub-heading 3808.10 of the CETA 1985 is wide enough to include plant growth regulator within its scope.
Plant growth regulator is defined in the Condensed Chemical Dictionary by G.G. Hawley (10th Edition) at page 280 as under: Plant growth regulator: An organic compound, either natural or synthetic, that modifies or controls one or more specific physiological processes within the plant. If the compound is produced by the plant, it is called hormone, e.g. auxin, which regulates the growth of longitudinal cells involved in bending of the stem one way or another. Substances applied externally also bring about modifications such as improved rooting of cuttings, increased rate of ripening (ethylene) and easier scission (separation of fruit from stem). A large number of chemicals tend to increase the yield of certain plants such as sugarcane, corn. etc.
All these, as well as plant produced hormones are included in the term plant growth regulator.
Alpha-napthaleneacetic acid (1) napthylacetic acid CIOH7CH2COOH. A plant growth regulator. Properties: White crystals, odorless: m.p.
132-135^oC. Soluble in acetone, ether, and chloroform, slightly soluble in water and alcohol. Grades: Usually supplied in dilute form, either as a powder or liquid solution ready for use.
Containers: Powder: Fiber cans or multiwall paper...solution; glass bottles and carboys.
Uses: Inducing rotting of plant cuttings: sparaying apple trees to prevent early drop: fruit thinner 7. The HSN Explanatory Notes to Chapter 38 Page 528-529 states that the product under heading 38.08 can be divided into (I) Insecticides (II) Fungicides (III) Herbicides anti-sprouting products, plant growth regulators and (IV) Disinfectants. The HSN Explanatory Notes state that "Plant growth regulators are applied to alter the life processes of a plant so as to accelerate or retard growth, enhance yield, improve quality or facilitate harvesting etc. Plant hormones (phytohormones) are one type of plant growth regulator (e.g. gibberellic acid).
Synthetic organic chemicals are also used as plant growth regulators.
8. Kirk Othmer's Encyclopaedia of Chemical Technology (2nd Edition) page 675 of volume 15 describes Plant growth substances or growth regulators as organic compounds other than nutrients which in small amounts, promote, inhibit, or otherwise modify and physiological process in plants (1) Under natural conditions, growth regulators are produced in certain tissues of the plant, but may exert special physiological effects at locations remote from the places of synthesis or application. They thus control, regulate and interacts the different activities of plants. There is considerable evidence that many different growth regulating compounds are produced by plants. Many synthetic compounds with physiological activity have also been discovered and are of considerable importance from the stand point of research and practical applications.
Plant growth substances are frequently designed by other names. Some of the more common terms are 'plant hormones', phytohormones and growth regulators. The term hormone is after reserved for the naturally occurring substances but usage is sometimes extended to include all chemical which are physiologically active when applied to plants.
9. Now let us see how insecticides, pesticides have been defined in various standard texts. The Encyclopedia of Chemical Technology, Third Edition, at page 418 of Volume 13 defines Insecticides as, "chemicals that are used to control damage or annoyance from insects. Generally, control is achieved by poisoning the insects by oral ingestion of stomach poisons, by contact poisons that penetrate through the cuticle, or by fumigants that penetrate through the respiratory system.
Ancillary chemicals also are employed in insect control and include attractants and repellents, which influence insect behaviour, and chemosterilants which influence reproduction.
Volume 18 of the same Encyclopedia at page 302 recognises that 'pesticide is a widely used synonym for chemical poisons which is a chemical intended for control, suppression or destruction of plants or animals that are of chemical significance as pests.
Hawley's Condensed Chemical Dictionary, 11th Edition at page 638 defines insectide as. "a type of pesticide designed to control insect life that is harmful to man, either directly as disease vectors or indirectly as destroyers of crops, food products or textile fabrics".
Pesticides has been defined at page 891, "any substance organic or inorganic used to destroy or inhibit the action of plant or animal pests, the term thus includes insecticides, herbicides, rodenticides, miticides etc." The definition of herbicides is found at page 594. "A pesticide, either organic or inorganic, used to destroy unwanted vegetation, specially various types of weeds, grasses and woody plants".
10. From the above definitions, what is seen is that plant growth regulators are different from insecticides or pesticides. Further it has been held by the Tribunal in the case of Agromore Ltd., Bangalore v. Collector of Central Excise. Bangalore that certain Plant growth regulators mainly containing ethrel/Napthyl acetic acid are not. insecticides/pesticides in any way so as to be eligible for exemption in terms of SI. No. 18 of the Schedule to the Notification 55/75-CE dated 1.3.75 as amended by Notification 62/78-CE dated 1.3.78. In this order, the Tribunal had relied upon its earlier order in the case of Collector of Central Excise, Bombay v. Bombay Chemicals Pvt. Ltd. view was that disinfectants manufactured by the respondents therein would not fall under the category of insecticides or pesticides and were therefore, not entitled to the benefit of exemption in terms of SI. No. 18 of Notification 55/75 as amended. The Bombay Chemicals decision of the Tribunal was further followed in the case of Collector of Central Excise v. M/s. Paushak Ltd. appellants before us contend that these decisions are no longer good law since the Tribunal's decision in the case of Bombay Chemicals has been reversed by the Hon'ble Supreme Court by its order .
11. We have carefully perused the judgment of the Apex Court. The ratio of the judgment is contained in para 9 in which it has been held that the "broad and basic characteristic for exemption under Notification 55/75 as amended is that the goods must have the property of killing germs and bacteria, insects or pests and it should be understood in the common parlance as well as being covered in one of the broad categories mentioned in the Notification and since the goods produced by the appellants are capable of killing bacteria and fungi which too. is covered in the expressions 'pesticide' and 'fungicide, there appears no reason to exclude the goods from the aforesaid Notification." The product in dispute in the present case namely ANAA being undisputedly a Plant growth regulator and not established by the appellants to be capable of killing insecticides or pests, the criterion laid down by the Supreme Court is not satisfied. The learned Counsel's reliance on para 6 of the judgment is misplaced as this paragraph of the Supreme Court judgment only sets out the definition of pesticide as contained in Butterworth's Chemical Dictionary and the US Federal Pesticides Control Act in which pesticies hasbejen defined to include (1) any substance or mixture of substances intended for preventing, distributing, repelling or mixing any pest, insect, rodent... and (2) any substance or mixture of substances intended for use as a plant growth regulator...), while the reasoning of the Court is contained in para 9. Since the relevant criterion laid down by the Supreme Court for considering something to be a pesticide or insecticide has not been fulfilled by the disputed product, ANAA cannot be held to be an insecticide or pesticide, therefore, it is not entitled to the benefit of Notification 234/82 at SI. No. 18 of the Table appended thereto. As far as classification under the new Tariff is concerned, we note that Chapter 38 covers Misc Chemical products and Note 1(a) to Chapter 38 excludes from its coverage, separately chemically defined elements or compounds with the exception of the following: (2) Insecticides, fungicides, herbicides, antiscrouting product and plant growth regulator, disinfectants and similar products.
While heading 3808 covers insecticides, fungicides, herbicides, antiscrouting product and plant growth regulator, disinfectants, heading 3808.10 covers insecticides, fungicides, herbicides and pesticides. Other products of heading 3808 such as plant growth regulators fall for classification under heading 3808.90 which is a residuary entry attracting duty at the rate of 15% ad valorem. The arguments of the learned Counsel that ANAA which is a plant growth regulator, will also be classifiable under sub-heading 3808.10 cannot be accepted in view of our finding in the earlier paragraphs with the disputed product is different and distinct from the type of products covered by sub-heading 3808.10. The fact that some herbicides or insecticides or pesticides might also help in the growth of plants by killing of weeds or insects or pests harmful to plants thus aiding and permitting the growth of the plants, makes no difference to the classification of the product in dispute which has nol been shown to be capable of killing insects or pests or weeds and which has been recognised as synthetic organic compound that modifies or controls physiological processes within the plant.
12. In the light of the above discussion, we hold that the ANAA manufactured by the appellants herein falls for classification under sub-heading 3808.90 of the CETA 1'.)85 and is not eligible to the benefit of exemption from duty in teans of SI. No. 20 of the Notification 234/82 dated 1.11.82 both prior to and subsequent to 1.3.86.
13. Regarding limitation, we find that throughout, the appellants had been filing classification lists for ANAA right from 1977 when they first began manufacturing this item. In this classification list, no exemption under any Notification was claimed. In the classification list filed on 2.3.78. exemption in terms of SI. No. IS to Notification 55/75 which covers 'insecticides, pesticides, weedicides and fungicides' was claimed and the classification list was initially approved provisionally. Vide letter dated 17.3.78 (page 43 of the paper book), the appellants had stated that they were holding a valid insecticides licence issued by the Deputy Director of Agriculture (Pesticides), Ahmedabad for manufacture of ANAA and requested final approval of classification list. Subsequent thereto, the classification list with effect from 2.3.78 was approved finally. In the classification list effective from 31.3.83. the benefit of Notification 234/82 dated 1.11.82 in terms of SI. No. 20 which was identical to SI.No. 18 of Notification 55/75. was claimed for ANAA. This classification list was also approved. A specific query was raised by the department on 5.12.84 regarding classification of ANAA as pesticides entitled to the benefit of Notification 234/82 and the query was as to whether the ANAA has been notified in the Pesticides Act. to which the appellants replied that ANAA has been notified in the Pesticides Act in the Extraordinary Gazette part II. Section 3 issued on 9th January 1974 at SI. No. 128. There was a further query as to whether ANAA as such was given to customers for direct use or any further process is to be carried out by the buyers before It is put in the market for use as pesticides and the appellants clarified that ANAA is in technical form which is further formulated by the buyers to 4.5% w/w solution (page 94A and 94B of the paper book). This classilxation list for the subsequent period in which the appellants claimed the benefit of Notification 234/ 82 for ANAA was also approved. Around the time when the new Central Excise Tariff was introduced, the appellants wrote to the department on 20.2.86 enclosing the data regarding raw material and process of manufacturing for classification of their products under the new Central Excise Tariff. In the date supplied, they clearly showed that ANAA (Tech) is a Plant Growth Regulator (pesticide) and set out the manufacturing process as under: Naphthalene is reacted with Paraformaldehyde in the presence of hydrochloric acid. Alpha Chloro Naphthalene so formed is nitrilated with Sodium Cyanide. The nitrile is further hydrolysed to give Alpha Naphthy Acetic Acid which is precipitated, centrifused and dried.
Classification of ANAA was claimed under sub-heading 3801.20 in the year 1986-87 and under sub-heading 3808.10 in 1987-88 and the classification lists were also approved. In the above background and particularly having regard to the claim of the appellants that ANAA was a Plant growth regulator (pesticide), it cannot be said that they were guilty of any wilful suppression or concealment of facts material for the purpose of correct classification of ANAA with intent to evade payment of duty so as to invoke the period of limitation against them.
Further the issue of classification of the product was a contentious one as seen from the earlier order of the Tribunal in the case of Agromore Ltd. and M/s. Paushak Ltd. cited (supra) and the Tribunal in the case of Paushak has also held that extended period of limitation was not available to the Revenue (para 10). Therefore, since the classification issue was a disputed one and since the appellants had disclosed all the material particulars about the product in question and the classification lists covering the entire period of dispute were all approved after queries raised by the department were answered satisfactorily by the appellants, we hold that the Revenue is not entitled to invoke the extended period of limitation in this case and as a result, the demand is sustainable only for the period within six months prior to the issue of the show cause notice. In this case, since the show cause notice dated 28.6.88 was issued demanding duty for the period 1.6.83 to 30.1.88, the demand for the period 28.12.87 to 30.1.88 alone is sustainable and the rest of the demand is set aside as time barred. In the result, we hold that ANAA manufactured by the appellants falls for classification under TI 68 of the Schedule to the erstwhile Central Excise Tariff upto 28.2.86 and under sub-heading 3808.90 of the Central Excise Tariff Act. 1985 from 1.3,86 onwards, and that the benefit of Notification 234/82 is not available to the product during the entire period and that the demand beyond the period of six months from the issue of the show cause notice Is barred by limitation.
14. The penalty of Rs. 7 lakhs imposed for evasion of duty of approximately Rs. 17.13 lakhs during the period from 1.6.83 to 30.1.88 is reduced to Rs. 2 lakhs since the demand is upheld only for the six months period.
With due respects to Hon. Member (J) my views and orders are as follows: 15. The product in question in this case is Alpha Naphthyl Acetic Acid (ANAA). There is no doubt that ANAA is a well known plant growth regulator. In fact there is hardly any scope for any dispute in this regard as its action as plant growth regulator is well recognised in technical literature including the Condensed Chemical Dictionary by G.G. Hawley and Encyclopedia of Technology by Kirk Othmer. However, as it is well known that certain chemicals have a variety of uses, the question which we have to really answer is as to whether this chemical was capable of being used as a pesticide or insecticide also. For the period prior to 1986 i.e. before the new tariff was introduced there is no problem regarding classification inasmuch as it was not covered by any specific entry in the tariff and therefore was classifiable under tariff item 68. Therefore the only question that remains is as to whether it was eligible for the benefit of notfn. 234/ 82 dt. 1.11.82.
This notification allowed exemption from duty to items falling under item No. 68 and specified in the Schedule annexed thereto. The entry at Sr. No. 20 covers insecticide/pesticide/weedicide and fungicide therefore if ANAA could be shown to fall in any one of these categories the benefit would be available otherwise not. In this connection I find that the Farm Chemicals Handbook '93 which includes pesticides dictionary incorporates ANAA. shows its action and use as plant growth regulator but also shows it in the list of highly toxic pesticides indicating its toxicity class and rating. It also shows pesticides as economic poisons and indicates that "As defined under the Federal Insecticide. Fungicide, and Rodenticide Act, economic poison means any substance or moixture of substances intended for preventing, destroying, repelling, or mitigating any insects, rodents, nematodes, fungi, or weeds, or any other forms of life declared to be pests: and any substance or misture of substances intended for use as a plant regulator, defoliant, or desiccant.' As so defined economic poisons are now known generally as pesticides.
16. I also note that this item can only be manufactured under a licence under the Insecticides Act and the appellants were holders of such a licence.
17. In this connection the arguments of the appellants that in the absence of any definition of pesticide or insecticide in the Central Excise Act we could safely seek guidance from its definition as given in Section 3E of the Insecticides Act, 1968. Since the appellants have produced Certificates of Registration of Insecticides covering ANAA 4.5% solution issued to them under Section (3) of the Insecticides Act and they were manufacturing it under licence to manufacture insecticides covering this item of technical grade granted under Rule 9(2) of the Insecticides Rules and were registered with the Govt, of India, Ministry of Agriculture, Dte. of Plant Protection, Quarantine and Storage. Faridabad as unit manufacturing insecticides/pesticides covering ANAA and have also referred to letter dt. 2/3.1.86 of Deputy Director of Agriculture and Licensing Officer. Insecticides and relating to approval of labels and leaflets to be affixed on the packings of insecticides. I consider that their submissions cannot be lightly brushed aside. The Tribunal's order in the case of Bombay Chemicals Pvt. Ltd. having been set aside by the have to see basically is whether the product satisfies the criteria laid down by the Hon. Supreme Court. In this judgment the Supreme Court was concerned as to whether the product was covered by notfn. 55/75 which allowed exemption from duty to insecticides, pesticides, weedicides and fungicides and the appellants had claimed that the disinfectant fluids manufactured by them were entitled to exemption after addition of item No. 18 in 1978 and the Supreme Court had observed that a disinfectant may be of two types one to disinfect and other to destroy the germs. But those products which are used for killing insects by use of substance high boiling tar acid have the same characteristic as pesticide. Further each of the words insecticides, pesticides, fungicides or weedicides are understood both in the technical and common parlance as having broad meaning. Therefore if any goods or items satisfy the test of being covered in either of the expression then it is entitled to exemption. The broad and basic characteristic for exemption under the notification is that the goods must have the property of killing germs and bacteria, insects or pests and it should be understood in the common parlance as well as being covered in one of the broad categories mentioned in the notification.
Since the goods produce by the appellants are capable of killing bacteria and fungi which too is covered in the expression pesticide and fungicide there appears no reason to exclude the goods from the aforesaid notification.
18. The notification No. 234/82 with which we are concerned is similarly worded. Therefore, the ratio of the aforesaid Supreme Court judgment would squarely apply.
19. In my opinion since many chemicals can act both as plant growth regulators as well as pesticide/insecticide/fungicide/weedicide therefore the mere fact of its being high plant growth regulator is not by itself sufficient to exclude from the above categories and what is more important to see is whether it can in addition to its use as plant growth regulator be also utilised as a pesticide or insecticide, weedicide or fungicide. In this respect the Supreme Court has referred to both technical aspect as well as the common man's understanding: and once there is already an Act of Parliament covering insecticide and pesticides I believe the provisions thereof could also be taken into consideration simultaneously. Therefore, we have to take note of the provisions of the Insecticides Act on one hand and the circular of the Pesticide Formulators Association of India on the other. The former would show whether the legislature and Government recognised it as an insecticide or pesticide and the latter would go to show whether the people who deal with this item in the normal course of trade consider it as an insecticide or pesticide. The Hawley's Dictionary as well as Pesticide Dictionary do indicate it as a plant growth regulator but it is not without significance that the Pesticide Dictionary indicates that "economic poisons are now known generally as pesticides" and include ANAA in the list indicating toxicity of certain pesticides.
20. Furthermore the book 'A Chemistry of Pesticides' by K.H. Buchal indicates that (he ANAA would promote growth on lower doses but also will have the effect of being a herbicide at higher concentrations.
21. Similarly vol 12 in Kirk Othmer's Encyclopedia of Chemical Technology shows ANAA in the list of herbicides. In the book New Pesticides Users Guide growth regulators are also included as pesticides. In the Pesticides and Human Welfare by D. L. Gun and J. R.Stevens it is stated: "The idea that all materials used to control pests do so by killing them is too facile to encompass the full array of sophisticated products that have been developed over the years with the aim of improving the productivity of agriculture and of protecting man, animals, and the environment from pest attack." It is further stated that the definition of 'pesticide' is not easy. Further: "In modern usage it is no longer confined to the killing of pests, as is implied by the derivation of the term, 'Pesticides' may include bacteria and viruses for the control of insect pests, chemicals which inhibit the normal growth and reproduction of pests, or which so affect their normal behavior patterns (e.g., mailing, feeding or swarming) that they no longer pose a threat as pests." It is also stated: "Even this definition is not sufficiently broad to include an emerging group of chemicals derived from research in pesticides and usually classed with them. These are the plant growth regulators (PGRs) which are a logical extension of work on weed control aimed at disrupting the normal growth of plants....
22. In the Import and Export Policy of the Government of India April 1985 to March 1988 Vol. I Appendix HI Part A includes under the serial No. 219 certain insecticides, pesticides and weedicides and ANAA is one of them. The groupings and nomenclature used in the Import and Export Policy can be taken as indicative of the fact as to how the items are known in trade and commerce. In a publication of Central Board for Prevention and Control of Water Pollution, New Delhi titled "Minimal National Standards--Pesticide Manufacturing and Formulation Industry'" has appendix II indicating the name of the technical grade pesticides including at sr. No. 63 ANAA.23. It is thus, apparent that not only scientifically and technically but also in the parlance employed in the trade and commerce some of the plant growth regulators which can act as insecticide, pesticide or weedicide are treated as such.
24. The department's side has relied on the Tribunal's order in the Agromore Case which has been followed in the Paushak case . However, a reading of the Agromore case shows that in that particular case the Tribunal held that the plant growth hormone regulators in question were not insecticide or pesticide. That by itself does not mean that no plant growth regulator could act as or be used as insecticide, pesticide, weedicide or fungicide. In other words that judgment would be applicable to the facts of that case only and a ratio cannot be drawn in a generalised way; Of course one of the items in that case was a preparation including ANAA also. But then it is noteworthy that plant growth regulators or hormones may act as promoter of growth in one concentration, inhibitors of growth in another concentration and the proportion and combination also matter.
Secondly both in Agromore case and the Paushak case the fact that Hawley's dictionary merely shows some of their uses and not all of their uses has not been noticed: Whereas the technical and other material discussed also shows that these are uses other than those which have been mentioned in Hawley's. In fact the Paushak case itself note some other uses. Insofar as ANAA is concerned, the Govt, of India.
Deptt. of Agriculture and Cooperation also treats ANAA as insecticide in view of the fact that it has been included in the schedule to the Insecticides Act, 1968 vide notification No. GSR IX (Dt. 9.1.74).
25. In view of the above discussion I am of the view that since it is well-recognised both in technical literature and in the field of commerce and industry that some of the growth regulators also act as pesticides, insecticides or weedicides/fungicide and the fact that ANAA was recognised both by Govt, of India as well as Govt, of Gujarat as an insecticide therefore, the product falling under tariff item 68 in the pre-1986 period was eligible to the benefit of the exemption notification claimed by the appellants: And similarly under the new tariff effective from 1.3.86 the item was classifiable under 38.08 but in the post 1.3.86 period since the heading 38.08 was further sub-classified in sub-headings 3808.10 and 3808.90 and plant growth regulators were included in the main heading but excluded from sub-heading 3808.10 it would fall under 3808.90. At the same time since in certain concentrations or permutations, combinations they could act as insecticide, fungicide, herbicide, weedicide or pesticide whereas in other concentrations they could only act as growth regulators therefore the classification under sub-heading can only be determined w.r.t. the above parameters and intended use. Correspondingly only those concentrations and or preparations in various permutation, combinations in which they can perform or are normally utilised as insecticide, fungicide, herbicide, weedicide or pesticide that the benefit of exemption notification would be available to them and not in others.
26. At the same time, I further notice that the appellants have been fair enough to declare full facts and the classification lists have been approved finally, and on some occasions after initial provisional approval and on further enquiry only they had been so finalised. It is also noteworthy that the appellants had declared them as plant growth regulators as well as pesticides. Since full facts had been declared and nothing was suppressed or mis-stated and they had repeatedly claimed that they were covered by the Certificate of Registration of Insecticide ANAA 4.5% solution issued to them under Section 9(3) of Insecticides Act. the extended period of limitation was not available to the department in any case. Even for the normal period of limitation, the authorities were required to verify in the light of above observations and findings and then consider the matter. I am required to make this observation because a copy of registration referred by them has been incorporated in the paper book and the show cause notice covers a long period; therefore during the normal period of limitation held to be applicable in their case it is required to be seen whether the concentration or permutation combination were such as would enable them to be utilised as insecticide, rodenticide or herbicide and it was being sold as such i.e. for being utilised or the purpose of killing pests (including bacteria, fungus, virus, birds insects etc. normally recognised as pest) if so, the benefit of exemption notification would be required to be extended even during the normal period of limitation.
27. This will also be in accordance with the Hon. Supreme Court's judgment in the case of Bombay Chemicals Pvt. Ltd. .
This judgment does not refer to any tariff heading in particulars although passed in the context of notfn. No. 55/75 (as amended by notfn. No. 62/78), it lays down a general principle and therefore the ratio is required to be followed irrespective of the heading or sub-heading in which the items may otherwise fall. It is also significant that notfn. No. 55/75. 104/82. 62/78 and 234/82 referred only to tariff item 68 and there was no dispute that the item(s) was classifiable under TI 68 in the earlier period. It is also noteworthy that later the Ministry had also issued a tariff advice No. 1 /86-CUS.clt. 24.6.86 mentioning, inter alia, that prior to 28.2.80 insecticide etc. were exempt from Central Excise duty under notification 234/82 and the new Central Excise tariff 3801.20 incorporates exactly the same wordings as in the said notification. In notes the reference to the definition of insecticide in the Insecticides Act, 1968 appears to include both concentrated bulk form as well as preparations. The Board was accordingly of the opinion that as the wordings under heading 3801.20 of the Central Excise Tariff stands, for the purpose of levying CVD, insecticide, fungicide, herbicide, weedicide and pesticides irrespective of classification for basic duty purposes would be covered under this heading--and whether or not of technical grade or constituted preparations.
28. This shows that even the CBEC kept the provisions of the Insecticides Act in mind and considered them relevant for classification and for CVD purposes. It is also noteworthy that after 1986 in the classification list the product has been shown as classifiable under 3801.10 with NIL rate of duty under Finance Bill 1986. Therefore for the post 1986 period the matter was required to be considered in the light of above observations and findings even for the normal period of limitation.
29. The impugned orders are therefore set aside and the matter is remanded for de novo consideration in respect of the normal period of limitation in the light of above observations and findings and the law.
In view of difference of opinion between Hon. Member (J) and the Vice-President, the matter is referred to the Hon. President for reference to a third Member on the following point: 1. Whether in view of the observations of Hon. Member (J) the item is required to be considered as not eligible to notfn. 234/82 and the demand within a normal period was required to be upheld and only penalty was required to be reduced or the item was covered by the Notification and the impugned orders are required to be set aside but remanded for de novo consideration in respect of the normal period of limitation in the light of the observations of the Vice-President? 30. The difference of opinion referred to me in this appeal filed by M/s. Bakul Chemicals Pvt. Ltd. is-- (1) whether in view of the observations of the Member (J) the item--Alpha Napthyl Acetic Acid (ANAA) was required to be considered as not eligible to Notification No. 234/82-CE and the demand within a normal period was required to be upheld and only penalty was required to be reduced.
(2) The said item ANAA was covered by the Notification No. 234/ 82-CE and the impugned order was required to be set aside but remanded for de novo consideration in respect of the normal period of limitation in the light of the observations of the Vice-President.
31. Shri C.S. Lodha. Advocate appearing for the appellants submitted that ANAA was a plant growth regulator and the plant growth regulators were covered by the expression "pesticides". He referred to the provisions of the Insecticides Act. 1968 and submitted that the expression "Pesticides" and "Insecticides" were wide enough to cover the plant growth regulators. He submitted that the order proposed by the Id. Vice-President be accepted.
32. In reply Shri H.K. Jain. SDR submitted that the plant growth regulator have been separately specified in the Tariff as different from the Insecticides. Rodenticides, Fungicides, Herbicides.
Disinfactant. etc. He referred to the Explanatory Notes to the Harmonised Commodity Description and Coding System (HSN) wherein plant growth regulators have been separately described and explained and were treated separately from insecticides, pesticides etc.
33. I have carefully considered the matter. The issue for consideration in this appeal filed by M/s. Bakul Chemicals (P) Ltd. is whether the product--Alpha Napthyl Acetic Acid (ANAA). a plant growth regulator is eligible for exemption from the payment of central excise duty when such exemption was available to insecticides, fungicides, herbicides, weedicides and pesticides. The Id. Member (J) had observed that plant growth regulators are different from insecticides and pesticides, and the product- ANNA was not an insecticide or pesticide. The Id.
Vice-President on the other hand had made a distinction between the plant growth regulators, which could also act as pesticides, insecticides, weedicides or fungicides, and those which could not act as pesticides, insecticides, weedicides or fungicides. He had viewed that those plant growth regulators, which could act as insecticides were to be treated as insecticides. He has further made a distinction between classification as prior to 28.2.1986 under the old Central Excise Tariff and from 28.2.1986 onwards under the new Central Excise Tariff based on the Central Excise Tariff Act, 1985. According to him, prior to 28.2.1986 the product, ANAA was eligible for exemption under Notification No. 55/75-CE dated 1.3.75 as amended. For the period under the new Central Excise Tariff, effective from 28.2 1986. he observed that Heading No, 38.08 of the Central Excise Tariff included plant growth regulators, while under the sub-headings under Heading No. 38.08 the plant growth regulators did not figure in the sub-heading No 3808.10. and as such the plant growth regulators under the new Central Excise Tariff were classifiable under sub-heading No. 3808.90 which covered the other goods classifiable under Heading No. 38.08, (other than insecticides, fungicides, herbicides, weedicides, and pesticides).
Even under the new Central Excise Tariff, in force from 28.2.86 he referred that;the plant growth regulators, which could act as insecticides, fungicides, herbicides, weedicides, or pesticides would be eligible for exemption and added that if they could not so act as insecticides, fungicides herbicides, weedicides or pesticides, then they would not be eligible for benefit accorded to such insecticides, etc. He had proposed remand of the matter for de novo consideration in respect of the normal period of limitation in the light of the various observations made by him in the order proposed.
34. Plant growth regulators regulate the growth of the plant. Plant growth js affected by internal and external factors. The internal controls are all the product of the genetic instructions carried in the plant. Inter Cellular communication in plants take place via hormones.
A plant hormone or phytohormone is an organic compound that is synthesised in minute quantities in one part of a plant and translocated to another part where it iniluences a specific physiological process. In plants chemicals hormones produced by synthesising chemicals, are used to modify the growth. According to chemical and technical dictionary 3rd enlarged edition by H. Bennett at page 825. the plant growth substances (plant growth regulators) have been defined as hormone like chemicals which regulate growth and maturation of plants.
The external controls relate to the soil and the environment in which the plant grows. The external factors place constraints on the extent to which the internal controls can permit the plant to grow and develop. On the positive side are the water, nutrient supply available in the soil, light etc. On the negative side are the competing weeds, wild growth, pests, insects etc.. who eat into the vitals of the plant and pose a competition to the crop. While insecticides, pesticides, etc., take care of the external factors, affecting the growth of the plant, the plant growth regulators alter and modify the internal life processes of a plant.
The plant growth regulators although included in the broad category of pesticides and herbicides, (and in various technical books are covered by the extended meaning given to the insecticides, pesticides, etc.) are separately identified in the agro-chemical industry. For Tariff purposes, plant growth regulators had been separately and specifically described and had not been included in the description of insecticides, herbicides, etc. While the role of pesticides, insecticides, etc. is negative, the plant growth regulators have a positive function. They alter and modify the life process of a plant. Even when their effect is to retard the growth, they are aimed to positively effect the product of that targetted plant. Pesticides, insecticides, etc. had negative function with regard to the external factors effecting the growth of the plant as they control or eliminate the factors effecting the growth of the plant by destroying pests, weeds, insects, etc. The plant growth regulators boost, tone, or accelerate the growth of the plant. They are like tonic to the plant.
According to Mcgraw Hill Dictionary of Scientific and Technical Terms IInd Edition, pesticide is a chemical agent that destroys pests also known as biocide (page-1193). According to the concise Chemical and Technical Dictionary III enlarged Edition by H. Bennett, pesticide is a product that is used as an insecticide, fungicide, acaricide (Miticide), herbicide, rodenticide, bacteriacide, parasiteicide.
nematicide and others used against pests, (page 797). (77 ELT 3) Insecticide is a substance or mixture for destroying insects (page 579 of concise Chemical and Technical Dictionary 3rd enlarged edition--H.Bennett referred to above). At page 821 of the Mcgraw Hill Dictionary of Scientific and Technical terms 2nd Edition, it had been defined as chemical agent that destroys insects.
Herbicide has been defined as a chemical agent that destroys or inhibits plant growth.
35. The plant growth regulators are applied directly to alter a life processes or structure in some beneficial way as to enhance yield, improve quality or facilitate harvesting. They work on the plant hormones, which control the physiological processes in plants. They are different from the insecticides, pesticides, fungicides, weedicides.
etc. By working on the plant hormones and causing modification in (he cell membrane, enzymes etc.. they (1) release natural growth hormone.
(2) combine with the hormone (3) prevent hormone synthesis or (4) affect transport or the fate of the hormone in the plant. They had a bearing on the response of the life of the plant to the internal and external factors that govern all stages of crop development from germination through vegetative growth, reproductive development, maturity, ageing as well as post-harvesting preservation. They are used as harvest aids for defoliating cotton, to control suckers in tobacco.
They are also used on wheat, rubber, sugarcane, rose, tea, etc.
36. As against pesticides, insecticides, etc. on the one hand and plant growth regulators, on the other, only fertilizers work through external factors (soil) to provide positive factors (nutrients) to the targetted plants: thus, as fertilizers are different from pesticides, etc., so plant growth regulators are not the same as pesticides etc.
37. Under Sub-heading No. 3808.10 as in the Central Excise Tariff during the relevant time only, (1) insecticides. (2) fungicides, (3) herbicides (4) weedicides and (5) pesticides were specified. Other than these specified product were classifiable under sub-heading No.3808.90. The plant growth regulators were specifically mentioned in the main Heading No. 38.08. They were however not included in sub-heading Nd. 3808.10. Thus, it is clear that the legislature wanted the plant growth regulators to be classified under sub-heading No. 3808.90. which covered products, which were otherwise covered by heading No. 38.08 but were other than insecticides, fungicides, herbicides, weedicides, and pesticides.
38. In the HSN Explanatory Notes, plant growth regulators are separately described from insecticides. At page 529, it has been explained that plant growth regulators are applied to alter the life processes of a plant so as to accelerate or retard growth, enhance yield, improve quality, or facilitate harvesting etc. Plant hormones (Phyto Harmones) are one type of plant growth regulators. Synthetic organic chemicals are also used as plant growth regulators. At page 528-529. insecticides are explained as under: Insecticides include not only products for killing insects, but also those having a repellent or attractant effect. The products may be in a variety of forms such as sprays or blocks (against moths), oils or sticks (against mosquitoes), powder (against ants), strips (against files), cyanogen gas absorbed in diatomite or paperboard (against fleas and lice).
Many insecticides are characterised by their mode of action or method of use. Amount these are: Insect growth regulators: chemicals which interfere with bio-chemical and physiological processes in insects.
--chemostcrilants: chemicals used to sterilise segments of an ins(sic) population.
--repellents: substances which prevent insect attack by making their food or living conditions unattractive or offensive.
39. It is thus, seen that the; plant growth regulators were a separate identifiable product, and for the Central Excise Tariff purposes, could not be given an extended meaning as to cover the insecticides, pesticides, etc.
40. Other aspects of the matter, including the Supreme Court's decision in the case of Bombay Chemical Put. Ltd. v. Collector of Central Excise, Bombay have been analysed by the Id. Member (J), and I agree with the order proposed by her.
41. In view of the majority opinion, the appeal is disposed of in terms of observations and findings of Hon'ble Member (Judicial).