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TMI Blog2018 (4) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... cise and Service Tax Appellate Tribunal (CESTAT) (hereinafter referred to as the Tribunal ) holding that the coconut oil manufactured and packed in small containers by the respondent(s) assessee(s) is classifiable under Heading 1513 and not under Heading 3305 of the Central Excise Tariff Act, 1985 (hereinafter referred to as the Act ), the Revenue is in appeal before us. 2. The dispute is with regard to classification of coconut oil in packings upto 2 litres in case of M/S Madhan Agro Industries the respondent assessee in Civil Appeal No.1766 of 2009 and packings upto 500ml in case of the respondent(s) assessee(s) in the connected appeals i.e. Civil Appeal Nos.6703 6710 of 2009. The relevant period of assessment in all 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 respondent asessee 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 Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b heading Nos.1502.00, 1503.00, 1504.00 and 1508.90, labeling or relabeling of containers and repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture . Heading No. Subheading No. Description of goods Rate of duty 15.01 1501.00 Animal (including fish) fats and oils, crude, refined or purified Nil 15.02 1502.00 Fixed vegetable oils, the following, namely cotton seed oil, neem seed oil, karanj oil, silk cotton seed oil, rice bran oil, khakhan oil, palm oil, water melon oil, sal oil, mahua oil, kusum oil, rubber seed oil, mango kernel oil, kokum oil, dhupa oil, undi oil, maroti oil, pisa oil and nahor oil, and their fractions. 8% 15.03 1503.00 Fixed vegetable oils, other than those of heading No.15.02 8% 15.04 1504.00 Vegetable fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value. 3. The perfumery, cosmetic or toilet preparations in heading No.33.07 applies, inter alia, to the following products : scented sachets; perfumed papers and papers impregnated or coated with cosmetics; contact lens or artificial eye solutions; wadding, felt and nonwovens, impregnated, coated or covered with perfume or cosmetics; animal toilet preparations. 4. In relation to products of heading Nos.33.03, 33.04 and 33.05, conversion of powder into tablets, labelling or relabelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, shall be construed as manufacture 5. Heading No.33.04 applies, inter alia, to the following products : beauty creams, vanishing creams, cold creams, make up creams, cleansing creams, skinfoods, skin tonics, face powders, baby powders, toilet powders, talcum powders and grease paints, lipsticks, eye shadow and eyebrow pencils, nail polishes and varnishes, cuti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to the products of heading 1507 or 1508 or 1509 or 1510 or1511 or 1512 or 1513 or 1514 or 1515, or 1518; sub heading 1516 20 or 1517 90; or tariff item 1517 10 10 or 1517 10 21 or 1517 10 29, labelling or relabelling of containers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture . 6. In relation to refined edible vegetable oils falling under headings 1507 to 1515, the process of refining, that is to say, any one or more of the processes, namely, treatment of crude oil with an alkali, bleaching and deodorisation, shall amount to 'manufacture'. Sub heading Note : 1. For the purpose of sub headings 1514 11 and 1514 19, the expression low erucic acid rape or colza oil means the fixed oil which has an erucic acid content of less than 2% by weight. Supplementary Notes : 1. In this Chapter, edible grade , in respect of a goods (i.e. edible oil) specified in Appendix B to the Prevention of Food Adulteration Rules, 1955, means the standard of quality specified for such goods in that Appendix. 2. In this Chapter, fixed vegetable oi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 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 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. 4. The expression perfumery, cosmetic or toilet preparations in heading 3307 applies, inter alia, to the following products: cented sachets; odoriferous preparations which operate by burning; perfumed papers and papers impregnated or coated with cosmetics; contact lens or artificial eye solution; wadding, felt and nonwovens, impregnated, coated or covered with perfume or cosmetics; animal toilet preparations. 5. In relation to products of headings 3303, 3304 and 3305, conversion of powder into tablets, labelling or relabelling of containers intended for consumers or repacking from bulk packs to retail packs or the adoption of any other treatment to render the products marketable to the consumer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. Specifically, Shri Panda has referred to the Rule 1 of the General Rules for the Interpretation of the Schedule to the Tariff Act; Chapter Note 1 (e) to 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 respondents assessees 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 cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular with regard to classification of coconut oil prior to the Amendment of the Act in the Year 2005 : (i) The Heading 33.05 covers preparations for 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 beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Chapter Notes, as may be reflected in the Circulars/Memos issued from time to time, can be an useful aid in understanding and resolving 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, Delhi III, 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. In all the aforesaid decisions, this Court has held that [Paragraph 5 in Alpine Industries (supra)]: 5. It is well established 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.404 05, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions hereinafter contained. 2. (a) Any reference in a heading to goods shall be taken to include a reference to those goods incomplete 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 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 provides the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 oils, other than those of heading No.15.02. 23. On the other hand prior to the amendment Heading 33.05 dealing with preparations for use on the hair was in the following terms: 33.05 Preparations for use on the hair 3305.10 Perfumed hair oils ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings 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 (post amendment) introduced by the Amendment Act in place of the erstwhile Chapter No.2 is identical with Chapter 3 Note of Chapter 33 in Harmonised System of Nomenclature (HSN) which must guide and illuminate the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 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 Excise Tariff Act, 1985, must be preferred, in case of any difference between the meaning of the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality 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 the HSN and the conditions/requirements stipulated in Chapter Note 3 of Chapter 33 of the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Note II by Chapter Note 3 w.e.f. 28 02 2005 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 affirmed by this Court and the appeals by the Revenue (Civil Appeal Nos.2023 2037 of 2014) have been dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ids, 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of Objects and Reasons of the Central Excise Tariff (Amendment) Act, 2004 reads as under:- (a) To accommodate more prominently the commodities which are of significance to the country's needs; (b) To adopt a common commodity classification for the purpose of levy and collection of duties of customs and central excise and for purpose of Import Trade Control Policy and collection of statistics; (c) To accommodate the demand from the trade and industry for adoption of a common commodity classification based on internationally adopted Harmonized Systems of Nomenclature to be used for trade- related transactions to facilitate International and domestic trade. (d) The salient feature of the Bill, inter 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 ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Heading description 33.05 Preparations for use on the hair 3305 Preparations for use on the hair 4. Sub heading description 3305.10 - Perfumed hair oils - Other: 3305 90 11 - - - - Perfumed 3305 90 19 - - - - Other 11. By a cumulative reading of the old provisions and the new legal provisions, it can be seen that following significant changes have been brought about in the Central Excise Tariff with effect from 28.02.2005:- (i) Modification of the then Note 2 to Chapter 33 (presently renumbered as 3) by way of deletion to the extent that ..... goods put up in packings with labels, literature or other indications that they are for use as......; (ii) After amendment, incorporation of the expressions in Note 3 to Chapter 33 the expressions suitable for use as goods of those headings and put up in packings of a kind sold by retail for such use ; and (iii) Introduction of Section Note 2 to Section VI - if the goods classifiable under Heading 3305, it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this schedule. Section Note 2 to Section VI of the first schedule is exclusionary in nature, wherein it is inter alia stated that if a good is classifiable under Heading ...33 05... it cannot be classified in any other Heading of the Schedule. As per the provisions of Note 2 to Section VI, if the conditions as specified in Chapter Note 3 for classification as 'Hair Oil' under Heading ...33 05... are satisfied, then the product has to be classified only under Heading ...33 05... and no other classification is permissible. If the conditions as specified under Chapter Note 3 of Chapter 33 for classification of impugned goods as 'Hair Oil' under Heading ...33 05... are satisfied then the product is classifiable as goods only under Chapter 33 and by virtue of Section Note 2 to Section VI no other classification is permissible. 16. Because of the suitability for use as hair oil and being 'put up in packings of the kind sold by retail for such use', by virtue of Section Note 2 to Section VI, their classification under Chapter 15 as 'fixed vegetables oils' or 'coconut oil' as claimed does not arise in view of the primacy given to Tariff s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HDPE bottles (High Density Polyethylene), screen printing with the brand name and logo 'Parachute' of Marico Ltd. and packing the bottles with coconut oil to be sold in the market under the brand 'Parachute'. From the materials on record, the process undertaken by M/s. Moreshwar and others on the job work from M/s. Marico is summarized as:- (a) M/s. Moreshwar and other job workers receive coconut oil in tankers from M/s. Marico, Pondicherry; the said oil is unloaded and stored in storage tanks at M/s. Moreshwar and other respondents/job workers; (b) Then, after mechanical filtering and stored in another tanker, the same is packed into 50 ml, 100 ml, 200 ml and 500 ml 'containers' and 'flip tops'; (c) these retail packs are then supplied to M/s. Marico depot as per their dispatch schedule for being sold under the brand name 'Parachute'; and (d) the description given on the packings is '100% pure coconut oil' with the 'Parachute' mark. As the process carried out by M/s. Moreshwar and other job workers is that after mechanical filtering packing of goods from bulk to retail pack of a kind (containers so far manufactured by them) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Tribunal, CESTAT held as under:- ...The packing of coconut oil in that case was not of the type referred to, above or which could be solely and exclusively said to be meant for application on hair only. As such the Tribunal held that Chapter 2 to Chapter 33 was not applicable for classifying the goods in that case under Chapter 33. HSN Explanatory Notes to Chapter 33 were same before and after 28.02.05. Moreover entries under Chapter 15 relating to coconut oil in the HSN and Central Excise Tariff after 28.02.2005 are also identical. Therefore, the decision of the Tribunal in the above case interpreting the scope of Chapter 15.13 and 33.05 of Central Excise Tariff applies to the corresponding entries even after 28.02.2005. The above ratio of the decision of the Tribunal therefore squarely applies to the present case also.... 21. Contention of the Revenue:- Learned Senior Counsel Mr. A.K. Panda submitted that the tribunal failed to consider that by virtue of amendment to Central Excise Tariff Act, 1985 with effect from 28.02.2005, 'Hair Oil' other than perfumed ones merit classification under tariff item No.3305.90.19. It was submitted that consequent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006 SCC online Raj 446 to contend that the small packings being done for convenience of consumers to cater to different sections of consumers at the different economic levels, it would not make the 'edible coconut oil' to be Hair Oil classifiable under Chapter 33. Reliance was also placed upon the judgment of Allahabad High Court in Marico Limited v. Commissioner, Commercial Taxes, UP (2015) 78 VST 423. 23. Whether the Tribunal was right in classifying the impugned goods under Chapter 15:- The Tribunal held that Chapter 15 covers all varieties of coconut oil, edible as well as non-edible. Chapter 15 of Section III of the Schedule to CETA, 1985 covers animal or vegetable fats and oils . Heading 1513 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 'Coconut Oil' manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by M/s. Moreshwar and other job workers that coconut oil stored in the tanks at M/s. Moreshwar after mechanical filtering is packed in 50 ml, 100 ml, 200 ml, 1 ltr., 2 ltr containers for retail use and these retail packs are supplied to M/s. Marico Depot as per the dispatch schedule. The description given on the packings is 100% pure coconut oil with 'Parachute' mark. So far as the first component the product may or may not be mixed , as discussed earlier, the impugned goods coconut oil is pure oil and is not a mixed product and thus, the first condition is satisfied. So far as the second condition, the product should be suitable for use as a good under these headings (33 03 to 33 07) is also satisfied. Thus, the first and second components of Note 3 to Chapter Note 33 the product may or may not be mixed and the product should be suitable for use as a good under these Headings (33 05) are satisfied. 26. As discussed infra by applying the 'Common Parlance Test', pure coconut oil packed in small containers is understood by the dealer and the consumer and in the market as 'Hair Oil'. The expression suitable for use as goods in these headings as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brand, Marico has set up a Research Centre to develop new coconut based products. Over the years, the company has launched several brand extensions such as 'Parachute Jasmine', 'Parachute Dandruff Solution', etc..... 29. An argument was advanced by the respondent/assessee that the packings/containers do not contain any label/indication to the effect that the subject goods are used on the hair. The contention that the packings contain description as 'Edible Oil' and that there was no indication on the packing that it is 'Hair Oil' is of no significance. After the amendment, there is no necessity that the packings/containers should bear label to the effect that the goods are used on the hair. As per Note 3 to Chapter 33, any product suitable for use as goods in these headings and that put up in packings of a kind sold by retail for such use , has to be classified as 'Hair Oil' under Chapter 33. So long as the product is suitable for use as 'Hair Oil' and if it is packed in such a way that it is useable for the purposes of 'Hair Oil', it has to be classified as 'Hair Oil' under Chapter 33. 30. Government of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for marketing hair oil and that registration of trademark for hair oil on the containers is of no significance for classifying the product as hair oil under Chapter 33. 31. Whether classification of 'Coconut Oil' falls under Chapter 15 and applicability of Interpretative Rule 3 is acceptable:- After amendment Heading 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 32. 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 Hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption will be preferred over the more general one. In the present case, when item description is read with the Chapter Notes, Section Notes and the tests for classification that is Tariff Item 1513.19.00 and 3305.90.19 are equally specific. Hence, as per Rule 3(c),when goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit classification. Hence, the coconut oil manufactured by the respondents could rightly be classified under heading 3305.90.19, as it occurs last in the numerical order of the tariff. 34. In Union of India and Ors. v. Pesticides Manufacturing and Formulators Association of India, (2002) 8 SCC 410, this Court has held that if there are two specific headings to which a product can be referred, the one occurring subsequently would prevail. 35. The Tribunal set aside the demand on the ground that the coconut oil would merit classification under Chapter Heading 15.03 of CETA, 1985 attracting 'NIL' rate of excise duty and not under Chapter Heading 33.05 of the CETA attracting duty of 16% advalorem. The Tribunal erred in not appreciating that with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied by the class or section of people dealing with or using the product is also a test when the statute itself does not contain any definition and commercial parlance would assume importance when the goods are marketable as was held in Atul Glass Industries (Pvt.) Ltd. v. CCE (1986) 3 SCC 480 and Indian Aluminium Cables Ltd. v. Union of India (1985) 3 SCC 284. In Asian Paints India Ltd. v. CCE (1988) 2 SCC 470 which was a case of emulsion paint, at para 8 it was said: (SCC p. 473, para 8) It is well settled that the commercial meaning has to be given to the expressions in tariff items. Where definition of a word has not been given, it must be construed in its popular sense. Popular sense means that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it. 38. In Dabur Industries Ltd. v. Commissioner of Central Excise, Jamshedpur (2005) 4 SCC 9, it was held that in classifying a product, the scientific or technical meaning is not to be resorted to but the test was to see what the persons using the product understand it to be. 39. In Commissioner of Central Excise v. Wockhardt Life Sciences Limited (2012) 5 SCC 585 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o account, apart from the understanding in common parlance. [See O.K. Play (India) Ltd. v. CCE (2005) 2 SCC 460, Alpine Industries v. CCE (2003) 3 SCC 111, Sujanil Chemo Industries v. CCE Customs (2005) 4 SCC 189, ICPA Health Products (P) Ltd. v. CCE (2004) 4 SCC 481, Puma Ayurvedic Herbal (2006) 3 SCC 266, Ishaan Research Lab (P) Ltd. (2008) 13 SCC 349 and CCE v. Uni Products India Ltd. (2009) 9 SCC 295] 37. A commodity cannot be classified in a residuary entry, in the presence of a specific entry, even if such specific entry requires the product to be understood in the technical sense (see Akbar Badrudin Giwani v. Collector of Customs (1990) 2 SCC 203 and Commr. of Customs v. G.C. Jain (2011) 12 SCC 713). A residuary entry can be taken refuge of only in the absence of a specific entry; that is to say, the latter will always prevail over the former [see CCE v. Jayant Oil Mills (P) Ltd. (1989) 3 SCC 343, HPL Chemicals Ltd. v. CCE (2006) 5 SCC 208, Western India Plywoods Ltd. v. Collector of Customs (2005) 12 SCC 731 and CCE v. Carrier Aircon Ltd. (2006) 5 SCC 596]. 40. In Commissioner of Central Excise, Delhi v. Carrier Aircon Ltd. (2006) 5 SCC 596, this Court held as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coconut oil for non-edible purpose. But an entry would never be restricted only to edible variety of coconut oil...... . [Underlining added] Though the above observation is in the context of importability of 'Coconut Oil', the factum of overwhelming use of 'Coconut Oil' and as to coconut oil is normally understood as 'Hair Oil' cannot be ignored. It is a matter of common knowledge that in many parts of the country 'Coconut Oil' is widely used as 'Hair Oil' and not generally used as edible oil; it is so used as edible oil only in few areas of the country. No one will normally understand 'Coconut Oil' to mean only as edible oil because such is not the major use of 'edible oil'. The moment we held that the impugned goods- coconut oil is suitable for use as 'Hair Oil' as discussed infra, it has to be classified only under Chapter 33. 43. As pointed out earlier, Revenue relies upon number of materials that those in trade, traders and consumers have understood 'Parachute' as 'Hair Oil'. In para (36) of Wockhardt Life Sciences Ltd. quoted above, this Court laid emphasis to the functional utility and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er wanting to purchase it would regard coal not in its geological sense but in the sense as ordinarily understood and would include charcoal in the term coal . It is only when the question of the kind or variety of coal would arise that a distinction would be made between coal and charcoal; otherwise, both of them would in ordinary parlance as also in their commercial sense be spoken as coal. 47. After referring to various judgments on the point of common parlance test, in Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant Private Ltd., New Delhi (2012) 13 SCC 639, it was held as under:- 33. Therefore, what flows from a reading of the aforementioned decisions is that in the absence of a statutory definition in precise terms; words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. In other words they have to be constructed in the sense that the people conversant with the subject-matter of the statute, would attribute to it. Resort to rigid interpretation in terms of scientific and technical meanings should be avoided in such circumstances. This, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able for being used as 'Hair Oil' are classifiable under Chapter 3305. In case of 'Parachute', this is further fortified by various materials placed on record and also registration of its Trademark No.1033842 Class-3 Parachute associated with Hair Oil, Hair lotion etc. 51. Re. Contention HSN Notes to Chapter Note 3 of Chapter 33 is the same as it was prior to amendment:- The Tribunal held that HSN Explanatory Notes to Chapter 33 were same before and after 28.02.2005. Moreover, Notes under Chapter 15 relating to 'Coconut Oil' in the HSN and Central Excise Tariff after 28.02.2005 are also identical. Mr. Bagaria, learned senior counsel for the assessee urged that the changes brought about by the amendment to Chapter Note 3 of Chapter 33 is of no significance since HSN Notes to Chapter Note 3 of Chapter 33 is exactly the same as in the Central Excise Tariff prior to amendment. It was submitted that Explanatory Notes in HSN clarified the purport, meaning, scope and effect of Chapter Note 3 of Chapter 33. It was submitted that since Central Excise Tariff is based on HSN, for resolving any dispute relating to tariff classification, HSN is a safe guide. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned (their appearance, properties, method of production and uses) and practical guidance for their identification. The Explanatory Notes also clarify the scope of particular sub-headings wherever appropriate. However, HSN or the Explanatory Notes thereon cannot supersede the relevant notes contained in the Tariff Schedule. They can be relied upon as a safe guide in cases of doubt. 55. In the case in hand, we are concerned with classification of goods - 'Coconut Oil' between two Chapters both falling within first Schedule to Central Excise Tariff Act, 1985. For proper appreciation, we may usefully refer to the relevant HSN Explanatory Notes relating to Chapter 33 and Chapter 33 of CETA Tariff Notes:- HSN Explanatory Notes CETA Tariff Notes Chapter 33 Essential Oils and Resinoids; Perfumery, Cosmetic or Toilet Preparations Chapter Notes: .......... 3. Heading 33.03 to 33.07 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 packing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56. So far as Chapter Note 3 to Chapter 33, CETA Amendment Act, 2004 has the same Chapter Note as the HSN. However, the general explanation of HSN adds further conditions for the product to be classifiable under Chapter 33 regarding packings of a kind sold to the consumer and put up with labels and literatures that they are for use for such purpose. To put it in other words, Chapter Note 3 to Chapter 33 as contained in the HSN, General Explanation to the said HSN Notes places certain conditions, i.e.:- (a) [when the goods are] In packings of a kind sold to the consumer and put up with labels, literature or indications that they are for use as perfumery, cosmetic or toilet preparations, or as room deodorizers; or (b) 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). It is important to note that the pre-amended Schedule (prior to CETA amendment) also had the same rigours as HSN Notes such as the product requiring labels and literatures including the specialized use (as Chapter Note 2 to Chapter 33). However, after the amendment with effect from 28.02.2005, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ......... Section Note 2 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 sale as a glue is classified in heading 35.06 and not in heading 35.05. 58. As discussed earlier, CETA Amendment Act, 2004 amended Section Note 2 to Section VI. The rigours placed for a product to be classified under these Headings are not prevalent in the CETA although they are prevalent in the HSN. The legislature consciously chose not to import the conditions and rigours placed in the HSN Explanatory Notes and the following as found in HSN does not find place in the amended Section Note 2 to Section VI:- (a) havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing upon the HSN for the purpose of marker inks in classifying them under Chapter Sub-Heading 3215.90 of the said Tariff. The Tribunal failed to appreciate that the entries under the HSN and the entries under the said Tariff are completely different. As mentioned above, it is settled law that when the entries in the HSN and the said Tariff are not aligned, reliance cannot be placed upon HSN for the purpose of classification of goods under the said Tariff. One of the factors on which the Tribunal based its conclusion is the entries in the HSN. The said conclusion in the order of the Tribunal is, therefore, vitiated and, accordingly, set aside. We agree with the findings recorded by the Commissioner (Appeals). 61. As discussed earlier, after the amendment to CETA, there is a material difference between the relevant notes provided in the HSN as against those provided in the Tariff Schedule to the CETA, 1985. The general explanation as provided in the HSN cannot be applied as they stand to explain the Notes in the HSN which is materially different from the Notes contained in the Tariff Schedule of the CETA. In instances of conflict, the Notes contained in the Tariff Schedule to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Section Notes, the Circular stated that the 'Coconut Oil' packed in small containers of sizes upto 200 ml shall be classified under Heading 3305. The relevant portion of the said Circular reads as under:- 5. .....Hence, in view of the amendments/insertion of Chapter Note and Section Note, the classification of coconut oil would depend upon the fact as to how the majority of the customers use the said product. Therefore, if coconut oil is packed in packages which are generally meant for sale in retail as hair oil, in that case, the said product would be classified as hair oil under heading 3305, even though few consumers may use it as edible oil. Through field survey, it has been gathered that smaller packs upto the sizes of 200ml are normally used as hair oil by the customers. It has also been reported that in small pack sizes upto 200ml are stacked along with other hair oil care preparations/cosmetics and not in edible oil section in the retail shops. Enquiries also reveal that small packs of coconut oil displayed at the hair care shelves are used as hair oil only and the customer ask for the smaller packages or the sachets for using them as 'hair oil'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the merits of the order. Now, the position (as per Circular dated 12.10.2015) is to decide the issue of classification by the field taking into consideration the facts of the case read with judicial pronouncements. 65. Conclusion: Impugned orders of the Tribunal are set aside and the appeals preferred by the revenue are allowed with the following findings:- i. Tribunal is not right in holding that Chapter 15 covers all varieties of 'coconut oil' both edible and non-edible. The judgments relied upon by the Tribunal and the Board's circular dated 31.08.1995 were prior to 2004 amendment. 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. Hence the impugned orders of the Tribunal are liable to be set aside. ii. 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' packed in small sachets/containers suitable for being used as 'Hair Oil' is classifiable under Chapter Tarif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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