TaxTMI 
TaxTMI 
2026 (1) TMI 777
X X X X Extracts X X X X
X X X X Extracts X X X X
....products are rightly classifiable under Heading 1704 9090 or under Heading 2101 1200 or otherwise. ii) Whether in the facts of the case, Rule 2 and Rule 3(a) are applicable or Rule 3(b) or Rule 3(c) are applicable for determining the correct classification or otherwise." 2. The factual matrix of the case is that INBISCO India [Assessee/Respondent] is engaged in the manufacture and distribution of food products like candy, biscuit and chocolate in India and also goods, namely, hard-boiled sugar and glucose confectionery sold under the brand name of 'Kopiko', Cappuccino and Espresso varieties, Juicy Milk, Mango and Strawberry, Tamarind, Chocolate confectionery sold under the brand name of Choki- Choki and noodles under the brand name of Joy-mee noodles. The product in question, namely, 'Kopiko' a hard boiled sugar and glucose confectionary is being manufactured by them since September 2012 with the following ingredients and formula: - SNO. Ingredient Quantity (kg) Percentage (%) Function 1 Refined Sugar 165.28 33.06 Sweetener 2 Liquid glucose 207.08 41.41 Sweetener 3 BD Palm Kernel Oil 59.043 11.81 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....extensive arguments in support of the appeal and Shri Sanjeev Nair, Advocate and Shri Rishin Gala, Chartered Accountant for the respondent have duly responded and contested the appeal. Submissions of the Revenue 6. The primary contention of the Revenue is that the product in question is essentially preparation based on extract of coffee and 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 decisions. The learned Authorised Representative emphasised that it is not the quantum, but the constituent which gives essential characteristic to the product and is a decisive factor for classification. Referring to the General Rules for Interpretation [GRI], especially Rule 3(a), he submitted that the classification of goods would depend, where the product in question is more specifically described in the chapter heading and since the product in question is more specifically described in CH 2101 1200, the same is classifiable therein. Also, it is required to be classified as if it contains the material ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Referring to the General Rules of Interpretation, the submission was that their products are more specifically described in Chapter 17 as Chapter 21 is general and therefore, as per Rule 1 there is no need for classification in terms of Rule 2(b) or under Rule 3(a) or 3(b). According to the assessee, the essential character comes from sugar and not from coffee extract and, therefore, the product falls under Chapter Heading 1704 9090. Impugned Order of the Commissioner 9. The impugned order, which has been passed prior to the decision of the Ahmedabad Bench has also ruled in favour of the respondent on the same analogy. The learned Commissioner has very meticulously examined the issue of classification. Considering the tariff entries of Chapter 17 and 21, it was noticed that the item manufactured by the assessee is for immediate consumption and no further processing is required, which is one of the characteristics of items falling under 1704 as per HSN. On the other hand, the tariff item 2101 1200 covers preparations with basis of extracts/essences/concentrates, or with the basis of coffee and therefore, to classify the goods under this item, the goods ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on coffee or its extract. Accordingly, I find that the impugned goods cannot qualify to be classified as 'preparations with basis of extracts, essences, concentrates or with a basis of coffee' under Tariff Item 2101 1200." 11. On that basis, the learned Commissioner concluded that the final product having only 2.5% or 4.5% of active agent cannot be treated as essential ingredient giving distinct identity to the product and, therefore, the product is essentially a sugar confectionary, which is a distinct product on its own and adding flavouring agent cannot alter its classification to a preparation with the basis of extracts, essences, or with the basis of coffee to fall under Tariff Item No. 2101 1200, as such meagre content cannot make the product manufactured with the basis of coffee or extracts of coffee. 12. The show cause notice proposing to classify the impugned goods under Chapter 2101 1200 based on Rule 3(a) of GRI which prescribed that while classifying goods, 'more specific description' shall be preferred to a 'more general description', was held to be legally not tenable on the principle that recourse to Rule 2,3 and 4 is taken in seriatim only when Ru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplying the principles of the said Rule 3(a) ibid, I find that the impugned goods fall under more specific description under heading 1704 "Sugar confectionery not containing Cocoa" rather than more generally described heading 2101. Further, recourse to Rule 3(c) of GRI can be made only when classification cannot be determined by involving Rule 3(a) and 3(b) as these sub-rules operate in the order in which they are set out in the Rule. The notice itself invokes 3(a) of GRI and in the same breath also invokes Rule 3(c) of GRI which is impermissible." 13. Before considering the issues referred, we may examine the decision rendered by the Ahmedabad Bench where the Bench considered the ingredients of the product Kopiko consisting of more than 74% sugar and glucose and extracts of coffee was used only to the extent of 1.57% for giving flavour. On that basis, it was concluded that the product 'Kopiko' cannot be classified under CH 2101 1200 and is correctly classifiable under CH 1704 9090 as it is not preparations with basis of coffee rather the basis of the product is sugar and glucose and therefore, undisputedly, the product is sugar confectionary, not containing Coco. The Bench then....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; India Limited- 1994 (71) ELT 850 affirmed by the Supreme Court- 1995 (76) ELT 233(SC) and subsequently again in Nestle India Ltd.- 2004 (169) ELT 22. However, the ratio laid down in these decisions is not applicable in the present controversy as the product in that case was Nescafe 3-in-1 and Nescafe Pre- mix as the commercial identity of the goods was held to be coffee and other items like milk, sucrose, partly skimmed milk powder, soluble Maltodextrin were subsidiary. It was noticed that the product is modified coffee, inclusive of coffee and chicory. Even the process of manufacture resulted in commercially known as "instant coffee chicory blend". Further, the products were used for preparing coffee whereas in the present case, the product is not subject to any process but is readily available in the market for use as sweet candy. Moreover, in the case of Nestlé India, the issue related to classification under the specific entry or under a residuary heading. Similarly, the decision of the Tribunal in Asia Tea Enterprises Versus Commissioner of Cus. & C.EX., Coimbatore- 2009 (234) ELT 641 (Tri.-Chennai) is also not relevant for the present controversy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the product. However, we are of the view that the said decision is of no assistance to the Revenue as in the case of medicinal preparations, the concept of quantum would be very different as even a minimal amount can have therapeutic value which would lead to its classification under medicaments. It is so held in the case of Puma Ayurvedic Herbal (P) Limited versus CCE, Nagpur- 2006 (196) ELT 3 (SC) and the relevant para reads as under: " 21. The extent or the quantity of medicament used in a particular product will also not be a relevant factor. Normally, the extent of use of medicinal ingredients is very low because a larger use may be harmful for the human body. The medical ingredients are mixed with what is in the trade parlance called fillers, or vehicles in order to make the medicament useful. To illustrate an example of Vicks Vaporub is given in which 98% is said to be paraffine wax, while the medicinal part i.e. Menthol is only 2%. Vicks Vaporub has been held to be medicament by this Court in CCE v. Richardson Hindustan Ltd. - 1989 (42) E.L.T. A100. Therefore, the fact that use of medicinal element in a product was minimal does not detract from it being classif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not the case here. Therefore, we agree with the view taken by the Ahmedabad Bench that CH 1704 offers the more specific heading in comparison to heading 2101. 20. In further considering the argument of the Revenue that classification has to be under CH 2101 1200 as a preparation with a basis of coffee extract, essences, or concentrates, or with a basis of coffee, the emphasis would be on the term 'basis'. The simple and plain meaning of the term 'basis' would be the principle or reason which lies behind something. In other words, the principal component of something. Here the principal component is sugar as the product is known as a candy which implies confectionery. Moreover, if coffee is removed from the product, it will still be known as a candy, but if sugar is removed, the product will no longer be so as the contents of sugar is 74% whereas coffee extract is merely 2.5%/4.5%. We would like to take note of the distinction pointed out by the Commissioner between "preparations containing coffee "and" preparations on basis of extracts/essences/concentrates or basis of coffee as under:- "18.5. I find that the use of the word 'basis' in the entries of chapter 21 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugar at 97%, whereas vitamin C is only 0.0189 and such enrichment would not alter the identity, character, and use of the product. Consequently, the product was classifiable as sugar confectionary under Heading 17.04. The observations and the conclusion arrived at in the said decision is equally applicable in the facts of the present case where the contents of sugar and glucose is 74% and the contents of coffee extracts is merely 2.5%/4.5% and the wrapper describes it as "Hygienic Deposited Sugar Boiled Confectionary". 22. The Revenue as well as the assessee has relied on the provisions of General Rules of Interpretation. To classify the impugned goods under Chapter 2101 1200, the Revenue has relied on Rule 3(a) of GRI, according to which, for classifying goods, 'more specific description' shall be preferred to a 'more general description'. Secondly, reliance was placed on Rule 3(c) where the goods can be classified under the heading, which occurs last in numerical order among those which equally merit classification and since item 2101 occurs last, the same would be applicable. The basic principle in applying the rules of interpretation is that the classification has to be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a different product as its primary and essential character remained the same as it continued to be known in the market and sold as rice only. Applying the same analogy, mere addition of coffee extract as a flavouring agent would not really alter its basic characteristic of being a candy and, therefore, the essential character would remain as sugar confectionary. 24. In the case of Plethico Pharmaceuticals Ltd., where the allegations of the Revenue was that the product, namely, Actifresh, "Plethico Mint, Plethico Byte" etc. were not medicines, but sugar confectionary classifiable under sub-heading 1704.90 as products largely made up of sucrose and liquid glucose with presence of small quantity of active ingredients, the Bench observed that each tablet of Actifresh consists of 1495 mg. of sucrose and 990.30 mg. of liquid glucose and active ingredient is 4.8 mg of Pudina aark and 3.90 mg of Nilgiri oil, which is nothing but eucalyptus oil and therefore, the same was classifiable as sugar confectionary under 1704 and for the same reason, Plethico mint tablet, which, in addition to the sugar/glucose base contains 0.15 mg of Pudina ark was also held to be classifiable as sugar c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ited versus Commissioner of Customs, Mumbai- 2000 (124) ELT 790 (Tri.). The observations of the Tribunal are as under: "We are not able to see why a classification under the Central Excise Tariff would not apply to imported goods. Where the relevant entries are identically worded both in the Central Excise Tariff and the Customs Tariff and are based on Harmonised System of Nomenclature formulated by the Customs Co-operation Council (now the World Customs Organisation) and the words in both are identical. In fact, the decision in C.C.E. v. Kinjal Electrical Pvt. Ltd. has applied the ratio of the decision in Chetna Polycoats Pvt. Ltd. v. C.C.E. to insulating tape is long rolls." 27. To examine whether the two entries under the Customs and Excise Tariff are identical, the same are reproduced below:- CENTRAL EXCISE TARIFF Tariff Item Descriptions of goods 1704 Sugar Confectionery(including white chocolate), not containing cocoa 1704 10 00 Chewing gum, whether or not sugar coated 1704 90 Other: 1704 90 10 Jelly confectionery 1704 90 20 Boiled sweets, whether or not filled 1704 90 30 Toffees, Caramels and similar sweets 1704 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onery or pan goods confectionery or toffee or milk toffee or modified toffee or lacto-bon-bon or by any other name shall mean a processed composite food article made from sugar with or without doctoring agents such as cream of tartar by process of boiling whether panned or not. It may contain centre filling. or otherwise, which may be in the form of liquid, semi-solid or solids with or without coating of sugar or chocolate or both. It may also contain any of the following:- (i)-(viii)------------------- (ix) tea extract, coffee extract, chocolate, cocoa;" The product being a food item has necessarily to be in conformity with the provisions of FSSAI and FSSR, whose primary objective is to regulate and monitor the manufacture, processing, distribution, sale, and import of food and to ensure that regulations have been framed governing the various food products with addition of even small doses of extracts, so as to enrich food products. Under FSSR, the candy manufactured is classified under Rule 2.7.1 as a sugar boiled confectionery and, therefore, the same is a relevant factor in determining the classification of sugar based confectionary with 2.5%/4.5% of coffee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iew that the FSSA license issued to the appellant is a relevant piece of evidence to ascertain the nature and identity of the product manufactured by them. The provision of the FSSA and the Regulations duly support the classification of the product. 29. We may now deal with one of the allegations made in the show cause notice that on the wrapper as well as on the website, the assessee has marketed the product as "Pocket Coffee". The Commissioner in the impugned order has reproduced the screenshots of the wrappers of Kopiko Cappuccino and Kopiko Espresso and on that basis recorded the findings as under: - "From the above wrappers, it is very clear that the very first line on the wrapper (Left side top corner) describe the product as 'Hygienic deposited sugar boiled confectionery'. Similarly, below the centrally printed words KOPIKO cappuccino and KOPIKO espresso, at the bottom of the wrapper one can observe 'Coffee candy'. These descriptions clearly indicate that the product is a sugar boiled candy. The descriptions like 'pocket coffee' etc. are only to be construed as marketing gimmick by the assessee to attract the buyers and to impress on them ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be ignored, and it is where the Hyderabad Bench has fallen in error in agreeing with the Revenue. Both the advertisement as well as the website data has consciously used the term 'candy' and that is how it is known to the public at large. 32. One of the most popular principles of classification is the test of common trade parlance. In Central Excise, New Delhi versus Connaught Plaza Restaurant P. Limited- 2012 (286) ELT 321 (S.C.), where the Apex Court decided the classification of the product, 'soft serve' as 'ice cream', observing as under:- "38. On the basis of the authorities cited on behalf of the assessee, it cannot be said that "ice-cream" ought to contain more than 10% milk fat content and must be served only frozen and hard. Besides, even if we were to assume for the sake of argument that there is one standard scientific definition of "icecream" that distinguishes it from other products like "soft serve‟, we do not see why such a definition must be resorted to in construing excise statutes. Fiscal statutes are framed at a point of time and meant to apply for significant periods of time thereafter; they cannot be expected to keep up with nuances and niceti....