Relevance of HSN in classification as per excise is limited - "Marker Ink" and "Writing Ink" is the same thing for the purpose of excise duty - SC

Facts of the Case:

The assessee manufactures various kinds of marker pens and sketch pen sets.

As per the CBEC Trade Notice, it has been clarified that "marker pens", Hi-liter pens, up- liners were "all" different categories of pens.

According to the assessee, since various types of inks mentioned aforesaid are used in one or other types of pens which are instruments for writing such inks are to be considered as "writing inks".

w.e.f. 1st March, 1997, Chapter Heading no. 32.15 has been revised and accordingly "writing ink" is now classifiable under CSH 3215.10 chargeable to duty at nil rate and all varieties of ink other than "writing inks" are classifiable under CSH no. 3215.90 chargeable to duty @ 16%.

Decision of the Tribunal:

Tribunal, by relying on HSN, held that two inks out of nine manufactured by the assessee being "marker inks and camiligraph (rapidograph) ink" will be assessed to duty under CSH 3215.90.

Decision of the Apex Court

(1)   on the issue of classification

"We find no reasons and approve the ground taken by the revenue that the understanding of the word "Writing Ink" has to be restricted and the common parlance understanding of the same has to be considered, while applying to classification under 32.1510. Therefore, when we find that the law is well settled, that HSN notes, have more than persuasive value especially when the headings are full aligned with Central Excise Tariff, we have no hesitation to consider that the Sub classification of ink under 32.15 should be based on constituent material. Material and evidence of end use and on "Writing Instruments", "pens etc." relied upon on both sides are found to be not relevant. Classification in the sub headings is to be made on the basis that "Writing Ink" as per the HSN Head Notes under 32.15, extracted herein supra, which indicate that ordinarily such inks, are based on water. On considering the admitted position that except for the ink type, named as "99-MARKER INKS" in the list of impugned inks before us, extracted in sub-para (a) above, all other inks listed and under consideration, are acqua or water based which would render them to be eligible for classification under sub- heading 32.1510, except "99-MARKER INKS" which not being water based would fall under residuary Head 32.1590."

(2)   On the issue of applicability of HSN

Tribunal erred in relying upon the HSN for the purpose of marker inks in classifying them under Chapter Sub-Heading 3215.90 of the said Tariff. The Tribunal failed to appreciate that the entries under the HSN and the entries under the said Tariff are completely different. As mentioned above, it is settled law that when the entries in the HSN and the said Tariff are not aligned, reliance cannot be placed upon HSN for the purpose of classification of goods under the said Tariff. One of the factors on which the Tribunal based its conclusion is the entries in the HSN. The said conclusion in the Order of the Tribunal is, therefore, vitiated and, accordingly, set aside. We agree with the findings recorded by the Commissioner (Appeals).

(For full text of judgment - visit 2008 -TMI - 30572 - SUPREME COURT)