# COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO INDUSTRIES (I) PVT. LTD

- **Citation:** [2018] 6 S.C.R. 387
- **Court:** Supreme Court of India
- **Decided:** 2018-04-13
- **Case number:** Civil Appeal No. 1766 of 2009
- **Bench:** Ranjan Gogoi, R. Banumathi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-central-excise-v-madhan-agro-industries-i-pvt-ltd-33232
- **Pages:** 70

## Headnote

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.
[2018] 6 S.C.R. 387
387
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SUPREME COURT REPORTS
[2018] 6 S.C.R.
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
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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 Nomenclatu

## Text

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COMMISSIONER OF CENTRAL EXCISE
v.
MADHAN AGRO INDUSTRIES (I) PVT. LTD.
(Civil Appeal No. 1766 of 2009)
APRIL 13, 2018
[RANJAN GOGOI AND R. BANUMATHI, JJ.]
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.
[2018] 6 S.C.R. 387
387
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SUPREME COURT REPORTS
[2018] 6 S.C.R.
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
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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
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO
INDUSTRIES (I) PVT. LTD.
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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]
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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,
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO
INDUSTRIES (I) PVT. LTD.
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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,
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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.
Case Law Reference
Per Ranjan Gogoi, J.
2014 (314) ELT 541 (Tribunal) referred to
Para 11
[1995] 2 SCR 797
 relied on
Para 12
[2008] 2 SCR 531
 relied on
Para 12
[2005] 1 SCR 1069
 relied on
Para 12
1981 (8) E.L.T. 325 (S.C.)
 distinguished
Para 15
1988 (35) E.L.T. 3 (S.C.)
 distinguished
Para 16
(1996) 9 SCC 402
 distinguished
Para 17
[2003] 1 SCR 313
 distinguished
Para 18
[2008] 12 SCR 1223 referred to Para 30
[2000] 2 SCR 1169
 referred to
Para 35
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO
INDUSTRIES (I) PVT. LTD.
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Per R. Banumathi, J.
2006 SCC online Raj 446
referred to
Para 22
UP (2015) 78 VST 423
referred to
Para 22
[2002] 3 Suppl. SCR 231
referred to
Para 34
(139) ELT 633 (T)
referred to
Para 35
2005 (180) ELT 401 (T)
referred to
Para 35
2006 (200) ELT 342 (T)
referred to
Para 35
(1988) 2 SCC 470
relied on
Para 36
[1990] 3 Suppl. SCR 384
relied on
Para 37
[2005] 3 SCR 144
relied on
Para 38
(2012) 5 SCC 585
relied on
Para 39
[2006] 3 Suppl. SCR 254
relied on
Para 40
1987 (29) ELT 753 Del
relied on
Para 42
[1967] SCR 720
relied on
Para 46
[2012] 11 SCR 365
relied on
Para 47
[2003] 3 SCC 111
relied on
Para 48
[2003] 5 SCC 60
relied on
Para 48
[1995] 2 SCR 797
relied on
Para 51
[2008] 2 SCR 531
relied on
Para 51
[2005] 1 SCR 1069
relied on
Para 51
[2008] 2 SCR 531
relied on
Para 53
[1995] 2 SCR 797
referred to
Para 59
[2008] 12 SCR 1223
referred to
Para 60
2014 (314) ELT 541
(Tri.-Mumbai)
referred to
Para 64
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CIVIL APPELLATE JURISDICTION : Civil Appeal No.1766
of 2009.
From the Judgment and Order No. 638/08 dated 25.06.2008 of
the Customs, Excise & Service Tax Appellate Tribunal, South Zonal
Bench at Chennai in Appeal No. E/111/08/MAS
WITH
Civil Appeal Nos. 6703-6710 of 2009.
A. K. Panda, Sr. Adv., Ms. Sunita Rani Singh, H.R. Rao,
Ms. Kirti Dua, B. Krishna Prasad, Advs. for the Appellant.
S. K. Bagaria, Sr. Adv., Mahesh Agarwal, Abhinav Agrawal,
Himanshu Satija, Ms. Manya Bhardwaj, E. C. Agrawala, Advs. for the
Respondents.
The Judgments and Order of the Court were delivered by
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 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 Appeal Nos.6703-6710 of 2009 the assesses are four job-workers
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO
INDUSTRIES (I) PVT. LTD.
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of M/S Marico Limited who had received 100% pure coconut oil from
Marico Limited in bulk and thereafter had packed the same in small
packages which were supplied back to Marico as per dispatch schedules
issued. The packages in question carried a declaration that they contain
100% pure coconut oil. The trademark "Parachute" is also inscribed on
the packs. In Civil Appeal No.1766 of 2009, the packings also included
pouches of 5 ml. All the packs are marked as "edible oil".
4. It may also be noticed at this stage that the packing sizes
conform to the requirement of Clause 5 of Schedule I of the Edible Oil
packaging (Regulation) Order 1998 read with serial No.10 Schedule III
of the Standards of Weights and Measures (packaged commodities)
Rules 1977.
5. While the assessee(s) contended that coconut oil in 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. merited classification under Heading 1513. This is the core dispute
between the parties in the present case.
6. The relevant Headings before and after the Amendment of the
Central Excise Tariff Act effective 28-02-2005 will require a specific
notice and is therefore extracted below:
 BEFORE AMENDMENT
 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) pig fat or poultry fat;
 (b) cocoa butter, fat and oil (Chapter 18);
 (c) Edible preparations of Chapter 21;
 (d) Greaves and residues of Chapter 23;
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(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. Soap-stocks, 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 sub-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.
Sub-heading
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 fats and oils and their fractions,
partly or wholly hydrogenated, interesterified,
re-esterified
or
elaidinised,
whether or not refined but not further
prepared.
8%
15.05
33.03.00
Omitted
8%
15.06
1506.00
Glycerol, Crude, Glycerol Waters and
Glycerol lyes
16%
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 ______________________________________________
BEFORE AMENDMENT
 CHAPTER 33
 ESSENTIAL OILS AND RESINOIDS; PERFUMERY,
COSMETIC OR TOILET PREPARATIONS
 Notes :
1. This Chapter does not cover :
(a) Natural oleoresins or vegetable extracts of heading
No.13.01;
(b) Soap or other products of heading 34.01;
(c) Gum, wood or sulphate turpentine or other products of
Chapter 38; or
(d) Perfumery, cosmetics and toilet preparations containing
alcohol or opium, Indian hemp or other narcotics and for this
purpose, these expressions have the meanings respectively
assigned to them in Section 2 of the Medicinal and Toilet
Preparations (Excise Duties) Act, 1955 (16 of 1955).
2. Heading Nos.33.03 to 33.07 apply, inter alia, to products,
whether or not mixed (other than aqueous distilltes and
aqueous solutions of essential oils), suitable for use as
15.07
1507.00
Vegetable
waxes
(other
than
triglycerides),
beeswax, other insect waxes and spermaceti,
whether or not refined or coloured; degras; residues
resulting from the treatment of fatty substances of
animal or vegetable waxes
16%
15.08

Margarine; edible mixtures or preparations of
animal or vegetables fats; animal or vegetable fats
and oils, boiled, oxidized, dehydrated, sulphurised,
blown, polymerized by heat in vacuum or in inert
gas or otherwise chemically modified; inedible
mixtures or preparations of fats and oils of this
Chapter
16%
1508.10
-Linoxyn
16%

1508.90
-Other
8%
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goods of these headings and put up in packings with labels,
literature or other indications that they are for use as
cosmetics or toilet preparations or put up in a form clearly
specialised 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.
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, 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;
brilliantines, perfumed hair oils, hair lotions, pomades and creams,
hair dyes (in whatever form), shampoos, whether or not containing
soap or organic surface active agents.
7. The expression "odoriferous substances" in heading 33.02 refers
only to the substances of heading No.33.01 to odoriferous
constituents isolated from those substances or to synthetic
aromatics.
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 POST AMENDMENT
 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) pig fat or poultry fat of heading 0209;
(b) cocoa butter, fat or oil (heading 1804);
(c) edible preparations containing by weight more than 15% of
the products of heading 0405 (generally Chapter 21);
(d) greaves (heading 2301) or residues of headings 2304 to
2306;
(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 (heading 4002).
2. Heading 1509 does not apply to oils obtained from olives by
solvent extraction (heading 1510).
3. Heading 1518 does not cover fats or oils or their fractions,
merely denatured, which are to be classified in the heading
appropriate to the corresponding undenatured fats and oils and
their fractions.
Chapter 33 Cosmetic or toilet preparations, essential oils etc.
Heading
No.
Sub-heading
No.
Description of goods
Rate of
duty
33.05
Preparations for use on the hair

3305.10
-Perfumed for use on the hair
-Other
16%
3305.91
-Hair fixer
16%

3305.99
-Other
16%
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4. Soap stocks, oil foots and dregs, stearin pitch, glycerol pitch
and wool grease residues fall in heading 1522.
5. In relation to the products of heading 1507 or 1508 or 1509 or
1510 or 1511 or 1512 or 1513 or 1514 or 1515, or 1518; subheading 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 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).
c.
Rate of
duty
16%
16%
16%
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 :

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POST AMENDMENT
 CHAPTER 33
Essential Oils and Resinoids, Perfumery, Cosmetic or
Toilet Preparations
NOTES
1. This Chapter does not cover:
a) natural oleoresins or vegetable extracts of heading 1301 or
1302;
(b) soap or other products of heading 3401;
(c) gum, wood or sulphate turpentine or other products of heading
3805; or
(d) perfumery, cosmetics and toilet preparations containing alcohol
or opium, Indian hemp or other narcotics and for this purpose,
these expressions have the meanings respectively assigned to them
in section 2 of the Medicinal and Toilet Preparations (Excise
Duties) Act, 1955 (16 of 1955).
1513 11 00 -Crude oil
kg.
8%
1513 19 00
-Other
-Palm k ernel or bab assu oil and
fractions th ereo f:
kg .
8%
1513 21
-Crude oil :

1513 21 10 -Palm kernel oil
kg.
8%
1513 21 20
-Babas su oil
kg.
8%
1513 29
-Other

1513 29 10
-Palm kernel oil and its fractions
kg.
8%
1513 29 20
-Babas su oil and its fractions edible
grade
kg .
8%
1513 29 30
-Babas su oil and its fractions, other
than edible grade
kg .
8%
1513 29 90
-Other
kg.
8%
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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, shall be construed as
'manufacture'.
Tariff Item
Description of Goods
Unit
Rate
of
duty
3305
Preparations for use on the hair

3305 10
-Shampoos :
kg.
16%
3305 10 10
- Containing spirit
kg.
16%
3305 10 90
- Other
3305 20 00
-Preparations for permanent waving
or straightening
kg.
16%
3305 30 00
-Hair lacquer
3305 90
-Other :
- Hair oil :
3305 90 11
- Perfumed
kg.
16%
8%
8%
8%
8%
8%
8%
8%
8%
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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 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 case so as to warrant classification of the product under
Chapter 33. Infact, Shri Bagaria has urged that prior to the coming into
3305 90 19
--Other
kg.
16%
3305 90 20
- Brilliantines (spirituous)
kg.
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%
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force of the Amendment Act 5 of 2005, the classification of coconut oil
was claimed and allowed under Chapter 15 Heading 1503 which dealt
with Fixed vegetable oils. It is only after the amendment that Heading
1513 was incorporated dealing specifically with coconut oil. Shri Bagaria
has also pointed out that amendment made in the year 2005 effective
from 28.02.2005 was for the sole purpose of fine tuning of the tariff with
the Harmonised System of Nomenclature (HSN). In this regard, Shri
Bagaria has drawn attention to the Statement of Objects and Reasons
of the Amendment Bill wherein it had been clearly stated that the
"Department of Revenue has developed eight digit classification
code based on Harmonised System of Nomenclature (HSN) for the
purpose of classification of excisable goods in India". Shri Bagaria
has also drawn attention of the Court to the fact that in the aforesaid
Objects and Reasons, it has been further stated that "the proposed
amendment does not make any change in the existing rates of the
central excise duties and hence the proposed changes do not involve
revenue implication".
9. Referring to the provisions of General Rules for Interpretation
and the Chapter and Section Notes relied upon by Shri Panda and drawing
the attention of the Court to the Chapter Note 3 and Explanatory Note
to Chapter Note 3 in the Harmonised System of Nomenclature (HSN),
Shri Bagaria has submitted that there is no manner of doubt that coconut
oil, regardless of the size of packings, is classifiable under Chapter 15 of
the Tariff Act and by no means, even remotely, 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 respondents-assesses, 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.145/56/95-CX 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
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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 behind the
Amendment effected in the year 2005, the efficacy of the above circular,
though issued when Chapter No.2 of Chapter 33 (already extracted)
was in force, would continue even in the post amendment era when
Chapter No.2 has now been substituted by Note 3 (Chapter 33).
11. An order dated 03.06.2009 of the Central Board of Excise
and Customs (CBEC) under Section 37B of the Central Excise Act has
been placed before us. The said order is to the effect 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.
It has been urged by Shri Bagaria that the learned Appellate Tribunal in
Rajasthan Oil Mills Vs. Commissioner of Central Excise1 had taken
the view that repacking of coconut oil from bulk containers in retail pack
of 200 ml or less would not make the item classifiable under Chapter 33.
It is submitted that the Revenue's Appeal against the aforesaid order of
the learned Tribunal i.e. Civil appeal Nos.2023-2037 of 2014 has been
dismissed by this Court by Order dated 07-12-2014 following which the
CBEC has issued another circular bearing no.1007/14/2015-CX dated
12-10-2015 withdrawing the earlier Circular dated 03-06-2009 and
directing that the issue of classification may be decided by the field
officers "taking into consideration the facts of the case read with the
judicial pronouncements".
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12. Disputes with regard to classification may arise in different
situations and circumstances. Whether a particular item/product would
fall under one or the other Chapter/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 by this Court
in Collector of Central Excise, Shillong Vs. Wood Craft Products
Ltd.2; Commissioner of Customs and Central Excise, Goa Vs. Phil
Corporation Limited3; O.K. Play (India) Ltd. Vs.