TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 1580
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....ee and not as "sugar confectionery not containing cocoa" as claimed by the appellant, by holding that it is rightly classifiable under the heading 1704 and not under 2101 1200 and dropped the entire demand. The Department felt that impugned order passed by the Adjudicating Authority is not legal and proper and needs to be set aside on various grounds as indicated in their memorandum of appeal and accordingly filed an appeal for setting aside of the impugned order. 2. In this appeal, a memorandum of cross objections i.e. E/CROSS/30643/2016 has also been filed by the Respondent rebutting the claim of the Department that their product would be classifiable under Heading 2101 1200 and not as claimed by Respondent and allowed by the Adjudicating Authority in the impugned order under heading 1704 9090. By way of preliminary objection, Learned AR points out that there is no ground or basis for the Respondent to file any Cross Objections as contemplated under Section 129A(4) of Customs Act or in terms of Section 35B(4) of Central Excise Act. He submits that since the entire demand has been decided in favour of the Respondent by the Adjudicating Authority, therefore they have no reasons ....
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....earch and Development, which supported the fact that the product in question is essentially a preparation based on extract of coffee and the essential character of the said product comes from the extract of coffee and merely because proportion of sugar, glucose and other materials are higher, it would not affect the determination of the classification, as held in various case laws including Union of India Vs Vicco Laboratories [2007 (218) ELT 647 (SC)], Dhariwal Industries Ltd., Vs CCE, Pune-III [2014 (304) ELT 585 (Tri-Mumbai)] and Rana Enterprises Vs CC, Mumbai [2011 (267) ELT 546 (Tri-Mum)]. He emphasises that it is not the quantum but the constituent which gives the essential characteristic to the product, that would be determinative of its classification. They have also explained the scheme of classification of goods under the first schedule of Central Excise Tariff Act (Tariff) and General Rules for implementation of the Schedule (hereinafter referred to as Rule). As per the said Rules, the classification of goods would depend on factual matrix and by relying on Rule 3(a), the product in question is more specifically described in Chapter Heading 2101 1200 rather than in Chapt....
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....r countries are being classified under 1704 9090 only by respective Customs. He has submitted various documents, invoices etc., issued by PT. Mayora Indah Tbk, Indonesia, which is their Parent Company, manufacturing similar product. 8. As regards various grounds taken by the Department in support of that the Commissioner has not appreciated the correct law points as well as facts while adjudicating the demand, Learned Advocate has relied on various judgments in support that a mere addition of flavouring agent does not change the essential characteristic and identity of the product viz: i) Sampre Nutritions Ltd., Vs CCE [2004 (169) ELT 42 (Tri-Bang)] ii) Satnam Overseas Ltd., Vs CCE, New Delhi [2015 (318) ELT 538 (SC)] iii) Hindustan Unilever Ltd., Vs CBEC [2012 (283) ELT 26 (Cal)] Further, on his argument that the classification is required to be determined on commercial understanding/primary function and not on marketability; he relies on following case laws: i) Blue Star Ltd., Vs UOI [1980 (6) ELT 280 (Bom)] ii) Hindustan Lever Ltd., Vs CCE, Mumbai [2000 (121) ELT 451 (Tri)] iii) Atul Glass Industries (P) Ltd., Vs CCE [1....
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....getting manufactured in India. 9. Learned Advocate also submits that, in any case, in respect of same product, arising out of same investigation, the Hon'ble CESTAT, Ahmedabad Bench has now decided the issue in their favour by way of Final Order No. 11775/2024 dated 13.08.2024, wherein, after evaluating same set of evidence and arguments, they held that their product is rightly classifiable and more specifically covered under entry no. 1704 9090 and not under 2101 1200. As a counter, the Learned AR points out that said order of the Tribunal has been accepted by the Department on account of low revenue involvement in view of extant guidelines/circulars issued by the Board and hence cannot have a precedence value. He also submits that if this Bench is not agreeing with the views of Ahmedabad Bench in their own case, matter needs to be referred to Larger Bench for proper determination. 10. Heard both the sides and perused the records. 11. The core issue, which is to be decided in this appeal is whether the product "Kopiko - Cappuccino and Kopiko - Espresso" are classifiable under Chapter Heading 1704 9090 as claimed by Respondent or under Heading 2101 1200 as claimed by D....
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.... sugar confectionery (including white chacolate not containing cocoa), whereas, Tariff Heading 21011200 covers preparation "with the basis of extracts, essence or concentrate with a basis of coffee". b) The expression "basis" refers to Chief constituent or fundamental ingredient and not the major ingredient c) Commissioner has wrongly relied on presence of meagre quantity of flavour/essence or extract as a ground for denying that it cannot be the basis for preparation containing coffee extract or coffee. He has not onsidered that this coffee extract is the one, which is imparting the essential characteristic to the impugned product and no effort has been made by the Adjudicating Authority to examine whether the said meagre percentage of coffee extract is the active ingredient or giving essential characteristic to the product or otherwise. The Department has relied on various statements given by relevant personnel of M/s Inbisco in support that "flavouring agent Kopiko" imported by Inbisco, contained two basic components viz Coffee Flavour, which is an artificial flavouring agent and Coffee Extracts, which is a natural ingredient which gives the kopiko products it&....
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....e refined sugar, liquid glucose, BD palm Kernel Oil, Lecithin, salt, unsalted butter, ethyl vanillin, skim milk powder, flavour milk, caramel colour, flavoured coffee etc. Admittedly, the Respondents are using "flavoured KPK-1D 001" imported from their Parent Company, Mayora Indah TBK, Indonesia and classified under heading 2101 1190. It is also an admitted position that this coffee flavour is comprising about 1.62%/3.23% (Cappuccino and Espresso varieties respectively) in terms of quantity used in manufacture of Kopiko whereas the major quantity of about 74.5% is that of refined sugar and liquid glucose. It is also an admitted position that apart from sugar and glucose, various other materials like BD palm kernel oil, Lecithin, salt, unsalted butter, skim milk powder, flavour milk etc., in different proportion are being used in manufacturing the impugned goods and together constitute about 11.81%. It is also an admitted position that the "flavour KPK-ID 001", their flavouring agent contains approximately 30% natural coffee extract. Therefore, overall, the final product will have approximately 2.5% and 4.5% (Cappuccino and Espresso respectively) of the natural coffee extract. There....
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....nyone who is taking these products. Unlike artificial flavour, which is also present in these goods, the presence of caffeine in the natural coffee extract cannot be ignored even though the percentage might not be as high as what is normally found in a normal cup of coffee. It is also an admitted fact that it has been developed and marketted as coffee candies and infact admitted by the concerned personnel that these coffee flavours including the natural coffee extract gives the characteristic coffee taste and aroma to any food item where it is added. Therefore, the Adjudicating Authority by simply going with the weight of the composite coffee flavour containing both artificial and natural coffee extract in the overall composition of the impugned products has erred by not understanding the unique aspect of natural coffee extract/caffeine used in an edible preparation with definite purpose. The product "Kopiko" made by their parent company is known worldwide for coffee flavoured products and it is not because of any artificial flavour but due to the use of natural coffee extracts in making these products. In fact, if all other components / ingredients are analysed, it would be obviou....
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....of 2.5% to 4.5% in a food preparation is meagre quantity and cannot become the basis for a food preparation is not correct. Moreover, taking into account, holistically, the composition of the coffee extract, intended use, marketing practices including Unique Selling proposition i.e. coffee candy etc., would lead to an obvious conclusion that natural coffee extract is the basis for the said food preparations. 17. Further, while the goods, as rightly observed by the Adjudicating Authority, is not explicitely excluded from the purview of heading 1704, however, for the reasons cited, supra, it can also not be completely ruled out from classification under Heading 2101. 18. It is an admitted fact that the impugned products are essentially a composite good consisting of different materials. Applying the general rule of interpretation, we find that as per Rule 2(b), the classification of goods consisting of more than one material or substance has to be in accordance with principles of Rule 3. Therefore, we find that since Rule 2(b), per se, cannot decide the classification, recourse will have to be taken to Rule 3. As per Rule 3(a), the heading which provides the most specific descr....
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....erials or substance contained in a composite good, then those headings are to be regarded as equally specific in relation to those goods. By ignoring this, he has classified it under Heading 1704. Further, as discussed, supra, this being a composite product, the essential characteristic of ingredients needs to be determined. While the Adjudicating Authority has held that a mere presence of 2.5 or 4.5% of flavouring agent cannot be treated as essential ingredient, giving distinct identity and therefore merely adding a flavouring agent cannot alter its classification, he has not appreciated the fact that it is neither meagre nor it's presence is non-essential. Further, his reliance on the judgment in the case of Sampre Nutritions Ltd., Vs CCE, Hyderabad [2004 (169) ELT 42 (Tri-Bag)], where the issue was to classify the product 'Vicks Vitamin C Orange/Mango Tablets' containing only 0.0189% of Vitamin C / 97% Sugar as pro-vitamins and vitamins falling under heading 2936, the Tribunal held that the product is 'sugar boiled confectionery' and also in the case of Collector of C. Ex. Vs Warner Hindustan Ltd., [1989 (42) ELT 33 (Tri)] where it was held that ice mint tabl....
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.... Ltd., [2012 (286) ELT 321 (SC)], Hon'ble Supreme Court went to the extent of observing that the provisions under Prevention of Food Adulteration Act are not the standard for interpreting goods mentioned in Tariff Act, as the purpose and object are different. Similar views were also taken by the Hon'ble High Court of Bombay in the case of Karia Dist. Co.Op. Milk Producers Union Ltd., Vs Union of India [1989 (41) ELT 186 (Bom)]. Therefore, it is no longer res-integra that the determination and decision under one statute cannot become the basis for decision under another statute having different provisions and purpose. Therefore, merely because they have been classifying under 1704 in respect of same product elsewhere in the world as also when they had imported into India, it cannot become binding for the classification under the Central Excise Tariff Act (CETA) and at most, it may have same persuasive value. It is also relevant to note that Kopiko is a popular Indonesia coffee brand known for high quality Instant Coffee Mixture, coffee flavour, coffee candy etc. This aspect cannot be totally overlooked in mechanical manner while deciding the scope of entry under heading 2101....
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....products and the classification is required to be decided in terms of General Rules of interpretation to the tariff. Similarly, reliance placed on Atul Glass Industries (P) Ltd., supra is also not relevant as it involved classification under erstwhile tariff item. In the case of Bharat Electricals, where the interpretation of Rule 2(a) of Customs Tariff Act was invoked to decide proper classification under Customs Tariff. Hence not relevant to the factual matrix of this case. Similarly, in the case of Collector of C. Ex, Chandigarh Vs Sukhjit Starch & Chemicals Ltd., supra, classification was under Chapter 17 and both the contrasting headings were within the same Chapter, whereas, in the present case, contrasting headings are falling under Chapter 17 and 21, subjected to different Chapter note and section notes. The reliance placed upon by the Respondent on the judgment of the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs Jocil Ltd., supra, is relevant in as much as Rule 3(b) cannot be applied directly and only when it is not possible to classify under Rule 3(a) then only Rule 3(b) is to be applied. In the present case, provisions of each of these rules....
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....te Bench at Ahmedabad vide Final Order No. 11775/2024 dated 13.08.2024. While, Learned AR has opposed the submission of the Advocate that the matter is no longer res-integra as the Co-ordinate Bench has already decided the issue of classification in their favour, on the grounds that the said order has been accepted by the Revenue on low monetary value and therefore it is not having any precedence value. We have, however, perused the order of the Co-ordinate Bench and we find that the Tribunal has primarily gone by the principle that "since the product contain more than 74% sugar and glucose, whereas flavour coffee was used only to the extent of 1.57% for giving flavour and which did not contribute to the essential character of main product and hence it would not be classifiable under 2101 1200. According to the Tribunal, it is a product made of sugar and glucose and therefore going by the interpretative Rule 1 the classification shall be determined according to the terms of heading. The Tribunal held that on reading both the headings, the sugar boiled confectionery is more specifically covered under 1704 9090 as compared to 2101 1200. Tribunal also took into account that same produ....