Wafer-thin gain for Nestle''s KitKat
By Mohini Bhatnagar | 24 Jan 1999
1
The customs excise and gold control (appellate) tribunal, or CEGAT, has classified Nestle's Kit Kat as a wafer. In doing so, it has overruled the excise department's demand for a Rs 24 crore duty payment from Nestle for alleged misclassification of Kit Kat as a wafer.
The excise department's contention was that Kit Kat was a chocolate and not a wafer, hence the company should pay a duty of 18 per cent instead of 8 per cent, which is applicable to wafers. The adjudicator of the excise department had ordered the company to pay Rs 12 crore and an additional penalty of an equal amount for misleading classification.
The multinational then approached CEGAT to adjudicate on the issue. Nestle says that Kit Kat is classified as "crisp wafer fingers covered with milk chocolate" and had hitherto been paying excise duty based on this classification.
Unfortunately for Nestle, while the company, is off the hook for past levies, it has lost the benefit it enjoyed because of the earlier classification. An amendment in the Union budget of 1998-99 (presented in June 1998) raised the duty on chocolate coated wafers from 8 per cent to 18 per cent, while plain wafers continue to pay 8 per cent. The excise department had made a detailed investigation of the company's plant in Goa, and also found that in common trade parlance, Kit Kat is considered a chocolate and not a wafer.
The excise department had issued similar notices to Cadbury's over alleged misclassification of Cadbury's Perk and Picnic. Unlike Nestle, Cadbury's continued to pay 18 per cent under protest.
The excise department's contention was that Kit Kat was a chocolate and not a wafer, hence the company should pay a duty of 18 per cent instead of 8 per cent, which is applicable to wafers. The adjudicator of the excise department had ordered the company to pay Rs 12 crore and an additional penalty of an equal amount for misleading classification.
The multinational then approached CEGAT to adjudicate on the issue. Nestle says that Kit Kat is classified as "crisp wafer fingers covered with milk chocolate" and had hitherto been paying excise duty based on this classification.
Unfortunately for Nestle, while the company, is off the hook for past levies, it has lost the benefit it enjoyed because of the earlier classification. An amendment in the Union budget of 1998-99 (presented in June 1998) raised the duty on chocolate coated wafers from 8 per cent to 18 per cent, while plain wafers continue to pay 8 per cent. The excise department had made a detailed investigation of the company's plant in Goa, and also found that in common trade parlance, Kit Kat is considered a chocolate and not a wafer.
The excise department had issued similar notices to Cadbury's over alleged misclassification of Cadbury's Perk and Picnic. Unlike Nestle, Cadbury's continued to pay 18 per cent under protest.
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