Mangal Enterprises Vs. Commissioner of Customs, Nhava - Court Judgment

Excerpt:
1. the question for consideration in this appeal is the classification of the unblended unflavoured cocoa powder that the appellant imported for purpose of levy of additional duties of customs. in the order impugned in the appeal, the commissioner (appeals) has confirmed the finding of the additional commissioner impugned before him that these goods were classifiable under 18.02 of the central excise tariff and the duty appropriately leviable under this heading would apply for purpose of additional duties of customs.2. headings 18.02 of the excise tariff reads "cocoa powder whether or not containing added sugar or other sweetening matter." it is the contention of the counsel for the appellant that the cocoa powder which is the subject matter of this headings, must necessarily be cocoa powder which has been obtained by blending cocoa powder of more than one kind, or by adding unblended cocoa powder to which flavouring material has been added. he relies upon the judgment of the bombay high court in cadbury fry (india) ltd. v. uoi 2000 (126) elt 237 which has been followed by a bench of the tribunal.3. in the judgment in question, the single judge of the bombay high court had for consideration before him the liability to classification under item 1(a)(2) of the central excise tariff of unblended unflavoured cocoa powder. the argument of the importer against the order of the appellate collector of central excise confirming the demand for duty issued to it was that the unblended unflavoured cocoa powder is not directly consumed and that it has to be flavoured. it is mixed with flavouring agents and properly blended in sophisticated machinery. it is only such flavoured and blended cocoa powder that is known as cocoa powder. the court accepted this argument.4. we are however today concerned with the duty leviable on these goods not under the central excise tariff as it stood on the date with which the bombay high court was concerned with in its judgment. we are concerned with the central excise tariff based on the harmonised system of nomenclature of the customs corporation council. no doubt, heading 18.09 of the tariff and item 18 both refer to cocoa powder. there however the similarity ends. the supreme court has confirmed that in determining the scope of a heading under the tariff, it is permissible to consider the explanatory notes. the general arrangement of chapter 18 of our tariff is based upon chapter 18 of that nomenclature. heading 18.05 of court tariff and the notes takes into the scope heading 18.05 of the notes, and such heading of 18.06. the notes have this to say- "cocoa powder is obtained by pulverising the partly defatted cocoa paste referred to in heading 18.03." the heading covers only cocoa powder not containing added sugar or other sweetening matter. this heading includes, inter alia , cocoa powder after treating the nibs, paste or powder with alkaline substance (carbonate of sodium or potassium, etc.) to increase its solubility (soluble cocoa)." 5. on this being put to him, the counsel for the appellant admits that cocoa powder imported by his client is obtained by pulverising partly defatted cocoa paste obtained from one variety of cocoa bean. from the plain words of the heading and the explanatory notes, it is clear that heading 18.05 covers and is intended to cover cocoa powder obtained by pulverising cocoa paste. there is nothing in these notes that would justify the view that the heading excludes unblended and unflavoured cocoa powder. if the intentions were to do so, the notes would surely have said so. going by the plain words of the notes, as we are bound to do, the cocoa powder would be classifiable under this heading.6. again, whatever being the pattern of trade prior to 1976, when the high court passed this order, it is clear to us there is a very much a trade in unblended cocoa powder in that name. the fact that the appellant and others regularly imported these goods is significant. the goods are described in the invoice as cocoa powder unblended and unflavoured. counsel for the appellants accepts that the appellant sells these goods as unblended cocoa powder to persons who use it either after blending or sells it to manufacturers of cocoa preparations. in the case that we are concerned with, it is clear that while there may or may not be a trade in unflavoured or unblended cocoa powder, between the blender of such cocoa and the persons who make the cocoa preparations, prior to that state, as between the manufacturer of the powder and the blender there is very clearly trade in this commodity which is known as cocoa powder. to say that cocoa powder is not traded as such, and it is only blended powder that is known to the trade, is entirely unacceptable. we therefore find no reason for interference.

Judgment:
1. The question for consideration in this appeal is the classification of the unblended unflavoured cocoa powder that the appellant imported for purpose of levy of additional duties of Customs. In the order impugned in the appeal, the Commissioner (Appeals) has confirmed the finding of the Additional Commissioner impugned before him that these goods were classifiable under 18.02 of the Central Excise Tariff and the duty appropriately leviable under this heading would apply for purpose of additional duties of customs.

2. Headings 18.02 of the Excise Tariff reads "Cocoa powder whether or not containing added sugar or other sweetening matter." It is the contention of the counsel for the appellant that the cocoa powder which is the subject matter of this headings, must necessarily be cocoa powder which has been obtained by blending cocoa powder of more than one kind, or by adding unblended cocoa powder to which flavouring material has been added. he relies upon the judgment of the Bombay High Court in Cadbury Fry (India) Ltd. v. UOI 2000 (126) ELT 237 which has been followed by a bench of the Tribunal.

3. In the judgment in question, the single judge of the Bombay High Court had for consideration before him the liability to classification under item 1(a)(2) of the Central Excise Tariff of unblended unflavoured cocoa powder. The argument of the importer against the order of the Appellate Collector of Central Excise confirming the demand for duty issued to it was that the unblended unflavoured cocoa powder is not directly consumed and that it has to be flavoured. It is mixed with flavouring agents and properly blended in sophisticated machinery. It is only such flavoured and blended cocoa powder that is known as cocoa powder. The Court accepted this argument.

4. We are however today concerned with the duty leviable on these goods not under the Central Excise Tariff as it stood on the date with which the Bombay High Court was concerned with in its judgment. We are concerned with the Central Excise Tariff based on the Harmonised System of Nomenclature of the Customs Corporation Council. No doubt, heading 18.09 of the Tariff and item 18 both refer to cocoa powder. There however the similarity ends. The Supreme Court has confirmed that in determining the scope of a heading under the tariff, it is permissible to consider the explanatory notes. The general arrangement of Chapter 18 of our Tariff is based upon Chapter 18 of that nomenclature. Heading 18.05 of court tariff and the notes takes into the scope heading 18.05 of the Notes, and such heading of 18.06. The notes have this to say- "Cocoa powder is obtained by pulverising the partly defatted cocoa paste referred to in heading 18.03." The heading covers only cocoa powder not containing added sugar or other sweetening matter. This heading includes, inter alia , cocoa powder after treating the nibs, paste or powder with alkaline substance (carbonate of sodium or potassium, etc.) to increase its solubility (soluble cocoa)." 5. On this being put to him, the counsel for the appellant admits that cocoa powder imported by his client is obtained by pulverising partly defatted cocoa paste obtained from one variety of cocoa bean. From the plain words of the heading and the explanatory notes, it is clear that heading 18.05 covers and is intended to cover cocoa powder obtained by pulverising cocoa paste. There is nothing in these Notes that would justify the view that the heading excludes unblended and unflavoured cocoa powder. If the intentions were to do so, the notes would surely have said so. Going by the plain words of the notes, as we are bound to do, the cocoa powder would be classifiable under this heading.

6. Again, whatever being the pattern of trade prior to 1976, when the High Court passed this order, it is clear to us there is a very much a trade in unblended cocoa powder in that name. The fact that the appellant and others regularly imported these goods is significant. The goods are described in the invoice as cocoa powder unblended and unflavoured. Counsel for the appellants accepts that the appellant sells these goods as unblended cocoa powder to persons who use it either after blending or sells it to manufacturers of cocoa preparations. In the case that we are concerned with, it is clear that while there may or may not be a trade in unflavoured or unblended cocoa powder, between the blender of such cocoa and the persons who make the cocoa preparations, prior to that state, as between the manufacturer of the powder and the blender there is very clearly trade in this commodity which is known as cocoa powder. To say that cocoa powder is not traded as such, and it is only blended powder that is known to the trade, is entirely unacceptable. We therefore find no reason for interference.