ORDER
Lajja Ram, Member (T)
1. In this appeal filed by M/s. Ravalgaon Sugar Farm Ltd. the matter relates to the classification of the product – choco cream toffee (double trouble). The appellants had sought its classification under sub-heading No. 1704.90 of the Central Excise Tariff, which covered sugar confectionary including white chocolate not containing cocoa. The Asstt. Collector of Central Excise had classified the same under sub-heading No. 1804.00 of the said Tariff as other food preparation containing cocoa. The classification as settled by the Asstt. Collector of Central Excise was confirmed by the Collector of Central Excise (Appeals), Pune.
2. The matter was heard on 31-5-2000 when Shri L.P. Asthana, Advocate submitted that the main issue for consideration in this appeal was whether the product in question contained cocoa or not. It was his plea that the product choco cream toffee contained unsweetened covering chocolate. While it was admitted that the unsweetened covering chocolate was made of cocoa, it was contended that the chocolate could not be treated as cocoa for the purpose of Tariff entry under sub-heading No. 1804.00 of the Tariff. He referred to the Test Report as communicated to the appellants by the Asstt. Collector of Central Excise, Jalgaon under letter dated 11-3-1994, and submitted that the test report had been challenged by the appellants. It was his contention that the product choco cream toffee (double trouble) did not contain cocoa and was made only of the chocolate, which in popular sense, could not be treated as cocoa, for the purpose of the tariff classification.
In reply, Shri V.M. Udhoji, JDR submitted that the chocolate was made of cocoa, and when the chocolate was used in the manufacture of choco cream toffee, it could not be said that it did not contain cocoa. Cocoa was the basic raw material for production of chocolate. He referred to the Explanatory Notes to the Harmonised Commodity Description and Coding System (HSN) and submitted that under Note (VI) of Heading No. 17.04, only cocoa butter was not regarded as cocoa, while all other products in which cocoa was used were considered to be the cocoa products. Chocolate is cocoa product and contains cocoa. He submitted that the choco cream toffee contained cocoa which was established by the Chemical Report. He pleaded that the goods in question were correctly classifiable under sub-heading No. 1804.00 of the Tariff.
3. We have carefully considered the matter. The issue for our consideration is the classification of the product – choco cream toffee (double trouble) manufactured by M/s. Ravalgaon Sugar Farm Ltd. The appellants had sought its classification under sub-heading No. 1704.90 of the Central Excise Tariff, while the Central Excise authorities had classified the same under subheading No. 1804.00 of the said Tariff. For proper understanding, Heading No. 17.04 and Heading No. 18.04 are extracted below :-
17 04 Sugar confectionary (including
white chocolate) not
containing cocoa.
1704.10 Chewing gum whether or not sugar coated
1704.90 Other.
18.04 Other food preparations containing cocoa.
It has been explained in Note I (a) under Chapter 17 that Chapter 17 did not cover sugar confectionary containing cocoa. Sugar confectionary containing cocoa was classifiable in Chapter 18. As explained by Note 2 under Chapter 18, Heading No.18.04 included sugar confectionary containing cocoa and other food preparations containing cocoa.
It is clear from the arrangement of the Tariff entries that the reference to cocoa is couched in general terms. Cocoa as such is a well recognised ingredient in confectionary, and in common parlance, the products containing cocoa and the products not containing cocoa are well recognised. It is also seen that the reference is to the cocoa as such and not to cocoa powder or any cocoa product.
4. It is an admitted position that the chocolate was an essential ingredient of the product choco cream toffee.
Chocolate is a substance made by roasting and grinding cocoa (cacao) beans. All chocolate is made from cocoa beans. Cocoa bean is the basic raw ingredient in the manufacture of all cocoa products, which includes chocolate. After the cocoa beans are processed, a free flowing substance known as chocolate liquor is obtained. Chocolate liquor is also known as cocoa mass.
Chocolate is a food made from the seeds of a tropical tree called the cacao. The word cacao apparently comes from two Maya Indian words meaning bitter juice. The word chocolate came from two Maya words meaning sour water.
The cacao tree produces the seeds, or cacao beans, from which all chocolate is made. These trees flourish in a warm, moist climate. They live within an area about 20° latitude north and south of the equator. Most of the world’s cacao beans come from the west coast of Africa, where Ghana, the Ivory Coast, and Nigeria are the largest producers. Brazil is the largest cacao bean producer in the Western Hemisphere.
The cultivated cacao tree grows about 25 feet (7.6 meters) high. It produces leaves, flowers, and fruit in all seasons of the year. The flowers are small. They grow singly and in clusters on the main stem of the branches and on the trunk. The ripe fruit, or pod, may be red, yellow golden, pale green, or a combination of these colours. The melonlike pod contains 20 to 40 almond-shaped seeds. When these seeds are fermented and dried, they become the commercial cacao bean.
Because of a mistake in spelling, probably made by English importers many years ago, these beans became known as cocoa beans in English-speaking countries. This causes many people to think that the beans come from the coconut palm tree instead of the cacao tree.
Harvesting the cacao beans. Workers cut the pods from the trees with knives attached to long poles, or with machetes. They gather the pods into heaps, cut them open, and scoop out the beans. The beans are placed in piles, covered with banana leaves or burlap, and allowed to ferment for 7 to 10 days. Next, the beans are dried in the sun or in artificial heat to prevent molding. Then workers place them in bags for shipment.
Manufacturing chocolate. Chocolate manufacturers receive many types of beans. They blend them so they yield the flavour and colour desired in the final product. The first steps in processing the seeds include cleaning, roasting, hulling, blending, and grinding them. Cacao seeds with the shells removed are called nibs. The nibs are quite dry, even though they contain about 54 per cent cocoa butter, the natural fat of the cacao bean. In the grinding process, the nibs are ground fine, and the cocoa butter is released. The mixture of cocoa butter and finely ground nibs forms a free-following substance known as chocolate liquor.
Chocolate products are all manufactured from the chocolate liquor. They include baking chocolate, cocoa, mild chocolate, and sweet and semi-sweet chocolate.
Baking chocolate is the commercial form of chocolate liquor. Manufacturers cool and solidify the chocolate liquor into cakes. The bitter, unsweetened baking chocolate is used in many baked products.
Cocoa. In making cocoa powder, huge hydraulic presses force some of the cocoa butter out of the heated chocolate liquor. The mass remaining in the hydraulic presses is in the form of large, hard cakes. Manufacturers change this remainder into its final usable form by grinding it into fine reddish-brown powder. People can prepare a hot beverage from the cocoa powder by adding sugar, hot milk, and sometimes vanilla. Confectioners, bakers, icecream manufacturers, and other food producers use cocoa in their products.
Milk chocolate probably ranks as the most popular of all chocolate products. Chocolate liquor, whole milk solids, and granulated sugar are the basic ingredients in this form of chocolate. Extra cocoa butter, obtained from cocoa powder production, is added to the chocolate liquor. First the ingredients are mixed well. Then the mixture passes through a series of large, steel roll refiners. The shearing and rubbing action of these rolls reduces the mass to a smooth paste. Machines called conches then process the chocolate for 72 hours. In these machines, a large cylindrical stone rolling on a stone bed pushes the chocolate back and forth. This rubbing action smooths off any rough edges on the chocolate particles, helps develop the desired flavour, and finishes blending the entire mass. Milk chocolate is sold in the form of bars and as the coating on some candies.
Sweet chocolate and semi-sweet chocolate are processed in the same way as milk chocolate. But manufacturers do not add milk solids to the mixture in making these products. Manufacturers sell large amounts of both sweet and semi-sweet chocolate to confectioners for making chocolate-covered candies. Increasingly large amounts of semi-sweet chocolate are used to make homemade cookies, candy, cakes, and other items.
The Larousse Gastronomique, a recognised cookery encyclopaedia refers, in the 1988 Mandarin Paperback edition, to chocolate as a product consisting essentially of a mixture of cocoa and sugar to which milk, honey, dried fruit, etc., may be added.
The New Shorter Oxford Dictionary gives the following meanings for chocolate:
“Article of food made from cacao seeds, infl. by unrelated cacaua-atl drink made from cacao; 1. A drink made of prepared chocolate (sense 2) dissolved in hot milk or water. 2 An edible paste or solid made from cacao seeds by roasting, grinding, etc.; a small sweet or confection made of or covered with chocolate.”
[Refer para 19 of the Tribunal’s decision in the case of Nestle (I) Ltd. v. CCE, Mumbai – 2000 (124) E.L.T. 898 (T)].
The ISI Standards for chocolates prescribe that un-sweetened covering chocolate (chocolate liquor or bitter chocolate) is the homogeneous solid or semi-plastic product obtained by finely grinded cocoa nibs to which may be added cocoa fat, cocoa press cake, cocoa powder or low fat cocoa powder to adjust the cocoa fat content not less than 50% by weight of the product and suitable for covering purposes.
The cocoa beans with the shells removed are called nibs.
It has been provided in the Standard that the material shall be a smooth homogeneous cocoa product obtained by the grinding of cocoa nibs from mature, sound and wholesome, cocoa beans, which have been properly fermented, dried and roasted.
According to the HSN, chocolate is composed essentially of cocoa paste and sugar or other sweetening matter usually with the addition of flavouring and cocoa butter; in some cases cocoa powder and vegetable oil may be substituted for cocoa paste.
From the above description, it is without any doubt that chocolate contains cocoa.
5. The description given in Heading No. 18.04 is “other food preparations containing cocoa”. The expression “containing” is with regard to the food preparation presented for assessment.
The expression “contain” implies the presence of a specified substance within the item in question. According to the Webster’s Dictionary 9th New Collegiate Dictionary “contain” means “to have within”. The expression “containing” refers to the actual presence, and whether the presence of the specified substance was direct or indirect was not material.
When chocolate contained cocoa, it could not be said that the product containing chocolate did not contain cocoa.
6. According to the HSN, sugar confectionary containing cocoa is not classifiable in Chapter 17. It was classifiable under Heading No. 18.06 which combines Heading No. 18.03 and Heading No. 18.04 of the Central Excise Tariff. It is also provided that the sugar confectionary containing cocoa or chocolate (other than white chocolate) in any proportion and sweetened cocoa powders were covered by Heading No. 18.06.
Heading No. 17.04 covers sugar confectionary (including white chocolate) not containing cocoa. Sugar confectionary containing chocolate is outside the purview of Heading No. 17.04. For this purpose, only white chocolate is not treated is chocolate. White chocolate is composed of sugar, cocoa butter, milk powder flavouring agents. It is also provided that it should not contain more than mere traces of cocoa. Cocoa butter for this purpose is not treated as cocoa. The fat removed from chocolate liquor is known as cocoa butter. White chocolate is covered by Heading No. 17.04 of the HSN.
7. The product choco cream toffee (double trouble) was got tested from the Dy. Chief Chemist, Central Excise Laboratory, Bombay vide Test Memo dated 5-3-92, and it was reported that the sample answered positive test for presence of cocoa in it. It is mentioned in the Order-in-Original dated 24-3-1994 that the appellants sought for re-test and the report of the re-test confirmed that the product choco cream toffee (double trouble) contained cocoa.
8. It is seen that from the facts on record that undisputedly up to 19-3-1990 the appellants were classifying their product choco cream toffee, under Heading No. 18.04 of the Tariff. There was no dispute that they were using cocoa in their product. Even after 19-3-1990, the appellants declared classification of their product under Heading No. 18.04 vide classification list No. 19/90 SI. No. 66 effective from 20-3-90. Thereafter from 7-6-1990, they filed a supplementary classification list and challenged the approved classification of the product in question, and sought the classification of choco cream toffee (double trouble) under Heading No. 1704.90. Up to 19-3-1990, the rate of duty under Heading No. 17.04 and 18.04 was the same. From 20-3-1990 different rates were applied to the goods falling under Heading No. 17.04 and 18.04. The name of the product remained the same. It was however, indicated that while earlier they were using cocoa in their product, now they have used unsweetened covering chocolate in the said product.
Admittedly, the chocolate contained cocoa. It is an admitted position that chocolate in any form is made from cocoa (refer para-3 of the Order-in-Appeal).
The test reports undoubtedly established that the choco cream toffee contained cocoa. The argument that what the appellant had used was chocolate and that no cocoa had been used directly is devoid of any force, as the expression used in the Tariff Entry was “other food preparations containing cocoa”.
In this regard, para-7 of the order-in-appeal is extracted below :-
“7. It is not disputed by the appellants that the choco cream manufactured by them contains unsweetened chocolate which in turn contains, in small percentage, cocoa. Chapter note 1 (a) of chapter 17 clearly provides that “this chapter does not cover sugar confectionery containing cocoa of Chapter 18.” This has been revealed by the test reports that choco cream did contain cocoa which has not been disputed by the appellants. Their contention only is that they have not used cocoa directly but they had used chocolate which contained cocoa. The fact remains that sugar confectionary manufactured by the appellant did contain cocoa. To emphasise their contention the appellants had taken an example of Oxygen. The example taken by the appellants does not drive the point home as claimed by them. To drive the point home, it is mentioned that as an example if a product is classified under a particular heading subject to the condition that it does not contain sugar and the manufacturer manufactures that particular product and adds therein a sweet made of sugar, it cannot be said that the product has been made without containing sugar. The same situation exists here as sugar confectionary for falling under Chapter 17 should not contain cocoa which, on test has been found to contain cocoa. It is immaterial whether the cocoa has been used directly or indirectly in the confectionary. This view gets support from HSN Explanatory notes also. Under heading No. 1704, which is similar to the sub-heading No. 1704 of the Schedule to the Central Excise Tariff Act, (page 134 of the HSN) , it has been clearly mentioned that the heading excludes sugar preparations containing cocoa of heading 18.06. Heading No. 18.06 of the HSN refers to chocolate and other food preparations containing cocoa.”
9. The ld. Advocate arguing for the appellants had referred to the following decisions of the Tribunal in support of his arguments :-
(i) Collector of Central Excise, Nagpur v. Dinshaw Frozen Foods – 1999 (106) E.L.T. 340 (Tribunal).
(ii) Nestle (I) Ltd. v. Collector of Central Excise, Mumbai – 2000 (124) E.L.T. 898 (T).
In the case of Collector of Central Excise, Nagpur v. Dinshaio Frozen Foods -1999 (106) E.L.T. 340 (Tribunal), the product was softy (choco) mix, and for consideration was the Notification No. 9/90-C.E., dated 20-3-1990, which is extracted below :-
“(E) In exercise of the powers conferred by Sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in column (3) of the Table hereto annexed and falling under the sub-heading No. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in the said Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) thereof:-
________________________________________________________________
Sl. No. Sub-heading Goods Rate
No.
_________________________________________________________________
1. 1901.00 All goods other than - Nil
i. malt extract, or
ii. food preparations
containing malt or
malt extract or coco
powder in any proportion.
2. 1902.10 Seviyan (Vermicilli). Nil
3. 1903.10 Sago Nil
4. 1903.10 All goods other than that 10% ad
at S. No. 3. valorem
The expression used there was cocoa powder and not cocoa as such. The product, softy (choco) mix contained chocolate. The Tribunal observed that chocolate powder can not be treated as cocoa powder itself. In the context, the expression cocoa powder was used in the Heading No. 19.01 of the Tariff and Notification No. 9/90-CE dated 20-3-1990, we consider that this decision will not be applicable for classification under Heading No. 18.04, wherein the expression ‘cocoa’ and not cocoa powder has been used.
In the Nestle (I) Ltd. v. Collector of Central Excise, Mumbai – 2000 (124) E.L.T. 898 (Tribunal) for consideration was the product marketed under the label ‘kitkat’ whose principal ingredients were wafer, sugar, milk powder, wheat flour, cocoa paste, cocoa butter, hydrogen-ated veg. oil and process additives. The Tribunal held that the said goods were classifiable under Heading No. 19.05 of the Tariff as waffles and wafers.
In para-21, the Tribunal had observed that all chocolate must necessarily contain cocoa.
We do not consider that these decisions in any case advance the case of the appellants.
10. From the above discussion, it is clear that choco cream toffee (double trouble) contained cocoa. Chocolate is a product of cocoa. By using chocolate it could not be said that choco cream toffee did not contain cocoa. The expression used in the tariff entry was “other food preparations containing cocoa”. Cocoa was present in the product. The fact that cocoa was contained in the product through the medium of chocolate will make no difference for classification of the product under Heading No. 18.04 of the Central Excise Tariff.
11. On careful consideration of the matter, we agree with the view taken by the learned Collector of Central Excise (Appeals), Pune that the product in question choco cream toffee (double trouble) was classifiable under Heading No. 18.04, sub-heading No. 1804.00 of the Central Excise Tariff.
12. Accordingly, we do not find any merit in this appeal and the same is rejected. Ordered accordingly.