Pure Coconut Oil Packaged & Sold In Small Quantities Would Be Classifiable As ‘Edible Oil’ Under Central Excise Tariff Act: SC

The Court dismissed the Appeal filed by the Revenue, upholding that pure coconut oil sold in small quantities must be classified as ‘edible oil’ under Heading 1513 of Section III, Chapter 15, in the First Schedule of the Central Excise Tariff Act, 1985, unless its packaging meets the criteria to qualify as a cosmetic product under Heading 3305 of Section VI, Chapter 33.

The Bench of Chief Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice R. Mahadevan observed, “The argument of the Revenue that the fact that edible coconut oil marketed by the respondents could also be used as hair oil is therefore not sufficient to classify the same under Heading 3305 with nothing further.”

AOR B. Krishna Prasad represented the Appellant, while Senior Advocates Harish N. Salve, Arvind Datar and S.K. Bagaria appeared for the Respondent.

The dispute pertained to the classification of pure coconut oil sold in small pack sizes ranging from 5 ml to 2 liters. The Revenue contended that such packaging rendered the oil suitable for use as a hair oil and sought to classify it under Heading 3305 of the Central Excise Tariff, which deals with "preparations for use on the hair." The respondents argued that the oil was sold as ‘edible oil,’ qualifying it for classification under Heading 1513, applicable to "coconut oil and its fractions, whether or not refined, but not chemically modified."

The Supreme Court explained that amall-sized containers were a feature common to both ‘edible oils’ as well as ‘hair oils’. Therefore, it pointed out that there must be something more to distinguish between them for classification of such oil, be it under Chapter 15 or under Chapter 33, other than the size of the packing.

The Bench noted that the Revenue had argued that ‘Shanti Coconut Oil’ was marketed in containers depicting a popular film actress with flowing tresses and it was contended that in the light of such marketing, the oil sold was obviously meant for use as ‘hair oil’ and not as ‘edible oil’. However, the Court stated that such an advertisement was not conclusive, in itself, to classify the oil as ‘hair oil’.

“The phrase ‘suitable for such use’ under Headings 3303 to 3307 in Chapter Note 3 would have to be read in conjunction with the Explanatory Notes thereto, which categorically state that such packaging must be accompanied with labels, literature or other indications that the product is intended for use as a cosmetic or toilet preparation or it must be put in a form clearly specialized to such use - as in the case of acetone marketed in small bottles, along with an applicator brush, indicating its use as nail polish remover,” the Court explained.

Consequently, the Court held, “On the above analysis, we are of the opinion that pure coconut oil sold in small quantities as ‘edible oil’ would be classifiable under Heading 1513 in Section III-Chapter 15 of the First Schedule to the Central Excise Tariff Act, 1985, unless the packaging thereof satisfies all the requirements set out in Chapter Note 3 in Section VI-Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985, read with the General/Explanatory Notes under the corresponding Chapter Note 3 in Chapter 33 of the Harmonized System of Nomenclature, whereupon it would be classifiable as ‘hair oil’ under Heading 3305 in Section VIChapter 33 thereof.”

Accordingly, the Supreme Court dismissed the Appeal.

Cause Title: Commissioner of Central Excise, Salem v. M/s. Madhan Agro Industries (India) Private Ltd. (Neutral Citation: 2024 INSC 1002)

Appearance:

Appellant: AOR B. Krishna Prasad, Gurmeet Singh Makker and Mukesh Kumar Maroria

Respondent: Senior Advocates Harish N. Salve, Arvind Datar and S.K. Bagaria; Advocates Ankur Saigal, Mahesh Agarwal, Vipin Jain, Rishi Agrawala, Vishal Aggarwal, Sayree Basu Mallik, Abhinabh Garg, Ramnath Prabhu, Karan Verma, Aditi Jain and Rongon Choudhry; AOR E.C. Agrawala

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