CESTAT Bangalore Holds Chocolate Flavour Not A Cocoa Preparation, Quashes Customs Duty Demand

The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 5 May held that the chocolate flavouring substances meant to be added to food cannot be classified as “chocolate and other food preparations containing cocoa” under Customs Tariff Heading 18069090.

Judicial Member Justice P.A. Augustian and Technical Member Pullela Nageswara Rao set aside the customs duty demand, interest, and penalties against Prova Flavours India Pvt Ltd and allowed its appeal against an order of the Commissioner (Appeals), Bangalore. The Bench held:

“The imported product is a flavouring substance meant to be added to food and not a preparation for direct consumption. Therefore, it does not fall within the scope of 'chocolate and other food preparations containing cocoa' under CTH 18069090.”

The dispute arose from the import of “Chocolate Flavour”, used in the food industry. The importer classified the product under Customs Tariff Heading 33021010 as mixtures of odoriferous substances, contending that it was a flavouring ingredient and not a food preparation for direct consumption.

Based on audit objections, the Department issued a show cause notice proposing reclassification under Heading 18069090 on the ground that the product was derived from cocoa extracts and therefore constituted a cocoa preparation.

The importer submitted that the goods were licensed by the Food Safety and Standards Authority of India (FSSAI) as a flavouring substance and were not capable of direct consumption as food. It further argued that classification under “chocolate and other food preparations containing cocoa” was misconceived.

On limitation, the importer contended that all relevant particulars had been disclosed in the Bills of Entry and the goods were cleared after out-of-charge orders, and therefore the extended limitation period could not be invoked in the absence of suppression or misstatement.

The Revenue, however, maintained that Heading 18069090 specifically covered preparations containing cocoa and argued that since the flavour was derived from cocoa extracts, it was appropriately classifiable under that heading. It also relied on clearance under the Risk Management System (RMS) to justify invocation of the extended limitation period.

The Tribunal, on examining the tariff entries and Chapter Notes, held that Heading 18069090 applies only to food preparations containing cocoa, whereas the imported product was a flavouring substance meant to be added to food and not consumed directly. It further held that such flavouring substances could not be brought within the scope of cocoa preparations under the residuary heading.

On limitation, the Bench rejected the Department's plea, noting that complete particulars of the goods had been disclosed in the Bills of Entry and that clearance had been granted after issuance of out-of-charge orders, negating any allegation of suppression.

Accordingly, the CESTAT set aside the impugned order and allowed the appeal with consequential relief in accordance with law.

For Appellant: Mr. M. S. Nagaraja, Advocate for the Appellant

For Respondent: Mr. M. Sreekanth, Authorized Representative