TaxTMI 
TaxTMI 
2018 (4) TMI 721
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.... the appeals under consideration is subsequent to the amendment of the First Schedule to the Central Excise Tariff Act, 1985 by the Amendment Act of 2004 (5 of 2005) which came into force on 28.2.2005. 3. The facts, in brief, may be noted at the outset: The respondent­asessee in Civil Appeal No.1766 of 2009 i.e. M/S Madhan Agro Industries Private Limited is/was a manufacturer of 100% pure coconut oil marketed under the brand name "Shanthi". In Civil Appeal Nos.6703­6710 of 2009 the assesses are four job­ workers of M/S Marico Limited who had received 100% pure coconut oil from Marico Limited in bulk and thereafter had packed the same in small packages which were supplied back to Marico as per dispatch schedules issued. The packages in question carried a declaration that they contain 100% pure coconut oil. The trademark "Parachute" is also inscribed on the packs. In Civil Appeal No.1766 of 2009, the packings also included pouches of 5 ml. All the packs are marked as "edible oil". 4. It may also be noticed at this stage that the packing sizes conform to the requirement of Clause 5 of Schedule I of the Edible Oil packaging (Regulation) Order 1998 read with serial No.10 ....
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.... Fixed vegetable oils, other than those of heading No.15.02 8% 15.04 1504.00 Vegetable fats and oils and their fractions, partly or wholly hydrogenated, interesterified, reesterified or elaidinised, whether or not refined but not further prepared. 8% 15.05 33.03.00 Omitted 8% 15.06 1506.00 Glycerol, Crude, Glycerol Waters and Glycerol lyes 16% 15.07 1507.00 Vegetable waxes (other than triglycerides), beeswax, other insect waxes and spermaceti, whether or not refined or coloured; degras; residues resulting from the treatment of fatty substances of animal or vegetable waxes 16% 15.08 Margarine; edible mixtures or preparations of animal or vegetables fats; animal or vegetable fats and oils, boiled, oxidized, dehydrated, sulphurised, blown, polymerized by heat in vacuum or in inert gas or otherwise chemically modified; inedible mixtures or preparations of fats and oils of this Chapter 16% 1508.10 Linoxyn 16% 1508.90 Other 8% BEFORE AMENDMENT CHAPTER 33 ESSENTIAL OILS AND RESINOIDS; PERFUMERY, COSMETIC OR TOILET PREPARATIONS Notes : 1. This Chapter does not cover : (a) Natural oleoresins or vegetable extracts of heading ....
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....ion "odoriferous substances" in heading 33.02 refers only to the substances of heading No.33.01 to odoriferous constituents isolated from those substances or to synthetic aromatics. Chapter 33 Cosmetic or toilet preparations, essential oils etc. Heading No. Sub­heading No Description of goods Rate of duty 33.05 Preparations for use on the hair 3305.10 ­Perfumed for use on the hair ­Other 16% 3305.91 ­Hair fixer 16% 3305.99 ­Other 16% POST AMENDMENT 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) pig fat or poultry fat of heading 0209; (b) cocoa butter, fat or oil (heading 1804); (c) edible preparations containing by weight more than 15% of the products of heading 0405 (generally Chapter 21); (d) greaves (heading 2301) or residues of headings 2304 to 2306; (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 oil....
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.... 1513 29 10 ­Palm kernel oil and its fractions kg. 8% 1513 29 20 ­Babassu oil and its fractions edible grade kg. 8% 1513 29 30 ­Babassu oil and its fractions, other than edible grade kg. 8% 1513 29 90 ­Other kg. 8% POST AMENDMENT CHAPTER 33 Essential Oils and Resinoids, Perfumery, Cosmetic or Toilet Preparations NOTES 1. This Chapter does not cover: (a) natural oleoresins or vegetable extracts of heading 1301 or 1302; (b) soap or other products of heading 3401; (c) gum, wood or sulphate turpentine or other products of heading 3805; or (d) perfumery, cosmetics and toilet preparations containing alcohol or opium, Indian hemp or other narcotics and for this purpose, these expressions have the meanings respectively assigned to them in section 2 of the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (16 of 1955). 2. The expression "odoriferous substances" in heading 3302 refers only to the substances of heading 3301, to odoriferous constituents isolated from those substances or to synthetic aromatics. 3. Headings 3303 to 3307 apply, inter alia, to products, whether or not mixed (other than aqueous d....
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....o 15; Section Note 2 to Section VI and Chapter Note 3 to Chapter 33 in support of the contentions advanced. Apart from relying on the aforesaid provisions of the Act, Shri Panda has submitted before the Court that an elaborate market survey of the product undertaken had indicated that coconut oil in smaller packages are understood in the market and purchased as 'hair oil' and not as 'edible oil'. Relying on several decisions of this Court, the details of which would be noticed later, Shri Panda has submitted that classification of the product must follow the Common Parlance Test in which event the coconut oil in dispute is eminently classifiable under Chapter 33, Heading 3305 and not under Chapter 15, Heading 1513 as claimed by the assessee. 8. On the other hand, Shri Bagaria, learned Senior Counsel for the respondents­assessees has submitted that none of the provisions relating to Interpretation of the Schedule to the Act and the Chapter Notes relied upon by the Revenue would be applicable and relevant to the present case so as to warrant classification of the product under Chapter 33. Infact, Shri Bagaria has urged that prior to the coming into force of the Amendment Act 5 o....
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....use on the hair". Coconut oil is not a preparation for use on the hair. It is fixed vegetable oil capable of being used as cooking medium (or for other purposes including for application on the hair). In the absence of any proof that it is specially prepared for use on the hair or any label/literature/indications on the containers to that effect, the subject goods cannot be classified under heading 3305 simply because they were packed in small containers and applied by some sections of the society on the hair. (ii) Coconut oil, whether pure or refined and whether packed in small or large containers merits classification under Heading 1503. (iii) Only if the containers bear labels/literatures etc. indicating that it is meant for application on hair as specified in Note 2 of Chapter 33 and/or if the coconut oil is used as additives or has undergone a process which make it a "preparation for use on hair", that coconut oil may merit classification under Chapter 33. 10. It is submitted that having regard to the object behind the Amendment effected in the year 2005, the efficacy of the above circular, though issued when Chapter No.2 of Chapter 33 (already extracted) was in force, wo....
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....esolving disputed issues of classification. The Harmonised System of Nomenclature (HSN) and the Chapter Notes and Explanatory Notes thereto, on which the Tariff Act has been remodelled by the Amendment, has been repeatedly acknowledged by this Court to be a safe guide for resolution of disputes with regard to classification under the Tariff Act. The opinions rendered by this Court in Collector of Central Excise, Shillong Vs. Wood Craft Products Ltd. (1995) 3 SCC 454; Commissioner of Customs and Central Excise, Goa Vs. Phil Corporation Limited (2008) 17 SCC 569; O.K. Play (India) Ltd. Vs. Commissioner of Central Excise, Delhi­III, Gurgaon (2005) 2 SCC 460 may be illustratively referred to in this regard. These are the different tools that would be available to the Court to deal with disputes with regard to classification which must be resorted to in the first instance. 13. To what extent the common parlance test would be applicable in determining the classification of the product in question is the first question that may be dealt in view of the very emphatic arguments made on behalf of the Revenue on this question. 14. Shri A.K. Panda, learned Senior Counsel for the Revenue h....
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....ed that in interpreting tariff entries in taxation statute like the Excise Act, where the primary object is to raise revenue and for that purpose various products are differently classified, the entries are not to be understood in their scientific and technical meaning. The terms and expressions used in tariff have to be understood by their popular meaning that is the meaning that is attached to them by those using the product. See the decision of the Supreme Court on the dispute regarding classification for excise duty, the product - Lal Dant Manjan manufactured by Shree Baidyanath Ayurved Bhavan Ltd. reported in the case of Shree Baidyanath Ayurved Bhavan Ltd. v. CCE (1996) 9 SCC 402. The manufacturer claimed the product to be an Ayurvedic medicinal preparation product for dental care. The view of the Tribunal was upheld by this Court by holding (at SCC pp.404­05, para 3) that "ordinarily a medicine is prescribed by a medical practitioner and it is used for a limited time and not every day unless it is so prescribed to deal with a specific disease like diabetes"." 20. A consideration of the facts of the cases, referred to above, however, would go to show that the basic dispu....
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....omplete or unfinished, provided that, the incomplete or unfinished goods have the essential character of the complete or finished goods. It shall also be taken to include a reference to those goods complete or finished (or falling to be classified as complete or finished by virtue of this rule), removed unassembled or disassembled. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles contained in Rule 3. 3. When by application of sub­rule (b) of rule 2 or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part ....
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...., 3303, 3304, 3305, 3306, 3307, 3506, 3707 or 3808 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of this Schedule. ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ Chapter Note 3 to Chapter 33 CHAPTER 33 ESSENTIAL OILS AND RESINOIDS; PERFUMERY, COSMETIC OR TOILET PREPARATIONS Notes : 1. xxxxx 2. xxxxx 3. Headings 3303 to 3307 apply, inter alia, to 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. 22. It has already been noticed that under the pre­ amended provisions of the Act coconut oil was not covered by any specific Heading and had been classified under Heading 15.03 which dealt with fixed vegetable oil....
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.... inter alia, would apply to products "which are suitable for use as goods mentioned in the Heading and if they are put up in packings of 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 in dispute that in the packings of coconut oil the inscription "edible oil" is mentioned. There is no representation, declaration or advertisement in the 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 which has been substituted by Chapter Note 3 was more explicit in requiring packing put up with: "labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form 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 or prophylactic value." However, the changes brought about/deletions made by the amendment would hardly be significant inasmuch as Chapter Note 3 of Chapter 33 (post­amendment) introduced by the Amendment Act in place of the erstwhile Chapter No.2 is....
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....entral Excise Tariff Act on the same terms as in the HSN would hardly make any difference in the conclusion to be reached in view of the clear and consistent pronouncement of this Court first expressed in Collector of Central Excise, Shillong Vs. Wood Craft Products Ltd. (supra) to the following effect: "12. It is significant, as expressly stated, in the Statement of Objects and Reasons, that the Central excise tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to "reduce disputes on account of tariff classification". Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central excise tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. The ISI Glossary of Terms has a different purpose and, therefore, the specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Exc....
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.... Headings/entries in the Central Excise Tariff Act cannot be lost sight of. 31. The photo personality of a cine star with flowing, hair, as urged on behalf of the Revenue, may not be convincingly determinative. Also the fact that some of the smaller containers of coconut oil have nozzles for release of drops of coconut oil from the container will not satisfy the above requirement inasmuch as the materials collected by the Revenue in the course of adjudication proceedings indicate that the amount of coconut oil used in cooking, at times, may be, minimum. 32. The above conspectus of fact can reasonably lead to the conclusion that the coconut oil in dispute in the present case would be more appropriately classifiable under Chapter 15, Heading 1513. If the above is a possible and reasonable conclusion and we are inclined to hold as such, the contention of the Revenue with regard to application of Rules 1 and 3 of the General Rules for Interpretation; Chapter Note 1(e) to Chapter 15; Note 2 to Section VI will not at all be relevant in this regard. The legislative history behind Chapter 15; the words and expressions in Heading 1513 of the Tariff Act; the relevant Heading i.e. 1513 in t....
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..... The above position would continue to hold the field notwithstanding the substitution of Chapter Note II by Chapter Note 3 w.e.f. 28­02­2005 in view of the similar stipulations and conditions incorporated in Chapter No.3 of the HSN read with the Explanatory Note 3 thereto which the Court would be obliged to take into account. 35. The Order under Section 37B of the Central Excise Act dated 3.6.2009 discussed above is infact a virtual admission on the part of the Revenue that coconut oil packed in containers upto 200 ml alone would be classifiable under Chapter 33 and the larger packages even of 1/2 litres would fall under Chapter 15. In the absence of the essential stipulations under Chapter Note 3 of Chapter 33, discussed above, in respect of the product in question there can be no justification for the direction contained in the order/circular dated 3.6.2009. The learned Appellate Tribunal in Raj Oil Mills Vs. Commissioner of Central Excise (supra), therefore, took the view that even small packets of 200 ml or less would be more appropriately classifiable under chapter 15 as coconut oil and not as hair oil under Chapter 33. The said decision of the Tribunal has been affi....
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....bsp; - - Crude Oil (or) 1513 19 00 - - Other 4. Chapter 33 deals with "Essential oils and Resinoids, Perfumery, Cosmetic or Toilet Preparations". Tariff Item 33 05 reads as under:- "3305 Preparations for use on the hair 3305 10 - Shampoos 3305 10 10 - - - Containing spirit 3305 10 90 - - - Other 3305 20 00 - Preparations for permanent waving or straightening 3305 30 00 - Hair lacquers 3305 90 - Other - - - Hair oil 3305 90 11 - - - - Perfumed 3305 90 19 - - - - Other" 5. Chapter 15 deals with "Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes". Tariff Item 15 13 reads as under:- "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 1513 11 00 - - Crude oil 1513 19 00 - - Other - Palm kernel or babassu oil and fractions thereof 6. A harmonious construction of the follo....
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.... or substance shall be according to the principles contained in rule 3. 3. When by application of sub-rule (b) of rule 2 or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:- (a) the heading which provide the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their 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 the numerical order a....
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.... alia, expands the six digit classification into eight digit classification and such expansion has been made in the First Schedule and the Second Schedule to the said Central Excise Tariff Act, to cover a wider range of specific commodities under enlarged tariff 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 xxxxxx) Next two digits: refer to heading of the goods in that Chapter (e.g. xx 05 xxxx) Next two digits: indicate Chapter sub-heading (e.g. xxxx 90 xx) Last two digits: refer to the chapter sub-sub-heading (e.g. xxxxxx 10) 10. By the 2004 amendment, there has been realignment of certain goods including the impugned goods. For proper appreciation, we may usefully refer to comparative chart of relevant old legal provisions and the new legal provisions after amendment as under:- Sl. No. Old Legal Provision New Legal Provision 1. Section Note to Section VI Note 2: Goods put up in sets consisting of two or more Note 2:- Subject to Note 1 above, goods classifiable in separate constituents, som....
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....der Heading 3305, it cannot be classified in any other heading of the Schedule. 12. Relevant Chapter Notes and Section Notes for classification of the impugned goods:- Let us now examine the relevant Headings, Sections and Chapter Notes pertaining to the classification of the impugned goods. Chapter Note 3 to Chapter 33 (amended w.e.f. 28.02.2005), reads as under:- "Headings 3303 to 3307 apply, inter alia, to 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" 13. Chapter Note 3 to Chapter 33 envisages four key things, namely: a. The product may or may not be mixed; b. The product should be suitable for use as a good under these headings (33 03 to 33 07); c. The product should be put up in packings of a kind sold by retail for such use; d. Headings 33 03 to 33 07 may also apply for other goods not being covered by this Chapter Note (as indicated by the phrase 'inter alia") 14. It is important to note that the Chapter Note is not phrased in an exclusive manner. It merely reiterates the conditions which are req....
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....ub-heading ...33 05... by Note 2 to Section VI. Further Note 1 (e) to Chapter 15 provides that "the chapter does not cover goods of Section VI". Note 1(e) to Chapter 15 reads as under:- "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, 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 under Section VI in which Chapter 33 Tariff Item 33 05 is one of the items. 17. Whether Coconut Oil falls under Chapter 15 and applicability of Interpretative Rule 3:- Contention of the assessee is that the description of 'Coconut Oil' under Chapter 15 is specific and hence applicable to the subject goods in terms of Rule 3(a) of the Interpretative Rules. It is well- settled that Rule 3(a) of "General Rules for the Interpretation" is invokable only if the Headings and the relevant Sections and the Chapter Notes are not clearly determinative of the classification. Claim of the assessee....
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....rico to be sold under the brand name 'Parachute', the activities of M/s. Moreshwar and other job workers amount to manufacture in terms of Section 2 (f)(iii) of Central Excise Act, 1944. According to Revenue, once this fact of manufacture of oil 'suitable for use as 'Hair Oil'' is established, classification under Chapter Heading 15 is ruled out and the appropriate Heading is 33 05 by virtue of Chapter Note 3 to Chapter 33 and Note 2 to Section VI. 19. M/s. Madhan Agro Industries (P) Ltd. (MAIPL):- So far as the 'MAIPL', coconut (copra) is crushed and grounded and the oil-cake and oil are separated and then the oil is filtered and purified. The filtered oil is then stored in tanks and packed in pouches and bottles of different measurements viz., 5 ml, 50 ml, 100 ml, 200 ml, 500 ml, and 1000 ml pouches, 50 ml, 100 ml, 200 ml and 500 ml plastic bottles, 100 ml, 200 ml, and 500 ml wide mouthed bottles, 200 ml tins, one litre and 2 litre cans and sold in the market. According to Revenue, MAIPL, tests the products of their competitor's such as 'Parachute Hair Oil' and compare the results of their products to ensure the marketability of their ....
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....the product is 'suitable for use as goods of the heading' and "put up in packing for retail sale for such use", whether mixed or not, is classifiable under Chapter Heading 33 05 and in the light of Section Note 2 to Section VI, it cannot be classified under any other Heading in this Schedule. It was further submitted that CESTAT relied upon various orders for referring to Chapter Note 2 to Chapter 33 which were though prior to amendment thereby failing to consider that the Show Cause Notice and the Order-in- Original were passed pursuant to the amended Chapter Note 2 to Chapter Note 33 and Section Note with effect from 01.03.2005. Insofar as 'Parachute' is concerned, Revenue places reliance upon various materials like Trade Mark Registration and other materials as to depicting how the market has understood, 'Parachute' as the 'Hair Oil'. It was further submitted that in case of conflict, the Notes contained in the Tariff Schedule to the CESTAT will prevail over that of the HSN and the impugned order cannot be sustained. 22. Contention of the respondent(s)/Assessee(s): Contention of the respondents/assessees is that 100% pure 'Coconut Oil' co....
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....;Coconut Oil' is put up in packing of a kind sold in retail suitable for use as application on hair would merit classification under tariff entry 33.05. This is the object of the legislature in bringing about the amendment to Chapter Note 3 of Chapter 33 and Section Note 2 to Section VI. Chapter Note 1(e) to Chapter 15 provides that ".....said Chapter does not cover goods of Section VI". This exclusion is in clear conformity and recognition of the fact that goods which otherwise would fall under Section VI are classifiable in accordance with the conditions 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 as well as non-edible, the Tribunal erred in not keeping in view that the object of the legislature in bringing about the amendment. 24. As discussed earlier, the process carried on by M/s. Moreshwar and other job workers are:- (i) oil received from M/s. Marico is unloaded and stored in storage tanks in the unit and it undergoes the process of mechanical filtering and stored in another tank, then sent through pipeline for filli....
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....lity for such use, if the answer to which is 'Yes', then the goods are classifiable under Chapter 33. So far as the next component, "the product should be put up in packings of a kind sold by retail facilitating such use", is satisfied then 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 also M/s. Moreshwar and other job workers, the product is packed in small quantities in containers like 50 ml, 100 ml, 200 ml, 500 ml which also contain the brand trademark 'Parachute'. 27. So far as respondent-MAIPL is concerned, coconut is crushed and pure coconut oil is packed in 5 ml, 50 ml, 100 ml, 200 ml, 500 ml and one litre pouches and also containers in 50 ml, 100 ml, 200 ml, 500 ml and one litre cans and sold under the brand name 'Shanthi'. Here again, these pouches/containers in such small packings by construing them in the sense as to how in the trade, dealers and consumers understood it. The Commissioner was right in holding that they were 'Hair Oil' suitable for use on hair. 28. Insofar as 'Parachute' is concerned, the Revenue relies upon various materials as ....
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....ms like hair oil, hair lotion, hair growing preparation, hair tonics etc. The Tribunal held that the aspect of label identified with the hair oil does not advance the case of Revenue for classification of 'Coconut Oil' as 'Hair Oil' since the allegation that job workers used green colour labels for marketing hair oil was absent in the Show Cause Notice. Relevant portion of the order of the Tribunal is as under:- "7. ........Moreover, the material allegation of Marico that its job workers used green coloured labels for marketing hair oil exclusively was absent in the show-cause notice. Marico had never marketed any product under the orange label and all along marketed its entire range of products using the green label only. We find that in the absence of any label which could be identified with a hair oil, this aspect of the label does not advance the Revenue'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 Notice issued to the respondent-M/s. Moreshwar and other job workers was absent on using green coloured labels for marketing ha....
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....goods is primarily based on the Headings, relative Chapter Notes and Section Notes which are paramount in this regard as per Rule 1 of the Interpretative Rules. 33. Rule 3 provides for classification in case goods are classifiable under two or more headings. For proper appreciation, at the risk of repetition, it is necessary to refer to Rule 3 of the Interpretative Rules which reads as under:- 3. When by application of sub-rule (b) of rule 2 or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:- (a) the heading which provide the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets, which cannot be classified b....
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....n Products (I) Ltd. 2006 (200) ELT 342 (T) etc. relied upon by the Tribunal and the Board circular dated 31.08.1995 were dealing with the cases pertaining to the period prior to 01.03.2005. The Tribunal was not right in relying upon the earlier orders/circular dated 31.08.1995 prior to amendment to base its conclusion that coconut oil both edible and non-edible merits classification under Chapter 15. 36. Tests for Classification: The Supreme Court has consistently taken the view that, in determining the meaning or connotation of words and expressions describing an article in a tariff schedule, one principle which is fairly well-settled is that those words and expressions should be construed in the sense in which they are understood in the trade, by the dealer and the consumer. Whether a particular article will fall within a particular tariff heading or not, has to be decided on the basis of as to how that article is understood in 'common parlance' or in 'commercial world' and not as per scientific or technical meaning. In the case of Asian Paints India Ltd. v. Collector of Central Excise (1988) 2 SCC 470, it has been held that when definition of a word has not been....
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....to determine how such an article is understood in "common parlance" or in "commercial world" or in "trade circle" or in its popular sense meaning. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention, when the statute was enacted (see Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan (1980) 4 SCC 71). 34. One of the essential factors for determining whether a product falls within Chapter 30 or not is whether the product is understood as a pharmaceutical product in common parlance [see CCE v. Shree Baidyanath Ayurved Bhavan Ltd. (2009) 12 SCC 419 and CCE v. Ishaan Research Lab (P) Ltd. (2008) 13 SCC 349]. Further, the quantity of medicament used in a particular product will also not be a relevant factor for, normally, the extent of use of medicinal ingredients is very low because a larger use may be harmful for the human body. [Puma Ayurvedic Herbal (P) Ltd. v. CCE (2006) 3 SCC 266, State of Goa v. Colfax Laboratories Ltd. (2004) 9 SCC 83 and B.P.L. Pharmaceuticals Ltd. v. CCE 1995 Supp (3) SCC 1.] 35. However, there cannot be a static parameter for the correct classific....
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....hich it is put to (produced), the end use to which the product is put to, cannot determine the classification of that product." 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 1513 deals with coconut (copra). Before considering the contentious issues as to the classification of the impugned goods, it is necessary to point out as to how 'Coconut Oil' is understood and treated in the market. 42. In Jain Exports Pvt. Ltd. v. Union of India 1987 (29) ELT 753 Del, the High Court of Delhi dealt with the use of 'Coconut Oil' and in 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 an edible oil in a very large part of our country. Almost all the parts of 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 some very 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 for coconut oil, the normal questio....
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....mited stating that 'Parachute' brand is associated with 'Hair Oil' whereas Saffola brand is associated with edible (cooking) oil. The revenue also refers to an article in the Financial Express dated 14.06.2001 where Mr. Srikand Gupta, Chief Executive Officer (CEO), Nature Care Division of M/s. Marico stated that they wanted the 'Parachute' brand to be perceived as a cosmetic brand with the utility of nourishing hair. 45. The appellant has relied upon the following write up on coconut oil by the Coconut Development Board (a statutory body under the Ministry of Agriculture):- "Coconut oil is used in the country as a cooking fat, hair oil, body oil and industrial oil..... Coconut oil is marketed in bulk as well as in packs ranging from sachets containing 5 ml to 15 kg tins. The branded coconut oil in small packs is mainly marketed as hair oil and body oil." 46. A taxing statute is being one levying a tax on goods must, in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance. In Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant Sing....
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....ent. The product was mainly supplied to the Defence Department for use by military personnel who are posted in high-altitude areas. In Commissioner of Central Excise, Calcutta v. Sharma Chemical Works (2003) 5 SCC 60, this Court held that in interpreting provisions of a statute like the Excise Act, the popular meaning as understood by the users should be applied and not the scientific or technical meaning. 49. As held in Jain Exports Pvt. Ltd., the factum of overwhelming use of 'Coconut Oil' as 'Hair Oil' in most parts of the country cannot be ignored. No one will normally understand 'Coconut Oil' to mean only as 'edible oil' because such is not the major use of 'edible oil'. Applying the common parlance test and also 'end use of the product', coconut oil is predominantly understood by the users namely dealers/consumers only as 'Hair Oil' and not as 'edible oil' and hence, classifiable only under Chapter 33 and not under Chapter 15. 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 classifying the same under 33.05. 'Coconut Oil' p....
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....ed and maintained by the World Customs Organization (WCO) (formerly the Customs Co- operation Council), an independent inter-governmental organization [Source: World Customs Organization:http:// www. wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system. aspx]. Along with the HSN, are the Explanatory Notes. They do not form an integral part of the Harmonized System Convention. However, as approved by the WCO Council, they constitute the official interpretation of the Harmonized System at the international 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-the-classification-in-the-hs/explanatory-notes.aspx]. 53. The Central Excise Tariff Act, 1985 (CETA) is based on the Harmonized System of Nomenclature (HSN), which is an internationally accepted product coding system formulated under the auspice of the General Agreement on Tariffs Trade (GATT). In Commissioner of Customs 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 b....
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....d by retail for such use (see Note 3 to this Chapter). 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). However, 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 those described above are classified in these headings only when they are:- * 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, cosmetic or toilet preparations, or as room deodorizers; or * 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). 33.05 -PREPARATIONS FOR USE ON THE HAIR ................ This heading covers:- 1. ........ 2.....
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....s of the Chemical or Allied Industries ........ After amendment 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 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of the Nomenclature. Notes: ........... 2. Subject to Note 1 above, goods classifiable in Headings 3004, 3005, 3006, 3212, 3303, 3304, 3305, 3306, 3307, 3506, 3707 or 3308 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of this schedule. 3. Goods put up in sets consisting of two or more separate constituents, some or all of which fall in this Section and are intended to be mixed 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 p....
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....ing any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central excise tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. The ISI Glossary of Terms has a different purpose and, therefore, the specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Excise Tariff Act, 1985, must be preferred, in case of any difference between the meaning of the expression given in the HSN and the meaning of that term given in the Glossary of Terms of the ISI." 60. However, in Camlin Ltd. v. Commissioner of Central Excise, Mumbai (2008) 9 SCC 82, this Court held that if the entries under HSN and the entries under the Central Excise Tariff Act are different then reliance cannot be placed upon HSN Notes for the purposes of classification of goods under the Central Excise Tariff. The relevant portion of the said judgment is as under:- "24. In our consider....
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....nt part of the Circular dated 31.08.1995 is as under:- "6. .....In the CET Heading 3305 covers "preparations for use on the hair". ...... 9. Therefore, keeping in view of Chapter Notes, HSN Notes, the Tariff Conference of 1991, the report of D.G. (A.E.) and the opinion of Chief Chemist, CRCL, it is felt that coconut oil whether pure or refined and whether packed in small or large containers merits classification under Heading No.1503 as long as it satisfies the criteria of 'fixed vegetable oil' laid down in Chapter Note 3 of Chapter 15. It is also clarified that if the containers bear labels/literature, etc., indicating that it is meant for application on hair, as specified under Note 2 of Chapter 33 and/or if the coconut oil has additives (other than BHA) or has undergone processes which made it a preparation for use on hair as mentioned in Chapter Note 6 of Chapter 33 then the coconut oil may merit classification under Chapter 33." 63. In exercise of powers under Section 37B of Central Excise Act, 1944, CBEC issued Circular No.102/05/2006-CX-3 dated 03.06.2009 withdrawing the Circular No. 145/56/95-CX dated 31.08.1995. After referring to the amendment and old and n....
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....by holding as under:- "1. We have heard learned Additional Solicitor General appearing for the Revenue. 2. Delay condoned. 3. We find no merit in the Civil Appeals. The Civil Appeals are dismissed." After the judgment of the Supreme Court, the Circular dated 03.06.2009 was withdrawn by another Circular No.103/01/2015-CX-3 dated 12.10.2015. Now, the issue of classification of 'Coconut Oil' as per the Circular dated 12.10.2015 is to be decided by the field by taking into consideration the facts of the case read with the judicial pronouncements. Merely because the 'Coconut Oil' of retail pack of 200 ml or less are not classifiable under Chapter 33 of the Central Excise Tariff and the civil appeals preferred by the Revenue were dismissed by the Supreme Court, it does not mean that it has attained finality. As pointed out earlier, civil appeals preferred by the Revenue were dismissed by a non-speaking order at the admission stage and hence, the "Doctrine of Merger" is not applicable. When the order passed by the Supreme Court is not a speaking order, it is not correct to assume that the Supreme Court had decided implicitly all the questions in relation to the meri....