Customs, Excise and Gold Tribunal - Mumbai
The Commissioner Of Central Excise vs Britannia Industries Ltd. on 5 January, 2005
Equivalent citations: 2005(183)ELT257(TRI-MUMBAI)
ORDER S.S Sekhon, Member (T)
1. After hearing both sides and considering the appeal filed by the revenue is as regards the classification of the following products of the respondents:-
i) Chekkers Choco 40 P
ii) Chekkers Fly Choco
iii) Chekkers Choco 640 P and
iv) Chekkers Choco ATC
2. It is found that the ground taken by the revenue's appeal to shift the classification of the said product from Wafer Biscuits to Chocolate wafer product are as follows:-
"The dispute is regarding the classification of the product wafer which contains "Chocolate ("ream" in between the layers of wafers. Since the wafer contains (he chocolate cream, which has the presence of chocolate, if is a contention of the Department that product 'Wafer' is classifiable under Chapter 1905.31.
However the Appellate Authority held that the said Chocolate Cream did not qualify as "Chocolate in any form "of Chapter 1803.00 of the Tariff hut more squarely covered as other food preparation containing Cocoa of Chapter subheading 1804.00 and therefore he held that wafer containing such cream will be classifiable under chapter 1905.90.
The above view of the Appellate Authority is not correct. before examining this, it may be pointed out at the outset that before Central Excise Tariff Act, 1985, the Central Excise Tariff was not harmonized on line of BTN [1996 (25) ELT 473 (SC)] Atulya Glass Industries Ltd v. C.CE. However, unlike the earlier Central Excise Tariff, the Central Excise Tariff Act, 1985 is harmonized on the lines of H.S.N. [C.C.E. Shillong v. Wood Craft Product Ltd. [1995(77) ELT 23(SC)]. And in case of nay doubt regarding the classification of the product, reference can be made to the guidelines mentioned in the Explanatory Notes of the H.S.N unless otherwise expressed intention is indicated in the Indian Tariff. In the background of this, the classification of Chocolate in the Tariff can be seen. In this connection the, two chapter sub-headings referred to by the Appellate Authority are as under
Chapter- 18
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Heading Sub-Heading Description of goods Rate of No. No. duty
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(1) (2) (3) (4)
------------------------------------------------------------------- 18.03 1803.00 Chocolates in any form, whether 16% or not containing nuts, fruits kernels or fruits, including drinking chocolates
------------------------------------------------------------------- 18.04 1804.00 Other food preparations 16% containing Cocoa
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Further, in the H.S.N. (2nd Edition, 1996), at page 143, under the heading- Chocolate and Other Food Preparation containing Cocoa, Chocolate has been defined as under :-
"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, Hazelds nuts, almonds, orange peel etc are some time also added. Chocolate and Chocolate goods may be put up either as blocks, slabs, Tablets. Nars, pastilles, croquettes, granules or powder or in the form of Chocolate products filled with cream, fruits etc. "
From the above, it is clear that Chocolate is essentially composed of Cocoa paste and sugar or other sweetening material with addition usually of flavour and Cocoa butter. However, in some cases Cocoa paste can be substituted with Cocoa powder and vegetable oil. Other things like milk, coffee etc. are also permitted to be added. Further Chocolate and Chocolate goods may be put in the form of Chocolate products filled with cream, fruits etc. thus, from this definition of Chocolate, the use of vegetable oil and cream is not out of the scope of Chocolate and Chocolate products.
In view of the above definition of the Chocolate, the product Chocolate cream of the test report cannot be out of the scope of the HSN Chocolate definition. Since this product which has been used in the wafer which is in classification dispute, has to be in the category of product containing Chocolates falling in Chapter heading 1803.00 which is a heading for Chocolate in any form. Further, the Test Report also confirms that the Chocolate Cream in question contains Chocolate. But the Appellate authority in the face of this position has erred in holding that Chocolate cream of the respondent fall under Chapter subheading 1804.00 in the category of other food preparation containing Cocoa. In doing so, the Appellate Authority has completely overlooked the scheme of Central Excise Tariff Act, 1985 designed on lines of HSN and which has been settled by Hon'ble Supreme Court I case of Wood Craft product which specifically mentioned that the guidelines in HSN should be followed unless otherwise intended n the Indian Tariff. The Appellate Authority has also not given nay justification for deviating from the new scheme of the Central Excise Tariff and ruling of the court of law on the issue, therefore, his view as mentioned earlier is not proper and legal.
2. The Appellate Authority also held the classification of Chocolate Cream in the Chapter Sub-heading 1804 of the Tariff on the basis of CEGAT decision in the respondents own case vide order No. 802/86 dated 03.09.86. in this case, the dispute was regarding classification of Bourborn Cream manufactured by the Respondents, duty before the year 1986, when new Central Excise Tariff Act, 1985 had not come into existence. The adjudicating authority held the classification of this product under the ten Excise Tariff Item No. 1A (4) on the ground that the said Cream contained Cocoa powder, which was an essential ingredient of all types of Chocolates as given in the ISI specification and the coverage of TI-1A (4) was wide enough covering Chocolate not otherwise specified. This classification was upheld by the Collector (Appeals). However, the CEGAT reversed the decision and held that the disputed Cream contained vegetable fat, which was not permitted by the ISI specification for use in the Chocolate, and held that it was not Chocolate. The appellate Authority relied on this very CEGAT's decision to tilt his opinion in the present case in favour of the respondent. In taking from the ratio of this decision of the CEGAT, the Appellate authority also relied on the respondent's argument in which it has been stated that PFA Act does not permit use of vegetable oil in Chocolate, therefore, in the Chocolate Cream in which vegetable oil has been used, is not Chocolate.
Above view of the Appellate Authority is misplaced here. As has been mentioned earlier before the introduction of Central Excise Tariff Act, 1935, the Central Excise Tariff was not arranged on the lines of international guidelines of BTN. Therefore, the dispute regarding Bourborn Cream was resolved taking the help from the ISI specifications. This position has changed with the introduction of Central Excise Tariff Act, 1985, as this Tariff has been arranged on the pattern of HSN. In case of any dispute regarding classification of products, the guidelines provided in the HSN are to be followed unless, there is, otherwise expressed intention in the tariff. This position has been confirmed by the hon'ble Supreme Court [CCE, Shillong v. Wood Crafts Ltd [1995 (77) ELT 23(SC)]. In fact, in this case, the Hon'ble Supreme Court unequivocally has mentioned that in dispute relating to Tariff classification must, as far as, possible, be resolved with reference to nomenclature indicated by the HSN unless there be a express difference intention indicated by the Central Excise Tariff Act, 1985. the definition of a term in ISI Glossary which h as a different purpose, cannot, in case of conflict over-ride by clear indication of the meaning of an identical expression in the same context in the HSN. Therefore, the Appellate Authority in deciding the present dispute regarding classification has committed as grave error by following the said CEGAT's decision which is based on ISI termology. Further, the Appellate Authority has not indicated the reason for deviation from the said ruling of the Apex Court. Following the ratio of the Apex Court, it may be pointed out that definition of Chocolate given in the PFA Act which the Appellate Authority also relied on for resolving the dispute in the present case, cannot be applied. There is not dispute that PFA Act has been enacted for different objectives which cannot be followed in resolving the dispute in Excise classification matters.
Thus, the Appellate Authority's view on the point discussed earlier is also not proper and legal.
3. The Appellate Authority in holding that the Chocolate Cream in question is not chocolate also relied on the Chemical Examiner Test Report. According to him - "The cream is found to be brown coloured pasty mass composed of sugar, vegetable oil, emulsifier, 'together with cocoa and other additives'. This pasty mass is reported to contain cocoa on fat free basis of 16.6% and on sample basis 7.9% by wt. Accordingly, it is difficult to accept the finding that this brown coloured pasty mass containing 7.95 of cocoa by wt. On sample basis (overall weight basis of the said pasty mass inclusive e of fat content) would be recognised as chocolate in any form ".
Here again the Appellate Authority committed an error in holding this view. Firstly, all the ingredients to be called as Chocolate as per the HSN are found in Chocolate Cream in Chocolate in any form. Thirdly, HSN definition of chocolate does not prescribe use of any fixed percentage of ingredients to be called Chocolate. In the sample test, Cocoa content on fat free basis is 16% and on sample basis 7.9% by wt. The appellate authority did not accept the brown paste of this content of Cocoa as Chocolate preparation. But, he has not given nay reason or authentic basis for it. He held such view without any authoritative support. In HSN definition of chocolate no fixed percentage of Cocoa use has been prescribed to be called as Chocolate for tariff classification. Fourthly, the quantity of Cocoa found in the test report is quite substantial and in the language of the rest report, the sample "Contains high percent of Cocoa". This percentage of Cocoa cannot be said to have been used only for flavour specially in a situation where other ingredients for Chocolate preparation such as sugar, additives etc. have also been used in the Chocolate Cream preparation and the issue itself is whether with these ingredients, the preparation can be called Chocolate or not. Therefore, the Appellate Authority's view on this point is based on personal assumptions, which is not proper and legal.
4. The Appellate Authority also held that the mentioning of Chocolate cream on the respondents product, ipsofacto, does not get covered under the heading wafer containing Chocolate, in reference to judgment of Hon'ble Supreme Court in case of M/s. Plasmac Machine Manufacturing Co. Ltd. According to him, the said ratio of Apex Court would be applicable in the case the statue does not define the product. According to him further in the present case the statute has laid down the parameter of the classification of the product in the chapter subheading 1905.31 of the Schedule as applicable to Wafer "Coated with Chocolate or containing with Chocolate ".
However, it appears that the Appellate Authority in holding the above view got mixed with the factual position without any clear-cut direction in consistency. The facts are that the Chocolate Cream, as has been explained with H.S.N. provision and the test report, is nothing but Chocolate in nature. It is also a fact that the said Chocolate cream is contained in between layers of the Wafer which has not been denied by the respondents. Therefore the Wafer in question containing Chocolate becomes classifiable under Chapter Sub-Heading 1905.31 beyond doubt. This fact is supported by mentioning the term (Chocolate Cream on the trade packages). The mentioning of the Chocolate Cream on the trade packages is nothing but only demonstration of chocolate which is contained in the wafer. There is no contradiction regarding the presence of Chocolate in the Chocolate cream used in the wafer and the message which is conveyed by the description on the trade packages. It is not a case that content in the wafer is different and the term used on the Trade Package is different. Therefore, content of the cream used in the Wafer and the term used on the Trade Package convey the same meaning that there is a presence of Chocolate in the cream. The same conclusion has been drawn by the Apex Court in the case of CCE v. Fuse base Eltoto Ltd. [1993 (67) ELT 30(SC)]. In this case, the Hon'ble Court observed that the identity of an article is associated with its primary function and utility. The names of certain products have functional association in the mind of the consumers. There is a mental association in the mind of the consumer in respect of certain products keeping in view the utility of the product and also the reputation the name of the product had acquired in the market and among the consumers. In the subject case, the presence of Chocolate content in the Chocolate Cream is reflected on the trade packages just to convey the Respondent's intention in the trade and also how the buyer will know the product in the trade. Therefore, the trade parlance test of the Hon'ble Supreme Court is additionally available test ipsofacto in absence of factual position. Therefore, the ratio of Hon'ble Supreme Court judgment in case of Plasmac Machine Manufacturing Co. Ltd. [1991 (51) ELT 161 (SC)] to the effect of trade parlance test, is very much applicable in the subject case. Trade parlance argument for classification in the subject case is also applicable alternatively in the sense that the chocolate as such has not been defined in Chapter 19 of the tariff; chocolate has been defined under chapter 18 of HSN. Where the disputed product is being considered for the classification, the trade parlance becomes decisive factor for arriving at the conclusion."
3. Considering the material on record it is found that based on the classification of the Chocolate Cream placed between two sliced biscuits-wafers and the fact that the said Chocolate cream would be classifiable under heading 1803 do not enthuse us to classify the biscuits, in this case, on the ground as taken irrespective of the fact of percentage of Cocoa in the entity, the ground taken that the decision relied upon by the Commissioner (Appeals) in the appellant's own case vide order No. 802/86 dated 03/09/86 was as regards the classification in case of Bourbon Cream manufactured by the respondents in the year 1986, which was under the erstwhile tariff and was based on the applicability of ISI specification for use of chocolate and that decision cannot be applied to the facts of this case as ISI and the Prevention of Food Adulteration Act, would not rule the classification to be arrived under the tariff based on HSN cannot be accepted, as the classification of the "chocolate cream" which forms a layer between two slices of biscuits cannot determine the classification of the biscuits itself. There is no material to consider that the biscuit is a cocoa product merely because of its certain percentage of cocoa which do not even predominate, were found in such entity. The entities are understood and have to be classified, as such they cannot be called chocolate for the reason as given.
4. As regards the third ground taken by the appellant's of markings or their packages/wrappers to indicate them as chocolates that word chocolate advertised on them will not ipsofacto lead the entities be classified as chocolate following the well settled law that advertised cannot be a guide or determinant to classification, as held by the Bombay High Court (1980 (6) FLT 280 (Bom.).
5. In view of the above finding, we find no valid ground in revenue's appeal to upset the same classification of the biscuits wafer in this case. The appeal is consequently rejected.
(Pronounced in Court)