TMI Blog1999 (5) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... and other substances is sandwiched between layer of such wafers and waffles. The sandwiched wafers are thereafter coated with chocolate manufactured from the cocoa paste, cocoa butter, sugar, so as to completely cover it. The resultant product is thereafter packed. 3. Prior to setting up of the factory for the manufacture of the goods the appellant claimed classification of these goods under Heading 19.05 of the tariff, in the classification list filed in August, 1994 and May, 1995. The classification so claimed was approved by the Assistant Commissioner. The appellant cleared these products after paying the duty applicable to this heading. Four notices dated 3-7-1996, 14-10-1996, 20-4-1997 and 24-9-1997 were issued between July, 1996 and April, 1997 alleging short payment of duty on the ground that the goods were classifiable under Heading 18.04 of the tariff and proposing recovery for each of the periods mentioned in those notices. These notices were issued by the Superintendent. Another notice was issued on 11-9-1997 by the Commissioner (Adjudication), Mumbai in exercise of powers conferred on him, proposing classification of the goods under Heading 18.03 of the tariff and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, for wafers and waffles coated with chocolate or containing chocolate. Since there has been no change in the words of the main heading, carving out a separate entry for wafers and waffles coated with or containing chocolates clearly shows that the main heading included in its scope these products. It is not correct to say that the product is treated by the appellant as chocolate or so understood in the market. On the other hand the product could not be marketed as chocolate since specifications of chocolate contained in Heading 25.03 of the Prevention of Food Adulteration Rules, 1955, excluded the presence of any vegetable fat other than cocoa butter and the goods containing hydrogenated palm kernel oil. The Indian Standard Specifications IS: 2397 of 1988 say in paragraph 5.1.3 that wafers may be coated with chocolate. The Explanatory Notes to Harmonized System of Nomenclature, 2nd edition, 1996, on which the tariff is based, say at page 151-153 (for Heading 19.05) that waffles under this heading, may also be chocolate covered. These notes say at page 144 that chocolate covered biscuits are excluded from Heading 18.06 and indicate their classification under Heading 19.05. Headin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .10 Put up in unit containers and ordinarily intended for sale. 1904.90 Other 19.05 Bread, pastry, cakes, biscuits and other bakers wares, whether or not containing cocoa, communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rise paper and similar products Biscuits; waffles and wafers: 1905.11 In or in relation to the manufacture which any process is ordinarily carried on with the aid of power 1905.11 Other 8. The note to Chapter 18 excluded at the relevant time, preparations of Headings 04.04, 19.01, 19.04, 19.05, 21.05, 22.02, 30.03. These headings cover other dairy product, edible products of animal origin not else specified or included (Heading 04.04); malt extract, food preparations of flour, malt, etc. not containing cocoa powder in a proportion by weight of less than 50% not elsewhere specified; food preparations of milk or ghee not containing cocoa powder (19.01); or containing cocoa powder in a proportion by weight of less than 10% not elsewhere specified; prepared foods obtained by swelling or roasting of cereals or cereal prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od preparations containing cocoa. Note 2 to Chapter 18 of the tariff is identical in contents with Note 2 Chapter 18 of the Explanatory Notes, except for the differences with the numbering in the Tariff Headings (18.03 and 18.06). Note 2 to Chapter 19 of the tariff tallies (except for the percentage of the cocoa) with Note 4 to Chapter 19 of the Explanatory Notes. In fact, each of the heading of the Chapter 19 at the relevant time tallied word for word with the heading in the HSN except to the extent of difference in the percentage of cocoa powder (referred to in Heading 19.01). The HSN used the word cocoa and not cocoa powder as in the present tariff after its amendment in March, 1998. There is a difference in the arrangement of the chapter, in that any prepared cocoa in the form of pitments and shells is not classifiable under Chapter 18 in the tariff (unlike in the HSN) and processed cocoa base is also excluded from the chapter. Cocoa butter and oil in Heading 18.01 of the tariff corresponds to the 18.04 of the HSN. Heading 18.02 with 18.05. Heading 18 of the HSN, chocolates and other food preparations containing cocoa, had been split up into two; 18.03 for chocolates in any for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative of the department referred to what he called advertising brief prepared by one of the appellant s officers, to guide the advertising of the product. The brief in fact goes against the department s case. It describes the product as a delicious, light, crisp, wafer covered with milk chocolate snack it emphasised that the product draws from both the chocolate and biscuit markets. It further described the product as biscuit covered with chocolate snack . There is certainly some reference in the guidelines, with regard to storage and transport suggesting that the product must, for the purposes of ambient temperature, be considered to be chocolate must care as for chocolate. There is incidentally a reference to caution in handling - handle like eggs - with care . From that direction by itself, it would not be legitimate to draw a conclusion that the appellant marketed the product as chocolate or that any of the buyers purchased the same as chocolate, or that it is commonly considered as chocolate. 13. It might have been necessary, in view of the presence of chocolate, to refrigerate the product to prevent its melting or spoiling. That alone cannot justify the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Explanatory Notes. It is therefore on the basis of the principles incorporated in the Explanatory Notes and in the tariff that we must decide the classification and the test of common parlance and understanding would not apply. 14. It is also to be noted at this juncture that the appellant, in view of the provisions of the Prevention of Food Adulteration could not, except by violation of law has sold the goods as chocolate. We must also refer here to the decision of this Tribunal in Kirloskar Oil Engines Ltd. v. Union of India - 1995 (77) E.L.T 479 and National Sales Corporation - 1995 (78) E.L.T 653 to the effect that the Indian Standard Institute are good and reliable indication of the common parlance and understanding. We have noted that the ISI specifications for biscuits include biscuit covered or coated with chocolate. Even if the common parlance test was to be applied presence of the contents of ISI specifications would be in favour of the appellant. 15. The representative of the department relies upon the Supreme Court s judgment in CCE v. Wood Polymers Ltd. The bench of the Supreme Court, which delivered that judgment, was concerned with classification of decor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er which requires consideration. This is the amendment carried out to Heading 19.05 by the budget of 1998. By this amendment two new sub-headings have been created in Heading 19.05, for wafers and waffles. Sub-heading 1905.31 for waffles and wafers coated with or containing chocolate called a rate of duty of 18% (corresponding to the same rate of duty as was applicable to Heading 18.03). Sub-heading 39 is other . It can hardly be disputed that wafers and waffles coated with or containing chocolate are classifiable, after the amendment, under heading 1905.31. Now, in the amendment made in 1998, there has been no change in the wordings of Heading 19.05 or of Heading 18.04, nor there has been any change in any of the notes to the Chapter 18 and 19 with which we are concerned. The Headings 19.05 and 18.03 and the notes, therefore remain unchanged before and after the amendment. That being the case, the effect of introduction of these two sub-headings would be only to carve a separate niche within the same heading for these products. This would mean that both before and after the amendment, waffles and wafer coated or covered with chocolate were classifiable under Heading 19.05. 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der), including fat reduced cocoa powder with or without addition of sugars, cocoa butter, milk solids including milk fat and non prohibited flavouring agents.. That the Explanatory Notes also proceed on this understanding that chocolate must contain cocoa is clear from the following extract in these notes in Heading 18.06 at pages 43 of the 1996 Explanatory Notes. chocolate is composed essentially of cocoa paste and sugar or other sweetening matter; usually with the addition of flavouring and cocoa butter; in some cases, cocoa powder and vegetable oil may be substituted for cocoa paste. Milk, coffee, hazelnuts, almonds, orange-peel, etc. are sometimes also added. 21. Thus while all chocolate must necessarily contain cocoa, it is not every cocoa product or preparation that is chocolate. The fact that Heading 19.05 uses the word cocoa whereas sub-heading 1905.31 refers to chocolate, therefore it is not significant in considering classification of this product. The tariff itself reconises that chocolate must contain cocoa. Heading 18.03 is for chocolates in any form . . . including drinking chocolates ; Heading 18.04 is for other food preparations containing cocoa. The other ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
