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TMI Blog2020 (7) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the benefit of Notifications No 3/2006 dated 1/3/2006 and 12/2012 dated 17/3/2012; classification 'Nestle Milky bar and Eclairs' under heading 1704.90 is not disputed by rival parties; the appellants claim that these products was also disclosed in the monthly ER-1 returns filed by the Appellants from time to time. 2. Revenue, is of the view that the appellants are not eligible to avail the concessional duty under the aforesaid Notifications' on Nestle Milky bar since the aforesaid products are 'White chocolates' which are specifically excluded from the description against Sl.No.15 /19 of the Tables annexed to the said Notifications; Revenue, vide letter dated 09.09.2008, sought the Appellants to furnish the details of ingredients used for the manufacture of Nestle White Chocolate and Nestle Milky Eclairs and to inform whether they availed Notifications No. 6/2002-CE, 3/2006-CE and 12/2012-CE. vide letter, OC No 414/2008, called upon appellants to furnish the details of the ingredients used for the manufacture of white chocolate and Nestle Milky bar Eclairs. Appellants vide their letter dated 22.11.2008 confirmed that Nestle Milky bar Eclairs manufactured by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e denied; Sl.No.247 of Notification No.6/2002-CE as amended and Sl.No.16 of Notification No.3/06-CE prescribes concessional rate of excise duty for 'sugar confectionery (excluding white chocolate), not containing cocoa' falling under sub-heading 1704.90; there is no dispute in the present case that the products in question are sugar confectionery falling under sub-heading 1704.90; only dispute raised by the Department is that the products in question are excluded from the purview of the Notification since the same are 'white chocolate' inasmuch as they contain 'cocoa butter'. 3.1. Appellants submit that Sl.No.247 of Notification No.6/02-CE admittedly excludes 'white chocolate' from its purview; Notification has no definition for the expression 'white chocolate'; Central Excise Tariff also has no chapter note or section note which defines the expression 'white chocolate'; in the absence of any statutory definition, one has to apply the commercial parlance test to find out as to how the product in question is commercially known, understood and bought and sold by the people who are dealing in those products as held in (i) Indo International Industries Vs CST reported in 1981 (8) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th specifications and standards for different types of chocolates; products in question in the present case certainly do not meet the standards and as such cannot be classified as white chocolates. 5. Learned Senior Counsel submits that Cocoa butter is not used as an ingredient in 'Nestle Milky bar Eclairs' from 01.01.2008; the ingredients till December 2007 and after wards are as follows. Till 31.12.2008 from 01.01.2008 (a) Liquid Glucose (b) Sugar (c) Milk Solids (d) Hydrogenated Refined Vegetable Oil (e) Cocoa Butter (f) Salt (g) Soya Lecithin (h) Glycerol Mono Stearate (a) Liquid Glucose (b) Sugar (c) Milk Solids (d) Hydrogenated Vegetable oils (e) Salt (f) Soya Lecithin (g) Glycerol Mono Stearate 6. Learned Senior counsel submits that effective from 1.1.2008, the appellants have stopped using cocoa butter in the manufacture of 'Nestle Milky bar Eclairs' as also evidenced from the letter dated 17.2.2009 by the Appellants; the affidavit dated 30.03.2010 sworn by the Deputy General Manager of Appellants and the wrapper of the Nestle Milky bar Eclairs manufactured by the Appellants right from January 2008. Similar is the position in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the present case since there is no dispute that the Nestle Milky bar Eclairs is classifiable under Heading No.1704 of Central Excise Tariff and not under Heading No.1806; General Note (b) to Chapter 18 of HSN states that the Chapter excluded White chocolate (heading 17.04); further, note (a) below the HSN Explanatory note to Heading No.1806 states that the heading does not include white chocolate (composed of cocoa butter, sugar and powdered milk) (heading 17.04); also the HSN explanatory note to Heading No.1704 does not mention that vegetable oils can be used as an ingredient in white chocolate, unlike the HSN explanatory note to Heading No.1806. 9. Learned Senior counsel submits that the burden of classification is on the Revenue and the said burden is to be discharged based on material evidence and not merely based on unsupported assertions; it is also settled legal position that when an assessee is fully covered by the terms of the notification and the Revenue seeks to dis-allow the benefit of the notification by invoking the exclusionary clause, the burden is on the Revenue to show that the product of the assessee is covered by the exclusion clause; he relies on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 02.02.2009 reported in 2009 (237) ELT A102 (SC); therefore, appellants couldn't be alleged to be guilty of suppression of facts in the nature of the product; duty was demanded on goods cleared during the period from September 2004 to June 2009 and the Show Cause Notice is dated 7.10.2009; the demand for the period prior to September 2008 is barred by limitation. He submits that so far as Nestle Milky bar is concerned, the Appellants have never used cocoa butter as one of the ingredients; hence the question of suppressing the fact of use of cocoa butter in this product does not arise; therefore, in so far as the duty demand on Nestle Milky bar is concerned, the extended period of limitation is not invokable at all; moreover, right from the day when the Appellants commenced manufacture of the products in question, the Appellants have filed the monthly ER-1 returns declaring the clearance of the various products by their description, classification and notification claimed; thus, all the necessary facts relevant for the Department to make up its mind regarding the correct classification and eligibility to exemption of these products was in the knowledge of the Department; further, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have not suppressed any facts much less with an intention to evade payment of duty; whether the goods manufactured by the Appellants are eligible for the exemption or are excluded from the purview of the notification is a matter of interpretation of law; when short-payment of duty is made due to the difference of bona fide interpretation of law, then no penalty is to be imposed. He relied on the ratio of the following cases. * White Machines Vs. CCE, Delhi-I - 2002 (149) ELT 210 * CCE, Indore Vs. Syncom Formulation (I) Ltd. - 2002 (150) ELT 1228 * Jay Kay Exports Vs. CC(Port), Calcutta - 2003 (161) ELT 443 * G.V. Exim Pvt. Ltd. Vs. CC(Airport), Kolkata - 2003 (160) ELT 900 * JJ Foam Pvt. Ltd. Vs. CCE, Ghaziabad- 2004 (165) ELT 309 * S. Narendra Kumar & Co. Vs. CCE, Mumbai-II- 2003 (156) ELT 1001 15. Learned Senior Counsel made following submissions, pursuant to the hearing held on 11.03.2020, stating that * as per Indian Standards Specification - IS 1163: 1992 3.1.5 - 'White Chocolate means a homogeneous product made from Cocoa butter, milk solids including milk fat and sugar' and as per 'Encyclopedia of Food Science and Technology by Frederick J. Francis - Univers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant under Chapter 1704.90 are 'white chocolate' or not; (ii). Whether or not the said products are eligible to avail of the concessional duty under the aforesaid Notifications and (iii). As to whether in respect of earlier period, the invocation of extended period of limitation and levy of Interest and imposition or penalties are justified. Referring to the appellants claim that main ingredients of 'Nestle Milky bar and Eclairs' were sugar, liquid glucose, skimmed milk powder, hydrogenated vegetable fat, cocoa butter, salt, soya lecithin, GM Stearate up to 1/1/2008 and that from 1/1/2008, cocoa butter was not used while other Ingredients continue to be used, learned Special Counsel reiterates the findings as at paras 14 to 23.02, 24 to 29 and Paras 30 to 33 of the OIO No.8/2010 dated 7/12 -5-2010; the appellants did not produce any correspondence with Nestle about the change in composition. 18. Learned Special Counsel submits that Revenue places reliance on the decision of the Hon'ble Tribunal in the case of Nestle India Limited Vs CCE, Goa 2008 (2271 E LT 631 (Tri-Mumbai) which was maintained by the Hon'ble SC; conclusions that can be drawn from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, 2011 to CET and the notification issued thereunder has been discussed in great detail which again has not been noticed by the Allahabad Bench. * Fourthly, Hon'ble Apex Court in the case of Commissioner of Central Excise, New Delhi Vs Connaught Plaza Restaurant (P) Ltd, 2012 (286) ELT 321 (SC), observed that: 43. We are unable to persuade ourselves to agree with the submission. It is a settled principle in excise classification that the definition of one statute having a different object, purpose and scheme cannot be applied mechanically to another statute. As aforesaid, the object of the Excise Act is to raise revenue for which various goods are differently classified in the Act. The conditions or restrictions contemplated by one statute having a different object and purpose should not be lightly and mechanically imported and applied to a fiscal statute for non-levy of excise duty, thereby causing a loss of revenue. The provisions of PFA, dedicated to food adulteration, would require a technical and scientific understanding of "ice-cream and thus, may require different standards for a good to be marketed as 'ice-cream. These provisions are for ensuring quality cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts or technical literature or commercial parlance; the impugned products contain hydrogenated vegetable oils and as per PFA Act, use of HVO in manufacturing of chocolates is not permissible and therefore the product cannot be held to be chocolate, leaving alone white chocolate; they have informed the Department that cocoa butter was never an ingredient Milky bar and w.e.f. 01.01.2008 usage of cocoa butter was discontinued in the manufacture of 'Eclairs'. 21.2. Per contra, Revenue is of the opinion that in terms of HSN Explanatory Notes and the Tariff Headings, the impugned products can be classified under CETH 1704.90; prohibitions or conditions laid down under other acts are not a criteria for determining the classification of a product under Central Excise Tariff and that as per the packing material, the samples of which were supplied by the appellants themselves vide their Letter dated 25.03.2009, the ingredients included liquid glucose, sugar, milk solids, partially hydrogenated oils, cocoa butter, salt and emulsifiers (soya lecithin and 471); as the product contains cocoa butter, the same is classifiable as 'white chocolate' and Tribunal in the case of Nestle India Ltd. Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cocoa) 22.2. 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. It includes inter alia white chocolate composed of sugar, cocoa butter, milk powder and flavoring agents but not containing more than mere traces of cocoa (cocoa butter is not regarded as cocoa). It is clear from the above that 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. 23. Going by the above, it is evident that the entire case hinges on the fact whether or not cocoa butter is used in the manufacture of the impugned products and whether or not the use of HVO would affect the classification u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lairs w.e.f. 01.01.2008. Learned Commissioner refers to sample of packing material (polybag and jar labels) of Nestle Milky bar Eclairs a letter submitted by the appellants on 25.03.2009, observes that the packing material shows that the ingredients are Liquid Glucose, Sugar, Milk Solids, Partially Hydrogenated Vegetable Oils, Cocoa Butter, Salt and Emulsifiers (soya Lecithin & 471). On going through the available case records, it is seen that the above letter of the appellants refers to a letter dated 23.03.2009 written by the Department wherein it was specifically asked to supply the wrappers/packing materials in respect of Milky bar Eclairs before January 2008. In this context, we find that it is not correct on the part of the Adjudicating Authority to rely upon the said wrappers pertaining to the period before January 2008 to conclude that the impugned goods contained cocoa butter during the period in dispute. The appellants submitted before the Adjudicating Authority an affidavit dated 30.03.2010 sworn by Sh. Suresh Bhandari, Deputy General Manager of the appellants. The affidavit clearly states that the averment in the SCN that the wrapper furnished vide letter dated 25.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibits at pages 179, 181, 183, we find that the ingredients contained in Nestle Milky bar before and after 01.01.2008 are sugar, partially hydrogenated vegetable oils, milk solids and soya lecithin contains added artificial flavoring substance. Exhibit at Page 179 is extracted as below: 26.1. The ingredients of Nestle Milky bar Eclairs before and after 01.01.2008 are as follows: Before 01.01.2008 after 01.01.2008 (a) Liquid Glucose (b) Sugar (c) Milk Solids (d) Partially Hydrogenated Vegetable Oils (e) Cocoa Butter (f) Salt (g) Emulsifiers (Soya Lecithin & 471) (a) Liquid Glucose (b) Sugar (c) Milk Solids (d) Hydrogenated Vegetable oils (e) Salt (f)Emulsifiers (Soya Lecithin & 471) The extracts at pages 181 & 183 are as follows: 27. We find that Revenue has relied upon the case of Nestle decided in 2008 (supra). Learned Senior Counsel for the appellants submits that it has been brought to the notice of the Adjudicating Authority that the following points distinguish the issue decided by Co-ordinate Bench in the above matter stating that Tribunal entirely relied upon HSN Explanatory Notes to Heading No. 1806 to come to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven detailed reasons and justifications for holding so". 28. We find that the instant case, the issue which remains to be decided is as to whether the impugned products contained cocoa butter so as to be categorised as White Chocolate under CETH 1704 and thus rendering them ineligible for exemption contained in the Notifications 6/2002-CE, 3/2006-C.E. and 12/2012-CE. Therefore, we find that the facts of the present case are different from those dealt by the Coordinate Bench in the case of Nestle Products decided in 2008 (supra) and therefore, we find that the ratio of the decision has no precedent value as far as this case is concerned. Moreover, we find that Tribunal, Allahabad in the case of Marko Foods Vs CCE, Kanpur reported in 2019 (370) E.L.T. 603 (Tri. - All.) 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. In view of the discussion above, we find that the Department has not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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