East Anglian Food Ingredients (EAFI) was taken to court for the sale of its Hot Curry Powder, which was found to contain the illegal dye last year.
The legal action was taken by Essex County Council Trading Standards after it became aware of the problem in July 2005.
"Food companies have a legal responsibility to ensure that the food they sell is safe and fit for human consumption," said David Statham, director of enforcement at the UK's Food Standards Agency (FSA).
"I very much welcome the outcome of this investigation. This successful prosecution is the result of a lot of hard work by Essex County Council officials during a long investigation."
There is now real pressure on food companies to ensure that they are in full compliance with the law. As of 1 January 2006, 17 old EU regulations have been replaced by five new, far-reaching pieces of legislation.
Failure to comply could lead to the closure of businesses. Food firms must know where their ingredients come from, and be able to trace unsafe food to the source. They must also have a food safety management system based on the HACCP (Hazard Analysis and Critical Control Point) principles.
The Sudan dye issue has focused a great deal of attention on the food industrys ability to meet these criteria. The red dyes, which are used for colouring solvents, oils, waxes, petrol, and shoe and floor polishes, are illegal in food products on account of the body of scientific evidence suggesting they have carcinogenic properties.
They have also been found, however, in some chilli powder imported from India and in a number of food products containing this chilli powder. Investigations are continuing to identify whether any other products contain the following dyes, Sudan I, Sudan II, Sudan III and Sudan IV (otherwise known as scarlet red).
The impact of the Sudan red controversy shows how vital it is for the food industry to ensure that effective traceability systems are put in place. Company-wounding costs from contamination, or even possible contamination, include sales loss, destruction, management time, plus the softer' costs like brand damage, which can have a longer-lasting impact.
The issue has also made consumers less trustful of food companies, and far more aware of product recalls and investigations.
Since July 2003, cargoes of dried and crushed or ground chilli and curry powders coming into any EU Member State have to be accompanied by a certificate showing they have been tested and found to be free of Sudan I. Any consignment that does not have a certificate must be detained for sampling and analysis.
Random sampling must also be undertaken both at ports and by local authorities. The FSA and local authorities randomly sample more than 1000 consignments a year of imported chilli products. All consignments found to contain Sudan I to IV must be destroyed.
When a consignment is split, each part must be accompanied by a copy of the certificate.