Central Excise Tariff Act, 1985 – Classification – Heading 1513 or 3305 – Coconut oil manufactured and packed in small containers by assessee – Whether classifiable under Heading 1513 or under Heading 3305 – Held: (Per Ranjan Gogoi, J.) In the instant case, “Coconut oil” packed in small packages/containers does not cease to be “Coconut oil” and become “Hair oil” though such “coconut oil” may be capable of being used for both purposes and therefore, is clearly covered by Chapter Heading 1513 and not by Chapter Heading 3305 – (Per R. Banumathi, J.) Coconut Oil packed in small container suitable for being used as Hair oil is classifiable under Chapter Heading 3305 – In view of difference of opinion, Registry directed to place these appeals before the Chief Justice of India for appropriate orders.
Directing the Registry to place the appeals before the Chief Justice of India in view of difference of opinion, by the Court
HELD:
Per Ranjan Gogoi, J.– 1.1 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. On the other hand prior to the amendment Heading 33.05 dealt with preparations for use on the hair. After coming into force of the amendment, Headings 1513 and 3305 in Chapters 15 and 33 virtually incorporated the contents of the Headings and subheadings as contained in the Harmonised System of Nomenclature (HSN). The position following the amendment of the Tariff Act is that a specific Heading for coconut oil has been introduced in the Tariff Act. So far as “preparation for use on the hair” is concerned, the sub-headings have made various such items more specific. Noticeably coconut oil as a preparation for use as hair oil is not included in Heading 3305 or any of its Sub-Headings. [Para 22,
23 and 26] [412-G-H; 413-A; 414-B-D]
Commissioner of Customs and Central Excise, Goa v. Phil Corporation Limited (2008) 17 SCC 569 : [2008] 2 SCR 531; O.K. Play (India) Ltd. v.
Commissioner of Central Excise, Delhi-III, Gurgaon (2005) 2 SCC 460 : [2005] 1 SCR 1069 ; O.K. Play (India) Ltd. v. Commissioner of Central Excise, Delhi-III, Gurgaon (2005) 2 SCC 460 : [2005] 1 SCR 1069 ; Central Excise, Goa v. Phil Corporation Limited (2008) 17 SCC 569 : [2008] 2 SCR 531 – relied on. Indo-International Industries v. Commissioner of Sales Tax, U.P. 1981 (8) E.L.T. 325 (S.C.) ; Asian Paints India Ltd. v. Collector of Central Excise 1988 (35) E.L.T. 3 (S.C.) ; Shree Baidyanath Ayurved Bhavan Ltd. v. Collector of Central Excise, Nagpur (1996) 9 SCC
402 ; Alpine Industries v. Collector of Central Excise, New Delhi (2003) 3 SCC 111 : [2003] 1 SCR 313 – distinguished.
Rajasthan Oil Mills v. Commissioner of Central Excise 2014 (314) ELT 541 (Tribunal); Collector of Central Excise, Shillong v. Wood Craft Products Ltd. (1995) 3 SCC 454 : [1995] 2 SCR 797 ; Commissioner of Customs Camlin Limited v. Commissioner of Central Excise, Mumbai (2008) 9 SCC 82 : [2008] 12 SCR 1223 ; V.M. Salgaocar & Bros. Pvt. Ltd. v. Commissioner of Income Tax (2000) 5 SCC 373 : [2000] 2 SCR 1169 – referred to.
1.2 Chapter Note 3 of Chapter 33 makes it clear that Heading 3305, inter alia, would apply to products “which are suitable for use as goods mentioned in the Heading and if they are put up in packings of a kind sold by retail for such use”. Heading 3305 deals with “preparations for use on the hair”. In the instant case, 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. In order to classify a product under tariff Item No.3305 of the Act, the requirements of Clauses (a) and (b) of the Explanatory Note to Chapter Note 3 of Harmonised System of Nomenclature (HSN) would be required to be satisfied and the goods/packages must be put up with labels/literatures and other indications that they are meant for use as perfumery, cosmetic and toilet preparations or the goods must be put up in a form clearly specialised for such use as for example nail varnish must be put up in small bottles accompanied with a brush. No such situation exists in respect of the coconut oil in question. The absence of any explanatory note to Chapter Note 3 of Chapter 33 of the Central Excise Tariff Act on the same terms as in the HSN would hardly make any difference in the conclusion to be reached. [Paras 27, 29] [414-E; 415-G-H; 416-A-B]
Collector of Central Excise, Shillong v. Wood Craft Products Ltd. (1995) 3 SCC 454 : [1995] 2 SCR 797 – relied on.
2. The coconut oil in the instant case would be more appropriately classifiable under Chapter 15, Heading 1513. 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 Central Excise Tariff read in the light of the relevant provisions of Chapter Note 3 along with the explanatory notes of Chapter 33 of the HSN, all, would lead to the irresistible conclusion that coconut oil is classifiable under Heading 1513 of Chapter 15 of the Central Excise Tariff Act. [Para 32] [417-G-H; 418-A-B]
3. The contents of Circular bearing No. No.145/56/95-CX dated 31.08.1995 makes it clear that a product cannot be classified under Chapter 33 Heading 3305 in the absence of any proof that it is specially prepared “for use on the hair” and in the absence of any label/literature etc on the container to such effect. Only if the containers bear labels/literature indicating that it is meant for use on the hair that the coconut oil in dispute may merit classification under Chapter 33. The above position would continue to hold the field notwithstanding the substitution of Chapter 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. [Para 34] [418-G; 419-A-B]
Raj Oil Mills Ltd. v. Commissioner, Central Excise 2014 (314) ELT 541 (Tri. - Mumbai) – referred to. Per R. Banumathi, J:– 1. In view of the amended provisions of Chapter Note 3 to Chapter 33 and Section Note 2 to Section VI, ‘Coconut Oil’ packed in small sachets/containers, as they are suitable for use on hair are classifiable under Chapter 33 and not under Chapter 15. Chapter Note 3 to Chapter 33 is not phrased in an exclusive manner. It merely reiterates the conditions which are required to be satisfied for a certain product to merit classification under Heading Tariff Items 33 03 to 33 07. The expression, ‘suitable for use as goods of these headings’ and ‘put up in packings of a kind sold by retail for such use’ as used in Note
3 of Chapter 33 indicate that oils suitable for use as Hair Oil are classifiable under Heading ...33 05... even if they are not so used. What matters, is the ‘suitability for such use’ and ‘packings of a kind sold by retail for such use’. In view of the amended position, if the conditions as specified in Note 3 to Chapter 33 for classification as ‘Hair Oil, Other’ are satisfied, then the product has to be classified only under Heading ...33 05... and no other classification is permissible. This positition is further made clear by amended Section Note 2 to Section VI. [Paras 1, 14] [420-B; 427-A-C]
2. 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. [Para 15] [427-E-G]
3. 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 sub-heading ...33 05... by Note 2 to Section VI. Further Note 1 (e) to Chapter 15 provides that “the chapter does not cover goods of Section VI”. Note 1(e) to Chapter 15 clearly excludes goods covered under Section VI in which Chapter 33 Tariff Item 33 05 is one of the items. [Para 16] [427-G-H; 428-A-B, C-D]
Assistant Commissioner v. Marico Industries Ltd. 2006 SCC online Raj 446 ; Marico Limited v. Commissioner, Commercial Taxes,UP (2015) 78 VST 423 ; Union of India and Ors. v. Pesticides Manufacturing and Formulators Association of India, (2002) 8 SCC 410 : [2002] 3 Suppl. SCR 231 – referred to.
4. Whether a particular article will fall within a particular tariff heading or not, has to be decided on the basis of as to how that article is understood in ‘common parlance’ or in ‘commercial world’ and not as per scientific or technical meaning. Chapter 15 of Section 3 of Central Excise Tariff deals with “Animal or Vegetable fats and Oils and their cleavage products; prepared edible fats; Animal or Vegetable Waxes”. Sub-Heading 1513 deals with coconut (copra). 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’. Applying the common parlance test and also ‘end use of the product’, coconut oil is predominantly understood by the users namely dealers/consumers only as ‘Hair Oil’ and not as ‘edible oil’ and hence, classifiable only under Chapter 33 and not under Chapter 15. [Paras 36, 41, 49] [438-E-F, 441-E; 444-E-F]
Asian Paints Ltd. v. Collector of Central Excise (1988)
2 SCC 470 ; Plasmac Machine Manufacturing Co. (P) Ltd. v. Collector of Central Excise, Bombay (1991) 1 Suppl. SCC 57 : [1990] 3 Suppl. SCR 384; Dabur Industries Ltd. v. Commissioner of Central Excise, Jamshedpur (2005) 4 SCC 9 : [2005] 3 SCR 144 ; Commissioner of Central Excise v. Wockhardt Life Sciences Limited (2012) 5 SCC 585 ; Commissioner of Central Excise, Delhi v. Carrier Aircon Ltd.(2006) 5 SCC 596 : [2006] 3 Suppl. SCR 254 ; Jain Exports Pvt. Ltd. v. Union of India 1987 (29) ELT 753 Del ; Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant Singh Charan Singh AIR 1967 SC 1454 : [1967] SCR 720 ; Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant Private Ltd., New Delhi (2012) 13 SCC 639 : [2012] 11 SCR 365 ; Alpine Industries v. Collector of Central Excise, New Delhi (2003) 3 SCC 111 ; Commissioner of Central Excise, Calcutta v. Sharma Chemical Works (2003) 5 SCC 60 ; Collector of Central Excise, Shillong v. Woods Craft Product Ltd. (1995) 3 SCC 454 : [1995] 2 SCR 797 ; Commissioner of Customs and Central Excise, Goa v. Phil Corporation Limited (2008) 17 SCC 569 : [2008]
2 SCR 531 ; O.K. Play (India) Ltd. v. Commissioner of Central Excise Delhi-III, Gurgaon (2005) 2 SCC 460 : [2005] 1 SCR 1069 ; Commissioner of Customs and Central Excise, Goa v. Phil Corporation Ltd. (2008) 17 SCC 569 : [2008] 2 SCR 531 – relied on.
Kothari Products Ltd. v. CCE 2002 (139 ELT 633 (T) ; Srikant Sachets Pvt. Ltd. v. CCE 2005 (180) ELT 401 (T); Commissioner of Central Excise v. Essen Products (I) Ltd. 2006 (200) ELT 342 (T) – referred to.
5.1 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 Parliament consciously chose not to impose or place the same rigours for classification of goods under this Heading and deleted the same. The Parliament intentionally and consciously deleted these conditions in the new (renumbered) Chapter Note 3 to Chapter 33 of the Tariff Schedule to the CETA. Therefore, to apply these conditions, postamendment would be against the intent of the Parliament. Hence, HSN Chapter Note cannot be relied upon to determine the classification rather the CETA Tariff Chapter Note must be considered. [Para 56] [448-G-H; 449-A-B]
5.2 The HSN General Explanatory Notes to Section VI are to an extent in conflict with the Notes contained in Tariff Schedule to the Central Excise Tariff Act, 1985. Therefore, the Notes contained in the Central Excise Tariff Act shall prevail over the Notes contained in HSN. 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. [Paras 58, 61] [450-G-H; 452-A-B] Collector of Central Excise, Shillong v. Woods Craft Product Ltd. (1995) 3 SCC 454 : [1995] 2 SCR 797 ; Camlin Limited v. Commissioner of Central Excise, Mumbai (2008) 9 SCC 82 : [2008] 12 SCR 1223 ; Raj Oil Mills Ltd. v. Commissioner, Central Excise 2014 (314) ELT 541 (Tri. - Mumbai) – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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