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TMI Blog2007 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... Show Cause Notices. 3.In both the cases, the dispute relates to classification and dutiability of Parachute Coconut Oil. The oil in question is obtained from M/s. May Win Enterprises Ltd. and packed in plastic HDPE containers of 100ml and 200 ml by M/s. Amardeo Plastics Industries and in additional packings of 1 Ltr., 500 ml and pouches of 6 ml by May Win Enterprises Ltd. It is the claim of the appellants that the impugned product is classifiable under Heading 15.03 as edible oil and is chargeable to nil duty, whereas it is the case of the department that the impugned product is classifiable under sub-heading 3305.90 and is chargeable to appropriate rate of duty as hair oil. 4.The learned Counsels for the appellants have contended before us that there are no additional standards for edible grade coconut oil under the relevant ISI standards and hence the impugned oil conforms to edible grade. They have also relied on Tribunal's decisions in the case of Kothari Product Ltd. v. CCE - 2002 (139) E.L.T. 633 and Srikanth Sachets Pvt. Ltd. v. CCE, Vishakhapatnam - 2005 (180) E.L.T. 401 and also Board's Circular No. 145/56/95-CX., dated 31-8-1995 and 166/77/95-CX., dated 29-12-199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication under Chapter 33." The circular dated 29-12-1995 merely states that use of antioxidants in the coconut oil will not alter the classification, if the same is meant for preventing the rancidity of the oil. 7.We observe that these circulars have not been issued under Section 37B of the CEA and that they draw attention to Chapter Notes under both Chapters 15 and 33 but leave the matter of classification to be decided by the field officials. We also note that the circulars do not draw attention to the legally binding Interpretative Rules, which cannot be ignored. As such, it is difficult to conclude that these circulars are either binding or are deterministic of the classification of the impugned goods. By the way, we note that the learned Consultant engaged to defend the department's case has been specially appointed by the department with the specific approval of the Board and if the contention of the appellants that finding of the adjudicating Commissioner is contrary to the circulars of the Board is correct then surely the Board would not have engaged the special fee Consultant for defending the orders of the adjudicating Commissioner. 8.We are of the view that the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, shall be construed as 'manufacturer'. 10.A perusal of the terms of these disputed headings would prima facie indicate that the products in question are classifiable as fixed vegetable oils under Heading 15.03 and also as hair oil under Heading 3305.90. The Chapter Note 4 to Chapter 33 also clearly includes the process of repacking of such coconut oil from bulk packs to retail packs to render the same marketable to the consumers. 11.There were, however, arguments and counter arguments from both sides with reference to the design of the bottles and reference was made to the advertisements in regard to coverage of the impugned goods under Chapter Note 2 to Chapter 33. It has been argued by the appellants that merely packing in a smaller bottle would not attract Chapter Note 2 to Chapter 33. However, there is no denying the fact that the impugned goods have been put up in packings/form which do not preclude their use as hair oil. The appellants have contended that edible oil is also put up in smaller containers and therefore use of the impugned coconut oil in small conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used also is meant to include both edible and industrial variety Thus Para 0.2 of the Indian Standard Specifications for Coconut Oil (Second Revision) shows the use of coconut oil both for edible and non-edible purpose, like in the manufacture of cosmetics, toilets. 'The requirements for various grades are suitable for the foregoing purpose.' Para 1.1 prescribes the standard which is the requirement for test of coconut oil used for edible and industrial purposes. Types and grades are mentioned and shows refined grade and raw grade 1A and 1B are suitable for direct edible consumption while raw grade 2 and other two grades are suitable for industrial uses and not for direct edible consumption. Thus as per specification 'coconut oil' standing by itself would include both edible and industrial variety of coconut oil. The specification by Indian Standard Institution has been accepted as furnishing very strong and incontrovertible support as to how an article is known to the consumers and commercial community (See Union of India and Another v. Delhi Cloth and General Mills Co. Ltd., 1977 E.L.T. 199 (S.C.) = 1963 S.C. 791 Para 10)." 13.It is clear from the above observations of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Delhi High Court and the terms of the disputed headings and related Chapter Notes, we are of the view that the impugned product is equally classifiable as fixed vegetable oil under Heading 15.03 and as hair oil under sub-heading 3305.90. Hence, we are of the opinion that Interpretative Rule 3 comes into play, which states that when goods cannot be classified by reference to specific description or essential character, they shall be classifiable under the heading which occurs last in numerical order among those which equally merit consideration. In our view since Heading 15.03 and sub-heading 3305.90 equally apply in the case of the impugned coconut oil, the same merits classification under the sub-heading 3305.90 which occurs last in the numerical order. We also hold that the product in question satisfies the Chapter Note 4 to Chapter 33 since repacking the bulk coconut oil into retail packs and rendering the same marketable to the consumers amounts to manufacture under the said Chapter Note. 16.As regards the competency of the authorities who have issued the impugned Show Cause Notices, we are of the view that the issue is settled by the decision of three Judges Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (b) that the coconut oil which the appellants received in bulk was manufactured by Marico Industries Ltd. at its plants. (c) Such oil was being classified by Marico Industries Ltd. as a fixed vegetable oil under Chapter Heading 1503 of the Schedule to Central Excise Tariff Act, 1985, which at the relevant time attracted nil rate of duty. (d) Circular No. 145/56/95, dated 31-8-1995 issued by the CBEC clarified that coconut oil packed in small containers was classifiable as a fixed vegetable oil under Chapter 15 and not as a cosmetic preparation under Chapter 33 of the Central Excise Tariff Act, 1985. This circular is very exhaustive and is based on Chapter notes, HSN Notes, the Tariff Conference of 1991, the report of DG (A.E.) and the opinion of the Chief Chemist, CRCL. It is clearly stated that coconut oil whether pure or refined and whether packed in small or large containers, merit classification under Heading 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the notice was without jurisdiction. (m) that there was no fraud, suppression or wilful mis-statement on its part so as to attract larger period of limitation. (n) that ISI specification for coconut oil for cosmetics wherein it has been laid down that in respect of cosmetics, the words "not for direct edible consumption" should be printed on the container. The appellants have submitted that the containers in which the coconut oil was packed categorically stated that the same was edible oil and consequently ISI specification in respect of coconut oil for cosmetic industries were not applicable to its product. (o) that the department has not brought even a single piece of evidence on record to prove that "parachute coconut oil" being sold by the appellants is meant for hair oil". (p) that in the absence of any evidence having been brought on record by the department to prove that the parachute coconut oil being sold by the appellants was meant only for hair oil, it was not competent for the Commissioner to have classified the same under Chapter Heading 33. (q) that the coconut oil was being classified by the appellants under Chapter Heading 15 rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that "Parachute Coconut Oil" was used as hair oil as no such allegations was made in the show cause notice. (u) Dr. Sane's report is correct on clarity and rancidity as he is expert in the smatter. (v) The affidavits of end users cannot be ignored and are bound to be relied on as evidence as no rebuttal thereof by way of any counter affidavit has been filed by the department. (w) The advertisement are stray and not related to the period of demand. (x) As already mentioned above "parachute coconut oil" has not gone under any special process or addition of any ingredients to make it use on the hair. (y) As already mentioned above the classification has to be based on Chapter 2 to Chapter 15 as per the Board's circular referred above. 20.It is pertinent to mention that no appeal has been filed by the department against the said decisions passed by the Tribunal and the decisions have become final and as such it is not open for the department to question the same. Once the Tribunal has already decided the issue, the department is bound by it and the department cannot reopen the same. 21.That when the CBEC issued two circulars clarifying that the product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 28.After hearing both sides duly represented by the Sr. Advocate Shri Joseph Vellapally, along with the ld. Advocate Shri. V.K. Jain, Advocate and the Revenue's representatives Shri Pramod Kumar, JDR Shri K.M. Mondal, Consultant, I find that the factual position is not disputed in the present appeal. The coconut oil is being extracted from the flush or copra of coconut by M/s. Marico Industries Ltd., who have cleared the same as fixed vegetable oil under Chapter Heading 1503, to the present appellants, who are engaged in the activity of re-filling the same into smaller containers of varying capacity. It is also admitted that the present appellants, apart from undertaking the packing of coconut oil, are not undertaking any other process on the said oil. Ld. Member (T) has upheld the revenue's claim by taking note of Chapter Note 3 of Chapter 15 and Chapter Note 2 and Chapter 4 of Chapter 33. On the other hand, Member (J) has relied upon the earlier decisions of the Tribunal holding coconut oil, being of edible grade and has hence classifiable under Chapter 15. Board's Circular has also been taken note of by Member (J). The fact of availability of precedent decisions on the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained from superior grade copra, scientifically filtered to remain fresh for long time. This is evident from the copy of the label on the bottle of Parachute coconut oil as filed with the Trade Mark Registry Bombay. During the course of arguments, it was clarified by the ld. Advocate that wherever the oil is being sold in packing indicating that the same is meant for use on hair, duty liability is being discharged accordingly. During the relevant period, coconut oil mixed with perfumes was being sold under the brand name 'Hair Care'. Parachut Premium Coconut Oil was with paraffin added to it and was being cleared for export with clear markings as "not for edible use". However, while packing the coconut oil received in bulk from the supplier, in smaller packs of varying sizes, no additives are being added and no further process is being undertaken on the same. Further, the bottles and other packing in which coconut oil is filled (sample produced during the course of hearing) are not in "form clearly specialized to the products use as hair oil". As clarified in the HSN explanatory note, the expression "form clearly specialized to such use" stands explained by giving an example of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 37B of the Central Excise Act, and as such, the same cannot be held to be either binding or determinative of the classification. The law on the said issues stands clarified by the Hon'ble Supreme Court in a number of decision laying down that revenue cannot be heard arguing against its own Board's Circular. Reference may be made to the decision in the case of Ranadey Micronutrients v. CCE, reported in 1996 (87) E.L.T. 19 (S.C.), wherein while dealing with the issue as to whether the Board's Circular would lose its binding effect if is the same is not issued under Section 37B, the Hon'ble Court observed that the whole objective of the circular is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of Excise duty. It does not lie in the mouth of the revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with the statutory provision. Consistency and discipline are of far greater importance than the winning or losing of court proceedings. As such, it has to be held that the said Board's Circular is binding on the revenue and the fact of engaging a Senior Counsel by the revenue to defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd industrial variety of coconut oil. This itself shows that coconut oil was being considered as an edible oil also. In fact reference was made to Indian Standard Specification for coconut oil showing the use of the same both for edible and non-edible purpose. It may be observed here that it is not disputed that the coconut oil is also used for application on hair on account of its natural and inherent quality. Such quality is not imparted by the appellants so as to bring the same under Note 2 of Chapter 33, in the absence of any additive or specialized packing as discussed above, coconut oil, in bulk, can also be used as hair oil and it is not that the same becomes hair oil after its packing in small containers. Admittedly, the oil has been cleared by the manufacturer under Chapter 15. Mere re-packing of the same will not convert the said oil into hair oil, unless Chapter Note 2 to Chapter 33 is satisfied. Inasmuch as the coconut oil satisfies the criteria of fixed vegetable oil laid down in Note 3 to Chapter 15 and in the absence of satisfaction of conditions laid down in Chapter Note 2 of Chapter 33, I agree with the ld. Member (J) that the coconut oil would appropriately fall u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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