Preheat your oven to 350°F (180°C) and line a muffin tin with paper liners.
In a bowl, whisk together the flour, baking powder, cinnamon, and salt.
In a separate bowl, cream together the softened butter, granulated sugar, and brown sugar until light and fluffy. Beat in the eggs one at a time, then stir in the vanilla extract.
Gradually add the milk and grated apple to the wet ingredients, then gently fold in the dry ingredients until just combined.
Mix until you have a smooth batter. Fill the muffin liners about ¾ full.
Bake the cupcakes for 18-20 minutes, or until golden brown and a toothpick inserted into the center comes out clean.
While the cupcakes are baking, prepare the frosting: In a bowl, beat the cream cheese and powdered sugar until smooth. Add the heavy cream and mix until creamy.
Let the cupcakes cool completely, then frost with the cream cheese frosting and drizzle with caramel sauce on top.
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