2020 (7) TMI 554 - AT - Central Excise

Nestle Milky bar and Eclairs - Benefit of exemption under N/N. 6 /2002-CE dated 1.3.2002 as amended with notifications 3/2006 dated 1/3/2006 and 12/2012 dated 17/3/2012 - classification of goods - Whether the confectionery products cleared by the appellant under Chapter 1704.90 are 'white chocolate' or not? - extended periof of limitation - interest and penalties - HELD THAT - Both the Revenue as well as the appellant do not dispute the classification of the impugned products under CETH 1704. The only difference in the argument is based on the presence or absence of ingredients like cocoa butter and hydrogenated vegetable oils. 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 sweetmeats, confectionery or candies - thus, white chocolate can be classified under Chapter 17 and white chocolate composes sugar, cocoa butter, milk powder and flavoring agents, but not containing more than mere traces of cocoa. Whether or not the impugned products merit classification as white chocolate in terms of the HSN Explanatory Notes? - HELD THAT - Tribunal, Allahabad in the case of M/S MARKO FOODS SHRI NAMAN MANDHYAN, PARTNER, M/S PAHLADRAI CONFECTIONARIES PVT. LTD. SHRI MOHIT VAID DIRECTOR VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR 2018 (9) TMI 14 - CESTAT ALLAHABAD held that a similar product i.e., Parle 2-in-1 Eclairs and Kismi Toffee and Bar , to be boiled sweets containing no cocoa butter and having 8% fat content, are not white chocolate under Tariff Item 1704 90 30 of Central Excise Tariff and held that the said goods are eligible to benefit of Notification Nos.6/2002-CE, 3/2006-C.E. and 12/2012-C.E. - the Department has not conclusively established that the appellant s claim that the impugned products did not contain cocoa butter during the impugned period with any indisputable proof or test report. The impugned goods i.e. Nestle Milky bar and Nestle Milky bar Eclairs are not excluded for the purpose of exemption contained in the Notifications. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of confectionery products as 'white chocolate' under Chapter 1704.90.
2. Eligibility for concessional duty under Notifications No. 6/2002-CE, 3/2006-CE, and 12/2012-CE.
3. Invocation of extended period of limitation, interest, and penalties.

Detailed Analysis:

1. Classification of Confectionery Products as 'White Chocolate':

The primary contention revolves around whether the products 'Nestle Milky Bar and Eclairs' should be classified as 'white chocolate' under Chapter 1704.90. The appellants argued that their products are sugar confectionery, not white chocolate, and thus should benefit from the concessional duty rates under the specified notifications. They emphasized that their products do not contain cocoa butter post-01.01.2008 and that the term 'white chocolate' is not defined in the Central Excise Tariff or the notifications. They relied on commercial parlance and technical literature to argue that their products are known as sugar confectionery, not white chocolate.

The Revenue, however, contended that the products are 'white chocolates' as they contain cocoa butter, which is specifically excluded from the concessional duty benefits under the notifications. They relied on the HSN Explanatory Notes, which describe white chocolate as composed of sugar, cocoa butter, milk powder, and flavoring agents.

The Tribunal found that the classification under CETH 1704.90 is agreed upon by both parties. However, the presence of cocoa butter in the products before 01.01.2008 was a point of contention. The Tribunal noted that the appellants provided an affidavit and other evidence to show that cocoa butter was not used post-01.01.2008, and the Revenue did not provide conclusive evidence or conduct tests to prove otherwise.

2. Eligibility for Concessional Duty:

The appellants claimed eligibility for concessional duty under Notifications No. 6/2002-CE, 3/2006-CE, and 12/2012-CE, arguing that their products are sugar confectionery and not white chocolate. They pointed out that their products do not meet the standards for white chocolate under the Prevention of Food Adulteration (PFA) Rules, which prohibit the use of hydrogenated vegetable oils in chocolates.

The Tribunal examined the ingredients and manufacturing process of the products and found that the products did not contain cocoa butter post-01.01.2008. The Tribunal also considered previous judgments and technical literature, concluding that the products are sugar confectionery and not white chocolate. Therefore, the products are eligible for concessional duty under the specified notifications.

3. Invocation of Extended Period of Limitation, Interest, and Penalties:

The Revenue invoked the extended period of limitation, arguing that the appellants continued to avail of the duty exemption despite being aware of the classification issues. The appellants contended that they had disclosed all relevant information in their monthly ER-1 returns and that there was no suppression of facts.

The Tribunal found that the appellants had provided sufficient evidence to show that they did not use cocoa butter post-01.01.2008 and that the Revenue did not conduct any tests to prove otherwise. The Tribunal also noted that the appellants had acted in a bona fide manner, relying on previous legal interpretations and technical literature. Therefore, the invocation of the extended period of limitation, interest, and penalties was not justified.

Conclusion:

The Tribunal concluded that the products 'Nestle Milky Bar and Eclairs' are sugar confectionery and not white chocolate, making them eligible for concessional duty under Notifications No. 6/2002-CE, 3/2006-CE, and 12/2012-CE. The invocation of the extended period of limitation, interest, and penalties was not justified. All appeals were allowed with consequential relief as per law.