ORDER
C.K. Mahajan, J.
1. The question that arises for consideration in the present petition relates to the correct classification of 'Technical Grade insecticides, pesticides etc.'. The petitioner has laid challenge to the circular dated 28-10-1997 issued by C.B.E.C. classifying the Technical Grade insecticides and pesticides under chapters 28 and 29 applicable to Chemicals in general or under heading No. 38.23, depending upon whether they are separately defined elements or compounds or not.
2. The petition has been filed in a representative capacity. The petitioner is a society registered under the Societies Registration Act and is an Association of various manufacturers of 'Technical Grade pesticides and insecticides' and formulations thereof.
3. The respondent No. 2, the Central Board of Excise and Customs has been given powers to issue orders under Section 37 of the Central Excise Act, 1944 for the purpose of uniformity of classifications. All such orders are binding on all the subordinate quasi-judicial authorities.
4. The respondent No. 2 issued a circular dated 28th October, 1997 directing the Excise Authorities to reclassify Technical Grade pesticides and recover the short levied duty resulting from the alleged misclassification of these products. The circular purported to allege that Technical Grade insecticides and pesticides etc. were distinct from formulations or preparations. It was further alleged that the tariff description 38.08, as amended in July, 1996 to cover only insecticides put in the form or packing for the retail sale and as a result the pesticides in bulk form were excluded from the heading 38.08. The bulk pesticides would be covered under Chapter 28 or 29 as if they are separate Chemically defined compounds and if not then under the heading 38.23.
5. Briefly stated the facts are that in the budget of 1986-87 all items of pesticides/insecticides etc. were classified under the Chapter heading 'Miscellaneous Chemical Products' under Chapter 38.01.20 with nil rate of duty. Thereafter these items were shifted under the heading 38.08.10 with nil duty continuing under the broad heading 38.08.
6. This pattern of classification continued till the financial year 1995-96. The items of insecticides/pesticides were classified under tariff heading 38.08 only and nowhere else in the Central Excise Tariff. There was no dispute that the Technical Grade pesticides and insecticides etc. and the subsequent formulations were covered by a single heading 38.08. Separate Chemically defined compounds were excluded from Chapter 38. However an exception was carved out by virtue of Chapter Note 1(a)(2) of Chapter 38.
7. Technical Grade insecticides and pesticides were covered under the heading 38.08 of the Central Excise Tariff Act, 1985 with effect from March 1,1986. There was no dispute that the Technical Grade pesticides, insecticides and the subsequent formulations were covered by the single heading 38.08. Separate Chemically defined compounds were excluded from Chapter 38.
8. During the period March, 1986 to July, 1996 the view taken by the respondent was that the Technical Grade insecticide was classifiable under Chapter 38.08 and further compounding of technical grade of insecticides and pesticides etc. into formulations was a manufacturing activity and excise duty was payable separately on formulations under the heading 38.08. This issue was finally decided by an order by Customs, Excise and Gold Control Appellate Tribunal in the case of Markfed Agro Chemicals v. Collector of Excise, Chandigarh whereby it was held that process of making a formulation did not amount to manufacture.
9. However the Board issued an order under Section 37B holding that addition of Chemical and other ingredients to pesticidial Chemicals in a highly concentrated form would amount to manufacture.
10. By the Finance Act, 1996 the heading 38.08 was amended and chapter Note 2 to Chapter 38 was introduced. The chapter Note read as under :
'Chapter 38. Miscellaneous Chemical Products Notes :
1...
2. In relation to products of heading No. 3808, addition of Chemicals and other ingredients like inert carriers or solvents, surface active dispersing and stabilising agents, emulsifiers, wetting and dispersing agents, deodorant, masking agent, attractants and feeding stimulants to pesticidal Chemicals in concentrated form, labelling or relabelling of containers intended for consumers and repacking from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumer shall amount to 'manufacture'.'
The Tariff Entry as amended in 1996 reads as under :
38.08 Insecticides, rodenticides, fungicides, herbicides,anti-sprouting products and plant growth regulators, disin- fectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sul-phurtreated bands, wicks and candles, and fly-papers)3808.10 - Insecticides, fungicides, herbicides, weedicides and pesti- cides 10%3808.20 - Plant growth regulators 10%3808.90 - Other 20%
11. The amendment in Chapter Note (2) brought within its scope certain activities like packing from bulk packs to retail packs. The effect of the Chapter Note was to artificially define what amounted to manufacture by stating that in relation to products of Heading No. 38.08, the addition of Chemicals, and other ingredients as set out therein, to pesticidal Chemicals, labelling/relabelling containers repacking from bulk pack to retail packs would amount to manufacture. Heading 38.08 as amended covered basically insecticides, pesticides etc. in three types of forms:
(i) in packings meant for retail sale; or
(ii) as preparations; or
(iii) as articles such as sulphur treated bands, wicks and candles etc.
12. By the Finance Act, 1997 Chapter Note 1(a)(2) was amended to read as under :
'This Chapter does not cover separate Chemical by defined elements or compounds with the exception of the following : (i) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth, regulators, disinfectants and similar products put up as described in Heading No. 38.08.'
Tariff item 38.08 reads as under :
38.08 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant growth regulators, disinfec-tants and similar products, put up in forms or packings for re-tail sale or as preparations or articles for example, sulphur-treated bands, wicks and candles, and fly papers.
13. The petitioner and the various members of the petitioner association made representations to the respondents regarding correct interpretation of the amended heading 38.08.
14. On the 20th October, 1997 the second respondent issued a circular which reads as under :
(i) That Technical Grade insecticides and pesticides etc. are distinct from formulations or preparations and that in commercial parlance as also technical literature Technical Grade pesticides would be distinguishable from formulations or preparations;
(ii) that the Insecticides Act and Rules distinguish them and prescribe different types of packages;
(iii) that the Section 37B Order dated 27-7-1995 would no longer be valid in its entirety because of the changes in Chapter 38 by the Finance Act, 1996;
(iv) that the Tariff description 38.08 was amended in July, 1996 to cover only Insecticides put up in forms or packing for retail sale and as a result pesticides in bulk forms were excluded from heading 38.08 and that bulk pesticides would be covered under Chapter 38 or 29 if they were separately Chemically defined compounds and if not then under heading 38.23;
(v) that the Technical Grade pesticides are neither cleared in the form or packing for retail sale or that they were not in the nature of an article and that they were also not in the nature of preparations;
(vi) that the Insecticides Act and Rules distinguish Technical Grade pesticides from intermediate preparations and formulations. In other words, intermediate preparations were equated with formulations and for that purpose reference was made to Form XV and XVI of the Insecticides Rules, 1971, and
(vii) that the changes made in the 1996 and 1997 budgets had not been fully appreciated and that the practice in some commissionerates of charging bulk pesticides etc. under heading 38.08 was not correct. The Excise Authorities were thereforee directed by the 2nd Respondent to reclassify the Technical Grade pesticides and immediately recover the short duty levied resulting from the alleged misclassification of these products.
15. In effect what is contended is that after the amendment all separate Chemically defined pesticides other than those in the retail packings would fall outside the scope of Chapter 38 and would be assessed on merits under Chapter 28 or 29. It is in these circumstances that the circular was issued directing the Commissioners to recover duty allegedly short levied resulting in misclassification of this product. This resulted in issue of show cause notices and threatened coercive recovery with penal consequences. Hence this petition.
16. The petitioners submit that the circular was manifestly incorrect and based on the misreading of the amendments of Finance Act of 1996 and 1997. Prior to 1996 there was no dispute with the Technical Grade pesticides which are usually Chemically defined compounds fall under heading 38.08 by virtue of Chapter Note 1 (a)(2). This position was accepted by the Respondents/Revenue. The amendments did not change the position. The insertion of Chapter Note (2) made it clear that other Technical Grade pesticides as also formulations fall under heading 38.08. The amended heading was brought in line with the H.S.N. Explanationn Notes. The said notes have been held by the Supreme Court in Collector of Central Excise v. Woodcraft Products Ltd. - : 1995ECR417(SC) to be of extremely persuasive value in interpreting the tariff entry. The word 'preparation' inter alia, covers intermediate preparations. These preparations have to be compounded by making additions so as to make it ready to use pesticide. Intermediate preparations as referred to in the H.S.N. Explanatory Notes are Technical Grade pesticides. In the circumstances the decision of respondent No. 2 to equate preparations with 'formulations and intermediate preparations' is uncalled for. The direction of respondent No. 2 to the Subordinate Authorities to recover duty on Technical Grade pesticides by reclassifying under Chapter 28 or 29 and to recover the duty short levied is wholly untenable. The show cause notice and directions issued pursuant to the circular issued by respondent No. 2 are illegal and without jurisdiction.
17. The respondents do not dispute the facts but draw a distinction between the Technical Grade pesticides and pesticides or insecticides. The Technical Grade pesticides are sold to pesticides formulators who by addition of solvents, emulsifiers, inherts etc. and masking agents manufacture these Chemically defined compounds as pesticides or insecticides. They further urged that the distinction between the two is very clear. The Technical Grade pesticides which is highly concentrated cannot be used as such and the same can be used only after the same is manufactured into pesticides or insecticides. Prior to the amendments there was no distinction between the bulk packings i.e. Technical Grade pesticides/insecticides and retail packing i.e. pesticides or insecticides and all pesticides fall under heading 38.08. The amendments changed the tariff description of heading 30.08 to cover only pesticides/insecticides put in forms or packings for retail sale. As a result pesticides in bulk form were excluded from the heading 38.08. Bulk pesticides can be classified under Chapter 28 or 29 depending on the composition. There being a distinction between the Technical Grade pesticides/insecticides and pesticides or insecticides manufactured to be sold in the retail market they have been classified under two separate headings and thereforee the circular to this fact which was issued on 28-10-1997 is justified.
18. We have heard the counsel for the parties and also examined the relevant provisions of the Central Excise Act, 1944 and Central Excise Tariff Act, 1985.
19. The clarification issued by the Central Board of Excise and Customs under Section 37B in July, 1995 stipulated that both the Technical Grade pesticides and formulations made there from would fall under heading 38.08 but the process of making a formulation from Technical Grade insecticides by addition of Chemicals, inherts carriers etc. would amount to manufacture. The circular was challenged in the Delhi and Gujarat High Courts. Both the courts decided against the Revenue holding that the making of formulations from Technical Grade pesticides would not amount to manufacture. Reference, is invited to Kissan Chemicals v. Union of India, : 1996(88)ELT648(Del) and Seth Enterprises v. Commissioner of Customs, : 1996(88)ELT652(Cal) .
20. Prior to 1996 and before the amendment of Chapter 38 w.e.f. 23rd July, 1996 it is admitted by both the petitioner and the Revenue that Technical Grade insecticides or pesticides and formulations fell within Chapter 38 of the Excise Tariff Heading 38.08. The excise duty was payable on the manufacture of Technical Grade pesticides under heading 38.08 as well as on the formulations falling under heading 38.08. The amendment was made to overcome the Markfed judgment of the Tribunal. By way of this amendment Chapter Note 2 was introduced and heading 38.08 was amended to bring it in line with H.S.N. Explanatory notes. The manufacture was artificially defined by Chapter Note by stating that in relation to products of Heading No. 38.08, the addition of Chemicals, and other ingredients to pesticidal Chemicals, labelling/relabelling containers repacking from bulk pack to retail packs would amount to manufacture. Chapter Note 1(a)(2) was not amended. Technical Grade pesticides/insecticides were intermediate preparations and separate Chemically defined elements or compounds and thus the heading 38.08 continues to apply to them.
21. Technical Grade insecticides are intermediate preparations. A preparation is synonymous with formulation. Formulation is made by further compounding the Technical Grade pesticides by the addition of inherts carriers, Chemicals etc. Hence it is an intermediate preparation. This preparation is to be further compounded in order to obtain the final preparation by formulation. The final preparation is ultimately sold to the consumers. Chapter Note 2 itself shows that the Technical Grade pesticides fall under heading 38.08. The Chapter Note would become redundant if the Technical Grade pesticides fall in Chapter 28 or 29 and the resultant formulation fall under Chapter 38. The need to artificially define manufacture in the Chapter Note would be a meaningless exercise because when a Chapter changes it automatically takes into its compass the character of the product for the purposes of excise/customs duty.
22. Chapter Note 1(a) makes an exception for separate Chemically defined elements or compounds which have pesticidal properties. Technical Grade pesticides are separate Chemically defined compounds. Formulations are mixtures and thereforee can never be separate Chemically defined compounds. If the intention was to cover under the heading 38.08 only formulations then the Chapter Note would be rendered redundant. It is significant to note that there is no Chapter Note introduced in Chapter 28, 29 or 38 stating that Technical Grade pesticides or bulk formulations would not be covered in Chapter 38 but would be covered under Chapter 28 or 29. There was no dispute with regard to classification of Technical grade pesticides and formulations prior to the Finance Act, 1996. By way of the amendment the Technical Grade pesticides do not cease to be pesticides. The character of the product doesn't change and continues to remain in the heading 38.08. The amendment in Chapter Note by the Finance Act of 1997 also did not make any material change. The amendment was done apparently to bring in line the said tariff entry with the H.S.N. and the Chapter Note was introduced to broaden the net of taxation to bring within its ambit formulators who have claimed that their activity did not amount to manufacture. A plain reading of the Chapter shows that both the Technical Grade pesticides and formulations fall in Heading 38.08. The respondents have totally misconstrued the meaning of the amended entry and the Chapter Note. We are unable to read in the amendments that bulk pesticides or insecticides do not fall under the heading 38.08.
23. While presenting the Finance Bill, 1996 in the Parliament there was no mention of any increase in duty of pesticides or any increase on amount of duty on Technical Grade pesticides. The statement of objects and reasons also did not contain any reference to that effect, nor did the Explanatory Note to the Budget 1996-97. In fact the tariff rate of duty was lowered from 20% to 10% on goods falling under Schedule to the Tariff Act. The amendment, thus, did not result in a change in the duty structure. The circular appears to be the result of misconstruction of the amendments introduced in the Tariff Act.
24. Technical Grade Pesticides in concentrated form cannot be used as insecticide or pesticide. They are Chemically defined compounds and cannot disqualify from being termed as pesticides. They possess pesticidal properties, which fact is not disputed by the respondents. The intention of the law makers was not to exclude fertilizers and plastics from Chapter 38 which are also Chemicals. If that was so then there was no need to place them in Chapter 38. They would automatically fall in Chapters 28 and 29 being Chemicals. The entry for insecticides and pesticides is a more specific entry whereas Chapter 28 and 29 which covers Chemicals is a general entry. In common parlance these products are known as pesticides and insecticides. Chapter note 1(a)(2) of Chapter 38 would be rendered otiose if the pesticidal Chemicals were to fall in Chapter 28 or 29 because they were separate Chemically defined compounds. The exception carved out in Chapter 38 for pesticides even though they are separate Chemically defined compounds cannot be nullified by the circular issued by the CBEC.
25. The relevant provisions of the Tariff Act and the Chapter Notes with amendments and the H.S.N. Explanatory Notes are set out herein below to facilitate the understanding of the controversy.
Tariff Heading 1995-96
38.08 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products.
CHAPTER 38
MISCELLANEOUS Chemical PRODUCTS
Notes
1. This Chapter does not cover:
(a) Separate Chemically defined elements or compounds with the exception of the following:
(1) ...
(2) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products.
(3) ....
(4) ....
Tariff Heading 1996-97
38.08 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up informs or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly papers)
CHAPTER 38
MISCELLANEOUS Chemical PRODUCTS
Notes
1. This Chapter does not cover :
(a) Separate Chemically defined elements or compounds with the exception of the following:
(1) ...
(2) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products.
(3)...
(4)...
(b)...
(c)...
2. In relation to products of heading No. 38.08 addition of Chemicals and other ingredients like inert carriers or solvents, surface active dispersing and stabilising agents, emulsifiers, wetting and dispersing agents, deodorant, masking agent attractants and feeding stimulants to pesticidal Chemicals in concentrated form labelling or relabelling of containers intended for consumers and repacking from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumer shall amount to 'manufacture'.
Tariff Heading 1997-98
38.08 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly papers)
CHAPTER 38
MISCELLANEOUS Chemical PRODUCTS
Notes
1. This Chapter does not cover :
(a) Separate Chemically defined elements or compounds with the exception of the following :
(1) ...
(2) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up as described in Heading No. 38.08.
(3) ...
(4) ...
(b) ...
(c) ...
2. In relation to products of heading No. 38.08 addition of Chemicals and other ingredients like inert carriers or solvents, surface active dispersing and stabilising agents, emulsifiers, wetting and dispersing agents, deodorant, masking agent attractants and feeding stimulants to pesticidal Chemicals in concentrated form labelling or relabelling of containers intended for consumers and repacking from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumer shall amount to 'manufacture'.
Hormonized Commodity Description and Coding System
Explanatory Notes
Second edition (1996)
38.08 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly-papers)
CHAPTER 38
MISCELLANEOUS Chemical PRODUCTS
Chapter Notes
1. This Chapter does not cover :
(a) Separate Chemically defined elements or compounds with the exception of the following :
(1) ...
(2) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products,
(3) ...
(4) ...
2...
GENERAL
This Chapter covers a large number of Chemical and related products.
It does not cover separate Chemically defined elements or compounds (usually classified in Chapter 28 or 29) with the exception of the following:
(1) ...
(2) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up as described in heading 38.08.
26. It is of interest to note that the H.S.N. Explanatory Notes relating to Chapter 28 or 29 exclude certain separate Chemically defined inorganic compounds from its purview even when they are pure. Certain other separate elements or separate Chemically defined compounds which would otherwise have been classified in Chapter 28 may be excluded when put up in certain forms or if they have been subjected to some treatment which leave the Chemical composition unchanged. Insecticides etc. put up as described in heading 38.08 are excluded specifically from Chapter 28 or 29.
27. If the H.S.N. Explanatory Notes are of persuasive value and a safe guide for determination of classification then it is clear that the circular issued by the respondents is an attempt to misconstrue the aforesaid provisions detailed above. The report given by the Commissioner, Central Board of Excise, Madras, the Central Insecticides Board and the Registration Committee conforms to the aforesaid view.
28. It matters little whether the pesticides/insecticides is put up in the forms or packings for retail sale or bulk packings, or preparations and intermediary preparations or articles as heading 38.08 covers all these items and this finds support from the H.S.N. Explanatory Notes which state that intermediary preparations requiring further compounding to produce ready for use insecticides etc. are also classified under heading 38.08 provided already possess pesticides /insecticidal properties. It is significant to note that prior to the Finance Bill of 1996 there was no distinction between the bulk packings, that is, Technical Grade pesticides/insecticides or retail packings and all the pesticide fell under heading 38.08. The amendments do not bring about any change and the only distinction that is made is between bulk packing and retail sale. There being no distinction between the bulk packing and retail sale prior to the Finance Bill, 1996 and admitted by the respondent we are unable to understand how the amendment could cease to be a pesticide and fall under Chapter 28 or 29 as separate Chemically defined compounds. The Chapter Notes exclude separate Chemically defined elements or compounds with the exception of insecticides, rodenticides, fungicides, herbicides etc.
29. The headings in so far as they relate to the Tariff item 38.08 for the years 1995-96, 1996-97 and 1997-98 read in line with the H.S.N. Explanatory Notes issued by the World Customs Organisation, Brussels which contains an identical tariff heading 38.08 and the expression used in the Indian Tariff Act must be construed to have the same meaning which is expressly given under it in the H.S.N. When there is no indication to the contrary in the Indian Tariff Act.
30. The H.S.N. Explanatory Notes to heading 38.08 make it clear that the said heading covers not only products that were put up for retail sale but also insecticides in the form, of preparations and intermediate preparations, whatever be their presentation. The Supreme Court had the occasion to deal with H.S.N. Explanatory Notes in Collector of Central Excise, Shillong v. Woodcraft Products Ltd., : 1995ECR417(SC) . It was held that the H.S.N. Explanatory Notes are safe guide to determine the classification of items which are patterned on the H.S.N. Explanatory Notes and in case of any conflict, unless a different intention is indicated in the tariff items, the H.S.N. Notes can safely be resorted to. The structure of the Central Excise Tariff is based on the internationally accepted nomenclature found in the H.S.N. and, thereforee, any dispute relating to tariff classification could be resolved with reference to the nomenclature indicated by the H.S.N. Explanatory Notes unless there be a different intention indicated by the Central Excise Tariff Act. The expression used in the Indian Tariff Act must be construed to have the same meaning which is expressly given to it in the H.S.N. when there is no indication to the contrary therein.
31. The H.S.N. Notes further confirm that the insecticides as described in heading 38.08 are excluded from the said chapter of certain separate Chemically defined organic compounds. It is also clear from the H.S.N. that the term 'preparation' is synonymous with 'formulation'. If dilution is treated as compounding the question of maintaining intermediate preparations in heading 38.08, as stated in the H.S.N. would never have arisen.
32. We are thus, unable to persuade ourselves to accept the contention of the Revenue/respondents that the heading 38.08 covers only the insecticides/pesticides etc. put up in the forms of packings for retail sale nor are they in the nature of an article of a preparation they would fall under chapter 28 or 29 depending upon the composition.
33. We are of the view that the Technical Grade pesticides do not get removed from the heading 38.08 by virtue of the amendments. If we were to accept the contention of the Revenue/respondents that the Technical Grade pesticides fall in Chapters 28 and 29 and the resultant formulations fall under Chapter 38 then there would be no need to artificially define in the Chapter Note as to what amounts to manufacture. Since both the Technical Grade pesticides and the formulations fall under the same heading the Chapter Note (2) becomes relevant as it shows that the Technical Grade pesticides continue to fall under the heading 38.08. If the reasoning given by the Revenue is to be adopted the Chapter Note would become redundant. The contention that the interpretation of Chapter Note (2) covers only formulations in retail packs is misleading. The expression 'in relation to products of heading 38.08' cannot be confined to the final product as is contended. The Chapter Note refers to Technical Grade pesticides as 'pesticidal Chemicals' in concentrated form. It is the pesticidal property that makes them a separate class of goods classifiable under Chapter 38.08. This is how the Chapter Note is to be interpreted otherwise it would lose its meaning.
34. The very fact that the Chapter Note 1(a) makes an exception for separate Chemically defined elements or compounds which are pesticidal preparations shows that the Technical Grade pesticides must fall under Chapter 38.08.
35. We have also examined Chapter 29 of the Central Excise Tariff Act and we make it clear that certain other separate Chemically defined organic products which were otherwise classified in Chapter 29 may be excluded when put up in certain forms and if they have been subjected to certain treatment which leave their Chemical composition unchanged. Insecticide is one such example. Merely because Chapter 38 of the Tariff has been amended, Technical Grade pesticides do not seize to be pesticides. The amendment does not change the character of the product and the product must continue to remain in the heading 38.08. It is well settled rule of interpretation that a specific entry must be preferred over a general entry. The tariff item 38.08 is a specific entry. It has to be preferred to any entry under Chapter 28 or 29 or 38.23 as they are general entries and in any event Chapter 29 excludes from its purview insecticides etc. as described in heading 38.08.
36. It has also been brought to our notice by the learned senior counsel for the petitioner that the Ministry of Agriculture and the Indian Institute of Chemical Technology have also clarified that the Technical Grade pesticides and their formulations fall in the same category and should not be interpreted separately for the levy of excise duty etc.
37. Under Section 3(e)(1) of the Insecticides Act the insecticides specified in the schedule are Technical Grade insecticides and any dilution also termed as formulation fall within the definition as the general property and toxity of both - the Technical and formulation - remains the same.
38. Reference has also been invited to the pesticides manual published by the British Crop Protection Council, Farms Chemical Handbook, 1997, the Pesticides Manufacturing and Toxic Material Control Encyclopedia, Agricultural Pests of the Tropic and Their Control and the Glossary of the Manual for Pesticides Users wherein it is categorically stated that the Technical Grade pesticides are known to be referred as pesticides. In common parlance the Technical Grade pesticides are known as pesticides.
39. The bare fact that the Technical Grade pesticides are Chemically defined compounds cannot disqualify the same from being the insecticides/pesticides. They posses pesticidal properties which has not been disputed by the respondents. Merely because the Technical Grade pesticides in concentrated forms cannot be directly used as insecticides or pesticides cannot lead to the conclusion that they cannot be termed as pesticides and insecticides. Prior to the Finance Bill, 1996 there was no distinction between the bulk packings i.e. technical grade pesticides and retail packings and all pesticides fell under the heading 38.08. The distinction drawn between the bulk packing and retail packing in 1997 Finance Bill does not in any way change the character of the pesticides and the same continues to be covered under the heading 38.08.
40. We are not inclined to accept the contention of the respondents that the Technical Grade pesticides when compounded to make the formulations result in the manufacture of a new and distinct product. The word compounding means mixing any active ingredient with solvent, inherts carriers etc. and is synonymous with formulation.
41. From a reading of the Tariff Item 38.08 and the Chapter Notes as amended from time to time we cannot persuade ourselves to hold that there is a distinction between pesticides or insecticides to be sold in the retail market or in bulk form or that the tariff description of heading 38.08 was amended to cover only pesticides/ insecticides put in the form for packing for retail sale excluding pesticides in bulk forms. We have examined Chapters 28 and 29 and we do not agree that bulk pesticides are to be treated as separate Chemically defined elements or compounds covered under the said Chapters.
42. For the foregoing reasons the petition is allowed. The impugned circular No. 348/64/97-CX, dated 28-10-1997 issued by the Central Board of Excise and Customs is directed to be struck down. All the notices issued and actions taken based on the said circular shall also stand quashed and set aside. No order as to costs.