Printer ink classification and suppression findings upheld, with penalty partly sustained and duty re-quantification remanded.

Printer ink sold and used as jet ink was held classifiable under Sub-Heading 3215.90, because the formulation, chemical test report and buyer statements showed it was not aqueous writing ink under Sub-Heading 3215.10. The assessee's declaration as writing ink was inconsistent with the product's actual commercial use, so suppression of material facts was established and the extended period of limitation was correctly invoked. Penalty under Section 11AC was sustained for the first notice where suppression with intent to evade duty was found, but was set aside for the second notice because the proviso to Section 11A(1) had not been invoked. The matter was remanded for limited re-quantification of duty and consequential penalty after cum-duty and input credit benefits.

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Issues: (i) Whether the goods were classifiable as writing ink under Sub-Heading 3215.10 or as other ink under Sub-Heading 3215.90. (ii) Whether the extended period of limitation was invocable on the ground of suppression of facts. (iii) Whether penalty under Section 11AC was sustainable, and whether re-quantification of duty was required after granting cum-duty price and input credit benefits.

Issue (i): Whether the goods were classifiable as writing ink under Sub-Heading 3215.10 or as other ink under Sub-Heading 3215.90.

Analysis: The declared formulation, chemical test report, and buyer statements showed that the product was not an aqueous writing ink but a jet ink used in printers. The evidence indicated that water was only a minor ingredient and that the product was marketed for printing use, not writing use. On these facts, the HSN note relied upon by the assessee did not assist classification under writing ink.

Conclusion: The goods were correctly classified under Sub-Heading 3215.90 and not under Sub-Heading 3215.10.

Issue (ii): Whether the extended period of limitation was invocable on the ground of suppression of facts.

Analysis: The assessee declared the product as writing ink in the classification declaration, but the evidence showed that it was supplied and sold as jet ink for printing purposes. The conduct was inconsistent with the declaration, and no cross-examination was pursued to discredit the buyers' statements. This established suppression of material facts with intent relevant to duty liability.

Conclusion: The extended period of limitation was rightly invoked against the assessee.

Issue (iii): Whether penalty under Section 11AC was sustainable, and whether re-quantification of duty was required after granting cum-duty price and input credit benefits.

Analysis: Penalty under Section 11AC was justified in respect of the first notice because suppression with intent to evade duty was established. For the second notice, since the proviso to Section 11A(1) had not been invoked, the penalty could not stand and had to be set aside. As the appellate authority had granted cum-duty treatment and input credit, the duty and consequential penalty required fresh quantification by the original authority.

Conclusion: Penalty was sustained for the first notice, set aside for the second notice, and the matter was remanded for limited re-quantification of duty and consequential reduction of penalty.

Final Conclusion: The classification and limitation findings went against the assessee, but partial relief was granted on penalty and quantification, resulting in a remand limited to recomputation of duty and consequential penalty.

Ratio Decidendi: A product sold and used as printer ink, supported by test results and buyer evidence, is classifiable by its actual commercial use rather than by a declaration inconsistent with its real character, and suppression of such material facts justifies the extended period and penalty where the statutory conditions are met.

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