Kopiko Is A Sugar Confectionary, Classifiable Under Heading 1704: CESTAT

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that 'Kopiko (cappuccino and espresso varieties)' contains more than 74% sugar and glucose and is classifiable under heading 1704. The bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the product 'Kopiko' is described in heading 1704 and the description given in 2101 is more general for the reason that the sugar confectionery is a specific product, whereas the preparations with the basis of extracts, essences, concentrates, or coffee are a more general description that may apply to many products, whereas the sugar confectionery is the description that is for only one product. Therefore, the description under 1704 is more specific, and the description given in 2101 is more general. Accordingly, as per the principle of interpretation of Rule 3A, the goods of the appellant are correctly classifiable under 1704.The appellant/assessee is involved in the distribution of food products like candy, biscuits, and chocolate in India. The appellant entered into manufacturing by setting up a manufacturing plant in Hyderabad in 2012 and in Sanand, Gujarat, in 2014.In the manufacturing facility, they manufactured excisable goods, namely hard-boiled sugar and glucose confectionery sold under the brand names Kopiko (cappuccino and espresso varieties), Juizy Milk (mango and strawberry), and Tamarin; chocolate confectionery sold under the brand name Choki-Choki; and noodles sold under the brand name JoyMee noodles, all edible items. Kopiko, a hard-boiled sugar and glucose confectionery, has been manufactured by the Hyderabad plant since September 2012 and the Gujarat plant since November 2014. The product Kopiko contains 1.57% flavor coffee.The officers of the zonal units of the Directorate General of Central Excise Intelligence, located in Hyderabad and Ahmedabad, commenced investigations into the classification of 'Kopiko'. A Show Cause Notice alleged that “Kopiko (cappuccino and espresso varieties)” is classifiable under Chapter Heading 2101 1200 of the First Schedule to the Central Excise Tariff Act, 1985, as “preparations with a basis of extracts, essences, concentrates, or with a basis of coffee," attracting 12% ad valorem plus education cesses (less abatement based upon valuation in terms of Section 4A of the Central Excise Act, 1944). The notice stated that the appellant has misclassified goods under Chapter Heading 1704 9090 as “sugar confessionary not containing cocoa” and has short-paid the Central Excise Duty.The Show Cause Notice was adjudicated by the Commissioner of Central Excise, Ahmedabad. The demand for a tax of Rs. 3,64,53,794 along with applicable interest was confirmed, and a penalty under Section 11 AC(1)(a) of the Central Excise, 1944, was imposed.The assessee contended that the product manufactured by the appellant, except for the percentage of flavor coffee, is sugar confessionary, and there is a specific tariff entry for sugar confessionary under Chapter Heading 1704, and Chapter Heading 2101 is a very general heading. It is settled law that the specific heading prevails over the general heading. Therefore, on this ground itself, the appellant's product, i.e., sugar confectionary under the brand name 'Kopiko', is correctly classifiable under 1704 and not classifiable under 2101. The product in question is a hard-boiled sugar confectionary and is marketed as such. Coffee is added as only a flavoring agent and consists of a minuscule percentage of the overall product, which is overwhelmingly composed of sugar and glucose. The packaging of the product clearly mentions that it is a "HYGENIC DEPOSITED SUGAR BOILED CONFECTIONERY." The product is marketed as a coffee candy. The term candy means a confectionery. Therefore, the heading 1704, which is for sugar confectionery not containing cocoa, offers a more specific heading for the product in question than the heading, which is for preparation with a basis of coffee.The issue raised was whether the goods are classifiable under the Central Excise Tariff Act under 1704, as claimed by the appellant, or under 2101, as claimed by the department.The tribunal held that the product was manufactured by the appellant, namely Kopiko, based on the quantity of ingredients contained in the said product. Since the product contains more than 74% sugar and glucose, these ingredients are the basis of the product; the flavor coffee was used only to the extent of 1.57% for flavor and did not contribute to the main product, i.e., confectionery. Therefore, the product Kopiko, by any imagination, cannot be classified under 2101-1200 for the simple reason that it is not prepared on the basis of coffee. The basis of the product is sugar and glucose, and undisputedly, the product is sugar confectionery, not cocoa. Even as per the general rule of interpretation of the Central Excise Tariff, the same support is given to the plea of the appellant. The...

Kopiko Is A Sugar Confectionary, Classifiable Under Heading 1704: CESTAT

Mariya Paliwala

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