COMMISSIONER OF CENTRAL EXCISE versus MADHAN AGRO INDUSTRIES (I) PVT. LTD. on 13 April 2018

COMMISSIONER OF CENTRAL EXCISE

v.

MADHAN AGRO INDUSTRIES (I) PVT. LTD.

(Civil Appeal No. 1766 of 2009)

APRIL 13, 2018

[RANJAN GOGOI AND R. BANUMATHI, JJ.]

Central Excise Tariff Act, 1985 – Classification – Heading1513 or 3305 – Coconut oil manufactured and packed in smallcontainers by assessee – Whether classifiable under Heading 1513or under Heading 3305 – Held: (Per Ranjan Gogoi, J.) In the instantcase, “Coconut oil” packed in small packages/containers does notcease to be “Coconut oil” and become “Hair oil” though such“coconut oil” may be capable of being used for both purposes andtherefore, is clearly covered by Chapter Heading 1513 and not byChapter Heading 3305 – (Per R. Banumathi, J.) Coconut Oil packedin small container suitable for being used as Hair oil is classifiableunder Chapter Heading 3305 – In view of difference of opinion,Registry directed to place these appeals before the Chief Justice ofIndia for appropriate orders.

Directing the Registry to place the appeals before the ChiefJustice of India in view of difference of opinion, by the Court

HELD:

Per Ranjan Gogoi, J.– 1.1 Under the pre-amendedprovisions of the Act, coconut oil was not covered by any specificHeading and had been classified under Heading 15.03 which dealtwith fixed vegetable oils, other than those of heading No.15.02.On the other hand prior to the amendment Heading 33.05 dealtwith preparations for use on the hair. After coming into force ofthe amendment, Headings 1513 and 3305 in Chapters 15 and 33virtually incorporated the contents of the Headings and sub-headings as contained in the Harmonised System of Nomenclature(HSN). The position following the amendment of the Tariff Act isthat a specific Heading for coconut oil has been introduced in theTariff Act. So far as “preparation for use on the hair” is concerned,the sub-headings have made various such items more specific.

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ANoticeably coconut oil as a preparation for use as hair oil is notincluded in Heading 3305 or any of its Sub-Headings. [Para 22,23 and 26] [412-G-H; 413-A; 414-B-D]

Commissioner of Customs and Central Excise, Goa v.Phil Corporation Limited (2008) 17 SCC 569 :[2008] 2 SCR 531; O.K. Play (India) Ltd. v.Commissioner of Central Excise, Delhi-III, Gurgaon(2005) 2 SCC 460 : [2005] 1 SCR 1069 ; O.K. Play(India) Ltd. v. Commissioner of Central Excise,Delhi-III, Gurgaon (2005) 2 SCC 460 : [2005] 1 SCR1069 ; Central Excise, Goa v. Phil Corporation Limited(2008) 17 SCC 569 : [2008] 2 SCR 531 – relied on.

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Indo-International Industries v. Commissioner of SalesTax, U.P. 1981 (8) E.L.T. 325 (S.C.) ; Asian Paints IndiaLtd. v. Collector of Central Excise 1988 (35) E.L.T. 3(S.C.) ; Shree Baidyanath Ayurved Bhavan Ltd. v.DCollector of Central Excise, Nagpur (1996) 9 SCC402 ; Alpine Industries v. Collector of Central Excise,New Delhi (2003) 3 SCC 111 : [2003] 1 SCR 313– distinguished.

Rajasthan Oil Mills v. Commissioner of Central ExciseE2014 (314) ELT 541 (Tribunal); Collector of CentralExcise, Shillong v. Wood Craft Products Ltd. (1995) 3SCC 454 : [1995] 2 SCR 797 ; Commissioner ofCustoms Camlin Limited v. Commissioner of CentralExcise, Mumbai (2008) 9 SCC 82 : [2008] 12 SCRF1223 ; V.M. Salgaocar & Bros. Pvt. Ltd. v. Commissionerof Income Tax (2000) 5 SCC 373 : [2000] 2 SCR 1169– referred to.

1.2 Chapter Note 3 of Chapter 33 makes it clear thatHeading 3305, inter alia, would apply to products “which aresuitable for use as goods mentioned in the Heading and if they areput up in packings of a kind sold by retail for such use”. Heading3305 deals with “preparations for use on the hair”. In the instantcase, in the packings of coconut oil, the inscription “edible oil”is mentioned. There is no representation, declaration oradvertisement in the packings that the same can be or is meant G

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to be used as a hair oil. In order to classify a product under tariffItem No.3305 of the Act, the requirements of Clauses (a) and (b)of the Explanatory Note to Chapter Note 3 of Harmonised Systemof Nomenclature (HSN) would be required to be satisfied and thegoods/packages must be put up with labels/literatures and otherindications that they are meant for use as perfumery, cosmeticand toilet preparations or the goods must be put up in a formclearly specialised for such use as for example nail varnish mustbe put up in small bottles accompanied with a brush. No suchsituation exists in respect of the coconut oil in question. Theabsence of any explanatory note to Chapter Note 3 of Chapter 33of the Central Excise Tariff Act on the same terms as in the HSNwould hardly make any difference in the conclusion to be reached.[Paras 27, 29] [414-E; 415-G-H; 416-A-B]

Collector of Central Excise, Shillong v. Wood CraftProducts Ltd. (1995) 3 SCC 454 : [1995] 2 SCR 797– relied on.

2. The coconut oil in the instant case would be moreappropriately classifiable under Chapter 15, Heading 1513. Thelegislative history behind Chapter 15; the words and expressionsin Heading 1513 of the Tariff Act; the relevant Heading i.e. 1513in the HSN and the conditions/requirements stipulated in ChapterNote 3 of Chapter 33 of the Central Excise Tariff read in the lightof the relevant provisions of Chapter Note 3 along with theexplanatory notes of Chapter 33 of the HSN, all, would lead tothe irresistible conclusion that coconut oil is classifiable underHeading 1513 of Chapter 15 of the Central Excise Tariff Act.[Para 32] [417-G-H; 418-A-B]

3. The contents of Circular bearing No. No.145/56/95-CXdated 31.08.1995 makes it clear that a product cannot be classifiedunder Chapter 33 Heading 3305 in the absence of any proof thatit is specially prepared “for use on the hair” and in the absence ofany label/literature etc on the container to such effect. Only if thecontainers bear labels/literature indicating that it is meant foruse on the hair that the coconut oil in dispute may meritclassification under Chapter 33. The above position wouldcontinue to hold the field notwithstanding the substitution ofChapter Note II by Chapter Note 3 w.e.f. 28-02-2005 in view of A

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Athe similar stipulations and conditions incorporated in ChapterNo.3 of the HSN read with the Explanatory Note 3 thereto whichthe Court would be obliged to take into account. [Para 34][418-G; 419-A-B]

Raj Oil Mills Ltd. v. Commissioner, Central ExciseB2014 (314) ELT 541 (Tri. - Mumbai) – referred to.

Per R. Banumathi, J:– 1. In view of the amended provisionsof Chapter Note 3 to Chapter 33 and Section Note 2 to SectionVI, ‘Coconut Oil’ packed in small sachets/containers, as they aresuitable for use on hair are classifiable under Chapter 33 and notunder Chapter 15. Chapter Note 3 to Chapter 33 is not phrasedCin an exclusive manner. It merely reiterates the conditions whichare required to be satisfied for a certain product to meritclassification under Heading Tariff Items 33 03 to 33 07. Theexpression, ‘suitable for use as goods of these headings’ and ‘putup in packings of a kind sold by retail for such use’ as used in NoteD3 of Chapter 33 indicate that oils suitable for use as Hair Oil areclassifiable under Heading ...33 05... even if they are not so used.What matters, is the ‘suitability for such use’ and ‘packings of akind sold by retail for such use’. In view of the amended position,if the conditions as specified in Note 3 to Chapter 33 forclassification as ‘Hair Oil, Other’ are satisfied, then the productEhas to be classified only under Heading ...33 05... and no otherclassification is permissible. This positition is further made clearby amended Section Note 2 to Section VI. [Paras 1, 14] [420-B;427-A-C]

2. Section Note 2 to Section VI of the first schedule isFexclusionary in nature, wherein it is inter alia stated that if a goodis classifiable under Heading ...33 05... it cannot be classified inany other Heading of the Schedule. As per the provisions of Note2 to Section VI, if the conditions as specified in Chapter Note 3for classification as ‘Hair Oil’ under Heading ...33 05... aresatisfied, then the product has to be classified only under HeadingG...33 05... and no other classification is permissible. If theconditions as specified under Chapter Note 3 of Chapter 33 forclassification of impugned goods as ‘Hair Oil’ under Heading ...3305... are satisfied then the product is classifiable as goods onlyunder Chapter 33 and by virtue of Section Note 2 to Section VIHno other classification is permissible. [Para 15] [427-E-G]

3. Because of the “suitability for use as hair oil” and being‘put up in packings of the kind sold by retail for such use’, by virtueof Section Note 2 to Section VI, their classification under Chapter15 as ‘fixed vegetables oils’ or ‘coconut oil’ as claimed does notarise in view of the primacy given to Tariff sub-heading ...33 05...by Note 2 to Section VI. Further Note 1 (e) to Chapter 15provides that “the chapter does not cover goods of Section VI”.Note 1(e) to Chapter 15 clearly excludes goods covered underSection VI in which Chapter 33 Tariff Item 33 05 is one of theitems. [Para 16] [427-G-H; 428-A-B, C-D]

Assistant Commissioner v. Marico Industries Ltd. 2006SCC online Raj 446 ; Marico Limited v. Commissioner,Commercial Taxes,UP (2015) 78 VST 423 ; Union ofIndia and Ors. v. Pesticides Manufacturing andFormulators Association of India, (2002) 8 SCC 410 :[2002] 3 Suppl. SCR 231 – referred to.

4. Whether a particular article will fall within a particulartariff heading or not, has to be decided on the basis of as to howthat article is understood in ‘common parlance’ or in ‘commercialworld’ and not as per scientific or technical meaning. Chapter 15of Section 3 of Central Excise Tariff deals with “Animal orVegetable fats and Oils and their cleavage products; prepared ediblefats; Animal or Vegetable Waxes”. Sub-Heading 1513 deals withcoconut (copra). It is a matter of common knowledge that in manyparts of the country ‘Coconut Oil’ is widely used as ‘Hair Oil’and not generally used as edible oil; it is so used as edible oilonly in few areas of the country. No one will normally understand‘Coconut Oil’ to mean only as edible oil because such is not themajor use of ‘edible oil’. Applying the common parlance test andalso ‘end use of the product’, coconut oil is predominantlyunderstood by the users namely dealers/consumers only as ‘HairOil’ and not as ‘edible oil’ and hence, classifiable only underChapter 33 and not under Chapter 15. [Paras 36, 41, 49][438-E-F, 441-E; 444-E-F]

Asian Paints Ltd. v. Collector of Central Excise (1988)2 SCC 470 ; Plasmac Machine Manufacturing Co. (P)Ltd. v. Collector of Central Excise, Bombay (1991) 1Suppl. SCC 57 : [1990] 3 Suppl. SCR 384; DaburIndustries Ltd. v. Commissioner of Central Excise, AB

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SUPREME COURT REPORTS

AJamshedpur (2005) 4 SCC 9 : [2005] 3 SCR 144 ;Commissioner of Central Excise v. Wockhardt LifeSciences Limited (2012) 5 SCC 585 ; Commissioner ofCentral Excise, Delhi v. Carrier Aircon Ltd.(2006) 5SCC 596 : [2006] 3 Suppl. SCR 254 ; Jain ExportsPvt. Ltd. v. Union of India 1987 (29) ELT 753 Del ;BCommissioner of Sales Tax, Madhya Pradesh, Indorev. Jaswant Singh Charan Singh AIR 1967 SC 1454 :[1967] SCR 720 ; Commissioner of Central Excise, NewDelhi v. Connaught Plaza Restaurant Private Ltd., NewDelhi (2012) 13 SCC 639 : [2012] 11 SCR 365 ; AlpineCIndustries v. Collector of Central Excise, New Delhi(2003) 3 SCC 111 ; Commissioner of Central Excise,Calcutta v. Sharma Chemical Works (2003) 5 SCC 60 ;Collector of Central Excise, Shillong v. Woods CraftProduct Ltd. (1995) 3 SCC 454 : [1995] 2 SCR 797 ;Commissioner of Customs and Central Excise, Goa v.DPhil Corporation Limited (2008) 17 SCC 569 : [2008]2 SCR 531 ; O.K. Play (India) Ltd. v. Commissioner ofCentral Excise Delhi-III, Gurgaon (2005) 2 SCC 460 :[2005] 1 SCR 1069 ; Commissioner of Customs andCentral Excise, Goa v. Phil Corporation Ltd. (2008) 17ESCC 569 : [2008] 2 SCR 531 – relied on.

Kothari Products Ltd. v. CCE 2002 (139 ELT 633 (T) ;Srikant Sachets Pvt. Ltd. v. CCE 2005 (180) ELT 401(T); Commissioner of Central Excise v. Essen Products(I) Ltd. 2006 (200) ELT 342 (T) – referred to.

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5.1 The pre-amended Schedule (prior to CETA amendment)also had the same rigours as HSN Notes such as “the productrequiring labels and literatures including the specialized use” (asChapter Note 2 to Chapter 33). However, after the amendmentwith effect from 28.02.2005, the Parliament consciously choseGnot to impose or place the same rigours for classification of goodsunder this Heading and deleted the same. The Parliamentintentionally and consciously deleted these conditions in the new(renumbered) Chapter Note 3 to Chapter 33 of the Tariff Scheduleto the CETA. Therefore, to apply these conditions, post-amendment would be against the intent of the Parliament. Hence, H

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HSN Chapter Note cannot be relied upon to determine theclassification rather the CETA Tariff Chapter Note must beconsidered. [Para 56] [448-G-H; 449-A-B]

5.2 The HSN General Explanatory Notes to Section VI areto an extent in conflict with the Notes contained in Tariff Scheduleto the Central Excise Tariff Act, 1985. Therefore, the Notescontained in the Central Excise Tariff Act shall prevail over theNotes contained in HSN. After the amendment to CETA, thereis a material difference between the relevant notes provided inthe HSN as against those provided in the Tariff Schedule to theCETA, 1985. The general explanation as provided in the HSNcannot be applied as they stand to explain the Notes in the HSNwhich is materially different from the Notes contained in the TariffSchedule of the CETA. [Paras 58, 61] [450-G-H; 452-A-B]

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Collector of Central Excise, Shillong v. Woods CraftProduct Ltd. (1995) 3 SCC 454 : [1995] 2 SCR 797 ;Camlin Limited v. Commissioner of Central Excise,Mumbai (2008) 9 SCC 82 : [2008] 12 SCR 1223 ; RajOil Mills Ltd. v. Commissioner, Central Excise2014 (314) ELT 541 (Tri. - Mumbai) – referred to.

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Case Law Reference

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CIVIL APPELLATE JURISDICTION : Civil Appeal No.1766of 2009.

From the Judgment and Order No. 638/08 dated 25.06.2008 ofthe Customs, Excise & Service Tax Appellate Tribunal, South ZonalBench at Chennai in Appeal No. E/111/08/MAS

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Civil Appeal Nos. 6703-6710 of 2009.

A. K. Panda, Sr. Adv., Ms. Sunita Rani Singh, H.R. Rao,Ms. Kirti Dua, B. Krishna Prasad, Advs. for the Appellant.

S. K. Bagaria, Sr. Adv., Mahesh Agarwal, Abhinav Agrawal,Himanshu Satija, Ms. Manya Bhardwaj, E. C. Agrawala, Advs. for theRespondents.

The Judgments and Order of the Court were delivered by RANJAN GOGOI, J. 1. Aggrieved by the orders passed by theCustoms, Excise and Service Tax Appellate Tribunal (CESTAT)(hereinafter referred to as ‘the Tribunal’) holding that the coconut oilmanufactured and packed in “small containers” by the respondent(s)-assessee(s) is classifiable under Heading 1513 and not under Heading3305 of the Central Excise Tariff Act, 1985 (hereinafter referred to as‘the Act’), the Revenue is in appeal before us.

2. The dispute is with regard to classification of coconut oil inpackings upto 2 litres in case of M/S Madhan Agro Industries therespondent-assessee in Civil Appeal No.1766 of 2009 and packings upto500ml in case of the respondent(s)-assessee(s) in the connected appealsi.e. Civil Appeal Nos.6703-6710 of 2009. The relevant period ofassessment in all the appeals under consideration is subsequent to theamendment of the First Schedule to the Central Excise Tariff Act, 1985by the Amendment Act of 2004 (5 of 2005) which came into force on28.2.2005.

3. The facts, in brief, may be noted at the outset:

The respondent-asessee in Civil Appeal No.1766 of 2009 i.e.M/S Madhan Agro Industries Private Limited is/was a manufacturer of100% pure coconut oil marketed under the brand name “Shanthi”. InCivil Appeal Nos.6703-6710 of 2009 the assesses are four job-workers A

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Aof M/S Marico Limited who had received 100% pure coconut oil fromMarico Limited in bulk and thereafter had packed the same in smallpackages which were supplied back to Marico as per dispatch schedulesissued. The packages in question carried a declaration that they contain100% pure coconut oil. The trademark “Parachute” is also inscribed onthe packs. In Civil Appeal No.1766 of 2009, the packings also includedBpouches of 5 ml. All the packs are marked as “edible oil”.

4. It may also be noticed at this stage that the packing sizesconform to the requirement of Clause 5 of Schedule I of the Edible Oilpackaging (Regulation) Order 1998 read with serial No.10 Schedule IIIof the Standards of Weights and Measures (packaged commodities)CRules 1977.

5. While the assessee(s) contended that coconut oil in smallpackings is also classifiable as coconut oil under Heading 1513 the revenueclaimed classification of the said products as “hair oil” under Heading3305 while conceding that coconut oil in large packings i.e. beyond 2DKgs. merited classification under Heading 1513. This is the core disputebetween the parties in the present case.

6. The relevant Headings before and after the Amendment of theCentral Excise Tariff Act effective 28-02-2005 will require a specificnotice and is therefore extracted below:E

BEFORE AMENDMENT

ANIMAL OR VEGETABLE FATS AND OILS AND THEIRCLEAVAGE PRODUCTS; PREPARED EDIBLE FATS;FANIMAL OR VEGETABLE WAXES

NOTES

1. This Chapter does not cover :

(a) pig fat or poultry fat;

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(b) cocoa butter, fat and oil (Chapter 18);

(c) Edible preparations of Chapter 21;

(d) Greaves and residues of Chapter 23;

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COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGROINDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

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(e) Fatty acids, prepared waxes, medicaments, paints,varnishes, soap, perfumery, cosmetic or toilet preparations,sulphonated oils or other goods of Section VI; or (f) Factice derived from oils (Chapter 40).

2. Soap-stocks, oil foots and dregs, stearin pitch, glycerol pitch andBwool grease residues fall in heading No.15.073. In this Chapter, the expression ‘fixed vegetable oils’ means oilswhich cannot easily be distilled without decomposition, whichare not volatile and which cannot be carried off by superheatedsteam (which decomposes and saponifies them).C

4. In relation to the products of sub-heading Nos.1502.00, 1503.00,1504.00 and 1508.90, labeling or relabeling of containers andrepacking from bulk packs to retail packs or the adoption of anyother treatment to render the product marketable to the consumer,shall amount to “manufacture”.

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[2018] 6 S.C.R.

BEFORE AMENDMENT

ESSENTIAL OILS AND RESINOIDS; PERFUMERY,COSMETIC OR TOILET PREPARATIONS

Notes :

1. This Chapter does not cover :

(a) Natural oleoresins or vegetable extracts of headingNo.13.01; (b) Soap or other products of heading 34.01;

(c) Gum, wood or sulphate turpentine or other products ofChapter 38; or (d) Perfumery, cosmetics and toilet preparations containingalcohol or opium, Indian hemp or other narcotics and for thispurpose, these expressions have the meanings respectivelyassigned to them in Section 2 of the Medicinal and ToiletPreparations (Excise Duties) Act, 1955 (16 of 1955).

2. Heading Nos.33.03 to 33.07 apply, inter alia, to products,whether or not mixed (other than aqueous distilltes andaqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings with labels,literature or other indications that they are for use ascosmetics or toilet preparations or put up in a form clearlyspecialised to such use and includes products whether ornot they contain subsidiary pharmaceutical or antisepticconstituents, or are held out as having subsidiary curativeor prophylactic value.

3. The ‘perfumery, cosmetic or toilet preparations’ in headingNo.33.07 applies, inter alia, to the following products : scentedsachets; perfumed papers and papers impregnated or coated withcosmetics; contact lens or artificial eye solutions; wadding, feltand nonwovens, impregnated, coated or covered with perfume orcosmetics; animal toilet preparations.

4. In relation to products of heading Nos.33.03, 33.04 and 33.05,conversion of powder into tablets, labelling or relabelling ofcontainers intended for consumers or repacking from bulk packsto retail packs or the adoption of any other treatment to renderthe products marketable to the consumer, shall be construed as‘manufacture’

5. Heading No.33.04 applies, inter alia, to the following products: beauty creams, vanishing creams, cold creams, make-up creams,cleansing creams, skinfoods, skin tonics, face powders, babypowders, toilet powders, talcum powders and grease paints,lipsticks, eye shadow and eyebrow pencils, nail polishes andvarnishes, cuticle removers and other preparations for use inmanicure or chiropody and barrier creams to give protection againstskin irritants.

6. Heading No.33.05 applies, inter alia, to the following products;brilliantines, perfumed hair oils, hair lotions, pomades and creams,hair dyes (in whatever form), shampoos, whether or not containingsoap or organic surface active agents.

7. The expression “odoriferous substances” in heading 33.02 refersonly to the substances of heading No.33.01 to odoriferousconstituents isolated from those substances or to syntheticaromatics.

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AChapter 33 Cosmetic or toilet preparations, essential oils etc.Heading Sub-heading Description of goods Rate of No. No. duty 33.05Preparations for use on the hairB3305.10 -Perfumed for use on the hair 16% -Other 3305.91-Hair fixer16%3305.99 -Other 16% C POST AMENDMENT

CHAPTER 15

Animal or Vegetable fats and Oils and their cleavage products;prepared edible fats; Animal or Vegetable WaxesDNOTES

1. This Chapter does not cover :

(a) pig fat or poultry fat of heading 0209; (b) cocoa butter, fat or oil (heading 1804); E

(c) edible preparations containing by weight more than 15% ofthe products of heading 0405 (generally Chapter 21); (d) greaves (heading 2301) or residues of headings 2304 to2306; F(e) fatty acids, prepared waxes, medicaments, paints,varnishes, soap, perfumery, cosmetic or toiletpreparations, sulphonated oils or other goods of SectionVI; or (f) factice derived from oils (heading 4002).

G2. Heading 1509 does not apply to oils obtained from olives bysolvent extraction (heading 1510).

3. Heading 1518 does not cover fats or oils or their fractions,merely denatured, which are to be classified in the headingappropriate to the corresponding undenatured fats and oils andHtheir fractions.

c.Rate of duty

16%

4. Soap stocks, oil foots and dregs, stearin pitch, glycerol pitchand wool grease residues fall in heading 1522.

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5. In relation to the products of heading 1507 or 1508 or 1509 or1510 or 1511 or 1512 or 1513 or 1514 or 1515, or 1518; sub-heading 1516 20 or 1517 90; or tariff item 1517 10 10 or 1517 1021 or 1517 10 29, labelling or relabelling of containers or repackingBfrom bulk packs to retail packs or the adoption of any othertreatment to render the product marketable to the consumer, shallamount to ‘manufacture’.

6. In relation to refined edible vegetable oils falling under headings1507 to 1515, the process of refining, that is to say, any one ormore of the processes, namely, treatment of crude oil with analkali, bleaching and deodorisation, shall amount to ‘manufacture’.

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Sub-heading Note :

1. For the purpose of sub-headings 1514 11 and 1514 19, theexpression “low erucic acid rape or colza oil” means the fixedDoil which has an erucic acid content of less than 2% by weight.

Supplementary Notes :

1. In this Chapter, “edible grade”, in respect of a goods (i.e.edible oil) specified in Appendix B to the Prevention of FoodEAdulteration Rules, 1955, means the standard of quality specifiedfor such goods in that Appendix.

2. In this Chapter, “fixed vegetable oil” means oils which cannoteasily be distilled without decomposition, which are not volatileand which cannot be carried off by superheated steam (whichFdecomposes and saponifies them).

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[2018] 6 S.C.R.

A1513 11 00 -Crude oil kg. 8% 1513 19 00-Other kg . 8% -Palm k ernel or bab assu oil and fractions th ereo f: 1513 21 -Crude oil : B1513 21 10 -Palm kernel oil kg. 8% 1513 21 20-Babas su oil kg. 8% 1513 29 -Other C1513 29 10-Palm kernel oil and its fractions kg. 8% 1513 29 20-Babas su oil and its fractions edible kg . 8% grade 1513 29 30-Babas su oil and its fractions, other kg .8%than edible grade D1513 29 90-Other kg. 8%

POST AMENDMENT

Essential Oils and Resinoids, Perfumery, Cosmetic orEToilet Preparations NOTES

1. This Chapter does not cover:

a) natural oleoresins or vegetable extracts of heading 1301 orF1302; (b) soap or other products of heading 3401;

(c) gum, wood or sulphate turpentine or other products of heading3805; or G(d) perfumery, cosmetics and toilet preparations containing alcoholor opium, Indian hemp or other narcotics and for this purpose,these expressions have the meanings respectively assigned to themin section 2 of the Medicinal and Toilet Preparations (ExciseDuties) Act, 1955 (16 of 1955).

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2. The expression “odoriferous substances” in heading 3302 refersonly to the substances of heading 3301, to odoriferous constituentsisolated from those substances or to synthetic aromatics.

3. Headings 3303 to 3307 apply, inter alia, to products,whether or not mixed (other than aqueous distillates andaqueous solutions of essential oils), suitable for use asgoods of these headings and put up in packings of a kindsold by retail for such use.

4. The expression “perfumery, cosmetic or toilet preparations” inheading 3307 applies, inter alia, to the following products: centedsachets; odoriferous preparations which operate by burning;perfumed papers and papers impregnated or coated with cosmetics;contact lens or artificial eye solution; wadding, felt and nonwovens,impregnated, coated or covered with perfume or cosmetics; animaltoilet preparations.

5. In relation to products of headings 3303, 3304 and 3305,conversion of powder into tablets, labelling or relabelling ofcontainers intended for consumers or repacking from bulk packsto retail packs or the adoption of any other treatment to renderthe products marketable to the consumer, shall be construed as‘manufacture’.

Tariff Item Description of Goods Unit Rate of duty3305 Preparations for use on the hair 3305 10-Shampoos :kg.16%3305 10 10– Containing spiritkg.16%3305 10 90– Other3305 20 00 -Preparations for permanent waving kg. 16%or straightening3305 30 00 -Hair lacquer 3305 90-Other :– Hair oil :3305 90 11 – Perfumed kg. 16%

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7. We may now take note of the arguments advanced on behalfCof the rival parties:

Shri Panda, learned Senior Counsel appearing for the appellant-Union of India has urged that a process of interpretation and considerationof the Rules of General Interpretation and relevant Chapter Notescontained in the Act alongwith the results of the market survey undertakenDby the Revenue would lead to the conclusion that classification claimedby the Revenue is fully justified and learned Tribunal (CESTAT) was notcorrect in rejecting the same. Specifically, Shri Panda has referred tothe Rule 1 of the General Rules for the Interpretation of the Schedule tothe Tariff Act; Chapter Note 1 (e) to 15; Section Note 2 to Section VI

and Chapter Note 3 to Chapter 33 in support of the contentions advanced.EApart from relying on the aforesaid provisions of the Act, Shri Pandahas submitted before the Court that an elaborate market survey of theproduct undertaken had indicated that coconut oil in smaller packagesare understood in the market and purchased as ‘hair oil’ and not as‘edible oil’. Relying on several decisions of this Court, the details ofFwhich would be noticed later, Shri Panda has submitted that classificationof the product must follow the Common Parlance Test in which eventthe coconut oil in dispute is eminently classifiable under Chapter 33,Heading 3305 and not under Chapter 15, Heading 1513 as claimed bythe assessee.

G8. On the other hand, Shri Bagaria, learned Senior Counsel forthe respondents-assessees has submitted that none of the provisionsrelating to Interpretation of the Schedule to the Act and the ChapterNotes relied upon by the Revenue would be applicable and relevant tothe present case so as to warrant classification of the product underChapter 33. Infact, Shri Bagaria has urged that prior to the coming intoH

force of the Amendment Act 5 of 2005, the classification of coconut oilwas claimed and allowed under Chapter 15 Heading 1503 which dealtwith Fixed vegetable oils. It is only after the amendment that Heading1513 was incorporated dealing specifically with coconut oil. Shri Bagariahas also pointed out that amendment made in the year 2005 effectivefrom 28.02.2005 was for the sole purpose of fine tuning of the tariff withthe Harmonised System of Nomenclature (HSN). In this regard, ShriBagaria has drawn attention to the Statement of Objects and Reasonsof the Amendment Bill wherein it had been clearly stated that the“Department of Revenue has developed eight digit classificationcode based on Harmonised System of Nomenclature (HSN) for thepurpose of classification of excisable goods in India”. Shri Bagariahas also drawn attention of the Court to the fact that in the aforesaidObjects and Reasons, it has been further stated that “the proposedamendment does not make any change in the existing rates of thecentral excise duties and hence the proposed changes do not involverevenue implication”.

9. Referring to the provisions of General Rules for Interpretationand the Chapter and Section Notes relied upon by Shri Panda and drawingthe attention of the Court to the Chapter Note 3 and Explanatory Noteto Chapter Note 3 in the Harmonised System of Nomenclature (HSN),Shri Bagaria has submitted that there is no manner of doubt that coconutoil, regardless of the size of packings, is classifiable under Chapter 15 ofthe Tariff Act and by no means, even remotely, under Chapter 33,specifically Heading 33.05 which deals with “preparations for use onthe hair”. In this regard Shri Bagaria has contended that there is nodispute on the fact that on all the packages of coconut oil cleared by oron behalf of the respondents-assesses, the inscription “edible oil” hasbeen clearly affixed and there is no advertisement/declaration/representation to the effect that the coconut oil is meant or intended forused as hair oil. In this regard, Shri Bagaria has also drawn the attentionof the Court to Central Excise Notification No.145/56/95-CX dated31.08.1995 whereby the following points were clarified by the CBEC inparagraphs 5 to 9 of the Circular with regard to classification of coconutoil prior to the Amendment of the Act in the Year 2005 :

(i) The Heading 33.05 covers “preparations for use on the hair”.Coconut oil is not a preparation for use on the hair. It is fixedvegetable oil capable of being used as cooking medium (or for AB

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Aother purposes including for application on the hair). In the absenceof any proof that it is specially prepared for use on the hair or anylabel/literature/indications on the containers to that effect, thesubject goods cannot be classified under heading 3305 simplybecause they were packed in small containers and applied bysome sections of the society on the hair.B

(ii) Coconut oil, whether pure or refined and whether packed insmall or large containers merits classification under Heading 1503.

(iii) Only if the containers bear labels/literatures etc. indicatingthat it is meant for application on hair as specified in Note 2 ofCChapter 33 and/or if the coconut oil is used as additives or hasundergone a process which make it a “preparation for use onhair”, that coconut oil may merit classification under Chapter 33.

10. It is submitted that having regard to the object behind theAmendment effected in the year 2005, the efficacy of the above circular,Dthough issued when Chapter No.2 of Chapter 33 (already extracted)was in force, would continue even in the post amendment era whenChapter No.2 has now been substituted by Note 3 (Chapter 33).

11. An order dated 03.06.2009 of the Central Board of Exciseand Customs (CBEC) under Section 37B of the Central Excise Act hasEbeen placed before us. The said order is to the effect that if coconut oilis packed in containers upto 200 ml it may be considered generally foruse as hair oil. If, however, the same coconut oil is packed in one litre ortwo litres pack, classification would be under Chapter 15 as coconut oil.It has been urged by Shri Bagaria that the learned Appellate Tribunal inRajasthan Oil Mills Vs. Commissioner of Central Excise[1] had takenFthe view that repacking of coconut oil from bulk containers in retail packof 200 ml or less would not make the item classifiable under Chapter 33.It is submitted that the Revenue’s Appeal against the aforesaid order ofthe learned Tribunal i.e. Civil appeal Nos.2023-2037 of 2014 has beendismissed by this Court by Order dated 07-12-2014 following which theGCBEC has issued another circular bearing no.1007/14/2015-CX dated12-10-2015 withdrawing the earlier Circular dated 03-06-2009 anddirecting that the issue of classification may be decided by the fieldofficers “taking into consideration the facts of the case read with thejudicial pronouncements”.

12014 (314) ELT 541 (Tribunal)H

12. Disputes with regard to classification may arise in differentsituations and circumstances. Whether a particular item/product wouldfall under one or the other Chapter/Heading of a Chapter is one suchsituation. A dispute may also arise on a claim that though the item fallswithin a particular Heading, owing to multifarious reasons, some part ofthe same item may fall under another Heading of the same Chapter or adifferent Chapter altogether. All disputes with regard to classification ofgoods manufactured and cleared has to be primarily decided and resolvedwithin the frame work of the Act and on the basis of Rules forInterpretation and the various Chapter Notes and Supplementary Notescontained in the Tariff Act. The understanding of the CBEC and otherauthorities exercising jurisdiction under the Act in respect of the Rulesfor Interpretation and the Chapter Notes, as may be reflected in theCirculars/Memos issued from time to time, can be an useful aid inunderstanding and resolving disputed issues of classification. TheHarmonised System of Nomenclature (HSN) and the Chapter Notesand Explanatory Notes thereto, on which the Tariff Act has beenremodelled by the Amendment, has been repeatedly acknowledged bythis Court to be a safe guide for resolution of disputes with regard toclassification under the Tariff Act. The opinions rendered by this Courtin Collector of Central Excise, Shillong Vs. Wood Craft ProductsLtd.[2]; Commissioner of Customs and Central Excise, Goa Vs. PhilCorporation Limited[3]; O.K. Play (India) Ltd. Vs. Commissioner ofCentral Excise, Delhi-III, Gurgaon[4] may be illustratively referred toin this regard. These are the different tools that would be available tothe Court to deal with disputes with regard to classification which mustbe resorted to in the first instance.

13. To what extent the common parlance test would be applicablein determining the classification of the product in question is the firstquestion that may be dealt in view of the very emphatic arguments madeon behalf of the Revenue on this question.

14. Shri A.K. Panda, learned Senior Counsel for the Revenue hasurged that a detailed market survey undertaken by the Revenue indicatedthat the consumers who purchase “coconut oil” in small containersinvariably make the said purchase for use as hair oil and not as edible oil.

2(1995) 3 SCC 4543(2008) 17 SCC 5694(2005) 2 SCC 460

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AIt has, therefore, been urged by Shri Panda that the product in dispute inthe present case i.e. “coconut oil” in small packings should be classifiedunder Heading 3305 and not under Heading 1513. To support thecontention advanced Shri Panda has referred to several pronouncementsof this Court wherein it has been held that the object of classification ofgoods for the purpose of Central Excise and other Fiscal Legislation isBto raise the revenue and, therefore, scientific and technical meaningmust be avoided and the particular product as understood in trade and incommon parlance should be preferred.

15. In Indo-International Industries vs. Commissioner of SalesCTax, U.P.[5] where the common parlance test was adopted to resolve thedispute of classification this Court was dealing with the question as towhether hypodermic clinical syringes could be regarded as “glass ware”under Entry No.39 of the First Schedule to the U.P. Sales Tax Act,1948.

D16. Similarly, in Asian Paints India Ltd. vs. Collector of CentralExcise[6] the question before this Court was whether “Decoplast”manufactured by the Asian Paints India Ltd. was classifiable under TariffItem No. 14(1)(3)(iv) of the First Schedule of the Central Excise Tariffas “plastic emulsion paint” or under Tariff Item No.14(1)(v) as “paintsnot otherwise specified”.E

17. In Shree Baidyanath Ayurved Bhavan Ltd. vs. Collectorof Central Excise, Nagpur[7] the issue before this Court was as towhether Dant Manjan Lal manufactured by the Assessee was medicineso as to be covered by Exemption Notification No.62/78-CE dated 1stMarch, 1978 or a toilet preparation.F

18. In Alpine Industries vs. Collector of Central Excise, NewDelhi[8] the question that arose for consideration before this Court waswhether “Lip Salve” is classifiable under Heading 33.04 of the CentralExcise Tariff Act, 1985 as “a preparation for care of skin” or whetherGas a “medicament” under Heading 30.03 thereof.

H

51981 (8) E.L.T. 325 (S.C.)61988 (35) E.L.T. 3 (S.C.)7(1996) 9 SCC 4028(2003) 3 SCC 111

19. In all the aforesaid decisions, this Court has held that-[Paragraph 5 in Alpine Industries (supra)]:

“5. It is well established that in interpreting tariff entries in taxationstatute like the Excise Act, where the primary object is to raiserevenue and for that purpose various products are differentlyclassified, the entries are not to be understood in their scientificand technical meaning. The terms and expressions used in tariffhave to be understood by their popular meaning that is the meaningthat is attached to them by those using the product. See thedecision of the Supreme Court on the dispute regardingclassification for excise duty, the product – Lal Dant Manjanmanufactured by Shree Baidyanath Ayurved Bhavan Ltd.reported in the case of Shree Baidyanath Ayurved Bhavan Ltd. v.CCE[9]. The manufacturer claimed the product to be an Ayurvedicmedicinal preparation product for dental care. The view of theTribunal was upheld by this Court by holding (at SCC pp.404-05,para 3) that “ordinarily a medicine is prescribed by a medicalpractitioner and it is used for a limited time and not every dayunless it is so prescribed to deal with a specific disease likediabetes”.”

20. A consideration of the facts of the cases, referred to above,however, would go to show that the basic dispute/conflict in the saidcases was whether a product which was not defined or specificallydealt with by any of the Headings/Entries would fall under one or anotherHeading/Entry of the Central Excise Tariff Act. The present is not acase where the identity of the product would require any debate as wasthe issue in the cases referred to above where the common parlancetest was applied. In the present case, the product is “coconut oil”, whichis clearly covered by Chapter Heading 1513 and not by Chapter Heading3305. What calls for a decision in the present case is whether “coconutoil” which otherwise is covered by Heading 1513 of Chapter 15, if packedin small containers and pouches/sachets, would cease to be “coconutoil” falling under Chapter Heading 1513 and would be covered by Heading“preparations for use on the hair” covered by Entry 3305 of Chapter 33.This is a question which has to be resolved not on the basis of theperception of the consumer or the customer but on the basis of theheadings and sub-headings and on an interpretation of the provisions of 9(1996) 9 SCC 402

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Athe relevant Chapter Notes, if required. Issues of classification have tobe resolved within the framework of the statutory provision. “Coconutoil” packed in small packages/containers does not cease to be “coconutoil” and become “hair oil” though such “coconut oil” may be capable ofbeing used for both purposes. The understanding of the product in themarket or amongst the consumers will always have a limited role in thisBregard. The above has been the view of this Court in O.K. Play (India)Ltd. Vs. Commissioner of Central Excise, Delhi-III, Gurgaon(supra) (para 13) and Commissioner of Customs and Central Excise,Goa Vs. Phil Corporation Ltd. (supra)(para 17).

21. We may now turn to examine the General Rules forCInterpretation and the Chapter Notes relied upon by the Revenue.

“[THE FIRST SCHEDULE] – EXCISE TARIFF

RULES FOR THE INTERPRETATION OF THIS SCHEDULE

1. The titles of Sections and Chapters are provided for ease ofDreference only; for legal purposes, classification shall be determinedaccording to the terms of the headings and any relative Section orChapter Notes and, provided such headings or Notes do nototherwise require, according to the provisions hereinafter contained.

2. (a) Any reference in a heading to goods shall be taken to includeEa reference to those goods incomplete or unfinished, providedthat, the incomplete or unfinished goods have the essentialcharacter of the complete or finished goods. It shall also be takento include a reference to those goods complete or finished (orfalling to be classified as complete or finished by virtue of thisrule), removed unassembled or disassembled.F

(b) Any reference in a heading to a material or substance shall betaken to include a reference to mixtures or combinations of thatmaterial or substance with other materials or substances. Anyreference to goods of a given material or substance shall be takento include a reference to goods consisting wholly or partly of suchGmaterial or substance. The classification of goods consisting ofmore than one material or substance shall be according to theprinciples contained in Rule 3.

3. When by application of sub-rule (b) of rule 2 or for any otherreason, goods are, prima facie, classifiable under two or moreHheadings, classification shall be effected as follows:

(a) The heading which provides the most specific description shallbe preferred to headings providing a more general description.However, when two or more headings each refer to part only ofthe materials or substances contained in mixed or composite goodsor to part only of the items in a set sale, those headings are to beregarded as equally specific in relation to those goods, even if oneof them gives a more complete or precise description of the goods.

(b) mixtures, composite goods consisting of different materials ormade up of different components, and goods put up in sets forretail sale, which cannot be classified by reference to (a), shall beclassified as if they consisted of the material or component whichgives them their essential character, insofar as this criterion isapplicable.

(c) when goods cannot be classified by reference to (a) or (b),they shall be classified under the heading which occurs last innumerical order among those which equally merit consideration.

4. Goods which cannot be classified in accordance with the aboverules shall be classified under the heading appropriate to the goodsto which they are most akin.

5. For legal purposes, the classification of goods in the sub-headings of a heading shall be determined according to the termsof those sub-headings and any related sub-heading Notes and,mutatis mutandis, to the above rules, on the understanding thatonly sub-headings at the same level are comparable. For thepurposes of this rule the relative Section and Chapter Notes alsoapply, unless the context otherwise requires.

Chapter Note 1(e) to Chapter 15

Animal or Vegetable fats and Oils and their cleavage products;prepared edible fats; Animal or Vegetable Waxes NOTES

1. This Chapter does not cover :

(a) xxxxxx

(b) xxxxxx

(c) xxxxxx

(d) xxxxxxxx

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412SUPREME COURT REPORTS

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(e) fatty acids, prepared waxes, medicaments, paints, varnishes,soap, perfumery, cosmetic or toilet preparations, sulphonated oilsor other goods of Section VI; or”

------------------------------------------------------------------------------- SECTION NOTE II to SECTION VI

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SECTION VI

PRODUCT OF THE CHEMICAL OR ALLIED INDUSTRIES

Notes :

1. xxxxxx

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2. Subject to Note 1 above, goods classifiable in heading 3004,3005, 3006, 3212, 3303, 3304, 3305, 3306, 3307, 3506, 3707 or3808 by reason of being put up in measured doses or for retailsale are to be classified in those headings and in no other headingof this Schedule.

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EESSENTIAL OILS AND RESINOIDS; PERFUMERY,COSMETIC OR TOILET PREPARATIONS

Notes :

1. xxxxx

2. xxxxx

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3. Headings 3303 to 3307 apply, inter alia, to products, whetheror not mixed (other than aqueous distillates and aqueous solutionsof essential oils), suitable for use as goods of these headings andput up in packings of a kind sold by retail for such use.

22. It has already been noticed that under the pre-amendedprovisions of the Act coconut oil was not covered by any specific Headingand had been classified under Heading 15.03 which dealt with fixedvegetable oils, other than those of heading No.15.02.

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23. On the other hand prior to the amendment Heading 33.05dealing with preparations for use on the hair was in the following terms:

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--------------------------------------------------------------------------------33.05 Preparations for use on the hair 3305.10--Perfumed hair oils16%--Other :B 3305.91--Hair fixer16% 3305.99--Other16%

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24. Heading 15.13 of the Harmonised System of Nomenclature(HSN) specifically deals with coconut oil in the following manner:

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“15.13 COCONUT (COPRA), PALM KERNEL OR BABASSUOIL AND FRACTIONS THEREOF, WHETHER OR NOTREFINED, BUT NOT CHEMICALLY MODIFIED (+)

- Coconut (copra) oil and its fractions :

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1513.11 - Crude oil

1513.19 - Other

- Palm kernel or babassu oil and fractions thereof:

1513.21 - Crude oil

1513.29 - Other”

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25. Heading 33.05 of the HSN is in the following terms:

“33.05 - PREPARATIONS FOR USE ON THE HAIR3305.10 - Shampoos 3305.20 - Preparation for permanent waving or straightening F

3305.30 - Hair lacquers3305.90 - Other

The Heading covers :

(1) Shampoos, containing soap or other organic surface-activeagents (see Note 1(c) to Chapter 34), and other shampoos. Allthese shampoos may contain subsidiary pharmaceutical ordisinfectant constituents, even if they have therapeutic orprophylactic properties (see Note 1(d) to Chapter 30)

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A(2) Preparations for permanent waving or straightening

(3) Hair lacquers (sometimes known as “hair sprays”)

(4) Other hair preparations, such as brilliantines, hair oils, creams(“pomades”) and dressings: hair dyes and bleaches used on theBhair, cream-rinses.

26. After coming into force of the amendment, Headings 1513and 3305 in Chapters 15 and 33 virtually incorporated the contents ofthe Headings and sub-headings as contained in the Harmonised Systemof Nomenclature (HSN). The position that is noticeable following theCamendment of the Tariff Act is that a specific Heading for coconut oilhas been introduced in the Tariff Act. So far as “preparation for useon the hair” is concerned, the sub-headings have made various suchitems more specific. Significantly and noticeably coconut oil as apreparation for use as hair oil is not included in Heading 3305 or any ofits Sub-Headings.D

27. Chapter Note 3 of Chapter 33 makes it clear that Heading3305, inter alia, would apply to products “which are suitable for useas goods mentioned in the Heading and if they are put up in packingsof a kind sold by retail for such use”. Heading 3305 deals with“preparations for use on the hair”. In the present case, it is not inEdispute that in the packings of coconut oil the inscription “edible oil” ismentioned. There is no representation, declaration or advertisement inthe packings that the same can be or is meant to be used as a hair oil.

28. Chapter Note II of Chapter 33 prior to amendment and whichFhas been substituted by Chapter Note 3 was more explicit in requiringpacking put up with:

“labels, literature or other indications that they are for use ascosmetics or toilet preparations or put up in a form clearlyspecialized to such use and includes products whether or not theyGcontain subsidiary pharmaceutical or antiseptic constituents, orare held out as having subsidiary curative or prophylactic value.”

However, the changes brought about/deletions made by theamendment would hardly be significant inasmuch as Chapter Note 3 ofChapter 33 (post-amendment) introduced by the Amendment Act in place H

of the erstwhile Chapter No.2 is identical with Chapter 3 Note of Chapter33 in Harmonised System of Nomenclature (HSN) which must guideand illuminate the correct process of interpretation and understanding.Furthermore, there is an explanatory note in the Harmonised System ofNomenclature relating to Chapter Note 3 the relevant part of which isas follows:

General

“Headings 33.03 to 33.07 include products, whether or not mixed(other than aqueous distillates and aqueous solutions of essentialoils), suitable for use as goods of these headings and put up inpackings of a kind sold by retail for such sue (see Note 3 to thisChapter).

The products of headings 33.03 to 33.07 remain in these headingswhether or not they contain subsidiary pharmaceutical ordisinfectant constituents, or are held out as having subsidiarytherapeutic or prophylactic value (see Note 1(d) to Chapter 30).However, prepared room deodorizers remain classified in heading33.07 even if they have disinfectant properties of more than asubsidiary nature.

Preparations (e.g. varnish) and unmixed products (e.g.,unperfumed powdered talc, fuller’s earth, aceton, alum) whichare suitable for other uses in addition to those described aboveare classified in these headings only) when they are :

(a) In packings of a kind sold to the consumer and put up withlabels, literature or other indications that they are for use asperfumery, cosmetic or toilet preparations, or as room deodorisers;or (b) Put up in a form clearly specialised to such use (e.g. nailvarnish put up in small bottles furnished with the brush requiredfor applying the varnish). “

29. Explanatory note to Chapter Note 3 of HSN makes thecontents of the Chapter Note more clear. In order to classify a productunder tariff Item No.3305 of the Act, the requirements of Clauses (a)and (b) of the Explanatory Note to Chapter Note 3 of Harmonised System A

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Aof Nomenclature (HSN) would be required to be satisfied and the goods/packages must be put up with labels/literatures and other indicationsthat they are meant for use as perfumery, cosmetic and toilet preparationsor the goods must be put up in a form clearly specialised for such use asfor example nail varnish must be put up in small bottles accompaniedwith a brush. No such situation exists in respect of the coconut oil inBquestion. The absence of any explanatory note to Chapter Note 3 ofChapter 33 of the Central Excise Tariff Act on the same terms as in theHSN would hardly make any difference in the conclusion to be reachedin view of the clear and consistent pronouncement of this Court firstexpressed in Collector of Central Excise, Shillong Vs. Wood CraftCProducts Ltd. (supra) to the following effect:

“12. It is significant, as expressly stated, in the Statement ofObjects and Reasons, that the Central excise tariffs are based onthe HSN and the internationally accepted nomenclature was takeninto account to “reduce disputes on account of tariff classification”.DAccordingly, for resolving any dispute relating to tariffclassification, a safe guide is the internationally acceptednomenclature emerging from the HSN. This being the expresslyacknowledged basis of the structure of Central excise tariff in theAct and the tariff classification made therein, in case of any doubtEthe HSN is a safe guide for ascertaining the true meaning of anyexpression used in the Act. The ISI Glossary of Terms has adifferent purpose and, therefore, the specific purpose of tariffclassification for which the internationally accepted nomenclaturein HSN has been adopted, for enacting the Central Excise TariffAct, 1985, must be preferred, in case of any difference betweenFthe meaning of the expression given in the HSN and the meaningof that term given in the Glossary of Terms of the ISI.

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18. We are of the view that the Tribunal as well as the HighCourt fell into the error of overlooking the fact that the structureof the Central excise tariff is based on the internationally acceptednomenclature found in the HSN and, therefore, any dispute relatingto tariff classification must, as far as possible, be resolved withreference to the nomenclature indicated by the HSN unless therebe an express different intention indicated by the Central ExciseTariff Act, 1985 itself. The definition of a term in the ISI Glossary,

which has a different purpose, cannot, in case of a conflict, overridethe clear indication of the meaning of an identical expression inthe same context in the HSN. In the HSN, block board is includedwithin the meaning of the expression “similar laminated wood” inthe same context of classification of block board. Since the CentralExcise Tariff Act, 1985 is enacted on the basis and pattern of theHSN, the same expression used in the Act must, as far aspracticable, be construed to have the meaning which is expresslygiven to it in the HSN when there is no indication in the Indiantariff of a different intention.”

30. The views expressed by this Court as to when the HSN canbe ignored including the view in Camlin Limited Vs. Commissioner ofCentral Excise, Mumbai[10]are not contrary to what has been expressedherein; rather the said views have been expressed in situations wherethe legislative intention to depart from the HSN is clear and unambiguous.Illustratively, the HSN would not permit the Court to import an entrymentioned in the HSN but not in the Tariff Act. The same principle willhowever not apply to the Chapter notes and the Explanatory notes whichare tools for understanding the Entries/Headings. The opinions in O.K.Play (India) Ltd. Vs. Commissioner of Central Excise, Delhi-III,Gurgaon (supra) and Commissioner of Customs and Central Excise,Goa Vs. Phil Corporation Limited (supra) reiterating the view inCollector of Central Excise, Shillong Vs. Wood Craft Products Ltd.(supra) and the specific stress on the Chapter Notes and explanatorynotes in the HSN as permissible and useful aids in understanding theHeadings/entries in the Central Excise Tariff Act cannot be lost sight of.

31. The photo personality of a cine star with flowing, hair, asurged on behalf of the Revenue, may not be convincingly determinative.Also the fact that some of the smaller containers of coconut oil havenozzles for release of drops of coconut oil from the container will notsatisfy the above requirement inasmuch as the materials collected bythe Revenue in the course of adjudication proceedings indicate that theamount of coconut oil used in cooking, at times, may be, minimum.

32. The above conspectus of fact can reasonably lead to theconclusion that the coconut oil in dispute in the present case would bemore appropriately classifiable under Chapter 15, Heading 1513. If the10(2008) 9 SCC 82

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Aabove is a possible and reasonable conclusion and we are inclined tohold as such, the contention of the Revenue with regard to application ofRules 1 and 3 of the General Rules for Interpretation; Chapter Note1(e) to Chapter 15; Note 2 to Section VI will not at all be relevant in thisregard. The legislative history behind Chapter 15; the words andexpressions in Heading 1513 of the Tariff Act; the relevant Heading i.e.B1513 in the HSN and the conditions/requirements stipulated in ChapterNote 3 of Chapter 33 of the Central Excise Tariff read in the light of therelevant provisions of Chapter Note 3 along with the explanatory notesof Chapter 33 of the HSN, all, would lead to the irresistible conclusionthat coconut oil is classifiable under Heading 1513 of Chapter 15 of theCCentral Excise Tariff Act. In this regard, it may be noticed that Rule 3 ofthe Rules of General Interpretation would apply only in a situation wherethe product is classifiable under two different Chapters, a position thatdoes not exist in the present case. At the same time, Chapter Note 1(e)to Chapter 15 and Note 2 to Section VI would be applicable only if theproduct i.e. coconut oil would unambiguously fall under any of theDHeadings under Section VI, a position that cannot be accepted.

33. A contention has been advanced on behalf of the Revenuethat “Parachute” is a registered trademark of Marico and goods arebeing marketed under the aforesaid trade mark for use as hair oil. TheEissue of registered trade mark and classification for the purpose of levyof Central Excise Tariff are unrelated and unconnected to each other.Registration of a trademark under any particular class cannot bedeterminative of the classification of the product for purposes of CentralExcise Tariff. Moreover, in the present case, Marico had/has obtainedregistration of its trade mark “Parachute” under different classesFincluding edible oil (Class 29) as well as hair oil lotions, hair preparationsunder Class 3.

34. The contents of Circular bearing No. No.145/56/95-CX dated31.08.1995 at a point of time when Chapter Note II of Chapter 33 wasin force has already been noticed and infact the relevant paragraphs 5 toG9 of the above Circular, extracted above, makes it clear that a productcannot be classified under Chapter 33 Heading 3305 in the absence ofany proof that it is specially prepared “for use on the hair” and in theabsence of any label/literature etc on the container to such effect. Merely because the product is packed in small containers and used by somesections of the customers as hair oil cannot be a valid basis forclassification under Heading 3305. Only if the containers bear labels/literature indicating that it is meant for use on the hair that the coconutoil in dispute may merit classification under Chapter 33. The aboveposition would continue to hold the field notwithstanding the substitutionof Chapter Note II by Chapter Note 3 w.e.f. 28-02-2005 in view of thesimilar stipulations and conditions incorporated in Chapter No.3 of theHSN read with the Explanatory Note 3 thereto which the Court wouldbe obliged to take into account.

35. The Order under Section 37B of the Central Excise Act dated3.6.2009 discussed above is infact a virtual admission on the part of theRevenue that coconut oil packed in containers upto 200 ml alone wouldbe classifiable under Chapter 33 and the larger packages even of 1/2litres would fall under Chapter 15. In the absence of the essentialstipulations under Chapter Note 3 of Chapter 33, discussed above, inrespect of the product in question there can be no justification for thedirection contained in the order/circular dated 3.6.2009. The learnedAppellate Tribunal in Raj Oil Mills Vs. Commissioner of Central Excise(supra), therefore, took the view that even small packets of 200 ml orless would be more appropriately classifiable under chapter 15 as coconutoil and not as hair oil under Chapter 33. The said decision of the Tribunalhas been affirmed by this Court and the appeals by the Revenue (CivilAppeal Nos.2023-2037 of 2014) have been dismissed on 7.12.2014. Thedismissal of the appeals, though by a non-speaking order, is one on meritand therefore the order of the Tribunal in Raj Oil Mills (supra) can beunderstood to have merged with the decision of this Court as held inV.M. Salgaocar & Bros. Pvt. Ltd. Vs. Commissioner ofIncome Tax[11].

36. For the aforesaid reasons, we take the view that the coconutoil in small packings in respect of which the present dispute with regardto classification has arisen is more appropriately classifiable under Chapter15, Heading 1513 and not under Chapter 33, Heading 3305. Consequentlywhile dismissing the appeals filed by the Revenue, we affirm the Ordersto the above effect passed by the learned Appellate Tribunal.

11(2000) 5 SCC 373

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AR. BANUMATHI, J. 1. I have gone through the judgment byHis Lordship Justice Ranjan Gogoi and I am unable to agree with thereasonings and the conclusion. I am of the view that in view of theamended provisions of Chapter Note 3 to Chapter 33 and Section Note2 to Section VI, ‘Coconut Oil’ packed in small sachets/containers, asthey are suitable for use on hair are classifiable under Chapter 33 andBnot under Chapter 15. Following are the reasonings for my conclusion.

2. Whether ‘Coconut Oil’ manufactured and packed in smallcontainers and sachets by the respondent, is classifiable under ChapterHeading 3305 (“Hair Oil”, “Other”) as claimed by the Revenue orunder Chapter 15 Heading 1513 : Coconut (Copra) oil as claimed byCthe respondent, is the point falling for consideration in these appeals.

3. The competing entries for classification as claimed by theappellant-Revenue and the respondent/assessee are as under:- D

E

Classification by the AppellantClassification by the Respondent3305 PREPARATIONS FOR 1513 COCONUT (COPRA), PALM USE ON THE HAIR KERNEL OR BABASSU OIL AND FRACTIONS THEREOF, WHETHER OR NOT REFINED, BUT NOT CHEMICALLY MODIFIED 3305 90 - Other - Coconut (copra) oil and its --- Hair Oil fractions: 3305 90 19 ---- Other 1513 11 00 - - Crude Oil (or) 1513 19 00 - - Other F

4. Chapter 33 deals with “Essential oils and Resinoids,Perfumery, Cosmetic or Toilet Preparations”. Tariff Item 33 05 readsas under:- H

5. Chapter 15 deals with “Animal or vegetable fats and oilsand their cleavage products; prepared edible fats; animal orvegetable waxes”. Tariff Item 15 13 reads as under:- CD

6. A harmonious construction of the following would govern thefield for classification of the goods:- E

· Rule 1 of the General Rules for the Interpretation of the FirstSchedule · Chapter Note 1(e) to Chapter 15

· Section Note 2 to Section VI (after amendment w.e.f.

F

28.02.2005)

· Chapter Note 3 to Chapter 33 (after amendment w.e.f.

28.02.2005)

As discussed infra, cumulative construction of the above would lead tothe conclusion that “if the impugned goods are classifiable underTariff Item 3305 90 19, then the impugned goods are automaticallyexcluded from classification under Tariff Item 1513 11 00 (or) 151319 00”.

G

H

A

A7. The Tariff itself has provided five rules for the interpretation.The First Ruleof the General Rules for the Interpretation of the FirstSchedule, is generally referred to as the cardinal principle forclassification. If the classification can be done from the Heading, Sectionor Chapter Notes, the rules of interpretation need not be resorted to.Interpretative rules are applicable only where the classification of aBproduct cannot be determined in accordance with the Headings or relativeSections or Chapter Notes. The First Schedule-Excise Tariff Rulesfor the interpretation of this Schedule, reads as under:- “1. The titles of Sections and Chapters are provided for ease ofreference only; for legal purposes, classification shall beCdetermined according to the terms of the headings and anyrelative Sectionor Chapter Notesand, provided such headings orNotes do not otherwise require, according to the provisionshereinafter contained.

2. (a) Any reference in a heading to goods shall be taken to includea reference to those goods incomplete or unfinished, providedthat, the incomplete or unfinished goods have the essentialcharacter of the complete or finished goods. It shall also be takento include a reference to those goods complete or finished (orfalling to be classified as complete or finished by virtue of thisrule), removed unassembled or disassembled.

D

E

(b) Any reference in a heading to a material or substance shall betaken to include a reference to mixtures or combinations of thatmaterial or substance with other materials or substances. Anyreference to goods of a given material or substance shall be takenFto include a reference to goods consisting wholly or partly of suchmaterial or substance. The classification of goods consisting ofmore than one material or substance shall be according to theprinciples contained in rule 3.

3. When by application of sub-rule (b) of rule 2 or for any otherGreason, goods are, prima facie, classifiable under two or moreheadings, classification shall be effected as follows:- (a) the heading which provide the most specific description shallbe preferred to headings providing a more general description.However, when two or more headings each refer to part only of H

the materials or substances contained in mixed or composite goodsor to part only of the items in a set, those headings are to beregarded as equally specific in relation to those goods, even if oneof them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials ormade up of different components, and goods put up in sets, whichcannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives themtheir essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to (a) or (b),they shall be classified under the heading which occurs last in thenumerical order among those which equally merit consideration.

4. Goods which cannot be classified in accordance with the aboverules shall be classified under the heading appropriate to the goodsto which they are most akin.

......”

8. The First Rule has two components, namely:

i. The titles of Sections, Chapters and Sub-Chapters are pro-vided for ease of reference only;

ii. for legal purposes, classification shall be determined accordingto the terms of the Headings andany relative Section orChapter Notesand, provided such Headings or ChapterNotes do not otherwise require, according to the provisionsthereinafter contained.

The classification of goods will be as per the point (ii) as per which, theclassification demands the following conditions to be taken intoconsideration:-

i. Classification shall be done according to the terms of the Headings, and

ii. According to any relative Section or Chapter Notes, and iii Provided such Headings or Chapter Notes do not otherwiserequire according to the provisions contained thereon that isRules 2 to 6

A

B

C

D

E

F

G

H

AIt is clear from the above that:- (i) the Heading and (ii) relativeSection or Chapter Notes must be considered before classification isdone. Only if after this exercise is done, a conflict in classification stillpersists, then the other rules for Interpretation may be resorted to (iii).

9. CHANGES BROUGHT IN BY CENTRAL EXCISEBTARIFF (AMENDMENT) ACT, 2004:- Central Excise Tariff(Amendment) Act, 2004 which came into force with effect from28.02.2005 brought in significant changes in Note 2 to Chapter 33 andintroduction of Note 2 to Section VI inviting reclassification of theimpugned goods. The Statement of Objects and Reasons of the CentralExcise Tariff (Amendment) Act, 2004 reads as under:-C

(a) To accommodate more prominently the commodities whichare of significance to the country’s needs;

(b) To adopt a common commodity classification for thepurpose of levy and collection of duties of customs andcentral excise and for purpose of Import Trade ControlDPolicy and collection of statistics;

(c) To accommodate the demand from the trade and industryfor adoption of a common commodity classification basedon internationally adopted Harmonized Systems ofNomenclature to be used for trade-related transactions toEfacilitate International and domestic trade.

(d) The salient feature of the Bill, inter alia, expands the sixdigit classification into eight digit classification and suchexpansion has been made in the First Schedule and theSecond Schedule to the said Central Excise Tariff Act, toFcover a wider range of specific commodities under enlargedtariff items so as to accommodate domestic concerns.

Tariff Item under eight digit system would be interpreted as under:- First two digits: refer to the Chapter Number of the Tariff (e.g. 33 ××××××)

GNext two digits: refer to heading of the goods in that Chapter(e.g. ×× 05 ××××)

Next two digits: indicate Chapter sub-heading(e.g. ×××× 90 ××)

Last two digits: refer to the chapter sub-sub-headingH (e.g. ×××××× 10)

10. By the 2004 amendment, there has been realignment of certaingoods including the impugned goods. For proper appreciation, we mayusefully refer to comparative chart of relevant old legal provisions andthe new legal provisions after amendment as under:- A

Sl. Old Legal Provision New Legal Provision No.B1. Section Note to Note 2: Goods put up in sets Note 2:- Subject to Note 1 Section VI consisting of two or more above, goods classifiable in separate constituents, some or heading 3004, 3005, 3006, all of which fall in this 3212, 3303, 3304, 3305, Section and are intended to be 3306, 3307, 3506, 3707 or mixed together to obtain a 3808 by reason of being put product of Section VI or VII, up in measured doses or for Care to be classified in the retail sale are to be classified heading appropriate to that in those headings and in no product, provided that the other heading of this constituents are; Schedule. (a) ....... (b) ....... (c) ......D2. Chapter Note Note 2: Heading Nos.33.03 to Note 3: Headings 3303 to to Chapter 33 33.07 apply, inter alia, to 3307 apply, inter alia, to products, whether or not products, whether or not mixed (other than aqueous mixed (other than aqueous distillates and aqueous distillates and aqueous solutions of essential oils), solutions of essential oils), suitable for use as goods of suitable for use as goods of Ethese headings and put up in these headings and put up in packings with labels, packings of a kind sold by literature or other retail for such use. indications that they are for use as cosmetics or toilet preparations or put up in a Fform clearly specialized to such use and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative Gor prophylactic value.3. Heading 33.05 Preparations for use on 3305 Preparations for use on description the hair the hair 4. Sub heading 3305.10 - Perfumed hair oils 3305 90 11 - - - - Perfumed description - Other: 3305 90 19 - - - - Other H

A11. By a cumulative reading of the old provisions and the newlegal provisions, it can be seen that following significant changes havebeen brought about in the Central Excise Tariff with effect from28.02.2005:-

(i) Modification of the then Note 2 to Chapter 33 (presentlyBrenumbered as 3) by way of deletion to the extent that .....goods put up in packings with labels, literature or otherindications that they are for use as......;

(ii) After amendment, incorporation of the expressions in Note 3to Chapter 33 the expressions “suitable for use as goodsCof those headings” and “put up in packings of a kindsold by retail for such use”; and

(iii) Introduction of Section Note 2 to Section VI - if the goodsclassifiable under Heading 3305, it cannot be classified inany other heading of the Schedule.

D12. Relevant Chapter Notes and Section Notes forclassification of the impugned goods:- Let us now examine therelevant Headings, Sections and Chapter Notes pertaining to theclassification of the impugned goods. Chapter Note 3 to Chapter 33(amended w.e.f. 28.02.2005), reads as under:-E“Headings 3303 to 3307 apply, inter alia, to products, whetheror not mixed (other than aqueous distillates and aqueous solutionsof essential oils), suitable for use as goodsof these headingsandput up in packings of a kind sold by retail for such use”

13. Chapter Note 3 to Chapter 33 envisages four key things, namely:

F

a. The product may or may not be mixed;

b. The product should be suitable for use as a good under theseheadings (33 03 to 33 07);

c. The product should be put up in packings of a kind sold by retailGfor such use;

d. Headings 33 03 to 33 07 may also apply for other goods notbeing covered by this Chapter Note (as indicated by the phrase‘inter alia”)

H

14. It is important to note that theChapter Note is not phrasedin an exclusive manner. It merely reiterates the conditions which arerequired to be satisfied for a certain product to merit classification underHeading Tariff Items 33 03 to 33 07. The expression, ‘suitable for useas goods of these headings’ and ‘put up in packings of a kind soldby retail for such use’as used in Note 3 of Chapter 33 indicate that oilssuitable for use as Hair Oil are classifiable under Heading ...33 05...even if they are not so used. What matters, is the ‘suitability for suchuse’ and ‘packings of a kind sold by retail for such use’. In view ofthe amended position, if the conditions as specified in Note 3 to Chapter33 for classification as ‘Hair Oil, Other’ are satisfied, then the producthas to be classified only under Heading ...33 05... and no otherclassification is permissible. The above is further made clear by amendedSection Note 2 to Section VI.

15. Section Note 2 to Section VI (after amendment w.e.f.28.02.2005) reads as under:- “Subject to Note 1 above, goods classifiable in heading 3004, 3005,3006, 3212, 3303, 3304, 3305, 3306, 3307, 3506, 3707 or 3808 byreason of being put up in measured doses or for retail saleareto be classified in those headings and in no other headingof this schedule.”

Section Note 2 to Section VI of the first schedule is exclusionaryin nature, wherein it is inter alia stated that if a good is classifiableunder Heading ...33 05... it cannot be classified in any other Heading ofthe Schedule. As per the provisions of Note 2 to Section VI, if theconditions as specified in Chapter Note 3 for classification as ‘Hair Oil’under Heading ...33 05... are satisfied, then the product has to beclassified only under Heading ...33 05... and no other classification ispermissible. If the conditions as specified under Chapter Note 3 ofChapter 33 for classification of impugned goods as ‘Hair Oil’ underHeading ...33 05... are satisfied then the product is classifiable as goodsonly under Chapter 33 and by virtue of Section Note 2 to Section VI noother classification is permissible.

16. Because of the “suitability for use as hair oil” and being‘put up in packings of the kind sold by retail for such use’, by virtueof Section Note 2 to Section VI, their classification under Chapter 15 as A

B

C

D

E

F

G

A‘fixed vegetables oils’ or ‘coconut oil’ as claimed does not arise in viewof the primacy given to Tariff sub-heading ...33 05... by Note 2 to SectionVI. Further Note 1 (e) to Chapter 15 provides that “the chapter doesnot cover goods of Section VI”. Note 1(e) to Chapter 15 reads asunder:- B“Animal or Vegetable fats and Oils and their cleavage products;prepared edible fats; Animal or Vegetable Waxes Notes:

1. This Chapter does not cover:-

............

(e) fatty acids, prepared waxes, medicaments, paints,C varnishes, soap, perfumery, cosmetic or toilet preparations, sulphonated oils or other goods of Section VI; or

..............”

Note 1(e) to Chapter 15 clearly excludes goods covered underSection VI in which Chapter 33 Tariff Item 33 05 is one of the items.D

17. Whether Coconut Oil falls under Chapter 15 andapplicability of Interpretative Rule 3:- Contention of the assessee isthat the description of ‘Coconut Oil’ under Chapter 15 is specific andhence applicable to the subject goods in terms of Rule 3(a) of theInterpretative Rules. It is well-settled that Rule 3(a) of “General RulesEfor the Interpretation” is invokable only if the Headings and the relevantSections and the Chapter Notes are not clearly determinative of theclassification. Claim of the assessee is that the description ‘CoconutOil’ under Chapter 15 is specific and hence, applicable to their goods interms of Rule 3(a) of the Interpretative Rules, though appears attractive,the same does not merit acceptance. This is because the classificationFof the impugned goods is based on the terms of Headings, relative ChapterNotes and Section Notes which are paramount in this regard under theprimary and main Rule 1 of the Interpretative Rules.

18. M/s. Moreshwar and other job workers:- In the light ofthe above amended provisions and the interpretation thereon, let meGconsider whether the impugned goods are classifiable under the Heading33 05 or under Chapter 15 Item 15 13. For convenience, firstly, I referto the facts in C.A. Nos.6703-10 of 2009. Assessees/respondents inthese appeals viz., (i) Aishwarya Industries; (ii) Moreshwar Industries;(iii) Shivam Enterprises; (iv) Sowparnika Enterprises are four job workers H

and M/s. Marico Ltd. who is the registered owner of the brand‘Parachute’ for ‘Hair Oil’. M/s. Moreshwar Industries and three otherjob workers had entered into a contract with M/s. Marico Ltd. for themanufacture of HDPE bottles (High Density Polyethylene), screenprinting with the brand name and logo ‘Parachute’ of Marico Ltd. andpacking the bottles with coconut oil to be sold in the market under thebrand ‘Parachute’. From the materials on record, the process undertakenby M/s. Moreshwar and others on the job work from M/s. Marico issummarized as:- (a) M/s. Moreshwar and other job workers receivecoconut oil in tankers from M/s. Marico, Pondicherry; the said oil isunloaded and stored in storage tanks at M/s. Moreshwar and otherrespondents/job workers; (b) Then, after mechanical filtering and storedin another tanker, the same is packed into 50 ml, 100 ml, 200 ml and 500ml ‘containers’ and ‘flip tops’; (c) these retail packs are then supplied toM/s. Marico depot as per their dispatch schedule for being sold underthe brand name ‘Parachute’; and (d) the description given on the packingsis ‘100% pure coconut oil’ with the ‘Parachute’ mark. As the processcarried out by M/s. Moreshwar and other job workers is that aftermechanical filtering packing of goods from bulk to retail pack of a kind(containers so far manufactured by them) and delivered to M/s. Maricoto be sold under the brand name ‘Parachute’, the activities of M/s.Moreshwar and other job workers amount to manufacture in terms ofSection 2 (f)(iii) of Central Excise Act, 1944. According to Revenue,once this fact of manufacture of oil ‘suitable for use as ‘Hair Oil’’ isestablished, classification under Chapter Heading 15 is ruled out and theappropriate Heading is 33 05 by virtue of Chapter Note 3 to Chapter 33and Note 2 to Section VI.

19. M/s. Madhan Agro Industries (P) Ltd. (MAIPL):- So faras the ‘MAIPL’, coconut (copra) is crushed and grounded and the oil-cake and oil are separated and then the oil is filtered and purified. Thefiltered oil is then stored in tanks and packed in pouches and bottles ofdifferent measurements viz., 5 ml, 50 ml, 100 ml, 200 ml, 500 ml, and1000 ml pouches, 50 ml, 100 ml, 200 ml and 500 ml plastic bottles, 100ml, 200 ml, and 500 ml wide mouthed bottles, 200 ml tins, one litre and 2litre cans and sold in the market. According to Revenue, MAIPL, teststhe products of their competitor’s such as ‘Parachute Hair Oil’ andcompare the results of their products to ensure the marketability of theirproduct. Case of Revenue is that plastic bottles have the provision for ABC

DE

FG

H

Amaking a small hole on the top and when the bottle is tilted and pressedlightly, only a small quantity of oil comes out, which can be applied on thehair and those coconut oil manufactured by M/s. MAIPL is suitable foruse as ‘Hair Oil’. The very nature of packing shows that the product ismeant to facilitate such use as ‘Hair Oil’ and the same is classifiableunder Chapter 33. It is alleged that with an intention to evade paymentBof duty, M/s. MAIPL have mis-declared the excisable coconut oil(un-perfumed Hair Oil) as ‘edible grade/oil’ filtered 100% pure coconutoil.

20. Findings of the Tribunal:- The tribunal set aside the orderof the Commissioner by holding that Chapter 15 covers all varieties ofCcoconut oil, edible as well as non-edible and it is not essential that theedible coconut oil should be marketed in packaging approved by PFARules for classifying it under Chapter 15 and that the earlier decision ofthe Tribunal (prior to amendment) applies to the corresponding entrieseven after amendment. In the case of MAIPL, after referring to earlierDdecisions of the Tribunal, CESTAT held as under:- “...The packing of coconut oil in that case was not of the typereferred to, above or which could be solely and exclusively said tobe meant for application on hair only. As such the Tribunal heldthat Chapter 2 to Chapter 33 was not applicable for classifyingEthe goods in that case under Chapter 33. HSN Explanatory Notesto Chapter 33 were same before and after 28.02.05. Moreoverentries under Chapter 15 relating to coconut oil in the HSN andCentral Excise Tariff after 28.02.2005 are also identical.Therefore, the decision of the Tribunal in the above caseinterpreting the scope of Chapter 15.13 and 33.05 of Central ExciseFTariff applies to the corresponding entries even after 28.02.2005.The above ratio of the decision of the Tribunal therefore squarelyapplies to the present case also....”

21. Contention of the Revenue:- Learned Senior Counsel Mr.A.K. Panda submitted that the tribunal failed to consider that by virtueGof amendment to Central Excise Tariff Act, 1985 with effect from28.02.2005, ‘Hair Oil’ other than perfumed ones merit classification undertariff item No.3305.90.19. It was submitted that consequent to theamendment, that so long as the product is ‘suitable for use as goods ofthe heading’ and “put up in packing for retail sale for such use”,H

whether mixed or not, is classifiable under Chapter Heading 33 05 andin the light of Section Note 2 to Section VI, it cannot be classified underany other Heading in this Schedule. It was further submitted that CESTATrelied upon various orders for referring to Chapter Note 2 to Chapter 33which were though prior to amendment thereby failing to consider thatthe Show Cause Notice and the Order-in-Original were passed pursuantto the amended Chapter Note 2 to Chapter Note 33 and Section Notewith effect from 01.03.2005. Insofar as ‘Parachute’ is concerned,Revenue places reliance upon various materials like Trade MarkRegistration and other materials as to depicting how the market hasunderstood, ‘Parachute’ as the ‘Hair Oil’. It was further submitted thatin case of conflict, the Notes contained in the Tariff Schedule to theCESTAT will prevail over that of the HSN and the impugned order cannotbe sustained.

22. Contention of the respondent(s)/Assessee(s): Contentionof the respondents/assessees is that 100% pure ‘Coconut Oil’ cover allvarieties of coconut (Copra oil) marked as ‘edible oil’ and manufacturedunder Prevention of Food Adulteration (PFA) licence the same cannotbe classified “preparation for use on hair” to be classified as ‘HairOil’ under Chapter 33 Tariff Item 33 05 merely because of the smallsize of the packings. Learned Senior Counsel Mr. Bagaria submittedthat under the statutory provision of the Edible Oils Packaging (Regulation)Order, 1988 read with Sl. No.10 of Schedule III of the Standards ofWeights & Measures (Packaged Commodities) Rules, 1977, edible oilshall be packed in the specified sizes of 50 ml, 100 ml, 200 ml, 500 ml, 1litre or 2 litres which are fully in accordance with the mandatoryrequirement of the aforesaid statutory provisions. It is, therefore, submittedthat by packing the said ‘edible Oil’ as per the sizes as required underthe law, ‘edible oil’ does not cease to become ‘edible oil’ and becomeclassifiable as ‘Hair Oil’ so as to attract classification under 33.05.Reliance was placed upon the judgment of Rajasthan High Court inAssistant Commissioner v. Marico Industries Ltd. 2006 SCC onlineRaj 446 to contend that the small packings being done for convenienceof consumers to cater to different sections of consumers at the differenteconomic levels, it would not make the ‘edible coconut oil’ to be “HairOil” classifiable under Chapter 33. Reliance was also placed upon thejudgment of Allahabad High Court in Marico Limited v. Commissioner,Commercial Taxes,UP (2015) 78 VST 423.

AB

C

D

E

F

G

H

A23. Whether the Tribunal was right in classifying theimpugned goods under Chapter 15:- The Tribunal held that Chapter15 covers all varieties of coconut oil, edible as well as non-edible. Chapter15 of Section III of the Schedule to CETA, 1985 covers “animal orvegetable fats and oils”. Heading 1513 reads as under:- B"1513 Coconut (copra), palm kernel or babassu oil and fractions thereof, whether or not refined, but not chemically modified Coconut (copra) oil and its fractions

- C1513 11 00 - - Crude oil 1513 19 00- -Other ‘Coconut Oil’ manufactured and cleared by M/s. Moreshwar andother job workers and MAIPL can be classified either as ‘Hair Oil’under sub-heading 3305 or as ‘Vegetable Oil’ under sub-heading 1513.DHowever, when ‘Coconut Oil’ is put up in packing of a kind sold in retailsuitable for use as application on hair would merit classification undertariff entry 33.05. This is the object of the legislature in bringing aboutthe amendment to Chapter Note 3 of Chapter 33 and Section Note 2 toSection VI. Chapter Note 1(e) to Chapter 15 provides that “.....saidEChapter does not cover goods of Section VI”. This exclusion is inclear conformity and recognition of the fact that goods which otherwisewould fall under Section VI are classifiable in accordance with theconditions of Chapter Notes contained in Chapter 33 (use of goods,nature of packing, form etc.) and under no other Heading of the Schedule.By holding that Chapter 15 covers all varieties of coconut oil, edible asFwell as non-edible, the Tribunal erred in not keeping in view that theobject of the legislature in bringing about the amendment.

24. As discussed earlier, the process carried on by M/s. Moreshwarand other job workers are:- (i) oil received from M/s. Marico is unloadedand stored in storage tanks in the unit and it undergoes the process ofGmechanical filtering and stored in another tank, then sent through pipelinefor filling in the small containers by the filling machines; (ii) oil obtainedby leakage, waste, overflow etc. are collected and fed into the salvageoil tank and the same is recycled and blended with 9 MT coconut oil intanker for two hours or 16 MT coconut oil tanker for three hours; (iii)

H

H

for manufacture of HDPE containers, HDPE granules and master batchin the required ratio is mixed and fed into the mould and blue colourcontainer is obtained; the fit container is sent to heating and then screen-printing with blue, green and white colour printing ink for printing thetrademark and logo and other details as required by M/s Marico Ltd.;(iv) waste grind materials and 8% of pellets are mixed with virgin granulesfor manufacture of containers; and (v) the containers are then wrappedwith thin plastic and packed in cardboard boxes and dispatched to thedepot of M/s. Marico Ltd.

25. Order-in-Original by the Commissioner recorded findings offact that HDPE containers manufactured by M/s. Moreshwar and otherjob workers that coconut oil stored in the tanks at M/s. Moreshwar aftermechanical filtering is packed in 50 ml, 100 ml, 200 ml, 1 ltr., 2 ltr containersfor retail use and these retail packs are supplied to M/s. Marico Depotas per the dispatch schedule. The description given on the packings is100% pure coconut oil with ‘Parachute’ mark. So far as the firstcomponent “the product may or may not be mixed”, as discussed earlier,the impugned goods “coconut oil” is pure oil and is not a mixed productand thus, the first condition is satisfied. So far as the second condition,“the product should be suitable for use as a good under theseheadings (33 03 to 33 07)” is also satisfied. Thus, the first and secondcomponents of Note 3 to Chapter Note 33 “the product may or maynot be mixed” and “the product should be suitable for use as a goodunder these Headings (33 05)” are satisfied.

26. As discussed infra by applying the ‘Common Parlance Test’,pure coconut oil packed in small containers is understood by the dealerand the consumer and in the market as ‘Hair Oil’. The expression“suitable for use as goods in these headings” as used in the ChapterNote 3 to Chapter 33 indicates that oils suitable for use as ‘Hair Oil’ orclassifiable under Heading 33 05 even if they are not so used. As perNote 3 to Chapter 33, what matters is suitability for such use, if theanswer to which is ‘Yes’, then the goods are classifiable under Chapter33.So far as the next component, “the product should be put up inpackings of a kind sold by retail facilitating such use”, is satisfiedthen they are classified under Chapter 33. As pointed out in the Order-in-Original and also as discussed earlier in the case of MAIPL and alsoM/s. Moreshwar and other job workers, the product is packed in small AB

C

D

E

F

G

H

Aquantities in containers like 50 ml, 100 ml, 200 ml, 500 ml which alsocontain the brand trademark ‘Parachute’.

27. So far as respondent-MAIPL is concerned, coconut is crushedand pure coconut oil is packed in 5 ml, 50 ml, 100 ml, 200 ml, 500 ml andone litre pouches and also containers in 50 ml, 100 ml, 200 ml, 500 mlBand one litre cans and sold under the brand name ‘Shanthi’. Here again,these pouches/containers in such small packings by construing them inthe sense as to how in the trade, dealers and consumers understood it.The Commissioner was right in holding that they were ‘Hair Oil’ suitablefor use on hair.

C

28. Insofar as ‘Parachute’ is concerned, the Revenue relies uponvarious materials as to how consumers and others engaged in the tradeunderstood “Parachute” for ‘Nature Care for Hair’including theregistration of Trademark No.1033842 Class-3-Parachute associated withHair Oil. Contention of Revenue is that the market identity of the subjectDgoods-coconut oil is ‘Hair Oil’ and not as ‘Edible Grade Oil’. TheRevenue has also referred to the website of ‘Parachute’ (vide Order-in-Original No.06/2008-(C) dated 28.02.2008) where ‘Parachute’ isdescribed as ‘Hair Oil’ and the same reads as under:-

“Nature Care Division (55% of turnover): Parachute was the firstEbranded coconut oil in the Indian market and has become a genericname for coconut oil used for hair application. It currently has a52% market share in the branded coconut oil market. About 50%of Marico’s turnover is contributed by the Parachute brand alone.To build upon and strengthen the strong association betweencoconut and Parachute brand, Marico has set up a ResearchFCentre to develop new coconut based products. Over the years,the company has launched several brand extensions such as‘Parachute Jasmine’, ‘Parachute Dandruff Solution’, etc.....”

29. An argument was advanced by the respondent/assessee thatthe packings/containers do not contain any label/indication to the effectGthat the subject goods are used on the hair. The contention that thepackings contain description as ‘Edible Oil’ and that there was no indicationon the packing that it is ‘Hair Oil’ is of no significance. After theamendment, there is no necessity that the packings/containers shouldbear label to the effect that the goods are used on the hair. As per Note H

3 to Chapter 33, any product “suitable for use as goods in theseheadings and that put up in packings of a kind sold by retail forsuch use”, has to be classified as ‘Hair Oil’ under Chapter 33. So longas the product is suitable for use as ‘Hair Oil’ and if it is packed in sucha way that it is useable for the purposes of ‘Hair Oil’, it has to be classifiedas ‘Hair Oil’ under Chapter 33.

30. Government of India, Trade Mark Registry and Public searchresult indicate that Trademark No.1033842 Class-3-Parachute isassociated with Hair Oil, Hair lotions etc. Registration of the trademarkof the ‘Parachute’ brand is for selling items like hair oil, hair lotion, hairgrowing preparation, hair tonics etc. The Tribunal held that the aspectof label identified with the hair oil does not advance the case of Revenuefor classification of ‘Coconut Oil’ as ‘Hair Oil’ since the allegation thatjob workers used green colour labels for marketing hair oil was absent inthe Show Cause Notice. Relevant portion of the order of the Tribunal isas under:- “7. ........Moreover, the material allegation of Marico that its jobworkers used green coloured labels for marketing hair oilexclusively was absent in the show-cause notice. Marico hadnever marketed any product under the orange label and all alongmarketed its entire range of products using the green label only.We find that in the absence of any label which could be identifiedwith a hair oil, this aspect of the label does not advance theRevenue’s case for classification of the coconut oil as hair oil.Use of a trademark or a label has no bearing on classification.”

The Tribunal is not right in saying that the Show Cause Noticeissued to the respondent-M/s. Moreshwar and other job workers wasabsent on using green coloured labels for marketing hair oil exclusively.Para (3.4.2) of the Show Cause Notice refers to Screen-printing asunder:- “.....HDPE granules and master batch in the required ratio is mixedand fed into the mould and blue colour container is obtained.Runners and raisers are removed and the container is examinedand if it is not fit, the same is sent for grinding. The fit containeris sent to heating and then screen-printing with blue, green andwhite colour printing ink for printing the trademark and logo andother details as required by Marico Ltd.....”[Underlining added]

A

B

C

D

E

F

G

H

AThat apart para (3.4.5)(4.1) of the Show Cause Notice containsscanned copy of the application for registration of the trademark in respectof hair oil. Contents of Show Cause Notice, there are clear avermentsas to the colour, printing of green ‘label’ and also the trademark. Hence,the Tribunal is not right in saying that the Show Cause Notice is absentas regards use of green coloured labels for marketing hair oil and thatBregistration of trademark for hair oil on the containers is of no significancefor classifying the product as hair oil under Chapter 33.

31. Whether classification of ‘Coconut Oil’ falls underChapter 15 and applicability of Interpretative Rule 3 isacceptable:-After amendment Heading 15 13 reads as under:- C

Coconut (copra), palm kernel or

babassu oil and fractions thereof,

whether or not refined, but not chemically modified -Coconut (copra) oil and its fractions- -Crude oil D1513 11 001513 19 00

- -Other

-Palm kernel or babassu oil and fractions thereof

32. Contention of the assessee is that the description of ‘Coconut Oil’ under Chapter 15 is specific and hence applicable to the subjectEgoods in terms of Rule 3(a) of the Interpretative Rules. It is well-settledthat Rule 3(a) of “General Rules for the Interpretation” is invokableonly if the Headings and the relevant Sections and the Chapter Notesare not clearly determinative of the classification. The contention thatthe description “coconut oil (copra)” under Chapter 15 is specific andFhence, applicable to the impugned goods does not merit acceptance sincethe classification of the goods is determinate on the harmoniousconstruction of headings, relative Chapter Notes and Section Notes andthe main Rule 1 of the Interpretative Rules. Classification of the impugnedgoods is primarily based on the Headings, relative Chapter Notes andSection Notes which are paramount in this regard as per Rule 1 of theGInterpretative Rules.

33. Rule 3 provides for classification in case goods are classifiableunder two or more headings. For proper appreciation, at the risk ofrepetition, it is necessary to refer to Rule 3 of the Interpretative Ruleswhich reads as under:-H

3. When by application of sub-rule (b) of rule 2 or for any otherreason, goods are, prima facie, classifiable under two or moreheadings, classification shall be effected as follows:- (a) the heading which provide the most specific description shallbe preferred to headings providing a more general description.However, when two or more headings each refer to part only ofthe materials or substances contained in mixed or composite goodsor to part only of the items in a set, those headings are to beregarded as equally specific in relation to those goods, even if oneof them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials ormade up of different components, and goods put up in sets, whichcannot be classified by reference to (a), shall be classified as ifthey consisted of the material or component which gives themtheir essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to (a) or (b),they shall be classified under the heading which occurs last in thenumerical order among those which equally merit consideration.

Rule 3(b) provides the manner of classification of mixtures,composite goods consisting of different materials or made up of differentcomponents and goods put up in sets for retail sale. As ‘Coconut Oil’ isnot mixed or composite goods, Rule 3(b) does not have application. Rule3(a) states that the most specific description will be preferred over themore general one. In the present case, when item description is readwith the Chapter Notes, Section Notes and the tests for classificationthat is Tariff Item 1513.19.00 and 3305.90.19 are equally specific. Hence,as per Rule 3(c), when goods cannot be classified by reference to (a) or(b), they shall be classified under the heading which occurs last innumerical order among those which equally merit classification. Hence,the coconut oil manufactured by the respondents could rightly be classifiedunder heading 3305.90.19, as it occurs last in the numerical order of thetariff.

34. In Union of India and Ors. v. Pesticides Manufacturingand Formulators Association of India, (2002) 8 SCC 410, this Courthas held that if there are two specific headings to which a product canbe referred, the one occurring subsequently would prevail.

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A35. The Tribunal set aside the demand on the ground that the“coconut oil”would merit classification under Chapter Heading 15.03of CETA, 1985 attracting ‘NIL’ rate of excise duty and not under ChapterHeading 33.05 of the CETA attracting duty of 16% advalorem. TheTribunal erred in not appreciating that with effect from 01.03.2005, theCentral Excise Tariff Act, 1985 has undergone an amendment as perBwhich (Note 3 to Chapter 33) Heading nos.3303 to 3307 would apply,inter alia, to products whether or not mixed suitable for use as goods ofthese headings and put up in packings of a kind sold by retail for suchuse. The case laws which were reported in Kothari Products Ltd. v.CCE2002 (139) ELT 633 (T); Srikant Sachets Pvt. Ltd. v. CCE 2005C(180) ELT 401 (T); and Commissioner of Central Excise v. EssenProducts (I) Ltd.2006 (200) ELT 342 (T) etc. relied upon by the Tribunaland the Board circular dated 31.08.1995 were dealing with the casespertaining to the period prior to 01.03.2005. The Tribunal was not rightin relying upon the earlier orders/circular dated 31.08.1995 prior toamendment to base its conclusion that coconut oil both edible and non-Dedible merits classification under Chapter 15.

36. Tests for Classification: The Supreme Court has consistentlytaken the view that, in determining the meaning or connotation of wordsand expressions describing an article in a tariff schedule, one principlewhich is fairly well-settled is that those words and expressions should beEconstrued in the sense in which they are understood in the trade, by thedealer and the consumer. Whether a particular article will fall within aparticular tariff heading or not, has to be decided on the basis of as tohow that article is understood in ‘common parlance’ or in ‘commercialworld’ and not as per scientific or technical meaning. In the case of FAsian Paints India Ltd. v. Collector of Central Excise (1988) 2 SCC470, it has been held that when definition of a word has not been given,it must be considered in its popular sense and not according to scientificor technical sense.

37. After referring to various judgments, in Plasmac MachineGManufacturing Co. (P) Ltd. v. Collector of Central Excise,Bombay1991 Supp (1) SCC 57, it was held by this Court as under:- “15. ..... It is an accepted principle of classification that the goodsshould be classified according to their popular meaning or as theyare understood in their commercial sense and not as per theHscientific or technical meaning. Indo International Industries v.

CST ((1981) 2 SCC 528 and Dunlop India Ltd. v. Union ofIndia (1976) 2 SCC 241 have settled this proposition. How is theproduct identified by the class or section of people dealing with orusing the product is also a test when the statute itself does notcontain any definition and commercial parlance would assumeimportance when the goods are marketable as was held in AtulGlass Industries (Pvt.) Ltd. v. CCE (1986) 3 SCC 480 and IndianAluminium Cables Ltd. v. Union of India (1985) 3 SCC 284. InAsian Paints India Ltd. v. CCE (1988) 2 SCC 470 which was acase of emulsion paint, at para 8 it was said: (SCC p. 473, para 8)

“It is well settled that the commercial meaning has to be givento the expressions in tariff items. Where definition of a wordhas not been given, it must be construed in its popular sense.Popular sense means that sense which people conversant withthe subject matter with which the statute is dealing, wouldattribute to it.””

38. In Dabur Industries Ltd. v. Commissioner of CentralExcise, Jamshedpur (2005) 4 SCC 9, it was held that in classifying aproduct, the scientific or technical meaning is not to be resorted to butthe test was to see what the persons using the product understand it tobe.

39. In Commissioner of Central Excise v. Wockhardt LifeSciences Limited (2012) 5 SCC 585, this Court emphasized “CommonParlance Test” or the “Commercial Usage Test” in paras (33) to (37)and held as under:- “33. There is no fixed test for classification of a taxable commodity.This is probably the reason why the “common parlance test” orthe “commercial usage test” are the most common (see A.Nagaraju Bros. v. State of A.P. 1994 Supp (3) SCC 122). Whethera particular article will fall within a particular tariff heading or nothas to be decided on the basis of the tangible material or evidenceto determine how such an article is understood in “commonparlance” or in “commercial world” or in “trade circle” or in itspopular sense meaning. It is they who are concerned with it and itis the sense in which they understand it that constitutes thedefinitive index of the legislative intention, when the statute wasenacted (see Delhi Cloth and General Mills Co. Ltd. v. Stateof Rajasthan (1980) 4 SCC 71).

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34. One of the essential factors for determining whether a productfalls within Chapter 30 or not is whether the product is understoodas a pharmaceutical product in common parlance [see CCE v.Shree Baidyanath Ayurved Bhavan Ltd. (2009) 12 SCC 419and CCE v. Ishaan Research Lab (P) Ltd. (2008) 13 SCC 349].Further, the quantity of medicament used in a particular productwill also not be a relevant factor for, normally, the extent of use ofmedicinal ingredients is very low because a larger use may beharmful for the human body. [Puma Ayurvedic Herbal (P) Ltd.v. CCE (2006) 3 SCC 266, State of Goa v. Colfax LaboratoriesLtd. (2004) 9 SCC 83 and B.P.L. Pharmaceuticals Ltd. v. CCE1995 Supp (3) SCC 1.]

35. However, there cannot be a static parameter for the correctclassification of a commodity. This Court in Indian AluminiumCables Ltd. v. Union of India (1985) 3 SCC 284 has culled outthis principle in the following words: (SCC p. 291, para 13)

“13. To sum up the true position, the process of manufactureof a product and the end use to which it is put, cannot necessarilybe determinative of the classification of that product under afiscal schedule like the Central Excise Tariff. What is moreimportant is whether the broad description of the article fits inwith the expression used in the Tariff.”

36. Moreover, the functional utility and predominant or primaryusage of the commoditywhich is being classified must be takeninto account, apart from the understanding in common parlance.[See O.K. Play (India) Ltd. v. CCE (2005) 2 SCC 460, AlpineIndustries v. CCE (2003) 3 SCC 111, Sujanil Chemo Industriesv. CCE & Customs (2005) 4 SCC 189, ICPA Health Products(P) Ltd. v. CCE (2004) 4 SCC 481, Puma Ayurvedic Herbal(2006) 3 SCC 266, Ishaan Research Lab (P) Ltd. (2008) 13SCC 349 and CCE v. Uni Products India Ltd. (2009) 9 SCC295]

37. A commodity cannot be classified in a residuary entry, in thepresence of a specific entry, even if such specific entry requiresthe product to be understood in the technical sense (see AkbarBadrudin Giwani v. Collector of Customs (1990) 2 SCC 203and Commr. of Customs v. G.C. Jain (2011) 12 SCC 713). A

residuary entry can be taken refuge of only in the absence of aspecific entry; that is to say, the latter will always prevail over theformer [see CCE v. Jayant Oil Mills (P) Ltd. (1989) 3 SCC343, HPL Chemicals Ltd. v. CCE (2006) 5 SCC 208, WesternIndia Plywoods Ltd. v. Collector of Customs (2005) 12 SCC731 and CCE v. Carrier Aircon Ltd. (2006) 5 SCC 596].

40. In Commissioner of Central Excise, Delhi v. Carrier AirconLtd.(2006) 5 SCC 596, this Court held as under:-

“14. End use to which the product is put to by itself cannot bedeterminative of the classification of the product. See IndianAluminium Cables Ltd. v. Union of India (1985) 3 SCC 284.There are a number of factors which have to be taken intoconsideration for determining the classification of a product. Forthe purposes of classification the relevant factors inter alia arestatutory fiscal entry, the basic character, function and use of thegoods. When a commodity falls within a tariff entry by virtue ofthe purpose for which it is put to (produced), the end use to whichthe product is put to, cannot determine the classification of thatproduct.”

41. Chapter 15 of Section 3 of Central Excise Tariff deals with“Animal or Vegetable fats and Oils and their cleavage products;prepared edible fats; Animal or Vegetable Waxes”. Sub-Heading 1513deals with coconut (copra). Before considering the contentious issuesas to the classification of the impugned goods, it is necessary to point outas to how ‘Coconut Oil’ is understood and treated in the market.

42. In Jain Exports Pvt. Ltd. v. Union of India1987 (29) ELT753 Del, the High Court of Delhi dealt with the use of ‘Coconut Oil’ andin the context of importability of ‘Coconut Oil’, held as under:- “25. ....it is well known that the coconut oil is not at all used as anedible oil in a very large part of our country. Almost all the partsof India up to Vindhyas do not use coconut oil as edible medium.Even in rest of the country though it is in use extensively in somevery small part, its use in most of the other part is small average.So ordinarily if a person was to go to the market and ask forcoconut oil, the normal question he would be asked will be whetherhe needs it as hair oil or shampoo. No one normally will understand AB

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Acoconut oil to mean only edible variety because such is not thenormal major use. A person would have to specifically clarifythat by asking for coconut oil he is asking for edible variety inorder to make his intention clear. Thus by itself and in ordinaryparlance coconut oil in the import policy would be understood toinclude both edible variety and industrial variety of coconut oil. IfBonly one variety of coconut oil was meant to be covered, it wouldbe more consistent to hold that it is industrial variety consideringthe overwhelming use of coconut oil for non-edible purpose. Butan entry would never be restricted only to edible variety of coconutoil......”. [Underlining added]

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Though the above observation is in the context of importability of‘Coconut Oil’, the factum of overwhelming use of ‘Coconut Oil’ and asto coconut oil is normally understood as ‘Hair Oil’ cannot be ignored. Itis a matter of common knowledge that in many parts of the country‘Coconut Oil’ is widely used as ‘Hair Oil’ and not generally used asDedible oil; it is so used as edible oil only in few areas of the country. Noone will normally understand ‘Coconut Oil’ to mean only as edible oilbecause such is not the major use of ‘edible oil’. The moment we heldthat the impugned goods-coconut oil is suitable for use as ‘Hair Oil’ asdiscussed infra, it has to be classified only under Chapter 33.

43. As pointed out earlier, Revenue relies upon number of materialsEthat those in trade, traders and consumers have understood ‘Parachute’as ‘Hair Oil’. In para (36) of Wockhardt Life SciencesLtd. quotedabove, this Court laid emphasis to the “functional utility andpredominant or primary usage of the commodity” that is to be takeninto account while classifying the product. As discussed earlier, afterFamendment what is more relevant is the suitability of the goods for beingused as ‘Hair Oil’ and the usage of the product in common parlance.

44. In the Order-in-Original No.06/2008-(C), reference is alsoreferred to feedback about the product by their consumers and theirimpressions and experiences. It also refers to the interview of Mr. ArvindMediratta, Head of Marketing Division of M/s. Marico Limited statingGthat ‘Parachute’ brand is associated with ‘Hair Oil’ whereas Saffolabrand is associated with edible (cooking) oil. The revenue also refers toan article in the Financial Express dated 14.06.2001 where Mr. SrikandGupta, Chief Executive Officer (CEO), Nature Care Division of M/s.Marico stated that they wanted the ‘Parachute’ brand to be perceivedHas a cosmetic brand with the utility of nourishing hair.

45. The appellant has relied upon the following write up on coconutoil by the Coconut Development Board (a statutory body under theMinistry of Agriculture):- “Coconut oil is used in the country as a cooking fat, hair oil, bodyoil and industrial oil..... Coconut oil is marketed in bulk as well asin packs ranging from sachets containing 5 ml to 15 kg tins. Thebranded coconut oil in small packs is mainly marketed as hair oiland body oil.”

46. A taxing statute is being one levying a tax on goods must, inthe absence of a technical term or a term of science or art, be presumedto have used an ordinary term as coal according to the meaning ascribedto it in common parlance. In Commissioner of Sales Tax, MadhyaPradesh, Indore v. Jaswant Singh Charan Singh, AIR 1967 SC 1454,it was held as under:- “5. The result emerging from these decisions is that whileconstruing the word “coal” in Entry I of Part III of Schedule II,the test that would be applied is what would be the meaning whichpersons dealing with coal and consumers purchasing it as fuelwould give to that word. A sales tax statute is being one levying atax on goods must in the absence of a technical term or a term ofscience or art, be presumed to have used an ordinary term as coalaccording to the meaning ascribed to it in common parlance.Viewed from that angle both a merchant dealing in coal and aconsumer wanting to purchase it would regard coal not in itsgeological sense but in the sense as ordinarily understood andwould include “charcoal” in the term “coal”. It is only when thequestion of the kind or variety of coal would arise that a distinctionwould be made between coal and charcoal; otherwise, both ofthem would in ordinary parlance as also in their commercial sensebe spoken as coal.”

47. After referring to various judgments on the point of commonparlance test, in Commissioner of Central Excise, New Delhi v.Connaught Plaza Restaurant Private Ltd., New Delhi (2012) 13 SCC639, it was held as under:- “33. Therefore, what flows from a reading of the aforementioneddecisions is that in the absence of a statutory definition in preciseterms; words, entries and items in taxing statutes must be construed A

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48. In the case of Alpine Industries v. Collector of CentralExcise, New Delhi(2003) 3 SCC 111, the question was whether “LipSalve” could be classifiable as a preparation for care of skin or as amedicament. The product was mainly supplied to the DefenceDepartment for use by military personnel who are posted in high-altitudeDareas. In Commissioner of Central Excise, Calcutta v. SharmaChemical Works (2003) 5 SCC 60, this Court held that in interpretingprovisions of a statute like the Excise Act, the popular meaning asunderstood by the users should be applied and not the scientific or technicalmeaning.

E49. As held in Jain Exports Pvt. Ltd., the factum of overwhelminguse of ‘Coconut Oil’ as ‘Hair Oil’ in most parts of the country cannot beignored. No one will normally understand ‘Coconut Oil’ to mean only as‘edible oil’ because such is not the major use of ‘edible oil’. Applyingthe common parlance test and also ‘end use of the product’, coconutoil is predominantly understood by the users namely dealers/consumersFonly as ‘Hair Oil’ and not as ‘edible oil’and hence, classifiable onlyunder Chapter 33 and not under Chapter 15.

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50. After the amendment (w.e.f. 28.02.2005) what is relevant is‘suitability of the goods for being used as Hair Oil’ for classifyingthe same under 33.05. ‘Coconut Oil’ packed in small sachets/containersGsuitable for being used as ‘Hair Oil’ is classifiable under Chapter TariffItem 3305. When a good is classifiable under tariff item 3305, by virtueof amended Section Note 2 to Section VI, no other classification ispermissible. By consideration of the materials placed on record and also applying the’Common Parlance Test’, coconut oil packed in smallsachets/containers understood in the market by dealers/consumers as‘Hair Oil’ is classifiable under Chapter 33, tariff item 33 05. In thecase of MAIPL, ‘Coconut Oil’ packed in small sachets/containers suitablefor being used as ‘Hair Oil’ are classifiable under Chapter 3305. Incase of ‘Parachute’, this is further fortified by various materials placedon record and also registration of its Trademark No.1033842 Class-3Parachute associated with “Hair Oil, Hair lotion etc.”

51. Re. Contention HSN Notes to Chapter Note 3 of Chapter33 is the same as it was prior to amendment:- The Tribunal heldthat “HSN Explanatory Notes to Chapter 33 were same before andafter 28.02.2005.” Moreover, Notes under Chapter 15 relating to‘Coconut Oil’ in the HSN and Central Excise Tariff after 28.02.2005are also identical. Mr. Bagaria, learned senior counsel for the assesseeurged that the changes brought about by the amendment to ChapterNote 3 of Chapter 33 is of no significance since HSN Notes to ChapterNote 3 of Chapter 33 is exactly the same as in the Central Excise Tariffprior to amendment. It was submitted that Explanatory Notes in HSNclarified the purport, meaning, scope and effect of Chapter Note 3 ofChapter 33. It was submitted that since Central Excise Tariff is basedon HSN, for resolving any dispute relating to tariff classification, HSN isa safe guide. In this regard, reliance is placed upon Collector of CentralExcise, Shillong v. Woods Craft Product Ltd. (1995) 3 SCC 454,Commissioner of Customs and Central Excise, Goa v. PhilCorporation Limited(2008) 17 SCC 569 and O.K. Play (India) Ltd. v.Commissioner of Central Excise, Delhi-III, Gurgaon(2005) 2 SCC460.

52. The Harmonized Commodity Description and Coding System(HS) of tariff nomenclature, generally referred to as the “HarmonizedSystem of Nomenclature (HSN)” is an internationally standardizedsystem of names and numbers for classifying traded products, developedand maintained by the World Customs Organization (WCO) (formerlythe Customs Co-operation Council), an independent inter-governmentalorganization [Source: World Customs Organization:http:// www. wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system. aspx]. Along with the HSN, are the ABC

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AExplanatory Notes. They do not form an integral part of the HarmonizedSystem Convention. However, as approved by the WCO Council, theyconstitute the official interpretation of the Harmonized System at theinternational level and are an indispensable complement to the System.[World Customs Council, retrieved from: http://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/tools-to-assist-with-Bthe-classification-in-the-hs/explanatory-notes.aspx].

53. The Central Excise Tariff Act, 1985 (CETA) is based on theHarmonized System of Nomenclature (HSN), which is an internationallyaccepted product coding system formulated under the auspice of theCGeneral Agreement on Tariffs Trade (GATT). In Commissioner ofCustoms and Central Excise, Goa v. Phil Corporation Ltd. (2008)17 SCC 569, this Court explained the HSN as under:- “29. ...The Central Excise Tariff Act is broadly based on the systemof classification from the international convention called theDBrussels Convention on the Harmonized Commodity Descriptionand Coding System (Harmonized System of Nomenclature) withnecessary modifications. HSN contains a list of all the possiblegoods that are traded (including animals, human, hair, etc.) and assuch the mention of an item has got nothing to do whether it ismanufactured and taxable or not”E

54. HSN Explanatory Notes provide a commentary on the scopeof each heading, giving a list of the main products included and excluded,together with technical description of the goods concerned (theirappearance, properties, method of production and uses) and practicalFguidance for their identification. The Explanatory Notes also clarify thescope of particular sub-headings wherever appropriate. However, HSNor the Explanatory Notes thereon cannot supersede the relevant notescontained in the Tariff Schedule. They can be relied upon as a safeguide in cases of doubt.

G55. In the case in hand, we are concerned with classification ofgoods - ‘Coconut Oil’ between two Chapters both falling within firstSchedule to Central Excise Tariff Act, 1985. For proper appreciation,we may usefully refer to the relevant HSN Explanatory Notes relatingto Chapter 33 and Chapter 33 of CETA Tariff Notes:-

AHSN Explanatory NotesCETA Tariff NotesChapter 33Chapter 33Essential Oils and Resinoids; Essential Oils and Resinoids, Perfumery, Cosmetic or Toilet Preparations Perfumery, Cosmetic or Toilet Preparations Chapter Notes: Notes: .......... B3. Heading 33.03 to 33.07 apply, inter alia, to .................. products, whether or not mixed (other than aqueous 3. Heading 3303 to 3307 apply, inter alia, distillates and aqueous solutions of essential oils), to products, whether or not mixed (other suitable for use as goods of these headings and put up than aqueous distillates and aqueous in packings of a kind sold by retail for such use. solutions of essential oils), suitable for use as goods of these headings and put up in Cpackings of a kind sold by retails for such General use. ........... Headings 33.03 to 33.07 include products, whether or not mixed (other than aqueous distillates and aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings of a kind sold by retail for such use (see Note 3 to this DChapter). The products of headings 33.03 to 33.07 remain in these headings whether or not they contain subsidiary pharmaceutical or disinfectant constituents, or are held out as having subsidiary therapeutic or prophylactic value (see Note 1(d) to Chapter 30). EHowever, prepared room deodorizers remain classified in heading 33.07 even if they have disinfectant properties of more than a subsidiary nature. Preparation (e.g. varnish) and unmixed products (e.g. unperfumed powdered talc, fuller's earth, acetone, alum) which are suitable for other uses in addition to Fthose described above are classified in these headings only when they are:- (a) In packings of a kind sold to the consumer and put up with labels, literature or other indications that they are for use as perfumery, Gcosmetic or toilet preparations, or as room deodorizers; or (b) Put up in a form clearly specialized to such use (e.g. nail varnish put up in small bottles furnished with the brush required for applying the varnish).

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33.05 -PREPARATIONS FOR USE ON 3305- Preparations for use on THE HAIR the hair ................ ............... BThis heading covers:- 3305 90 - Other 1........ -- Hair Oil 2......... 3......... 4. Other hair preparations, such as Cbrilliantines, hair oils, creams ("pomades") and dressings, hair dyes and bleaches used on the hair; cream-rinses

56. So far as Chapter Note 3 to Chapter 33, CETA AmendmentDAct, 2004 has the same Chapter Note as the HSN. However, the generalexplanation of HSN adds further conditions for the product to beclassifiable under Chapter 33 regarding packings of a kind sold to theconsumer and put up with labels and literatures that they are for use forsuch purpose. To put it in other words, Chapter Note 3 to Chapter 33 asEcontained in the HSN, General Explanation to the said HSN Notes placescertain conditions, i.e.:- (a) [when the goods are] In packings of a kind sold to theconsumer and put up with labels, literature or indications that they arefor use as perfumery, cosmetic or toilet preparations, or as roomFdeodorizers; or G

(b) Put up in a form clearly specialized to such use (e.g. nailvarnish put up in small bottles furnished with the brush required forapplying the varnish).

It is important to note that the pre-amended Schedule (prior toCETA amendment) also had the same rigours as HSN Notes such as“the product requiring labels and literatures including the specializeduse” (as Chapter Note 2 to Chapter 33). However, after the amendment

with effect from 28.02.2005, the Parliament consciously chose not toimpose or place the same rigours for classification of goods under thisHeading and deleted the same. The Parliament intentionally andconsciously deleted these conditions in the new (renumbered) ChapterNote 3 to Chapter 33 of the Tariff Schedule to the CETA. Therefore, toapply these conditions, post-amendment would be against the intent ofthe Parliament. Hence, HSN Chapter Note cannot be relied upon todetermine the classification rather the CETA Tariff Chapter Note mustbe considered.

57. The relevant HSN Explanatory Notes and competing CETATariff Note, insofar as Section Note 2 to Section VI is as under:- HSN Explanatory NotesCETA Tariff Notes Section VI Section VI Products of the Chemical or Allied Industries Products of the Chemical or Allied Industries Section Notes. After amendment ........ Notes: 2. Subject to Note 1 above, goods classifiable in Heading Nos. 30.04, 30.05, 30.06, 32.12, 33.03, ........... 33.04, 33.05, 33.06, 33.07, 35.06, 37.07 or 38.08 2. Subject to Note 1 above, goods by reason of being put up in measured doses or classifiable in Headings 3004, 3005, for retail sale are to be classified in those 3006, 3212, 3303, 3304, 3305, 3306, headings and in no other heading of the 3307, 3506, 3707 or 3308 by reason of Nomenclature. being put up in measured doses or for 3. Goods put up in sets consisting of two or more retail sale are to be classified in those separate constituents, some or all of which fall in headings and in no other heading of this Section and are intended to be mixed this schedule. together to obtain a product of Section VI or VII, are to be classified in the heading appropriate to that product, provided that the constituents are:- (a) having regard to the manner in which they are put up, clearly identifiable as being intended to be used together without first being repacked; (b) presented together; and (c) identifiable, whether by their nature or by the relative proportions in which they are present, as being complementary one to another.

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GeneralSection Note 1 ......... Section Note 2 Section Note 2 provides that goods (other than Bthose described in headings 28.43 to 28.46) which are covered by heading 30.04, 30.05, 30.06, 32.12, 33.03, 33.04, 33.05, 33.06, 33.07, 35.06, 37.07 or 38.08 by reason of being put up in measured doses or for retail sale are to be classified in those headings notwithstanding that they could also fall in some other heading of the CNomenclature. For example, sulphur put up for retail sale for therapeutic purposes is classified in heading 30.04 and not in Heading 25.03 or 28.02, and dextrin put up for retail sale as a glue is classified in heading 35.06 and not in heading 35.05.

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58. As discussed earlier, CETA Amendment Act, 2004 amendedSection Note 2 to Section VI. The rigours placed for a product to beclassified under these Headings are not prevalent in the CETA althoughthey are prevalent in the HSN. The legislature consciously chose not toimport the conditions and rigours placed in the HSN Explanatory NotesEand the following as found in HSN does not find place in the amendedSection Note 2 to Section VI:- “(a) having regard to the manner in which they are put up, clearlyidentifiable as being intended to be used together withoutfirst being repacked; F

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(c) identifiable, whether by their nature or by the relativeproportions in which they are present, as beingcomplementary one to another.”

It is clear from the above, that the HSN General ExplanatoryNotes to Section VI are to an extent in conflict with the Notes containedin Tariff Schedule to the Central Excise Tariff Act, 1985. Therefore, theNotes contained in the Central Excise Tariff Act shall prevail over theNotes contained in HSN.

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59. In Collector of Central Excise, Shillong v. Woods CraftProduct Ltd.(1995) 3 SCC 454, this Court held HSN is a safe guide forinterpretation and entitled to great consideration. The relevant portionof the said judgment is as under:- “12. It is significant, as expressly stated, in the Statement ofObjects and Reasons, that the Central excise tariffs are based onthe HSN and the internationally accepted nomenclature was takeninto account to “reduce disputes on account of tariff classification”.Accordingly, for resolving any dispute relating to tariffclassification, a safe guide is the internationally acceptednomenclature emerging from the HSN. This being the expresslyacknowledged basis of the structure of Central excise tariff in theAct and the tariff classification made therein, in case of any doubtthe HSN is a safe guide for ascertaining the true meaning of anyexpression used in the Act. The ISI Glossary of Terms has adifferent purpose and, therefore, the specific purpose of tariffclassification for which the internationally accepted nomenclaturein HSN has been adopted, for enacting the Central Excise TariffAct, 1985, must be preferred, in case of any difference betweenthe meaning of the expression given in the HSN and the meaningof that term given in the Glossary of Terms of the ISI.”

60. However, in Camlin Ltd. v. Commissioner of CentralExcise, Mumbai(2008) 9 SCC 82, this Court held that if the entriesunder HSN and the entries under the Central Excise Tariff Act aredifferent then reliance cannot be placed upon HSN Notes for the purposesof classification of goods under the Central Excise Tariff. The relevantportion of the said judgment is as under:- “24. In our considered view, the Tribunal erred in relying uponthe HSN for the purpose of marker inks in classifying them underChapter Sub-Heading 3215.90 of the said Tariff. The Tribunalfailed to appreciate that the entries under the HSN and the entriesunder the said Tariff are completely different. As mentioned above,it is settled law that when the entries in the HSN and the saidTariff are not aligned, reliance cannot be placed upon HSN forthe purpose of classification of goods under the said Tariff. Oneof the factors on which the Tribunal based its conclusion is theentries in the HSN. The said conclusion in the order of the Tribunalis, therefore, vitiated and, accordingly, set aside.We agree withthe findings recorded by the Commissioner (Appeals).”

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A61. As discussed earlier, after the amendment to CETA, there is amaterial difference between the relevant notes provided in the HSN asagainst those provided in the Tariff Schedule to the CETA, 1985. Thegeneral explanation as provided in the HSN cannot be applied as theystand to explain the Notes in the HSN which is materially different fromthe Notes contained in the Tariff Schedule of the CETA. In instances ofBconflict, the Notes contained in the Tariff Schedule to the CETA willprevail over that of the HSN. One of the factors on which the Tribunalbased its conclusion was the entries in HSN and its observation thatentries in HSN to Chapter 33 and CETA Tariff Notes of Chapter 33 areone and the same even after amendment. In my view, the TribunalCerred in not keeping in view the principles laid down by this Court inCamlin Ltd. casethat when the Notes in HSN and the Tariff are notaligned, reliance cannot be placed upon the HSN for the purpose ofclassification of the goods.

62. Circular No.145/56/95-CX dated 31.08.1995was issuedDin the context of classification of ‘Coconut Oil’ under the Central ExciseTariff as it existed prior to the amendment. The said circular clarifiedthat for classification of ‘Coconut Oil’ under Chapter 33 (as ‘Hair Oil’),it must satisfy the requirements of Chapter Note 2 of Chapter 33. Asper the said circular, though ‘Coconut Oil’ may be capable of being usedas ‘Hair Oil’, the product must satisfy the criteria of label/literature onEpacking of ‘Coconut Oil’ showing its use as ‘Hair Oil’ as per Note 2 toChapter 33. The relevant part of the Circular dated 31.08.1995 is asunder:- “6. .....In the CET Heading 3305 covers “preparations for use onthe hair”.F

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9. Therefore, keeping in view of Chapter Notes, HSN Notes, theTariff Conference of 1991, the report of D.G. (A.E.) and theopinion of Chief Chemist, CRCL, it is felt that coconut oil whetherGpure or refined and whether packed in small or large containersmerits classification under Heading No.1503 as long as it satisfiesthe criteria of ‘fixed vegetable oil’ laid down in Chapter Note 3 ofChapter 15. It is also clarified that if the containers bear labels/literature, etc., indicating that it is meant for application on hair, asspecified under Note 2 of Chapter 33 and/or if the coconut oil has H

additives (other than BHA) or has undergone processes whichmade it a preparation for use on hair as mentioned in ChapterNote 6 of Chapter 33 then the coconut oil may merit classificationunder Chapter 33.”

63. In exercise of powers under Section 37B of Central ExciseAct, 1944, CBEC issued Circular No.102/05/2006-CX-3 dated03.06.2009 withdrawing the Circular No. 145/56/95-CX dated31.08.1995. After referring to the amendment and old and new ChapterNotes and Section Notes, the Circular stated that the ‘Coconut Oil’packed in small containers of sizes upto 200 ml shall be classified underHeading 3305. The relevant portion of the said Circular reads as under:- “5. .....Hence, in view of the amendments/insertion of ChapterNote and Section Note, the classification of coconut oil woulddepend upon the fact as to how the majority of the customers usethe said product. Therefore, if coconut oil is packed in packageswhich are generally meant for sale in retail as hair oil, in that case,the said product would be classified as hair oil under heading 3305,even though few consumers may use it as edible oil.

Through field survey, it has been gathered that smaller packs uptothe sizes of 200 ml are normally used as hair oil by the customers.It has also been reported that in small pack sizes upto 200ml arestacked along with other hair oil care preparations/cosmetics andnot in edible oil section in the retail shops. Enquiries also revealthat small packs of coconut oil displayed at the hair care shelvesare used as hair oil only and the customer ask for the smallerpackages or the sachets for using them as ‘hair oil’.

6. In view of foregoing discussion, it is concluded that coconut oilpacked in containers upto 200ml may be considered as generallyused as hair oil. This would bring uniformity in assessment inrespect of coconut oil sold in small containers irrespective of thefact as to whether its use as hair oil is indicated on containers/labels or not. Therefore, following instructions/directions areissued:-

(i) Circular No. 145/56/95-CX dated 31.08.1995 stands withdrawn.(ii) the coconut oil packed in small container of sizes upto 200mlshall be classified under heading 3305.”

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A64. In Raj Oil Mills Ltd. v. Commissioner, Central Excise2014(314) ELT 541 (Tri. - Mumbai), it was held that repacking of ‘EdibleGrade Coconut Oil’ from bulk pack to retail pack of 200 ml and less arenot classifiable under Chapter 33 of Central Excise Tariff which covers“cosmetic or toilet preparations” rather it would be classifiable underChapter 15 which covers “animal or vegetable fats and oils and theirBcleavage products”. Challenging the judgment of the Tribunal in RajMills Ltd. case, the appeals preferred by the Revenue in CA Nos.2023-37 of 2014 were dismissed on 17.12.2014 by holding as under:- “1. We have heard learned Additional Solicitor General appearingfor the Revenue.C

2. Delay condoned.

3. We find no merit in the Civil Appeals. The Civil Appeals aredismissed.”

After the judgment of the Supreme Court, the Circular datedD03.06.2009 was withdrawn by another Circular No.103/01/2015-CX-3dated 12.10.2015. Now, the issue of classification of ‘Coconut Oil’ asper the Circular dated 12.10.2015 is to be decided by the field by takinginto consideration the facts of the case read with the judicialpronouncements. Merely because the ‘Coconut Oil’ of retail pack ofE200 ml or less are not classifiable under Chapter 33 of the Central ExciseTariff and the civil appeals preferred by the Revenue were dismissed bythe Supreme Court, it does not mean that it has attained finality. Aspointed out earlier, civil appeals preferred by the Revenue were dismissedby a non-speaking order at the admission stage and hence, the “Doctrineof Merger” is not applicable. When the order passed by the SupremeFCourt is not a speaking order, it is not correct to assume that the SupremeCourt had decided implicitly all the questions in relation to the merits ofthe order. Now, the position (as per Circular dated 12.10.2015) is todecide the issue of classification by the field taking into considerationthe facts of the case read with judicial pronouncements.G65. Conclusion: Impugned orders of the Tribunal are set asideand the appeals preferred by the revenue are allowed with the followingfindings:- i. Tribunal is not right in holding that Chapter 15 covers all varietiesof ‘coconut oil’ both edible and non-edible. The judgments reliedH

upon by the Tribunal and the Board’s circular dated 31.08.1995were prior to 2004 amendment. The Tribunal was not right inrelying upon the earlier orders/circular dated 31.08.1995 priorto amendment to base its conclusion that coconut oil both edibleand non-edible merits classification under Chapter 15. Hencethe impugned orders of the Tribunal are liable to be set aside.

ii. After the amendment (w.e.f. 28.02.2005) what is relevant is‘suitability of the goods for being used as Hair Oil’ forclassifying the same under 33.05. ‘Coconut Oil’ packed in smallsachets/containers suitable for being used as ‘Hair Oil’ isclassifiable under Chapter Tariff Item 3305. When a good isclassifiable under tariff item 3305, by virtue of amended SectionNote 2 to Section VI, no other classification is permissible.

iii. Rule 3(a) states that the most specific description will bepreferred over the more general one. In the present case, whenitem description is read with the Chapter Notes, Section Notesand the tests for classification that is Tariff Item 1513.19.00and 3305.90.19 are equally specific. Hence, as per Rule 3(c),when goods cannot be classified by reference to (a) or (b),they shall be classified under the heading which occurs last innumerical order among those which equally merit classification.Hence, the coconut oil manufactured by the respondents couldrightly be classified under heading 3305.90.19, as it occurs lastin the numerical order of the tariff.

iv. By consideration of the materials placed on record and alsoapplying the’Common Parlance Test’, coconut oil packed insmall sachets/containers understood in the market by dealers/consumers as ‘Hair Oil’ is classifiable under Chapter 33, tariffitem 33 05.

v. After the amendment to Central Excise Tariff Act (w.e.f.28.02.2005), there is material difference between the relevantExplanatory Notes in the HSN as against those provided in theTariff Schedule to Central Excise Tariff Act, 1985. As held inCamlin Ltd. v. Commissioner of Central Excise, Mumbai(2008) 9 SCC 82, when the Explanatory Notes in the HSN andthe Notes tariff schedule are not aligned, reliance cannot beplaced upon HSN for the purpose of classification of goods.

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Avi. In the case of MAIPL, ‘Coconut Oil’ packed in small sachets/containers suitable for being used as ‘Hair Oil’ are classifiableunder Chapter 3305. In case of ‘Parachute’, this is furtherfortified by various materials placed on record and alsoregistration of its Trademark No.1033842 Class-3 Parachuteassociated with “Hair Oil, Hair lotion etc.”Bvii. Circular dated 03.06.2009 and dismissal of appeals preferredby the Revenue in CA Nos. 2023-37 of 2014 (dated 17.12.2014)at the admission stage by non-speaking order, the ‘Doctrine ofMerger’ is not applicable.

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In view of the difference of opinion in terms of the judgmentspronounced by us in the present appeals, the Registry is directed toplace the said appeals before Hon’ble the Chief Justice of India forappropriate orders.

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Devika Gujral

Directions to place before Hon’ble CJI for appropriate orders.

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