TMI Blog2020 (7) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... or semi-solid form, generally suitable for immediate consumption and collectively referred to as sweetmeats, confectionery or candies - thus, white chocolate can be classified under Chapter 17 and white chocolate composes sugar, cocoa butter, milk powder and flavoring agents, but not containing more than mere traces of cocoa. Whether or not the impugned products merit classification as white chocolate in terms of the HSN Explanatory Notes? - HELD THAT:- Tribunal, Allahabad in the case of M/S MARKO FOODS SHRI NAMAN MANDHYAN, PARTNER, M/S PAHLADRAI CONFECTIONARIES PVT. LTD. SHRI MOHIT VAID DIRECTOR VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR [ 2018 (9) TMI 14 - CESTAT ALLAHABAD] held that a similar product i.e., Parle 2-in-1 Eclairs and Kismi Toffee and Bar , to be boiled sweets containing no cocoa butter and having 8% fat content, are not white chocolate under Tariff Item 1704 90 30 of Central Excise Tariff and held that the said goods are eligible to benefit of Notification Nos.6/2002-CE, 3/2006-C.E. and 12/2012-C.E. - the Department has not conclusively established that the appellant s claim that the impugned products did not contain cocoa butter during the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.11.2008 confirmed that Nestle Milky bar Eclairs manufactured by them does not contain any cocoa butter/ cocoa powder or cocoa content in any other form and vide letter dated 17.02.2009 provided the details of the ingredients used in the manufacture of white chocolate and submitted that they have discontinued the production of the same from 01.07.2008. It was also informed that ingredients of Nestle Milky bar Eclairs have changed from January 2008. A Show Cause Notice, C. No. IV/9/131/2009 Hqrs- Adjn dated 7.10.2009, demanding differential duty of ₹ 6,64, 08,403/- on the clearances of Nestle Milky bar Eclairs and Nestle Milky bar, during the period from September 2004 to June 2009 was issued on the ground that the appellants had used cocoa butter in the manufacture of Nestle Milky Bar Eclairs therefore no eligible to the benefit of the Notification. The Commissioner vide Order-in-Original No. 08/2010 dated 07.05.2010 confirmed the demand as proposed in the Show Cause Notice. Periodical demands were raised for subsequent periods and confirmed. The demands confirmed as below. Hence, these appeals. SI. No. Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (excluding white chocolate), not containing cocoa falling under sub-heading 1704.90; there is no dispute in the present case that the products in question are sugar confectionery falling under sub-heading 1704.90; only dispute raised by the Department is that the products in question are excluded from the purview of the Notification since the same are white chocolate inasmuch as they contain cocoa butter . 3.1. Appellants submit that Sl.No.247 of Notification No.6/02-CE admittedly excludes white chocolate from its purview; Notification has no definition for the expression white chocolate ; Central Excise Tariff also has no chapter note or section note which defines the expression white chocolate ; in the absence of any statutory definition, one has to apply the commercial parlance test to find out as to how the product in question is commercially known, understood and bought and sold by the people who are dealing in those products as held in (i) Indo International Industries Vs CST reported in 1981 (8) ELT 325 (SC) and (ii) Asian Paints India Ltd Vs CCE reported in 1988 (35) ELT 3 (SC); the products in question are known, bought and sold and commercially recognized as E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e classified as white chocolates. 5. Learned Senior Counsel submits that Cocoa butter is not used as an ingredient in Nestle Milky bar Eclairs from 01.01.2008; the ingredients till December 2007 and after wards are as follows. Till 31.12.2008 from 01.01.2008 (a) Liquid Glucose (b) Sugar (c) Milk Solids (d) Hydrogenated Refined Vegetable Oil (e) Cocoa Butter (f) Salt (g) Soya Lecithin (h) Glycerol Mono Stearate (a) Liquid Glucose (b) Sugar (c) Milk Solids (d) Hydrogenated Vegetable oils (e) Salt (f) Soya Lecithin (g) Glycerol Mono Stearate 6. Learned Senior counsel submits that effective from 1.1.2008, the appellants have stopped using cocoa butter in the manufacture of Nestle Milky bar Eclairs as also evidenced from the letter dated 17.2.2009 by the Appellants; the affidavit dated 30.03.2010 sworn by the Deputy General Manager of Appellants and the wrapper of the Nestle Milky bar Eclairs manufactured by the Appellants right from January 2008. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olate is wholly irrelevant and inapplicable to the present case since there is no dispute that the Nestle Milky bar Eclairs is classifiable under Heading No.1704 of Central Excise Tariff and not under Heading No.1806; General Note (b) to Chapter 18 of HSN states that the Chapter excluded White chocolate (heading 17.04); further, note (a) below the HSN Explanatory note to Heading No.1806 states that the heading does not include white chocolate (composed of cocoa butter, sugar and powdered milk) (heading 17.04); also the HSN explanatory note to Heading No.1704 does not mention that vegetable oils can be used as an ingredient in white chocolate, unlike the HSN explanatory note to Heading No.1806. 9. Learned Senior counsel submits that the burden of classification is on the Revenue and the said burden is to be discharged based on material evidence and not merely based on unsupported assertions; it is also settled legal position that when an assessee is fully covered by the terms of the notification and the Revenue seeks to dis-allow the benefit of the notification by invoking the exclusionary clause, the burden is on the Revenue to show that the product of the assessee is covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nger period alleging suppression is not maintainable as the Appellants were under the bona fide belief that the impugned products are not white chocolate; even in the decision Tribunal followed in the impugned order had held that it was a case of pure interpretation of the tariff entries vis- -vis the exemption Notification; appeal filed by the Revenue against the portion of the order of the tribunal has been dismissed by the Apex Court vide their order dated 02.02.2009 reported in 2009 (237) ELT A102 (SC); therefore, appellants couldn t be alleged to be guilty of suppression of facts in the nature of the product; duty was demanded on goods cleared during the period from September 2004 to June 2009 and the Show Cause Notice is dated 7.10.2009; the demand for the period prior to September 2008 is barred by limitation. He submits that so far as Nestle Milky bar is concerned, the Appellants have never used cocoa butter as one of the ingredients; hence the question of suppressing the fact of use of cocoa butter in this product does not arise; therefore, in so far as the duty demand on Nestle Milky bar is concerned, the extended period of limitation is not invokable at all; moreover, ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act has prescribed an abatement @ 40% for white chocolate falling under Heading 1704.90; if the Department treats the products in question as white chocolate and demands differential duty, the higher abatement @ 40% should be extended from the MRP and accordingly differential duty demand is to be calculated. 14. Learned Senior Counsel submits that penal provisions under Section 11AC of the Act and Rule 25 of the Rules are not invokable as the Appellants have not suppressed any facts much less with an intention to evade payment of duty; whether the goods manufactured by the Appellants are eligible for the exemption or are excluded from the purview of the notification is a matter of interpretation of law; when short-payment of duty is made due to the difference of bona fide interpretation of law, then no penalty is to be imposed. He relied on the ratio of the following cases. White Machines Vs. CCE, Delhi-I - 2002 (149) ELT 210 CCE, Indore Vs. Syncom Formulation (I) Ltd. - 2002 (150) ELT 1228 Jay Kay Exports Vs. CC(Port), Calcutta - 2003 (161) ELT 443 G.V. Exim Pvt. Ltd. Vs. CC(Airport), Kolkata - 2003 (160) ELT 900 JJ Foam Pvt. Ltd. Vs. CCE, Ghaziabad- 2004 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is accepted by both the appellant and the department; Revenue is, however, of the view that the appellant is not eligible to avail of the concessional duty under the aforesaid Notifications since the aforesaid products are 'White chocolates' which are specifically excluded from the description against s.no.15 /19 of the Tables annexed to the said Notifications. 17. Issues involved in these appeals are (i). Whether the confectionery products cleared by the appellant under Chapter 1704.90 are 'white chocolate' or not; (ii). Whether or not the said products are eligible to avail of the concessional duty under the aforesaid Notifications and (iii). As to whether in respect of earlier period, the invocation of extended period of limitation and levy of Interest and imposition or penalties are justified. Referring to the appellants claim that main ingredients of 'Nestle Milky bar and Eclairs' were sugar, liquid glucose, skimmed milk powder, hydrogenated vegetable fat, cocoa butter, salt, soya lecithin, GM Stearate up to 1/1/2008 and that from 1/1/2008, cocoa butter was not used while other Ingredients continue to be used, learned Special Counsel reiterates the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... colate containing more than mere traces of cocoa would get covered under heading 18.06; white chocolate without any traces of cocoa i.e. even without cocoa butter does exist ( as per CESTAT order in Nestle) and it goes without saying that such white chocolate would get covered under heading 17.04 and continue to be known as white chocolate; Thirdly, the inapplicability of the provisions of Food Safety and Standards (Food Products Standard and Food Additives) Regulations, 2011 to CET and the notification issued thereunder has been discussed in great detail which again has not been noticed by the Allahabad Bench. Fourthly, Hon'ble Apex Court in the case of Commissioner of Central Excise, New Delhi Vs Connaught Plaza Restaurant (P) Ltd, 2012 (286) ELT 321 (SC), observed that: 43. We are unable to persuade ourselves to agree with the submission. It is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. As aforesaid, the object of the Excise Act is to raise revenue for which various goods are differently classified in the Act. The conditions or res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Notification 6/2002-CE dated 01.03.2002 (SI. No. 247) and Notification No. 3/2006-CE dated 01.03.2006 (SI. No. 16) and whether the invocation of extended period, (in respect of Appeal No. E/1754/2010) and imposition of penalties are tenable. 21.1. The crux of the argument on the part of the appellants is that white chocolate is not defined under Central Excise Tariff or Notifications and therefore necessarily, the treatment of the impugned goods should be as per the other acts or technical literature or commercial parlance; the impugned products contain hydrogenated vegetable oils and as per PFA Act, use of HVO in manufacturing of chocolates is not permissible and therefore the product cannot be held to be chocolate, leaving alone white chocolate; they have informed the Department that cocoa butter was never an ingredient Milky bar and w.e.f. 01.01.2008 usage of cocoa butter was discontinued in the manufacture of Eclairs . 21.2. Per contra, Revenue is of the opinion that in terms of HSN Explanatory Notes and the Tariff Headings, the impugned products can be classified under CETH 1704.90; prohibitions or conditions laid down under other acts are not a criteria for dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any proportion and sweetened cocoa powder (heading 18.06). (b) Sweetened food preparation of Chapter 19,20,21 or 22, (c) Sweetened forage (heading 23.09) (d) Chemically pure sugars (other than sucrose, lactose, maltose, glucose and fructose) and aqueous solutions thereof (heading 29.40) (e) Medicaments containing sugar (Chapter 30). CHAPTER 17- SUGARS AND SUGARS CONFECTIONERY HEADING 17.04 SUGAR CONFECTIONERY (INCLUDING WHITE CHOCOLATE); Not CONTAINING COCOA 170410- Chewing gum, whether or not sugar-coated 1704.90 Other This heading covers most of the sugar preparations which are marketed in a solid or semi-solid form, generally suitable for immediate consumption and collectively referred to as sweetmeats, confectionery or candies, inter alia (i)--- (ii)---- (iii)---- (iv)---- (v)----- (vi) White chocolate composed of sugar, cocoa butter, milk powder and flavoring agents, but not containing more than mere traces of cocoa (cocoa butter is not regarded as cocoa) 22.2. As per Tariff Entry 1704 refers to sugar confectionery (including white chocolate) not containing cocoa. Chapter 17 does not include sugar confectionery containing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notes of the Tariff do provide a definition for the disputed White Chocolate ; Explanatory Notes under Heading 1704.90- Others, go to specify that the Heading includes, inter alia (vi) White chocolate composed of sugar, cocoa butter, milk powder and flavoring agents, but not containing more than mere traces of cocoa (cocoa butter is not regarded as cocoa). In view of the above, it is evident that definition of White Chocolate is provided in the Explanatory Notes and therefore to this extent, we find that the submissions of learned Senior Counsel are not correct and the case laws relied upon to say that in the absence of statutory definition, commercial/trade parlance understanding has no relevance. 24. Now, the case hinges on the only issue that is whether or not the impugned products merit classification as white chocolate in terms of the HSN Explanatory Notes. It is the averment of the appellants that they have not used cocoa butter at all in Milky bar and have discontinued the use of same in Eclairs w.e.f. 01.01.2008. Learned Commissioner refers to sample of packing material (polybag and jar labels) of Nestle Milky bar Eclairs a letter submitted by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the writings on the wrappers/packing material which are claimed and reasonably established to belong to the period before 01.01.2008. It is also not correct on the part of the Commissioner to base his findings on the purported delay that occurred in the reply furnished by the appellants. Appellants vide their letter dated 22.11.2008 confirmed that Nestle Milky bar Eclairs manufactured by them does not contain any cocoa butter/ cocoa powder or cocoa content in any other form. Moreover, the Department was also aware of the judgment of Mumbai Bench of the Tribunal in the case of Nestle in 2008. SCN came to be issued in October 2009. There was delay on the part of the Department also and moreover, no samples were drawn and test conducted. Therefore, we find that the Department has not discharged the burden of proof that the impugned products contained cocoa butter and thus were not eligible for exemption in terms of the Notification cited above. 26. On going through the affidavit signed by the appellants and exhibits at pages 179, 181, 183, we find that the ingredients contained in Nestle Milky bar before and after 01.01.2008 are sugar, partially hydrogenated vegetable oils, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that: 29 . Ld. Counsel for the appellant made a submission that earlier the appellant was not using partially hydrogenated vegetable oil in Nestle Milky bar , another product manufactured by it in Mangalore Commissionerate. Hence the appellant was classifying it as White Chocolate. But now the appellant is using partially hydrogenated vegetable oil in it and hence it is not being classified as white chocolate. In support of this submission, he had shown, two wrappers of Nestle Milky bar indicating the use of various ingredients. He also produced the copies of the invoices indicating payment of duty @ 16% in the former case and @ 8% in the latter case. We are not aware of the circumstances and the background in which it is being done and what is the stand of the Mangalore Commissionerate in this regard. Further, the classification of Nestle Milky bar and the applicability of the exemption Notification No. 6/2002-C.E. as amended or Notification No. 3/2006-C.E. is not an issue before us. Hence, we refrain from offering any comments in the matter. We have already held that the presence of the partially hydrogenated vegetable oil in Milky bar Choo will not take it out of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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