2007 (4) TMI 51 - AT - Central Excise

Classification Revenue contended that appellant products(chocos) were classifiable under Heading 18.04 but as per appellant classifiable under Heading 19.04 Held that the good classifiable under Heading 18.04

Summary

Issues involved:
1. Correct classification of the product "Chocos".
2. Methodology adopted for determining the cocoa content.
3. Relevance of HSN explanatory notes in classification.
4. Scope of proceedings extended by Commissioner (Appeals).

Detailed Analysis:

1. Correct classification of the product "Chocos":
The primary issue in this case revolves around the correct classification of the product "Chocos". The appellants argued for classification under Chapter Heading 19.04, while the Revenue held that the product should be classified under Heading 18.04. The manufacturing process of "Chocos" involves two stages: the production of base material and the coating of this base material with a syrup solution containing cocoa. The test report revealed that the cocoa content in the product exceeded the maximum limit of 6% stipulated under Chapter Note 3 of Chapter 19, thus excluding it from Chapter 19 and placing it under Chapter 18.

2. Methodology adopted for determining the cocoa content:
The appellants contested the methodology used by the Chief Chemical Examiner, which was based on determining the Theobromine content in the cocoa powder. The method adopted was in accordance with "The Chemical Analysis of Food" by David & Pearson. The appellants argued that the combined method of Theobromine and Caffeine, as suggested in HSN Chapter Note 3, should have been used. However, the Tribunal noted that the method adopted by the Revenue was one of the prescribed methods and was not incorrect. It was further observed that there is no prescribed method in the Central Excise Tariff Act for determining cocoa content, and the method used by the Revenue was endorsed by relevant experts and international agencies.

3. Relevance of HSN explanatory notes in classification:
The appellants relied on HSN explanatory notes, which provide a method for calculating cocoa content by multiplying the combined Theobromine and Caffeine by a factor of 31. However, the Tribunal held that the HSN notes are not binding when there is a deviation in the Central Excise Tariff Act. The Tribunal emphasized that the HSN notes are only one method for determining cocoa content and that the method adopted by the Revenue, which was supported by technical literature and expert opinions, was valid.

4. Scope of proceedings extended by Commissioner (Appeals):
The appellants argued that the Commissioner (Appeals) extended the scope of the proceedings by referring to the second clause of Chapter Note 3 of Chapter 19, which was not initially in dispute. The Tribunal found that the Commissioner (Appeals) was correct in interpreting the chapter note to determine the correct classification. The reference to the chapter note was necessary for classification and was not an extension of the scope of proceedings. The Tribunal held that the burden of classification was on the department, and in this case, the Revenue had discharged this burden effectively.

Conclusion:
The Tribunal upheld the classification of "Chocos" under Heading 18.04 as determined by the authorities below. The appeal was rejected, and the Tribunal found no merit in the arguments presented by the appellants. The methodology adopted by the Revenue for determining cocoa content was deemed appropriate, and the interpretation of chapter notes by the Commissioner (Appeals) was upheld. The decision was pronounced in court on 27-4-2007.