M/S Northern Minerals Ltd. Vs. Commissioner of Central Excise, - Court Judgment

Excerpt:
1. these appeals are against the order dated 15.05.2000 passed by the commissioner of central excise classifying the product "dhanzyme" m/s northern minerals ltd. under chapter sub-heading (csh) no.3808.20 of the central excise tariff schedule, demanding central excise duty of rs.37,58,560.00 on the clearances of the product for the period 1995-96 to september 1988 by invoking the extended period of limitation under the proviso the section 11a (1) of the central excise act, demanding interest on the duty amount under section 11ab of the act, imposing penalty (equal to duty) on the company under section 11ac of the act and also imposing personal penalties of rs.1 lakh each on shri r.g.agarwal (managing director of the company) and shri arun kumar dhanuka (managing director of the company) under rule 209a of the central excise rules. appeal no.2055 is by the company and appeal nos.2055 and 2057 are by shri a.k.dhanuka and shri r.g. dhanuka and shri r.g.agarwal respectively.2. we have carefully examined the records. the material averments in the appeal memo are that m/s northern minerals ltd. (hereinafter referred to as 'the company') were engaged in the manufacture of pesticides and insecticides falling under chapter heading 38.08 since 1980; that, besides such manufacture, the company obtained from m/s samruddhi farmachem marketing pvt. ltd., (in short, samruddhi) and m/s wockhardt ltd. (in short, wockhardt) a product viz. biozyme (described as bio-fertiliser) in bulk quantities (mainly 200 litre) under the brand names "sampdazyme" and "wokazim" respectively and repacked the same into smaller packings of 1000 ml, 500 ml, 180 ml, 90 ml, and 30 ml and sold such packing sunder its own brand name "dhanzyme"; that the bulk products supplied by samruddhi and wockhardt to the company were classified under csh 3101.00 and were chargeable to nil rate of duty; that the department had never proposed to change the classification of those goods; that the aforesaid activity of repacking the product supplied by samruddhi and wockhardt did not amount to manufacture; that the company also sold "dhanzyme" in granular form; that, for the said purpose, the company procured granules of bentonite clay from bhavnagar and sprayed "dhanzyme" liquid on the granules and packed the same in packings of 4 kg and 8 kg; that the company also imported seaweed extract powder in 25 kg packings from canada, diluted the same with water to 18% concentration, added to it a stabiliser to prevent fermentation and (after testing ) packed the formulation in hdpe bottles of size of 30 ml, 90 ml, 180 ml, 500 ml and 1000 ml for sale under the brand name "dhanzyme"; that the appellants used this formulation also for spraying on granules as aforesaid for obtaining the granular product n 4 kg and 8 kg packages; that, int he classification declarations filed by the company from time to time, they claimed classification of "dhanzyme" in liquid and granular from under csh 3101.00 as bio-fertiliser; that the seaweed extract powder which they imported from canada had been classified by customs authorities them selves under heading 31010000 of itc; that the department, nevertheless, insisted on classifying the appellants' products as plant growth regulators under csh 3808.20 and levying duty on that basis and accordingly the department by show-cause notice (scn) dated 08.01.1999 demanded duty of rs.37,58,560.00 on the above products viz. "dhanzyme" cleared by the company during the period 1995-96 to september 1998 and proposed to impose penalty on the appellants. the commissioner's order passed in adjudication of the scn has been challenged on various grounds.4. shri v. lakshmikumaran, counsel for the appellants, submitted that the appellants had purchased biozyme from samruddhi and wockhardt under brand names 'sampdazyme' and 'wokazim' respectively and had only carried out repacking of that product into smaller packings of 1000 ml, 500 ml etc. for sale under t heir own brand name "dhanzyme". the suppliers of biozyme had classified their product under csh 3101.00 and the department had not proposed to revise that classification. there was no chapter note in chapter 31 of the central excise tariff schedule which provided any legal fiction (as in chapter note 2 of chapter 38) defining the activity of repacking of bulk product as 'manufacture'.therefore, counsel submitted, there was no justification on the part of the commissioner in classifying the "dhanzyme" brand goods under a chapter heading different from 31.01. ld. counsel, further, questioned the correctness of the reliance placed by the commissioner on chapter note 2 of chapter 38. that chapter note could be relied on for holding any activity of repacking of a bulk product to be "manufacture", only if the bulk product fell in chapter 38. in the appellants ' case, the bulk product was classified by samruddhi and wockhardt under chapter 31 and not under chapter 38 and such classification had the approval of the department. it was without applying his mind to this aspect of the matter that the commissioner placed the appellants' products under csh 3808.20. counsel further submitted that it was the department's burden to show that the appellants' product was different from the bulk product supplied by samruddhi and wockhardt and had resulted from a manufacturing activity, but the department did not successfully discharge that burden. there was not even any attempt on the part of the department to rebut the appellants' contention that the department had never proposed to revise the classification of biozme manufacture by samruddhi and wockhardt and supplied by them in bulk quantities under their own brand names tot he appellants as bio-fertiliser under csh 3101.00. referring to the classification, by the adjudicating authority of "dhanzyme" as a plant growth regulator under csh 3808.20, id. advocate submitted that the appellant's product contained nutrients which were characteristic of fertilisers, but a plant growth regulator could not have any nutrient in it. ld. counsel referred to scientific literature on the subject and emphasised the point that plant growth regulators were organic compounds other than nutrients, which in relatively small amounts could inhibit, promote or other wise alter/modify physiological processes in plants. the appellants' product "dhanzyme" contained nutrients and only promoted plant growth, which was a function squarely attributable to fertilisers. in this connection, counsel also referred to hsn explanatory notes, which also said that plant growth regulators were intended to inhibit or promote physiological processes in plants. nutrients and amino acids present in "dhanzyme" promoted growth of the plant as a whole and did not play any restrictive role like a plant growth regulator. counsel also questioned the reasoning of the commissioner that a fertiliser should be applied directly to the soil so as to increase its fertility and "dhanzyme" which was used for spray over the plant foliage cold not be considered as a fertiliser. the appellants had marketed not only "dhanzyme" liquid but also "dhanzyme" in granular form. while "dhanzyme" liquid formulation was applied to the plant, the granular form was applied to the soil to provide nutritional support to the plant. fertilisers could be applied on the plant foliage as well as to the soil. for instance, urea granules were applied to the soil whereas urea solution was used as a liquid spray on plants. in any case, urea was a fertiliser only.referring to literature on the subject, id. advocate submitted that any substance which contained amino acids (as a source of nitrogen to plants) could only be classified as fertilisers. "dhanzyme" was rich in amino acids and hence classifiable only as a fertiliser. he, further, submitted that the presence of traces of hormones like cytokinin and auxin precursors in "dhanzyme" would not take the product outside the definition of fertiliser inasmuch as the product could perform its essential function (as a fertiliser) of promoting the growth and development of plants without any aid from the said hormones. ld.advocate heavily relied on literature in support of his contention that "dhanzyme" was classifiable as a bio-fertiliser.5. ld. advocate submitted that the demand of duty raised in the scn dated 08.01.1999 for the period 1995-96 to september 1998 was barred by limitation. the longer period of limitation under the proviso the section 11a(1) of the cental excise act was not invokable in the appellant's case in as much as there was no suppression, on their part of any material information from the department, nor any intention for evading payment of duty on the impugned goods. the appellants had, in their declaration filed with the department on 15.09.1995, clearly indicated that their product "dhanzyme" was being classified as bio-fertiliser and used as fertiliser . they also provided a list of raw-materials with their classification list. in their letter annexed to the proforma, the appellants had clearly stated that "dhanzyme" was a biologically derived plant growth promoter containing certain natural trace elements as well as precursors, enzymes and hydrolysed protein complexes. the necessary information about the product was thus made available to the department as early as n 1995 an, therefore, there was no question of any suppression with intent to evade payment of duty.ld. advocate further submitted that, since the bulk product, 'biozyme' supplied by samruddhi and wockhardt had been classified at their end under csh 3101.00, the appellants were under a bonafide belief that their product "dhanzyme" obtained by repacking the bulk product into smaller retail packings was also classifiable under the same csh and that the said activity of repacking did not amount to manufacture.moreover, the classification declarations filed by samruddhi and wockhardt classifying their bulk products under csh 3101.00 were approved by the department. in such circumstances, counsel added, there was no room for attributing to the appellants any intent for evading payment of duty. therefore, the extended period of limitation was wrongly invoked against the appellants. ld. counsel, further, submitted that the provisions of section 11ac of the act were not applicable to such a case. in any case, that section had effect only from 28.09.1996.therefore, the penalty impose on the appellants under section 11ac was not sustainable. counsel advanced a similar argument in relation to the interest sought to be levied under section 11ab of the act. he prayed for setting aside the order of the commissioner and allowing the appeals.6. ld. sdr, dr. d.k. verma reiterated the findings of the adjudicating authority. he also made an endeavour to draw support from the decision of this tribunal in the case of cce, meerut vs unique farmaid pvt.ltd. 1999 (33) rlt 365 to the commissioner's finding that the present appellant's products were plant growth regulators. he also relied on the decision of the tribunal on the classification of the appellants' own product 'dhanumon' reported in 1998 (102) e.l.t.182. in has rejoinder, id. advocate sought to distinguish both the cited cases.further, he cited the hon'ble supreme court's decision in the case of ranadey micronutrients vs cce (1996 (87) e.l.t.19(sc)] in support of his submission that micro-nutrients were appropriately classifiable under chapter 31 of the central excise tariff schedule. the appellant's products also contained micro-nutrients and hence the same should be classified only under chapter 31.7.1 we have carefully examined the submissions. we are primarily concerned with the classification of the appellants' goods branded "dhanzyme". the goods cleared by the appellants under the said brand name were in two forms, one in liquid form and the other in granular form. the liquid product was admittedly smaller packings of "biozyme", a bio-fertiliser supplied in bulk quantities to the appellant-company by m/s samruddhi and m/s wockhardt under the brand names "sampdazyme" and "wokazim" respectively. it is the appellant's consistent claim that the said bulk products branded "sampdazyme" and "wokazim" were classified by the manufacturers thereof under csh 3101.00 and that the department had never proposed to revise such classification. we note that this claim of the appellants has not been rebutted by the department. what the appellants did was simply to repack the bulk products of "sampdazyme" and "wokazim" brand receive from samruddhi and wockhardt into smaller packings of 1000 ml, 500 ml, 180 ml, 90 ml, and 30 ml, and sell the same under their own brand name "dhanzyme". in the absence of any chapter note in chapter 31 of the cental excise tariff schedule creating a legal fiction that repacking of bulk product into smaller packings amounted to manufacture, the aforesaid repacking activity of the appellants could not be held to be a process of manufacture within the meaning of section 2(f) of the central excise act inasmuch as that activity did not bring into existence any commodity different in character, use or commercial identity from the bulk product. therefore liquid "dhanzyme" was not excisable and the demand of duty on the product is not sustainable.7.2 as regards the appellant's granular product "dhanzyme", we note that the product was obtained by spraying liquid "dhanzyme" over granules of bentonite clay and that the granules so obtained were to be applied to the soil, unlike liquid "dhanzyme" itself which was for direct application to the plant. the bentonite clay granules with a spray of liquid "dhanzyme" over them are not the same product as liquid "dhanzyme" in the mind of the ultimate customer i.e., the farmer. while liquid "dhanzyme" is to be applied directly to the plant, the granular product is to be applied to the soil. therefore, in the mind of the customer, granular "dhanzyme" is different in character and use from liquid "dhanzyme" emerged out of a process of "manufacture' within the scope of section 2(f) of the act and the product would be excisable.however, we find that on the classification of the product, id.commissioner has not taken into account all the materials placed before him by the appellants, nor has he applied hid mind to the classification of the bulk product as approved by the department at the end of samruddhi and wockhardt.7.3 the five reasons stated in the scn for classifying 'dhanzyme' a plant growth regulator (in short, pgr) under csh 3808.20 appear to have been approved in toto in the impugned order. those reasons (as in scn) read as under:- "(i) the literature of the product taken over fro the party itself describes the product as a plant growth promoter. (ii) the leaflet says cytokinin and auxin precursors contained in dhanzyme are plant growth promoters, which induce and control seed germination, flowering, transition from vegetative to reproductive stages, fruit settling and maturation of sees". the functions, as stated here, clearly indicate that dhanzyme regulates various activities of the plants from vegetative to reproductive stages. (iii) it enhances photosynthesis in plants and also helps in cell growth. (iv) it doe snot appear to increase the fertility of soil as is in the case of fertilizes. it works directly on the plants. (iv) significantly, it is not covered as a fertilizer in fertilizer control order, 1985, where the fertilizers are covered. it is, therefore, obvious that statute does not recognise dhanzyme as a fertilizer".the commissioner appears to have held plant growth promoter to be synonymous with plant growth regulator. he has fallen into a patent error here. a plant growth promoter will only promote growth of the plant and will not inhibit it. on the other hand, a plant growth regulator can inhibit, promote or otherwise later physiological processes in plants. the relevant hsn note is clear to this effect.kirk-othmer "encyclopedia of chemical technology" (3rd edition-volume 18) introduces pgrs follows: "plant-growth regulators, other than nutrients, usually are organic compounds. they are either natural or synthetic compounds and are applied directly to a plant to alter its life processes or structure in some beneficial way so as to enhance piled, improve equality, or facilitate harvesting. plant hormones, i.e., phytohormones, are plant-produced growth regulators and, therefore, are naturally occurring plant substances. plant-growth regulators, however, apply to phytohormones as well as synthetic compounds." "plant physiology" (4th edition ) by robert m.devlin & francis h.witham gives the following description:- "plant regulators are organic compounds other than nutrients that in small amounts promote, inhibit, or otherwise modify a physiological process in plants".j.c. johnson's "plant growth regulators and herbicide antagonists-recent advances" introduces pgrs as under:- "plant growth regulators are compounds , mainly organic ,other than nutrients which in relatively small amounts inhibit, promote or otherwise alter physiological plant processes".all the above literatures cited by id. advocate seem to be converging on the point covered by the hsn note. they indicate that pgrs are natural or synthetic organic compounds of the than nutrients and that, when applied in a small amounts, they can alter physiological processes in plants. in the instant case, the department had no case that "dhanzyme" could inhibit or otherwise modify (apart from promoting) plant processes. the appellants plea that the product contained only aminoacides and other nutrients and, therefore, only promoted plant growth has not been successfully dislodged n the commission's order kirk-othmer says that pgrs are directly applied to plants. the appellants' 'dhanzyme' on granules was applied to soil only. the department has had no dispute about this fact. from the literature and other evidence on record, we find that the appellants' product in question is only a bio-fertilizer capable of promoting plant growth by providing nutritional support. the supplies of 'biozyme'-the bulk product repacked by the appellants into smaller 'dhanzyme' packings-certified in their brochure that their product contained two major components viz. seaweed extract and hydrolyzed protein complex.in an apparently alternative method of manufacturing 'dhanzyme' liquid in small hdpe containers, the appellants used seaweed extract powder imported from canada, which was sought to be classified by customs authorities under itc (has) 31010000. whether supplied by the biozyme manufacturers or formulated by the appellants themselves form the imported seaweed extract powder, the 'dhanzyme' liquid used for spray over bentonite clay granules had a seaweed origin.7.4 in the case of leeds kem [2000(41) rlt 674], we had occasion to examine the question whether seaweed was a bio-fertilizer or not. in that case, after consulting technical authorities on fertilizer,s we held that 'plantozyme' manufactured mainly form seaweed extract was bio-fertilizer classifiable under heading 31.01. we also held that the mere presence of small amounts of cytokinin in a bio-fertilizer would not detract from the latter's character of bio-fertilizer. it was further observed, in that case, that a product to be classified as plant growth regulator under c 38.08 must be a separate chemically defined compound, on which basis we found that the decision in unique farmaid (supra) holding 'floramin' to be a pgr did not help the revenue in leeds kem's case. we may, contextually, observe that the dr's reliance on the decision in northern minerals pvt. ltd vs cce [1998 (102) e.l.t.182 wherein 4.5% aqueous solution of alpha-naphthy 1 acetic acid (trade name: "dhanumon") was held to be a pgr is equally unhelpful to the revenue in the instant case.'floramin' and 'alpha-naphthyl acetic acid' are chemically defined organic compounds. in the instant case, the department appears to have had no case that the "dhanzyme" brand products of the appellants were chemically defined organic compounds.7.5 we would adopt the relevant reasonings of ours form the case of leeds kem for the purpose of deciding the classification of the present appellants' "dhanzyme" on granules. we hold that the "dhanzyme" on granules, cleared by the appellants during the material period was a bio-fertilizer classifiable under csh 3101.00 chargeable to nil rate of duty and no duty of excise was liable to be demanded in respect thereof.8. in view of our finding that on demand of duty was liable to be raised in respect of the products in question, there is no need of looking into other issues raised in these appeals. the impugned order is set aside and the appeals are allowed.

Judgment:
1. These appeals are against the order dated 15.05.2000 passed by the Commissioner of Central Excise classifying the product "Dhanzyme" M/s Northern Minerals Ltd. under Chapter Sub-heading (CSH) No.3808.20 of the Central Excise Tariff Schedule, demanding Central Excise duty of Rs.37,58,560.00 on the clearances of the product for the period 1995-96 to September 1988 by invoking the extended period of limitation under the proviso the Section 11A (1) of the Central Excise Act, demanding interest on the duty amount under Section 11AB of the Act, imposing penalty (equal to duty) on the Company under Section 11AC of the Act and also imposing personal penalties of Rs.1 lakh each on Shri R.G.Agarwal (Managing Director of the Company) and Shri Arun Kumar Dhanuka (Managing Director of the Company) under Rule 209A of the Central Excise Rules. Appeal No.2055 is by the Company and appeal Nos.2055 and 2057 are by Shri A.K.Dhanuka and Shri R.G. Dhanuka and Shri R.G.Agarwal respectively.

2. We have carefully examined the records. The material averments in the appeal memo are that M/s Northern Minerals Ltd. (hereinafter referred to as 'the Company') were engaged in the manufacture of pesticides and insecticides falling under Chapter Heading 38.08 since 1980; that, besides such manufacture, the Company obtained from M/s Samruddhi Farmachem Marketing Pvt. Ltd., (in short, Samruddhi) and M/s Wockhardt Ltd. (in short, Wockhardt) a product viz. Biozyme (described as Bio-fertiliser) in bulk quantities (mainly 200 litre) under the brand names "Sampdazyme" and "Wokazim" respectively and repacked the same into smaller packings of 1000 ml, 500 ml, 180 ml, 90 ml, and 30 ml and sold such packing sunder its own brand name "Dhanzyme"; that the bulk products supplied by Samruddhi and Wockhardt to the Company were classified under CSH 3101.00 and were chargeable to Nil rate of duty; that the Department had never proposed to change the classification of those goods; that the aforesaid activity of repacking the product supplied by Samruddhi and Wockhardt did not amount to manufacture; that the company also sold "Dhanzyme" in granular form; that, for the said purpose, the Company procured granules of Bentonite clay from Bhavnagar and sprayed "Dhanzyme" liquid on the granules and packed the same in packings of 4 kg and 8 Kg; that the Company also imported seaweed extract powder in 25 Kg packings from Canada, diluted the same with water to 18% concentration, added to it a stabiliser to prevent fermentation and (after testing ) packed the formulation in HDPE bottles of size of 30 ml, 90 ml, 180 ml, 500 ml and 1000 ml for sale under the brand name "Dhanzyme"; that the appellants used this formulation also for spraying on granules as aforesaid for obtaining the granular product n 4 Kg and 8 kg packages; that, int he classification declarations filed by the Company from time to time, they claimed classification of "Dhanzyme" in liquid and granular from under Csh 3101.00 AS bio-fertiliser; that the seaweed extract powder which they imported from Canada had been classified by Customs authorities them selves under Heading 31010000 of ITC; that the department, nevertheless, insisted on classifying the appellants' products as plant growth regulators under CSH 3808.20 and levying duty on that basis and accordingly the Department by show-cause notice (SCN) dated 08.01.1999 demanded duty of Rs.37,58,560.00 on the above products viz. "Dhanzyme" cleared by the Company during the period 1995-96 to September 1998 and proposed to impose penalty on the appellants. The Commissioner's order passed in adjudication of the SCN has been challenged on various grounds.

4. Shri V. Lakshmikumaran, Counsel for the appellants, submitted that the appellants had purchased Biozyme from Samruddhi and Wockhardt under brand names 'Sampdazyme' and 'Wokazim' respectively and had only carried out repacking of that product into smaller packings of 1000 ml, 500 ml etc. for sale under t heir own brand name "Dhanzyme". The suppliers of Biozyme had classified their product under CSH 3101.00 and the Department had not proposed to revise that classification. There was no Chapter Note in Chapter 31 of the Central Excise Tariff Schedule which provided any legal fiction (as in Chapter Note 2 of Chapter 38) defining the activity of repacking of bulk product as 'manufacture'.

Therefore, Counsel submitted, there was no justification on the part of the Commissioner in classifying the "Dhanzyme" brand goods under a Chapter Heading different from 31.01. Ld. Counsel, further, questioned the correctness of the reliance placed by the Commissioner on Chapter Note 2 of Chapter 38. That Chapter Note could be relied on for holding any activity of repacking of a bulk product to be "manufacture", only if the bulk product fell in Chapter 38. In the appellants ' case, the bulk product was classified by Samruddhi and Wockhardt under Chapter 31 and not under Chapter 38 and such classification had the approval of the Department. It was without applying his mind to this aspect of the matter that the Commissioner placed the appellants' products under CSH 3808.20. Counsel further submitted that it was the Department's burden to show that the appellants' product was different from the bulk product supplied by Samruddhi and Wockhardt and had resulted from a manufacturing activity, but the Department did not successfully discharge that burden. There was not even any attempt on the part of the Department to rebut the appellants' contention that the Department had never proposed to revise the classification of Biozme manufacture by Samruddhi and Wockhardt and supplied by them in bulk quantities under their own brand names tot he appellants as bio-fertiliser under CSH 3101.00. Referring to the classification, by the adjudicating authority of "Dhanzyme" as a plant growth regulator under CSH 3808.20, Id. Advocate submitted that the appellant's product contained nutrients which were characteristic of fertilisers, but a plant growth regulator could not have any nutrient in it. Ld. Counsel referred to scientific literature on the subject and emphasised the point that plant growth regulators were organic compounds other than nutrients, which in relatively small amounts could inhibit, promote or other wise alter/modify physiological processes in plants. The appellants' product "Dhanzyme" contained nutrients and only promoted plant growth, which was a function squarely attributable to fertilisers. In this connection, Counsel also referred to HSN Explanatory Notes, which also said that plant growth regulators were intended to inhibit or promote physiological processes in plants. Nutrients and amino acids present in "Dhanzyme" promoted growth of the plant as a whole and did not play any restrictive role like a plant growth regulator. Counsel also questioned the reasoning of the Commissioner that a fertiliser should be applied directly to the soil so as to increase its fertility and "Dhanzyme" which was used for spray over the plant foliage cold not be considered as a fertiliser. The appellants had marketed not only "Dhanzyme" liquid but also "Dhanzyme" in granular form. While "Dhanzyme" liquid formulation was applied to the plant, the granular form was applied to the soil to provide nutritional support to the plant. Fertilisers could be applied on the plant foliage as well as to the soil. For instance, urea granules were applied to the soil whereas urea solution was used as a liquid spray on plants. In any case, urea was a fertiliser only.

Referring to literature on the subject, Id. Advocate submitted that any substance which contained amino acids (as a source of nitrogen to plants) could only be classified as fertilisers. "Dhanzyme" was rich in amino acids and hence classifiable only as a fertiliser. He, further, submitted that the presence of traces of hormones like cytokinin and auxin precursors in "Dhanzyme" would not take the product outside the definition of fertiliser inasmuch as the product could perform its essential function (as a fertiliser) of promoting the growth and development of plants without any aid from the said hormones. Ld.

Advocate heavily relied on literature in support of his contention that "Dhanzyme" was classifiable as a Bio-fertiliser.

5. Ld. Advocate submitted that the demand of duty raised in the SCN dated 08.01.1999 for the period 1995-96 to September 1998 was barred by limitation. The longer period of limitation under the proviso the Section 11A(1) of the Cental Excise Act was not invokable in the appellant's case in as much as there was no suppression, on their part of any material information from the Department, nor any intention for evading payment of duty on the impugned goods. The appellants had, in their declaration filed with the Department on 15.09.1995, clearly indicated that their product "Dhanzyme" was being classified as bio-fertiliser and used as fertiliser . They also provided a list of raw-materials with their Classification List. In their letter annexed to the proforma, the appellants had clearly stated that "Dhanzyme" was a biologically derived plant growth promoter containing certain natural trace elements as well as precursors, enzymes and hydrolysed protein complexes. The necessary information about the product was thus made available to the Department as early as n 1995 an, therefore, there was no question of any suppression with intent to evade payment of duty.

Ld. Advocate further submitted that, since the bulk product, 'biozyme' supplied by Samruddhi and Wockhardt had been classified at their end under CSH 3101.00, the appellants were under a bonafide belief that their product "Dhanzyme" obtained by repacking the bulk product into smaller retail packings was also classifiable under the same CSH and that the said activity of repacking did not amount to manufacture.

Moreover, the classification declarations filed by Samruddhi and Wockhardt classifying their bulk products under CSH 3101.00 were approved by the Department. In such circumstances, Counsel added, there was no room for attributing to the appellants any intent for evading payment of duty. Therefore, the extended period of limitation was wrongly invoked against the appellants. Ld. counsel, further, submitted that the provisions of Section 11AC of the Act were not applicable to such a case. In any case, that Section had effect only from 28.09.1996.

Therefore, the penalty impose on the appellants under Section 11Ac was not sustainable. Counsel advanced a similar argument in relation to the interest sought to be levied under Section 11AB of the Act. He prayed for setting aside the order of the Commissioner and allowing the appeals.

6. Ld. SDR, Dr. D.K. Verma reiterated the findings of the adjudicating authority. He also made an endeavour to draw support from the decision of this Tribunal in the case of CCE, Meerut Vs Unique Farmaid Pvt.Ltd. 1999 (33) RLT 365 to the Commissioner's finding that the present appellant's products were plant growth regulators. He also relied on the decision of the Tribunal on the classification of the appellants' own product 'Dhanumon' reported in 1998 (102) E.L.T.182. In has rejoinder, Id. Advocate sought to distinguish both the cited cases.

Further, he cited the Hon'ble Supreme Court's decision in the case of Ranadey Micronutrients Vs CCE (1996 (87) E.L.T.19(SC)] in support of his submission that micro-nutrients were appropriately classifiable under Chapter 31 of the Central Excise Tariff Schedule. The appellant's products also contained micro-nutrients and hence the same should be classified only under Chapter 31.

7.1 We have carefully examined the Submissions. We are primarily concerned with the classification of the appellants' goods branded "Dhanzyme". The goods cleared by the appellants under the said brand name were in two forms, one in liquid form and the other in granular form. The liquid product was admittedly smaller packings of "Biozyme", a bio-fertiliser supplied in bulk quantities to the appellant-company by M/s Samruddhi and M/s Wockhardt under the brand names "Sampdazyme" and "Wokazim" respectively. It is the appellant's consistent claim that the said bulk products branded "Sampdazyme" and "Wokazim" were classified by the manufacturers thereof under CSH 3101.00 and that the Department had never proposed to revise such classification. We note that this claim of the appellants has not been rebutted by the department. What the appellants did was simply to repack the bulk products of "Sampdazyme" and "Wokazim" brand receive from Samruddhi and Wockhardt into smaller packings of 1000 ml, 500 ml, 180 ml, 90 ml, and 30 ml, and sell the same under their own brand name "Dhanzyme". In the absence of any Chapter Note in Chapter 31 of the Cental Excise Tariff Schedule creating a legal fiction that repacking of bulk product into smaller packings amounted to manufacture, the aforesaid repacking activity of the appellants could not be held to be a process of manufacture within the meaning of Section 2(f) of the Central Excise Act inasmuch as that activity did not bring into existence any commodity different in character, use or commercial identity from the bulk product. Therefore liquid "Dhanzyme" was not excisable and the demand of duty on the product is not sustainable.

7.2 As regards the appellant's granular product "Dhanzyme", we note that the product was obtained by spraying liquid "Dhanzyme" over granules of Bentonite clay and that the granules so obtained were to be applied to the soil, unlike liquid "Dhanzyme" itself which was for direct application to the plant. The Bentonite clay granules with a spray of liquid "Dhanzyme" over them are not the same product as liquid "Dhanzyme" in the mind of the ultimate customer i.e., the farmer. While liquid "Dhanzyme" is to be applied directly to the plant, the granular product is to be applied to the soil. Therefore, in the mind of the customer, granular "Dhanzyme" is different in character and use from liquid "Dhanzyme" emerged out of a process of "manufacture' within the scope of Section 2(f) of the Act and the product would be excisable.

However, we find that on the classification of the product, Id.

Commissioner has not taken into account all the materials placed before him by the appellants, nor has he applied hid mind to the classification of the bulk product as approved by the department at the end of Samruddhi and Wockhardt.

7.3 The five reasons stated in the SCN for classifying 'Dhanzyme' a Plant Growth Regulator (in short, PGR) under CSH 3808.20 appear to have been approved in toto in the impugned order. Those reasons (as in SCN) read as under:- "(i) The literature of the product taken over fro the party itself describes the product as a plant growth promoter.

(ii) The leaflet says Cytokinin and Auxin precursors contained in Dhanzyme are plant growth promoters, which induce and control seed germination, flowering, transition from vegetative to reproductive stages, fruit settling and maturation of sees". The functions, as stated here, clearly indicate that Dhanzyme regulates various activities of the plants from vegetative to reproductive stages.

(iii) It enhances photosynthesis in plants and also helps in cell growth.

(iv) It doe snot appear to increase the fertility of soil as is in the case of fertilizes. It works directly on the plants.

(iv) Significantly, it is not covered as a fertilizer in Fertilizer Control Order, 1985, where the fertilizers are covered. It is, therefore, obvious that statute does not recognise Dhanzyme as a fertilizer".

The Commissioner appears to have held plant growth promoter to be synonymous with plant growth regulator. He has fallen into a patent error here. A plant growth promoter will only promote growth of the plant and will not inhibit it. On the other hand, a plant growth regulator can inhibit, promote or otherwise later physiological processes in plants. The relevant HSN Note is clear to this effect.

Kirk-Othmer "ENCYCLOPEDIA OF CHEMICAL TECHNOLOGY" (3rd Edition-Volume 18) introduces PGRs follows: "Plant-growth regulators, other than nutrients, usually are organic compounds. They are either natural or synthetic compounds and are applied directly to a plant to alter its life processes or structure in some beneficial way so as to enhance piled, improve equality, or facilitate harvesting. Plant hormones, i.e., phytohormones, are plant-produced growth regulators and, therefore, are naturally occurring plant substances. Plant-growth regulators, however, apply to phytohormones as well as synthetic compounds." "PLANT PHYSIOLOGY" (4th Edition ) by Robert M.Devlin & Francis H.Witham gives the following description:- "Plant regulators are organic compounds other than nutrients that in small amounts promote, inhibit, or otherwise modify a physiological process in plants".

J.C. Johnson's "PLANT GROWTH REGULATORS AND HERBICIDE ANTAGONISTS-RECENT ADVANCES" introduces PGRs as under:- "Plant growth regulators are compounds , mainly organic ,other than nutrients which in relatively small amounts inhibit, promote or otherwise alter physiological plant processes".

All the above literatures cited by Id. Advocate seem to be converging on the point covered by the HSN Note. They indicate that PGRs are natural or synthetic organic compounds of the than nutrients and that, when applied in a small amounts, they can alter physiological processes in plants. In the instant case, the Department had no case that "Dhanzyme" could inhibit or otherwise modify (apart from promoting) plant processes. The appellants plea that the product contained only aminoacides and other nutrients and, therefore, only promoted plant growth has not been successfully dislodged n the Commission's order Kirk-Othmer says that PGRs are directly applied to plants. the appellants' 'Dhanzyme' on granules was applied to soil only. The Department has had no dispute about this fact. From the literature and other evidence on record, we find that the appellants' product in question is only a bio-fertilizer capable of promoting plant growth by providing nutritional support. The supplies of 'Biozyme'-the bulk product repacked by the appellants into smaller 'Dhanzyme' packings-certified in their brochure that their product contained two major components viz. Seaweed extract and Hydrolyzed protein complex.

In an apparently alternative method of manufacturing 'Dhanzyme' liquid in small HDPE containers, the appellants used seaweed extract powder imported from Canada, which was sought to be classified by Customs authorities under ITC (HAS) 31010000. Whether supplied by the Biozyme manufacturers or formulated by the appellants themselves form the imported seaweed extract powder, the 'Dhanzyme' liquid used for spray over Bentonite clay granules had a seaweed origin.

7.4 In the case of Leeds Kem [2000(41) RLT 674], we had occasion to examine the question whether seaweed was a bio-fertilizer or not. In that case, after consulting technical authorities on fertilizer,s we held that 'plantozyme' manufactured mainly form seaweed extract was bio-fertilizer classifiable under Heading 31.01. We also held that the mere presence of small amounts of cytokinin in a bio-fertilizer would not detract from the latter's character of bio-fertilizer. It was further observed, in that case, that a product to be classified as plant growth regulator under C 38.08 must be a separate chemically defined compound, on which basis we found that the decision in Unique Farmaid (supra) holding 'floramin' to be a PGR did not help the Revenue in Leeds Kem's case. We may, contextually, observe that the DR's reliance on the decision in Northern Minerals Pvt. Ltd Vs CCE [1998 (102) E.L.T.182 wherein 4.5% aqueous solution of Alpha-Naphthy 1 Acetic Acid (Trade name: "Dhanumon") was held to be a PGR is equally unhelpful to the Revenue in the instant case.'Floramin' and 'Alpha-Naphthyl Acetic Acid' are chemically defined organic compounds. In the instant case, the Department appears to have had no case that the "Dhanzyme" brand products of the appellants were chemically defined organic compounds.

7.5 We would adopt the relevant reasonings of ours form the case of Leeds Kem for the purpose of deciding the classification of the present appellants' "Dhanzyme" on granules. We hold that the "Dhanzyme" on granules, cleared by the appellants during the material period was a bio-fertilizer classifiable under CSH 3101.00 chargeable to Nil rate of duty and no duty of excise was liable to be demanded in respect thereof.

8. In view of our finding that on demand of duty was liable to be raised in respect of the products in question, there is no need of looking into other issues raised in these appeals. The impugned order is set aside and the appeals are allowed.