Commercial classification of edible coconut oil favoured the taxpayer, with the edible oil entry prevailing over the residuary hair oil category.

Coconut oil manufactured and marketed as food-grade edible coconut oil was held to fall within the expression "edible oil" in Entry 24(i) of Part A of the 2nd Schedule to the Assam Value Added Tax Act, 2003, and not within the residuary schedule for hair oil. The classification turned on common and commercial parlance, and the entry was not confined to oils from any particular source. The possibility that coconut oil may also be used as hair oil did not displace its edible character where the product was sold as an edible product. As two views were reasonably possible, the interpretation favourable to the taxpayer was preferred, and the reclassification based on assumption was set aside.

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Issues: Whether coconut oil manufactured and marketed as edible coconut oil was classifiable under Entry 24(i) of Part A of the 2nd Schedule to the Assam Value Added Tax Act, 2003 as edible oil taxable at 4%, or under the residuary 5th Schedule as hair oil taxable at 12.5%.

Analysis: The competing classification depended on the meaning of coconut oil in common and commercial parlance. The record showed that the product was manufactured and sold as food grade edible coconut oil, and the entry in the 2nd Schedule covered edible oil without confining it to any particular source. The fact that coconut oil may also be popularly used as hair oil in Assam did not by itself exclude edible coconut oil from the category of edible oil. Where two views were possible on classification, the interpretation favourable to the taxpayer was to be adopted. The impugned reclassification was found to rest on assumption rather than acceptable material.

Conclusion: Coconut edible oil fell within Entry 24(i) of Part A of the 2nd Schedule and was taxable at 4%, not under the 5th Schedule at 12.5%; the impugned orders were liable to be quashed.

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