TaxTMI 
TaxTMI 
2020 (7) TMI 554
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....from time to time; they were also availing the benefit of Notifications No 3/2006 dated 1/3/2006 and 12/2012 dated 17/3/2012; classification 'Nestle Milky bar and Eclairs' under heading 1704.90 is not disputed by rival parties; the appellants claim that these products was also disclosed in the monthly ER-1 returns filed by the Appellants from time to time. 2. Revenue, is of the view that the appellants are not eligible to avail the concessional duty under the aforesaid Notifications' on Nestle Milky bar since the aforesaid products are 'White chocolates' which are specifically excluded from the description against Sl.No.15 /19 of the Tables annexed to the said Notifications; Revenue, vide letter dated 09.09.2008, sought the Appellants to furnish the details of ingredients used for the manufacture of Nestle White Chocolate and Nestle Milky Eclairs and to inform whether they availed Notifications No. 6/2002-CE, 3/2006-CE and 12/2012-CE. vide letter, OC No 414/2008, called upon appellants to furnish the details of the ingredients used for the manufacture of white chocolate and Nestle Milky bar Eclairs. Appellants vide their letter dated 22.11.2008 confirmed that....
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....impugned products are not 'chocolate'; in any case not white chocolate and hence exemption under notification no.6/02-ce (Sl.No.247) and no.3/06-CE Sl.No.16) cannot be denied; Sl.No.247 of Notification No.6/2002-CE as amended and Sl.No.16 of Notification No.3/06-CE prescribes concessional rate of excise duty for 'sugar confectionery (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 commerci....
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....hat reason, the products do not become chocolate and they continue to retain their character as biscuits or wafers. Clause A.25.03 of this Appendix B (PFA Rules) deals with specifications and standards for different types of chocolates; products in question in the present case certainly do not meet the standards and as such cannot be 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 ....
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....or counsel submits that reliance placed on the HSN Explanatory note to Heading No.1806 to come to the conclusion that vegetable oil can be used as ingredient in chocolate 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 ....
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....was a case of pure interpretation of the tariff entries vis-à-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, right from the day when the Appellants commenced manufacture of the products in question, the Appellants have filed the monthly ER-1 returns declaring the clearance of the various products by their description, classification an....
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....hould 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 (165) ELT 309 • S. Narendra Kumar & Co. Vs. CCE, Mumbai-II- 2003 (156) ELT 1001 15. Learned Senior Counsel made following submissions, pursuant to t....
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....ellant 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 findings as at paras 14 to 23.02, 24 to 29 and Paras 30 to 33 of the OIO No.8/2010 dated 7/12 -5-201....
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....aces 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 restrictions cont....
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....tion 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 determining the cla....
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....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 cocoa or chocolate (other than white chocolate) in any proportion and sweetened cocoa powder (heading 18.06). HSN Explanatory Notes to Heading 170490 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 sweetm....
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....ot 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 appellants on 25.03.2009, 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 23.03.2....
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....onfirmed 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, milk solids and soya lecithin contains added artificial flavoring substance. Exhibit at Page 179 is extracted as below: 26.1. The ingredients of Nestle Milky bar Eclairs before and after 01.01.2008 are as follows: Before 01.01.2008 after 01.01.2008 (a) Liquid Glucose (b) Sugar (c) Milk Solids (d) Partially Hydrogenated ....
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....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 Notifications 6/2002-CE, 3/2006-C.E. and 12/2012-CE. Therefore, we find that the facts of the present case are different from those dealt by the Coordinate B....