2008 (9) TMI 1 - SC - Central Excise

Writing inks manufactured & captively consumed in mfg. of marker pens which are exempt from excise duty assessee plea that inks used in one or other types of pens are to be considered as writing inks & hence classifiable under CSH 3215.10, is acceptable - Tribunal erred in relying upon the HSN for the purpose of marker inks in classifying them u/h 3215.90 but Tribunal s order is confirmed in respect of inks other than marker inks

Summary

Issues Involved:
1. Classification of "writing inks" manufactured and captively consumed by the assessee.
2. Consequent demand of duty on these inks.

Detailed Analysis:

Classification of "Writing Inks":

Issue:
The primary issue revolves around the classification of various inks manufactured by the assessee, specifically whether they should be classified as "writing inks" or under a different category, impacting the duty rate applicable.

Findings:
- The Tribunal initially classified items at serial nos. 2 to 9 as "writing inks," thus exigible to a nil rate of duty. However, "marker ink" at serial no. 1 was classified under Chapter sub-heading 3215.90, making it subject to 16% excise duty.
- The Tribunal relied on the Harmonized System of Nomenclature (HSN) for its classification, which differentiates between "ordinary writing or drawing inks" and other inks like "marking inks."

Legal Reasoning:
- The Indian Central Excise Tariff creates two categories: "writing ink" and a residual entry of "other." In contrast, the HSN has distinct categories for "printing ink," "other," and a residual entry of "other."
- It is settled law that when the entries in the HSN and the Indian Tariff are not aligned, reliance cannot be placed on HSN for classification purposes.
- The Tribunal erred in relying on HSN for classifying marker inks under Chapter Sub-Heading 3215.90, as the Indian Tariff classification should prevail.

Conclusion:
- The Tribunal's classification of items at serial nos. 2 to 9 as "writing inks" is confirmed, making them eligible for a nil rate of duty.
- The classification of "marker inks" under Chapter Sub-Heading 3215.90 by the Tribunal is set aside. Marker inks should be classified under CSH 3215.10, making them eligible for a nil rate of duty.

Consequent Demand of Duty:

Issue:
The duty demand on the inks based on their classification, particularly whether the marker inks should be subject to 16% excise duty.

Findings:
- Initially, the department had approved the classification list submitted by the assessee, which did not attract duty. However, this classification was later challenged by the revenue.
- The Commissioner (Appeals) had accepted the assessee's contention that all inks used in writing instruments (including marker pens) should be classified as "writing inks" and thus exempt from duty.

Legal Reasoning:
- The Tribunal's reliance on HSN for classifying marker inks under 3215.90 was incorrect, as the Indian Tariff classification should take precedence.
- The Finance Minister's letter dated 28th May 1997, indicated that writing inks used in pens, which are exempt from duty, should also be exempt from excise duty.

Conclusion:
- The Tribunal's decision to impose a 16% duty on marker inks is overturned.
- Marker inks are to be classified under CSH 3215.10, making them exempt from excise duty.

Final Judgment:
- The appeals filed by the Revenue are dismissed.
- The appeals filed by the assessee are accepted.
- The Tribunal's order is confirmed for inks other than marker inks, which are classified as "writing inks" and eligible for a nil rate of duty.
- The Tribunal's order classifying marker inks under Chapter Sub-Heading 3215.90 is set aside. Marker inks are to be classified under CSH 3215.10 and are exempt from duty.
- Parties to bear their own costs in all the appeals.