2015 (8) TMI 102 - AT - Central Excise

Classification of goods - classification of the coconut oil packed in the packings of 200 ml or less - Classification under Heading 1513 or under Heading No.3305 - Edible oil or hair oil - Held that - there are a series of decisions of the Tribunal wherein the Tribunal after examining the Tariff Heading No.1513 pertaining to Coconut Oil and Heading No.3305 which covers Hair Oil and the relevant Chapter and Section Notes examined the question of classification of Coconut Oil in the packing upto 200 ml, which are not marketed as Hair Oil and held that just because the retail packs are of 200 ml. of less, the same cannot be presumed to be meant for use as Hair Oil and would not be classifiable under Heading No.3305. - As regards the coconut oil packs, in question, containing TBHQ, an antioxidant, its addition is permitted under Prevention of Food and Adulteration Act, 1954 to improve its shelf life by preventing its oxidation and hence rancidity. The addition of antioxidant does not make the coconut oil as suitable for use as Hair Oil. Even in terms of Board s Circular No.166/77/95-CX dated 29.12.95, the use of anti-oxidants as specified under Rule 59 of the Prevention of Food Adulteration Rules, 1955 will not alter the classification if they are meant only for preventing the rancidity of the oil. No evidence has been produced by the Department to show that the addition of anti-oxidants in coconut oil will make the same more suitable for use on hair. Denial of refund claim - Pre mature refund claim - Held that - even if the writ petition filed by the appellant before Allahabad High Court, challenging the Board s Circular dated 3.6.2009, has now been transferred to the Apex Court where it is still pending and even if at some point of time, the appellant had addressed a letter to the Department that they would file refund claim as and when the matter is decided in their favour, in our view, they are at liberty to file the refund claim even though the matter is still pending before the Apex Court, more so, when the Hon ble Madras High Court in its judgement in the case of VVD & Sons (Pvt.) Ltd. (2014 (12) TMI 653 - MADRAS HIGH COURT) after considering the Board s Circular dated 3.6.2009 has quashed the same observing that the same is arbitrary and contrary to the provisions of Section 37B of the Central Excise Act, 1944 and hence null and void. - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of Coconut Oil packed in containers of 200 ml or less.
2. Validity of the Board's Circular dated 3.6.2009.
3. Prematurity of the refund claim.
4. Binding nature of the Board's Circular on departmental officers.
5. Addition of antioxidants in coconut oil and its impact on classification.
6. Examination of unjust enrichment in the refund claim.

Detailed Analysis:

1. Classification of Coconut Oil packed in containers of 200 ml or less:
The primary issue was whether the product "Anmol Coconut Oil" packed in containers of 200 ml or less should be classified under Heading 1513 (Coconut Oil) or Heading 3305 (Hair Oil) of the Central Excise Tariff. The appellants argued that the product is marketed as edible oil and not as hair oil, thus should be classified under Heading 1513. The department, relying on the Board's Circular dated 3.6.2009, contended that such packaging is generally used as hair oil and should be classified under Heading 3305.

2. Validity of the Board's Circular dated 3.6.2009:
The Board's Circular dated 3.6.2009 stated that coconut oil packed in containers up to 200 ml should be classified as hair oil under Heading 3305, based on a survey indicating general usage as hair oil. The appellants referred to judgments from the Madras High Court and Kerala High Court, which quashed the circular, declaring it arbitrary, unreasonable, and contrary to the Central Excise Act, 1944. The Tribunal acknowledged these judgments, emphasizing that the circular cannot override judicial decisions.

3. Prematurity of the refund claim:
The department argued that the refund claim was premature since the appellant had a pending writ petition before the Allahabad High Court, which was transferred to the Supreme Court. The Tribunal rejected this argument, stating that the appellants were within their rights to file a refund claim even if the matter was pending before the Apex Court, especially since the Madras High Court had already quashed the Board's Circular.

4. Binding nature of the Board's Circular on departmental officers:
The lower authorities had rejected the refund claim based on the binding nature of the Board's Circular, as upheld by the Supreme Court in previous judgments. However, the Tribunal referred to the Constitutional Bench decision in CCE, Bolpur Vs. Ratan Meltings & Wire Industries, which held that Board's Circulars are binding only if they are in accordance with the law. Since the Madras High Court had quashed the circular, it could not be considered binding.

5. Addition of antioxidants in coconut oil and its impact on classification:
The Tribunal noted that the addition of antioxidants like TBHQ in coconut oil is permitted under the Prevention of Food and Adulteration Act, 1954, to prevent rancidity and does not change its classification to hair oil. The Board's Circular No.166/77/95-CX also supported this view, stating that the use of antioxidants for preventing rancidity does not alter the classification of the oil.

6. Examination of unjust enrichment in the refund claim:
The Tribunal remanded the matter to the Original Adjudicating Authority to process the refund claim, directing them to examine the question of unjust enrichment before granting the refund.

Conclusion:
The Tribunal set aside the impugned order, holding that the coconut oil packed in containers of 200 ml or less should be classified under Heading 1513 as coconut oil and not as hair oil under Heading 3305. The matter was remanded to the Original Adjudicating Authority for further processing of the refund claim, with specific instructions to examine the issue of unjust enrichment.