2008 (7) TMI 37 - AT - Central Excise

Classification of MILKYBAR CHOO Even if impugned item is containing Hydro generated vegetable oil , it can t be classified as sugar confectionery as contended by assessee impugned goods conforms to the definition of White Chocolate as per HSN Notes to Chapter 17 so it is classifiable as White chocolate duty @ 16 % is payable by assessee exemption under notification no. 6/2002 is not allowable HSN Notes should be given greater consideration than other statutes

Summary

Issues Involved:
1. Classification of "Milkybar Choo" under Central Excise Tariff.
2. Applicability of exemption notifications.
3. Relevance of Prevention of Food Adulteration Rules, 1955.
4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Classification of "Milkybar Choo" under Central Excise Tariff:
The primary issue was whether "Milkybar Choo" should be classified as sugar confectionery not containing cocoa or as white chocolate under sub-heading 1704.90 of the Central Excise Tariff. The appellant argued that the product could not be classified as white chocolate because it contained partially hydrogenated vegetable oils, which are prohibited in chocolates under the Prevention of Food Adulteration Rules, 1955. The Revenue countered that the product fits the definition of white chocolate under the Harmonized System of Nomenclature (HSN) notes to Chapter 18.06, which allows for the inclusion of vegetable oils in chocolate. The Tribunal upheld the Revenue's classification, stating that the presence of partially hydrogenated vegetable oils does not exclude the product from being classified as white chocolate.

2. Applicability of Exemption Notifications:
The appellant claimed eligibility for a concessional duty rate of 8% ad valorem under Notification No. 3/2006-C.E., which excludes white chocolate from its purview. The Tribunal found that since "Milkybar Choo" is classified as white chocolate, it is not eligible for the concessional rate under the said notification. The Tribunal confirmed the Commissioner's order demanding duty of Rs. 1,00,86,921/- including education cess.

3. Relevance of Prevention of Food Adulteration Rules, 1955:
The appellant argued that the product could not be marketed as white chocolate due to the prohibition of vegetable oils in chocolates under the Prevention of Food Adulteration Rules, 1955. The Tribunal, however, held that the definition of chocolate under the Prevention of Food Adulteration Rules is not relevant for classification under the Central Excise Tariff. The Tribunal cited several judgments, including the Supreme Court's decision in CC, Bombay v. Business Forms Ltd., to support the view that definitions in one statute should not be applied to another statute unless explicitly stated.

4. Imposition of Penalty under Section 11AC of the Central Excise Act, 1944:
The Commissioner had imposed an equal amount of penalty on the appellant under Section 11AC of the Central Excise Act, 1944, read with Rule 25(1)(d) of the Central Excise Rules, 2002. The Tribunal found that the case involved an interpretation of tariff entries and exemption notifications, and there was no suppression of facts by the appellant. Therefore, the Tribunal set aside the penalty imposed on the appellant.

Conclusion:
The Tribunal upheld the classification of "Milkybar Choo" as white chocolate, thereby confirming the duty demand but set aside the penalty imposed on the appellant. The appeal was partly allowed.