Judgment:
1. This appeal arises from order-in-original passed by Collector of Central Excise confirming the duty amount of Rs. 14,98,714.00 under Rule 9(2) of the Central Excise Rules, 1944 read with Section 11A proviso of the Central Excises and Salt Act, 1944. He also imposed personal penalty of Rs. 2,00,000/- under Rule 9(2) and 173Q of the Central Excise Rules, 1944 for contravention of various Rules of the Central Excise Rules, 1944.
2. The Collector had raised two issues before him which are as follows : (1) whether the mixture that is obtained from power operated mixing machine and used for printing wax paper and polythylene coated paper would be covered under the definition of printing ink classifiable under chapter sub-heading 3215 of Central Excise Tariff and if so the same would be dutiable? (2) as to whether the extended period can be invoked in terms of proviso to Section 11A of the Act for alleged 3. As regards the first issue, the Collector rejected the contention of the assessee that the product is not a printing ink and does not get covered under the definition of excisable goods and also that there was no manufacture of the same or the goods have not been sold/saleable in the market. He has held that the noticee has been mixing essential ingredients of printing ink viz. colour solvent and resin in power operated mills and the mixture thus obtained, is used for printing wax paper and polythylene coated paper. Therefore, he has held that the mixture acquires such of the properties defined for printing ink, otherwise it could not have been used for printing purpose. He has held that neither colour nor resin nor spirit would have been able to print such papers. Further mixing of these three raw materials by power operated sand mill is not a mechanical mixing so that each of the raw materials can again be separated back rather it is a chemical mixing of the raw materials giving rise to a definite identifiable product, which is and which can be used as printing ink. He has held that the addition of additives, so that the product acquires some desirable functional properties is not a must in this process. By supplying emphasis on the addition, of these additives does not make any material change in the identifiable nature of the product. He has further added that the additive may improve the quality or standard are not a must for the product being defined as printing ink. In view of this reasoning, he has held that the colour mixture prepared by the assessee is nothing but an identifiable product known as printing ink and is covered within the tariff description of sub-heading 3215.00 of Central Excise Tariff Act.
As regards the claim of the assessee that the product is not marketed or marketable; he has held that admittedly this colour mixture is not marketed as such because the noticee is not a manufacturer seeking to manufacture and trade in printing ink but certainly it is trading its product in the printed form like printed waxed paper or polyethylene paper. He has held that the marketability of the product thus becomes evident. No doubt there might have been some complaints regarding the quality of printing as has been brought in the defence but this complaint is possible even otherwise. Therefore, he held that the product produced for printing waxed paper by the noticee is excisable and chargeable to Central Excise duty under the said tariff heading.
4. As-regards the notification of extended period, he has held that the noticee did not produce any evidence that there was no suppression .of fact except about the plea that the Central Excise officers had visited the factory of the noticee and that the department was aware of the activities of the noticee. He has held that it is found from the records that the noticee was purchasing printing ink as well as making printing ink in the name of colour mixture, unless the Central Excise officers go for specific inquiry regarding the production process of printing ink, it may be possible that the same had escaped their notice. He has held that it is necessary on the part of noticee to declare any such activity to the Department so that the department is fully aware of the activities of the manufacturer. No such declaration had been produced as evidence and therefore, the noticee had suppressed their activity from the department with an intent to evade duty and hence has confirmed the demands for larger period.
5. Arguing for the appellants ld. Advocate Shri P.P. Mittal submitted that the burden of classification in this matter had not been discharged by the department inasmuch as they have not produced any evidence of the product being marketable or being marketed as a printing ink. The department had also not drawn samples for chemical test and there is no opinion from the Chemical Examiner to show that the item is printing ink. He also filed a Misc. application seeking to rise additional grounds in which it has been contended that the appellants were under a bonafide belief that colour mixture prepared by them for captive use during the material period did not come in the category of excisable goods since it did not have functional properties which will make it function as Printing Ink as defined in HSN to be liable to duty under Chapter 3215. It is pleaded that there was neither any suppression nor any mis-statement nor any intention to evade duty for invocation of larger period. In this regard the appellants are relying on the judgment of Hon'ble Supreme Court rendered in the case of Cosmic Dye Chemicals v. Collector of Customs as reported in 1995 (75) E.L.T. 721 and that of the Tribunal judgment rendered in the case of Johnson & Johnson Ltd. v. Collector of Central Excise, Bombay as reported in 1995 (78) E.L.T. 193. It is also pleaded that no penalty is imposable. In this regard the following judgments are relied :Cement Marketing Co. of India v. Asstt. Commissioner of Sales Tax - 1980 (6) E.L.T. 295Johnson & Johnson Ltd. v. Collector of Central Excise, Bombay - 1995 (78) E.L.T. 193 It is also pleaded that in the event Colour Mixture is held to be dutiable as Printing Ink falling tinder Chapter 3215 of CET, then Modvat benefit in respect of the duty paid on inputs namely Pigment, Resin, Solvent etc. used in the manufacture of the said product should be extended to them and in this regard they relied on the judgment rendered in the case of Kesoram Cements v. Collector of Central Excise as reported in 1989 (40) E.L.T. 413 and that of Indian Oxygen Ltd. v.Collector of Central Excise as reported in 1995 (80) E.L.T. 573 and that of Gujarat Ambuja Cement v. Commissioner of Central Excise as reported in 1996 (85) E.L.T. 154 and that of Veena Organics Ltd. v.Collector of Central Excise as reported in 1992 (59) E.L.T. 87. Ld.
Counsel also pointed out that the Printing Inks undergo a comprehensive set of tests before it is sealed in containers, and sent to market for sale. The tests carried out pertaining to the printing ink are as follows: It is his submission that even as per HSN Notes at page 469, the ingredients should consist of either natural resins or synthetic polymers, dispersed in oils or dissolved in solvents and contains a small quantity of additives to impart the desired functional properties. He points out that the Collector himself had agreed that the item did not satisfy this specification but yet held it to be printing ink on the basis of the appellant's use of a sub-standard material for printing wax paper and polyethene. It is his submission that even this printing carried out on wrappers for biscuits has been objected to by those who had given them the contracts and they had produced evidence about the bad quality of this colour mixture, which has been rejected by the Collector. He submits that merely because they used this for the purpose of some captive use that by itself does not make it a printing ink for the purpose of marketing it, as a printing ink in the commercial/trade sets. He also pointed out to the definition appearing in the Book "Paint/Coatings Dictionary" published by Federation of Societies for Coatings Technology. He relied on the definition of "Printing Ink" appearing at page 344 which reads : Any fluid or viscous composition of materials, used in printing, impressing, stamping or transferring on paper or paper like substance, wood, fabrics, plastics, films or metals by the recognised mechanical reproductive process employed in printing, publishing and related services "ASTM".
He submits that the item does not specify the test laid down by the Trade and as in the technical literature. In this regard, he also relied on the letter dated 22-6-1991 of a manufacturer of Printing Ink namely Coates of India Ltd. It is his submission that the appellant have not added additives, therefore, in the absence of additives, itself it is clear that the item is not a printing ink in terms of the HSN Notes. He also submits that the appellants were under the bonafide belief that it is not a printing ink, therefore, the question of invoking larger period does not arise.
6. Ld. DR on the other hand submits that the findings given by the Collector is required to be upheld, as the appellants were using the items for printing wax paper and polyethylene coated paper. The appellants were manufacturing the item by mixing pigment, solvent and hence it performs the function of a printing ink and as there was no filing of declaration, the extended period can be invoked.
7. On a careful consideration of the submission made by both the sides, we find force in the submissions advanced by ld. Advocate. It is an admitted fact that the department has not drawn samples for the purpose of chemical test, to find out as to whether the item is a printing ink or colour mixture, on the basis of the appellants utilising the colour mixture for printing wrappers on wax paper. It has been presumed to be a printing ink. The department has not proceeded to make market enquiries and to obtain trade opinion with regard to the item, having any market and could be used by users as a printing ink. The appellants have contended that they were using printing ink for the purpose of printing wrappers of biscuits on job work basis. They also prepared colour mixture for captive use, which was objected to for poor quality and they had produced evidence to this effect. In this regard, ld.Collector has rejected their pleas and has proceeded to hold the items as printing ink as it is captively used in the appellant's factory. The burden of proving that the item is known in the market as printing ink and it is traded as such has not been discharged by the department.
Hon'ble Supreme Court has time and again held that the burden of prove to show the item is marketable is always on the Revenue which has not been discharged in terms of judgments rendered in the case of Bhor Industries Ltd. v. Collector of Central Excise, Bombay as reported in 1989 (40) E.L.T. 280 (S.C.), Collector of Central Excise v. Ambalal Sarabhai Enterprises as reported in 1989 (43) E.L.T. 214 (S.C.), Moti Laminates Pvt. Ltd. v. Collector as reported in 1995 (76) E.L.T. 241 (S.C.) and Union of India v. Delhi Cloth & General Mills Co. Ltd. as reported in 1997 (92) E.L.T. 315 (S.C.).
8. It was pointed out by ld. Advocate that in terms of Explanatory Notes under Heading 3215 at page 469, additives are required to be added in small quantity to impart desire functional properties, to satisfy the definition of printing ink. He also pointed out that in order to specify the item as a printing ink, it has passed several tests and it has been so pointed out by one such manufacturer as per their letter dated 22-6-1991. The department has not produced any evidence to show that the item satisfied the criteria. Admittedly the appellants are not adding additives and there is no evidence that the item satisfies all the chemical properties and tests of a printing ink.
We notice that this letter dated 22-6-1991 of M/s. Coates of India Ltd. specification of Indian Standard Institution - method of Test for printing ink and specification of Indian Standards Glossary of Terms relating to Printing Ink and Allied Industries had placed before the Collector and he has noted the same in his order. However, the ld.Collector has not given any findings on this material evidence, which was before him to show that the item in question satisfies the tests required to classify the item as a printing ink, both in terms of technical sense and as per trade parlance and commercial understanding.
In view of the pleas raised by the appellants that the item is only a colour mixture and such mixtures are not printing inks and that the department has not produced any evidence to counter the evidence produce by the appellants, therefore, it has to be held that the department has failed to discharge that burden of classification in the matter. In view of our findings, the question of invoking larger period to confirm the duty does not arise. The item in question is not printing ink for classification under Chapter Heading 3215 of Central Excise Tariff Act. In that view of the matter, the impugned order is set aside, the appeal is allowed.