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TMI Blog2024 (12) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 these cases, excluding interest and penalties, would be about Rs.40 crore, this Court requested t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Chapter Note 3 of Chapter 15. It was further clarified that if the containers bore labels/literature indicating that it was meant for application on hair, as specified under Note 2 of Chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIBLE 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 1522. Heading 1513 is relevant for our purposes and it reads as under: Tariff Item Description of goods Unit Rate of duty 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p;--- 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 was adopted in 1983 and enforced in January, 1988. In Commissioner of Customs and Central Excise, Amritsar (Punjab) vs. D.L. Steels etc. 2022 SCC OnLine SC 863, this Court noted that this multipurpose international product nomenclature harmonizes description, classification and coding of goods and, while the primary objective of the HSN is to facilitate and aid trade, it is also for other diverse purposes like internal taxes, monitoring import tariffs, quota controls, rules of origin, transport statistics, freight tariffs, compilation of national acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, 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. --------- 18. We are of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed 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 was held to be invalid. It was affirmed that it is only when the entry in the HSN and the tariff description in the First Schedule to the Act of 1985 are aligned that reliance would be placed upon the HSN for the purpose of classification of such goods under the correct tariff description. 18. It would, therefore, be relevant to examine the HSN in the context of the changes made in the First Schedule to the Act of 1985 in 2005 apropos 'coconut oil'. Section III and Chapter 15 in the HSN are titled the same as Section III and Chapter 15 in the First Schedule and read thus: S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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. 21. Chapter Note No. 3 in Chapter 33 of the HSN, titled Essential Oils and Resinoids; Perfumery, Cosmetics or Toilet Preparations' is identical to the amended Chapter Note 3 in Chapter 33 in Section VI of the First Schedule, and it reads as follows: CHAPTER 33 ESSENTIAL OILS AND RESINOIDS; PERFUMERY, COSMETIC OR TOILET PREPARATIONS Chapter Notes. 1.... 2.... 3. Headings 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 packings of a kind sold by retail for such use. 22. The General Notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 the 2005 amendment, Heading 1513 was created specifically for coconut oil and the other named oils. This heading dealt with crude coconut oil and other forms of coconut oil and its fractions. All that was required thereunder was that the coconut oil should not have been chemically modified. Significantly, the post-2005 amendment description of coconut oil in Heading 1513 was a replication of its description in Heading 15.13 in the HSN. 25. When it comes to Section VI of the First Schedule, pertaining to 'Products of the Chemical or Allied Industries', the post-2005 amended Section Note 2 was more or less identical to Section Note 2 in Section VI of the HSN. However, Chapter Note 2 of Chapter 33 in Section VI of the First Schedule, prior to the 2005 amendment, was more detailed than the corresponding Chapter Note 3 in Chapter 33 in Section VI of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 First Schedule was made a verbatim reproduction of the corresponding Chapter Note 3 in Chapter 33 in the HSN. However, as it is an admitted position that the Explanatory Notes in the HSN would also be binding once the entry in the HSN corresponds with the description of the goods in the First Schedule to the Act of 1985, the General Notes in Chapter 33 in the HSN would apply. In consequence, what was set out earlier in Chapter Note 2 in Chapter 33 of the First Schedule is now brought in by way of the General Notes in Chapter 33 of the HSN and the removal thereof from the Chapter Note in Chapter 33 of the First Schedule has no significance, except for the fact that it brought about complete parity between the First Schedule to the Act of 1985 and the HSN. 28. Therefore, it would not be sufficient to merely show that the products in question are suitable f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. 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, withdrew the Circular dated 03.06.2009 and left the issue of classification of coconut oil packed in small containers of up to 200 ml to be decided in the field, taking into consideration judicial pronouncements and the facts of individual cases. 31. It is also relevant to note that in Heading 1513 in Chapter 15 in Section III of the First Schedule, there is no mention of the size, volume or weight of the packaging and coconut oil, whether or not refined, is classifiable under this heading as long as it is not chemically modified. On the other hand, whenever and wherever it was intended that the weight of the product was a factor to be considered for classification, the headings provided for the same. For instance, Heading 0902 in Chapter IX, titled 'Coffee, Tea, Mate and Spices', in Section II of the First Schedule deals with Tea, whether or not flavoured, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actures 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 Industries, M/s. Moreshwar Industries, M/s. Shivam Enterprises and M/s. Sowparnika Enterprises, all situated at Pondicherry (now, Puducherry). Show-cause notices were issued in July, 2007, by the Central Excise authorities proposing to treat the coconut oil so sold by them as 'hair oil', classifiable under Heading 3305, which led to Orders-in-original being passed on 27th and 28th of February, 2008, confirming the demand of excise duty against the four job-workers and M/s. Marico Ltd., treating the coconut oil as 'hair oil' and also levying penalty and interest. However, the appeals filed by M/s. Marico Ltd. and its four job-workers before the Customs Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, were allowed, vide Final Orders No. 1068 to 1075 of 2008 dated 30.07.2008. It is against these orders passed by the Tribunal that the Revenue is before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 are framed at a point of time but are meant to apply for significant periods of time thereafter and they cannot, therefore, be expected to keep up with nuances and niceties. It was held that the terms of the statutes must be adapted to developments of contemporary times rather than being held entirely inapplicable and it is for this precise reason that Courts apply the 'common parlance test' every time parties attempt to differentiate their products on the basis of subtle and finer characteristics. 37. Earlier, in Alpine Industries vs. Collector of Central Excise, New Delhi (2003) 3 SCC 111, this Court observed that, in interpreting tariff entries in taxation statues like the Excise Act, where the primary object is to raise revenue and, for that purpose, various products are differently classified, the entries must not be understood in their scientific/technical sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tail 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 indications that the product is intended for use as a cosmetic or toilet preparation or it must be put in a form clearly specialized to such use - as in the case of acetone marketed in small bottles, along with an applicator brush, indicating its use as nail polish remover. 41. The mere fact that coconut oil is also capable of being put to use as a cosmetic or toilet preparation, by itself, would not be sufficient to exclude such oil from the ambit of 'coconut oil' and subject it to classification as 'hair oil' as 'coconut oil' is name-specific. It is not in dispute that the packaging of the coconut oil in the cases on hand clearly demonstrated that it was being sold as 'edible oil' and all parameters that had to be met in that regard were duly complied with. Edible coconut oil requires to be packed in containers using edible grade plastic. The coconut oil so sold must satisfy the req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 'medicament' under Heading 3003 in Chapter 30 of the First Schedule. 44. Further, registration of the trademark 'Parachute' by M/s. Marico Ltd. for 'hair oil' is not sufficient to classify the coconut oil sold by it, in its entirety, as hair oil. As rightly noted in the impugned final orders, 'Parachute' trademark was also registered by the company for Edible Oil (Class 29), Coffee/Tea (Class 30), Pharmaceuticals (Class 5) and Non-Alcoholic Beverages (Class 32). Therefore, the trademark, by itself, does not indicate that every product sold thereunder is the same and meant only for one use. Significantly, M/s. Marico Ltd. also markets various coconut-based hair oils, containing ingredients such as perfumes, etc., which are manufactured under a separate license obtained under the Drugs and Cosmetics Act, 1940, and classified as preparations for use on the hair, thereby falling under Heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 nothing further. As pointed out by this Court in HPL Chemicals Ltd. vs. Commissioner of Central Excise, Chandigarh ( 2006 ) 5 SCC 208 , classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue if it intends to classify the goods under a particular heading or sub-heading different from that claimed by the assesses. In such an event, the Revenue had to adduce proper evidence and discharge that burden of proof in the context of the classification entries, which it failed to do satisfactorily in the cases on hand. 48. On the above analysis, we are of the opinion that pure coconut oil sold in small quantities as 'edible oil' would be classifiable under Heading 1513 in Section III-Chapter 15 of the First Schedule to the Central Excise Tariff Act, 1985, unless the packaging thereof satisfies all the requirements set out in Chapter Note 3 in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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