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2018 (4) TMI 721

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. merited classification under Heading 1513 - Whether classifiable under Heading 1513 or under Heading 3305 of the Central Excise Tariff Act, 1985? - difference of opinion. - Held that: - In view of the difference of opinion in terms of the judgments pronounced by us in the present appeals, the Registry is directed to place the said appeals before Hon’ble the Chief Justice of India for appropriate orders. - Civil Appeal No. 1766 of 2009, Civil Appeal Nos. 6703­-6710 of 2009 - Dated:- 13-4-2018 - Ranjan Gogoi And R. Banumathi, JJ. JUDGMENT Ranjan Gogoi, J. 1. Aggrieved by the orders passed by the Customs, Excise 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 c .....

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ocoa butter, fat and oil (Chapter 18); (c) Edible preparations of Chapter 21; (d) Greaves and residues of Chapter 23; (e) Fatty acids, prepared waxes, medicaments, paints, varnishes, soap, perfumery, cosmetic or toilet preparations, sulphonated oils or other goods of Section VI; or (f) Factice derived from oils (Chapter 40). 2. Soap­stocks, oil foots and dregs, stearin pitch, glycerol pitch and wool grease residues fall in heading No.15.07 3. In this Chapter, the expression fixed vegetable oils 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). 4. In relation to the products of sub­heading 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 .....

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smetic 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, make­up 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, cuticle removers and other preparations for use in manicure or chiropody and barrier creams to give protection against skin irritants. 6. Heading No.33.05 applies, inter alia, to the following products; .....

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39;. Sub­heading Note : 1. For the purpose of sub­headings 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 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). Tariff Item Description of Goods Unit Rate of duty 1513 Coconut (copra), plam kernet 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 kg. 8% 1513 19 00 ­Other ­Palm kernel or babassu oil and fractions thereof: kg. 8% 1513 21 ­Crude oil : 1513 21 10 ­Palm kernel oil kg. 8% 1513 21 20 ­Babassu oil kg. 8% 1513 29 ­Other 1513 29 10 ­Palm kernel oil and its fractions kg. 8% 15 .....

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g. 16% 3305 90 30 - Hair cream kg. 16% 3305 90 40 - Hair dyes (natural, herbal or synthetic) kg. 16% 3305 90 50 - Hair fixers kg. 16% 3305 90 90 - Other kg. 16% 7. We may now take note of the arguments advanced on behalf of the rival parties: Shri Panda, learned Senior Counsel appearing for the appellant­Union of India has urged that a process of interpretation and consideration of the Rules of General Interpretation and relevant Chapter Notes contained in the Act alongwith the results of the market survey undertaken by the Revenue would lead to the conclusion that classification claimed by the Revenue is fully justified and learned Tribunal (CESTAT) was not correct in rejecting the 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 .....

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y, under Chapter 33, specifically Heading 33.05 which deals with preparations for use on the hair . In this regard Shri Bagaria has contended that there is no dispute on the fact that on all the packages of coconut oil cleared by or on behalf of the respondents­assesses, the inscription edible oil has been clearly affixed and there is no advertisement/declaration/ representation to the effect that the coconut oil is meant or intended for used as hair oil. In this regard, Shri Bagaria has also drawn the attention of the Court to Central Excise Notification No.145/56/95­CX dated 31.08.1995 whereby the following points were clarified by the CBEC in paragraphs 5 to 9 of the Circular 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 .....

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ter/Heading of a Chapter is one such situation. A dispute may also arise on a claim that though the item falls within a particular Heading, owing to multifarious reasons, some part of the same item may fall under another Heading of the same Chapter or a different Chapter altogether. All disputes with regard to classification of goods manufactured and cleared has to be primarily decided and resolved within the frame work of the Act and on the basis of Rules for Interpretation and the various Chapter Notes and Supplementary Notes contained in the Tariff Act. The understanding of the CBEC and other authorities exercising jurisdiction under the Act in respect of the Rules for Interpretation 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 .....

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ot otherwise specified . 17. In Shree Baidyanath Ayurved Bhavan Ltd. vs. Collector of Central Excise, Nagpur (1996) 9 SCC 402 the issue before this Court was as to whether Dant Manjan Lal manufactured by the Assessee was medicine so as to be covered by Exemption Notification No.62/78­CE dated 1st March, 1978 or a toilet preparation. 18. In Alpine Industries vs. Collector of Central Excise, New Delhi (2003) 3 SCC 111 the question that arose for consideration before this Court was whether Lip Salve is classifiable under Heading 33.04 of the Central Excise Tariff Act, 1985 as a preparation for care of skin or whether as a medicament under Heading 30.03 thereof. 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 .....

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l Excise, Delhi­III, Gurgaon (supra) (para 13) and Commissioner of Customs and Central Excise, Goa Vs. Phil Corporation Ltd. (supra) (para 17). 21. We may now turn to examine the General Rules for Interpretation and the Chapter Notes relied upon by the Revenue. [THE FIRST SCHEDULE] - EXCISE TARIFF RULES FOR THE INTERPRETATION OF THIS SCHEDULE 1. The titles of Sections and Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according 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 re .....

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xxxxx (c) xxxxxx (d) xxxxxxxx (e) fatty acids, prepared waxes, medicaments, paints, varnishes, soap, perfumery, cosmetic or toilet preparations, sulphonated oils or other goods of Section VI; or ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ SECTION NOTE II to SECTION VI SECTION VI PRODUCT OF THE CHEMICAL OR ALLIED INDUSTRIES Notes : 1. xxxxxx 2. Subject to Note 1 above, goods classifiable in heading 3004, 3005, 3006, 3212, 3303, 3304, 3305, 3306, 3307, 3506, 3707 or 3808 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of this Schedule. ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ .....

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ncorporated the contents of the Headings and sub­ headings as contained in the Harmonised System of Nomenclature (HSN). The position that is noticeable 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 sub­headings have made various such items more specific. Significantly and noticeably coconut oil as a preparation for use as hair oil is not included in Heading 3305 or any of its Sub­Headings. 27. 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 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 mo .....

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(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 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 r .....

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Tariff Act. The same principle will however not apply to the Chapter notes and the Explanatory notes which are tools for understanding the Entries/Headings. The opinions in O.K. Play (India) Ltd. Vs. Commissioner of Central Excise, Delhi­III, Gurgaon (supra) and Commissioner of Customs and Central Excise, Goa Vs. Phil Corporation Limited (supra) reiterating the view in Collector of Central Excise, Shillong Vs. Wood Craft Products Ltd. (supra) and the specific stress on the Chapter Notes and explanatory notes in the HSN as permissible and useful aids in understanding the Headings/entries in the Central Excise Tariff Act cannot be lost sight of. 31. The photo personality 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 .....

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lear 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. Merely because the product is packed in small containers and used by some sections of the customers as hair oil cannot be a valid basis for classification under Heading 3305. 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. 28­02­2005 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 fa .....

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re as under:- Classification by the Appellant Classification by the Respondent 3305 PREPARATIONS FOR USE ON THE HAIR 3305 90 - Other - Hair Oil 3305 90 19 - Other 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 (or) 1513 19 00 - Other 4. Chapter 33 deals with "Essential oils and Resinoids, 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 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 - Pal .....

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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 goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to .....

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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 ××××××) Next two digits: refer to heading of the goods in that Chapter (e.g. ×× 05 ××××) Next two digits: indicate Chapter sub-heading (e.g. ×××× 90 ××) Last two digits: refer to the chapter sub-sub-heading (e.g. ×××××× 10) 10. By the 2004 amendment, there has been realignment of certain goods including the impugned goods. For proper appreciation, we may usefully refer to comparative chart of relevant old legal provisions and the new legal provisions after amendment as under:- Sl. No. Old Legal Provision New Legal Provision 1. .....

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e 2 to Section VI - if the goods classifiable under Heading 3305, it cannot be classified in any other heading of the Schedule. 12. Relevant Chapter Notes and Section Notes for classification of the impugned goods:- Let us now examine the relevant Headings, Sections and Chapter Notes pertaining to the classification of the impugned goods. Chapter Note 3 to Chapter 33 (amended w.e.f. 28.02.2005), reads as under:- "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" 13. Chapter Note 3 to Chapter 33 envisages four key things, namely: a. The product may or may not be mixed; b. The product should be suitable for use as a good under these headings (33 03 to 33 07); c. The product should be put up in packings of a kind sold by retail for such use; d. Headings 33 03 to 33 07 may also apply for other goods not being covered by this Chapter Note (as indicated by the phrase 'inter alia") 14. It is important to note that the Chapter Note is not phrased in an exclusive manner. .....

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s 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 reads as under:- "Animal or Vegetable fats and Oils and their cleavage products; prepared edible fats; Animal or Vegetable Waxes Notes: 1. This Chapter does not cover:- ............ (e) fatty acids, prepared waxes, medicaments, paints, varnishes, soap, perfumery, cosmetic or toilet preparations, sulphonated oils or other goods of Section VI; or .............." 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. 17. Whether Coconut Oil falls under Chapter 15 and applicability of Interpretative Rule 3:- 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 Headings and the relevant Sections and the Chapter .....

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pack of a kind (containers so far manufactured by them) and delivered to M/s. Marico to be sold under the brand name 'Parachute', the activities of M/s. Moreshwar and other job workers amount to manufacture in terms of Section 2 (f)(iii) of Central Excise Act, 1944. According to Revenue, once this fact of manufacture of oil 'suitable for use as 'Hair Oil'' is established, classification under Chapter Heading 15 is ruled out and the appropriate Heading is 33 05 by virtue of Chapter Note 3 to Chapter 33 and Note 2 to Section VI. 19. M/s. Madhan Agro Industries (P) Ltd. (MAIPL):- So far as the 'MAIPL', coconut (copra) is crushed and grounded and the oil-cake and oil are separated and then the oil is filtered and purified. The filtered oil is then stored in tanks and packed in pouches and bottles of different measurements viz., 5 ml, 50 ml, 100 ml, 200 ml, 500 ml, and 1000 ml pouches, 50 ml, 100 ml, 200 ml and 500 ml plastic bottles, 100 ml, 200 ml, and 500 ml wide mouthed bottles, 200 ml tins, one litre and 2 litre cans and sold in the market. According to Revenue, MAIPL, tests the products of their competitor's such as 'Parachute Hair Oil' .....

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em No.3305.90.19. It was submitted that consequent to the amendment, that so long as the product is 'suitable for use as goods of the heading' and "put up in packing for retail sale for such use", whether mixed or not, is classifiable under Chapter Heading 33 05 and in the light of Section Note 2 to Section VI, it cannot be classified under any other Heading in this Schedule. It was further submitted that CESTAT relied upon various orders for referring to Chapter Note 2 to Chapter 33 which were though prior to amendment thereby failing to consider that the Show Cause Notice and the Order-in- Original were passed pursuant to the amended Chapter Note 2 to Chapter Note 33 and Section Note with effect from 01.03.2005. Insofar as 'Parachute' is concerned, Revenue places reliance upon various materials like Trade Mark Registration and other materials as to depicting how the market has understood, 'Parachute' as the 'Hair Oil'. It was further submitted that in case of conflict, the Notes contained in the Tariff Schedule to the CESTAT will prevail over that of the HSN and the impugned order cannot be sustained. 22. Contention of the respondent(s)/A .....

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ng 3305 or as 'Vegetable Oil' under sub-heading 1513. However, when 'Coconut Oil' is put up in packing of a kind sold in retail suitable for use as application on hair would merit classification under tariff entry 33.05. This is the object of the legislature in bringing about the amendment to Chapter Note 3 of Chapter 33 and Section Note 2 to Section VI. Chapter Note 1(e) to Chapter 15 provides that ".....said Chapter does not cover goods of Section VI". This exclusion is in clear conformity and recognition of the fact that goods which otherwise would fall under Section VI are classifiable in accordance with the conditions of Chapter Notes contained in Chapter 33 (use of goods, nature of packing, form etc.) and under no other Heading of the Schedule. By holding that Chapter 15 covers all varieties of coconut oil, edible as well as non-edible, the Tribunal erred in not keeping in view that the object of the legislature in bringing about the amendment. 24. As discussed earlier, the process carried on by M/s. Moreshwar and other job workers are:- (i) oil received from M/s. Marico is unloaded and stored in storage tanks in the unit and it undergoes the process .....

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or use as 'Hair Oil' or classifiable under Heading 33 05 even if they are not so used. As per Note 3 to Chapter 33, what matters is suitability for such use, if the answer to which is 'Yes', then the goods are classifiable under Chapter 33. So far as the next component, "the product should be put up in packings of a kind sold by retail facilitating such use", is satisfied then they are classified under Chapter 33. As pointed out in the Order-in-Original and also as discussed earlier in the case of MAIPL and also M/s. Moreshwar and other job workers, the product is packed in small quantities in containers like 50 ml, 100 ml, 200 ml, 500 ml which also contain the brand trademark 'Parachute'. 27. So far as respondent-MAIPL is concerned, coconut is crushed and pure coconut oil is packed in 5 ml, 50 ml, 100 ml, 200 ml, 500 ml and one litre pouches and also containers in 50 ml, 100 ml, 200 ml, 500 ml and one litre cans and sold under the brand name 'Shanthi'. Here again, these pouches/containers in such small packings by construing them in the sense as to how in the trade, dealers and consumers understood it. The Commissioner was right in holding .....

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indicate that Trademark No.1033842 Class-3-Parachute is associated with Hair Oil, Hair lotions etc. Registration of the trademark of the 'Parachute' brand is for selling items like hair oil, hair lotion, hair growing preparation, hair tonics etc. The Tribunal held that the aspect of label identified with the hair oil does not advance the case of Revenue for classification of 'Coconut Oil' as 'Hair Oil' since the allegation that job workers used green colour labels for marketing hair oil was absent in the Show Cause Notice. Relevant portion of the order of the Tribunal is as under:- "7. ........Moreover, the material allegation of Marico that its job workers used green coloured labels for marketing hair oil exclusively was absent in the show-cause notice. Marico had never marketed any product under the orange label and all along marketed its entire range of products using the green label only. We find that in the absence of any label which could be identified with a hair oil, this aspect of the label does not advance the Revenue's case for classification of the coconut oil as hair oil. Use of a trademark or a label has no bearing on classification.&q .....

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rminate on the harmonious construction of headings, relative Chapter Notes and Section Notes and the main Rule 1 of the Interpretative Rules. Classification of the impugned goods is primarily based on the Headings, relative Chapter Notes and Section Notes which are paramount in this regard as per Rule 1 of the Interpretative Rules. 33. Rule 3 provides for classification in case goods are classifiable under two or more headings. For proper appreciation, at the risk of repetition, it is necessary to refer to Rule 3 of the Interpretative Rules which reads as under:- 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 goods or to part only of the items in a set, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of .....

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h were reported in Kothari Products Ltd. v. CCE 2002 (139) ELT 633 (T); Srikant Sachets Pvt. Ltd. v. CCE 2005 (180) ELT 401 (T); and Commissioner of Central Excise v. Essen Products (I) Ltd. 2006 (200) ELT 342 (T) etc. relied upon by the Tribunal and the Board circular dated 31.08.1995 were dealing with the cases pertaining to the period prior to 01.03.2005. 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. 36. Tests for Classification: The Supreme Court has consistently taken the view that, in determining the meaning or connotation of words and expressions describing an article in a tariff schedule, one principle which is fairly well-settled is that those words and expressions should be construed in the sense in which they are understood in the trade, by the dealer and the consumer. 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 .....

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v. State of A.P. 1994 Supp (3) SCC 122). Whether a particular article will fall within a particular tariff heading or not has to be decided on the basis of the tangible material or evidence to determine how such an article is understood in common parlance or in commercial world or in trade circle or in its popular sense meaning. It is they who are concerned with it and it is the sense in which they understand it that constitutes the definitive index of the legislative intention, when the statute was enacted (see Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan (1980) 4 SCC 71). 34. One of the essential factors for determining whether a product falls within Chapter 30 or not is whether the product is understood as a pharmaceutical product in common parlance [see CCE v. Shree Baidyanath Ayurved Bhavan Ltd. (2009) 12 SCC 419 and CCE v. Ishaan Research Lab (P) Ltd. (2008) 13 SCC 349]. Further, the quantity of medicament used in a particular product will also not be a relevant factor for, normally, the extent of use of medicinal ingredients is very low because a larger use may be harmful for the human body. [Puma Ayurvedic Herbal (P) Ltd. v. CCE (2006) 3 SCC 266, State of G .....

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vant factors inter alia are statutory fiscal entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to (produced), the end use to which the product is put to, cannot determine the classification of that product." 41. 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). Before considering the contentious issues as to the classification of the impugned goods, it is necessary to point out as to how 'Coconut Oil' is understood and treated in the market. 42. In Jain Exports Pvt. Ltd. v. Union of India 1987 (29) ELT 753 Del, the High Court of Delhi dealt with the use of 'Coconut Oil' and in the context of importability of 'Coconut Oil', held as under:- "25. ....it is well known that the coconut oil is not at all used as an edible oil in a very large part of our country. Almost all the parts of India up to Vindhyas do not use coconut oil as edible medium. Even in rest of the country though .....

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is also referred to feedback about the product by their consumers and their impressions and experiences. It also refers to the interview of Mr. Arvind Mediratta, Head of Marketing Division of M/s. Marico Limited stating that 'Parachute' brand is associated with 'Hair Oil' whereas Saffola brand is associated with edible (cooking) oil. The revenue also refers 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. 45. The appellant has relied upon the following write up on coconut oil by the Coconut Development Board (a statutory body under the Ministry of Agriculture):- "Coconut oil is used in the country as a cooking fat, hair oil, body oil and industrial oil..... Coconut oil is marketed in bulk as well as in packs ranging from sachets containing 5 ml to 15 kg tins. The branded coconut oil in small packs is mainly marketed as hair oil and body oil." 46. A taxing statute is being one levying a tax on goods must, in the absence of a technical .....

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rstanding." 48. In the case of Alpine Industries v. Collector of Central Excise, New Delhi (2003) 3 SCC 111, the question was whether "Lip Salve" could be classifiable as a preparation for care of skin or as a medicament. The product was mainly supplied to the Defence Department for use by military personnel who are posted in high-altitude areas. In Commissioner of Central Excise, Calcutta v. Sharma Chemical Works (2003) 5 SCC 60, this Court held that in interpreting provisions of a statute like the Excise Act, the popular meaning as understood by the users should be applied and not the scientific or technical meaning. 49. As held in Jain Exports Pvt. Ltd., the factum of overwhelming use of 'Coconut Oil' as 'Hair Oil' in most parts of the country cannot be ignored. 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 .....

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ized Commodity Description and Coding System (HS) of tariff nomenclature, generally referred to as the "Harmonized System of Nomenclature (HSN)" is an internationally standardized system of names and numbers for classifying traded products, developed and maintained by the World Customs Organization (WCO) (formerly the Customs Co- operation Council), an independent inter-governmental organization [Source: World Customs Organization:http:// www. wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system. aspx]. Along with the HSN, are the Explanatory Notes. They do not form an integral part of the Harmonized System Convention. However, as approved by the WCO Council, they constitute the official interpretation of the Harmonized System at the international level and are an indispensable complement to the System. [World Customs Council, retrieved from: http://www.wcoomd.org/ en/topics/nomenclature/instrument-and-tools/tools-to-assist- with-the-classification-in-the-hs/explanatory-notes.aspx]. 53. The Central Excise Tariff Act, 1985 (CETA) is based on the Harmonized System of Nomenclature (HSN), which is an internationally accepted product coding system formulate .....

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ates and aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings of a kind sold by retails for such use. as goods of these headings and put up in packings of a kind sold by retail for such use (see Note 3 to this Chapter). The products of headings 33.03 to 33.07 remain in these headings whether or not they contain subsidiary pharmaceutical or disinfectant constituents, or are held out as having subsidiary therapeutic or prophylactic value (see Note 1(d) to Chapter 30). However, prepared room deodorizers remain classified in heading 33.07 even if they have disinfectant properties of more than a subsidiary nature. Preparation (e.g. varnish) and unmixed products (e.g. unperfumed powdered talc, fuller's earth, acetone, alum) which are suitable for other uses in addition to those described above are classified in these headings only when they are:- In packings of a kind sold to the consumer and put up with labels, literature or other indications that they are for use as perfumery, cosmetic or toilet preparations, or as room deodorizers; or Put up in a form clearly specialized to such use (e.g. nail varnish put up in small bottles furn .....

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he Chemical or Allied Industries ........ After amendment 2. Subject to Note 1 above, goods classifiable in Heading Nos. 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 and in no other heading of the Nomenclature. Notes: ........... 2. Subject to Note 1 above, goods classifiable in Headings 3004, 3005, 3006, 3212, 3303, 3304, 3305, 3306, 3307, 3506, 3707 or 3308 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of this schedule. 3. Goods put up in sets consisting of two or more separate constituents, some or all of which fall in this Section and are intended to be mixed together to obtain a product of Section VI or VII, are to be classified in the heading appropriate to that product, provided that the constituents are:- (a) having regard to the manner in which they are put up, clearly identifiable as being intended to be used together without first being repacked; (b) presented together; and (c) identifiable, whether by their nature or by the relative proportions in whic .....

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ide 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." 60. However, in Camlin Ltd. v. Commissioner of Central Excise, Mumbai (2008) 9 SCC 82, this Court held that if the entries under HSN and the entries under the Central Excise Tariff Act are different then reliance cannot be placed upon HSN Notes for the purposes of classification of goods under the Central Excise Tariff. The relevant portion of the said judgment is as under:- "24. In our considered view, the Tribunal erred in relying upon the HSN f .....

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er:- "6. .....In the CET Heading 3305 covers "preparations for use on the hair". ...... 9. Therefore, keeping in view of Chapter Notes, HSN Notes, the Tariff Conference of 1991, the report of D.G. (A.E.) and the opinion of Chief Chemist, CRCL, it is felt that coconut oil whether pure or refined and whether packed in small or large containers merits classification under Heading No.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 Note 2 of Chapter 33 and/or if the coconut oil has additives (other than BHA) or has undergone processes which made it a preparation for use on hair as mentioned in Chapter Note 6 of Chapter 33 then the coconut oil may merit classification under Chapter 33." 63. In exercise of powers under Section 37B of Central Excise Act, 1944, CBEC issued Circular No.102/05/2006-CX-3 dated 03.06.2009 withdrawing the Circular No. 145/56/95-CX dated 31.08.1995. After referring to the amendment and old and new Chapter Notes and Section Notes, t .....

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r:- "1. We have heard learned Additional Solicitor General appearing for the Revenue. 2. Delay condoned. 3. We find no merit in the Civil Appeals. The Civil Appeals are dismissed." After the judgment of the Supreme Court, the Circular dated 03.06.2009 was withdrawn by another Circular No.103/01/2015-CX-3 dated 12.10.2015. Now, the issue of classification of 'Coconut Oil' as per the Circular dated 12.10.2015 is to be decided by the field by taking into consideration the facts of the case read with the judicial pronouncements. Merely because the 'Coconut Oil' of retail pack of 200 ml or less are not classifiable under Chapter 33 of the Central Excise Tariff and the civil appeals preferred by the Revenue were dismissed by the Supreme Court, it does not mean that it has attained finality. As pointed out earlier, civil appeals preferred by the Revenue were dismissed by a non-speaking order at the admission stage and hence, the "Doctrine of Merger" is not applicable. When the order passed by the Supreme Court is not a speaking order, it is not correct to assume that the Supreme Court had decided implicitly all the questions in relation to the merits of .....

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nt Explanatory Notes in the HSN as against those provided in the Tariff Schedule to Central Excise Tariff Act, 1985. As held in Camlin Ltd. v. Commissioner of Central Excise, Mumbai (2008) 9 SCC 82, when the Explanatory Notes in the HSN and the Notes tariff schedule are not aligned, reliance cannot be placed upon HSN for the purpose of classification of goods. vi. In the case of MAIPL, 'Coconut Oil' packed in small sachets/containers suitable 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." vii. Circular dated 03.06.2009 and dismissal of appeals preferred by the Revenue in CA Nos. 2023-37 of 2014 (dated 17.12.2014) at the admission stage by non-speaking order, the 'Doctrine of Merger' is not applicable. J. [R. Banumathi] ORDER In view of the difference of opinion in terms of the judgments pronounced by us in the present appeals, the Registry is directed to place the said appeals before Hon ble the Chief Justice of India for ap .....

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