Decided on November 14,1991

Rainbow Ink And Varnish Mfg. Co. Appellant
COLLECTOR OF C. EX. Respondents


Jyoti Balasundaram, Member (J) - (1.) THE appellants herein manufacture "printing ink media". They filed classification lists during the period 1 -7 -1984 to 14 -4 -1986 classifying the product under Tariff Item 68 (upto 28 -2 -1986) and under Heading 3215.00 (after 1 -3 -1986). All the classification lists were approved by the Jurisdictional Assistant Collector except classification list No. 2/32/86 dated 15 -4 -1986 which was approved provisionally on 23 -9 -1986. Permission to work under Rule 56B of the Central Excise Rules was also granted on 7 -4 -1984 and on the basis of the same the appellants cleared the printing ink media to their factory at Vakola, Bombay for further processing. Samples were drawn of the following items viz. 1. MM -3 9. ODD -1675 2. MM -25 10. ODD -1837/4 3. Gloss -22 11. ODD -995 4. Gloss -31 12. ODD -1737 5. Gloss -35 13. ODD -702 6. SSP 63/1 14. ODD -1017 and 7. 535/120 15. 155 -med 8. QS -20 The test reports revealed that the said products are not classifiable under Heading 3215.00 but were in fact varnishes, phenolic resins and bituminous mixers falling under the erstwhile Tariff Item 14II(i), 15A(1) and 14II(ii) and not under Tariff Item 68 as claimed by the assessee. The Department issued a show cause notice on 2 -8 -1989 for demand of duty on the printing ink media cleared between the period 1 -7 -1984 to 14 -4 -1986 invoking the extended period of limitation. The Adjudicating authority dropped the charge of contravention of provisions under Rule 56B holding that the finished products and the semi -finished goods are classifiable under the erstwhile Tariff Item 68 and for the period w.e.f. 1 -7 -1984 to 1 -3 -1986 the assessee had filed classification lists classifying the said product under TI 68 claiming exemption in terms of Notification 118/75 -CE which was duly approved by the Assistant Collector. The demand for duty was confirmed on the basis of the test reports. Hence this appeal.
(2.) WE have heard Shri A. Hidaytullah, Senior Advocate and Shri L.N. Murthy, learned DR.
(3.) THE contention of the appellants is that the demand is barred by limitation as this is not a case where there can be said to have any suppression or misdeclaration justifying the extended period of limitation being invoked. The Department had full knowledge of the manufacture of printing ink media and had been approving classification lists filed ever since 1972. During the period 1972 to 1976 there were two orders of Assistant Collectors that the product in question did not fall within the purview of either TI 14 or TI 15A. The Department had also written to the appellants in February 1976 that they need not file classification lists once printing ink media was non -excisable. In 1982 the appellants applied for permission to avail of Chapter X procedure and right from 1983 filed classification lists claiming exemption under Notification 118/75 which were approved by the Department. The appellants submit that in view of the above they cannot be held guilty of any suppression of manufacture and clearance of the disputed items. The records before us reveal that right from 1972 the Department was seized of the issue of the classification of printing ink media. On 12th October 1972, the Assistant Collector informed the appellants that the "black medium 155 and A 9774 and Flowing Agent medium F -A.6157" etc. will not fall within the purview of TI 14 if manufactured and used solely for the further manufacture of printing inks in the appellants' factory at Vakola. On 25 -1 -1973 the appellants were informed by the Superintendent of Central Excise that their Saki Naka factory manufacturing printing ink media was decontrolled from licencing control and the appellants were instructed to apply for cancellation of L4 licence. They did so on 7 -2 -1973. The Collector of Central Excise, Bombay informed the All India Printing Ink Manufacturers' Association of Bombay on 29 -1 -1975 that no duty was being collected on printing medias which are used in the manufacture of printing inks. On 9 -2 -1976, the Superintendent informed the appellants that printing ink mediums were non -excisable. However, it was obligatory for the appellants to file a classification list declaring these items as non -excisable. On 27 -2 -1976 the Assistant Collector wrote to the appellants that there was no need to file classification lists for the product which was declared to be non -excisable. On 8 -3 -1976 the Assistant Collector approved certain ink media as non -excisable under TI 15 -A provided they were manufactured out of duty paid resins. The appellants filed classification list No. 1/68/81 on 24 -10 -1981 classifying the product under TI 68 and claiming the benefit of exemption under Notification 118/75 - this classification list was approved on 29 -10 -1981. The Assistant Collector passed an order dropping the demand for duty on printing ink mediums for the period from June 1977 to July 1981 holding that the products falling under TI 68 were exempt under Notification 118/75 dated 30 -4 -1975. On 20 -11 -1981 a certificate was issued by the Superintendent of Central Excise to the effect that exemption in respect of printing ink media had been allowed by the Assistant Collector by approval of the classification list classifying the items under TI 68. The appellants had applied on 22 -3 -1982 to avail of Chapter X Procedure, consequent upon the amendment of Notification 118/75 -CE by 105/82 dated 28 -2 -1982, in respect of printing ink media and inks for use in the manufacture of printing ink falling under TI 68. Permission was granted on 13 -4 -1982. L 6 licence was granted on 16 -4 -1982 in pursuance of which the appellants executed the statutory bond on 21 -4 -1982. The appellants filed classification list 2/83 classifying printing ink medias under TI 68 and claiming exemption under Notification 118/75. This was approved on 30 -8 -1983 by the Department. Classification list 1/68/84 was also approved on 26 -4 -1984. Classification list No. 1/85 was approved on 19 -12 -1985 subject to Chapter X Procedure being followed. On 23 -9 -1986 classification list 2/32/86 was provisionally approved wherein the appellants claimed classification of printing ink media under 3215.00 as semi -finished goods and declared that the same are being cleared in terms of 56B and permission was granted in April 1984: It cannot be said that the assessee wilfully suppressed any information or intentionally misled the Department as has been held by the adjudicating authority. The Collector of Central Excise has held that the Department's approval of classification list does not absolve the appellants from the charge of misdeclaration as the "Revenue Officers cannot, by any stretch of imagination, be masters in all technical fields and have to be dependent on the assessees in so far as the basic information is concerned and if that itself is subsequently proved to be wrong, the charge of wilful suppression stands substantiated against the assessee, unless of course, they make out a case that they genuinely believed in, and had the conviction about, what they declared. The Department's approval of classification list filed by the assessee, believing it to be true and correct does not ipso facto absolve the assessee of wilful mis -declaration." The Tribunal has taken the view in the case of Collector of Central Excise v. Muzaffar Nagar Steels reported in 1989 (44) E.L.T. 552 that "approval of classification list is an important part of the assessment and therefore, the Assistant Collector is required to be careful and is expected to apply his mind before according approval. He is entitled to and indeed required to make such enquiries and summon such information as may be called for in order to carry on the correct decision. In other words the act of approval was not merely a passive act or concurrence but involves an active decision making and the Assistant Collector was required to fully satisfy himself about the particulars of goods being manufactured and the process of manufacture wherever necessary and the relevant facts and then only determine the classification and pass appropriate orders; and once the Assistant Collector has approved the classification the Department has to bear the consequences thereof." Therefore, once the classification lists had been filed (and in this case they have been filed over a long period of time) and the Department had approved the classification lists from time to time, the appellants cannot be charged with mis -declaration and suppression so as to invoke the extended period of limitation.;

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