Generally, “caramel” is defined as a chewy, light-brown candy made from butter, sugar, and milk or cream. For example: I love eating caramels because they are soft and chewy. In contrast, “Carmel,” is used as a proper noun, and it is a popular beach town in California, known as Carmel-by-the-Sea.
Carmel and caramel are not different spellings of the same word. Caramel is the correct spelling if you’re talking about food or colors.