2009 (11) TMI 371 - AT - Central Excise

Classification- The question is whether certain ink manufactured and cleared by the appellant during the period of dispute is classifiable under Sub-Heading 3215.10 as writing ink as claimed by the assessee or under SH 3215.90 (other) as claimed by the Revenue for the period from 1999 to March 2004. The assessee had filed a classification declaration for the year 1999-2000 wherein they had described their product as writing ink and classified the same under SH 3215.10 attracting nil rate of duty. In that declaration they specified the inputs as (i) dyes (ii) solvent and (iii) water. Commissioner (Appeals) granted two benefits to the assessee. Firstly the assessee was allowed to treat the invoiced price of the goods as cum-duty price . Secondly they were allowed to claim input duty credit . The assessee deposited duty with interest within thirty days from the date of communication of the orders of adjudication. It is submitted that they also paid penalty to the extent of 25% of the duty amount within such period. These facts are not in dispute. Therefore our decision on the penalty-related issue will be subject to the relevant provisions of Section 11AC.

Summary

Issues:
Classification dispute regarding ink manufactured by the appellant under Sub-Heading 3215.10 or 3215.90, imposition of duty, penalties, interest, and benefit claims.

Classification Dispute:
The case involves a classification dispute regarding ink manufactured by the appellant, whether it falls under Sub-Heading 3215.10 as writing ink or 3215.90 (other). The appellant initially classified the product as writing ink under SH 3215.10, attracting 'nil' duty rate based on the inputs and manufacturing process. The Department issued show-cause notices demanding duty, penalties, and interest for the period in question. The Commissioner (Appeals) upheld the classification under SH 3215.90, leading to the present appeals.

Arguments and Evidence:
The Consultant argued that the product should be classified as writing ink based on HSN Explanatory Notes and the presence of water content. The SDR, however, referred to a chemical test report suggesting otherwise, supported by oral evidence from buyers using the ink for printing. Both sides debated the reliability of HSN Notes in classification under the Central Excise Tariff Act, with the Consultant emphasizing their persuasive effect and citing relevant case law.

Decision and Analysis:
The Tribunal rejected the Consultant's argument that the ink was a water-based preparation, citing lack of evidence. The chemical test report indicated organic color content, glycolic compound, and water, with the ink labeled as 'jet ink'. Oral evidence from buyers confirmed the ink's use for printing, not writing. The Tribunal upheld the classification under SH 3215.90 based on the evidence, rejecting the Consultant's arguments and not delving into other cases cited.

Penalties and Limitation:
The Tribunal found suppression of facts by the assessee, leading to the invocation of the extended period of limitation and penalties under Section 11AC. The Tribunal distinguished the case from precedent where mere classification claims did not amount to suppression. In the second show-cause notice, since the proviso to Section 11A(1) was not invoked, the penalty under Section 11AC was set aside.

Conclusion and Remand:
The Tribunal disposed of both appeals, upholding the classification under SH 3215.90, penalties under Section 11AC for the first notice, and setting aside penalties for the second notice. The Tribunal noted the appellant's payment of duty, interest, and partial penalty within the stipulated period. The matter was remanded to the original authority for re-quantification of duty and a consequent reduction of penalty, considering the granted benefits of treating invoiced price as 'cum-duty price' and claiming input duty credit.