Custom, Excise & Service Tax Tribunal
Campco Chocolate Factory vs Commissioner Of Central Excise & ... on 29 March, 2022
Excise appeal No.21263 of 2018
Excise appeal No.20049 of 2020
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 21263 of 2018
[Arising out of Order-in-Original No. MLR-EXCUS-000-COM-MS-
01-18-19 dated 25/04/2018 passed by Commissioner of
Central Excise and Central Tax, Mangalore]
Campco Chocolate Factory
Kemminje
PUTTUR Appellant(s)
KARNATAKA
574202
VERSUS
C.E, S.T-Commissioner of Central
Excise & Central Tax, Mangalore
Commissionerate
7th Floor, Trade Center, Bunts Hostel Road Respondent(s)
Mangalore
Karnataka
575003
AND
Central Excise Appeal No. 20049 of 2020
[Arising out of Order-in-Appeal No. MLR-EXCUS-000-APP-MSC-
064-2019-20 dated 27/09/2019 passed by Commissioner of
Central Tax(Appeals), Belagavi]
Campco Chocolate Factory
Kemminje
PUTTUR Appellant(s)
KARNATAKA
574202
VERSUS
C.E, S.T-Commissioner of Central
Excise & Central Tax, Mangalore
Commissionerate
7th Floor, Trade Center, Bunts Hostel Road Respondent(s)
Mangalore
Karnataka
575003
Appearance:
Shri Ravi Raghavan and Ms. Neetu James, Advocates for the Appellant
Smt. D.S. Sangeetha, Addl. Commissioner(AR) for the Respondent
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Excise appeal No.21263 of 2018
Excise appeal No.20049 of 2020
CORAM:
HON'BLE MR. RAMESH NAIR, JUDICIAL MEMBER
HON'BLE MR. P. ANJANI KUMAR, TECHNICAL MEMBER
Final Order No: 20144-20145 / 2022
Date of Hearing: 22/03/2022
Date of Decision: 29/03/2022
Per : RAMESH NAIR
The issue involved in the present appeals is that whether the
product Nestle Milkybar Eclairs are white chocolate and therefore not
eligible for the concessional duty under sl.No.19 of the Notification
No.12/2012-CE dt. 17/03/2012.
2. Shri Ravi Raghavan, learned counsel appearing on behalf of the
appellant at the outset submits that the issue is no longer res integra as
the very identical issue in the appellant's own case for the earlier period
has been decided in their favour vide this Tribunal's Final Order No.20394-
20401/2020 dt. 14/07/2020 reported at Campco Chocolate Factory Vs.
CCE, Mangalore [2021(375) ELT 209 (Tri. Bang.)].
3. Smt. D.S. Sangeetha, learned Additional Commissioner(AR)
appearing on behalf of the Revenue reiterates the findings of the impugned
order. She further submits that against this Tribunal's order in the
appellant's case, as cited by the learned counsel, the Revenue has filed
appeal before the Hon'ble Supreme Court. On query from the Bench
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Excise appeal No.21263 of 2018
Excise appeal No.20049 of 2020
whether any stay has been granted, she fairly concedes that there is no
stay against the Tribunal's order.
4. We have carefully considered the submissions of both sides and
perused the records. We find that the issue whether the appellant's product
viz. Nestle Milkybar Eclairs is white chocolate or otherwise and consequently
eligible for exemption under Notification No.12/2012-CE dt. 17/03/2012
has been finally decided by this Tribunal in it's Final Order No.20394-
20401/2020 dt. 14/07/2020. The relevant order portion is reproduced
below:-
22. We find that both the Revenue as well as the appellant do
not dispute the classification of the impugned products under
CETH 1704. The only difference in the argument is based on
the presence or absence of ingredients like cocoa butter and
hydrogenated vegetable oils. We find that reference to the
Tariff Headings and Chapter/Section Notes and HSN
Explanatory Notes is required to have a better appreciation of
the issue.
Tariff Headings of Chapter 17 Sugars and Sugar Confectionery
1704 Sugar
Confectionery
(including white
chocolate), not
containing cocoa
1704 - Chewing Kg. 16%
10 00 gum,
whether or
not sugar
coated
1704 - Other : Kg. 16%
90
1704 - Jelly Kg. 16%
90 10 - confectionery
-
1704 - Boiled Kg. 16%
90 20 - sweets,
- whether or
not filled
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Excise appeal No.20049 of 2020
1704 - Toffees, Kg. 16%
90 30 - caramels and
- similar
sweets
1704 - Other Kg. 16%
90 90 -
-
22.1 HSN Explanatory Notes for Chapter 17 relevant for the current issue are as follows :
SECTION IV - PREPARED FOODSTUFFS; BEVERAGES, SPIRITS AND VINEGAR; TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES CHAPTER 17 SUGARS AND SUGARS CONFECTIONERY GENERAL
-----------
The Chapter does not include :
(a) Sugar Confectionery containing cocoa or chocolate (other than white chocolate) 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
1704.10 - 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 flavouring 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 4 Excise appeal No.21263 of 2018 Excise appeal No.20049 of 2020 does not include sugar confectionery containing cocoa or chocolate (other than white chocolate) in any proportion and sweetened cocoa powder (Heading 18.06). HSN Explanatory Notes to Heading 1704 90 other says that the 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. It includes inter alia white chocolate composed of sugar, cocoa butter, milk powder and flavouring agents but not containing more than mere traces of cocoa (cocoa butter is not regarded as cocoa). It is clear from the above that white chocolate can be classified under Chapter 17 and white chocolate composes sugar, cocoa butter, milk powder and flavouring agents, but not containing more than mere traces of cocoa.
23. Going by the above, it is evident that the entire case hinges on the fact whether or not cocoa butter is used in the manufacture of the impugned products and whether or not the use of HVO would affect the classification under Central Excise Tariff. We find that the appellants have pleaded that the concerned 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 v. CST (supra); and (ii) Asian Paints India Ltd. v. CCE (supra); the products in question are known, bought and sold and commercially recognized as Eclairs which is nothing but a boiled sugar confectionery; further, the process of manufacture of the product and the various statutory provisions under the PFA Act and the Rules also would show that the product is nothing but a boiled sugar confectionery only; the product in question does not have any of the characters which would be present and attributable to a chocolate and is not commercially known or bought and sold in the market or dealt with or understood as white chocolate by anybody; neither the wrappers nor the advertisements nor the invoices refer to the products as white chocolate but as "sugar boiled confectionery". As seen above, we note that HSN Explanatory 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 flavouring agents, but not containing more than mere traces of cocoa (cocoa butter is not regarded as cocoa)."5
Excise appeal No.21263 of 2018 Excise appeal No.20049 of 2020 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. 1-1-2008. Learned Commissioner refers to sample of packing material (polybag and jar labels) of Nestle Milky bar Eclairs a letter submitted by the appellants on 25-3- 2009, observes that the packing material shows that the ingredients are Liquid Glucose, Sugar, Milk Solids, Partially Hydrogenated Vegetable Oils, Cocoa Butter, Salt and Emulsifiers (soya Lecithin & 471). On going through the available case records, it is seen that the above letter of the appellants refers to a letter dated 23-3-2009 written by the Department wherein it was specifically asked to supply the wrappers/packing materials in respect of Milky bar Eclairs before January, 2008. In this context, we find that it is not correct on the part of the Adjudicating Authority to rely upon the said wrappers pertaining to the period before January, 2008 to conclude that the impugned goods contained cocoa butter during the period in dispute. The appellants submitted before the Adjudicating Authority an affidavit dated 30-3-2010 sworn by Sh. Suresh Bhandari, Deputy General Manager of the appellants. The affidavit clearly states that the averment in the SCN that the wrapper furnished vide letter dated 25-3-2009 is the wrapper of Nestle Milky bar Eclairs for the period after 1st January, 2008 is factually incorrect and contrary to the facts on record; they have stopped using cocoa butter as an ingredient in the impugned product.
25. Learned Commissioner, while depending on wrappers for the period before 1-1-2008, observes that perusal of the correspondence between the Department and the appellants lead to the conclusion that the appellants have taken lot of time and after much deliberations proffered the details required by the Department and after much consideration submitted the affidavit. Learned Commissioner does not, however, give any specific evidence to show that the impugned products contain cocoa butter and therefore are not eligible for the exemption contained in the Notification cited above. It is not also the case of the Department that an enquiry has been conducted by way of drawl of samples from factory or market resulting in recovery of literature which showed that the impugned products contained cocoa butter. We also find that the Department has 6 Excise appeal No.21263 of 2018 Excise appeal No.20049 of 2020 not got any test or chemical analysis to confirm the presence of cocoa butter in the impugned products, which alone would have been helpful in establishing the facts about the ingredients. The same not having been done, it is not open for the Adjudicating Authority to decide the case on the basis of the writings on the wrappers/packing material which are claimed and reasonably established to belong to the period before 1-1-2008. 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 1-1- 2008 are sugar, partially hydrogenated vegetable oils, milk solids and soya lecithin contains added artificial flavouring substance. Exhibit at Page 179 is extracted as below :
7Excise appeal No.21263 of 2018 Excise appeal No.20049 of 2020 26.1 The ingredients of Nestle Milky bar Eclairs before and after 1-1-2008 are as follows :
Before 1-1- After 1-1-2008
2008
(a) Liquid (a) Liquid
Glucose Glucose
(b) Sugar (b) Sugar
(c) Milk Solids (c) Milk Solids
(d) Partially (d)
Hydrogenated Hydrogenate
Vegetable Oils d Vegetable oils
(e) Cocoa (e) Salt
Butter (f) Emulsifiers
(f) Salt (Soya Lecithin &
(g) Emulsifiers 471)
(Soya Lecithin &
471)
The extracts at pages 181 & 183 are as follows :8
Excise appeal No.21263 of 2018 Excise appeal No.20049 of 2020
27. We find that Revenue has relied upon the case of Nestle decided in 2008 (supra). Learned Senior Counsel for the appellants submits that it has been brought to the notice of the Adjudicating Authority that the following points distinguish the issue decided by Co-ordinate Bench in the above matter stating that Tribunal entirely relied upon HSN Explanatory Notes to Heading No. 1806 to come to the conclusion that vegetable oil can be used as an ingredient in the Milky bar choo falling under [Heading] 1704. HSN Notes under CETH 1806 are not relevant as there is no dispute that the impugned products are classifiable under [Heading] 1704; Tribunal ignored Prevention of Food Adulteration Rules, 1955; as per Rule 5 (Item No. A 25.03) chocolates shall not contain any vegetable fat other than cocoa butter; CESTAT has overlooked the precedence of its own judgment in another case of Nestle, 2000 (124) E.L.T. 898 which was affirmed by Hon'ble Supreme Court 2005 (184) E.L.T. A164 wherein Tribunal relied upon PFA Rules to hold that the preparation containing vegetable fat/oil cannot be treated as chocolate. On going through the judgment of the Co-ordinate 9 Excise appeal No.21263 of 2018 Excise appeal No.20049 of 2020 Bench, we find that the brief point for consideration before the Bench was whether the prohibition provided under PFA Rules would in itself debar a particular item to be classified under a particular Heading or sub-heading of Central Excise Tariff. The Bench has correctly concluded that classification needs to be arrived on the basis of respective headings in the Tariff, Section/Chapter Notes and HSN Explanatory Notes. The Bench observes 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 purview of White Chocolate and we have given detailed reasons and justifications for holding so".
28. We find that the instant case, the issue which remains to be decided is as to whether the impugned products contained cocoa butter so as to be categorised as White Chocolate under CETH 1704 and thus rendering them ineligible for exemption contained in the Notification Nos. 6/2002-C.E., 3/2006-C.E. and 12/2012-C.E. Therefore, we find that the facts of the present case are different from those dealt by the Co-ordinate Bench in the case of Nestle Products decided in 2008 (supra) and therefore, we find that the ratio of the decision has no precedent value as far as this case is concerned. Moreover, we find that Tribunal, Allahabad in the case of Marko Foods v. CCE, Kanpur reported in 2019 (370) E.L.T. 603 (Tri. - All.) 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-C.E., 3/2006-C.E. and 12/2012-C.E. In view of the discussion above, we find that the Department has not conclusively established that the appellant's claim that the impugned products did not 10 Excise appeal No.21263 of 2018 Excise appeal No.20049 of 2020 contain cocoa butter during the impugned period with any indisputable proof or test report. Therefore, we find that the impugned goods i.e. Nestle Milky bar and Nestle Milky bar Eclairs are not excluded for the purpose of exemption contained in the notifications cited above.
29. In view of the above, all the appeals are allowed with consequential relief, if any, as per law.
5. From the above judgment, it can be seen that identical issue has been decided by this Tribunal whereby it was held that the appellant's product viz. Nestle Milkybar Eclairs is not a white chocolate and accordingly eligible for exemption Notification No.12/2012-CE. Therefore, the issue is no longer res integra. We, respectfully following the above Tribunal's order, set aside the impugned orders and allow the appeals with consequential relief, if any, in accordance with law.
(Order pronounced in open court on 29/03/2022) (RAMESH NAIR) JUDICIAL MEMBER (P. ANJANI KUMAR) TECHNICAL MEMBER Raja...
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