1. This is an appeal against the order dated 30-5-1986 passed by the Collector of Central Excise, Trichy. The appellants were licenced for the manufacture of confectionery under Tariff Item 1A and boiled sweets under Item 68 of the erstwhile Central Excise Tariff. Chocolate Eclairs were being cleared by the appellants under Tariff Item 68. After the issue of Tariff Advice No. 114/81, dated 13-10-1981 stating that Chocolate Eclairs containing more than 3.5% chocolate would merit classification under Tariff Item 1A (Confectionery) and on the basis of the findings of the Revenue Audit the appellants were served with a show cause notice dated 17-12-1985 alleging that Chocolate Eclairs manufactured by them containing more than 3.5% chocolate was classifiable under Tariff Item 1A. It was stated that the appellants had been suppressing facts regarding the correct percentage of chocolate in Chocolate Eclairs which according to the reports of the Chemical Examiner and Chief Chemist had chocolate content by weight of 27% (approximately) and 27.7% respectively. The appellants were therefore, asked to show cause as to why Chocolate Eclairs manufactured by them should not be classified under Tariff Item 1A and differential duty should not be recovered on the clearances during the period 20-12-1980 to 16-3-1985 under Section 11A(1) of the Central Excises and Salt Act, 1944.
2. While denying the allegations in the show cause notice, the appellants stated that they had been clearing Chocolate Eclairs under Tariff Item 68 on the basis of approved classification lists. They stated that the ingredients and the process of manufacture of Chocolate Eclairs in their factory had remained substantially unaltered. They pointed out that in 1969 refund claimed by them in respect of Chocolate Eclairs classified under Tariff Item lA(ii) as chocolate was allowed by the Assistant Collector and the goods were held as classifiable under Tariff Item lA(i) as boiled sweets. They also pointed out that the proceedings were initiated by show cause notice dated 21-10-1980 seeking to classify Chocolate Eclairs as Chocolate under Tariff Item 1 A(iv) and samples were drawn on 19-12-1980 and 9-3-1981 and sent to the Chemical Examiner but later the appellants' stand that Chocolate Eclair being a modified toffee classifiable under Tariff Item 68 was accepted and the proceedings initiated by the show cause dated 21-10-1980 were dropped. However, by the impugned order, the Collector while rejecting the contentions of the appellants observed that the outcome of the earlier proceedings not having been initiated on the basis of the basis of the percentage of chocolate in Chocolate Eclairs could not have any bearing on the proceedings initiated by the show cause notice dated 17-12-1985. The Collector held that the percentage of chocolate by weight in the disputed Chocolate Eclairs being in excess of 3.5% as revealed by the report dated 28-2-1985 given by the Chemical Examiner and the report of the Chief Chemist, CRCL, New Delhi, after the issue of Madras Collectorate Circular No. 66/81, dated 2-11-1981 based the tariff advice dated 17-12-1985, the Eclairs in question were classifiable as Chocolate under Tariff Item 1A(4). The Collector also held that by not declaring the actual percentage of chocolate in Chocolate Eclairs even after being made aware of revised basis for the classification of Eclairs by the Trade Notice dated 2-11-1981 the appellants had suppressed facts and the differential duty was demandable from them by invoking the extended period in terms of the proviso to Section 11A of the Central Excises and Salt Act, 1944.
3. On behalf of the appellants Shri A. Vijayaraghavan, learned Consultant appeared before us. He submitted that since 1967 the composition of Chocolate Eclairs manufactured by the appellants had remained unchanged. He added that in 1969 when the Department classified Chocolate Eclairs under Tariff Item 1A(ii) as chocolate the appellants had contested the change in classification sought by the Department on the grounds that the Eclairs in question being boiled sweets were classifiable under Tariff Item 1A(i). He stated that the appellants' stand was accepted by the Department and refund of duty paid on account of assessment of Chocolate Eclairs as 'Chocolates' under Tariff Item 1A(ii) was allowed. He added that based on the test report dated 21-10-1980 in respect of the sample drawn on 10-3-1980, the Department once again initiated proceedings with a view to classify Chocolate Eclairs under Tariff Item 1 A(4) as Chocolates but these proceedings were also dropped by the Assistant Collector by his order dated 3-2-1982. He submitted that there being no statutory definition of 'Chocolate' in the Tariff, the question whether Chocolate Eclairs could be deemed as 'Chocolate' or 'boiled sweets' could be decided only on the basis of the trade parlance. He contended that the adoption of criteria of chocolate content in excess of 3.5% by weight as laid down in the Tariff Advice for determining whether Chocolate Eclairs would be classifiable as chocolates was totally arbitrary and illegal. He stated that the chocolate content of 27% as determined by the Chemical Examiner in respect of the sample drawn on 21-1-1985 had been relied upon by the Collector even though the appellants had pointed out that higher figure in respect of the chocolate content was on account of the weight of the ingredients, namely icing sugar, milk powder, edible fats having been used along with cocoa beans as inner filling in Eclairs appeared to have been taken into account for this purpose. He submitted that having regard to the long standing practice of the Department to classify Chocolate Eclairs by treating them as boiled sweets and there being no requirement in the Tariff for distinguishing between chocolates and boiled sweets, the confirmation of the demand by invoking the extended period under the proviso to Section 11A, on the grounds that the appellants had failed to declare the correct percentage of Chocolate Eclairs in question after the issue of the Trade Notice dated 2-11-1981 on the basis of the Tariff Advice was totally arbitrary and contrary to law. He therefore, pleaded that the impugned order may be set aside.
4. On behalf of the respondents Shri Mohan Lal, JDR took us through the impugned order and reiterated the findings therein.
5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the main questions arising for consideration in this case are whether : (1) The Collector's order holding Chocolate Eclairs as classifiable under Tariff Item 1A(4) on the basis of the Board's Tariff Advice laying down that Chocolate Eclairs and Chocolate Toffees containing about 3.5% of chocolate would be classifiable under Tariff Item 68 is legally sustainable; and (2) In the facts and circumstances of the case, the demand confirmed by the Collector by invoking the extended period in terms of the proviso to Section 11A is sustainable.
6. For the proper appreciation of rival contentions we consider it desirable to refer to the changes that were made from time to time in Item 1A of the erstwhile Central Excise Tariff. In 1968 when Tariff Item 1A was introduced for the first time, it read as :- " 1A - CONFECTIONERY AND CHOCOLATES IN OR IN RELATION TO THE OF WHICH ANY PROCESS IS ORDINARILY CARRIED ON WITH THE AID OF POWER NAMELY - (1) Boiled sweets, toffees, caramels, candies, nuts pastilles (including almonds) and fruit kernels coated with sweetening agents, and chewing gums.
(2) Chocolates in the form of slabs, tablets, bars, pastilles or croquettes, whether or not containing nuts, fruit kernels or fruits.
Subsequently but before the introduction of the Finance (No. 2) Bill, 1977, T.I. 1A was amended and it read as - "1A - CONFECTIONERY, COCOA POWDER AND CHOCOLATES, IN OR IN RELATION TO THE OF WHICH ANY PROCESS IS ORDINARILY CARRIED ON WITH THE AID OF POWER, NAMELY - (1) Boiled sweets, Toffees, Caramels, Candies, Nuts (including almonds) and fruit kernels coated with sweetening agent, and chewing gums.
(3) Drinking Chocolates, chocolates in the form of granules or powder.
(4) Chocolates in the form of blocks, slabs, tablets, bars, pastilles or croquettes or in any other form, not otherwise specified, whether or not containing nuts, fruit kernels or fruits.
With the introduction of the Finance (No. 2) Bill, 1977 Boiled Sweets, Toffees, Caramels, Candies, Nuts (including Almonds) and Fruit Kernels coated with sweetening agent (falling under sub-item (1) of T.I. 1 A) were omitted from T.I. No. 1A and the result was amendment of the description of T.I. No. 1A to read as :- "1A - CONFECTIONERY, COCOA POWDER AND CHOCOLATES, IN OR IN RELATION TO THE OF WHICH ANY PROCESS IS ORDINARILY CARRIED ON WITH THE AID OF POWER NAMELY :- (3) Drinking chocolates, chocolates in the form of granules or powder.
(4) Chocolates in the form of blocks, slabs, tablets, bars, pastilles or croquettes, or in any other form, not otherwise specified, whether or not containing nuts, fruit kernels or fruits.
T.I. 1A of this description remained unchanged in the First Schedule to the Central Excises & Salt Act, 1944 till the First Schedule was delinked from the Central Excises & Salt Act, 1944 and replaced by a separate enactment viz., Central Excise Tariff Act, 1985.
7. The disputed finger shaped Chocolate Eclairs consist of two parts, viz. centre and casing. The centre consists of a paste prepared out of icing sugar, milk powder, edible fat and cocoa paste. The paste is covered by outer crust made from sugar, glucose, milk and fat and emulsifying agents. In 1969 when for the first time the Department decided to assess Chocolate Eclairs under Tariff Item 1A(2) as chocolates, the appellants filed a refund claim on the grounds that the Eclairs in question were classifiable under Tariff Item 1A(1). The refund claim was allowed and thereafter the appellants' chocolates were classified under Tariff Item 1A(1). On 10-3-1980 a sample of the product was drawn for chemical analysis and on the basis of the report of the Chemical Examiner which stated that the 'The sample was in the form of finger-shaped piece composed of soft centre containing chocolate coated with soft outer casing'. On 21-10-1980 the appellants were asked to show cause why the Chocolate Eclairs should not be re-classified as Chocolates under Tariff Item 1A(4) and why differential duty should not be demanded in respect of part clearances of Chocolate Eclairs from 18-6-1977. In their reply to the show cause notice the assessee contended that according to I.S.I. Specification No. IS : 1008-1971 for Hard Boiled Sugar Confectionery and according to ISI Specification No. IS : 1667 -1971 for Toffees, both the Chocolate Eclairs and Chocolate Toffees containing chocolate as ingredient were confectionery falling under Item 68 of Central Excise Tariff and they were also known as confectionery in the trade. The appellants also contended that on account of addition of a little chocolate or cocoa powder for flavouring purposes their product could not be deemed as having been converted into chocolate since in trade parlance chocolate is a product which contains over 80% of chocolate. On these grounds they contended that Eclairs in question having much lower percentage of chocolate paste could not be deemed as Chocolates. The Assistant Collector accepted the appellants' explanation and by his order dated 3-2-1982 dropped further proceedings in regard to re-classification of Chocolate Eclairs under Tariff Item 1A(4).
8. The Collector has held that after October, 1981 Chocolate Eclairs containing more than 3.5% of chocolate became classifiable under Tariff Item 68 in terms of the Tariff Advice of October, 1981 and the Trade Notice No. CE 282/81, dated 2-11-1981 which clarified that Chocolate Eclairs and Chocolate Toffees containing about 3.5% of chocolate were classifiable under Tariff Item 1A(4). In the case of Collector of Customs v. Bhor Industries Ltd. reported in 1988 (35) E.L.T. 346, the Supreme Court has held that for the purposes of classification how the goods are known in the trade and treated in the trade literature is relevant and significant. In the case of Indo-International Industries v. Commissioner of Sales Tax, U.P. reported in 1981 (8) E.L.T. 325, the Supreme Court has held that if any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment, the meaning of the term in a common parlance or commercial parlance has to be adopted. In the case of Kirloskar Oil Engines Ltd. v. Union of India reported in 1991 (51) E.L.T. 334, the Bombay High Court has held that the burden to establish the classification of goods under a particular item of the Tariff is on the Department. In the case of M.C. Mody & Bros. v. Collector of Customs reported in 1989 (44) E.L.T. 484, it was held by the Tribunal that quasi-judicial authorities cannot be controlled by tariff rulings/advices or instructions of any authority, however high they may be in the administrative hierarchy and when they are called upon to decide disputes arising under the Act, they must act independently and impartially. Para 9 of the said order being relevant is reproduced below :- "9. We have carefully considered the submissions of both sides. The appellants have adopted a rather strange and self-contradictory stand. In one breath they say that the subject goods were being assessed in accordance with Tariff Advice No. 25 (Trade Notice No. 19, dated 14-12-1976) which had a binding effect on the Department.
According to them, the impugned demand was, therefore, bad in law.
In the next breath they say that the impugned demand was apparently issued pursuant to Tariff Advice No. 1, dated 25-1-1978 and it was illegal, null and void because the Tariff Advice amounted to merely an administrative direction and could not be the basis for a demand.
We would say that in the present case the orders of the 2 lower authorities do not talk about any Tariff Advice. The status of Tariff rulings or Tariff Advices, as they are now called, and other administrative directions has been settled by the Supreme Court in the Orient Paper Mills Ltd. v. Union of India 1978 (2) E.L.T. (J 382) where the Court held that quasi-judicial authorities cannot be controlled by any such rulings, advices or instructions of any authority, however high they may be in the administrative [hierarchy]. The Court further observed that when assessing authorities and appellate authorities are called upon to decide disputes arising under the Act (Customs Act), they must act independently and impartially. This is precisely what the Appellate Collector has done in the present case. We have, therefore, to arrive at the classification of the subject goods without reference to either of the Tariff Advices based on the merits of the dispute." 9. No criteria or definition was laid down in the relevant items of the Tariff for determination whether a product could be deemed as Chocolate or Confectionery and it was a long standing practice of the Department to classify Chocolate Eclairs manufactured by the appellants as Confectionery under Tariff Item 68. On the ratio of the judgments quoted above we therefore hold that the Collector's order classifying Chocolate Eclairs under Tariff Item 1A(4) is not sustainable since it was based only on a Tariff Advice issued by the Board and not on any enquiries made to determine as to how the said goods were known and treated by the trade is not sustainable. In view of this finding the demand confirmed by the impugned order in terms of the proviso to Section 11A also does not survive.
10. In the result, the impugned order is set aside and the appeal is allowed.