The court, however, clarified that if coconut oil is packaged in small bottles and labelled as hair oil, it should be classified as hair oil under the Central Excise Tariff Act, 1985.

The Supreme Court's three-judge bench of Chief Justice Sanjiv Khanna and Justices Sanjay Kumar and R Mahadevan, had reserved the judgement on October 17 in this case.

The issue for consideration in the appeals filed by the revenue department was whether pure coconut oil, packaged and sold in small quantities ranging from 5 ml to 2 litres, would be classifiable as “Edible oil” under Heading 1513, titled Coconut (Copra) oil, etc., in Section III-Chapter 15, or as “Hair oil” under Heading 3305, titled Preparations for use on the hair, in Section VI-Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985.

The court ruled that the argument of the revenue department that the fact that edible coconut oil marketed by the respondents could also be used as hair oil is, therefore, not sufficient to classify the same under Heading 3305.

The revenue department had stated before the court that the amount involved in its appeals, such as the excise duty, penalties, redemption fine and interest, would aggregate to over ₹159 crore. The department had argued that the issue was relevant due to pendency of similar cases at various levels.

Madhan Agro Industries Pvt Ltd, which made 100% coconut oil in containers of up to 2 litres under the “Shanthi” brand, had challenged the show-cause notices of the Central Excise authorities proposing to levy duty treating the coconut oil sold during April 1, 2005 to August 31, 2007 as “hair oil”.

Similarly, Marico, which sells 100% coconut oil under the “Parachute” brand, challenged the show-cause notices of the Central Excise authorities. Marico’s appeals were allowed.

Source: Business Standard