Holding

Pure coconut oil sold in small retail packs as edible oil is classifiable under Heading 1513 of Chapter 15, unless the packaging expressly indicates it is a hair‑oil product, in which case it would fall under Heading 3305 of Chapter 33.

Summary

The case concerned whether pure coconut oil sold in small retail packs (5 ml‑2 L) should be classified as ‘edible oil’ under Heading 1513 of Chapter 15 or as ‘hair oil’ under Heading 3305 of Chapter 33 in the First Schedule to the Central Excise Tariff Act, 1985. The respondents marketed the oil as edible oil, while the Revenue argued that its suitability for hair‑care and the small pack size warranted classification as a cosmetic preparation. The Court examined the alignment of the First Schedule with the Harmonized System of Nomenclature (HSN) and held that, where the headings correspond, the HSN and its Explanatory Notes are binding. It further ruled that a product can be placed in the cosmetic heading only if it is specifically packaged and labelled for that use, which was not the case here. Consequently, the oil must remain classified under Heading 1513 as edible oil. The appeals filed by the Commissioner were dismissed.

Issues considered

Whether pure coconut oil packaged in small quantities should be classified as ‘edible oil’ under Heading 1513, Chapter 15, or as ‘hair oil’ under Heading 3305, Chapter 33 of the Central Excise Tariff Act, 1985.
Whether the Harmonized System of Nomenclature and its Explanatory Notes must be applied when the First Schedule aligns with the HSN.
Whether the ‘common parlance test’ is applicable in the absence of ambiguity in the tariff headings.

Legislation cited

Central Excise Act, 1944s. Section 35L(b)
Central Excise Tariff Act, 1985s. Section 5 (amendment power), s. Section III (Chapter 15), s. Section VI (Chapter 33)
Central Excise Tariff (Amendment) Act, 2004
Drugs and Cosmetics Act, 1940
Edible Oils Packaging (Regulations) Order, 1998
Food Safety and Standards Act, 2006
Standards of Weights and Measures (Packaged Commodities) Rules, 1977

Headnote

Issue for Consideration Issue arose whether pure coconut oil, packaged and sold in small quantities ranging from 5 ml to 2 litres, would be classifiable as ‘Edible oil’ under Heading 1513, titled ‘Coconut (Copra) oil, etc.’, in Section oil’ under Heading 3305, titled ‘Preparations for use on the hair’, in Section VI-Chapter 33, of the First Schedule to the Central Excise Tariff Act, 1985. Headnotes† Central Excise Tariff Act, 1985 – First Schedule, Chapter 15, Section III, Heading 1513,

Subjects

Pure coconut oilEdible oilHair oilTariff classificationCentral Excise Tariff ActHarmonized System of NomenclatureCommon parlance testPackagingExcise dutyHeading 1513Heading 3305

Judgment

[2024] 12 S.C.R. 893 : 2024 INSC 1002

Commissioner of Central Excise, Salem
v.
M/s Madhan Agro Industries (India) Private Ltd.
(Civil Appeal No. 1766 of 2009)
18 December 2024
[Sanjiv Khanna, Sanjay Kumar* and R. Mahadevan, JJ.]

Issue for Consideration
Issue arose whether pure coconut oil, packaged and sold in small
quantities ranging from 5 ml to 2 litres, would be classifiable as
‘Edible oil’ under Heading 1513, titled ‘Coconut (Copra) oil, etc.’,
in Section III-Chapter 15, or as ‘Hair oil’ under Heading 3305, titled
‘Preparations for use on the hair’, in Section VI-Chapter 33, of the
First Schedule to the Central Excise Tariff Act, 1985.

Headnotes†

Central Excise Tariff Act, 1985 – First Schedule, Chapter 15,
Section III, Heading 1513, titled ‘Coconut (Copra) oil, etc.’;
Chapter 33 Section VI Heading 3305, titled ‘Preparations for
use on the hair’ – Pure coconut oil, packaged and sold in
small quantities ranging from 5 ml to 2 litres – Classification
of, as ‘Edible oil’ under Heading 1513 or as ‘Hair oil’ under
Heading 3305:
Held: Pure coconut oil sold in small quantities as ‘edible oil’
would be classifiable under Heading 1513, unless the packaging
thereof satisfies all the requirements set out in Chapter Note 3 in
Section VI-Chapter 33 of the First Schedule 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
VI Chapter 33 thereof – Pure coconut oil is suitable for multiple
uses – Notwithstanding, when a specific heading was created in
Chapter 15, viz., Heading 1513, for ‘coconut oil’ along with other
oils, it would not stand excluded therefrom so as to be classified as
a cosmetic product under Heading 3305 in Chapter 33 in Section
VI of the First Schedule, unless all the conditions required therefor

* Author
894 [2024] 12 S.C.R.

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are satisfied – Not only must the coconut oil be suitable for use
as ‘hair oil’, but it must also be put in packaging sold in retail for
such particular use, as hair oil – Mere fact that coconut oil is also
capable of being put to use as a cosmetic or toilet preparation, by
itself, would not be sufficient to exclude such oil from the ambit of
‘coconut oil’ and subject it to classification as ‘hair oil’ as ‘coconut
oil’ is name-specific – Packaging of the coconut oil in the instant
cases clearly demonstrated that it was being sold as ‘edible oil’
and all parameters that had to be met in that regard were duly
complied with – Small-sized containers are a feature common to both
‘edible oils’ as well as ‘hair oils’ – Thus, 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 – Relevant headings in the First Schedule to the Act
of 1985 corresponding with the entries in HSN, there can be no
distinction drawn between the two and the Explanatory Notes in the
HSN would have to be given due effect while interpreting Heading
1513 in the First Schedule – Thus, the coconut oil marketed and
sold by the respondents during the relevant period must necessarily
be classified as edible oil. [Paras 40-49]
Interpretation of statutes – Taxing statutes – Principle of
interpretation – ‘Common parlance test’ :
Held: Words therein must be construed in consonance with
their commonly accepted meaning in the trade and their popular
meaning – When a word is not explicitly defined or there is
ambiguity as to its meaning, it must be interpreted for the purpose
of classification in the popular sense, which is the sense attributed
to it by those who are conversant with the subject matter that the
statute is dealing with – This principle, known as the ‘common
parlance test’, serves as good fiscal policy so as to not put people
in doubt or quandary about their tax liability – Test is an extension
of the general principle of interpretation of statutes for deciphering
the mind of the law-maker but it is subject to certain exceptions-
when there is an artificial definition or special meaning attached to
the word in the statute itself, whereby the ordinary sense approach
would not be applicable – Said test cannot be brought into play
when there is no ambiguity and there is no difference in the clear
heading in the First Schedule and the corresponding entry in the
HSN. [Paras 35, 36]
[2024] 12 S.C.R. 895

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

Central Excise Tariff Act, 1985 – Central Excise Tariffs –
Interpretation of entries – Reliance on the Harmonized System
of Nomenclature-HSN and the Explanatory Notes:
Held: Once the Headings in the First Schedule to the Act of 1985
in perfect alignment with the corresponding entries in the HSN, the
General/Explanatory Notes in the HSN would be applicable and
cannot be ignored while classifying goods as per the headings in
the First Schedule – If the headings/entries in the First Schedule
to the Act of 1985 are different from the headings/entries in the
HSN or if they are not fully aligned, reliance cannot be placed
upon the HSN for the purpose of classifying those goods under
the Act of 1985 – First Schedule to the Act of 1985 is based on the
HSN, which is an internationally standardized system developed
and maintained by the World Customs Organization for classifying
products, and unless the intention to the contrary is found within
the Act of 1985 itself, the HSN and the Explanatory Notes thereto,
being the official interpretation of the Harmonized System at the
international level, would be of binding guidance in understanding
and giving effect to the headings in the First Schedule – It is only
when a different intention is explicitly indicated in the Act of 1985
itself that the HSN would cease to be of guidance – Legislative
intention to depart from the HSN must be clear and unambiguous.
[Paras 16, 17, 34]

Case Law Cited
Commissioner of Customs and Central Excise, Amritsar (Punjab) v.
D.L. Steels etc. [2022] 17 SCR 151 : 2022 SCC OnLine SC 863;
Collector of Central Excise, Shillong v. Wood Craft Products Ltd.
(1995) 3 SCC 454; O.K. Play (India) Ltd. v. Commissioner of
Central Excise, Delhi-III, Gurgaon [2005] 1 SCR 1086 : (2005) 2
SCC 460; Camlin Ltd. v. Commissioner of Central Excise, Mumbai
[2008] 12 SCR 1223 : (2008) 9 SCC 82; B.P.L. Pharmaceuticals
Ltd. v. Collector of Central Excise, Vadodara [1995] 3 SCR 1235 :
(1995) Supp. 3 SCC 1; Commissioner of Central Excise, New
Delhi v. Connaught Plaza Restaurant Pvt. Ltd., New Delhi [2012]
11 SCR 365 : (2012) 13 SCC 639; Alpine Industries v. Collector
of Central Excise, New Delhi [2003] 1 SCR 313 : (2003) 3 SCC
111; Indo International Industries v. Commissioner of Sales Tax,
Uttar Pradesh [1981] 3 SCR 294 : (1981) 2 SCC 528; Meghdoot
896 [2024] 12 S.C.R.

Supreme Court Reports

Gramodyog Sewa Sansthan, U.P. v. Commissioner of Central
Excise, Lucknow (2005) 4 SCC 15; Dunlop India Ltd. v. Union
of India and others [1976] 2 SCR 98 : (1976) 2 SCC 241; State
of Haryana v. Dalmia Dadri Cement Ltd. [1988] 2 SCR 1 : AIR
1988 SC 342; HPL Chemicals Ltd. v. Commissioner of Central
Excise, Chandigarh [2006] Supp. 1 SCR 125 : (2006) 5 SCC
208 – referred to.

List of Acts
Central Excise Tariff Act, 1985; Central Excise Tariff (Amendment)
Act, 2004; Central Excise Act, 1944; Food Safety and Standards
Act, 2006; Drugs and Cosmetics Act, 1940; Edible Oils Packaging
(Regulations) Order, 1998; Standards of Weights and Measures
(Packaged Commodities) Rules, 1977.

List of Keywords
Pure coconut oil; ‘Edible oil’; ‘Hair oil’; Heading 1513, titled ‘Coconut
(Copra) oil, etc.’; ‘Hair oil’; Heading 3305, ‘Preparations for use
on the hair’; General/Explanatory Notes; Harmonized System of
Nomenclature; Multiple uses; Cosmetic product; Suitable for such
use; Packaging of the coconut oil; Edible grade plastic; Burden of
proof; Taxing statutes; Principle of interpretation; ‘Common parlance
test’; Central Excise Tariffs.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1766 of 2009
From the Judgment and Order 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

Appearances for Parties
N. Venkataraman, A.S.G., A.K. Panda, Sr. Adv., Gurmeet Singh
Makker, H.R. Rao, Adit Khorana, Ms. Bani Dikshit, Sanjay Kumar
Visen, Anirudh Bhat, B. Krishna Prasad, Mukesh Kumar Maroria,
Advs. for the Appellant.
[2024] 12 S.C.R. 897

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

S.K. Bagadia, Arvind Datar, Harish N. Salve, Sr. Advs., Mahesh
Agarwal, Rishi Agrawala, Ankur Saigal, Vipin Jain, Ms. Sayree Basu
Mallik, Abhinabh Garg, Ramnath Prabhu, Karan Verma, Ms. Aditi
Jain, E.C. Agrawala, Vishal Agarwal, Advs. for the Respondent.

Judgment / Order of the Supreme Court

Judgment
Sanjay Kumar, J.
1. The issue for consideration in these appeals filed by the Revenue
is whether pure coconut oil, packaged and sold in small quantities
ranging from 5 ml to 2 litres, would be classifiable as ‘Edible oil’
under Heading 1513, titled ‘Coconut (Copra) oil, etc.’, in Section III-
Chapter 15, or as ‘Hair oil’ under Heading 3305, titled ‘Preparations
for use on the hair’, in Section VI-Chapter 33, of the First Schedule
to the Central Excise Tariff Act, 1985.
2. The Bench which heard these appeals earlier was divided in its
opinion on the issue. Justice Ranjan Gogoi, as the learned Judge
then was, was of the view that such coconut oil in small packings
was more appropriately classifiable as edible oil under Heading 1513.
Justice R. Banumathi, on the other hand, concluded that coconut oil,
packed in small sachets/containers suitable for being used as hair
oil, was classifiable as such under Heading 3305. In view of their
difference in opinion, these appeals have been placed before us.
3. Insofar as Civil Appeal No. 1766 of 2009 is concerned, this issue
is raised in relation to the duty payable for the period 01.04.2005
to 31.08.2007. As regards Civil Appeal Nos. 6703-6710 of 2009, it
is contextual to the period 28.02.2005 to 28.02.2007. Taking note
of this aspect and in view of the statement of the learned counsel
for the respondents that the total revenue involved in these cases,
excluding interest and penalties, would be about ₹40 crore, this Court
requested the learned Additional Solicitor General, on 18.01.2023, to
obtain instructions whether the issue would survive for consideration
and whether the Revenue still wanted to press these appeals. On
25.01.2023, the learned Additional Solicitor General averred that
the matters required to be resolved on merits. He produced letter
dated 24.01.2023 addressed by the Additional Commissioner,
Directorate of Legal Affairs, Central Board of Indirect Taxes and
898 [2024] 12 S.C.R.

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Customs, Government of India, stating that the amount involved in
these appeals, viz., the excise duty, penalties, redemption fine and
interest, would aggregate to over ₹159 crores. According to him, the
issue remained relevant due to pendency of similar cases at various
levels.In its written submissions also, the Revenue asserted that
the issue is not rendered academic as on date as matters relating
to this issue were still pending and show-cause notices had also
been issued in this regard under the GST regime, which presently
holds the field.
4. Before we proceed to consider the issue on the facts obtaining and
on merits, it would be apposite to take note of the statutory milieu
germane thereto, both past and present.
Prior to 28.02.2005, i.e., before amendment of the First Schedule
to the Central Excise Tariff Act, 1985 (hereinafter, ‘the Act of
1985’), vide the Central Excise Tariff (Amendment) Act, 2004
[Act 5 of 2005], irrespective of the size of its packaging, coconut
oil was treated as a ‘vegetable oil’ exigible to excise duty under
Heading 15.03 in Chapter 15 in Section III of the First Schedule to
the Act of 1985. Section III, Chapter 15 and the relevant Chapter
Notes therein along with Heading 15.03, as they then stood, are
extracted hereunder:
SECTION III
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; ANIMAL
OR VEGETABLE WAXES
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) to (d) ……;
(e) Fatty acids, prepared waxes, medicaments, paints, varnishes,
soap, perfumery, cosmetic or toilet preparations, sulphonated
oils or other goods of Section VI; or
[2024] 12 S.C.R. 899

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

(f) …..
……
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).
Heading 15.03 read thus: -

Sub-
Heading Rate of
heading Description of goods
No. duty
No.
Fixed vegetable oils, other
15.03 1503.00 than those of Heading No. 8%
15.02

Coconut oil, a vegetable oil, did not find mention in the oils named in
Heading 15.02 and was, accordingly, classified under Heading 15.03.
5. In terms of this classification, the Central Board of Excise and
Customs, Ministry of Finance (Department of Revenue), Government
of India, issued Circular No. 145/56/95-CX dated 31.08.1995, due to
doubts being expressed about coconut oil packed in small containers
and as to whether it would be classifiable as a fixed vegetable oil or
as a cosmetic preparation under the Act of 1985. The Board clarified
that coconut oil, whether pure or refined and whether packed in small
or large containers, merited classification under Heading 15.03 if it
satisfied the criteria of ‘fixed vegetable oil’ in Chapter Note 3 of Chapter
15. It was further clarified that if the containers bore labels/literature
indicating that it was meant for application on hair, as specified under
Note 2 of Chapter 33 and/or if the oil had additives (other than BHA)
or had undergone processes which made it a preparation for use
on hair, as mentioned in Chapter Note 6 of Chapter 33, then the
coconut oil merited classification under Chapter 33.
6. Section VI in the First Schedule to the Act of 1985 deals with “Products
of the Chemical or Allied Industries” and Chapter 33 therein, referred
to in the above Circular, is titled “Essential Oils and Resinoids;
Perfumery, Cosmetic or Toilet Preparations”. Relevant particulars
in this Section, Chapter and heading, as they then stood, i.e., prior
to the amendment in 2005, read as under:
900 [2024] 12 S.C.R.

Supreme Court Reports

SECTION VI
PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES
CHAPTER 33
ESSENTIAL OILS AND RESINOIDS; PERFUMERY, COSMETIC
OR TOILET PREPARATIONS
Notes:
1. ……
2. Heading Nos. 33.03 to 33.07 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 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 – 5. ……
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.
Heading 33.05 in Chapter 33 read as under:

Sub-
Heading Rate of
heading Description of goods
No. duty
No.
Preparations for use on
33.05 the hair
- Perfumed hair oils
3305.10 16%
- Other
3305.91 – Hair fixer 16%
3305.99 – Other 16%
[2024] 12 S.C.R. 901

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

7. While so, the Central Excise Tariff (Amendment) Act, 2004 [Act 5 of
2005] was promulgated by the Parliament and came into effect on
28.02.2005. Thereby, in exercise of power under Section 5 of the
Act of 1985, the Central Government amended the First Schedule to
the Act of 1985. Thereafter, the amended Chapter Notes in Chapter
15 in Section III, to the extent relevant, read as under:

SECTION III
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS;
ANIMAL OR VEGETABLE WAXES
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) to (d). ……;
(e) fatty acids, prepared waxes, medicaments, paints,
varnishes, soap, perfumery, cosmetic or toilet preparations,
sulphonated oils or other goods of Section VI; or
(f) …....
SupplementaryNotes:
1. ……
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).
8. Headings in Chapter 15 also underwent a major change.
Earlier, there were only 8 headings, i.e., Heading 15.01 to Heading
15.08, but after the amendment, the headings range from 1501 to
1522. Heading 1513 is relevant for our purposes and it reads as
under:
902 [2024] 12 S.C.R.

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Tariff Item Description of goods Unit Rate of
duty
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 kg. 8%
1513 19 00 -- Other kg. 8%
- Palm kernel or babassu oil
and fractions thereof:
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 kg. 8%
fractions
1513 29 20 --- Babassu oil and its fractions kg. 8%
edible grade
1513 29 30 --- Babassu oil and its fractions, kg. 8%
other than edible grade
1513 29 90 --- Other kg. 8%

9. Section VI, pertaining to ‘Products of the Chemical or Allied Industries’,
also underwent a change. Section Note 2 therein now read thus:
SECTION VI
PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES
Notes:
1. …..
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.
[2024] 12 S.C.R. 903

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

10. Chapter 33 in Section VI was also amended. Chapter Note 3,
pertaining to Headings 3303 to 3307, now reads as follows:
Chapter 33
ESSENTIAL OILS AND RESINOIDS, PERFUMERY,
COSMETIC OR TOILET PREPARATIONS
Notes:
1 – 2. ….
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.
11. Post the amendment, Heading 3305 reads as under:

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 kg. 16%
3305 20 00 - Preparations for permanent
kg. 16%
waving or straightening
3305 30 00 -- Hair lacquers kg. 16%
3305 - Other :
--- Hair Oil:
3305 90 11 ---- Perfumed kg. 16%
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
kg. 16%
or synthetic)
3305 90 50 --- Hair fixers kg. 16%
3305 90 90 --- Other kg. 16%
904 [2024] 12 S.C.R.

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12. The Act of 1985 also provides rules for interpretation of the First
Schedule thereto. Rule 1 therein provides that classification of
goods shall be determined according to the terms of the headings
and any relative Section or Chapter Notes. However, the admitted
position is that the Harmonized Commodity Description and Coding
System [Harmonized System of Nomenclature (HSN)], brought out
by the World Customs Organization, reflects internationally accepted
norms and is extensively used the world over for resolving disputes
relating to tariff classification. It was adopted in 1983 and enforced
in January, 1988. In Commissioner of Customs and Central
Excise, Amritsar (Punjab) vs. D.L. Steels etc.,1 this Court noted
that this multipurpose international product nomenclature harmonizes
description, classification and coding of goods and, while the primary
objective of the HSN is to facilitate and aid trade, it is also for other
diverse purposes like internal taxes, monitoring import tariffs, quota
controls, rules of origin, transport statistics, freight tariffs, compilation
of national accounts and economic research and analysis. It was
further noted that, in the present times, given the widespread adoption
of the HSN by over 200 countries, it would be very difficult to deal
with an international trade issue involving commodities, without
adverting to the HSN.
13. As a matter of fact, the Statement of Objects and Reasons of the
Central Excise Tariff Bill, 1985, the precursor to the Act of 1985,
recorded that a technical study group was set up to conduct a
comprehensive inquiry into the structure of Central Excise Tariffs
and the tariffs that were suggested by this group for 137 items were
based on the internationally accepted nomenclatures in the HSN.
Significantly, the Central Excise Tariff (Amendment) Act, 2004 (Act
5 of 2005), effected amendments in the First Schedule to the Act
of 1985 with the sole intention of fine-tuning the tariff descriptions
therein with the HSN. The Statement of Objects and Reasons dated
13.07.2004 therein noted that the First Schedule to the Act of 1985
was based on a six-digit classification code while the Department
of Revenue had developed an eight-digit classification code based
on the HSN for the purposes of classification of excisable goods
in India. It was also noted that the Directorate General of Foreign

1 [2022] 17 SCR 151 : 2022 SCC OnLine SC 863
[2024] 12 S.C.R. 905

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

Trade and the Directorate General of Commercial Intelligence of
Statistics had already adopted the eight-digit classification code
for the purpose of import trade control policy and for collection
of statistics respectively. Reference was made to demands from
several quarters to adopt the eight-digit classification code for Central
Excise also in order to accommodate the demand from the trade
and industry for adoption of a common commodity classification
based on the internationally adopted HSN to be used for all trade-
related transactions to facilitate international and domestic trade.
The amendment Bill, therefore, proposed to expand the six-digit
classification in the First Schedule into an eight-digit classification,
so as to remove difficulties arising from divergence in classification
by different departments and would also facilitate international trade.
It was clarified that the proposed amendments did not make any
change in the existing rates of Central Excise duties and, hence,
they did not involve revenue implication.
14. Notably, in Collector of Central Excise, Shillong vs. Wood Craft
Products Ltd.,2 a 3-Judge Bench of this Court held as under:
‘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 relating to tariff classification, a safe guide 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

2 (1995) 3 SCC 454
906 [2024] 12 S.C.R.

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given in the HSN and the meaning of that term given in
the Glossary of Terms of the ISI.
---------
18. We are of the view that the Tribunal as well as the
High Court fell into the error of overlooking the fact that
the structure of the Central excise tariff is based on the
internationally accepted nomenclature found in the HSN
and, therefore, any dispute relating to tariff classification
must, as far as possible, be resolved with reference to the
nomenclature indicated by the HSN unless there be an
express different intention indicated by the Central Excise
Tariff Act, 1985 itself. The definition of a term in the ISI
Glossary, which has a different purpose, cannot, in case
of a conflict, override the clear indication of the meaning
of an identical expression in the same context in the HSN.
In the HSN, block board is included within the meaning
of the expression “similar laminated wood” in the same
context of classification of block board. Since the Central
Excise Tariff Act, 1985 is enacted on the basis and pattern
of the HSN, the same expression used in the Act must,
as far as practicable, be construed to have the meaning
which is expressly given to it in the HSN when there is
no indication in the Indian tariff of a different intention.’
15. Again, in O.K. Play (India) Ltd. vs. Commissioner of Central
Excise, Delhi-III, Gurgaon,3 another 3-Judge Bench of this Court
affirmed that the scheme of Central Excise Tariffs is based on the
HSN and the Explanatory Notes appended thereto and, therefore,
the HSN along with its Explanatory Notes provide a safe guide for
interpretation of entries.
16. Ergo, in resolving disputes relating to tariff description and
classification, a ready reckoner is the internationally accepted
nomenclature in the HSN. That being said, we must hasten to
reiterate what was pointed out in Wood Craft Products Ltd. (supra).
If the headings/entries in the First Schedule to the Act of 1985 are
different from the headings/entries in the HSN or if they are not fully

3 [2005] 1 SCR 1086 : (2005) 2 SCC 460
[2024] 12 S.C.R. 907

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

aligned, reliance cannot be placed upon the HSN for the purpose of
classifying those goods under the Act of 1985.
17. To sum up, the First Schedule to the Act of 1985 is based on the
HSN, which is an internationally standardized system developed
and maintained by the World Customs Organization for classifying
products, and unless the intention to the contrary is found within the
Act of 1985 itself, the HSN and the Explanatory Notes thereto, being
the official interpretation of the Harmonized System at the international
level, would be of binding guidance in understanding and giving effect
to the headings in the First Schedule. It is only when a different
intention is explicitly indicated in the Act of 1985 itself that the HSN
would cease to be of guidance. In effect, the legislative intention to
depart from the HSN must be clear and unambiguous. For instance,
in Camlin Ltd. v. Commissioner of Central Excise, Mumbai4, this
Court found that there was an inconsistency between the Central
Excise tariff description and the entry in the HSN and, therefore,
reliance upon the HSN entry was held to be invalid. It was affirmed
that it is only when the entry in the HSN and the tariff description
in the First Schedule to the Act of 1985 are aligned that reliance
would be placed upon the HSN for the purpose of classification of
such goods under the correct tariff description.
18. It would, therefore, be relevant to examine the HSN in the context of
the changes made in the First Schedule to the Act of 1985 in 2005
apropos ‘coconut oil’. Section III and Chapter 15 in the HSN are
titled the same as Section III and Chapter 15 in the First Schedule
and read thus:
SECTION III
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS;
ANIMAL OR VEGETABLE WAXES
CHAPTER 15
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS;
ANIMAL OR VEGETABLE WAXES

4 [2008] 12 SCR 1223 : (2008) 9 SCC 82
908 [2024] 12 S.C.R.

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Chapter Notes.
1. - This Chapter does not cover:
(a) to (d) …
(e) Fatty acids, prepared waxes, medicaments, paints,
varnishes, soap, perfumery, cosmetic or toilet preparations,
sulphonated oils or other goods of Section VI; or
(f) …
19. Heading 15.13 in the HSN is identical to Heading 1513 in Chapter
15 in Section III of the First Schedule, after its amendment, and
reads thus:
15.13 – 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 - - Crude oil
1513.19 - - Other
- Palm kernel or babassu oil and fractions
thereof:
1513.21 - - Crude oil
1513.29 - - Other

(A) COCONUT (COPRA) OIL
This oil is obtained from the dried flesh or copra (as it is called)
of the coconut (Cocos nucifera). Fresh coconut flesh can also
be used. This non-drying oil is pale yellow or colourless and
is solid below 250C. Coconut oil is used in soaps, in cosmetic
or toilet preparations, for making lubricating greases, synthetic
detergents, laundering or cleaning preparations and as a source
of fatty acids, fatty alcohols and methyl esters.
Refined coconut oil is edible and is used for food products such
as margarine, dietary supplements.
20. Section VI of the HSN is titled ‘Products of the Chemical or Allied
Industries’ as is Section VI in the First Schedule to the Act of 1985.
Section Note 2 therein reads as follows:
[2024] 12 S.C.R. 909

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

SECTION VI
PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES
Section Notes.
1. …
2. - Subject to Note 1 above, goods classifiable in heading
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.
It is, therefore, identical to the amended Section Note 2 in Section
VI in the First Schedule to the Act of 1985. The General Note under
Section Note 2 in the HSN is of relevance and reads as follows:
Section Note 2 provides that goods (other than those
described in headings 28.43 to 28.46) which are covered
by heading 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 notwithstanding that they could also fall
in some other heading of the Nomenclature. For example,
sulphur put up for retail sale for therapeutic purposes is
classified in heading 30.04 and not in heading 25.03 or 28.02,
and dextrin put up for retail sale as a glue is classified in
heading 35.06 and not in heading 35.05.
21. Chapter Note No. 3 in Chapter 33 of the HSN, titled Essential Oils and
Resinoids; Perfumery, Cosmetics or Toilet Preparations’ is identical
to the amended Chapter Note 3 in Chapter 33 in Section VI of the
First Schedule, and it reads as follows:
CHAPTER 33
ESSENTIAL OILS AND RESINOIDS; PERFUMERY,
COSMETIC OR TOILET PREPARATIONS
Chapter Notes.
1. …
2. …
3. Headings 33.03 to 33.07 apply, inter alia, to products,
whether or not mixed (other than aqueous distillates and
910 [2024] 12 S.C.R.

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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.
22. The General Notes thereunder, to the extent relevant, read thus:
GENERAL
……….
Headings 33.03 to 33.07 include 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 (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
deodorisers remain classified in heading 33.07 even if they
have disinfectant properties of more than a subsidiary
nature.
Preparations (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:
(a) 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 deodorisers; or
(b) Put up in a form clearly specialised to such use (e.g.,
nail varnish put up in small bottled furnished with the brush
required for applying the varnish).
23. Heading 33.05 in the HSN reads as follows:
33.05 – PREPARATIONS FOR USE ON THE HAIR.
3305.10 - Shampoos
[2024] 12 S.C.R. 911

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

3305.20 - Preparations for permanent waving or
straightening
3305.30 - Hair lacquers
3305.90 - Other
This heading covers:
(1) to (3) ---
(4) Other hair preparations, such as brilliantines; hair oils,
creams (“pomades”) and dressings; hair dyes and bleaches
used on the hair; cream-rinses.
24. Comparison of the relevant headings in the First Schedule to the
Act of 1985, both pre-2005 amendment and post-2005 amendment,
with the corresponding headings in the HSN reveals that Chapter
Note 1(e) in Chapter 15 in Section III of the First Schedule remained
the same even after the 2005 amendment and was identical to
Chapter Note 1(e) in Chapter 15 of Section III of the HSN. This Note
clarified that Chapter 15 would not be applicable to fatty acids, etc.,
including cosmetic or toilet preparations, which would fall in Section
VI. However, the headings in Chapter 15 in Section III of the First
Schedule increased to twenty-two after the amendment, with effect
from 28.02.2005. Heading 15.03 in the pre-amended Chapter 15 dealt
with fixed vegetable oils, excluding those named in Heading 15.02.
Coconut oil, not being one of them, was classifiable under Heading
15.03 and there was no issue about it, as was clarified vide Circular
dated 31.08.1995. However, post the 2005 amendment, Heading 1513
was created specifically for coconut oil and the other named oils.
This heading dealt with crude coconut oil and other forms of coconut
oil and its fractions. All that was required thereunder was that the
coconut oil should not have been chemically modified. Significantly,
the post-2005 amendment description of coconut oil in Heading 1513
was a replication of its description in Heading 15.13 in the HSN.
25. When it comes to Section VI of the First Schedule, pertaining to
‘Products of the Chemical or Allied Industries’, the post-2005 amended
Section Note 2 was more or less identical to Section Note 2 in Section
VI of the HSN. However, Chapter Note 2 of Chapter 33 in Section
VI of the First Schedule, prior to the 2005 amendment, was more
detailed than the corresponding Chapter Note 3 in Chapter 33 in
912 [2024] 12 S.C.R.

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Section VI of the HSN. In the HSN, this Chapter Note stated that
Headings 33.03 to 33.07 would apply to products suitable for use as
goods of these headings and put up in packings of a kind sold by retail
for such use. However, the unamended Chapter Note 2 in Chapter
33 of the First Schedule to the Act of 1985 went further by stating
that Headings 33.03 to 33.07 would apply to products suitable for
use as 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 specialized 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. There was thus a difference
in the Chapter Note in the First Schedule and the corresponding
Chapter Note in the HSN.
26. Interestingly, the expanded Chapter Note in the First Schedule was
a reflection of what was stated in the General Notes in Chapter
33 of the HSN. Whatever was stated in the expanded Note with
regard to the products being ‘put up in packings with labels,
literature or other indications that they were for use as cosmetic
or toilet preparations or put up in a form clearly specialized to
such use and that products, whether or not they contain subsidiary
pharmaceutical or antiseptic constituents or are held out as having
subsidiary, curative or prophylactic value, would also be included
under the headings in question’, is set out in the very same words
in the General Notes in Chapter 33 of the HSN. At that time, full
conformity was not there between the First Schedule and the HSN
and that was, perhaps, the reason why what was clarified in the
General Notes in Chapter 33 of the HSN was directly incorporated in
Chapter Note 2 in Chapter 33. Notably, in B.P.L. Pharmaceuticals
Ltd. vs. Collector of Central Excise, Vadodara,5 this Court held
that for a product to be classified as a cosmetic under Chapter 33
in Section VI of the First Schedule, it must first be a cosmetic, i.e.,
it should be suitable for use as ‘goods falling under Headings 3303
to 3308’ and it must be put in packing with a label or literature or
other indication, showing that it is intended for use as a cosmetic
preparation. This decision was rendered in the year 1995 and was

5 [1995] 3 SCR 1235 : (1995) Supp. 3 SCC 1
[2024] 12 S.C.R. 913

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

in keeping with the then Chapter Note 2 in Chapter 33 of the First
Schedule.
27. As already noted hereinbefore, Act 5 of 2005 was aimed at bringing
about full conformity between the First Schedule to the Act of 1985
and the HSN and amendments were made accordingly in the First
Schedule. Post the 2005 amendment, Chapter Note 3 in Chapter 33
in Section VI of the First Schedule was made a verbatim reproduction
of the corresponding Chapter Note 3 in Chapter 33 in the HSN.
However, as it is an admitted position that the Explanatory Notes in
the HSN would also be binding once the entry in the HSN corresponds
with the description of the goods in the First Schedule to the Act of
1985, the General Notes in Chapter 33 in the HSN would apply. In
consequence, what was set out earlier in Chapter Note 2 in Chapter
33 of the First Schedule is now brought in by way of the General
Notes in Chapter 33 of the HSN and the removal thereof from the
Chapter Note in Chapter 33 of the First Schedule has no significance,
except for the fact that it brought about complete parity between the
First Schedule to the Act of 1985 and the HSN.
28. Therefore, it would not be sufficient to merely show that the products
in question are suitable for use as goods falling under Headings
3303 to 3307 in Chapter 33 of the First Schedule and were put up
in packings of a kind sold by retail for such use, but it must also be
demonstrated that such products, which are suitable for other uses
in addition to those described and classified in Headings 3303 to
3307, are in packings of a kind sold to consumers and are put up
with labels, literature or other indications that they are for use as
perfumery, cosmetic or toilet preparations or they are put up in a form
clearly specialized to such use, for example - acetone put up in small
bottles along with a brush for applying it, thereby indicating its use as
nail polish remover. In consequence, all the conditions prescribed, as
above, have to be satisfied before products suitable for multiple uses
can be treated as goods classifiable under Headings 3303 to 3307.
29. The Central Government was also conscious of the effects of the
amendments made by the Act of 2005. Circular No. 890/10/2009-
CX dated 03.06.2009 was issued by the Central Board of Excise
and Customs, Ministry of Finance, Government of India, in relation
to classification of coconut oil packed in small containers. Thereby,
the Board clarified that when ‘hair oil’ is printed on the container/
914 [2024] 12 S.C.R.

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label, there can be no dispute that it is classifiable as hair oil under
Chapter 33 and not as edible oil under Chapter 15. The Board
noted that Chapter Note 2 in Chapter 33 was modified with effect
from 28.02.2005 and the amendment was carried out to align the
Central Excise Tariff with the internationally accepted HSN. The
Board further noted that in view of the amendment, the clarification
issued, vide Circular dated 31.08.1995, required modification. Having
said so, the Board strangely concluded that coconut oil packed in
containers of up to 200 ml may be considered as generally used as
hair oil and that this would bring uniformity in assessment of such
oil sold in small containers, irrespective of whether its use as hair
oil was indicated on the containers. The Circular dated 31.08.1995
was withdrawn and coconut oil in small quantities, up to 200 ml, was
directed to be classified under Heading 3305.
30. However, this understanding of the Board was clearly not in keeping
with the General Notes in Chapter 33 of the HSN. Perhaps realizing
the same, the Board then issued Circular No. 1007/14/2015-CX
dated 12.10.2015. Therein, it was noted that decisions had been
rendered on the issue by Tribunals/Courts holding that, just because
the retail packs of coconut oil were in sizes of 200 ml or less, the
same could not be presumed to be meant for use as hair oil and
the same would not be classifiable under Heading 3305. The Board,
accordingly, withdrew the Circular dated 03.06.2009 and left the issue
of classification of coconut oil packed in small containers of up to
200 ml to be decided in the field, taking into consideration judicial
pronouncements and the facts of individual cases.
31. It is also relevant to note that in Heading 1513 in Chapter 15 in Section
III of the First Schedule, there is no mention of the size, volume or
weight of the packaging and coconut oil, whether or not refined, is
classifiable under this heading as long as it is not chemically modified.
On the other hand, whenever and wherever it was intended that the
weight of the product was a factor to be considered for classification,
the headings provided for the same. For instance, Heading 0902 in
Chapter IX, titled ‘Coffee, Tea, Mate and Spices’, in Section II of the
First Schedule deals with Tea, whether or not flavoured, and the sub-
headings thereunder specifically detail the weight of the packaging
for the purpose of classification. Similarly, Heading 1806, pertaining
to ‘Chocolate and other food preparations containing cocoa’, in
Chapter 18, titled ‘Cocoa and cocoa preparations’, in Section IV of
[2024] 12 S.C.R. 915

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

the First Schedule indicates that as per the weight of the preparation,
the classification under Sub-Heading 1806 20 00 would apply. The
absence of weight or volume specifications in relation to ‘coconut
oil’ in Heading 1513 is, therefore, of significance.
32. Coming to the facts in the appeals on hand, Civil Appeal No. 1766 of
2009 pertains to Madhan Agro Industries (India) Pvt. Ltd., Kangeyam,
Tamil Nadu, which manufactures and markets coconut oil in packages
ranging from 5 ml to 2 litres, under the name and style of ‘Shanti
Coconut Oil’. This oil was sold as ‘edible oil’ during the relevant period,
i.e., 01.04.2005 to 31.08.2007. Show-cause notices dated 16.02.2007,
05.09.2007, 06.09.2007, 19.09.2007 and 28.11.2007 were issued
to the company by the Central Excise authorities proposing to levy
duty treating the coconut oil sold during that period as ‘hair oil’,
classifiable under Heading 3305 in Chapter 33 in Section VI of the
First Schedule, and not under Heading 1513 in Chapter 15 in Section
III of the First Schedule. Interest and penalties were also proposed
to be levied. Order-in-original dated 12.12.2007 was passed by the
Commissioner of Customs and Central Excise, Salem, holding to
that effect and confirming the demand for excise duty treating the
coconut oil sold as ‘hair oil’ and also levying interest thereon along
with redemption fine and penalties. Aggrieved thereby, Madhan Agro
Industries (India) Pvt. Ltd. filed Appeal No. E/111/08/MAS before the
Customs Excise and Service Tax Appellate Tribunal, South Zonal
Bench, Chennai. By Final Order No. 638/08 dated 25.06.2008, the
Tribunal allowed the appeal in the light of the amendments brought
about in the year 2005 and the Explanatory Notes in the HSN. The
Tribunal held that the coconut oil sold during the relevant period
was classifiable as ‘edible oil’ under Heading 1513 in Chapter 15 of
Section III of the First Schedule to the Act of 1985.
33. Civil Appeal Nos. 6703 to 6710 of 2009, eight appeals in all, pertain
to the period 28.02.2005 to 28.02.2007. Four of these appeals relate
to M/s. Marico Ltd., Mumbai, which manufactures and markets pure
coconut oil as ‘edible oil’ under the name ‘Parachute’. The remaining
four appeals relate to job-workers of M/s. Marico Ltd., who receive
its coconut oil in bulk and market the same after packing it in small
containers, ranging from 50 ml to 2 litres. The four job-workers
are M/s. Aishwarya Industries, M/s. Moreshwar Industries, M/s.
Shivam Enterprises and M/s. Sowparnika Enterprises, all situated at
Pondicherry (now, Puducherry). Show-cause notices were issued in
916 [2024] 12 S.C.R.

Supreme Court Reports

July, 2007, by the Central Excise authorities proposing to treat the
coconut oil so sold by them as ‘hair oil’, classifiable under Heading
3305, which led to Orders-in-original being passed on 27th and 28th
of February, 2008, confirming the demand of excise duty against
the four job-workers and M/s. Marico Ltd., treating the coconut oil
as ‘hair oil’ and also levying penalty and interest. However, the
appeals filed by M/s. Marico Ltd. and its four job-workers before the
Customs Excise and Service Tax Appellate Tribunal, South Zonal
Bench, Chennai, were allowed, vide Final Orders No. 1068 to 1075
of 2008 dated 30.07.2008. It is against these orders passed by the
Tribunal that the Revenue is before us by way of these appeals filed
under Section 35L(b) of the Central Excise Act, 1944.
34. Though much stress has been laid by the Revenue upon the fact
that pure coconut oil is suitable for use as ‘hair oil’ and is, in fact,
used as such by many people, this contention does not further the
case of the Revenue, given the clarity of the headings in the First
Schedule to the Act of 1985 which are in perfect alignment with
the corresponding entries in the HSN. Once the entries are aligned
and reflect the same position, the General/Explanatory Notes in the
HSN would be applicable and cannot be ignored while classifying
goods as per the headings in the First Schedule. This position is
well settled, as pointed out by this Court in Wood Craft Products
Limited (supra).
35. We may now deal with the next point – the ‘common parlance
test’. A well settled principle of interpretation of taxing statutes is
that words therein must be construed in consonance with their
commonly accepted meaning in the trade and their popular meaning.
When a word is not explicitly defined or there is ambiguity as to its
meaning, it must be interpreted for the purpose of classification in
the popular sense, which is the sense attributed to it by those who
are conversant with the subject matter that the statute is dealing
with. This principle, known as the ‘common parlance test’, serves as
good fiscal policy so as to not put people in doubt or quandary about
their tax liability. The test is an extension of the general principle of
interpretation of statutes for deciphering the mind of the law-maker
but it is subject to certain exceptions - for example, when there is
an artificial definition or special meaning attached to the word in the
statute itself, whereby the ordinary sense approach would not be
applicable [See D.L. Steels (supra)].
[2024] 12 S.C.R. 917

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

36. However, we find that the reliance presently placed by the Revenue
upon the ‘common parlance test’ is utterly misplaced. The said
test would have to be understood in the proper perspective and
cannot be brought into play when there is no ambiguity and there
is no difference in the clear heading in the First Schedule and the
corresponding entry in the HSN. In Commissioner of Central Excise,
New Delhi vs. Connaught Plaza Restaurant Pvt. Ltd., New Delhi,6
this Court observed that classification of excisable goods shall be
determined according to the headings and corresponding Chapter
or Section Notes but where these are not clearly determinative of
the proper classification, the same shall be effected according to the
general rules of interpretation and according to the common parlance
understanding of such goods. It was pointed out that fiscal statutes
are framed at a point of time but are meant to apply for significant
periods of time thereafter and they cannot, therefore, be expected
to keep up with nuances and niceties. It was held that the terms
of the statutes must be adapted to developments of contemporary
times rather than being held entirely inapplicable and it is for this
precise reason that Courts apply the ‘common parlance test’ every
time parties attempt to differentiate their products on the basis of
subtle and finer characteristics.
37. Earlier, in Alpine Industries vs. Collector of Central Excise,
New Delhi,7 this Court observed that, in interpreting tariff entries in
taxation statues like the Excise Act, where the primary object is to
raise revenue and, for that purpose, various products are differently
classified, the entries must not be understood in their scientific/
technical sense and must be construed as per their popular meaning,
i.e., the meaning that would be attached to them by those using
the product. However, as already noted above, this exercise would
be undertaken when a product is not clearly defined or specifically
dealt with in the headings in the First Schedule to the Act of 1985
and the corresponding HSN entries.
38. Long prior thereto, in Indo International Industries vs. Commissioner
of Sales Tax, Uttar Pradesh,8 this Court held that any term or

6 [2012] 11 SCR 365 : (2012) 13 SCC 639
7 [2003] 1 SCR 313 : (2003) 3 SCC 111
8 [1981] 3 SCR 294 : (1981) 2 SCC 528
918 [2024] 12 S.C.R.

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expression defined in a taxing statute must be understood in the
light of the definitions given in the Act, in the absence of which the
meaning of the term as understood in common parlance or commercial
parlance must be adopted.
39. It is also to be noted that Rule 1 of the General Rules of Interpretation
in the First Schedule to the Act of 1985 must be applied in the first
instance and only if classification cannot be determined thereunder,
recourse would have to be taken to the other Rules specified in the
General Rules. Once the determination can be made under Rule
1, the question of applying other tests relatable to the other rules
would not arise. In consequence, when there is no ambiguity or
confusion about the classification of a particular product in the light
of the clear heading in the First Schedule to the Act of 1985 and the
corresponding entry in the HSN, resort to tools such as the ‘common
parlance test’ would not arise.
40. Presently, it is an admitted fact that pure coconut oil is suitable for
multiple uses. That notwithstanding, when a specific heading was
created in Chapter 15, viz., Heading 1513, for ‘coconut oil’ along
with other oils, it would not stand excluded therefrom so as to be
classified as a cosmetic product under Heading 3305 in Chapter 33
in Section VI of the First Schedule, unless all the conditions required
therefor are satisfied. As already noted, such conditions formed part
of Chapter Note 2 in Chapter VI of the First Schedule itself, prior
to the 2005 amendment, but after that amendment, whereby the
said Chapter Note was brought into conformity with Chapter Note
3 in Chapter 33 of the HSN, the Explanatory/General Notes in the
HSN in relation to the said Chapter Note would have to be fully
satisfied. In effect, not only must the coconut oil be suitable for use
as ‘hair oil’, but it must also be put in packaging sold in retail for
such particular use, i.e., 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.
[2024] 12 S.C.R. 919

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

41. The mere fact that coconut oil is also capable of being put to use
as a cosmetic or toilet preparation, by itself, would not be sufficient
to exclude such oil from the ambit of ‘coconut oil’ and subject it to
classification as ‘hair oil’ as ‘coconut oil’ is name-specific. It is not in
dispute that the packaging of the coconut oil in the cases on hand
clearly demonstrated that it was being sold as ‘edible oil’ and all
parameters that had to be met in that regard were duly complied with.
Edible coconut oil requires to be packed in containers using edible
grade plastic. The coconut oil so sold must satisfy the requirements
of the Food Safety and Standards Act, 2006, and be packaged in
conformity with the Edible Oils Packaging (Regulations) Order, 1998.
Further, edible oil would have a shorter shelf life than oil meant for
cosmetic purposes and must meet the Indian Standards Specifications
prescribed for edible oil which are different from the standards for hair
oil. Significantly, the Standards of Weights and Measures (Packaged
Commodities) Rules, 1977, provide that ‘edible oil’ can be packed in
specified sizes of 50 ml, 100 ml, 200 ml, 500 ml, 1 litre or 2 litres.
42. Shanti Coconut Oil, produced and marketed by Madhan Agro
Industries (India) Pvt. Ltd., bore ‘Agmark’ certification from the
concerned authorities to qualify as a Grade-I coconut oil, fit for human
consumption. The fact that such edible coconut oil was sold in smaller
containers would not, by itself, be indicative of it being packaging of
a kind fit for use as ‘hair oil’. One may choose to buy one’s cooking
oil in small quantities, be it for economic or for health reasons or due
to the inclination to use fresh oil in one’s food preparation, and the
smaller size of the packaging of such oil cannot be taken to mean
that it is to be used as ‘hair oil’ without any pointer to that effect, be
it by way of a label or literature or by any other indication that it is to
be used as ‘hair oil’. Notably, the Board’s Circulars dated 03.06.2009
and 12.10.2015 were issued only because of this doubt being raised
in the field that edible oil can also be purchased in small quantities.
43. Small-sized containers are a feature common to both ‘edible oils’
as well as ‘hair oils’. Therefore, 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.
Stress was also laid by the Revenue on the fact 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
920 [2024] 12 S.C.R.

Supreme Court Reports

not as ‘edible oil’. However, such an advertisement is not conclusive,
in itself, to classify the oil as ‘hair oil’. Reference may be made to
Meghdoot Gramodyog Sewa Sansthan, U.P. vs. Commissioner
of Central Excise, Lucknow,9 wherein this Court held that the mere
fact that the product in that case was sold in a packing depicting a
lady with flowing hair was not determinative of such product being
intended as a preparation for use on the hair. This Court considered
the composition and curative properties of the product to ultimately
conclude that the product was classifiable as a ‘medicament’ under
Heading 3003 in Chapter 30 of the First Schedule.
44. Further, registration of the trademark ‘Parachute’ by M/s. Marico Ltd.
for ‘hair oil’ is not sufficient to classify the coconut oil sold by it, in
its entirety, as hair oil. As rightly noted in the impugned final orders,
‘Parachute’ trademark was also registered by the company for Edible
Oil (Class 29), Coffee/Tea (Class 30), Pharmaceuticals (Class 5) and
Non-Alcoholic Beverages (Class 32). Therefore, the trademark, by
itself, does not indicate that every product sold thereunder is the
same and meant only for one use. Significantly, M/s. Marico Ltd.
also markets various coconut-based hair oils, containing ingredients
such as perfumes, etc., which are manufactured under a separate
license obtained under the Drugs and Cosmetics Act, 1940, and
classified as preparations for use on the hair, thereby falling under
Heading 3305.
45. The argument of the Revenue that pure coconut oil should invariably
be classified under Heading 3305 is, therefore, liable to be rejected.
This argument completely loses sight of the General/Explanatory
Notes in relation to Chapter Note 3 in Chapter 33 of the HSN and
the fact that the said Chapter Note 3 is identical to Chapter Note 3
in Chapter 33 of the First Schedule to the Act of 1985. It is for the
Revenue to take a stand by way of legislative action in the event
it chooses to treat pure coconut oil marketed in small quantities
differently from ‘Coconut oil’ in Heading 1513. Having failed to do so
and given the fact that the relevant headings in the First Schedule to
the Act of 1985 are corresponding with the entries in the HSN, there
can be no distinction drawn between the two and the Explanatory
Notes in the HSN would have to be given due effect while interpreting

9 (2005) 4 SCC 15
[2024] 12 S.C.R. 921

Commissioner of Central Excise, Salem v.
M/s Madhan Agro Industries (India) Private Ltd.

Heading 1513 in the First Schedule to the Act of 1985. In consequence,
the coconut oil marketed and sold by the respondents during the
relevant period must necessarily be classified as edible oil.
46. Pertinently, in Dunlop India Ltd. vs. Union of India and others,10 a
3-Judge Bench of this Court pointed out that it is good fiscal policy to
not put people in doubt and quandary about their liability to pay duty
and that when an article has, by all standards, a reasonable claim
to be classified under an enumerated item in the Tariff Schedule, it
would be against the very principle of classification to deny it that
parentage and consign it to an orphanage of the residuary clause.
Applying that standard, once a specific heading was created for
coconut oil in the First Schedule, something more would be required
before such oil can be excluded therefrom and classified under
the general heading pertaining to toilet and cosmetic preparations.
Equally important is certainty and consistency in the stand of the
Revenue.
47. Reliance placed by the Revenue on State of Haryana vs. Dalmia
Dadri Cement Ltd.,11 in support of its contention that the expression
‘for use’ can only mean ‘intended for use’ and not ‘actual use’, is
misplaced as that decision turned upon the language of Section
5(2)(a)(iv) of the Punjab General Sales Tax Act, 1948, and the said
interpretation cannot be applied mutatis mutandis in the present case,
as the wording of the provisions presently under consideration and
the rules of interpretation applicable thereto are entirely different.
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. As pointed out by this Court in HPL Chemicals Ltd.
vs. Commissioner of Central Excise, Chandigarh,12 classification
of goods is a matter relating to chargeability and the burden of proof
is squarely upon the Revenue if it intends to classify the goods under
a particular heading or sub-heading different from that claimed by
the assesses. In such an event, the Revenue had to adduce proper
evidence and discharge that burden of proof in the context of the

10 [1976] 2 SCR 98 : (1976) 2 SCC 241
11 [1988] 2 SCR 1 : AIR 1988 SC 342
12 [2006] Supp. 1 SCR 125 : (2006) 5 SCC 208
922 [2024] 12 S.C.R.

Supreme Court Reports

classification entries, which it failed to do satisfactorily in the cases
on hand.
48. 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 VI-Chapter 33 thereof.
49. The impugned orders, holding to that effect, therefore do not brook
interference on any count. The appeals are bereft of merit and are
accordingly dismissed.
Parties shall bear their own costs.

Result of the case: Appeals dismissed.

†
Headnotes prepared by: Nidhi Jain