CX - 'Anmol' Coconut oil sold in packing of 200 ml or less - Duty paid under protest by adopting classification as Hair Oil (33.05) - Judgment of Tribunal in case of Capital Technologies classifying goods under 1513 @Nil rate of Tariff is binding precedent - Matter remanded to verify unjust enrichment: CESTAT
By TIOL News Service
NEW DELHI, JULY 16, 2015: THE dispute is in respect of product "Anmol Coconut Oil" being manufactured by the appellant. While, according to the appellant, this product which is packed in the packings of 200 ml or less, contains anit-oxidants and is sold as "pure coconut oil" or "edible product" & is classifiable under Heading 1513 of the CETA and the rate of duty would be Nil, according to the Department, the coconut oil packed in packings of 200 ml or less is "hair oil" covered by heading 3305 in view of Chapter Note 3 to Chapter 33.
The period of dispute in the present case is from 1.9.2011 to 31.03.2012.
The department stand is based on the Board's Circular No. 890/10/09/-CX dated 3.6.2009.
During the period of dispute, in view of the instructions of the department, the appellant cleared the coconut oil packed in the packing of 200 ml or less on payment of duty under heading 3305 of the Tariff. Subsequently, however, refund claim was filed, which was rejected by the Asstt. Commissioner. The AC while rejecting the refund claim relied upon the Board's Circular dated 3.6.2009 and also the Apex Court's judgements in the case of Ranadey Micronutrients Vs. CCE - 2002-TIOL-184-SC-CX, CCE Vs. Dhiren Chemical Industries - 2002-TIOL-83-SC-CX-CB, CCE, Vs. Maruti Foam Ltd. - 2004-TIOL-120-SC-CX, wherein it was held that the circulars issued by the CBEC is binding on the department even if it is against the statutory provisions.
As the Commissioner(A) upheld this order, the appellant is before the CESTAT.
It is submitted that from the photographs of the labels of the product, it would be seen that it is not marketed as hair oil but is marketed as edible oil, that the label on the packing nowhere mentions the product packed as Hair Oil but describes the same as "edible oil" or as "pure coconut oil" or "coconut oil", that in view of this, the product, in question, would be classifiable as coconut oil under heading no.1513 of the CE Tariff; that the validity of the Board's Circular dated 3.6.2009 was challenged by filing a writ petition by M/s. VVD and Sons (Pvt.) Ltd and the Madras High court vide judgement dated 29.04.2014 - 2014-TIOL-2142-HC-MAD-CX observed that the same is arbitrary and unreasonable and without jurisdiction and hence, null and void and contrary to the provisions of the CEA, 1944; that the Tribunal in the case of Aiswarya Industries - 2008-TIOL-2846-CESTAT-MAD held that coconut oil packed and sold in the packages of capacity ranging 50 ml to 500 ml (plastic bottles) and marketed as "pure edible oil" would be classifiable under heading 1513 as coconut oil and not as hair oil under SH3305; that this judgement was followed in Capital Technologies Ltd. & Ors. - 2011-TIOL-775-CESTAT-BANG; that Civil Appeal has been dismissed by the Apex Court vide order dated 23.2.2012, that similar stand has been taken in the case of Amardeo Plastics Industries Vs. Commissioner - 2007-TIOL-240-CESTAT-MUM & Raj Oil Mills & Others - 2013-TIOL-1609-CESTAT-MUM and that in view of the above, the impugned order upholding the rejection of the refund claim is not correct.
The AR defended the order passed by the lower authorities and also submitted that the appellant had filed a WP before the Allahabad High Court challenging the Board's Circular dated 3.6.2009 but, thereafter, filed an application before the Apex Court for transfer of the writ petition and the said application is pending; that till the appellant's transfer petition is decided by the Apex Court, the Tribunal should not pass any final order in this matter. It is also submitted that in the various communications to the department the appellant has mentioned that as and when the issue is decided by the High Court they would be filing a refund claim for refund of the duty paid under protest. Inasmuch as the refund claim filed by them is pre-mature and should not have been decided.
The Bench after considering the submissions, in the matter of contention of the AR that the refund claim is premature,observed -
…in our view, they (appellant) are at liberty to file the refund claim even though the matter is still pending before the Apex Court, more so, when the Hon'ble Madras High Court in its judgement in the case of VVD & Sons (Pvt.) Ltd. (supra) reported in - 2014-TIOL-2142-HC-MAD-CX after considering the Board's Circular dated 3.6.2009 has quashed the same observing that the same is arbitrary and contrary to the provisions of Section 37 B of the Central Excise Act, 1944 and hence null and void.
On the merits of the case, the Bench noted -
+ …we are of the view that the reliance of the lower authorities on the Apex Court's judgement in the case of Ranadey Micronutrients (supra) and Dhiren Chemical Industries(supra) is not correct as the issue of binding effect of Board's Circular had been examined by Constitutional Bench of the Apex Court in the case of CCE, Bolpur Vs. Ratan Meltings & Wire Industries - 2008-TIOL-194-SC-CX-CB, wherein the Apex Court has held that the Board's circular would be binding only if they are in accordance with the provisions of law and the same would not be binding if they are contrary to the provisions of law.
+ In the present case, when validity of the Board's Circular dated 3.6.2009 issued under Section 37 B of the Act has been examined in detail by the Hon'ble Madras High Court in the case of VVD & Sons (Pvt.) Ltd. (supra) and when the Board's Circular has been held to be contrary to the provisions of Central Excise Act, 1944 and arbitrary and unreasonable and for the same reason, the same has been quashed, the Board's Circular cannot be treated as binding on the Departmental Officers.
Citing the Kerala High Court decision in the case of Marico Ltd & Tribunal's order in Capital Technology Ltd. - 2011-TIOL-775-CESTAT-BANG (affirmed by Supreme Court), wherein the Tribunal independently examined the issue of classification of Coconut Oil packed in retail packs of 50 ml., 100 ml. and 200 ml in respect of the period w.e.f. 28.02.2005 and after discussing the amendments to Chapter Note to Chapter 33 and Section Note 2 to Section VI w.e.f. 28.02.2005 held that the Coconut oil packed in retail packs of 500 ml. and 200 ml. would be classifiable as Coconut Oil under Heading No. 1513 and not as Hair Oil under Heading 3305, the Bench held that the same is a binding precedent.
The Tribunal also mentioned that the addition of TBH antioxidant which is permitted under Prevention of Food and Adulteration Act, 1954 to improve its shelf life by preventing its oxidation and hence rancidity does not make the coconut oil as suitable for use as Hair Oil;that no evidence has been produced by the Department to show that the addition of anti-oxidants in coconut oil will make the same more suitable for use on hair.
Holding that the order of the lower authority is not sustainable, the same was set aside and the matter was remanded to the Original Adjudicating Authority for processing the refund claim after examining the question of unjust enrichment.
In passing: Also see 2014-TIOL-1203-CESTAT-DEL, same story…
(See 2015-TIOL-1434-CESTAT-DEL)
