Chocolate is not chocolate in law

EXPERT EYE

Chocolate can be bitter in more senses than one. There is something called bitter chocolate, which is the raw form before it is sweetened.

The other way in which chocolate can be bitter is when there is a bitter legal fight over what is chocolate, what will be the rate of excise duty when even a modicum of chocolate inside a biscuit or wafer can bring higher duty on the whole product.

Interestingly, the case law on chocolate is considerably impressive. One should not be surprised if it becomes more and more elaborate unless the tariff is reformed to make it uniform.

To have some idea about the controversies, we may have to taste the following stories. The Supreme Court decided in 1990 that Bourbon Cream Chocolate Biscuit was not chocolate and was not classifiable as such in the Commissioner of Central Excise vs Britannia Industries (1990 (50) ELT A86 (SC).

Melody Chocolate Toffee was classifiable, but not classifiable as chocolate, ruled the Supreme Court in the Parle Products vs Collector case, (1999 (106) ELT A 189 (SC)).

In a latest judgment in the Commissioner of Central Excise vs Britannia Industries case, (2005 (1830 ELT 257 (T)), the tribunal has now decided that "wafers which contain chocolate cream in between the layers" cannot be regarded as wafers containing chocolate, the rate of duty being 16 per cent, but other preparations of cereals that attract no duty.

After lengthy discussion about what is chocolate, the tribunal decided that the chocolate cream inside was not chocolate as such.

The revenue department argued that it had been advertised by the manufacturer as containing chocolate and therefore it was not open to them to now claim that it was not chocolate. The tribunal held that advertisement did not form a conclusive proof for classification in fiscal law.

On this point, there is also a Bombay High Court decision in the Blue Star vs Union of India case (1980 ELT 280 (Bom). The court said what the petitioner might advertise could be no criterion for adjudicating on the issue whether duty was payable under a particular tariff item.

This does not mean that a manufacturer gets away with a false advertisement by misrepresenting that something is chocolate though it is not.

Tho-ugh for classification in fiscal law it is not an offence, misrepresentation can be taken up for punishment with the authorities dealing with unfair competition under the MRTP Act.

But for classification, there can be no doubt that if there is no chocolate in the biscuit or in wafers, they cannot be taken as chocolate, irrespective of the advertisement. Wrong advertisement does not make something chocolate, if it is not chocolate.

These controversies are arising in the case of chocolate and the case laws have become impressive (nearly 150 judgments reported) because there is no statutory definition of chocolate. The judgment in the Commissioner of Central Excise vs Britannia Industries also refers to this proposition though it does not give verdict on the basis of market parlance.

What is chocolate in the market parlance is not easy to find out. It is doubly difficult because there are products like biscuits, wafers and breads mixed with different combinations of chocolates.

In mixed products, it is always difficult to find out the proper identity of the goods for the purpose of classification. New items are being produced by mixing several things, which do not conform to conventional standards.

A solution has to be found in incorporating definitions in the statute book itself. Once the statutory definition is there, it is binding on all concerned and there is no scope of controversy as to what is the market definition or scientific definition.

This is the only solution. We have to consider how the definitions in the statutes can be made more realistic since some amount of artificial nature of the definitions is almost inevitable.

One of the reasons why the statutory definitions are to be artificial is that the products have in the recent times ceased to be natural but are artificial in the sense that they are mixtures of different products. Many products are made of mixtures such as rubber and resin, leather and rubber (leatheroid), wood and resin, textile and resin.

Such products cannot be easily identified or defined and not in any case by natural standards. Merely going by predominant use or predominant content by weight or value has its own problems since use is multiple and value cannot be apportioned in many cases.

In such cases only placing a definition in the statute book can solve the uncertainty. For example textile fabric, on which plastic material has been coated, laminated or impregnated, has been placed in the textile chapter (59) of the Central Excise Tariff.

It is an artificial definition since such a product is not in the popular sense used as a textile. It is neither fish nor foul, that is, neither textile nor resin. But it has been defined as textile for the purpose of tariff. There is no other way.

We can solve the problems of classification for mixed products such as wafers with chocolate cream by the following methods:

Make the rates of duty same and not 16 per cent and nil.

Put a definition of items such as chocolate in the tariff.

The definition can be artificial.

Initiate penal action against misleading claims in the advertisement that the product contains chocolate though it does not.

Claiming one thing for classification and another in advertisement for sales promotion should not go unpunished.

(The author is a former member of the Central Board of Excise & Customs)

smukher2000@yahoo.co