1999 (5) TMI 371 - AT - Central Excise

Summary

Issues Involved:
1. Classification of the product 'KIT-KAT'.
2. Limitation on notices issued for recovery of duty.
3. Liability of the appellant to penalty.

Summary:

1. Classification of the Product 'KIT-KAT':
The principal question in this appeal is the classification of the product marketed under the label 'KIT-KAT' manufactured by the appellant. The appellant claimed classification under Heading 19.05 of the tariff, which was initially approved by the Assistant Commissioner. However, four notices were issued alleging short payment of duty, proposing classification under Heading 18.04, and later under Heading 18.03 by the Commissioner. The Commissioner confirmed classification under Heading 18.03, stating that the product is predominantly chocolate, comprising 68 to 72% by weight and value, and is perceived as chocolate by dealers and customers. The appellant argued that the product should be classified under Heading 19.05, citing the presence of words "whether or not containing cocoa" and various references, including the Explanatory Notes to the Harmonized System of Nomenclature and Supreme Court judgments, which support classification under Heading 19.05. The Tribunal concluded that the product is classifiable under Heading 19.05, noting that the Explanatory Notes and the scheme of classification in the Central Excise tariff support this classification. The Tribunal also referred to the amendment in the 1998 budget, which introduced sub-headings for wafers and waffles coated with or containing chocolate under Heading 19.05, indicating that such products were always classifiable under this heading.

2. Limitation on Notices Issued for Recovery of Duty:
The appellant contended that the notices issued for recovery of duty are barred by limitation, as the extended period in the proviso to Section 11A of the Act is not available, given that the department was aware of the relevant facts. The Tribunal, having concluded the classification under Heading 19.05, did not find it necessary to go into the aspect of limitation.

3. Liability of the Appellant to Penalty:
The Tribunal concluded that since the product is classifiable under Heading 19.05, the penalty ordered cannot be imposed. The appeal was allowed, and the impugned order was set aside with consequential relief.