Customs, Excise and Gold Tribunal - Mumbai
Amardeo Plastics Industries vs Commissioner Of C. Ex. on 15 January, 2007
ORDER Chittaranjan Satapathy, Member (T)
1. Heard both sides at length. These two appeals are against two orders passed by the same adjudicating Commissioner respectively on 17-12-2004 and 28-4-2005. In the case of M/s. Amardeo Plastics Industries, the duty demand is for Rs. 84,23,94,428/- for the impugned period January 1995 to April 1998. In addition, there is a penalty of Rs. 57,86,94, 085/-. The order relates to 9 Show Cause Notices.
2. In the case of M/s. May & Win Enterprises Pvt. Ltd., the duty demand is for Rs. 2,29,73,905/- for the period June 1998 to April 2000 and there is also a penalty of an equal amount. The order covers 6 Show Cause Notices.
3. In both the cases, the dispute relates to classification and dutiability of Parachute Coconut Oil. The oil in question is obtained from M/s. May & Win Enterprises Ltd. and packed in plastic HDPE containers of 100ml and 200 ml by M/s. Amardeo Plastics Industries and in additional packings of 1 Ltr., 500 ml and pouches of 6 ml by May & Win Enterprises Ltd. It is the claim of the appellants that the impugned product is classifiable under Heading 15.03 as edible oil and is chargeable to nil duty, whereas it is the case of the department that the impugned product is classifiable under sub-heading 3305.90 and is chargeable to appropriate rate of duty as hair oil.
4. The learned Counsels for the appellants have contended before us that there are no additional standards for edible grade coconut oil under the relevant ISI standards and hence the impugned oil conforms to edible grade. They have also relied on Tribunal's decisions in the case of Kothnri Product Ltd. v. CCE and Srikanth Sachets Pvt. Ltd. v. CCE, Vishakhapatnam and also Board's Circular No. 145/56/95-CX., dated 31-8-1995 and 166/77/95-CX., dated 29-12-1995. It is their contention that the Board's circular is binding on the lower authorities as also the Tribunal's decisions cited above.
5. The learned Consultant appearing for the department states that firstly these Board's circulars are not orders issued under Section 37B of the Central Excises Act, 1944 (CEA) and the same are not binding on the adjudicating authority in view of the Hon'ble Supreme Court's decision in the case of Orient Paper Mills Ltd. v. Union of India which held that assessing and appellate authorities exercising quasi-judicial powers are not to be influenced by departmental clarification or Board's tariff ruling. He also states that the Tribunal's decision in Srikanth (cited supra) merely follows Kothari (supra), which in turn wrongly relies on the Board's circular which is not binding. He also states that Kothari (supra) is not good law as it has held repacking to be not manufacturing contrary to the specific Chapter Note to that effect. The learned Consultant states that the Tribunal has to decide the classification independent of the Board's clarification and according to him any direction issued by the Board contrary to or in derogation to the provisions of the CEA is not valid in view of the order of the three Judges Bench of the Hon'ble Supreme Court in the case of Pahwa Chemicals Ltd. v. CCE, Delhi .
6. We have seen both the circulars issued by the Board. We take note that these circulars have not been issued under Section 37B of the CEA. The circular dated 31-8-1995 concludes in Para 9 as follows:
Therefore, keeping in view the 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 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 additives (other than BHA) or has undergone processes which make 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.
The circular dated 29-12-1995 merely states that use of antioxidants in the coconut oil will not alter the classification, if the same is meant for preventing the rancidity of the oil.
7. We observe that these circulars have not been issued under Section 3713 of the CEA and that they draw attention to Chapter Notes under both Chapters 15 and 33 but leave the matter of classification to be decided by the field officials. We also note that the circulars do not draw attention to the legally binding Interpretative Rules, which cannot be ignored. As such, it is difficult to conclude that these circulars are either binding or are deterministic of the classification of the impugned goods. By the way, we note that the learned Consultant engaged to defend the department's case has been specially appointed by the department with the specific approval of the Board and if the contention of the appellants that finding of the adjudicating Commissioner is contrary to the circulars of the Board is correct then surely the Board would not have engaged the special fee Consultant for defending the orders of the adjudicating Commissioner.
8. We are of the view that the aforecited circulars of the Board are neither binding on the lower authorities nor are they the last word on classification of the impugned product apart from not having been issued under the said Section 37B. As a corollary, we hold that the earlier decision of the Tribunal in the case of Kothnri (supra) which relies on these circulars cannot be taken as a binding precedent.
9. We find that Interpretative Rule 1 under the Central Excise Tariff Act, 1985 requires that the classification of a product shall be determined according to the terms of the headings and any relative Chapter Note. In the present case, the competing headings are as under:
Heading Sub-heading Description of goods No. No. 15.03 Fixed vegetable oils, other than those of Heading No. 15.02 1503.10 Which have undergone, subsequent to their extraction, any one or more of the following processes, namely :-
(1) Treatment with an alkali or acid.
(2) Bleaching
(3) Deodorisation
1503.90 Other
Heading Sub-heading Description of goods
No. No.
33.05 Preparation for use on the hair
3305.10 Perfumed hair oils
3305.90 Other
The relevant Chapter Notes under both the Chapters are as follows:
CHAPTER 15
Chapter Note 3. In this Chapter, the expression 'fixed vegetable oil' means oils which cannot easily be distilled without decomposition, which are not volatile and which cannot be carried off by superheated steam (which decomposes and saponifies them).
CHAPTER 33 Chapter Note 2. Heading Nos. 33.03 to 33.07 apply, inter alia, to products, whether or not mixed (other than aqueous solutions of essential oils), suitable for use as goods of these headings and put up in packings with labels, literature or other indications that they are for use as cosmetics or toilet preparations or put up in a form clearly specialized to such use and includes products whether or not they contain subsidiary pharmaceutical or antiseptic constituents, or are held out as having subsidiary curative or prophylactic value.
Chapter Note 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 consurners 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 'manufacturer'.
10. A perusal of the terms of these disputed headings would prima facie indicate that the products in question are classifiable as fixed vegetable oils under Heading 15.03 and also as hair oil under Heading 3305.90. The Chapter Note 4 to Chapter 33 also clearly includes the process of repacking of such coconut oil from bulk packs to retail packs to render the same marketable to the consumers.
11. There were, however, arguments and counter arguments from both sides with reference to the design of the bottles and reference was made to the advertisements in regard to coverage of the impugned goods under Chapter Note 2 to Chapter 33. It has been argued by the appellants that merely packing in a smaller bottle would not attract Chapter Note 2 to Chapter 33. However, there is no denying the fact that the impugned goods have been put up in packings/form which do not preclude their use as hair oil. The appellants have contended that edible oil is also put up in smaller containers and therefore use of the impugned coconut oil in small containers for edible purposes cannot be questioned.
12. The learned Consultant for the department has drawn our attention to the decision of the Hon'ble High Court of Delhi in the case of Jain Exports Pvt. Ltd. v. UOI . The said order was passed in the context of importability of coconut oil. The Hon'ble High Court has ejected the plea that coconut oil stood for only edible variety. In Paragraph 25 of the order, the Hon'ble High Court has held as follows:
It may be noted that the production of coconut oil for 1983-84 is about 1.69 lakhs tons only. The requirement in the country of vanaspati in terms of oil has been assessed by the Government about a million ton only. The requirement is met from the indigenous and import of the main traditional edible oils like ground nuts mustards, rapeseed which are the major one and also from the minor oils like sunflower and safflower. It has been calculated that 64% of the total coconut production in the country does not come to the milling as copra indeed they meet the fat and oil needs of the people indirectly as it forms part and parcel of those states where this crop is grown. It is well known than 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 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 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 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. In the trade circles coconut oil when used also is meant to include both edible and industrial variety Thus Para 0.2 of the Indian Standard Specifications for Coconut Oil (Second Revision) shows the use of coconut oil both for edible and non-edible purpose, like in the manufacture of cosmetics, toilets. 'The requirements for various grades are suitable for the foregoing purpose.' Para 1.1 prescribes the standard which is the requirement for test of coconut oil used for edible and industrial purposes. Types and grades are mentioned and shows refined grade and raw grade 1A and 1B are suitable for direct edible consumption while raw grade 2 and other two grades are suitable for industrial uses and not for direct edible consumption. Thus as per specification 'coconut oil' standing by itself would include both edible and industrial variety of coconut oil. The specification by Indian Standard Institution has been accepted as furnishing very strong and incontrovertible support as to how an article is known to the consumers and commercial community (See Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. 1977 E.L.T. 199 (S.C.) : 1963 S.C. 791 Para 10).
13. It is clear from the above observations of the Hon'ble High Court that it is well known that coconut oil is not at all used as edible oil in a very large part of our country and that it is used only in a very small part of our country as an edible medium. The Hon'ble High Court further observes that no one will normally understand coconut oil to mean only edible variety because such is not the normal major use. The Hon'ble High Court has also noted that overwhelming use of coconut oil is for non-edible purposes.
14. In view of the aforcited decision of the Hon'ble Delhi High Court, we cannot ignore the fact that the impugned coconut oil is predominantly used as hair oil. In fact, not an iota of evidence has been produced before us by the appellants to demonstrate that the coconut oil bottled and sold by them is not used as hair oil. We also note that had they indicated on the packings that the impugned oil is usable as hair oil, the classification under sub-heading 3305.90 would have been obvious in view of Chapter Note 2. However, such non-indication does not make the impugned oil purely an edible oil nor does it take it out of the purview of the description under the Heading 3305.90. Incidentally, the appellants have also provided no indication on the packing that it is edible oil. In the absence of any indication on the bottles, one can at best hold that Chapter Note 2 will have no application But that does not take the product outside the purview of the sub-heading 3305.90. There is a clear difference between the Chapter Note 3 to Chapter 15 which defines the fixed vegetable oils covered under Heading 15.03. If a product does not conform to the definition under the said Chapter Note, it also goes out of the coverage under Heading 15.03. On the other hand, Chapter Note 2 to Chapter 33 merely extends the coverage of Headings 33.03 to 33.07 to products which conform to the said Note. In other words, Heading 33.05 covers certain products under the natural meaning of its terms. For example, perfumed hair oil will be covered under sub-heading 3305.10 even if the same is not put up in packings with labels in terms of Chapter Note 2. Similarly, coconut hair oil will be covered under sub-heading 3305.90, itself even when the bottles are not labeled as hair oil. We also note that Chapter Note 2 uses the phrase 'inter alia' which means "amongst other things".
15. In the light of the aforecited decision of the Hon'ble Delhi High Court and the terms of the disputed headings and related Chapter Notes, we are of the view that the impugned product is equally classifiable as fixed vegetable oil under Heading 15.03 and as hair oil under sub-heading 3305.90. Hence, we are of the opinion that Interpretative Rule 3 comes into play, which states that when goods cannot be classified by reference to specific description or essential character, they shall be classifiable under the heading which occurs last in numerical order among those which equally merit consideration. In our view since Heading 15.03 and sub-heading 3305.90 equally apply in the case of the impugned coconut oil, the same merits classification under the sub-heading 3305.90 which occurs last in the numerical order. We also hold that the product in question satisfies the Chapter Note 4 to Chapter 33 since repacking the bulk coconut oil into retail packs and rendering the same marketable to the consumers amounts to manufacture under the said Chapter Note.
16. As regards the competency of the authorities who have issued the impugned Show Cause Notices, we are of the view that the issue is settled by the decision of three Judges Bench of the Hon'ble High Court in the case of Pahwa Chemicals Pvt. Ltd. v. CCE, Delhi . Hence, we are of the opinion that the impugned Show Cause Notices have been validly issued.
17. As regards the invocation of the extended period of time for issuing the demand notices, after taking into account the entire facts and circumstances of the case, we are of the view that the extended period of five years is not applicable in this case. We see no reason as to why the departmental authorities were not able to raise the demands in time since the appellants merely repacked bulk coconut oil into the small packs and the same, in terms of Chapter Note 4 to Chapter 33 made the product classifiable under sub-heading 3305.90 by applying the Interpretative Rules as shown by us above. We are also of the view that the case merely involves disputed classification under two competing entries and therefore, do not justify penalties of over Rs. 60 crores imposed by the adjudicating Commissioner.
18. In view of our findings as above, we uphold the classification of the impugned goods under sub-heading 3305.90 and remand the matter to the adjudicating Commissioner for re-quantifying the duty liability within the normal period of demand. We also set aside the penalties. However, interest would be recoverable in accordance with law. The appeals are disposed off in the above terms.
(Pronounced in Court on....) Sd/-
(Chittaranjan Satapathy) Member (T) Krishna Kumar, Member (J)
19. I have carefully gone through the order recorded by the ld. Member (Technical). I am in full agreement with regard to setting aside the penalties imposed on the appellants. As regards setting aside the impugned order and remanding the matter to the adjudicating Commissioner with regard to the duty, I differ with him for the following reasons:
(a) that the appellants were engaged in the actively of refilling of coconut oil received by it in bulk from Marico Industries Ltd. into smaller HDPE containers of 100 ml and 200 ml. The coconut oil so packed in smaller containers was marketed under the brand name of "Parachute coconut oil". This activity was being done on job work basis. Appellant have been filing the classification lists from time to time, wherein it had categorically declared that it was "only refilling coconut oil in HDPE bottles".
(b) that the coconut oil which the appellants received in bulk was manufactured by Marico Industries Ltd. at its plants.
(c) Such oil was being classified by Marico Industries Ltd. as a fixed vegetable oil under Chapter Heading 1503 of the Schedule to Central Excise Tariff Act, 1985, which at the relevant time attracted nil rate of duty.
(d) Circular No. 145/56/95, dated 31-8-1995 issued by the CBEC clarified that coconut oil packed in small containers was classifiable as a fixed vegetable oil under Chapter 15 and not as a cosmetic preparation under Chapter 33 of the Central Excise Tariff Act, 1985. This circular is very exhaustive and is based on Chapter notes, HSN Notes, the Tariff Conference of 1991, the report of DG (A.E.) and the opinion of the Chief Chemist, CRCL. It is clearly stated that coconut oil whether pure or refined and whether packed in small or large containers, merit classification under Heading 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 additives (other than BHL) or has undergone processes which make it a preparation for use on hair as mentioned in Chapter 6 of Chapter 33 then the coconut oil may merit classification under Chapter 33.
It is significant to point out that the Bench has seen the HDPE bottles and found that it was clearly written as 'edible oil' and nowhere on the bottle it was written that it is meant for application on hair. It is undisputed that the coconut oil has not gone under any processes or contained any additives. Chapter Note 2 of Chapter 33 clearly excludes from its purview such oil. Therefore, the board's circular has clearly provided that all pending disputes assessments on the issue may be settled in the light of these guidelines.
(e) Board Circular No. 166/77/95-CX, dated 29-12-95 further clarified hat use of anti-oxidanls as specified under Rule 59 of the Prevention of Food Adulteration Rules, 1995 will not alter the classification of a fixed vegetable oil.
(f) that relied upon documents were not supplied to the appellants.
(g) that coconut oil was derived from copra by Marico Industries Ltd. through a process of expelling, which is a simple process of subjecting the oil bearing material to pressure under which it gives liquid. The appellants enclosed affidavits confirming the fact that the parachute coconut oil was fixed vegetable oil to which no additives were added at any stage of the process. The affidavits from consumers and distributors were filed to prove that parachute coconut oil are used/sold as cooking oil.
(h) that the bottles containing parachute coconut oil were specifically marked for 'edible oil' and it also did not contain any label/literature/indication to suggest its use as a cosmetic or a toilet preparation".
(j) that except for refilling the oil, appellants did not undertake any process on the bulk coconut oil received from Marico Industries Ltd.
(k) that the process of refilling of bulk coconut oil into smaller packs was not an activity amounting to manufacture.
(l) that the notice alleging fraud, suppression, wilful mis-statement have been issued by the Range Superintendent who was not authorized to issue such notice and that it was only the Commissioner who could have issued a notice alleging fraud, suppression, wilful mis-statement and therefore the notice was without jurisdiction.
(m) that there was no fraud, suppression or wilful mis-statement on its part so as to attract larger period of limitation.
(n) that 1SI specification for coconut oil for cosmetics wherein it has been laid down that in respect of cosmetics, the words "not for direct edible consumption" should be printed on the container. The appellants have submitted that the containers in which the coconut oil was packed categorically stated that the same was edible oil and consequently ISI specification in respect of coconut oil for cosmetic industries were not applicable to its product.
(o) that the department has not brought even a single piece of evidence on record to prove that "parachute coconut oil" being sold by the appellants is meant for hair oil".
(p) that in the absence of any evidence having been brought on record by the department to prove that the parachute coconut oil being sold by the appellants was meant only for hair oil, it was not competent for the Commissioner to have classified the same under Chapter Heading 33.
(q) that the coconut oil was being classified by the appellants under Chapter Heading 15 right from the very beginning and the classification lists filed by the appellants have been duly approved by the competent authority from time to time. Therefore it was not competent for the department to turn around and say that the same is classifiable under Chapter 33.
It is very significant to point out that the Commissioner cannot of his own change the classification without having undergone the process of holding a subsequent conference like the conference of Collectors held in 1991 wherein the issue of classification of the product in question was decided by them. The report of DG (A.E.) and the opinion of Chief Chemist and the Board opinion. In the absence of any such process as indicated in the Circular of 31-8-1995 having been undertaken to reverse the decision taken at such a large level, the impugned order has no locus standi and it is wholly beyond the competence of the Commissioner to reverse the decision of the conference and other competent authorities as mentioned above.
(r) that the issue of classification of coconut oil is no longer res Integra in view of the Kothari Products Ltd. v. CCE and in the case of Shrikanth Sachets Pvt. Ltd. v. CCE , wherein this Tribunal has held that the repacking of coconut oil from bulk to smaller packs does not result in the emergence of a new product having a different name, use or character and hence does not amount to manufacture.
It is pertinent to mention that I was a member of the Bench which passed the order in Kothari Products Ltd. wherein the above said circulars were duly cited and the decisions of Hon'ble Apex Court, Bombay High Court, Madras High Court and of this Tribunal were also referred to and relied. Therefore, once the issue in question has been settled by the case of Kothari Products Ltd. and Srikanth Sachets Pvt. Ltd. and the department has chosen not to file an appeal against the said decisions, the decisions in Kothari and Sachets have attained the finality and the same cannot be reopened. Looking to the judicial propriety we are fully bound by the said decisions.
(s) The finding of the ld. Commissioner that the product in question contained paraffin is misconceived as it is not based on any evidence.
(t) The literature drawn from the internet goes beyond the scope of the show cause notice to prove that "Parachute Coconut Oil" was used as hair oil as no such allegations was made in the show cause notice.
(u) Dr. Sane's report is correct on clarity and rancidity as he is expert in the smatter.
(v) The affidavits of end users cannot be ignored and are bound to be relied on as evidence as no rebuttal thereof by way of any counter affidavit has been filed by the department.
(w) The advertisement are stray and not related to the period of demand.
(x) As already mentioned above "parachute coconut oil" has not gone under any special process or addition of any ingredients to make it use on the hair.
(y) As already mentioned above the classification has to be based on Chapter 2 to Chapter 15 as per the Board's circular referred above.
20. It is pertinent to mention that no appeal has been filed by the department against the said decisions passed by the Tribunal and the decisions have become final and as such it is not open for the department to question the same. Once the Tribunal has already decided the issue, the department is bound by it and the department cannot reopen the same.
21. That when the CBEC issued two circulars clarifying that the products in questions is classifiable under Chapter Heading 15, the same is not open to the department to challenge as held by the Apex Court in the case of Simplex reported in 2003 (155) E.L.T. 5 (S.C.). The Apex Court has clearly held that no appeal would be preferable against such circular. Such a view was earlier held by the Hon'ble Apex Court in the case of Ranadey Micronntrients reported in 1996 (87) E.L.T. 19 (S.C). As already stated above no evidence of any kind has been brought by the department with regard to market parlance as was being argued by the ld. Consultant.
22. In the absence of any material on record if is difficult to hold that the product would be classifiable under Chapter Heading 33.
23. It is significant to point out that no rebuttal has been filed by the department to the affidavits of the consumers and the distributors. Therefore, the affidavits of the consumers and the distributors go unrebutted and they cannot be brushed aside in the absence of such rebuttal.
24. That the ISI standards with regard to clarity and rancidity were more stringent IS : 547/1968 vis-a-vis IS : 11470/1985 and are supported by an affidavit by Dr. R.T. Sane, Principal of Ruia College, Matunga, Mumbai. This affidavit has been totally overlooked by the Commissioner.
25. The impugned order has totally travelled beyond the scope of the show cause notice. In view of the above, I set aside the impugned order and allow the appeals filed by the appellants.
Sd/-
(Krishna Kumar) Member (J) DIFFERENCE OF OPINION
26. Following difference of opinion has arisen between the Member (Judicial) and Member (Technical):
Whether the order recorded by the Member (Tech) remanding the appeals for duty is correct Or the order recorded by the Member (Judicial) allowing the appeals in this regard is correct.
(Pronounced in open Court on 14-3-2006)
Sd/- Sd/-
(Chittaranjan Satapathy) (Krishna Kumar)
Member (T) Member (J)
Archana Wadhwa, Member (J)
27. Difference between ld. Member (T) and ld. Member (J) pertains to the issue of classification of parachute coconut oil packed in different capacity packs. Ld. Member (T) has upheld the revenue's claim of classification under Heading 3305.90 as preparation for use on hair, whereas ld. Member 0) has accepted the appellant's stands of classification under Heading 15.03 as edible oil.
28. After hearing both sides duly represented by the Sr. Advocate Shri Joseph Vellapally, along with the ld. Advocate Shri. V.K. Jain, Advocate and the Revenue's representatives Shri Pramod Kumar, JDR & Shri K.M. Mondal, Consultant, I find that the factual position is not disputed in the present appeal. The coconut oil is being extracted from the flush or copra of coconut by M/s. Marico Industries Ltd., who have cleared the same as fixed vegetable oil under Chapter Heading 1503, to the present appellants, who are engaged in the activity of refilling the same into smaller containers of varying capacity. It is also admitted that the present appellants, apart from undertaking the packing of coconut oil, are not undertaking any other process on the said oil. Ld. Member (T) has upheld the revenue's claim by taking note of Chapter Note 3 of Chapter 15 and Chapter Note 2 and Chapter 4 of Chapter 33. On the other hand, Member (J) has relied upon the earlier decisions of the Tribunal holding coconut oil, being of edible grade and has hence classifiable under Chapter 15. Board's Circular has also been taken note of by Member (]). The fact of availability of precedent decisions on the disputed issue is not being doubted by the ld. Member (T) but the same do not stand followed by him on the ground that the said decisions were mainly based upon the Board's Circular, which having not been issued under Section 37B, has no binding effect.
29. Chapter Note 2 to Chapter 33 stands re-produced in the order proposed by ld. Member (T). A reading of the same makes it clear that the said Chapter applies to products, suitable for use as goods of these headings and put up in packing 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. The corresponding Chapter Notes in the HSN is Note 3 to Chapter 33 are reads as:
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 heading and put up in packings of a kind sold by retail for such use.
The explanatory notes of the HSN explains the above referred Chapter Note in the following manner:
Preparations (e.g., varnish) and unmixed products (e.g. unperfumed powdered talc, fuller's earth, acetone, alum) which are suitable for other uses in addition to those described above are classified in these headings only when they are:
(a) In packings of a kind sold to the consumer and put up with labels, literature or other indications that they are for use as perfumery, cosmetic or toilet preparations, or as room 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)
30. A combined reading of the above notes with Note 2 to Chapter 33 in the Central Excise Tariff show that in substance, both are identical in its scope and lays down three conditions for classifying the product under Chapter 33:
(i) Suitability for use as goods of these heading.
(ii) Packing/label/literature/any other indication should be indicative of their use as, cosmetic or toilet preparation.
(iii) Put up in a form clearly specialized to such use.
31. Admittedly, the packs and bottles in which coconut oil is packed do not indicate their use on the hair. On the contrary, I find that the same carries the inscription that this contains premium quality edible oil obtained from superior grade copra, scientifically filtered to remain fresh for long time. This is evident from the copy of the label on the bottle of Parachute coconut oil as filed with the Trade Mark Registry Bombay. During the course of arguments, it was clarified by the ld. Advocate that wherever the oil is being sold in packing indicating that the same is meant for use on hair, duty liability is being discharged accordingly. During the relevant period, coconut oil mixed with perfumes was being sold under the brand name 'Hair & Care'. Parachut Premium Coconut Oil was with paraffin added to it and was being cleared for export with clear markings as "not for edible use". However, while packing the coconut oil received in bulk from the supplier, in smaller packs of varying sizes, no additives are being added and no further process is being undertaken on the same. Further, the bottles and other packing in which coconut oil is filled (sample produced during the course of hearing) are not in "form clearly specialized to the products use as hair oil". As clarified in the HSN explanatory note, the expression "form clearly specialized to such use" stands explained by giving an example of nail varnish put up in small bottles along with a brush required for applying the varnish. On analogy, packing of a powder containing puff for application on the face or a bottle of mascara or eye liner containing a specialized brush for application of the same would get covered by the expression "form clearly specialized to such use". The packing of coconut oil in the instant case are not the type referred above or which can be solely and exclusively said to be meant for hair application only. As such I am of the view that Chapter Note 2 to Chapter 33 is not applicable for classifying the goods under Chapter 33. Ld. Member (Technical) has observed that packing/form do not preclude their use as hair oil. However, as examined, in the light of the explanatory note to HSN, such packing are required to be specialized and having nexus to the use of the same. Merely because the coconut oil packed in a similar packing can also be applied on the hair does not mean that the same are put up in a "form clearly specialized for such use".
32. I also note that the Board vide its Circular dated 31-8-95 has examined the entire issue of classification including the report of the Chief Chemist CRCL and has clarified that the mere fact of packing the same in small containers will not shift the classification of the same from Chapter 15 to Chapter 33. In Para 9 it has been observed that coconut oil, whether pure or refined or whether packed in smaller containers merits classification under Heading No. 1503 as long as its satisfy the criteria of "fixed vegeiable oil" laid down in Chapter Note 3 of Chapter 15. 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 additives (other than BHA) or has undertaken process, which make 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. It is not disputed in the order of the ld. Member (Technical) that coconut oil was cleared as fixed vegetable oil by M/s. Marico Industries and the appellants are neither adding anything to the same nor undertaking any further process to make it a preparation for use of hair. However, the said circular does not stands followed by ld. Member (T) by observing that the same has not been issued under Section 37B of the Central Excise Act, and as such, the same cannot be held to be either binding or determinative of the classification. The law on the said issues stands clarified by the Hon'ble Supreme Court in a number of decision laying down that revenue cannot be heard arguing against its own Board's Circular. Reference may be made to the decision in the case of Ranadey Micronutrients v. CCE, , wherein while dealing with the issue as to whether the Board's Circular would lose its binding effect if is the same is not issued under Section 37B, the Hon'ble Court observed that the whole objective of the circular is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of Excise duty. It does not lie in the mouth of the revenue to repudiate a circular issued by the Board on the basis that it is inconsistent with the statutory provision. Consistency and discipline are of far greater importance than the winning or losing of court proceedings. As such, it has to be held that the said Board's Circular is binding on the revenue and the fact of engaging a Senior Counsel by the revenue to defend the proceedings before the Tribunal, (as observed by Member (T)j will not change the above position of law, which stands re-affirmed by the Court in a number of subsequent decisions.
33. Apart from the above, I find that the issue stands decided by the Tribunal's decision in the case of Kothari Products Ltd. v. CCE , Srikanth Sachets Pvt. Ltd. v. CCE & CCE v. Essen Products (I) Ltd. 2006 TIOL 580. It is not the revenue's case that the said decisions were appealed against by them before the higher appellate forum. Inasmuch as the same have attained finality, they are required to be followed. Reference in this regard may be made to a recent decision of the Hon'ble Supreme Court in the case of Indian Oil Corporation Ltd., reported in 2006 (202) E.L.T. 37 (S.C.) wherein it was observed that if no appeal was filed by the department against the earlier order of the Tribunal involving the same issue, which consequently had attained finality, the department is not entitled to raise the same point in another cases. As such, judicial discipline requires the Bench of coordinate strength to follow the earlier decisions, not one but three given by different Benches. The said detailed decisions were duly supported by the Board's Circular and settle the issue at hand. As observed by the Hon'ble Supreme Court in the case of Birla Corporation Ltd. 2005 (186) E.L.T. 266 (S.C), revenue cannot be permitted to take a different stand, if the earlier appeal involving identical issue was not pressed and therefore, dismissed. Their Lordships further observed that if that is permitted, the law will be in a state of confusion and will place the authorities as well as the assessees in a quandary. Ar. such, I agree with ld. Member (J) that the issue having been set at rest by the earlier decision and revenue having taken a conscious decision not to challenge the same, the ratio of the same has to be applied to the present case.
34. Reference by the ld. Member (Technical) on the decision and judgment of Delhi High Court in the case of jain Exports Pvt. Ltd., may not advanced revenue's case inasmuch as the issue before the Hon'ble High Court was entirely different and was in the context of the importability of the coconut oil. While examining the issue the Hon'ble High Court observed that coconut oil by itself would include both edible and industrial variety of coconut oil. This itself shows that coconut oil was being considered as an edible oil also. In fact reference was made to Indian Standard Specification for coconut oil showing the use of the same both for edible and non-edible purpose. It may be observed here that it is not disputed that the coconut oil is also used for application on hair on account of its natural and inherent quality. Such quality is not imparted by the appellants so as to bring the same under Note 2 of Chapter 33, in the absence of any additive or specialized packing as discussed above, coconut oil, in bulk, can also be used as hair oil and it is not that the same becomes hair oil after its packing in small containers. Admittedly, the oil has been cleared by the manufacturer under Chapter 15. Mere re-packing of the same will not convert the said oil into hair oil, unless Chapter Note 2 to Chapter 33 is satisfied. Inasmuch as the coconut oil satisfies the criteria of fixed vegetable oil laid down in Note 3 to Chapter 15 and in the absence of satisfaction of conditions laid down in Chapter Note 2 of Chapter 33, I agree with the ld. Member (J) that the coconut oil would appropriately fall under Chapter 15.
35. Before parting, I may deal with the revenue's contention that the oil is being advertised as hair oil by the appellants. Apart from the fact that the advertisement of a product is not indicative of its classification under Central Excise Tariff, as the same is to lure the customer and enhance the sales, the appellants have clarified that they are also manufacturing hair oil on which they are paying duty. In any case, application of coconut oil on hair is one of its numerous uses and the advertisement only highlights the same. The use highlighted in the advertisement cannot be made the basis for classification, which is to be determined on the basis of nature of product and its description in the relevant tariff headings read with Chapter note. In any case, the sample produced shows that coconut oil cleared for hair is under the brand Parachute "Advanced" and clearly mentions "Refined coconut hair oil, Not for edible use".
36. In view of above discussion, I agree with the order passed by the ld. Member (J). File is sent back to the original Bench for recording of the final order.
(Pronounced) Sd/-
(Archana Wadhwa) Member (J) dated 18-12-2006 FINAL ORDER
36. In view of the majority order, the impugned orders are set aside and the appeals, are allowed with consequential relief.
Sd/- Sd/-
(M. Veeraiyan) (Archana Wadhwa)
Member (T) Member (J)
dated 23-1-2007