Tribunal overturns duty & penalty on appellant due to misclassification, lack of evidence

SIDDHO MAL PAPER CONVERSION CO. Versus COLLECTOR OF C. EX., MEERUT

SIDDHO MAL PAPER CONVERSION CO. Versus COLLECTOR OF C. EX., MEERUT - 1998 (98) E.L.T. 484 (Tribunal) Issues:
1. Classification of the product as printing ink under Central Excise Tariff.
2. Invocation of extended period under Section 11A for alleged suppression to evade duty.

Analysis:

Issue 1: Classification of the product as printing ink under Central Excise Tariff:
The Collector confirmed duty and imposed a penalty on the appellant for manufacturing a mixture used for printing wax paper and polyethylene coated paper, considering it as printing ink under Chapter sub-heading 3215 of Central Excise Tariff. The Collector held that the mixture, obtained by mixing essential ingredients of printing ink, was chemically mixed and used for printing purposes, making it identifiable as printing ink. Despite the appellant's argument that the product was not marketed as printing ink, the Collector emphasized that the product was marketable as it was used in printed forms. The appellant contended that the burden of classification was not discharged by the department, as no evidence was presented to prove marketability or chemical testing. However, the department's failure to conduct chemical tests and market inquiries led to the conclusion that the burden of proving marketability was on the Revenue, which was not fulfilled. The appellant's plea that the item was not a printing ink was supported by the absence of additives and failure to meet chemical properties and tests required for classification as printing ink. Consequently, the Tribunal held that the item in question did not qualify as printing ink under Chapter Heading 3215, setting aside the duty confirmation and penalty.

Issue 2: Invocation of extended period under Section 11A for alleged suppression to evade duty:
Regarding the invocation of the extended period under Section 11A for alleged suppression of facts to evade duty, the Collector found that the appellant had not declared their activity of manufacturing printing ink, leading to the suppression of facts from the department. The appellant argued that there was no intention to evade duty and relied on judgments to support their claim. However, the Tribunal noted that the department's failure to produce evidence to counter the appellant's arguments regarding the nature of the product as not being printing ink, led to the conclusion that the extended period could not be invoked. The Tribunal emphasized that the burden of classification and proving marketability rested with the Revenue, which was not fulfilled. Therefore, the invocation of the extended period was deemed unwarranted, and the appeal was allowed in favor of the appellant.

This detailed analysis highlights the Tribunal's decision to set aside the duty confirmation and penalty imposed on the appellant due to the failure to classify the product as printing ink under the Central Excise Tariff and the lack of evidence to support the invocation of the extended period for alleged suppression.