Holding

Coconut oil packed in small retail containers is classifiable under Chapter 33, Heading 3305 (hair oil) and not under Chapter 15, Heading 1513.

Summary

The case concerned the classification of 100% pure coconut oil packed in small retail containers. The Revenue argued that such packaging made the oil a "hair oil" falling under Chapter 33, Heading 3305, while the assessee contended it remained "coconut oil" under Chapter 15, Heading 1513. The Court examined the pre‑ and post‑amendment provisions of the Central Excise Tariff Act, the relevant Chapter and Section Notes, the Harmonised System of Nomenclature, and the common‑parlance test. It held that, after the 2004 amendment, the oil is "suitable for use as hair oil" and, being packed in retail sizes, must be classified under Heading 3305; Rule 3(c) further favoured the later heading. The Court therefore allowed the Revenue’s appeal, overturning the Tribunal’s decision, and directed the matter to be placed before the Chief Justice of India for final orders.

Issues considered

The correct tariff heading for coconut oil packed in small containers: Chapter 15 Heading 1513 or Chapter 33 Heading 3305?
Whether the post‑amendment Chapter Note 3 to Chapter 33 and Section Note 2 to Section VI override earlier circulars and pre‑amendment rules.
Whether the common‑parlance test and suitability for hair‑oil use control classification despite the product’s edible‑oil label.
Whether Rule 3 of the General Rules for Interpretation applies, and if so, which heading prevails.

Legislation cited

Central Excise Act, 1944s. Section 37B
Central Excise Tariff Act, 1985s. Chapter Note 3 (Chapter 33), s. Rule 1, s. Rule 3, s. Section Note 2 to Section VI
Edible Oil Packaging (Regulation) Order, 1998
Standards of Weights and Measures (Packaged Commodities) Rules, 1977

Subjects

central excisetariff classificationcoconut oilhair oilChapter 15Chapter 33common parlance testHSNpackagingSection Note 2Chapter Note 3

Judgment

[2018] 6 S.C.R. 387 387

COMMISSIONER OF CENTRAL EXCISE A
v.
MADHAN AGRO INDUSTRIES (I) PVT. LTD.
(Civil Appeal No. 1766 of 2009)
APRIL 13, 2018 B
[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
C
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 D
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 E
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 F
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 sub- G
headings 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.
H
387
388 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 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 :
B [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
C (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.
D 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
E 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
F 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
G 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
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 389
INDUSTRIES (I) PVT. LTD.

to be used as a hair oil. In order to classify a product under tariff A
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
B
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 C
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. D
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 E
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] F
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 G
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
H
390 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 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
B 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
C 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
D 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
E 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
F 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
G
...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
H no other classification is permissible. [Para 15] [427-E-G]
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 391
INDUSTRIES (I) PVT. LTD.

3. Because of the “suitability for use as hair oil” and being A
‘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
B
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, C
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 D
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 E
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 F
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] G
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, H
392 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 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 ;
B
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
C 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.
D
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
E 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.
F 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
G 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, post-
amendment would be against the intent of the Parliament. Hence,
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 393
INDUSTRIES (I) PVT. LTD.

HSN Chapter Note cannot be relied upon to determine the A
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 B
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 C
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, D
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
E
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
F
[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 G
[2003] 1 SCR 313 distinguished Para 18
[2008] 12 SCR 1223 referred to Para 30
[2000] 2 SCR 1169 referred to Para 35
H
394 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 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
B
(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
C (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
D
[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
E [2012] 11 SCR 365 relied on Para 47
[2003] 3 SCC 111 relied on Para 48
[2003] 5 SCC 60 relied on Para 48

F [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
G
[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
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 395
INDUSTRIES (I) PVT. LTD.

CIVIL APPELLATE JURISDICTION : Civil Appeal No.1766 A
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 B

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, C
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
D
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. E
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 F
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: G
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
H
396 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 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
B
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)
C 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
D 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:
E
BEFORE AMENDMENT
CHAPTER 15
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS;
F ANIMAL OR VEGETABLE WAXES
NOTES
1.This Chapter does not cover :
(a) pig fat or poultry fat;
G (b) cocoa butter, fat and oil (Chapter 18);
(c) Edible preparations of Chapter 21;
(d) Greaves and residues of Chapter 23;

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 397
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

(e) Fatty acids, prepared waxes, medicaments, paints, A
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 B

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).
C
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”.
D
Heading Sub-heading Description of goods Rate
No. No. of
duty
15.01 1501.00 An imal (including fish) fats and oil s, crude, Nil
refined or purified
15.02 1502.00 Fixed vegetable oils, the following, namely 8% E
cotton seed oil, neem s eed 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. F
15.03 1503.00 Fixed vegetable oils, other than those of 8%
heading No.15.02
15.04 1504.00 Vegetable fats and oils and their fractions, 8%
partly or wholly hydrogenated, int er-
es terified, re-est erified o r elaidinised,
whether or not refi ned but not furt her G
prepared.
15.05 33.03.00 Omitted 8%

15.06 1506.00 Gl ycerol, Crude, Glycerol Waters and 16%
Gl ycerol lyes
H
398 SUPREME COURT REPORTS [2018] 6 S.C.R.

A
______________________________________________
15.07 1507.00 Vegetable waxes (other than triglycerides), 16%
beeswax, other insect waxes and spermaceti,
whether or not refined or coloured; degras; residues
resulting from the treatment of fatty substances of
B animal or vegetable waxes
15.08 Margarine; edible mixtures or preparations of 16%
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
C Chapter
1508.10 -Linoxyn 16%
1508.90 -Other 8%

BEFORE AMENDMENT
D
CHAPTER 33
ESSENTIAL OILS AND RESINOIDS; PERFUMERY,
COSMETIC OR TOILET PREPARATIONS
Notes :
E
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;
F (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
G 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
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 399
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

goods of these headings and put up in packings with labels, A
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
B
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
C
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 D
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, E
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. F

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.
G
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.
H
400 SUPREME COURT REPORTS [2018] 6 S.C.R.

A
Chapter 33 Cosmetic or toilet preparations, essential oils etc.
Heading Sub-heading Description of goods Rate of
No. No. duty

33.05 Preparations for use on the hair
B
3305.10 -Perfumed for use on the hair 16%
-Other
3305.91 -Hair fixer 16%
3305.99 -Other 16%

C
POST AMENDMENT
CHAPTER 15
Animal or Vegetable fats and Oils and their cleavage products;
prepared edible fats; Animal or Vegetable Waxes
D NOTES
1. This Chapter does not cover :
(a) pig fat or poultry fat of heading 0209;
(b) cocoa butter, fat or oil (heading 1804);
E
(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;
F (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).
G 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
H their fractions.
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 401
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

4. Soap stocks, oil foots and dregs, stearin pitch, glycerol pitch A
c. and wool grease residues fall in heading 1522.
Rate of 5. In relation to the products of heading 1507 or 1508 or 1509 or
duty
1510 or 1511 or 1512 or 1513 or 1514 or 1515, or 1518; sub-
heading 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 B
16%
from bulk packs to retail packs or the adoption of any other
treatment to render the product marketable to the consumer, shall
16%
amount to ‘manufacture’.
16%
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 C
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 D
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
E
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
F
decomposes and saponifies them).

Tariff Description of Goods Unit Rate of
Item duty
1513 Coconut (copra), plam kernet or babassu
oil and fractions thereof, whether or not
G
refined, but not chemically modified
-Coconut (copra) oil and its fractions :

H
402 SUPREME COURT REPORTS [2018] 6 S.C.R.

A
15 13 11 00 -Cr ud e o il kg . 8%

15 13 19 0 0 -O ther kg . 8%
-P alm k ern el or bab assu oil an d
fractio ns th ereo f:
15 13 21 -Cr ud e o il :
B
15 13 21 1 0 -P alm ker nel o il kg . 8%

15 13 21 2 0 -Ba bas su oi l kg . 8%

15 13 29 -O ther
C 15 13 29 1 0 -P alm ker nel o il an d its fractio ns kg . 8%

15 13 29 2 0 -Babas su oil and its fr action s ed ible kg . 8%
grad e
15 13 29 3 0 -Babas su o il an d its fraction s, oth er kg . 8%
th an edib le g rad e
D
15 13 29 9 0 -O ther kg . 8%

POST AMENDMENT
CHAPTER 33
Essential Oils and Resinoids, Perfumery, Cosmetic or
E
Toilet Preparations
NOTES
1. This Chapter does not cover:
a) natural oleoresins or vegetable extracts of heading 1301 or
F 1302;
(b) soap or other products of heading 3401;
(c) gum, wood or sulphate turpentine or other products of heading
3805; or
G (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).
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 403
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

2. The expression “odoriferous substances” in heading 3302 refers A
8%
only to the substances of heading 3301, to odoriferous constituents
8% 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 B
8% goods of these headings and put up in packings of a kind
sold by retail for such use.
8%
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; C
8%
perfumed papers and papers impregnated or coated with cosmetics;
8% contact lens or artificial eye solution; wadding, felt and nonwovens,
impregnated, coated or covered with perfume or cosmetics; animal
8% toilet preparations.
5. In relation to products of headings 3303, 3304 and 3305, D
8% 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’.
E
Tariff Item Description of Goods Unit Rate
of
duty
3305 Preparations for use on the hair
3305 10 -Shampoos : kg. 16%
F
3305 10 10 – Containing spirit kg. 16%
3305 10 90 – Other
3305 20 00 -Preparations for permanent waving kg. 16%
or straightening
3305 30 00 -Hair lacquer G

3305 90 -Ot her :
– Hair oil :
3305 90 11 – Perfumed kg. 16%

H
404 SUPREME COURT REPORTS [2018] 6 S.C.R.

A
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 kg. 16%
B synthetic)
3305 90 50 – Hair fixers kg. 16%
3305 90 90 – Other kg. 16%

7. We may now take note of the arguments advanced on behalf
C of the rival parties:
Shri Panda, learned Senior Counsel appearing for the appellant-
Union 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
D 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.
E
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
F 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.
G 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
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 405
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

force of the Amendment Act 5 of 2005, the classification of coconut oil A
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
B
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 C
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”.
D
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 E
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 F
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 G
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
H
406 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 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.
B
(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
C 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,
D 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
E 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
F 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
G 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”.
1
2014 (314) ELT 541 (Tribunal)
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 407
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

12. Disputes with regard to classification may arise in different A
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
B
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 C
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
D
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. Commissioner of E
Central Excise, Delhi-III, Gurgaon4 may be illustratively referred to
in this regard. These are the different tools that would be available to
the Court to deal with disputes with regard to classification which must
be resorted to in the first instance.
13. To what extent the common parlance test would be applicable F
in determining the classification of the product in question is the first
question that may be dealt in view of the very emphatic arguments made
on behalf of the Revenue on this question.
14. Shri A.K. Panda, learned Senior Counsel for the Revenue has
urged that a detailed market survey undertaken by the Revenue indicated G
that the consumers who purchase “coconut oil” in small containers
invariably make the said purchase for use as hair oil and not as edible oil.
2
(1995) 3 SCC 454
3
(2008) 17 SCC 569
4
(2005) 2 SCC 460 H
408 SUPREME COURT REPORTS [2018] 6 S.C.R.

A It has, therefore, been urged by Shri Panda that the product in dispute in
the present case i.e. “coconut oil” in small packings should be classified
under Heading 3305 and not under Heading 1513. To support the
contention advanced Shri Panda has referred to several pronouncements
of this Court wherein it has been held that the object of classification of
goods for the purpose of Central Excise and other Fiscal Legislation is
B
to raise the revenue and, therefore, scientific and technical meaning
must be avoided and the particular product as understood in trade and in
common parlance should be preferred.

15. In Indo-International Industries vs. Commissioner of Sales
C Tax, U.P.5 where the common parlance test was adopted to resolve the
dispute of classification this Court was dealing with the question as to
whether hypodermic clinical syringes could be regarded as “glass ware”
under Entry No.39 of the First Schedule to the U.P. Sales Tax Act,
1948.

D 16. Similarly, in Asian Paints India Ltd. vs. Collector of Central
Excise6 the question before this Court was whether “Decoplast”
manufactured by the Asian Paints India Ltd. was classifiable under Tariff
Item No. 14(1)(3)(iv) of the First Schedule of the Central Excise Tariff
as “plastic emulsion paint” or under Tariff Item No.14(1)(v) as “paints
not otherwise specified”.
E
17. In Shree Baidyanath Ayurved Bhavan Ltd. vs. Collector
of Central Excise, Nagpur7 the issue before this Court was as to
whether Dant Manjan Lal manufactured by the Assessee was medicine
so as to be covered by Exemption Notification No.62/78-CE dated 1st
March, 1978 or a toilet preparation.
F
18. In Alpine Industries vs. Collector of Central Excise, New
Delhi8 the question that arose for consideration before this Court was
whether “Lip Salve” is classifiable under Heading 33.04 of the Central
Excise Tariff Act, 1985 as “a preparation for care of skin” or whether
G as a “medicament” under Heading 30.03 thereof.

5
1981 (8) E.L.T. 325 (S.C.)
6
1988 (35) E.L.T. 3 (S.C.)
7
(1996) 9 SCC 402
8
(2003) 3 SCC 111
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 409
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

19. In all the aforesaid decisions, this Court has held that- A
[Paragraph 5 in Alpine Industries (supra)]:
“5. It is well established that in interpreting tariff entries in taxation
statute like the Excise Act, where the primary object is to raise
revenue and for that purpose various products are differently
classified, the entries are not to be understood in their scientific B
and technical meaning. The terms and expressions used in tariff
have to be understood by their popular meaning that is the meaning
that is attached to them by those using the product. See the
decision of the Supreme Court on the dispute regarding
classification for excise duty, the product – Lal Dant Manjan
manufactured by Shree Baidyanath Ayurved Bhavan Ltd. C
reported in the case of Shree Baidyanath Ayurved Bhavan Ltd. v.
CCE9. The manufacturer claimed the product to be an Ayurvedic
medicinal preparation product for dental care. The view of the
Tribunal was upheld by this Court by holding (at SCC pp.404-05,
para 3) that “ordinarily a medicine is prescribed by a medical D
practitioner and it is used for a limited time and not every day
unless it is so prescribed to deal with a specific disease like
diabetes”.”
20. A consideration of the facts of the cases, referred to above,
however, would go to show that the basic dispute/conflict in the said E
cases was whether a product which was not defined or specifically
dealt with by any of the Headings/Entries would fall under one or another
Heading/Entry of the Central Excise Tariff Act. The present is not a
case where the identity of the product would require any debate as was
the issue in the cases referred to above where the common parlance
test was applied. In the present case, the product is “coconut oil”, which F
is clearly covered by Chapter Heading 1513 and not by Chapter Heading
3305. What calls for a decision in the present case is whether “coconut
oil” which otherwise is covered by Heading 1513 of Chapter 15, if packed
in small containers and pouches/sachets, would cease to be “coconut
oil” falling under Chapter Heading 1513 and would be covered by Heading G
“preparations for use on the hair” covered by Entry 3305 of Chapter 33.
This is a question which has to be resolved not on the basis of the
perception of the consumer or the customer but on the basis of the
headings and sub-headings and on an interpretation of the provisions of
9
(1996) 9 SCC 402
H
410 SUPREME COURT REPORTS [2018] 6 S.C.R.

A the relevant Chapter Notes, if required. Issues of classification have to
be resolved within the framework of the statutory provision. “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. The understanding of the product in the
market or amongst the consumers will always have a limited role in this
B
regard. The above has been the view of this Court in O.K. Play (India)
Ltd. Vs. Commissioner of Central Excise, Delhi-III, Gurgaon
(supra) (para 13) and Commissioner of Customs and Central Excise,
Goa Vs. Phil Corporation Ltd. (supra) (para 17).
21. We may now turn to examine the General Rules for
C Interpretation and the Chapter Notes relied upon by the Revenue.
“[THE FIRST SCHEDULE] – EXCISE TARIFF
RULES FOR THE INTERPRETATION OF THIS SCHEDULE
1. The titles of Sections and Chapters are provided for ease of
D reference only; for legal purposes, classification shall be determined
according to the terms of the headings and any relative Section or
Chapter Notes and, provided such headings or Notes do not
otherwise require, according to the provisions hereinafter contained.
2. (a) Any reference in a heading to goods shall be taken to include
E a reference to those goods incomplete or unfinished, provided
that, the incomplete or unfinished goods have the essential
character of the complete or finished goods. It shall also be taken
to include a reference to those goods complete or finished (or
falling to be classified as complete or finished by virtue of this
F rule), removed unassembled or disassembled.
(b) Any reference in a heading to a material or substance shall be
taken to include a reference to mixtures or combinations of that
material or substance with other materials or substances. Any
reference to goods of a given material or substance shall be taken
to include a reference to goods consisting wholly or partly of such
G
material or substance. The classification of goods consisting of
more than one material or substance shall be according to the
principles contained in Rule 3.
3. When by application of sub-rule (b) of rule 2 or for any other
reason, goods are, prima facie, classifiable under two or more
H headings, classification shall be effected as follows:
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 411
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

(a) The heading which provides the most specific description shall A
be preferred to headings providing a more general description.
However, when two or more headings each refer to part only of
the materials or substances contained in mixed or composite goods
or to part only of the items in a set sale, those headings are to be
regarded as equally specific in relation to those goods, even if one
B
of them gives a more complete or precise description of the goods.
(b) mixtures, composite goods consisting of different materials or
made up of different components, and goods put up in sets for
retail sale, which cannot be classified by reference to (a), shall be
classified as if they consisted of the material or component which
gives them their essential character, insofar as this criterion is C
applicable.
(c) when goods cannot be classified by reference to (a) or (b),
they shall be classified under the heading which occurs last in
numerical order among those which equally merit consideration.
D
4. Goods which cannot be classified in accordance with the above
rules shall be classified under the heading appropriate to the goods
to which they are most akin.
5. For legal purposes, the classification of goods in the sub-
headings of a heading shall be determined according to the terms E
of those sub-headings and any related sub-heading Notes and,
mutatis mutandis, to the above rules, on the understanding that
only sub-headings at the same level are comparable. For the
purposes of this rule the relative Section and Chapter Notes also
apply, unless the context otherwise requires.
F
Chapter Note 1(e) to Chapter 15
CHAPTER 15
Animal or Vegetable fats and Oils and their cleavage products;
prepared edible fats; Animal or Vegetable Waxes
NOTES G
1. This Chapter does not cover :
(a) xxxxxx
(b) xxxxxx
(c) xxxxxx
(d) xxxxxxxx H
412 SUPREME COURT REPORTS [2018] 6 S.C.R.

A (e) fatty acids, prepared waxes, medicaments, paints, varnishes,
soap, perfumery, cosmetic or toilet preparations, sulphonated oils
or other goods of Section VI; or”
-------------------------------------------------------------------------------
SECTION NOTE II to SECTION VI
B
SECTION VI
PRODUCT OF THE CHEMICAL OR ALLIED INDUSTRIES
Notes :
1. xxxxxx
C
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.
D
-------------------------------------------------------------------------------
Chapter Note 3 to Chapter 33
CHAPTER 33

E ESSENTIAL OILS AND RESINOIDS; PERFUMERY,
COSMETIC OR TOILET PREPARATIONS
Notes :
1. xxxxx
2. xxxxx
F
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.
G 22. It has already been noticed that 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.

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 413
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

23. On the other hand prior to the amendment Heading 33.05 A
dealing with preparations for use on the hair was in the following terms:
--------------------------------------------------------------------------------
33.05 Preparations for use on the hair
3305.10 --Perfumed hair oils 16%
--Other : B
3305.91 --Hair fixer 16%
3305.99 --Other 16%
--------------------------------------------------------------------------------
24. Heading 15.13 of the Harmonised System of Nomenclature
(HSN) specifically deals with coconut oil in the following manner: C
“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 D
1513.19 - Other
- Palm kernel or babassu oil and fractions thereof:
1513.21 - Crude oil
1513.29 - Other”
E
25. Heading 33.05 of the HSN is in the following terms:
“33.05 - PREPARATIONS FOR USE ON THE HAIR
3305.10 - Shampoos
3305.20 - Preparation for permanent waving or straightening
F
3305.30 - Hair lacquers
3305.90 - Other
The Heading covers :
(1) Shampoos, containing soap or other organic surface-active G
agents (see Note 1(c) to Chapter 34), and other shampoos. All
these shampoos may contain subsidiary pharmaceutical or
disinfectant constituents, even if they have therapeutic or
prophylactic properties (see Note 1(d) to Chapter 30)

H
414 SUPREME COURT REPORTS [2018] 6 S.C.R.

A (2) Preparations for permanent waving or straightening
(3) Hair lacquers (sometimes known as “hair sprays”)
(4) Other hair preparations, such as brilliantines, hair oils, creams
(“pomades”) and dressings: hair dyes and bleaches used on the
B hair, cream-rinses.
26. After coming into force of the amendment, Headings 1513
and 3305 in Chapters 15 and 33 virtually incorporated the contents of
the Headings and sub-headings as contained in the Harmonised System
of Nomenclature (HSN). The position that is noticeable following the
C 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. Significantly and noticeably coconut oil as a
preparation for use as hair oil is not included in Heading 3305 or any of
its Sub-Headings.
D
27. Chapter Note 3 of Chapter 33 makes it clear that Heading
3305, inter alia, would apply to products “which are suitable for use
as goods mentioned in the Heading and if they are put up in packings
of a kind sold by retail for such use”. Heading 3305 deals with
“preparations for use on the hair”. In the present case, it is not in
E
dispute that in the packings of coconut oil the inscription “edible oil” is
mentioned. There is no representation, declaration or advertisement in
the packings that the same can be or is meant to be used as a hair oil.
28. Chapter Note II of Chapter 33 prior to amendment and which
F has been substituted by Chapter Note 3 was more explicit in requiring
packing put up 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
G contain subsidiary pharmaceutical or antiseptic constituents, or
are held out as having subsidiary curative or prophylactic value.”
However, the changes brought about/deletions made by the
amendment would hardly be significant inasmuch as Chapter Note 3 of
Chapter 33 (post-amendment) introduced by the Amendment Act in place
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 415
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

of the erstwhile Chapter No.2 is identical with Chapter 3 Note of Chapter A
33 in Harmonised System of Nomenclature (HSN) which must guide
and illuminate the correct process of interpretation and understanding.
Furthermore, there is an explanatory note in the Harmonised System of
Nomenclature relating to Chapter Note 3 the relevant part of which is
as follows:
B
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 sue (see Note 3 to this C
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
D
therapeutic or prophylactic value (see Note 1(d) to Chapter 30).
However, prepared room deodorizers remain classified in heading
33.07 even if they have disinfectant properties of more than a
subsidiary nature.
Preparations (e.g. varnish) and unmixed products (e.g.,
unperfumed powdered talc, fuller’s earth, aceton, alum) which E
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; F
or

(b) Put up in a form clearly specialised to such use (e.g. nail
varnish put up in small bottles furnished with the brush required
for applying the varnish). “
G
29. Explanatory note to Chapter Note 3 of HSN makes the
contents of the Chapter Note more clear. 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
H
416 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 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
B
question. The absence of any explanatory note to Chapter Note 3 of
Chapter 33 of the Central Excise Tariff Act on the same terms as in the
HSN would hardly make any difference in the conclusion to be reached
in view of the clear and consistent pronouncement of this Court first
expressed in Collector of Central Excise, Shillong Vs. Wood Craft
C Products Ltd. (supra) to the following effect:

“12. It is significant, as expressly stated, in the Statement of
Objects and Reasons, that the Central excise tariffs are based on
the HSN and the internationally accepted nomenclature was taken
into account to “reduce disputes on account of tariff classification”.
D 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
E 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
F the meaning of the expression 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
G 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,
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 417
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

which has a different purpose, cannot, in case of a conflict, override A
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
B
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.”

30. The views expressed by this Court as to when the HSN can C
be ignored including the view in Camlin Limited Vs. Commissioner of
Central Excise, Mumbai10 are not contrary to what has been expressed
herein; rather the said views have been expressed in situations where
the legislative intention to depart from the HSN is clear and unambiguous.
Illustratively, the HSN would not permit the Court to import an entry
mentioned in the HSN but not in the Tariff Act. The same principle will D
however not apply to the Chapter notes and the Explanatory notes which
are tools for understanding the Entries/Headings. The opinions in O.K.
Play (India) Ltd. Vs. Commissioner of Central Excise, Delhi-III,
Gurgaon (supra) and Commissioner of Customs and Central Excise,
Goa Vs. Phil Corporation Limited (supra) reiterating the view in E
Collector of Central Excise, Shillong Vs. Wood Craft Products Ltd.
(supra) and the specific stress on the Chapter Notes and explanatory
notes in the HSN as permissible and useful aids in understanding the
Headings/entries in the Central Excise Tariff Act cannot be lost sight of.

31. The photo personality of a cine star with flowing, hair, as F
urged on behalf of the Revenue, may not be convincingly determinative.
Also the fact that some of the smaller containers of coconut oil have
nozzles for release of drops of coconut oil from the container will not
satisfy the above requirement inasmuch as the materials collected by
the Revenue in the course of adjudication proceedings indicate that the
amount of coconut oil used in cooking, at times, may be, minimum. G

32. The above conspectus of fact can reasonably lead to the
conclusion that the coconut oil in dispute in the present case would be
more appropriately classifiable under Chapter 15, Heading 1513. If the
10
(2008) 9 SCC 82
H
418 SUPREME COURT REPORTS [2018] 6 S.C.R.

A above is a possible and reasonable conclusion and we are inclined to
hold as such, the contention of the Revenue with regard to application of
Rules 1 and 3 of the General Rules for Interpretation; Chapter Note
1(e) to Chapter 15; Note 2 to Section VI will not at all be relevant in this
regard. The legislative history behind Chapter 15; the words and
expressions in Heading 1513 of the Tariff Act; the relevant Heading i.e.
B
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
C Central Excise Tariff Act. In this regard, it may be noticed that Rule 3 of
the Rules of General Interpretation would apply only in a situation where
the product is classifiable under two different Chapters, a position that
does not exist in the present case. At the same time, Chapter Note 1(e)
to Chapter 15 and Note 2 to Section VI would be applicable only if the
product i.e. coconut oil would unambiguously fall under any of the
D
Headings under Section VI, a position that cannot be accepted.

33. A contention has been advanced on behalf of the Revenue
that “Parachute” is a registered trademark of Marico and goods are
being marketed under the aforesaid trade mark for use as hair oil. The
E issue of registered trade mark and classification for the purpose of levy
of Central Excise Tariff are unrelated and unconnected to each other.
Registration of a trademark under any particular class cannot be
determinative of the classification of the product for purposes of Central
Excise Tariff. Moreover, in the present case, Marico had/has obtained
registration of its trade mark “Parachute” under different classes
F including edible oil (Class 29) as well as hair oil lotions, hair preparations
under Class 3.

34. The contents of Circular bearing No. No.145/56/95-CX dated
31.08.1995 at a point of time when Chapter Note II of Chapter 33 was
in force has already been noticed and infact the relevant paragraphs 5 to
G
9 of the above Circular, extracted above, 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. Merely

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 419
INDUSTRIES (I) PVT. LTD. [RANJAN GOGOI, J.]

because the product is packed in small containers and used by some A
sections of the customers as hair oil cannot be a valid basis for
classification under Heading 3305. Only if the containers bear labels/
literature indicating that it is meant for use on the hair that the coconut
oil in dispute may merit classification under Chapter 33. The above
position would continue to hold the field notwithstanding the substitution
B
of Chapter Note II by Chapter Note 3 w.e.f. 28-02-2005 in view of the
similar stipulations and conditions incorporated in Chapter No.3 of the
HSN read with the Explanatory Note 3 thereto which the Court would
be obliged to take into account.

35. The Order under Section 37B of the Central Excise Act dated C
3.6.2009 discussed above is infact a virtual admission on the part of the
Revenue that coconut oil packed in containers upto 200 ml alone would
be classifiable under Chapter 33 and the larger packages even of 1/2
litres would fall under Chapter 15. In the absence of the essential
stipulations under Chapter Note 3 of Chapter 33, discussed above, in
respect of the product in question there can be no justification for the D
direction contained in the order/circular dated 3.6.2009. The learned
Appellate Tribunal in Raj Oil Mills Vs. Commissioner of Central Excise
(supra), therefore, took the view that even small packets of 200 ml or
less would be more appropriately classifiable under chapter 15 as coconut
oil and not as hair oil under Chapter 33. The said decision of the Tribunal E
has been affirmed by this Court and the appeals by the Revenue (Civil
Appeal Nos.2023-2037 of 2014) have been dismissed on 7.12.2014. The
dismissal of the appeals, though by a non-speaking order, is one on merit
and therefore the order of the Tribunal in Raj Oil Mills (supra) can be
understood to have merged with the decision of this Court as held in
V.M. Salgaocar & Bros. Pvt. Ltd. Vs. Commissioner of F
Income Tax11.

36. For the aforesaid reasons, we take the view that the coconut
oil in small packings in respect of which the present dispute with regard
to classification has arisen is more appropriately classifiable under Chapter
G
15, Heading 1513 and not under Chapter 33, Heading 3305. Consequently
while dismissing the appeals filed by the Revenue, we affirm the Orders
to the above effect passed by the learned Appellate Tribunal.
11
(2000) 5 SCC 373

H
420 SUPREME COURT REPORTS [2018] 6 S.C.R.

A R. BANUMATHI, J. 1. I have gone through the judgment by
His Lordship Justice Ranjan Gogoi and I am unable to agree with the
reasonings and the conclusion. I am of the view that 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
B
not under Chapter 15. Following are the reasonings for my conclusion.
2. Whether ‘Coconut Oil’ manufactured and packed in small
containers and sachets by the respondent, is classifiable under Chapter
Heading 3305 (“Hair Oil”, “Other”) as claimed by the Revenue or
under Chapter 15 Heading 1513 : Coconut (Copra) oil as claimed by
C the respondent, is the point falling for consideration in these appeals.
3. The competing entries for classification as claimed by the
appellant-Revenue and the respondent/assessee are as under:-

Classification by the Appellant Classification by the Respondent
D
3305 PREPARATIONS FOR 1513 COCONUT (COPRA), PALM
USE ON THE HAIR KERNEL OR BABASSU OIL AND
FRACTIONS THEREOF, WHETHER
OR NOT REFINED, BUT NOT
CHEMICALLY MODIFIED
E 3305 90 - Other - Coconut (copra) oil and its
--- Hair Oil fractions:
3305 90 19 ---- Other 1513 11 00 - - Crude Oil (or)
1513 19 00 - - Other

F
4. Chapter 33 deals with “Essential oils and Resinoids,
Perfumery, Cosmetic or Toilet Preparations”. Tariff Item 33 05 reads
as under:-
"3305 Preparations for use on the hair
G 3305 10 - Shampoos
3305 10 10 - -- Containing spirit
3305 10 90 - -- Other
3305 20 00 - Preparations for permanent waving
or straightening

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 421
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

3305 30 00 - Hair lacquers A
3305 90 - Other
-- - Hair oil
3305 90 11 --- - Perfumed
3305 90 19 --- - Other" B
5. Chapter 15 deals with “Animal or vegetable fats and oils
and their cleavage products; prepared edible fats; animal or
vegetable waxes”. Tariff Item 15 13 reads as under:-
"1513 Coconut (copra), palm kernel or C
babassu oil and fractions
thereof, whether or not refined,
but not chemically modified
- Coconut (copra) oil and its
fractions
1513 11 00 -- Crude oil D
1513 19 00 -- Other
- Palm kernel or babassu oil and
fractions thereof

6. A harmonious construction of the following would govern the
field for classification of the goods:-
E
· Rule 1 of the General Rules for the Interpretation of the First
Schedule
· Chapter Note 1(e) to Chapter 15
· Section Note 2 to Section VI (after amendment w.e.f.
28.02.2005) F

· Chapter Note 3 to Chapter 33 (after amendment w.e.f.
28.02.2005)
As discussed infra, cumulative construction of the above would lead to
the conclusion that “if the impugned goods are classifiable under G
Tariff Item 3305 90 19, then the impugned goods are automatically
excluded from classification under Tariff Item 1513 11 00 (or) 1513
19 00”.

H
422 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 7. The Tariff itself has provided five rules for the interpretation.
The First Ruleof the General Rules for the Interpretation of the First
Schedule, is generally referred to as the cardinal principle for
classification. If the classification can be done from the Heading, Section
or Chapter Notes, the rules of interpretation need not be resorted to.
Interpretative rules are applicable only where the classification of a
B
product cannot be determined in accordance with the Headings or relative
Sections or Chapter Notes. The First Schedule-Excise Tariff Rules
for the interpretation of this Schedule, reads as under:-
“1. The titles of Sections and Chapters are provided for ease of
reference only; for legal purposes, classification shall be
C determined according to the terms of the headings and any
relative Section or Chapter Notes and, provided such headings or
Notes do not otherwise require, according to the provisions
hereinafter contained.
2.(a) Any reference in a heading to goods shall be taken to include
D a reference to those goods incomplete or unfinished, provided
that, the incomplete or unfinished goods have the essential
character of the complete or finished goods. It shall also be taken
to include a reference to those goods complete or finished (or
falling to be classified as complete or finished by virtue of this
E rule), removed unassembled or disassembled.
(b) Any reference in a heading to a material or substance shall be
taken to include a reference to mixtures or combinations of that
material or substance with other materials or substances. Any
reference to goods of a given material or substance shall be taken
F to include a reference to goods consisting wholly or partly of such
material or substance. The classification of goods consisting of
more than one material or substance shall be according to the
principles contained in rule 3.
3. When by application of sub-rule (b) of rule 2 or for any other
G reason, goods are, prima facie, classifiable under two or more
headings, classification shall be effected as follows:-
(a) the heading which provide the most specific description shall
be preferred to headings providing a more general description.
However, when two or more headings each refer to part only of
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 423
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

the materials or substances contained in mixed or composite goods A
or to part only of the items in a set, those headings are to be
regarded as equally specific in relation to those goods, even if one
of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or
made up of different components, and goods put up in sets, which B
cannot be classified by reference to (a), shall be classified as if
they consisted of the material or component which gives them
their essential character, insofar as this criterion is applicable.
(c) When goods cannot be classified by reference to (a) or (b),
they shall be classified under the heading which occurs last in the C
numerical order among those which equally merit consideration.
4. Goods which cannot be classified in accordance with the above
rules shall be classified under the heading appropriate to the goods
to which they are most akin.
......” D
8. The First Rule has two components, namely:
i. The titles of Sections, Chapters and Sub-Chapters are pro-
vided for ease of reference only;
ii. for legal purposes, classification shall be determined according E
to the terms of the Headings andany relative Section or
Chapter Notes and, provided such Headings or Chapter
Notes do not otherwise require, according to the provisions
thereinafter contained.
The classification of goods will be as per the point (ii) as per which, the F
classification demands the following conditions to be taken into
consideration:-
i. Classification shall be done according to the terms of the
Headings, and
ii. According to any relative Section or Chapter Notes, and G

iii Provided such Headings or Chapter Notes do not otherwise
require according to the provisions contained thereon that is
Rules 2 to 6

H
424 SUPREME COURT REPORTS [2018] 6 S.C.R.

A It is clear from the above that:- (i) the Heading and (ii) relative
Section or Chapter Notes must be considered before classification is
done. Only if after this exercise is done, a conflict in classification still
persists, then the other rules for Interpretation may be resorted to (iii).
9. CHANGES BROUGHT IN BY CENTRAL EXCISE
B TARIFF (AMENDMENT) ACT, 2004:- Central Excise Tariff
(Amendment) Act, 2004 which came into force with effect from
28.02.2005 brought in significant changes in Note 2 to Chapter 33 and
introduction of Note 2 to Section VI inviting reclassification of the
impugned goods. The Statement of Objects and Reasons of the Central
Excise Tariff (Amendment) Act, 2004 reads as under:-
C
(a) To accommodate more prominently the commodities which
are of significance to the country’s needs;
(b) To adopt a common commodity classification for the
purpose of levy and collection of duties of customs and
central excise and for purpose of Import Trade Control
D Policy and collection of statistics;
(c) To accommodate the demand from the trade and industry
for adoption of a common commodity classification based
on internationally adopted Harmonized Systems of
Nomenclature to be used for trade-related transactions to
E facilitate International and domestic trade.
(d) The salient feature of the Bill, inter alia, expands the six
digit classification into eight digit classification and such
expansion has been made in the First Schedule and the
Second Schedule to the said Central Excise Tariff Act, to
F cover a wider range of specific commodities under enlarged
tariff items so as to accommodate domestic concerns.
Tariff Item under eight digit system would be interpreted as under:-
First two digits: refer to the Chapter Number of the Tariff
(e.g. 33 ××××××)
G Next two digits: refer to heading of the goods in that Chapter
(e.g. ×× 05 ××××)
Next two digits: indicate Chapter sub-heading
(e.g. ×××× 90 ××)
Last two digits: refer to the chapter sub-sub-heading
H (e.g. ×××××× 10)
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 425
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

10. By the 2004 amendment, there has been realignment of certain A
goods including the impugned goods. For proper appreciation, we may
usefully refer to comparative chart of relevant old legal provisions and
the new legal provisions after amendment as under:-
Sl. Old Legal Provision New Legal Provision
No.
1. Section Note to Note 2: Goods put up in sets Note 2:- Subject to Note 1
B
Section VI consisting of two or more above, goods classifiable in
separate constituents, some or heading 3004, 3005, 3006,
all of which fall in this 3212, 3303, 3304, 3305,
Section and are intended to be 3306, 3307, 3506, 3707 or
mixed together to obtain a 3808 by reason of being put
product of Section VI or VII, up in measured doses or for C
are to be classified in the retail sale are to be classified
heading appropriate to that in those headings and in no
product, provided that the other heading of this
constituents are; Schedule.
(a) .......
(b) .......
(c) ...... D
2. Chapter Note Note 2: Heading Nos.33.03 to Note 3: Headings 3303 to
to Chapter 33 33.07 apply, inter alia, to 3307 apply, inter alia, to
products, whether or not products, whether or not
mixed (other than aqueous mixed (other than aqueous
distillates and aqueous distillates and aqueous
solutions of essential oils), solutions of essential oils),
suitable for use as goods of suitable for use as goods of E
these headings and put up in these headings and put up in
packings with labels, packings of a kind sold by
literature or other retail for such use.
indications that they are for
use as cosmetics or toilet
preparations or put up in a
form clearly specialized to F
such use and includes
products whether or not they
contain subsidiary
pharmaceutical or antiseptic
constituents, or are held out
as having subsidiary curative
G
or prophylactic value.
3. Heading 33.05 Preparations for use on 3305 Preparations for use on
description the hair the hair
4. Sub heading 3305.10 - Perfumed hair oils 3305 90 11 - - - - Perfumed
description - Other: 3305 90 19 - - - - Other

H
426 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 11. By a cumulative reading of the old provisions and the new
legal provisions, it can be seen that following significant changes have
been brought about in the Central Excise Tariff with effect from
28.02.2005:-
(i) Modification of the then Note 2 to Chapter 33 (presently
B renumbered as 3) by way of deletion to the extent that .....
goods put up in packings with labels, literature or other
indications that they are for use as......;
(ii) After amendment, incorporation of the expressions in Note 3
to Chapter 33 the expressions “suitable for use as goods
C of those headings” and “put up in packings of a kind
sold by retail for such use”; and
(iii) Introduction of Section Note 2 to Section VI - if the goods
classifiable under Heading 3305, it cannot be classified in
any other heading of the Schedule.
D 12. Relevant Chapter Notes and Section Notes for
classification of the impugned goods:- Let us now examine the
relevant Headings, Sections and Chapter Notes pertaining to the
classification of the impugned goods. Chapter Note 3 to Chapter 33
(amended w.e.f. 28.02.2005), reads as under:-
E “Headings 3303 to 3307 apply, inter alia, to products, whether
or not mixed (other than aqueous distillates and aqueous solutions
of essential oils), suitable for use as goods of these headings
and put up in packings of a kind sold by retail for such use”
13. Chapter Note 3 to Chapter 33 envisages four key things, namely:
F
a. The product may or may not be mixed;
b. The product should be suitable for use as a good under these
headings (33 03 to 33 07);
c. The product should be put up in packings of a kind sold by retail
G for such use;
d. Headings 33 03 to 33 07 may also apply for other goods not
being covered by this Chapter Note (as indicated by the phrase
‘inter alia”)

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 427
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

14. It is important to note that theChapter Note is not phrased A
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
B
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 C
classification is permissible. The above is further made clear by amended
Section Note 2 to Section VI.
15. Section Note 2 to Section VI (after amendment w.e.f.
28.02.2005) reads as under:-
“Subject to Note 1 above, goods classifiable in heading 3004, 3005, D
3006, 3212, 3303, 3304, 3305, 3306, 3307, 3506, 3707 or 3808 by
reason of being put up in measured doses or for retail saleare
to be classified in those headings and in no other heading
of this schedule.”
Section Note 2 to Section VI of the first schedule is exclusionary E
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 F
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. G
16. 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

H
428 SUPREME COURT REPORTS [2018] 6 S.C.R.

A ‘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 reads as
under:-
B “Animal or Vegetable fats and Oils and their cleavage products;
prepared edible fats; Animal or Vegetable Waxes
Notes:
1. This Chapter does not cover:-
............
(e) fatty acids, prepared waxes, medicaments, paints,
C varnishes, soap, perfumery, cosmetic or toilet preparations,
sulphonated oils or other goods of Section VI; or
..............”
Note 1(e) to Chapter 15 clearly excludes goods covered under
Section VI in which Chapter 33 Tariff Item 33 05 is one of the items.
D 17. Whether Coconut Oil falls under Chapter 15 and
applicability of Interpretative Rule 3:- Contention of the assessee is
that the description of ‘Coconut Oil’ under Chapter 15 is specific and
hence applicable to the subject goods in terms of Rule 3(a) of the
Interpretative Rules. It is well-settled that Rule 3(a) of “General Rules
E for the Interpretation” is invokable only if the Headings and the relevant
Sections and the Chapter Notes are not clearly determinative of the
classification. Claim of the assessee is that the description ‘Coconut
Oil’ under Chapter 15 is specific and hence, applicable to their goods in
terms of Rule 3(a) of the Interpretative Rules, though appears attractive,
the same does not merit acceptance. This is because the classification
F of the impugned goods is based on the terms of Headings, relative Chapter
Notes and Section Notes which are paramount in this regard under the
primary and main Rule 1 of the Interpretative Rules.
18. M/s. Moreshwar and other job workers:- In the light of
the above amended provisions and the interpretation thereon, let me
G consider whether the impugned goods are classifiable under the Heading
33 05 or under Chapter 15 Item 15 13. For convenience, firstly, I refer
to the facts in C.A. Nos.6703-10 of 2009. Assessees/respondents in
these appeals viz., (i) Aishwarya Industries; (ii) Moreshwar Industries;
(iii) Shivam Enterprises; (iv) Sowparnika Enterprises are four job workers
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 429
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

and M/s. Marico Ltd. who is the registered owner of the brand A
‘Parachute’ for ‘Hair Oil’. M/s. Moreshwar Industries and three other
job workers had entered into a contract with M/s. Marico Ltd. for the
manufacture of HDPE bottles (High Density Polyethylene), screen
printing with the brand name and logo ‘Parachute’ of Marico Ltd. and
packing the bottles with coconut oil to be sold in the market under the
B
brand ‘Parachute’. From the materials on record, the process undertaken
by M/s. Moreshwar and others on the job work from M/s. Marico is
summarized as:- (a) M/s. Moreshwar and other job workers receive
coconut oil in tankers from M/s. Marico, Pondicherry; the said oil is
unloaded and stored in storage tanks at M/s. Moreshwar and other
respondents/job workers; (b) Then, after mechanical filtering and stored C
in another tanker, the same is packed into 50 ml, 100 ml, 200 ml and 500
ml ‘containers’ and ‘flip tops’; (c) these retail packs are then supplied to
M/s. Marico depot as per their dispatch schedule for being sold under
the brand name ‘Parachute’; and (d) the description given on the packings
is ‘100% pure coconut oil’ with the ‘Parachute’ mark. As the process
D
carried out by M/s. Moreshwar and other job workers is that after
mechanical filtering packing of goods from bulk to retail pack of a kind
(containers so far manufactured by them) and delivered to M/s. Marico
to be sold under the brand name ‘Parachute’, the activities of M/s.
Moreshwar and other job workers amount to manufacture in terms of
Section 2 (f)(iii) of Central Excise Act, 1944. According to Revenue, E
once this fact of manufacture of oil ‘suitable for use as ‘Hair Oil’’ is
established, classification under Chapter Heading 15 is ruled out and the
appropriate Heading is 33 05 by virtue of Chapter Note 3 to Chapter 33
and Note 2 to Section VI.
19. M/s. Madhan Agro Industries (P) Ltd. (MAIPL):- So far F
as the ‘MAIPL’, coconut (copra) is crushed and grounded and the oil-
cake and oil are separated and then the oil is filtered and purified. The
filtered oil is then stored in tanks and packed in pouches and bottles of
different measurements viz., 5 ml, 50 ml, 100 ml, 200 ml, 500 ml, and
1000 ml pouches, 50 ml, 100 ml, 200 ml and 500 ml plastic bottles, 100
ml, 200 ml, and 500 ml wide mouthed bottles, 200 ml tins, one litre and 2 G
litre cans and sold in the market. According to Revenue, MAIPL, tests
the products of their competitor’s such as ‘Parachute Hair Oil’ and
compare the results of their products to ensure the marketability of their
product. Case of Revenue is that plastic bottles have the provision for
H
430 SUPREME COURT REPORTS [2018] 6 S.C.R.

A making a small hole on the top and when the bottle is tilted and pressed
lightly, only a small quantity of oil comes out, which can be applied on the
hair and those coconut oil manufactured by M/s. MAIPL is suitable for
use as ‘Hair Oil’. The very nature of packing shows that the product is
meant to facilitate such use as ‘Hair Oil’ and the same is classifiable
under Chapter 33. It is alleged that with an intention to evade payment
B
of duty, M/s. MAIPL have mis-declared the excisable coconut oil
(un-perfumed Hair Oil) as ‘edible grade/oil’ filtered 100% pure coconut
oil.
20. Findings of the Tribunal:- The tribunal set aside the order
of the Commissioner by holding that Chapter 15 covers all varieties of
C coconut oil, edible as well as non-edible and it is not essential that the
edible coconut oil should be marketed in packaging approved by PFA
Rules for classifying it under Chapter 15 and that the earlier decision of
the Tribunal (prior to amendment) applies to the corresponding entries
even after amendment. In the case of MAIPL, after referring to earlier
D decisions of the Tribunal, CESTAT held as under:-
“...The packing of coconut oil in that case was not of the type
referred to, above or which could be solely and exclusively said to
be meant for application on hair only. As such the Tribunal held
that Chapter 2 to Chapter 33 was not applicable for classifying
E the goods in that case under Chapter 33. HSN Explanatory Notes
to Chapter 33 were same before and after 28.02.05. Moreover
entries under Chapter 15 relating to coconut oil in the HSN and
Central Excise Tariff after 28.02.2005 are also identical.
Therefore, the decision of the Tribunal in the above case
interpreting the scope of Chapter 15.13 and 33.05 of Central Excise
F Tariff applies to the corresponding entries even after 28.02.2005.
The above ratio of the decision of the Tribunal therefore squarely
applies to the present case also....”
21. Contention of the Revenue:- Learned Senior Counsel Mr.
A.K. Panda submitted that the tribunal failed to consider that by virtue
G of amendment to Central Excise Tariff Act, 1985 with effect from
28.02.2005, ‘Hair Oil’ other than perfumed ones merit classification under
tariff item No.3305.90.19. It was submitted that consequent to the
amendment, that so long as the product is ‘suitable for use as goods of
the heading’ and “put up in packing for retail sale for such use”,
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 431
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

whether mixed or not, is classifiable under Chapter Heading 33 05 and A
in the light of Section Note 2 to Section VI, it cannot be classified under
any other Heading in this Schedule. It was further submitted that CESTAT
relied upon various orders for referring to Chapter Note 2 to Chapter 33
which were though prior to amendment thereby failing to consider that
the Show Cause Notice and the Order-in-Original were passed pursuant
B
to the amended Chapter Note 2 to Chapter Note 33 and Section Note
with effect from 01.03.2005. Insofar as ‘Parachute’ is concerned,
Revenue places reliance upon various materials like Trade Mark
Registration and other materials as to depicting how the market has
understood, ‘Parachute’ as the ‘Hair Oil’. It was further submitted that
in case of conflict, the Notes contained in the Tariff Schedule to the C
CESTAT will prevail over that of the HSN and the impugned order cannot
be sustained.
22. Contention of the respondent(s)/Assessee(s): Contention
of the respondents/assessees is that 100% pure ‘Coconut Oil’ cover all
varieties of coconut (Copra oil) marked as ‘edible oil’ and manufactured D
under Prevention of Food Adulteration (PFA) licence the same cannot
be classified “preparation for use on hair” to be classified as ‘Hair
Oil’ under Chapter 33 Tariff Item 33 05 merely because of the small
size of the packings. Learned Senior Counsel Mr. Bagaria submitted
that under the statutory provision of the Edible Oils Packaging (Regulation)
Order, 1988 read with Sl. No.10 of Schedule III of the Standards of E
Weights & Measures (Packaged Commodities) Rules, 1977, edible oil
shall be packed in the specified sizes of 50 ml, 100 ml, 200 ml, 500 ml, 1
litre or 2 litres which are fully in accordance with the mandatory
requirement of the aforesaid statutory provisions. It is, therefore, submitted
that by packing the said ‘edible Oil’ as per the sizes as required under F
the law, ‘edible oil’ does not cease to become ‘edible oil’ and become
classifiable as ‘Hair Oil’ so as to attract classification under 33.05.
Reliance was placed upon the judgment of Rajasthan High Court in
Assistant Commissioner v. Marico Industries Ltd. 2006 SCC online
Raj 446 to contend that the small packings being done for convenience
of consumers to cater to different sections of consumers at the different G
economic levels, it would not make the ‘edible coconut oil’ to be “Hair
Oil” classifiable under Chapter 33. Reliance was also placed upon the
judgment of Allahabad High Court in Marico Limited v. Commissioner,
Commercial Taxes,UP (2015) 78 VST 423.
H
432 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 23. Whether the Tribunal was right in classifying the
impugned goods under Chapter 15:- The Tribunal held that Chapter
15 covers all varieties of coconut oil, edible as well as non-edible. Chapter
15 of Section III of the Schedule to CETA, 1985 covers “animal or
vegetable fats and oils”. Heading 1513 reads as under:-
B "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
-
C 1513 11 00 -- Crude oil
1513 19 00 -- Other

‘Coconut Oil’ manufactured and cleared by M/s. Moreshwar and
other job workers and MAIPL can be classified either as ‘Hair Oil’
under sub-heading 3305 or as ‘Vegetable Oil’ under sub-heading 1513.
D
However, when ‘Coconut Oil’ is put up in packing of a kind sold in retail
suitable for use as application on hair would merit classification under
tariff entry 33.05. This is the object of the legislature in bringing about
the amendment to Chapter Note 3 of Chapter 33 and Section Note 2 to
Section VI. Chapter Note 1(e) to Chapter 15 provides that “.....said
E Chapter does not cover goods of Section VI”. This exclusion is in
clear conformity and recognition of the fact that goods which otherwise
would fall under Section VI are classifiable in accordance with the
conditions of Chapter Notes contained in Chapter 33 (use of goods,
nature of packing, form etc.) and under no other Heading of the Schedule.
By holding that Chapter 15 covers all varieties of coconut oil, edible as
F
well as non-edible, the Tribunal erred in not keeping in view that the
object of the legislature in bringing about the amendment.
24. As discussed earlier, the process carried on by M/s. Moreshwar
and other job workers are:- (i) oil received from M/s. Marico is unloaded
and stored in storage tanks in the unit and it undergoes the process of
G mechanical filtering and stored in another tank, then sent through pipeline
for filling in the small containers by the filling machines; (ii) oil obtained
by leakage, waste, overflow etc. are collected and fed into the salvage
oil tank and the same is recycled and blended with 9 MT coconut oil in
tanker for two hours or 16 MT coconut oil tanker for three hours; (iii)
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 433
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

for manufacture of HDPE containers, HDPE granules and master batch A
in the required ratio is mixed and fed into the mould and blue colour
container is obtained; the fit container is sent to heating and then screen-
printing with blue, green and white colour printing ink for printing the
trademark and logo and other details as required by M/s Marico Ltd.;
(iv) waste grind materials and 8% of pellets are mixed with virgin granules
B
for manufacture of containers; and (v) the containers are then wrapped
with thin plastic and packed in cardboard boxes and dispatched to the
depot of M/s. Marico Ltd.
25. Order-in-Original by the Commissioner recorded findings of
fact that HDPE containers manufactured by M/s. Moreshwar and other
job workers that coconut oil stored in the tanks at M/s. Moreshwar after C
mechanical filtering is packed in 50 ml, 100 ml, 200 ml, 1 ltr., 2 ltr containers
for retail use and these retail packs are supplied to M/s. Marico Depot
as per the dispatch schedule. The description given on the packings is
100% pure coconut oil with ‘Parachute’ mark. So far as the first
component “the product may or may not be mixed”, as discussed earlier, D
the impugned goods “coconut oil” is pure oil and is not a mixed product
and thus, the first condition is satisfied. So far as the second condition,
“the product should be suitable for use as a good under these
headings (33 03 to 33 07)” is also satisfied. Thus, the first and second
components of Note 3 to Chapter Note 33 “the product may or may
not be mixed” and “the product should be suitable for use as a good E
under these Headings (33 05)” are satisfied.
26. As discussed infra by applying the ‘Common Parlance Test’,
pure coconut oil packed in small containers is understood by the dealer
and the consumer and in the market as ‘Hair Oil’. The expression
“suitable for use as goods in these headings” as used in the Chapter F
Note 3 to Chapter 33 indicates that oils suitable for use as ‘Hair Oil’ or
classifiable under Heading 33 05 even if they are not so used. As per
Note 3 to Chapter 33, what matters is suitability for such use, if the
answer to which is ‘Yes’, then the goods are classifiable under Chapter
33.So far as the next component, “the product should be put up in G
packings of a kind sold by retail facilitating such use”, is satisfied
then they are classified under Chapter 33. As pointed out in the Order-
in-Original and also as discussed earlier in the case of MAIPL and also
M/s. Moreshwar and other job workers, the product is packed in small

H
434 SUPREME COURT REPORTS [2018] 6 S.C.R.

A quantities in containers like 50 ml, 100 ml, 200 ml, 500 ml which also
contain the brand trademark ‘Parachute’.
27. So far as respondent-MAIPL is concerned, coconut is crushed
and pure coconut oil is packed in 5 ml, 50 ml, 100 ml, 200 ml, 500 ml and
one litre pouches and also containers in 50 ml, 100 ml, 200 ml, 500 ml
B and one litre cans and sold under the brand name ‘Shanthi’. Here again,
these pouches/containers in such small packings by construing them in
the sense as to how in the trade, dealers and consumers understood it.
The Commissioner was right in holding that they were ‘Hair Oil’ suitable
for use on hair.
C 28. Insofar as ‘Parachute’ is concerned, the Revenue relies upon
various materials as to how consumers and others engaged in the trade
understood “Parachute” for ‘Nature Care for Hair’including the
registration of Trademark No.1033842 Class-3-Parachute associated with
Hair Oil. Contention of Revenue is that the market identity of the subject
D goods-coconut oil is ‘Hair Oil’ and not as ‘Edible Grade Oil’. The
Revenue has also referred to the website of ‘Parachute’ (vide Order-
in-Original No.06/2008-(C) dated 28.02.2008) where ‘Parachute’ is
described as ‘Hair Oil’ and the same reads as under:-
“Nature Care Division (55% of turnover): Parachute was the first
E branded coconut oil in the Indian market and has become a generic
name for coconut oil used for hair application. It currently has a
52% market share in the branded coconut oil market. About 50%
of Marico’s turnover is contributed by the Parachute brand alone.
To build upon and strengthen the strong association between
coconut and Parachute brand, Marico has set up a Research
F Centre to develop new coconut based products. Over the years,
the company has launched several brand extensions such as
‘Parachute Jasmine’, ‘Parachute Dandruff Solution’, etc.....”
29. An argument was advanced by the respondent/assessee that
the packings/containers do not contain any label/indication to the effect
G that the subject goods are used on the hair. The contention that the
packings contain description as ‘Edible Oil’ and that there was no indication
on the packing that it is ‘Hair Oil’ is of no significance. After the
amendment, there is no necessity that the packings/containers should
bear label to the effect that the goods are used on the hair. As per Note
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 435
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

3 to Chapter 33, any product “suitable for use as goods in these A
headings and that put up in packings of a kind sold by retail for
such use”, has to be classified as ‘Hair Oil’ under Chapter 33. So long
as the product is suitable for use as ‘Hair Oil’ and if it is packed in such
a way that it is useable for the purposes of ‘Hair Oil’, it has to be classified
as ‘Hair Oil’ under Chapter 33.
B
30. Government of India, Trade Mark Registry and Public search
result indicate that Trademark No.1033842 Class-3-Parachute is
associated with Hair Oil, Hair lotions etc. Registration of the trademark
of the ‘Parachute’ brand is for selling items like hair oil, hair lotion, hair
growing preparation, hair tonics etc. The Tribunal held that the aspect
C
of label identified with the hair oil does not advance the case of Revenue
for classification of ‘Coconut Oil’ as ‘Hair Oil’ since the allegation that
job workers used green colour labels for marketing hair oil was absent in
the Show Cause Notice. Relevant portion of the order of the Tribunal is
as under:-
D
“7. ........Moreover, the material allegation of Marico that its job
workers used green coloured labels for marketing hair oil
exclusively was absent in the show-cause notice. Marico had
never marketed any product under the orange label and all along
marketed its entire range of products using the green label only.
We find that in the absence of any label which could be identified E
with a hair oil, this aspect of the label does not advance the
Revenue’s case for classification of the coconut oil as hair oil.
Use of a trademark or a label has no bearing on classification.”
The Tribunal is not right in saying that the Show Cause Notice
issued to the respondent-M/s. Moreshwar and other job workers was F
absent on using green coloured labels for marketing hair oil exclusively.
Para (3.4.2) of the Show Cause Notice refers to Screen-printing as
under:-
“.....HDPE granules and master batch in the required ratio is mixed
and fed into the mould and blue colour container is obtained. G
Runners and raisers are removed and the container is examined
and if it is not fit, the same is sent for grinding. The fit container
is sent to heating and then screen-printing with blue, green and
white colour printing ink for printing the trademark and logo and
other details as required by Marico Ltd.....”[Underlining added]
H
436 SUPREME COURT REPORTS [2018] 6 S.C.R.

A That apart para (3.4.5)(4.1) of the Show Cause Notice contains
scanned copy of the application for registration of the trademark in respect
of hair oil. Contents of Show Cause Notice, there are clear averments
as to the colour, printing of green ‘label’ and also the trademark. Hence,
the Tribunal is not right in saying that the Show Cause Notice is absent
as regards use of green coloured labels for marketing hair oil and that
B
registration of trademark for hair oil on the containers is of no significance
for classifying the product as hair oil under Chapter 33.
31. Whether classification of ‘Coconut Oil’ falls under
Chapter 15 and applicability of Interpretative Rule 3 is
acceptable:-After amendment Heading 15 13 reads as under:-
C
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
D 1513 11 00 - - Crude oil
1513 19 00 - - Other
- Palm kernel or babassu oil and fractions
thereof
32. Contention of the assessee is that the description of ‘Coconut
Oil’ under Chapter 15 is specific and hence applicable to the subject
E goods in terms of Rule 3(a) of the Interpretative Rules. It is well-settled
that Rule 3(a) of “General Rules for the Interpretation” is invokable
only if the Headings and the relevant Sections and the Chapter Notes
are not clearly determinative of the classification. The contention that
the description “coconut oil (copra)” under Chapter 15 is specific and
F hence, applicable to the impugned goods does not merit acceptance since
the classification of the goods is determinate on the harmonious
construction of headings, relative Chapter Notes and Section Notes and
the main Rule 1 of the Interpretative Rules. Classification of the impugned
goods is primarily based on the Headings, relative Chapter Notes and
Section Notes which are paramount in this regard as per Rule 1 of the
G Interpretative Rules.
33. Rule 3 provides for classification in case goods are classifiable
under two or more headings. For proper appreciation, at the risk of
repetition, it is necessary to refer to Rule 3 of the Interpretative Rules
which reads as under:-
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 437
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

3. When by application of sub-rule (b) of rule 2 or for any other A
reason, goods are, prima facie, classifiable under two or more
headings, classification shall be effected as follows:-
(a) the heading which provide the most specific description shall
be preferred to headings providing a more general description.
However, when two or more headings each refer to part only of B
the materials or substances contained in mixed or composite goods
or to part only of the items in a set, those headings are to be
regarded as equally specific in relation to those goods, even if one
of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or C
made up of different components, and goods put up in sets, which
cannot be classified by reference to (a), shall be classified as if
they consisted of the material or component which gives them
their essential character, insofar as this criterion is applicable.
(c) When goods cannot be classified by reference to (a) or (b), D
they shall be classified under the heading which occurs last in the
numerical order among those which equally merit consideration.
Rule 3(b) provides the manner of classification of mixtures,
composite goods consisting of different materials or made up of different
components and goods put up in sets for retail sale. As ‘Coconut Oil’ is E
not mixed or composite goods, Rule 3(b) does not have application. Rule
3(a) states that the most specific description will be preferred over the
more general one. In the present case, when item description is read
with the Chapter Notes, Section Notes and the tests for classification
that is Tariff Item 1513.19.00 and 3305.90.19 are equally specific. Hence,
as per Rule 3(c), when goods cannot be classified by reference to (a) or F
(b), they shall be classified under the heading which occurs last in
numerical order among those which equally merit classification. Hence,
the coconut oil manufactured by the respondents could rightly be classified
under heading 3305.90.19, as it occurs last in the numerical order of the
tariff. G
34. In Union of India and Ors. v. Pesticides Manufacturing
and Formulators Association of India, (2002) 8 SCC 410, this Court
has held that if there are two specific headings to which a product can
be referred, the one occurring subsequently would prevail.
H
438 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 35. The Tribunal set aside the demand on the ground that the
“coconut oil”would merit classification under Chapter Heading 15.03
of CETA, 1985 attracting ‘NIL’ rate of excise duty and not under Chapter
Heading 33.05 of the CETA attracting duty of 16% advalorem. The
Tribunal erred in not appreciating that with effect from 01.03.2005, the
Central Excise Tariff Act, 1985 has undergone an amendment as per
B
which (Note 3 to Chapter 33) Heading nos.3303 to 3307 would apply,
inter alia, to products whether or not mixed suitable for use as goods of
these headings and put up in packings of a kind sold by retail for such
use. The case laws which were reported in Kothari Products Ltd. v.
CCE2002 (139) ELT 633 (T); Srikant Sachets Pvt. Ltd. v. CCE 2005
C (180) ELT 401 (T); and Commissioner of Central Excise v. Essen
Products (I) Ltd.2006 (200) ELT 342 (T) etc. relied upon by the Tribunal
and the Board circular dated 31.08.1995 were dealing with the cases
pertaining to the period prior to 01.03.2005. The Tribunal was not right
in relying upon the earlier orders/circular dated 31.08.1995 prior to
amendment to base its conclusion that coconut oil both edible and non-
D
edible merits classification under Chapter 15.
36. Tests for Classification: The Supreme Court has consistently
taken the view that, in determining the meaning or connotation of words
and expressions describing an article in a tariff schedule, one principle
which is fairly well-settled is that those words and expressions should be
E construed in the sense in which they are understood in the trade, by the
dealer and the consumer. Whether a particular article will fall within a
particular tariff heading or not, has to be decided on the basis of as to
how that article is understood in ‘common parlance’ or in ‘commercial
world’ and not as per scientific or technical meaning. In the case of
F Asian Paints India Ltd. v. Collector of Central Excise (1988) 2 SCC
470, it has been held that when definition of a word has not been given,
it must be considered in its popular sense and not according to scientific
or technical sense.
37. After referring to various judgments, in Plasmac Machine
G Manufacturing Co. (P) Ltd. v. Collector of Central Excise,
Bombay1991 Supp (1) SCC 57, it was held by this Court as under:-
“15. ..... It is an accepted principle of classification that the goods
should be classified according to their popular meaning or as they
are understood in their commercial sense and not as per the
H scientific or technical meaning. Indo International Industries v.
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 439
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

CST ((1981) 2 SCC 528 and Dunlop India Ltd. v. Union of A
India (1976) 2 SCC 241 have settled this proposition. How is the
product identified by the class or section of people dealing with or
using the product is also a test when the statute itself does not
contain any definition and commercial parlance would assume
importance when the goods are marketable as was held in Atul
B
Glass Industries (Pvt.) Ltd. v. CCE (1986) 3 SCC 480 and Indian
Aluminium Cables Ltd. v. Union of India (1985) 3 SCC 284. In
Asian Paints India Ltd. v. CCE (1988) 2 SCC 470 which was a
case of emulsion paint, at para 8 it was said: (SCC p. 473, para 8)
“It is well settled that the commercial meaning has to be given
to the expressions in tariff items. Where definition of a word C
has not been given, it must be construed in its popular sense.
Popular sense means that sense which people conversant with
the subject matter with which the statute is dealing, would
attribute to it.””
38. In Dabur Industries Ltd. v. Commissioner of Central D
Excise, Jamshedpur (2005) 4 SCC 9, it was held that in classifying a
product, the scientific or technical meaning is not to be resorted to but
the test was to see what the persons using the product understand it to
be.
39. In Commissioner of Central Excise v. Wockhardt Life E
Sciences Limited (2012) 5 SCC 585, this Court emphasized “Common
Parlance Test” or the “Commercial Usage Test” in paras (33) to (37)
and held as under:-
“33. There is no fixed test for classification of a taxable commodity.
This is probably the reason why the “common parlance test” or F
the “commercial usage test” are the most common (see A.
Nagaraju Bros. v. State of A.P. 1994 Supp (3) SCC 122). Whether
a particular article will fall within a particular tariff heading or not
has to be decided on the basis of the tangible material or evidence
to determine how such an article is understood in “common G
parlance” or in “commercial world” or in “trade circle” or in its
popular sense meaning. It is they who are concerned with it and it
is the sense in which they understand it that constitutes the
definitive index of the legislative intention, when the statute was
enacted (see Delhi Cloth and General Mills Co. Ltd. v. State
of Rajasthan (1980) 4 SCC 71). H
440 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 34. One of the essential factors for determining whether a product
falls within Chapter 30 or not is whether the product is understood
as a pharmaceutical product in common parlance [see CCE v.
Shree Baidyanath Ayurved Bhavan Ltd. (2009) 12 SCC 419
and CCE v. Ishaan Research Lab (P) Ltd. (2008) 13 SCC 349].
Further, the quantity of medicament used in a particular product
B
will also not be a relevant factor for, normally, the extent of use of
medicinal ingredients is very low because a larger use may be
harmful for the human body. [Puma Ayurvedic Herbal (P) Ltd.
v. CCE (2006) 3 SCC 266, State of Goa v. Colfax Laboratories
Ltd. (2004) 9 SCC 83 and B.P.L. Pharmaceuticals Ltd. v. CCE
C 1995 Supp (3) SCC 1.]
35. However, there cannot be a static parameter for the correct
classification of a commodity. This Court in Indian Aluminium
Cables Ltd. v. Union of India (1985) 3 SCC 284 has culled out
this principle in the following words: (SCC p. 291, para 13)
D “13. To sum up the true position, the process of manufacture
of a product and the end use to which it is put, cannot necessarily
be determinative of the classification of that product under a
fiscal schedule like the Central Excise Tariff. What is more
important is whether the broad description of the article fits in
E with the expression used in the Tariff.”
36. Moreover, the functional utility and predominant or primary
usage of the commodity which is being classified must be taken
into account, apart from the understanding in common parlance.
[See O.K. Play (India) Ltd. v. CCE (2005) 2 SCC 460, Alpine
F Industries v. CCE (2003) 3 SCC 111, Sujanil Chemo Industries
v. CCE & Customs (2005) 4 SCC 189, ICPA Health Products
(P) Ltd. v. CCE (2004) 4 SCC 481, Puma Ayurvedic Herbal
(2006) 3 SCC 266, Ishaan Research Lab (P) Ltd. (2008) 13
SCC 349 and CCE v. Uni Products India Ltd. (2009) 9 SCC
295]
G
37. A commodity cannot be classified in a residuary entry, in the
presence of a specific entry, even if such specific entry requires
the product to be understood in the technical sense (see Akbar
Badrudin Giwani v. Collector of Customs (1990) 2 SCC 203
and Commr. of Customs v. G.C. Jain (2011) 12 SCC 713). A
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 441
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

residuary entry can be taken refuge of only in the absence of a A
specific entry; that is to say, the latter will always prevail over the
former [see CCE v. Jayant Oil Mills (P) Ltd. (1989) 3 SCC
343, HPL Chemicals Ltd. v. CCE (2006) 5 SCC 208, Western
India Plywoods Ltd. v. Collector of Customs (2005) 12 SCC
731 and CCE v. Carrier Aircon Ltd. (2006) 5 SCC 596].
B
40. In Commissioner of Central Excise, Delhi v. Carrier Aircon
Ltd.(2006) 5 SCC 596, this Court held as under:-
“14. End use to which the product is put to by itself cannot be
determinative of the classification of the product. See Indian
Aluminium Cables Ltd. v. Union of India (1985) 3 SCC 284. C
There are a number of factors which have to be taken into
consideration for determining the classification of a product. For
the purposes of classification the relevant factors inter alia are
statutory fiscal entry, the basic character, function and use of the
goods. When a commodity falls within a tariff entry by virtue of
the purpose for which it is put to (produced), the end use to which D
the product is put to, cannot determine the classification of that
product.”
41. Chapter 15 of Section 3 of Central Excise Tariff deals with
“Animal or Vegetable fats and Oils and their cleavage products;
prepared edible fats; Animal or Vegetable Waxes”. Sub-Heading 1513 E
deals with coconut (copra). Before considering the contentious issues
as to the classification of the impugned goods, it is necessary to point out
as to how ‘Coconut Oil’ is understood and treated in the market.
42. In Jain Exports Pvt. Ltd. v. Union of India1987 (29) ELT
753 Del, the High Court of Delhi dealt with the use of ‘Coconut Oil’ and F
in the context of importability of ‘Coconut Oil’, held as under:-
“25. ....it is well known that the coconut oil is not at all used as an
edible oil in a very large part of our country. Almost all the parts
of India up to Vindhyas do not use coconut oil as edible medium.
Even in rest of the country though it is in use extensively in some G
very small part, its use in most of the other part is small average.
So ordinarily if a person was to go to the market and ask for
coconut oil, the normal question he would be asked will be whether
he needs it as hair oil or shampoo. No one normally will understand
H
442 SUPREME COURT REPORTS [2018] 6 S.C.R.

A coconut oil to mean only edible variety because such is not the
normal major use. A person would have to specifically clarify
that by asking for coconut oil he is asking for edible variety in
order to make his intention clear. Thus by itself and in ordinary
parlance coconut oil in the import policy would be understood to
include both edible variety and industrial variety of coconut oil. If
B
only one variety of coconut oil was meant to be covered, it would
be more consistent to hold that it is industrial variety considering
the overwhelming use of coconut oil for non-edible purpose. But
an entry would never be restricted only to edible variety of coconut
oil......”. [Underlining added]
C Though the above observation is in the context of importability of
‘Coconut Oil’, the factum of overwhelming use of ‘Coconut Oil’ and as
to coconut oil is normally understood as ‘Hair Oil’ cannot be ignored. 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
D 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’. The moment we held
that the impugned goods-coconut oil is suitable for use as ‘Hair Oil’ as
discussed infra, it has to be classified only under Chapter 33.
43. As pointed out earlier, Revenue relies upon number of materials
E that those in trade, traders and consumers have understood ‘Parachute’
as ‘Hair Oil’. In para (36) of Wockhardt Life SciencesLtd. quoted
above, this Court laid emphasis to the “functional utility and
predominant or primary usage of the commodity” that is to be taken
into account while classifying the product. As discussed earlier, after
F amendment what is more relevant is the suitability of the goods for being
used as ‘Hair Oil’ and the usage of the product in common parlance.
44. In the Order-in-Original No.06/2008-(C), reference is also
referred to feedback about the product by their consumers and their
impressions and experiences. It also refers to the interview of Mr. Arvind
Mediratta, Head of Marketing Division of M/s. Marico Limited stating
G
that ‘Parachute’ brand is associated with ‘Hair Oil’ whereas Saffola
brand is associated with edible (cooking) oil. The revenue also refers to
an article in the Financial Express dated 14.06.2001 where Mr. Srikand
Gupta, Chief Executive Officer (CEO), Nature Care Division of M/s.
Marico stated that they wanted the ‘Parachute’ brand to be perceived
H as a cosmetic brand with the utility of nourishing hair.
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 443
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

45. The appellant has relied upon the following write up on coconut A
oil by the Coconut Development Board (a statutory body under the
Ministry of Agriculture):-
“Coconut oil is used in the country as a cooking fat, hair oil, body
oil and industrial oil..... Coconut oil is marketed in bulk as well as
in packs ranging from sachets containing 5 ml to 15 kg tins. The B
branded coconut oil in small packs is mainly marketed as hair oil
and body oil.”
46. A taxing statute is being one levying a tax on goods must, in
the absence of a technical term or a term of science or art, be presumed
to have used an ordinary term as coal according to the meaning ascribed C
to it in common parlance. In Commissioner of Sales Tax, Madhya
Pradesh, Indore v. Jaswant Singh Charan Singh, AIR 1967 SC 1454,
it was held as under:-
“5. The result emerging from these decisions is that while
construing the word “coal” in Entry I of Part III of Schedule II, D
the test that would be applied is what would be the meaning which
persons dealing with coal and consumers purchasing it as fuel
would give to that word. A sales tax statute is being one levying a
tax on goods must in the absence of a technical term or a term of
science or art, be presumed to have used an ordinary term as coal
according to the meaning ascribed to it in common parlance. E
Viewed from that angle both a merchant dealing in coal and a
consumer wanting to purchase it would regard coal not in its
geological sense but in the sense as ordinarily understood and
would include “charcoal” in the term “coal”. It is only when the
question of the kind or variety of coal would arise that a distinction F
would be made between coal and charcoal; otherwise, both of
them would in ordinary parlance as also in their commercial sense
be spoken as coal.”
47. After referring to various judgments on the point of common
parlance test, in Commissioner of Central Excise, New Delhi v. G
Connaught Plaza Restaurant Private Ltd., New Delhi (2012) 13 SCC
639, it was held as under:-
“33. Therefore, what flows from a reading of the aforementioned
decisions is that in the absence of a statutory definition in precise
terms; words, entries and items in taxing statutes must be construed
H
444 SUPREME COURT REPORTS [2018] 6 S.C.R.

A in terms of their commercial or trade understanding, or according
to their popular meaning. In other words they have to be constructed
in the sense that the people conversant with the subject-matter of
the statute, would attribute to it. Resort to rigid interpretation in
terms of scientific and technical meanings should be avoided in
such circumstances. This, however, is by no means an absolute
B
rule. When the legislature has expressed a contrary intention, such
as by providing a statutory definition of the particular entry, word
or item in specific, scientific or technical terms, then, interpretation
ought to be in accordance with the scientific and technical meaning
and not according to common parlance understanding.”
C 48. In the case of Alpine Industries v. Collector of Central
Excise, New Delhi(2003) 3 SCC 111, the question was whether “Lip
Salve” could be classifiable as a preparation for care of skin or as a
medicament. The product was mainly supplied to the Defence
Department for use by military personnel who are posted in high-altitude
D areas. In Commissioner of Central Excise, Calcutta v. Sharma
Chemical Works (2003) 5 SCC 60, this Court held that in interpreting
provisions of a statute like the Excise Act, the popular meaning as
understood by the users should be applied and not the scientific or technical
meaning.
E 49. As held in Jain Exports Pvt. Ltd., the factum of overwhelming
use of ‘Coconut Oil’ as ‘Hair Oil’ in most parts of the country cannot be
ignored. No one will normally understand ‘Coconut Oil’ to mean only as
‘edible oil’ because such is not the major use of ‘edible oil’. Applying
the common parlance test and also ‘end use of the product’, coconut
oil is predominantly understood by the users namely dealers/consumers
F only as ‘Hair Oil’ and not as ‘edible oil’and hence, classifiable only
under Chapter 33 and not under Chapter 15.
50. After the amendment (w.e.f. 28.02.2005) what is relevant is
‘suitability of the goods for being used as Hair Oil’ for classifying
the same under 33.05. ‘Coconut Oil’ packed in small sachets/containers
G suitable for being used as ‘Hair Oil’ is classifiable under Chapter Tariff
Item 3305. When a good is classifiable under tariff item 3305, by virtue
of amended Section Note 2 to Section VI, no other classification is
permissible. By consideration of the materials placed on record and

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 445
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

also applying the’Common Parlance Test’, coconut oil packed in small A
sachets/containers understood in the market by dealers/consumers as
‘Hair Oil’ is classifiable under Chapter 33, tariff item 33 05. In the
case of MAIPL, ‘Coconut Oil’ packed in small sachets/containers suitable
for being used as ‘Hair Oil’ are classifiable under Chapter 3305. In
case of ‘Parachute’, this is further fortified by various materials placed
B
on record and also registration of its Trademark No.1033842 Class-3
Parachute associated with “Hair Oil, Hair lotion etc.”
51. Re. Contention HSN Notes to Chapter Note 3 of Chapter
33 is the same as it was prior to amendment:- The Tribunal held
that “HSN Explanatory Notes to Chapter 33 were same before and
after 28.02.2005.” Moreover, Notes under Chapter 15 relating to C
‘Coconut Oil’ in the HSN and Central Excise Tariff after 28.02.2005
are also identical. Mr. Bagaria, learned senior counsel for the assessee
urged that the changes brought about by the amendment to Chapter
Note 3 of Chapter 33 is of no significance since HSN Notes to Chapter
Note 3 of Chapter 33 is exactly the same as in the Central Excise Tariff D
prior to amendment. It was submitted that Explanatory Notes in HSN
clarified the purport, meaning, scope and effect of Chapter Note 3 of
Chapter 33. It was submitted that since Central Excise Tariff is based
on HSN, for resolving any dispute relating to tariff classification, HSN is
a safe guide. In this regard, reliance is placed upon Collector of Central
Excise, Shillong v. Woods Craft Product Ltd. (1995) 3 SCC 454, E
Commissioner of Customs and Central Excise, Goa v. Phil
Corporation Limited(2008) 17 SCC 569 and O.K. Play (India) Ltd. v.
Commissioner of Central Excise, Delhi-III, Gurgaon(2005) 2 SCC
460.
F
52. The Harmonized Commodity Description and Coding System
(HS) of tariff nomenclature, generally referred to as the “Harmonized
System of Nomenclature (HSN)” is an internationally standardized
system of names and numbers for classifying traded products, developed
and maintained by the World Customs Organization (WCO) (formerly
the Customs Co-operation Council), an independent inter-governmental G
organization [Source: World Customs Organization:
http:// www. wcoomd.org/en/topics/nomenclature/overview/what-is-
the-harmonized-system. aspx]. Along with the HSN, are the

H
446 SUPREME COURT REPORTS [2018] 6 S.C.R.

A Explanatory Notes. They do not form an integral part of the Harmonized
System Convention. However, as approved by the WCO Council, they
constitute the official interpretation of the Harmonized System at the
international level and are an indispensable complement to the System.
[World Customs Council, retrieved from: http://www.wcoomd.org/
en/topics/nomenclature/instrument-and-tools/tools-to-assist-with-
B
the-classification-in-the-hs/explanatory-notes.aspx].

53. The Central Excise Tariff Act, 1985 (CETA) is based on the
Harmonized System of Nomenclature (HSN), which is an internationally
accepted product coding system formulated under the auspice of the
C General Agreement on Tariffs Trade (GATT). In Commissioner of
Customs and Central Excise, Goa v. Phil Corporation Ltd. (2008)
17 SCC 569, this Court explained the HSN as under:-

“29. ...The Central Excise Tariff Act is broadly based on the system
of classification from the international convention called the
D Brussels Convention on the Harmonized Commodity Description
and Coding System (Harmonized System of Nomenclature) with
necessary modifications. HSN contains a list of all the possible
goods that are traded (including animals, human, hair, etc.) and as
such the mention of an item has got nothing to do whether it is
manufactured and taxable or not”
E
54. HSN Explanatory Notes provide a commentary on the scope
of each heading, giving a list of the main products included and excluded,
together with technical description of the goods concerned (their
appearance, properties, method of production and uses) and practical
F guidance for their identification. The Explanatory Notes also clarify the
scope of particular sub-headings wherever appropriate. However, HSN
or the Explanatory Notes thereon cannot supersede the relevant notes
contained in the Tariff Schedule. They can be relied upon as a safe
guide in cases of doubt.

G 55. In the case in hand, we are concerned with classification of
goods - ‘Coconut Oil’ between two Chapters both falling within first
Schedule to Central Excise Tariff Act, 1985. For proper appreciation,
we may usefully refer to the relevant HSN Explanatory Notes relating
to Chapter 33 and Chapter 33 of CETA Tariff Notes:-

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 447
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

A
HSN Explanatory Notes CETA Tariff Notes
Chapter 33 Chapter 33
Essential Oils and Resinoids; Essential Oils and Resinoids,
Perfumery, Cosmetic or Toilet Preparations Perfumery, Cosmetic or Toilet
Preparations
Chapter Notes:
Notes:
.......... B
3. Heading 33.03 to 33.07 apply, inter alia, to ..................
products, whether or not mixed (other than aqueous 3. Heading 3303 to 3307 apply, inter alia,
distillates and aqueous solutions of essential oils), to products, whether or not mixed (other
suitable for use as goods of these headings and put up
than aqueous distillates and aqueous
in packings of a kind sold by retail for such use. solutions of essential oils), suitable for use
as goods of these headings and put up in
packings of a kind sold by retails for such
C
General use.
...........
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 D
Chapter).
The products of headings 33.03 to 33.07 remain in
these headings whether or not they contain subsidiary
pharmaceutical or disinfectant constituents, or are
held out as having subsidiary therapeutic or
prophylactic value (see Note 1(d) to Chapter 30).
However, prepared room deodorizers remain E
classified in heading 33.07 even if they have
disinfectant properties of more than a subsidiary
nature.
Preparation (e.g. varnish) and unmixed products (e.g.
unperfumed powdered talc, fuller's earth, acetone,
alum) which are suitable for other uses in addition to F
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 G
deodorizers; or
(b) Put up in a form clearly specialized to such
use (e.g. nail varnish put up in small bottles
furnished with the brush required for
applying the varnish).

H
448 SUPREME COURT REPORTS [2018] 6 S.C.R.

A

33.05 -PREPARATIONS FOR USE ON 3305- Preparations for use on
THE HAIR the hair

................ ...............
B
This heading covers:- 3305 90 - Other

1........ -- Hair Oil
2.........
3.........
4. Other hair preparations, such as
C brilliantines, hair oils, creams ("pomades")
and dressings, hair dyes and bleaches used
on the hair; cream-rinses

56. So far as Chapter Note 3 to Chapter 33, CETA Amendment
D
Act, 2004 has the same Chapter Note as the HSN. However, the general
explanation of HSN adds further conditions for the product to be
classifiable under Chapter 33 regarding packings of a kind sold to the
consumer and put up with labels and literatures that they are for use for
such purpose. To put it in other words, Chapter Note 3 to Chapter 33 as
E contained in the HSN, General Explanation to the said HSN Notes places
certain conditions, i.e.:-

(a) [when the goods are] In packings of a kind sold to the
consumer and put up with labels, literature or indications that they are
for use as perfumery, cosmetic or toilet preparations, or as room
F deodorizers; or

(b) Put up in a form clearly specialized to such use (e.g. nail
varnish put up in small bottles furnished with the brush required for
applying the varnish).
G It is important to note that 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

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 449
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

with effect from 28.02.2005, the Parliament consciously chose not to A
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, post-amendment would be against the intent of
B
the Parliament. Hence, HSN Chapter Note cannot be relied upon to
determine the classification rather the CETA Tariff Chapter Note must
be considered.
57. The relevant HSN Explanatory Notes and competing CETA
Tariff Note, insofar as Section Note 2 to Section VI is as under:- C
HSN Explanatory Notes CETA Tariff Notes
Section VI Section VI
Products of the Chemical or Allied Industries Products of the Chemical or Allied
Industries
Section Notes.
After amendment D
........
Notes:
2. Subject to Note 1 above, goods classifiable in
Heading Nos. 30.04, 30.05, 30.06, 32.12, 33.03, ...........
33.04, 33.05, 33.06, 33.07, 35.06, 37.07 or 38.08
2. Subject to Note 1 above, goods
by reason of being put up in measured doses or
classifiable in Headings 3004, 3005,
for retail sale are to be classified in those
3006, 3212, 3303, 3304, 3305, 3306,
headings and in no other heading of the E
3307, 3506, 3707 or 3308 by reason of
Nomenclature.
being put up in measured doses or for
3. Goods put up in sets consisting of two or more retail sale are to be classified in those
separate constituents, some or all of which fall in headings and in no other heading of
this Section and are intended to be mixed this schedule.
together to obtain a product of Section VI or VII,
are to be classified in the heading appropriate to F
that product, provided that the constituents are:-
(a) having regard to the manner in which
they are put up, clearly identifiable as
being intended to be used together
without first being repacked;
(b) presented together; and G
(c) identifiable, whether by their nature or by
the relative proportions in which they are
present, as being complementary one to
another.

H
450 SUPREME COURT REPORTS [2018] 6 S.C.R.

A
General
Section Note 1
.........
Section Note 2

Section Note 2 provides that goods (other than
B 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
C 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.

D
58. As discussed earlier, CETA Amendment Act, 2004 amended
Section Note 2 to Section VI. The rigours placed for a product to be
classified under these Headings are not prevalent in the CETA although
they are prevalent in the HSN. The legislature consciously chose not to
import the conditions and rigours placed in the HSN Explanatory Notes
E and the following as found in HSN does not find place in the amended
Section Note 2 to Section VI:-
“(a) having regard to the manner in which they are put up, clearly
identifiable as being intended to be used together without
first being repacked;
F
(b) presented together; and
(c) identifiable, whether by their nature or by the relative
proportions in which they are present, as being
complementary one to another.”
G It is clear from the above, that 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.

H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 451
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

59. In Collector of Central Excise, Shillong v. Woods Craft A
Product Ltd.(1995) 3 SCC 454, this Court held HSN is a safe guide for
interpretation and entitled to great consideration. The relevant portion
of the said judgment is as under:-
“12. It is significant, as expressly stated, in the Statement of
Objects and Reasons, that the Central excise tariffs are based on B
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 C
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 D
in HSN has been adopted, for enacting the Central Excise Tariff
Act, 1985, must be preferred, in case of any difference between
the meaning of the expression given in the HSN and the meaning
of that term given in the Glossary of Terms of the ISI.”
60. However, in Camlin Ltd. v. Commissioner of Central
Excise, Mumbai(2008) 9 SCC 82, this Court held that if the entries E
under HSN and the entries under the Central Excise Tariff Act are
different then reliance cannot be placed upon HSN Notes for the purposes
of classification of goods under the Central Excise Tariff. The relevant
portion of the said judgment is as under:-
“24. In our considered view, the Tribunal erred in relying upon F
the HSN for the purpose of marker inks in classifying them under
Chapter Sub-Heading 3215.90 of the said Tariff. The Tribunal
failed to appreciate that the entries under the HSN and the entries
under the said Tariff are completely different. As mentioned above,
it is settled law that when the entries in the HSN and the said
G
Tariff are not aligned, reliance cannot be placed upon HSN for
the purpose of classification of goods under the said Tariff. One
of the factors on which the Tribunal based its conclusion is the
entries in the HSN. The said conclusion in the order of the Tribunal
is, therefore, vitiated and, accordingly, set aside. We agree with
the findings recorded by the Commissioner (Appeals).” H
452 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 61. As discussed earlier, 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. In instances of
B
conflict, the Notes contained in the Tariff Schedule to the CETA will
prevail over that of the HSN. One of the factors on which the Tribunal
based its conclusion was the entries in HSN and its observation that
entries in HSN to Chapter 33 and CETA Tariff Notes of Chapter 33 are
one and the same even after amendment. In my view, the Tribunal
C erred in not keeping in view the principles laid down by this Court in
Camlin Ltd. casethat when the Notes in HSN and the Tariff are not
aligned, reliance cannot be placed upon the HSN for the purpose of
classification of the goods.
62. Circular No.145/56/95-CX dated 31.08.1995was issued
D in the context of classification of ‘Coconut Oil’ under the Central Excise
Tariff as it existed prior to the amendment. The said circular clarified
that for classification of ‘Coconut Oil’ under Chapter 33 (as ‘Hair Oil’),
it must satisfy the requirements of Chapter Note 2 of Chapter 33. As
per the said circular, though ‘Coconut Oil’ may be capable of being used
as ‘Hair Oil’, the product must satisfy the criteria of label/literature on
E packing of ‘Coconut Oil’ showing its use as ‘Hair Oil’ as per Note 2 to
Chapter 33. The relevant part of the Circular dated 31.08.1995 is as
under:-
“6. .....In the CET Heading 3305 covers “preparations for use on
the hair”.
F
......
9. Therefore, keeping in view of Chapter Notes, HSN Notes, the
Tariff Conference of 1991, the report of D.G. (A.E.) and the
opinion of Chief Chemist, CRCL, it is felt that coconut oil whether
G pure or refined and whether packed in small or large containers
merits classification under Heading No.1503 as long as it satisfies
the criteria of ‘fixed vegetable oil’ laid down in Chapter Note 3 of
Chapter 15. It is also clarified that if the containers bear labels/
literature, etc., indicating that it is meant for application on hair, as
specified under Note 2 of Chapter 33 and/or if the coconut oil has
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 453
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

additives (other than BHA) or has undergone processes which A
made it a preparation for use on hair as mentioned in Chapter
Note 6 of Chapter 33 then the coconut oil may merit classification
under Chapter 33.”
63. In exercise of powers under Section 37B of Central Excise
Act, 1944, CBEC issued Circular No.102/05/2006-CX-3 dated B
03.06.2009 withdrawing the Circular No. 145/56/95-CX dated
31.08.1995. After referring to the amendment and old and new Chapter
Notes and Section Notes, the Circular stated that the ‘Coconut Oil’
packed in small containers of sizes upto 200 ml shall be classified under
Heading 3305. The relevant portion of the said Circular reads as under:-
C
“5. .....Hence, in view of the amendments/insertion of Chapter
Note and Section Note, the classification of coconut oil would
depend upon the fact as to how the majority of the customers use
the said product. Therefore, if coconut oil is packed in packages
which are generally meant for sale in retail as hair oil, in that case,
the said product would be classified as hair oil under heading 3305, D
even though few consumers may use it as edible oil.
Through field survey, it has been gathered that smaller packs upto
the sizes of 200 ml are normally used as hair oil by the customers.
It has also been reported that in small pack sizes upto 200ml are
stacked along with other hair oil care preparations/cosmetics and E
not in edible oil section in the retail shops. Enquiries also reveal
that small packs of coconut oil displayed at the hair care shelves
are used as hair oil only and the customer ask for the smaller
packages or the sachets for using them as ‘hair oil’.
6. In view of foregoing discussion, it is concluded that coconut oil F
packed in containers upto 200ml may be considered as generally
used as hair oil. This would bring uniformity in assessment in
respect of coconut oil sold in small containers irrespective of the
fact as to whether its use as hair oil is indicated on containers/
labels or not. Therefore, following instructions/directions are G
issued:-
(i) Circular No. 145/56/95-CX dated 31.08.1995 stands withdrawn.
(ii) the coconut oil packed in small container of sizes upto 200ml
shall be classified under heading 3305.”
H
454 SUPREME COURT REPORTS [2018] 6 S.C.R.

A 64. In Raj Oil Mills Ltd. v. Commissioner, Central Excise2014
(314) ELT 541 (Tri. - Mumbai), it was held that repacking of ‘Edible
Grade Coconut Oil’ from bulk pack to retail pack of 200 ml and less are
not classifiable under Chapter 33 of Central Excise Tariff which covers
“cosmetic or toilet preparations” rather it would be classifiable under
Chapter 15 which covers “animal or vegetable fats and oils and their
B
cleavage products”. Challenging the judgment of the Tribunal in Raj
Mills Ltd. case, the appeals preferred by the Revenue in CA Nos.
2023-37 of 2014 were dismissed on 17.12.2014 by holding as under:-
“1. We have heard learned Additional Solicitor General appearing
for the Revenue.
C
2. Delay condoned.
3. We find no merit in the Civil Appeals. The Civil Appeals are
dismissed.”
After the judgment of the Supreme Court, the Circular dated
D 03.06.2009 was withdrawn by another Circular No.103/01/2015-CX-3
dated 12.10.2015. Now, the issue of classification of ‘Coconut Oil’ as
per the Circular dated 12.10.2015 is to be decided by the field by taking
into consideration the facts of the case read with the judicial
pronouncements. Merely because the ‘Coconut Oil’ of retail pack of
E 200 ml or less are not classifiable under Chapter 33 of the Central Excise
Tariff and the civil appeals preferred by the Revenue were dismissed by
the Supreme Court, it does not mean that it has attained finality. As
pointed out earlier, civil appeals preferred by the Revenue were dismissed
by a non-speaking order at the admission stage and hence, the “Doctrine
of Merger” is not applicable. When the order passed by the Supreme
F Court is not a speaking order, it is not correct to assume that the Supreme
Court had decided implicitly all the questions in relation to the merits of
the order. Now, the position (as per Circular dated 12.10.2015) is to
decide the issue of classification by the field taking into consideration
the facts of the case read with judicial pronouncements.
G 65. Conclusion: Impugned orders of the Tribunal are set aside
and the appeals preferred by the revenue are allowed with the following
findings:-
i. Tribunal is not right in holding that Chapter 15 covers all varieties
of ‘coconut oil’ both edible and non-edible. The judgments relied
H
COMMISSIONER OF CENTRAL EXCISE v. MADHAN AGRO 455
INDUSTRIES (I) PVT. LTD. [R. BANUMATHI, J.]

upon by the Tribunal and the Board’s circular dated 31.08.1995 A
were prior to 2004 amendment. The Tribunal was not right in
relying upon the earlier orders/circular dated 31.08.1995 prior
to amendment to base its conclusion that coconut oil both edible
and non-edible merits classification under Chapter 15. Hence
the impugned orders of the Tribunal are liable to be set aside.
B
ii. After the amendment (w.e.f. 28.02.2005) what is relevant is
‘suitability of the goods for being used as Hair Oil’ for
classifying the same under 33.05. ‘Coconut Oil’ packed in small
sachets/containers suitable for being used as ‘Hair Oil’ is
classifiable under Chapter Tariff Item 3305. When a good is
classifiable under tariff item 3305, by virtue of amended Section C
Note 2 to Section VI, no other classification is permissible.
iii. Rule 3(a) states that the most specific description will be
preferred over the more general one. In the present case, when
item description is read with the Chapter Notes, Section Notes
and the tests for classification that is Tariff Item 1513.19.00 D
and 3305.90.19 are equally specific. Hence, as per Rule 3(c),
when goods cannot be classified by reference to (a) or (b),
they shall be classified under the heading which occurs last in
numerical order among those which equally merit classification.
Hence, the coconut oil manufactured by the respondents could E
rightly be classified under heading 3305.90.19, as it occurs last
in the numerical order of the tariff.
iv. By consideration of the materials placed on record and also
applying the’Common Parlance Test’, coconut oil packed in
small sachets/containers understood in the market by dealers/ F
consumers as ‘Hair Oil’ is classifiable under Chapter 33, tariff
item 33 05.
v. After the amendment to Central Excise Tariff Act (w.e.f.
28.02.2005), there is material difference between the relevant
Explanatory Notes in the HSN as against those provided in the G
Tariff Schedule to Central Excise Tariff Act, 1985. As held in
Camlin Ltd. v. Commissioner of Central Excise, Mumbai
(2008) 9 SCC 82, when the Explanatory Notes in the HSN and
the Notes tariff schedule are not aligned, reliance cannot be
placed upon HSN for the purpose of classification of goods.
H
456 SUPREME COURT REPORTS [2018] 6 S.C.R.

A vi. In the case of MAIPL, ‘Coconut Oil’ packed in small sachets/
containers suitable for being used as ‘Hair Oil’ are classifiable
under Chapter 3305. In case of ‘Parachute’, this is further
fortified by various materials placed on record and also
registration of its Trademark No.1033842 Class-3 Parachute
associated with “Hair Oil, Hair lotion etc.”
B
vii. Circular dated 03.06.2009 and dismissal of appeals preferred
by the Revenue in CA Nos. 2023-37 of 2014 (dated 17.12.2014)
at the admission stage by non-speaking order, the ‘Doctrine of
Merger’ is not applicable.
C ORDER
In view of the difference of opinion in terms of the judgments
pronounced by us in the present appeals, the Registry is directed to
place the said appeals before Hon’ble the Chief Justice of India for
appropriate orders.
D

Devika Gujral Directions to place before Hon’ble
CJI for appropriate orders.

E

F

G

H