Customs, Excise and Gold Tribunal - Delhi
G.M. Pens International Ltd. vs Commr. Of Cus. (Sea-Port) on 18 July, 2005
Equivalent citations: 2005(187)ELT180(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. The issue under reference to this Larger Bench is the Central Excise classification of two inks 'Permanent Marker Ink' and 'Dry Wiper Marker Ink'. Both the inks are used in marker pens. The difference is that writing/marking with Permanent Marker Ink, leaves lasting impression, while writing or marking done with Dry Wiper Marker Ink can be removed by mere rubbing with a duster, just like writing with chalk.
2. The appellants contend that classification of these marker inks would be under sub-heading 3215.10 as "writing ink' and would attract duty at NIL rate. Revenue authorities have held that the classification would be under 3215.90 as 'other' (inks) attracting duty at 16%. The controversy has arisen in regard to imported consignments, inasmuch as imported goods attract additional duty of customs at rates equivalent to Central Excise duty on goods manufactured in India.
3. Before we go into the arguments of both sides, we may first note the competing tariff heading:-
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Heading 32.15 of the Central Heading 32.15 of the Customs Tariff :
Excise Tariff Act, 1985
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32.15 Printing ink, writing 32.15 Printing ink, writing -
or drawing ink and or drawing ink and
other inks, whether or other inks, whether
not concentrated or or not concentrated
solid or solid.
- Printing Ink :
3215.10 - Writing Ink Nil 3215.11 -- Black
3215.90 - Other 16% 3215.19 -- Other
3215.90 -- Other
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4. It is to be straightaway noted that Heading 32.15, which is for all kinds of inks both under Central Excise and Customs Tariffs, groups inks into the following three categories :-
(a) Printing ink
(b) Writing or drawing ink
(c) Other inks These headings are the same under HSN classification also. At the subheading level the Customs Tariff as well as HSN have carved out a heading for 'printing ink' and other than printing inks are grouped together as "other". As against this, in the Central Excise Tariff, 'writing ink' has been given a separate identity with a separate sub-heading and the remaining inks are grouped as "other".
5. The contention of the learned Counsel for the appellant is that all "Writing Inks" would fall under sub-heading 3215.10 of the Central Excise Tariff in view of the fact that writing inks have a specific sub-heading. It is being emphasized, that classification of any writing ink under the residuary ("other") heading would be contrary to the well settled principles of interpretation that an item with a specific heading/sub-heading cannot be put in the orphanage of "other". At the same time, it is being contended that, for the purpose of custom classification, writing inks fall under "other", the reason being that under the custom tariff all inks, other than 'printing ink', fall under "other".
6. The Revenue contends that the Central Excise classification canvassed by the appellant is an impermissible expansion of the scope of the entry 'writing ink' and a drastic curtailment of the scope of the entry 'other' inks. It is also being submitted that such an expansion is contrary to HSN explanatory notes to Heading 3215. It is being pointed out that explanatory notes to HSN have delineated the area in which each of the categorizations (printing ink, writing ink and other inks operates. It is of particular significance that the notes have included only "ordinary" writing or drawing inks under the category of 'writing and drawing inks'. The notes have left other than ordinary writing or writing inks in the category of 'other' inks. It is also being emphasized that HSN notes specifically mention that "ink for ball point pens" and "marking inks" would fall under the third category of 'other' inks. Learned SDR has further submitted that it is well settled that in cases of doubt about classification, resort may be taken to HSN notes. It is also mentioned that in the appellant's own case, this Tribunal has taken the view that correct classification of the inks in question would be under 3215.90 [2001 (133) E.L.T. 720] and appeal against that order was dismissed by the Supreme Court [2003 (158) E.L.T. A276 (S.C.)], even though on the ground of inordinate delay.
7. The contention of the learned Counsel for the appellant in regard to the applicability of the HSN note is that, since excise tariff is not aligned to HSN classification at the sub-heading level, the HSN notes relating to the heading are not applicable to classification. Specific reliance is being placed on Note 5 of General Rules for the Interpretation of Central Excise Tariff schedule. We may quote that rule :-
"5. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those sub-headings and any related Sub-heading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule, the relative Chapter and Section Notes also apply, unless the context otherwise requires".
8. However, learned SDR points out that the interpretation placed by the appellant on Rule 5 is not correct inasmuch as that rule specifically says that even Chapter and Section notes are relevant "unless the context otherwise requires". Learned SDR has also brought to our notice that the Tribunal has relied on HSN notes while deciding the same issue in the earlier decision in the case of CCE, Mumbai v. Camlin Limited - 2002 (144) E.L.T. 638 and that judgment was following an earlier judgment in the case of CCE, New Delhi v. Technik Industries -2000 (120) E.L.T. 123 passed in the light of HSN notes.
9. It is clear from what is stated above that there are several decisions of this Tribunal in support of the Revenue's contention, while the contentions on behalf of the assessee are raised based on a pure interpretation of heading as well as the decision of the Tribunal in the case of Linc Pen & Plastic Ltd. v. CCE, Kolkata - that Ball Point Pen Ink would be classifiable under Heading 3215.10 as writing ink.
10. As already noted, the Heading 3215 covers three varieties of inks. The first two varieties 'printing inks' and 'writing ink' are specific, depending upon the use of the ink, while the third category residuary 'other' inks. This is the categorization under the HSN notes also. In such a scheme, any expanded scope given to the two specific entries, particularly, the entry for writing ink, would narrow the otherwise normal scope of the residuary entry for other inks. In order to prevent such encroachment, the HSN has specifically demarcated the scope of the specific entries for 'writing or drawing inks' and 'other' inks. Further, the note also indicates that the entries in the three groups of inks does not cover under the heading "this heading does not include". We may read these notes :-
(B) Ordinary writing or drawing inks are solutions or suspensions of a black or coloured material in water, usually with the addition of gum and other products (e.g. preservatives). These include inks based on iron salts, inks based on logwood extracts or on synthetic organic colours. Indian ink, used mainly for drawing, consists usually or carbon black in suspension in water (with the addition of gum Arabic, shellac, etc.), or in certain animal glues.
(C) Other inks in this heading include : (1) Copying and hectographic inks (ordinary inks thickened with glycerol, sugar, etc.). (2) Inks for ball point pens. (3) Inks for duplicating machines or for impregnating ink-pads or typewriter ribbons. (4) Marking inks (e.g., based on silver nitrate). (5) Metallic inks (finely divided metals or alloys in suspension in a solution of gum, e.g., gold, silver or bronze inks). (6) Prepared sympathetic or invisible inks (e.g., based on cobalt chloride).
These products are generally in the form of liquids or pastes, but they are also included in this heading when concentrated or solid (i.e. powders, tablets, sticks, etc.) to be used as inks after simple dilution or dispersion.
This heading does not include :
(a) Developers consisting of a toner (a mixture of carbon black and thermoplastic resins) compounded with a carrier (grains of sand coated with ethylcellulose), used in photocopying machines (Heading 37.07).
(b) Refills for ball point fountain pens comprising the ball point and ink-reservoir (Heading 96.08). On the other hand, mere ink-filled cartridges for ordinary fountain pens remain in this heading.
(c) Inked ribbons for typewriters or ink-pads (Heading 96.12)". (emphasis supplied)
11. The notes keep the entry for 'writing or drawing inks' within its proper bounds by stating what 'ordinary' writing or drawing inks are. In the absence of such border delineation, inks which are normally not used for writing or drawing could also claim assessment as writing or drawing ink, because most applications of inks fall under the category of writing or drawing. The notes in respect of other inks, specifically mention that the heading "other inks" covers hectographic ink, inks for ball point pens, marking inks etc. The inks under consideration are marking inks.
12. Any effort to interpret this entry without regard to the notes creates confusion about other entries in the tariff also. The note seeks to remove such confusion by mentioning the items which are excluded from 3215 such as developers used in photocopying 'machine', refills for ball point fountain pens, etc. The note clarifies that refills for ball point fountain pen comprising the ball point and ink will fall under Heading 9608 which is for miscellaneous manufactured articles. Thus, it is not practicable to undertake excise or custom classification under Heading 3215 without reference to the HSN notes to that heading.
13. We are not able to agree with the learned Counsel for the appellant that Rule 5 of Interpretative Rules forbids any reference to HSN notes for clarification, wherever tariff heading are at variance with the HSN headings at the subheading level. We have already extracted that rule. A perusal of that rule makes it clear that the prohibition sought to be read into it is not to be found in the language of the Rule. Instead, that rule envisages using of HSN notes including chapter and section note to find out the correct scope of headings and subheading. The only prohibition is against using notes when "the context otherwise requires". This is a rule of prudence. If the sub-headings in the tariff are very differently worded from the sub-heading in the HSN, and those wordings in the tariff are indicative of a legislative intend to classify items differently from the HSN heading or sub-heading, clearly the notes would have no application. There can be no doubt on this proposition, because it is well settled that HSN notes can be brought into the picture only when there is doubt or ambiguity about the scope of any tariff entry. If the tariff entry itself is clear, no external aid is necessary or permissible for determining its scope. Legislative freedom in regard to taxation of commodities is in no way restrained or inhabited by HSN classification.
14. Two things are clear in the present case. One is that entries for 'writing and drawing ink' and 'other inks' can overlap and create doubts and confusion unless the boundaries are delineated. Heading 32 of the Central Excise Tariff does not adumbrate the area of each entry through chapter notes. The second is that doubt arising therefrom can legitimately be clarified by taking resort to the notes in HSN to Heading 3215. As we have already noted, Rule 5 of the Interpretative Rules does not prohibit this. HSN notes specifically mention 'marking ink' (Serial No. 4) under other inks. Similarly, "inks for ball' point pens" remain included under Serial No. 2 as "other inks'. Therefore, clearly these varieties of inks have to be classified under 3215.90 as "other inks". Decision to the contrary in the case of Linc Pen & Plastic Ltd. and other cases are not correct.
15. In view of what is stated above, we answer the reference in favour of the Revenue.
16. The registry is directed to place the appeals before the Division Bench for orders.
[Operative part of the order was pronounced in the open Court on 18-7-2005]