Holding

The product cannot be classified as "other fertilizer" merely because of trace nitrogen; classification requires nitrogen, phosphorus or potassium as essential constituents, which micronutrients lack, and the matter is remitted for de novo determination.

Summary

M/s Karnataka Agro Chemicals manufactured "multi micronutrient" compounds, registered as fertilizers, and the Central Excise Commissioner alleged that the company misdeclared the products as containing nitrogen to attract classification under "other fertilizers" (CHS 3105.00) and evade duty. The Tribunal held that even a trace of 0.31% nitrogen was enough to place the product under CHS 3105.00. The Supreme Court examined the nature of micronutrients, noting that they do not contain nitrogen, phosphorus or potassium as essential constituents and that plant growth regulators are organic compounds distinct from fertilizers. Consequently, the Court set aside the Tribunal’s classification, remitted the matter to the Adjudicating Authority for a fresh determination, and held that the extended period of limitation under s.11A could not be invoked as there was no positive act of suppression. The appeals were partly allowed, upholding the Tribunal’s order on limitation but overturning its classification decision.

Issues considered

Whether the "multi micronutrient" product should be classified under CHS 3105.00 (other fertilizers) or CHS 3808.20 (plant growth regulators).
Whether the presence of 0.31% nitrogen makes the product an "other fertilizer" within the meaning of Explanatory Note 6 to Chapter 31.
Whether the extended period of limitation under Section 11A of the Central Excise Act, 1944 can be invoked for alleged misdeclaration.
Whether a penalty can be imposed on the assessee.

Legislation cited

Subjects

classificationmicronutrientsplant growth regulatorcentral excise dutyessential constituentextended limitationmisdeclarationtariff headings

Judgment

[2008] 8 S.C.R. 983

COMMISSIONER OF CENTRAL EXCISE, BANGALORE A
v.
M/S. KARNATAKA AGRO CHEMICALS
(Civil Appeal Nos. 378-381 of 2008)
MAY 15, 2008
B
(S.H. KAPADIA AND 8. SUDERSHAN REDDY, JJ)

Central Excise Tariff Act, 1985- CSH 3808.20 or 3105.00
- Multi micronutrient compounds - Classification of - Case
of assessee that the product is mixture of various inorganic c
substances whose essential constituent is nitrogen, hence clas-
sifiable as 'other fertilizers under CHS 3105.00- Department's
case that product is a 'Plant Growth Regulator; thus classifiable
under CHS 3808.20 and assessee added nitrogen only as a
pretence to classify the product as 'other fertilizer' under CSH
0
3105.00 - Tribunal holding that presence of mere 0.31% nitro-
gen sufficient to classify product as 'other fertilizers'- On ap-
peal, held: Nitrogen (N), Phosphorus (P) or Potassium (K) are
not essential constituent of micronutrients - Multi micronutri-
ent is Plant Growth Regulator (PGR) which are organic com- E
pound and do not contain N, P or K - However; in view of sub-
missions of parties, Adjudicating Authority to examine whether
presence of mere 0.31% of nitrogen would make PGR in prod-
uct classifiable as "other fertilizers" in CSH 3105.00 - Hence,
matter remitted back to the Adjudicating Authority
F
Central Excise Act, 1944 - s. 11A - Extended period of
limitation - Invocation of - Show cause notice alleging
misdeclaration by assessee that 'micronutrient' compounds
contained nitrogen for classifying it under CSH 3105.00 and
goods cleared without payment of duty - Demand of duty - G
Held: Positive act of suppression is required for invoking larger
period of limitation and not mere non-declaration - More so,
controversy regarding classification of 'micronutrient' com-
pound not settled - Thus, extended period of limitation not
983 H
984 SUPREME COURT REPORTS [2008) 8 S.C.R.

A invokable nor penalty could be imposed - Order of tribunal to ( '
that extent upheld.

The respondent-assessee was engaged in the manu-
facturing of 'micronutrient' compounds for soil applica-
tion and foliar application. It was registered as 'fertilizers'
8 in terms of s. 2(h) of the Fertiliser (Control) Order. The ap-
pellant-Department issued show cause notice to asses-
see alleging that it misdeclared that 'micronutrient' com-
pounds contained nitrogen for classifying it under CSH
3105.00 of the Central Excise Tariff as 'other fertilizer, and
C cleared the goods without payment of duty. According to
the appellan.t-Department, in the 'micronutrient' com-
pounds there was no N-nitrogen, P-phosphorus or K-
potassium as essential constituents; that though in the
product 0.31 % nitrogen did exist, it existed as a chelating
D agent and not as a fertilizing element; that 'Plant growth
regulator' is an item in CSH 3808.20 which is a specific
item which would over~ide the item 'other fertilizers' in
CSH 31"05.00, th•Js, was classifiable under CSH 3808.20.
It was respondent-assessee's case that nitrogen was es-
E sential constituent of 'micronutrient' and was classifiable
under CSH 3808.20. The Adjudicating Authority held that
the mere trace of nitrogen being 0.31 % in the product was
net sufficient to classify the same under CSH 3105.00;
that 0.31% of nitrogen was not sufficient to be called as
F 'fertilizing element and nitrogen was used only as a
chelating agent; that 'fertilizer' is a general entry whereas
PGR is a specific entry and thus, the specific entry would
override th~ general entry in the matter of classification.
However, the tribunal held that the product was mixture
G of various inorganic substances; that even a trace of ni-
trogen in the product was sufficient to classify 'micronu-
trient' as 'other fertilizers' under CSH 3105.00. Hence the
present appeal.
Partly allowing the appeals, the Court
H
COMMISSIONER OF CENTRAL EXCISE v. M/S. 985
KARNATAKAAGRO CHEMICALS
I
'
HELD: 1.1 In a generic sense "micronutrients" may A
be a kind of fertilizer in the functional sense but for the
purposes of Central Excise Tariff they are excluded from
the scope of CH 31.05 (fertilizers) by virtue of Chapter Note
6 which requires the term "other fertilizers' to include only
those products used as fertilizers and containing N-ni- B
trogen, P-phosphorus or K-potassium as an essential
constituent which is not the case in respect of micronu-
trients. Therefore, one needs to ascertain the composi-
tion of micronutrients. The important thing to be noted is
that N, P or K is not mentioned as an element of "micro- c
nutrients". Therefore, it is clear that "micronutrients" do
not include N or P or K. "Micronutrient" is required in very
small quantity, almost a trace in the plant nutrients. (Paras
13, 14, 15 and 16) [996-C,D,F, 998-E]

.,. 1.2 Micronutrients per se, as against macronutrients, . D
do not contain N, P or K. Micronutrient(s) functionally may
be a Fertilizer but not in terms of composition. In fact, N, P
or K is the constituent element of macronutrient and not
of micronutrient. (Paras 19 and 20) [998-H; 999-A-B]
1.3 In the instant case, the impugned product(s) is multi E
micronutrient'. The method of manufacture of "multi mi-
cronutrient becomes relevant as the impugned product(s)
is a mixture of various inorganic substances. The "method
of manufacture" has a strong bearing on the question
whether the products(s) needs to be classified under CSH F
3808.20 or 3105.00. This aspect was not examined by the
Adjudicating Authority. (Paras 22 and 23) [999-C; E-F]
1.4 It is accepted that N, P or K are not the essential
constituents of micronutrient(s). Two tests have been for-
G
mulated in the circular of CBEC dated 19.5.1998, namely
whether the subject-products(s) is a chemically defined
compound, if so, it goes out of CSH 3105.00. If not, whether
the said product(s) contains N, P or K as constituent ele-
ment in terms of explanatory note 6. (Para 24) [999-F-G]
H
J
986 SUPREME COURT REPORTS (2008] 8 S.C.R. r
1~ :
f •
A 1.5 In the show cause notice, no allegation was made
by the Department that the impugned products(s) is a dis-
tinct chemical compound. Therefore, the only question is
whether the impugned product(s) contains nitrogen as
an "essential constituent". According to the assessee, the
B impugned product(s) is a mixture of various inorganic
substances whose essen.tial constituent is nitrogen which
makes it a fertilizer. It is this point which arises for cons id- .,
eration, viz, whether 0.31% of nitrogen found to exist in
the impugned product(s) would make it a fertilizer. In this
c connection, the scientific study indicates that Plant
Growth Re'gulator (PGR) are organic compounds, other
than nutrients, which in small quantity inhibits, promotes,
alters or modifies physiological processes in plants. As
compared to nutrients which play a major role in the plant
growth as a whole, PG Rs. play a restrictive role. PGR do.
•\"

D
not contain N, P or K. In the impugned product(s) manu-
factured by the assessee, PGR exists. Therefore, the ques-
tion to be asked is whether presence of mere 0.31% of
nitrogen would make the PGR in the impugned product
classifiable as "other fertilizers" in CSH 3105.00. Essen-
E tially the impugned products is PGR. However, assessee
contends that the impugned product(s) is a mixture of
various inorganic substances and, therefore, it is for the
Adjudicating Authority to go into composition and find out
whether 0.31% of nitrogen would convert PGR into nutri-
F ent falling under CH 31.05. Whether with addition of 0.31 %
of nitrogen, the PGR becomes "other fertilizers" in CSH
3105.00 is the question which needs to be examined by
the Adjudicating Authority as it is the case of the Depart-
ment that the assessee has added nitrogen only as a pre-
G tence so that the impugned products(s) could be. classi- ...
tied as "other fertilizer" under CSH 3105.00. With regard
to the classification of the impugned product, the im-
pugned judgment dated 26,02.07 of the. tribunal is set aside
and the matter is remitted back to the Adjudicating Au-
H thority for denovo determination of the case in accordance
1"
COMMISSIONER OF CENTRAL EXCISE v. M/S. 987
KARNATAKAAGRO CHEMICALS
• ~

with law. (Paras 21, 25 and 26) [999-H; 1000-A-G) A
Scientific Encyclopedia by Van Nostrandi; 'Gardener's
Guide to Fertilizing Trees and Shrubs'; "McGraw-Hill Encyclo-
pedia of Science and Technology; 'Encyclopedia Americana'
- referred to.
B
2. With regard to the invocation of extended period
of limitation, the view expressed by the tribunal that the
larger period of limitation was not invokable by the De-
partment is accepted. Three Circulars have been issued
by the Department. Till today, the controversy regarding c
the classification of 'micronutrient fertilizers' was not
settled. There is even a conflict of views between Minis-
try of Finance and Ministry of Agriculture. In the circum-
stances, question of invoking extended period of limita-
tion does not arise. Mere non-declaration is not sufficient
D
to invoke the larger period but some positive act of sup-
pression is required for invoking larger period of limitation
uls 11A of the Central Excise Act, 1944. Therefore, in the
instant case, there is no warrant to invoke larger period of
limitation or to impose penalty and to that extent the order
of the tribunal is upheld. (Para 27) [1000-H; 1001-A-C) E

CIVILAPPELLATE JURISDICTION: Civil Appeal Nos. 378-
381 of 2008
-~
From the final Judgment and Order Nos. 341-344 of 2007
dated 26.02.2007 of the Customs Excise and Service Tax Ap- F
pellate Tribunal South Zonal Bench at Bangalore in Appeal Nos.
E. 1043/2005 & E/589/2005
WITH
,, C.A. Nos. 348-349 of 2008 G
V. Shekhar, Alka Sharma, Jangpo and B. Krishna Prasad
for the Appellant.
T.L.V. Lyer, Shanth Kr. Mahala, M.S. Srinivasa, Rajesh
Mahale and Harish S.R. for the Respondent. H

,_
988 SUPREME COURT REPORTS [2008] 8 S.C.R.
,, I

A The Judgment of the Court was delivered by
S.H. KAPADIA, J. These civil appeals concern classifi-
cation of "micronutrient" compounds for the purpose of excise
duty. According to the Department, micronutrient is a 'Plant
Growth Regulator' ("PGR" for short), therefore, it falls under CSH
B 3808.20 of the Central Excise Tariff as a chemical product
whereas according to the assessee it falls under CSH 3105.00
(other fertilizers). By the impugned judgment dated 26.2.07,
CESTAT has <1ccepted the contention of the assessee that their
product(s) "multi micronutrient" (the impugned product) would
c fall under CSH 3105.00 as contended by the respondent-as-
sessee, hence these civil appeals are filed by the Department.
2. For the sake of convenience we reproduce hereinbe-
low the facts as reproduced in the case of Commissioner of
Central Excise, Bangalore v. Mis. Karnataka Agro Chemicals ...
D
[Civil Appeal Nos. 378-381 OF 2008]. 1,

3. Respondent-assessee manufactures "multi micronutri- .
ents" for soil application and for foliar application. The Ministry
of Agriculture has granted registration to the assessee's
E product(s) as "fertilizer" in terms of Section 2(h) of the Fertiliser
(Control) Order.
4. By show cause notices dated 26.8.02, 25.2.03, 1.10.03
and 24.5.04, the Department alleged that the assessee had :'~
misdeclared that the impugned product(s) contained nitrogen
F and had cleared the same without payment of duty. According
to the Department, the label on each of the products of the as-
sessee indicated the composition of each of the several prod-
ucts. The label indicated the percentage of zinc, ferrous, man-
ganese and boron (micronutrient elements). In the label there
G was no mention of N (nitrogen), P (phosphorus) or K (potas-
sium). According to the show cause notices, the chemical ~naly-
•
sis of the samples confirmed the fact that fertilizing elements N,
P or K were .not there in "micronutrient compounds" of the as-
,~
sessee. According to the show cause notices, the mixtures
H manufactured by"the assessee did not contain N, P or K as
COMMISSIONER OF CENTRAL EXCISE v. MIS. 989
KARNATAKAAGRO CHEMICALS [S.H. KAPADIA, J.]

• , essential constituents. That, in any event, N, P or Kare not the A
essential constituents of the micronutrients. That, in the im-
pugned product(s) there was no N, P or K as fertilizing element.
That, addition of N, P or K was only a pretence to misdeclare
their product(s). Therefore, the impugned product(s) were clas-
sifiable under CSH 3808.20 of the Central Excise Tariff. B
5. In reply to the above show cause notices, assessee sub-
mitted that its product(s) were got tested on three occasions by
the Department which indicated presence of nitrogen in all the
products. That, on perusal of Explanatory Note 6 to Chapter
31, it was sufficient if nitrogen is present in the product(s) of the C
assessee to merit classification under CSH 3105.00 Accord-
ing to the assessee, nitrogen was an essential constituent of
the assessee's product(s) and-, therefore, the product(s) came
within CH 31.05 For that purpose reliance was placed by the
assessee on Explanatory Note 6 to Chapter 31. According to D
the assessee, even in the trade parlance, the product(s) manu-
factured by the assessee are known and used as fertilizers and
since nitrogen is a fertilizing agent it was an essential constitu-
ent in its product(s) used as fertilizers.

6. We quote hereinbelow Explanatory Note 6 to Chapter E
31 of the Central Excise Tariff which reads as below:

"CHAPTER 31

FERTILISERS
F
Notes :
6. For the purposes of heading No.31.05, the term "other
fertilizers" applies only to products of a kind used as
fertilizers and containing, as an essential constituent, at
least one of the fertilizing elements nitrogen, phosphorus G
or potassium."

7. We also quote hereinbelow CSH 3105.00 of the Cen-
tral Excise Tariff which reads as below:

H
990 SUPREME COURT REPORTS [2008) 8 S.C.R.

A "CHAPTER 31 ( .
FERTILISERS

Heading Sub- Description of goods Rate of duty
No. heading
B No, .

(1) (2) (3) (4)
31.05 3105.00 Mineral or chemical fer- 16%
tilizers, containing two or .

three of the fertilizing el-
c ements, nitrogen, phos-
phorous and potassium;
other fertilizers

D .8. We also quote hereinbelow Explanatory Note 1 to Chap-
ter 38 of the Central Excise Tariff which reads as below:
"CHAPTER 38
MISCELLANEOUS CHEMICAL PRODUCTS
E Notes:
1. This Chapter does not cover:
(a) Separate chemically defined elements or compounds
with the exception of the following:
F (1) Artificial graphite (heading No.38.01 );
(2) Insecticides, rodenticides, fungicides,
herbicides, anti-sprouting products and plant-
growth regulators, disinfectants and similar
G products, put up as described in. Heading
No.38.08."
9. We also quote hereinbelow CH 3808 of the Central Ex-
\ cise Tariff which reads as below:

H.
COMMISSIONER OF CENTRAL EXCISE v. MIS: 991
KARNATAKAAGRO CHEMICALS [S.H. KAPADIA, J.]

• 'I "CHAPTER 38 A
MISCELLANEOUS CHEMICAL PRODUCTS

Heading Sub- Description of goods Rate of duty
No. heading
No. B
(1) (2) (3) (4)
38.08 Insecticides, rodenti-
cides, fungicides, herbi-
cides, antisprouting
products and plant c
growth regulators, disin-
fectants and similar
products, put up in forms
or packings for retail
sale or as preparations D
or articles (for example, ,
sulphur-treated bands,
wicks and candles, and
fly-papers)
Plant growth regulators 16% E
3808.20
3808.90 Other 16%

10. We also quote hereinbelow Circular No.392/25/98-
CX., dated 19.5.1998 issued by CBEC which reads as follows: ,F

"Micronutrients - Classification of [Chapter 28/31]

Circular No. 392/25/98-CX., dated 19-5-1998

[From F.No. 106/1/98-CX.3]

Government of India G

Ministry of Finance (Department of Revenue),

New Delhi

H
.992 SUPREME COURT REPORTS [2008] 8 S.C.R.

A Subject : Central Excise - Classification of Micronutri- ( •
ents - Clarification Regarding.
Attention is invited to the instructions contained in Board's
Circular No. 79/79/94-CX., dated 21-11-1994 [See 1994
(74) E.L.T. T46] wherein Board had clarified that
B Micronutrients listed under the Fertiliser (Control) Order,
1985 and their mixtures (with or without N. P. K. ), as notified
by the Central Government or a State Government would
be classifiable under CET Chapter 31.05.

c 2. A doubt has been raised regarding classification of
certain Micronutrients such as compounds of Zinc,
Boron, Manganese, Molybdenum, Iron etc., which are
required in minor quantities to regulate plant growth
- whether classifiable as fertilisers (31.05), plant
growth.regulators (38.08) or as separate chemically
D
defined compound (Ch. 28).
3. The matter has been re-examined in the light of
Supreme Court judgment in the case of Ranadey
Micronutrients v. Collector of Central Excise - Civil
E Appeal No. 5404 of 1993, decided on 10-9-1996 -
1996 (87) E.L. T. 19 (S.C.). Micronutrients are
basically salts of elements such as Zinc, Boron,
Manganese, Molybdenum, Iron etc., known as trace
elements. These are essential for plant growth in
F small amounts only and their absence leads to stunted
growth. These elements are supplied in minor
quantities to regulate the formation of hormones etc.,
which in turn alter life processes of the plant so as to
accelerate growth, enhance yield and improve quality,
G thus indirectly contributing to regulate plant growth.
4. According to HSN Explanatory Notes, plant growth
regulators are applied to alter the life process of the
plant so as to accelerate or retard growth, enhance
yield, improve quality offacilitate harvesting, etc. Plant
H hormones are one type of plant growth regulators.
COMMISSIONER OF CENTRAL EXCISE v. M/S. 993
KARNATAKAAGRO CHEMICALS [S.H. KAPADIA, J.]

• Synthetic organic chemicals are also used as plant A
' growth regulators.
5. Fertilizers are materials added to soil and,
sometimes to foliage to supply nutrients to sustain
plants and promote their abundant and fruitful growth.
The elements that constitute these plant foods are 8
divided into three classes - (1) Primary-Nitrogen (N),
Phosphorous (P) a11d Potassium (K), (2) Secondary
- Calcium (Ca), Magnesium (Mg) and Sulphur (S)
and (3) Minor or so called micronutrients - Iron (Fe),
Manganese (Mn), Copper (Cu), Zinc (Zn), Boron (8) c
and Molybdenum (Mo). However, for the purpose of
classification of micronutrients as 'Other Fertilizers'
in Heading 31.05 CET, the scope of the term 'Other
Fertilizers' has to be determined in the light of Note
6 of Chapter 31. Further, the specific exclusion of . D
separate chemically defined compounds as laid
down in the HSN Explanatory Notes to Heading
3105.90, must also be borne in mind. If, the
micronutrient is a separate chemically defined
compound, it will be classifiable under Chapter 28/ E
29. If not so, and if in accordance with Note 8 to
Chapter 31, it contains N, P or K, it will be classifiable
under Chapter Heading 31.
6. Further it is also stated that notification under F.C.O.
is irrelevant for deciding classification under the F
Central Excise Tariff and regardless of such
notification, the appropriate consideration should be:-
(i) whether or not the micronutrient in question is
a separate chemically defined compound. If it
G
is, then classification under 31.05 is ruled out;
,, and
(ii) if it is not, whether it contains N, P or K as laid
down in the Explanatory Notes.
H
994 SUPREME COURT REPORTS [2008] 8 S.C.R.

A 7. Therefore, it is clarified that classification of ~ •
micronutrients may be done in accordance with the
above guidelines.
8. The above clarification may be brought to the notice
ofthe lower field formations and the trade interests
8 may also be suitably advised.
9. Board's earlier Circular No. 79/79/94-CX, dated 21-
11"1994 stands modified accordingly.
10. All pending assessments may be finalized on the
c above basis."
11.At this stage we need to consider the order passed by
the Adjudicating Authority. The main issue which arose for
determination was: whether the impugned product(s)
manufactured by the assessee was classifiable as Plant Growth
0
Regulator ("PGR") under CSH 3808.20 or whether it was "other
fertilizer" under CSH 3105.00. The main submission made by
the Department in the show cause notices was that to classify
the. impugned product(s) under CSH 3105.00, nitrogen is not
E the essential element of micronutrients. That, though in the
impugned product(s) nitrogen did exist, it did not exist as a
· fertilizing element but as a chelating agent and consequently
the impugned product(s) was not classifiable under CSH
3105.00. In this connection, the Adjudicating Authority placed
I
reliance on the Report of the Chemical Examiner dated 12.7.01.
F According to the Adjudicating Authority, in any event, mere trace
of nitrogen in the impugned product(s) was not sufficient to
classify the same under CHS 3105.00. Reliance was also
placed on the labels, affixed on the impugned product(s), by the
Adjudicating Authority to show that "Multi Micronutrients"
G manufactured by the assessee for soyabean, coffee, citrus, tea
nursery etc. only indicated that they could be used to increase
or improve the yield in terms of quality and quantity and since
PGRs are organic chemicals synthesized in the plant to regulate
its growth and development the impugned product(s) fell under
H CSH 3808.20 of the Central Excise Tariff. According to the
COMMISSIONER OF CE.NTRAL EXCISE v. MIS. 995
KARNATAKAAGRO CHEMICALS [S.H. KAPADIA, J.]

.' Adjudicating Authority, the content of nitrogen, present in the A
impugned product(s), was only 0.31 %, which was not sufficient
to be called as "fertilizing element" and that the said nitrogen
was used only as a chelating agent and, therefore, it was not
sufficient enough to act as a fertilizing element, consequently
the impugned product(s) fell under CSH 3808.20. According to B
the Department, PGR is an item in CH 38.08. The said item
is a specific item which would override the item "other fertilizers"
in CSH 3105.00. According to the Adjudicating Authority
"fertilizer" is a general entry whereas PGR is a specific entry
and, therefore, the specific entry will override the general entry c
in the matter of classification.

12. The order of the Adjudicating Authority was overruled
by the Tribunal which came to the conclusion by the impugned
judgment thatPGRs are chemical compounds; that in the show D
cause notices there was no allegation made by the Department
that the impugned product(s) was a chemically defined com-
pound; that in fact the impugned product(s) was a mixture of
various inorganic substances and, therefore, it cannot be clas-
sified under CSH 3808.20. According to the Tribunal, classifi-
cation of "micronutrients" has been the subject-matter of three E
circulars issued by CBEC, the first was dated 24.5.90 in which
micronutrients were classified under CH 38.08 on the ground
that it did not contain nitrogen, phosphorus or potassium;· the
second was issued on 21.11.94 in which it was stated that mi-
cronutrients with or without N, P, K stood recognized as a fertil- F
izer and on 19.5.98 third Circular was issued clarifying that in
order to classify micronutrients two tests are required to be fol-
lowed, namely, whether or not the micronutrients is a separate
chemically defined compound and if it is so then classification
under CH 31.05 shall stand ruled out and if the said micronutri- G
ents is not a separate chemically defined compound then one
has to find out whether it contains N, P or K in terms of Note 6 to
chapter 31. In this case the Tribunal observed that even in the
Circular dated 19.5.98 issued by CBEC there is no prescribed
percentage of any of the above elements in the impugned. H
996 SUPREME COURT REPORTS [2008) 8 S.C.R.

A product(s}. According to the Tribunal, there is also no specific 'f I
mention of micronutrients in the said Explanatory Note which ;-
'
has led to confusion. Therefore, according to the Tribunal even
a trace of nitrogen in the impugned product(s) was sufficient to
classify micronutrient as "other fertilizer" in CSH 3105.00, hence )(\
Hi
B these civil appeals by the Department.
13. At the outset, it may be stated that in a generic sense
"micronutrients" may be a kind of fertilizer in the functional sense
but for the purposes of Central Excise Tariff they are excluded
from the scope ofCH 31.05 (fertilizers) by virtue of Chapter
c Note 6 which requires the term "other fertilizers" to include only
those products used as fertilizers and containing N, P or K as
an essential constituent which is not the case in respect of mi-
cronutrients.
14. Therefore, one needs to ascertain the composition of ""
D
micronutrients. In this connection, we wish to quote from cer-
tain encyclopedias/chemical dictionaries as follows:
(i) According to the "Scientific Encyclopedia" by Van
Nostrand, "fertilizer" is a substance which is often a
E combination of substances of organic composition,
natural or manufactured, in solid or liquid form. The
"micronutrient" consists of Boron (B), Copper (Cu),
Iron (Fe), Manganese (Mn), Zinc (Zn) and
Molybdenum (Mo).
I
F 15. The important thing to be noted is that N, P or K is not '
mentioned as an element of "micronutrient".
(ii) According to the "Gardener's Guide to Fertilizing
Trees and Shrubs" plants require 17 elements for
normal growth. Carbon, hydrogen and Oxygen are
G
found in air and water.Nitrogen, potassium, ,.J'.,o';
magnesium, calcium, phosphorous and sulfur are G
absorbed from the soil. The last 6 elements are used
in large amounts by the plant and are called
macronutrients. There are 8 other elements which
H
'~.

COMMISSIONER OF CENTRAL EXCISE v. M/S, 997
., KARNATAKAAGRO CHEMICALS [S.H. KAPADIA, J.]
...
are used in smaller amounts. These are called A
micronutrients or trace elements which include
iron, zinc, molybdenum, manganese, boron, copper,
cobalt and chlorine. The nutrients that are most likely
to limit plant growth are nitrogen, phosphorus and
potassium. B

• (iii) According to the "Scientific Encyclopedia" by Van
Nostrand, a 'plant growth regulator' is essentially a
chemical substance which is concerned with plant
growth and which provides tonic to the plant growth.
It is a plant hormone. It is an organic compound C
which controls growth.
(iv) According to the www.en.wikipedia.org
"micronutrients" are vitamins and minerals. Vitamin
is an organic compound. Vitamins are classified by
0
their biological activities and not· by their structure.
Vitamins have diverse bio-chemical functions
including functions as hormones, therefore, plant
hormones are also known as plant growth
regulators. Plant hormones are made of chemicals
that can vary in structure from one plant to another. E
(v) According to the "McGraw-Hill Encyclopedia of
Science & Technology" materials added to the
soil or applied directly to crop, to supply elements
needed for nutrition of the plant is called as "fertilizers". F
The chemical elements - nitrogen, phosphorus and
potassium are macronutrients or primary fertilizer
elements which are required in greatest quantity.
Sulphur, calcium and magnesium are secondary
.. elements necessary for the health of vegetation. They G
are required in lesser amounts as compared to
• macronutrients. The other elements include boron,
cobalt, copper, iron, manganese, molybdenum and
zinc. These a1~ required in traces. These minor
elements are called micronutrients. Many
H
COMMISSIONER OF CENTRAL EXCISE v. MIS. 999
KARNATAKAAGRO CHEMICALS [S.H. KAPADIA, J.]
..• per se, as against macronutrients, do not contain N, P or K. A
20. Micronutrient(s) functionally may be a Fertilizer but not
in terms of composition. In fact, N, P or K is the constituent ele-
ment of macronutrient and not of micronutrient.
21. Coming to PGRs, it needs to be emphasized that they B
are organic compounds, other than nutrients, which in small
quantity inhibits, promotes, alters or modifies physiological pro-
cesses in plants.
22. In the present case, the impugned product(s) is "multi
micronutrient". It is contended on behalf of the assessee that c
the impugned product(s) contains nitrogen, hence it is classifi-
able as "other fertilizer" under CSH 3105.00. It is contended
that nitrogen is an essential constituent of the impugned
product(s) and, therefore, the same is classifiable as "other fer-
"" tilizers". D
23. Tl1erefore, the relevant question to be asked is- what
is the method of manufacture of"multi micronutrient"? This ques-
tion becomes relevant as the impugned product(s) is a mixture
of various inorganic substances. It is the "method of manufac-
ture" which has a strong bearing on the question whether the E
product(s) needs to be classified under CSH 3808.20 or under
CSH 3105.00. This aspect has not been examined by the Adju-
dicating Authority.
"' 24. It is alleged by the Department that N, P or Kare not F
the essential constituents of micronutrient(s). We agree. How-
ever, in this case, the impugned product(s) is "multi micronutri-
ent" which the assessee claims to be a mixture of various inor-
ganic substances. In this connection it is important to note that
two tests have been formulated in the circular of CBEC dated
.. 19.5.1998, namely, whether the subject-product(s) is a chemi-
G
cally defined compound, if so, it goes out of CSH 3105.00. If
not, whether the said product(s) contains N, P or K as constitu-
ent element in terms of explanatory note 6.
25. In the show cause notice, no allegation was made by H
1000 SUPREME COURT REPORTS [2008] 8 $.C.R.

A the Department that the impugned product(s) is a distinct chemi-
. ;

cal compound. Therefore, the only question is whether the im-
pugned product(s) contains nitrogen as an "essential constitu-
ent". According to the assessee, the impugned product(s) is a
mixture of various inorganic substances whose essential con-
B stituent is nitrogen which makes it a fertilizer. It is this point which
arises for consideration, viz, whether 0.31% of nitrogen found
to exist in the impugned product(s) would make it a fertilizer. In
this connection, the aforestated scientific study indicates that
PG Rs are organic compounds, other than nutrients. As com-
e pared to nutrients which play a major role in the plant growth as
a whole, PGRs. play a restrictive role. PGR do not contain N, P
or K. In the impugned product(s) manufactured by the asses-
see, PGR exists. Therefore, the question to be asked is whether
presence of mere 0.31% of nitrogen would make the PGR in
the impugned product classifiable as "other fertilizers" in CSH
0
3105.00. In our view, essentially the impugned product is PGR.
However, assessee contends that the impugned produc;t(s) is
a mixture of various inorganic substances and, therefore, it is
for the Adjudicating Authority to go into composition and find
out whether 0.31 % of nitrogen would convert PGR into nutrient
E falling under CH 31.05. Whether with addition of 0.31% of nitro-
gen, the PGR becomes "other fertilizers" in CSH 3105.00 is the
question which needs to be examined by theAdjudicating Au-
thority as it is the case of the Department that the assessee has
added nitrogen only as a pretence so that the impugned
F product(s) could be classified as "other fertilizer" under CSH
3105.00.
26. For the aforestated reasons, on the point of classifica~
tion and not on the point of invocation of larger period (which is
G separately dealt With hereinafter) we set aside the impugned
judgment dated 26.2.07 of CESTAT and remit the matter to the
Adjudicating Authority for de novo determination of the said
case in accordance with law.
27. On the question of invocation of extended period of
H limitation, we are in agreement with the view expressed by the
COMMISSIONER OF CENTRAL EXCISE v. M/S. 1001
KARNATAKAAGRO CHEMICALS [S.H. KAPADIA, J.]
.. Tribunal that the larger period of limitation was not invokable by A
the Department. As stated above, three Circulars have been
issued by the Department. Till today, the controversy regarding
the classification of "micronutrient fertilizers" was not settled.
There is even a conflict of views between Ministry of Finance
and Ministry of Agriculture. In the circumstances, question of B
invoking extended period of limitation does not arise. It is well-
settled that mere non-declaration is not sufficient to invoke the
larger period but some positive act of suppression is required
for invoking larger period of limitation under Section 11 A of the
Central Excise Act, 1944 [See: Padmini Products v. Collector c
of Central Exc{se - 1989 (43) ELT 195 (SC) ]. Therefore, in
the present case, there is no warrant to invoke larger period of
limitation or to impose penalty and to that extent we uphold the
order of the Tribunal. .
28. Accordingly the civil appeals are partly allowed to the D
• extent indicated above with no order as to costs .
N.J. Appeals partly allowed.