2008 (9) TMI 1 - SC - Central Excise

Tribunal reclassifies marker inks, exempts from duty

The Tribunal confirmed the classification of items as 'writing inks' eligible for a nil rate of duty, except for marker inks which were wrongly classified ... “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 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.