Excise classification of coconut Oil in small packings-In view of the difference of opinion, the Registry directed to place appeals before CJI
ABCAUS Case Law Citation:
ABCAUS 228 (2018) (04) SC
Important Case Laws Cited/relied upon by the parties
Rajasthan Oil Mills Vs. Commissioner of Central Excise 12014 (314) ELT 541
The Commissioner of Central Excise and the assessee(s) were in appeal before the Hon’ble Supreme Court on the issue of classification of coconut oil in packings upto 2 litres Kgs. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) (‘the Tribunal’) had held that the coconut oil manufactured and packed in small containers was classifiable under Heading 1513 and not under Heading 3305 of the Central Excise Tariff Act, 1985 ( ‘the Act’).
One of the assesses was a manufacturer of 100% pure coconut oil the other assesses were jobworkers who had received 100% pure coconut oil from a company in bulk and thereafter had packed the same in small packages which were supplied back to the company. The packages in question carried a declaration that they contain 100% pure coconut oil. The trademark “Parachute” was also inscribed on the packs. In one case, the packings also included pouches of 5 ml. All the packs were marked as “edible oil”.
While the assessee(s)contended that coconut oilin small packings is also classifiable as coconut oil under Heading 1513,the revenue claimed classification of the said products as “hair oil”under Heading 3305 while conceding that coconut oil in large packings i.e. beyond 2 Kgs. only merited classification under Heading 1513.
The dispute was heard by the division bench consisting of Justice Ranjan Gogoi and Justice R, Banumati.
The Revenue contended that the 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’.
The revenue also refered to an article in the Financial Express dated 14.06.2001 where Mr. Srikand Gupta, Chief Executive Officer (CEO), Nature Care Division of M/s. Marico stated that they wanted the ‘Parachute’ brand to be perceived as a cosmetic brand with the utility of nourishing hair.
The assessee contended that prior to the coming into force of the Amendment Act of 2005, the classification of coconut oil was claimed and allowed under Chapter 15 Heading 1503 which dealt with Fixed vegetable oils. It was only after the amendment that Heading 1513 was incorporated dealing specifically with coconut oil. The amendment was for the purpose of fine tuning of the Tariff with HSN and had no Revenue implications.
It was contended there was no dispute on the fact that on all the packages of coconut oil, the inscription “edible oil” had been clearly affixed and there was no advertisement/declaration/representation to the effect that the coconut oil was meant or intended for used as hair oil.
It was submitted that the CBEC had issued a circular u/s 37B of the Central Excise Act which provided that if coconut oil is packed in containers upto 200 ml it may be considered generally for use as hair oil. If, however, the same coconut oil is packed in one litre or two litres pack, classification would be under Chapter 15 as coconut oil. However after the Appellate Tribunal’s order to the contrary which was upheld by the Hon’ble Supreme Court , the CBEC withdrew the said order.
However as their Lordships could not reach unanimity,
The decision made were as under:
Justice Ranjan Gogoi
His Lordship dismissed the appeal of the Revenue and held that the coconut oil in small packings is more appropriately classifiable under Chapter 15, Heading 1513 and not under Chapter 33, Heading 330.
Justice R. Banumati
Order of the Tribunal was set aside and the appeals preferred by the revenue were allowed. It was held that the Tribunal was not right in relying upon the earlier orders/circular prior to amendment to base its conclusion that coconut oil both edible and non-edible merits classification under Chapter 15. After the amendment of 2005 what is relevant is ‘suitability of the goods for being used as Hair Oil’ for classifying the same under 33.05. 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. The dismissal of appeals by the Supreme Court at the admission stage by non-speaking order did not attract the ‘Doctrine of Merger’
In view of the difference of opinion the Registry was directed to place the appeals before Hon’ble the Chief Justice of India for appropriate orders.
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