Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs, New Delhi
Subject : CE-Classification of Coconut Oil packed in small containers clarification regarding.Online GST Certification Course by TaxGuru & MSME- Click here to Join
I am directed to say that doubts have been expressed regarding correct classification of coconut oil packed in small containers as to whether the same is classification of coconut oil packed in small containers as to whether the same is classifiable as a fixed vegetable oil under chapter 15 or as a cosmetic preparation under Central Excise Tariff Act, 1985.
2. In this connection, kind attention is invited to the minutes of Conference of the Collectors of Central Excise, North Zone, held at Lucknow on 20th and 21st September, 1991 circulated vide Board”s letter F.No. 112/15/91-CX-3 dated 11.10.95. The Conference had decided that coconut oil in small packing manufactured from coconut oil purchased in bulk falling under Chapter 15 would not merit classification under heading 33.05 if it did not bear labels/ literature or other indications that it was for use as” preparations for use on the hair. The Director General (Anti Evasion) was also asked to conduct an enquiry as to whether such type of products were being advertised in the media as “hair oil” though they did not have such indications on the labels of the containers. The report of the Director General (Anti Evasion) since received refers to some advertisements of an earlier period which indicated the suitability of the product for application on hair. However, after examining the issue in detail he has stated that there are divergent views in the matter of classification of coconut oil packed in small containers and the matter is fit for consideration by the Board.
3. The Board has also consulted the Chief Chemist, CRCL, the Chief Chemist in his report has stated that the samples referred by DG(AE) showed presence of BHA, an antioxidant which is added to prevent oxidation or rancidity in the coconut oil. But he has also emphasized that the addition or presence of BHA may improve the degree of flavour or stability but it does not change the basic characteristics of coconut oil and that it does not impart any cosmetic effect or properly to the coconut oil.
4. The matter has been carefully considered by the Board. It is seen that coconut oil is obtained from the dried flesh or copra of the coconut. This coconut oil has multiple uses, as, besides, cosmetics and toilet preparations, for making lubricating greases, synthetic detergent, laundering and cleaning preparations as a source of fatty acid and also as an oil for application on hair by some sections of the society.
5. To enable its classification as a product falling under Chapter 33 it must satisfy the requirements of Chapter Note 2 and 6 of Chapter 33 of CETA. Note 2 of Chapter 33 applies, inter-alia to “the products whether or not mixed, suitable for use as goods of these headings and put up in packings with label, 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”. Thus, though an oil may be capable of being used as hair oil the product must satisfy the above label/ literature on the packing of coconut oil under consideration do not meet above criteria.
6. Note 6, of Chapter 33 says that Heading No. 33.05 applies, inter-alia, to brilliantine”s, perfumed hair oils, hair lotions, pomades and creams, hair dyes (in whatever form), shampoos, whether or not containing soap or organic surface active agents. This is in line with notes under heading 3305 at p. 476 of HSN, which stated that this heading covers, (4) “other hair preparations, such as brilliantines; hair oils, creams (Pomades) and dressings; hair dyes and bleaches used on the hair; creamrinses.”
In the CET Heading 3305 covers “Preparations for use on the hair”. Under it perfumed air oils have been specially covered under Sub-heading 3305.10 and all, “Other preparations” would fall under Sub-heading 3305.90. In the instant case, the coconut oil is neither a perfumed hair oil nor a “preparations for use on the hair”. It is a fixed vegetable oil capable of being used as cooking medium (or) for 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 the effect, the subject goods cannot be classified under 3305.09 simply because they were packed in small containers and applied by some sections of the society on the hair.
7. On the other hand, coconut oil under consideration seems to be fixed vegetable oil as per Note 3 of the Chapter 15 which defines “fixed vegetable oil” as oils which cannot be easily distilled without decomposition, which are not volatile and which cannot be carried off by super-heated steam (which decomposes and saponifies them). Further, under general description at p. 101 of HSN, it has been stated that Chapter 15 covers, inter-alia, animal or vegetable fast and oils, whether crude, purified or refined or treated in certain ways (e.g.boiled, sulphurised or hydrogenated). Also Heading 15.13 in HSN covers coconut oil and its faction whether crude or refined. Though it is true that the Headings in HSN are not aligned with CETA, 1985, the HSN notes are a guiding factor they clearly bring out that coconut oil is a fixed vegetable oil which merits classification under Chapter 15.
8. It is seen that prior to 1.3.95 filtered coconut oil merited classification under 1503.90 while coconut oil which underwent certain specified process of refinement would have merited classification under 1503.90 However, w.e.f. 1.3.95 the two sub-heading s have been done away with, and coconut oil now merits classification under 1503.00 even if filtered or refined.
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 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.
10. All pending disputes/ assessments on the issue may be settled in the light of these guidelines.