AI Drafter 
TaxTMI 
TaxTMI 
2024 (12) TMI 1022
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....s 'Edible oil' under Heading 1513, titled 'Coconut (Copra) oil, etc.', in Section IIIChapter 15, or as 'Hair oil' under Heading 3305, titled 'Preparations for use on the hair', in Section VI-Chapter 33, of the First Schedule to the Central Excise Tariff Act, 1985. 2. The Bench which heard these appeals earlier was divided in its opinion on the issue. Justice Ranjan Gogoi, as the learned Judge then was, was of the view that such coconut oil in small packings was more appropriately classifiable as edible oil under Heading 1513. Justice R. Banumathi, on the other hand, concluded that coconut oil, packed in small sachets/containers suitable for being used as hair oil, was classifiable as such under Heading 3305. In view of their difference in opinion, these appeals have been placed before us. 3. Insofar as Civil Appeal No. 1766 of 2009 is concerned, this issue is raised in relation to the duty payable for the period 01.04.2005 to 31.08.2007. As regards Civil Appeal Nos. 6703-6710 of 2009, it is contextual to the period 28.02.2005 to 28.02.2007. Taking note of this aspect and in view of the statement of the learned counsel for the respondents that the total revenue involved in the....
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...... 3. In this Chapter, the expression 'fixed vegetable oils' means oils which cannot easily be distilled without decomposition, which are not volatile and which cannot be carried off by superheated steam (which decomposes and saponifies them). Heading 15.03 read thus: - Heading No. Subheading No. Description of goods Rate of duty 15.03 1503.00 Fixed vegetable oils, other than those of Heading No. 15.02 8 % Coconut oil, a vegetable oil, did not find mention in the oils named in Heading 15.02 and was, accordingly, classified under Heading 15.03. 5. In terms of this classification, the Central Board of Excise and Customs, Ministry of Finance (Department of Revenue), Government of India, issued Circular No. 145/56/95-CX dated 31.08.1995, due to doubts being expressed about coconut oil packed in small containers and as to whether it would be classifiable as a fixed vegetable oil or as a cosmetic preparation under the Act of 1985. The Board clarified that coconut oil, whether pure or refined and whether packed in small or large containers, merited classification under Heading 15.03 if it satisfied the criteria of 'fixed vegetable oil' in Ch....
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....t of 1985, the Central Government amended the First Schedule to the Act of 1985. Thereafter, the amended Chapter Notes in Chapter 15 in Section III, to the extent relevant, read as under: SECTION III ANIMAL OR VEGETABLE FATS AND OILS AND THEIR CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; ANIMAL OR VEGETABLE WAXES 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) to (d). ......; (e) fatty acids, prepared waxes, medicaments, paints, varnishes, soap, perfumery, cosmetic or toilet preparations, sulphonated oils or other goods of Section VI; or (f) ....... Supplementary Notes: 1. ...... 2. In this Chapter, "fixed vegetable oil" means oils which cannot easily be distilled without decomposition, which are not volatile and which cannot be carried off by superheated steam (which decomposes and saponifies them). 8. Headings in Chapter 15 also underwent a major change. Earlier, there were only 8 headings, i.e., Heading 15.01 to Heading 15.08, but after the amendment, the headings range from 1501 to....
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.... 3305 20 00 - Preparations for permanent waving or straightening kg. 16% 3305 30 00 -- Hair lacquers kg. 16% 3305 - Other : --- Hair Oil: 3305 90 11 ---- Perfumed kg. 16% 3305 90 19 ---- Other kg. 16% 3305 90 20 --- Brilliantines (spirituous) kg. 16% 3305 90 30 --- Hair cream kg. 16% 3305 90 40 --- Hair dyes (natural, herbal or synthetic) kg. 16% 3305 90 50 --- Hair fixers kg. 16% 3305 90 90 --- Other kg. 16% 12. The Act of 1985 also provides rules for interpretation of the First Schedule thereto. Rule 1 therein provides that classification of goods shall be determined according to the terms of the headings and any relative Section or Chapter Notes. However, the admitted position is that the Harmonized Commodity Description and Coding System [Harmonized System of Nomenclature (HSN)], brought out by the World Customs Organization, reflects internationally accepted norms and is extensively used the world over for resolving disputes relating to tariff classification. It ....
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....ernational and domestic trade. The amendment Bill, therefore, proposed to expand the six-digit classification in the First Schedule into an eight-digit classification, so as to remove difficulties arising from divergence in classification by different departments and would also facilitate international trade. It was clarified that the proposed amendments did not make any change in the existing rates of Central Excise duties and, hence, they did not involve revenue implication. 14. Notably, in Collector of Central Excise, Shillong vs. Wood Craft Products Ltd. (1995) 3 SCC 454, a 3-Judge Bench of this Court held as under: '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....
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.... of 1985 are different from the headings/entries in the HSN or if they are not fully aligned, reliance cannot be placed upon the HSN for the purpose of classifying those goods under the Act of 1985. 17. To sum up, the First Schedule to the Act of 1985 is based on the HSN, which is an internationally standardized system developed and maintained by the World Customs Organization for classifying products, and unless the intention to the contrary is found within the Act of 1985 itself, the HSN and the Explanatory Notes thereto, being the official interpretation of the Harmonized System at the international level, would be of binding guidance in understanding and giving effect to the headings in the First Schedule. It is only when a different intention is explicitly indicated in the Act of 1985 itself that the HSN would cease to be of guidance. In effect, the legislative intention to depart from the HSN must be clear and unambiguous. For instance, in Camlin Ltd. v. Commissioner of Central Excise, Mumbai (2008) 9 SCC 82, this Court found that there was an inconsistency between the Central Excise tariff description and the entry in the HSN and, therefore, reliance upon the HSN entry wa....
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....ein reads as follows: SECTION VI PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES Section Notes. 1. ... 2. - Subject to Note 1 above, goods classifiable in 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 and in no other heading of the Nomenclature. It is, therefore, identical to the amended Section Note 2 in Section VI in the First Schedule to the Act of 1985. The General Note under Section Note 2 in the HSN is of relevance and reads as follows: Section Note 2 provides that goods (other than those 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 Nomenclature. 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 ....
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.... Other This heading covers: (1) to (3) --- (4) Other hair preparations, such as brilliantines; hair oils, creams ("pomades") and dressings; hair dyes and bleaches used on the hair; cream-rinses. 24. Comparison of the relevant headings in the First Schedule to the Act of 1985, both pre-2005 amendment and post-2005 amendment, with the corresponding headings in the HSN reveals that Chapter Note 1(e) in Chapter 15 in Section III of the First Schedule remained the same even after the 2005 amendment and was identical to Chapter Note 1(e) in Chapter 15 of Section III of the HSN. This Note clarified that Chapter 15 would not be applicable to fatty acids, etc., including cosmetic or toilet preparations, which would fall in Section VI. However, the headings in Chapter 15 in Section III of the First Schedule increased to twenty-two after the amendment, with effect from 28.02.2005. Heading 15.03 in the pre-amended Chapter 15 dealt with fixed vegetable oils, excluding those named in Heading 15.02. Coconut oil, not being one of them, was classifiable under Heading 15.03 and there was no issue about it, as was clarified vide Circular dated 31.08.1995. However, post t....
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....same words in the General Notes in Chapter 33 of the HSN. At that time, full conformity was not there between the First Schedule and the HSN and that was, perhaps, the reason why what was clarified in the General Notes in Chapter 33 of the HSN was directly incorporated in Chapter Note 2 in Chapter 33. Notably, in B.P.L. Pharmaceuticals Ltd. vs. Collector of Central Excise, Vadodara 1995 Supp (3) SCC 1, this Court held that for a product to be classified as a cosmetic under Chapter 33 in Section VI of the First Schedule, it must first be a cosmetic, i.e., it should be suitable for use as 'goods falling under Headings 3303 to 3308' and it must be put in packing with a label or literature or other indication, showing that it is intended for use as a cosmetic preparation. This decision was rendered in the year 1995 and was in keeping with the then Chapter Note 2 in Chapter 33 of the First Schedule. 27. As already noted hereinbefore, Act 5 of 2005 was aimed at bringing about full conformity between the First Schedule to the Act of 1985 and the HSN and amendments were made accordingly in the First Schedule. Post the 2005 amendment, Chapter Note 3 in Chapter 33 in Section VI of the Fir....
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....ral Excise Tariff with the internationally accepted HSN. The Board further noted that in view of the amendment, the clarification issued, vide Circular dated 31.08.1995, required modification. Having said so, the Board strangely concluded that coconut oil packed in containers of up to 200 ml may be considered as generally used as hair oil and that this would bring uniformity in assessment of such oil sold in small containers, irrespective of whether its use as hair oil was indicated on the containers. The Circular dated 31.08.1995 was withdrawn and coconut oil in small quantities, up to 200 ml, was directed to be classified under Heading 3305. 30. However, this understanding of the Board was clearly not in keeping with the General Notes in Chapter 33 of the HSN. Perhaps realizing the same, the Board then issued Circular No. 1007/14/2015-CX dated 12.10.2015. Therein, it was noted that decisions had been rendered on the issue by Tribunals/Courts holding that, just because the retail packs of coconut oil were in sizes of 200 ml or less, the same could not be presumed to be meant for use as hair oil and the same would not be classifiable under Heading 3305. The Board, accordingly, w....
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....and for excise duty treating the coconut oil sold as 'hair oil' and also levying interest thereon along with redemption fine and penalties. Aggrieved thereby, Madhan Agro Industries (India) Pvt. Ltd. filed Appeal No. E/111/08/MAS before the Customs Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai. By Final Order No. 638/08 dated 25.06.2008, the Tribunal allowed the appeal in the light of the amendments brought about in the year 2005 and the Explanatory Notes in the HSN. The Tribunal held that the coconut oil sold during the relevant period was classifiable as 'edible oil' under Heading 1513 in Chapter 15 of Section III of the First Schedule to the Act of 1985. 33. Civil Appeal Nos. 6703 to 6710 of 2009, eight appeals in all, pertain to the period 28.02.2005 to 28.02.2007. Four of these appeals relate to M/s. Marico Ltd., Mumbai, which manufactures and markets pure coconut oil as 'edible oil' under the name 'Parachute'. The remaining four appeals relate to job-workers of M/s. Marico Ltd., who receive its coconut oil in bulk and market the same after packing it in small containers, ranging from 50 ml to 2 litres. The four job-workers are M/s. Aishwarya Industr....
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.... of interpretation of statutes for deciphering the mind of the law-maker but it is subject to certain exceptions - for example, when there is an artificial definition or special meaning attached to the word in the statute itself, whereby the ordinary sense approach would not be applicable [See D.L. Steels (supra)]. 36. However, we find that the reliance presently placed by the Revenue upon the 'common parlance test' is utterly misplaced. The said test would have to be understood in the proper perspective and cannot be brought into play when there is no ambiguity and there is no difference in the clear heading in the First Schedule and the corresponding entry in the HSN. In Commissioner of Central Excise, New Delhi vs. Connaught Plaza Restaurant Pvt. Ltd., New Delhi (2012) 13 SCC 639, this Court observed that classification of excisable goods shall be determined according to the headings and corresponding Chapter or Section Notes but where these are not clearly determinative of the proper classification, the same shall be effected according to the general rules of interpretation and according to the common parlance understanding of such goods. It was pointed out that fiscal statutes....
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....onut oil is suitable for multiple uses. That notwithstanding, when a specific heading was created in Chapter 15, viz., Heading 1513, for 'coconut oil' along with other oils, it would not stand excluded therefrom so as to be classified as a cosmetic product under Heading 3305 in Chapter 33 in Section VI of the First Schedule, unless all the conditions required therefor are satisfied. As already noted, such conditions formed part of Chapter Note 2 in Chapter VI of the First Schedule itself, prior to the 2005 amendment, but after that amendment, whereby the said Chapter Note was brought into conformity with Chapter Note 3 in Chapter 33 of the HSN, the Explanatory/General Notes in the HSN in relation to the said Chapter Note would have to be fully satisfied. In effect, not only must the coconut oil be suitable for use as 'hair oil', but it must also be put in packaging sold in retail for such particular use, i.e., as hair oil. The phrase 'suitable for such use' under Headings 3303 to 3307 in Chapter Note 3 would have to be read in conjunction with the Explanatory Notes thereto, which categorically state that such packaging must be accompanied with labels, literature or other indication....
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....n also be purchased in small quantities. 43. Small-sized containers are a feature common to both 'edible oils' as well as 'hair oils'. Therefore, there must be something more to distinguish between them for classification of such oil, be it under Chapter 15 or under Chapter 33, other than the size of the packing. Stress was also laid by the Revenue on the fact that Shanti Coconut Oil was marketed in containers depicting a popular film actress with flowing tresses and it was contended that in the light of such marketing, the oil sold was obviously meant for use as 'hair oil' and not as 'edible oil'. However, such an advertisement is not conclusive, in itself, to classify the oil as 'hair oil'. Reference may be made to Meghdoot Gramodyog Sewa Sansthan, U.P. vs. Commissioner of Central Excise, Lucknow ( 2005 ) 4 SCC 15, wherein this Court held that the mere fact that the product in that case was sold in a packing depicting a lady with flowing hair was not determinative of such product being intended as a preparation for use on the hair. This Court considered the composition and curative properties of the product to ultimately conclude that the product was classifiable as a 'medicam....
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....of classification to deny it that parentage and consign it to an orphanage of the residuary clause. Applying that standard, once a specific heading was created for coconut oil in the First Schedule, something more would be required before such oil can be excluded therefrom and classified under the general heading pertaining to toilet and cosmetic preparations. Equally important is certainty and consistency in the stand of the Revenue. 47. Reliance placed by the Revenue on State of Haryana vs. Dalmia Dadri Cement Ltd. AIR 1988 SC 342, in support of its contention that the expression 'for use' can only mean 'intended for use' and not 'actual use', is misplaced as that decision turned upon the language of Section 5(2)(a)(iv) of the Punjab General Sales Tax Act, 1948, and the said interpretation cannot be applied mutatis mutandis in the present case, as the wording of the provisions presently under consideration and the rules of interpretation applicable thereto are entirely different. The argument of the Revenue that the fact that edible coconut oil marketed by the respondents could also be used as hair oil is therefore not sufficient to classify the same under Heading 3305 with no....