2025 (10) TMI 608 - AT - Central Excise

Appellant's chocolate confectionery classifiable under Tariff item 17049020 of Central Excise Tariff Act, 1985; classification settled

M/s. Campco Chocolate Factory Versus Commissioner of Central Tax Mysuru Commissionerate

CESTAT Bangalore (AT) held that the appellant's chocolate confectionery is classifiable under Tariff item 17049020 of the Central Excise Tariff Act, 1985, ... Classification of the Nestle Milky bar Eclairs manufactured by the appellant - classifiable under Tariff item 17049020 or under Tariff item 17049090 of Central Excise Tariff Act, 1985? - HELD THAT:- The issue is squarely covered by the Final Order of this Tribunal in CAMPCO CHOCOLATE FACTORY VERSUS COMMISSIONER OF CENTRAL EXCISE [2020 (7) TMI 554 - CESTAT BANGALORE] where it was held that 'Both the Revenue as well as the appellant do not dispute the classification of the impugned products under CETH 1704'. Accordingly, the classification of impugned goods, ‘Nestle Milkybar Eclairs’, is no more res integra and is classifiable under Tariff item entry 17049020 of Central Excise Tariff Act, 1985. Appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the product 'Milkybar Eclairs' manufactured and cleared by the appellant is classifiable under Tariff Item 1704 90 20 (boiled sweets, whether or not filled) or under Tariff Item 1704 90 90 (other sugar confectionery including white chocolate) of the Central Excise Tariff Act, 1985. 2. Whether the question of classification in this appeal is res integra or settled by earlier Final Order(s) of the Tribunal in the appellant's own case. 3. Whether there is any revenue implication arising from classification between the two Tariff Items for the period in dispute (i.e., whether differential duty would arise). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Correct classification (1704 90 20 v. 1704 90 90) Legal framework: Classification is determined with reference to the Central Excise Tariff Act, 1985 entries for Chapter 17 and applicable Tariff Item descriptions (1704 90 20 v. 1704 90 90). The characterisation turns on the nature/contents of the product, specifically whether the product contains cocoa butter sufficient to constitute 'white chocolate' excluded from certain notifications. Precedent Treatment: The Tribunal relied on its own Final Order in the appellant's prior matter which examined whether the impugned products contained cocoa butter and concluded they fall under 1704 90 20. The Tribunal also noted other Tribunal decisions addressing similar products (including a decision treating analogous sweets/toffees as boiled sweets with no cocoa butter and therefore not white chocolate) and distinguished earlier Coordinate Bench authority where facts differed. Interpretation and reasoning: The Tribunal observed that classification hinges on whether the impugned goods contain cocoa butter so as to be characterised as white chocolate. The record includes the appellant's change of classification supported by ingredient lists and test reports; however, decisive proof of cocoa butter was required to sustain a classification as white chocolate. The Tribunal found the facts of the present matter to be squarely covered by the Tribunal's own earlier Final Order holding that the said products are not shown conclusively to contain cocoa butter and are therefore classifiable as boiled sweets under Tariff Item 1704 90 20. The Tribunal treated decisions finding similar goods lacking cocoa butter as supportive and distinguished contrary precedent where material facts differed on composition. Ratio vs. Obiter: The binding ratio is that where the product's composition does not establish the presence of cocoa butter rendering it 'white chocolate,' it must be classified under Tariff Item 1704 90 20 as boiled sweets. Observations regarding the insufficiency of the Department's proof (absence of indisputable test reports showing cocoa butter) function as operative reasoning and part of the ratio; comparative citations to other decisions serve as supportive obiter and precedent treatment. Conclusion: The Tribunal concluded that the impugned product is classifiable under Tariff Item 1704 90 20 (boiled sweets), not under Tariff Item 1704 90 90 (white chocolate). Issue 2 - Res judicata / res integra and application of prior Final Order Legal framework: Principles permitting reliance on earlier final decisions of the same Tribunal when facts and legal questions are the same or substantially similar; the doctrine disfavoring re-opening issues which are no longer res integra within the same factual matrix. Precedent Treatment: The Tribunal applied its own earlier Final Order in the appellant's case (Final Order Nos. 20394-20401/2020 dated 14.07.2020), which had determined classification of the same product(s) for relevant periods and had held the goods were not white chocolate when cocoa butter was not conclusively established. Interpretation and reasoning: The Tribunal held the present issue to be 'squarely covered' by the earlier Final Order and thus no longer res integra. The Revenue's Authorized Representative conceded coverage by that decision. Given identity of the legal question and similarity of factual matrix concerning composition and proof of cocoa butter, the Tribunal found it appropriate to follow the earlier Final Order. Ratio vs. Obiter: The guiding ratio is that where an earlier final Tribunal order has determined the classification on substantially identical facts, the issue ceases to be res integra and the later bench will apply the earlier decision; this was applied as binding in the present appeal. Remarks about factual distinctions in other cases are obiter to the extent they explain divergence from other authorities. Conclusion: The Tribunal held the classification issue was settled by the Tribunal's prior Final Order and therefore applied that decision to classify the impugned goods under 1704 90 20. Issue 3 - Revenue implication and penalty Legal framework: Relevance of revenue implication in classification appeals and the imposition/setting aside of penalties under Rule 27 of the Central Excise Rules, 2004 where incorrect classification is alleged but no duty differential arises. Precedent Treatment: The adjudicating authority had imposed a penalty under Rule 27 for adopting a different classification; Commissioner (Appeals) confirmed classification but set aside the penalty. The Tribunal noted submissions that the rate of duty applicable to both tariff items was similar for the period in dispute, hence no revenue impact. Interpretation and reasoning: Counsel for the appellant and the Tribunal observed that no differential duty resulted from classification between the two Tariff Items for the period in question, reducing the significance of revenue prejudice. The Commissioner (Appeals) had already set aside the penalty; the Tribunal did not reinstate any penalty and allowed the appeal with consequential relief. Ratio vs. Obiter: The operative finding is that where no revenue implication arises from alternate classifications for the period, a penalty for adopting the alternate classification lacks justification; the Tribunal's disposition followed the Commissioner (Appeals) in setting aside penalty implications and is operative for the present appeal. Conclusion: There was no revenue implication arising from the classification at issue for the period under dispute; the penalty previously imposed was not sustained by the Tribunal, and the appeal was allowed with consequential relief as per law. Operative Disposition The Tribunal applied its prior Final Order and concluded that the impugned goods are classifiable under Tariff Item 1704 90 20; accordingly the appeal is allowed with consequential relief, if any, consistent with the foregoing reasoning.