COMMISSIONER OF CENTRAL EXCISE, SALEM versus M/S MADHAN AGRO INDUSTRIES (INDIA) PRIVATE LTD.
[2024] 12 S.C.R. 893, Supreme Court of India, 2024
Outcome: Dismissed (Dismissed)
Segment: Issues
[2024] 12 S.C.R. 893 : 2024 INSC 1002
Commissioner of Central Excise, Salem
v.
M/s Madhan Agro Industries (India) Private Ltd. 
(Civil Appeal No. 1766 of 2009)
18 December 2024
[Sanjiv Khanna, Sanjay Kumar* and R. Mahadevan, JJ.]
Issue for Consideration
Issue arose 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.
Headnotes†
Central Excise Tariff Act, 1985 – First Schedule, Chapter 15, 
Section III, Heading 1513, titled ‘Coconut (Copra) oil, etc.’; 
Chapter 33 Section VI Heading 3305, titled ‘Preparations for 
use on the hair’ – Pure coconut oil, packaged and sold in 
small quantities ranging from 5 ml to 2 litres – Classification 
of, as ‘Edible oil’ under Heading 1513 or as ‘Hair oil’ under 
Heading 3305: 
Held: Pure coconut oil sold in small quantities as ‘edible oil’ 
would be classifiable under Heading 1513, unless the packaging 
thereof satisfies all the requirements set out in Chapter Note 3 in 
Section VI-Chapter 33 of the First Schedule read with the General/
Explanatory Notes under the corresponding Chapter Note 3 in 
Chapter 33 of the Harmonized System of Nomenclature, whereupon 
it would be classifiable as ‘hair oil’ under Heading
3305 in Section 
VI Chapter 33 thereof – Pure coconut oil is suitable for multiple 
uses – Notwithstanding, when a specific heading was created in 
Chapter 15, viz., Heading 1513, for ‘coconut oil’ along with other 
oils, it would not stand excluded therefrom so as to be classified as 
a cosmetic product under Heading 3305 in Chapter 33 in Section 
VI of the First Schedule, unless all the conditions required therefor 
* Author
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are satisfied – Not only must the coconut oil be suitable for use 
as ‘hair oil’, but it must also be put in packaging sold in retail for 
such particular use, as hair oil – Mere fact that coconut oil is also 
capable of being put to use as a cosmetic or toilet preparation, by 
itself, would not be sufficient to exclude such oil from the ambit of 
‘coconut oil’ and subject it to classification as ‘hair oil’ as ‘coconut 
oil’ is name-specific – Packaging of the coconut oil in the instant 
cases clearly demonstrated that it was being sold as ‘edible oil’ 
and all parameters that had to be met in that regard were duly 
complied with – Small-sized containers are a feature common to both 
‘edible oils’ as well as ‘hair oils’ – Thus, there must be something 
more to distinguish between them for classification of such oil, be 
it under Chapter 15 or under Chapter 33, other than the size of 
the packing – Relevant headings in the First Schedule to the Act 
of 1985 corresponding with the entries in HSN, there can be no 
distinction drawn between the two and the Explanatory Notes in the 
HSN would have to be given due effect while interpreting Heading 
1513 in the First Schedule – Thus, the coconut oil marketed and 
sold by the respondents during the relevant period must necessarily 
be classified as edible oil. [Paras 40-49]
Interpretation of statutes – Taxing statutes – Principle of 
interpretation – ‘Common parlance test’ :
Held: Words
therein must be construed in consonance with 
their commonly accepted meaning in the trade and their popular 
meaning  – When a word is not explicitly defined or there is 
ambiguity as to its meaning, it must be interpreted for the purpose 
of classification in the popular sense, which is the sense attributed 
to it by those who are conversant with the subject matter that the 
statute is dealing with – This principle, known as the ‘common 
parlance test’, serves as good fiscal policy so as to not put people 
in doubt or quandary about their tax liability – Test is an extension 
of the general principle of interpretation of statutes for deciphering 
the mind of the law-maker but it is subject to certain exceptions- 
when there is an artificial definition or special meaning attached to 
the word in the statute itself, whereby the ordinary sense approach 
would not be applicable – Said test  cannot be brought into play 
when there is no ambiguity and there is no difference in the clear 
heading in the First Schedule and the corresponding entry in the 
HSN. [Paras 35, 36]
[2024] 12 S.C.R. 
895
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
Central Excise Tariff Act, 1985 – Central Excise Tariffs – 
Interpretation of entries – Reliance on the Harmonized System 
of Nomenclature-HSN and the Explanatory Notes: 
Held: Once the Headings in the First Schedule to the Act of 1985 
in perfect alignment with the corresponding entries in the HSN, the 
General/Explanatory Notes in the HSN would be applicable and 
cannot be ignored while classifying goods as per the headings in 
the First Schedule – If the headings/entries in the First Schedule 
to the Act of 1985 are different from the headings/entries in the 
HSN or if they are not fully aligned, reliance cannot be placed 
upon the HSN for the purpose of classifying those goods under 
the Act of 1985 – First Schedule to the Act of 1985 is based on the 
HSN, which is an internationally standardized system developed 
and maintained by the World Customs Organization for classifying 
products, and unless the intention to the contrary is found within 
the Act of 1985 itself, the HSN and the Explanatory Notes thereto, 
being the official interpretation of the Harmonized System at the 
international level, would be of binding guidance in understanding 
and giving effect to the headings in the First Schedule – It is only 
when a different intention is explicitly indicated in the Act of 1985 
itself that the HSN would cease to be of guidance – Legislative 
intention
to depart from the HSN must be clear and unambiguous. 
[Paras 16, 17, 34]
Case Law Cited
Commissioner of Customs and Central Excise, Amritsar (Punjab) v. 
D.L. Steels etc. [2022] 17 SCR 151 : 2022 SCC OnLine SC 863; 
Collector of Central Excise, Shillong v. Wood Craft Products Ltd. 
(1995) 3 SCC 454; O.K. Play (India) Ltd. v. Commissioner of 
Central Excise, Delhi-III, Gurgaon [2005] 1 SCR 1086 : (2005) 2 
SCC 460; Camlin Ltd. v. Commissioner of Central Excise, Mumbai 
[2008] 12 SCR 1223 : (2008) 9 SCC 82; B.P.L. Pharmaceuticals 
Ltd. v. Collector of Central Excise, Vadodara [1995] 3 SCR 1235 : 
(1995) Supp. 3 SCC 1; Commissioner of Central Excise, New 
Delhi v. Connaught Plaza Restaurant Pvt. Ltd., New Delhi [2012] 
11 SCR 365 : (2012) 13 SCC 639; Alpine Industries v. Collector 
of Central Excise, New Delhi [2003] 1 SCR 313 : (2003) 3 SCC 
111; Indo International Industries v. Commissioner of Sales Tax, 
Uttar Pradesh [1981] 3 SCR 294 : (1981) 2 SCC 528; Meghdoot
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Gramodyog Sewa Sansthan, U.P. v. Commissioner of Central 
Excise, Lucknow (2005) 4 SCC 15; Dunlop India Ltd. v. Union 
of India and others [1976] 2 SCR 98 : (1976) 2 SCC 241; State 
of Haryana v. Dalmia Dadri Cement Ltd. [1988] 2 SCR 1 : AIR 
1988 SC 342; HPL Chemicals Ltd. v. Commissioner of Central 
Excise, Chandigarh [2006] Supp. 1 SCR 125 : (2006) 5 SCC 
208 – referred to.
List of Acts
Central Excise Tariff Act, 1985; Central Excise Tariff (Amendment) 
Act, 2004; Central Excise Act, 1944; Food Safety and Standards 
Act, 2006; Drugs and Cosmetics Act, 1940; Edible Oils Packaging 
(Regulations) Order, 1998; Standards of Weights and Measures 
(Packaged Commodities) Rules, 1977.
List of Keywords
Pure coconut oil; ‘Edible oil’; ‘Hair oil’; Heading 1513, titled ‘Coconut 
(Copra) oil, etc.’; ‘Hair oil’; Heading 3305, ‘Preparations for use 
on the hair’; General/Explanatory Notes; Harmonized System of 
Nomenclature; Multiple uses; Cosmetic product; Suitable for such 
use; Packaging of the coconut oil; Edible grade plastic; Burden of 
proof; Taxing statutes; Principle of interpretation; ‘Common parlance 
test’; Central Excise Tariffs.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1766 of 2009
From the Judgment and Order 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
Civil Appeal Nos. 6703-6710 of 2009
Appearances for Parties
N.
Venkataraman, A.S.G., A.K. Panda, Sr. Adv., Gurmeet Singh 
Makker, H.R. Rao, Adit Khorana, Ms. Bani Dikshit, Sanjay Kumar 
Visen, Anirudh Bhat, B. Krishna Prasad, Mukesh Kumar Maroria, 
Advs. for the Appellant.
[2024] 12 S.C.R. 
897
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
S.K. Bagadia, Arvind Datar, Harish N. Salve, Sr. Advs., Mahesh 
Agarwal, Rishi Agrawala, Ankur Saigal, Vipin Jain, Ms. Sayree Basu 
Mallik, Abhinabh Garg, Ramnath Prabhu, Karan Verma, Ms. Aditi 
Jain, E.C. Agrawala, Vishal Agarwal, Advs. for the Respondent.
Judgment / Order of the Supreme Court
Judgment
Sanjay Kumar, J.
1.	
The issue for consideration in these appeals filed by the Revenue 
is 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.
2.	
The Bench which heard these appeals earlier was divided in its 
opinion on the issue. Justice Ranjan Gogoi, as the learned Judge 
then was, was of the view that such coconut oil in small packings 
was more appropriately classifiable as edible oil under Heading 1513. 
Justice R. Banumathi, on the other hand, concluded that coconut oil, 
packed in small sachets/containers suitable for being used as hair 
oil, was classifiable as such under Heading 3305. In view of their 
difference in opinion, these appeals have been placed before us.
3.	
Insofar as Civil Appeal No. 1766 of 2009 is
concerned, this issue 
is raised in relation to the duty payable for the period 01.04.2005 
to 31.08.2007. As regards Civil Appeal Nos. 6703-6710 of 2009, it 
is contextual to the period 28.02.2005 to 28.02.2007. Taking note 
of this aspect and in view of the statement of the learned counsel 
for the respondents that the total revenue involved in these cases, 
excluding interest and penalties, would be about ₹40 crore, this Court 
requested the learned Additional Solicitor General, on 18.01.2023, to 
obtain instructions whether the issue would survive for consideration 
and whether the Revenue still wanted to press these appeals. On 
25.01.2023, the learned Additional Solicitor General averred that 
the matters required to be resolved on merits. He produced letter 
dated 24.01.2023 addressed by the Additional Commissioner, 
Directorate of Legal Affairs, Central Board of Indirect Taxes and
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Customs, Government of India, stating that the amount involved in 
these appeals, viz., the excise duty, penalties, redemption fine and 
interest, would aggregate to over ₹159 crores. According to him, the 
issue remained relevant due to pendency of similar cases at various 
levels.In its written submissions also, the Revenue asserted that 
the issue is not rendered academic as on date as matters relating 
to this issue were still pending and show-cause notices had also 
been issued in this regard under the GST regime, which presently 
holds the field. 
4.	
Before we proceed to consider the issue on the facts obtaining and 
on merits, it would be apposite to take note of the statutory milieu 
germane thereto, both past and present.
Prior to 28.02.2005, i.e., before amendment of the First Schedule 
to the Central Excise Tariff Act, 1985 (hereinafter, ‘the Act of 
1985’), vide the Central Excise Tariff (Amendment) Act, 2004 
[Act 5 of 2005], irrespective of the size of its packaging, coconut 
oil was treated as a ‘vegetable oil’ exigible to excise duty under 
Heading 15.03 in Chapter 15 in Section III of the First Schedule to 
the Act of 1985. Section III, Chapter 15 and the relevant Chapter 
Notes therein along with Heading 15.03, as they then stood, are 
extracted hereunder: 
SECTION III
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR 
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; ANIMAL 
OR VEGETABLE WAXES
CHAPTER 15
ANIMAL OR VEGETABLE
FATS AND OILS AND THEIR 
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; ANIMAL 
OR VEGETABLE WAXES
Notes:
1. This Chapter does not cover:
(a) to (d) ……;
(e) Fatty acids, prepared waxes, medicaments, paints, varnishes, 
soap, perfumery, cosmetic or toilet preparations, sulphonated 
oils or other goods of Section VI; or
[2024] 12 S.C.R. 
899
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
(f) …..
……
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).
Heading 15.03 read thus: -
Heading 
No.
Sub-
heading 
No.
Description of goods
Rate of 
duty
15.03
1503.00
Fixed vegetable oils, other 
than those of Heading No. 
15.02
8 %
Coconut oil, a vegetable oil, did not find mention in the oils named in 
Heading 15.02 and was, accordingly, classified under Heading 15.03.
5.	
In terms of this classification, the Central Board of Excise and 
Customs, Ministry of Finance (Department of Revenue), Government 
of India, issued Circular No. 145/56/95-CX dated 31.08.1995, due to 
doubts being expressed about coconut oil packed in small containers 
and as to whether it would be classifiable as a fixed vegetable oil or 
as a cosmetic preparation under the Act of 1985. The Board clarified 
that coconut oil, whether pure or refined and whether packed in small 
or large containers, merited classification under Heading 15.03 if it 
satisfied the criteria of ‘fixed vegetable oil’ in Chapter Note 3 of Chapter 
15. It was further clarified that if the containers bore labels/literature 
indicating that it was meant for application on hair, as specified under 
Note 2 of Chapter 33 and/or
if the oil had additives (other than BHA) 
or had undergone processes which made it a preparation for use 
on hair, as mentioned in Chapter Note 6 of Chapter 33, then the 
coconut oil merited classification under Chapter 33. 
6.	
Section VI in the First Schedule to the Act of 1985 deals with “Products 
of the Chemical or Allied Industries” and Chapter 33 therein, referred 
to in the above Circular, is titled “Essential Oils and Resinoids; 
Perfumery, Cosmetic or Toilet Preparations”. Relevant particulars 
in this Section, Chapter and heading, as they then stood, i.e., prior 
to the amendment in 2005, read as under:
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SECTION VI
PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES
CHAPTER 33
ESSENTIAL OILS AND RESINOIDS; PERFUMERY, COSMETIC 
OR TOILET PREPARATIONS
Notes:
1. ……
2. Heading Nos. 33.03 to 33.07 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 with labels, 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 or prophylactic value.
3 – 5. ……
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.
Heading 33.05 in Chapter 33 read as under:
Heading 
No.
Sub-
heading 
No.
Description of goods
Rate of 
duty
33.05
Preparations for use on 
the hair
3305.10
- Perfumed hair oils
- Other
16%
3305.91
– Hair fixer
16%
3305.99
– Other
16%
[2024] 12 S.C.R. 
901
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
7.	
While so, the Central Excise Tariff (Amendment) Act, 2004 [Act 5 of 
2005] was promulgated by the Parliament and came into effect on 
28.02.2005. Thereby, in exercise of power under Section 5 of the 
Act of 1985, the Central Government amended the First Schedule to 
the Act of 1985. Thereafter, the amended Chapter Notes in Chapter 
15 in Section III, to the extent relevant, read as under:
SECTION III
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR 
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; 
ANIMAL OR VEGETABLE WAXES
CHAPTER 15
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR 
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; 
ANIMAL OR VEGETABLE WAXES
Notes:
1. This Chapter does not cover:
(a) to (d). ……;
(e) fatty acids, prepared waxes, medicaments, paints, 
varnishes, soap, perfumery, cosmetic or toilet preparations, 
sulphonated oils or other goods of Section VI; or 
(f) …....
SupplementaryNotes:
1. ……
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 decomposes and saponifies them).
8.	
Headings in Chapter 15 also underwent a major change. 
Earlier, there were only 8 headings, i.e., Heading 15.01 to Heading 
15.08, but after the amendment, the headings range from 1501 to 
1522. Heading 1513 is relevant for our purposes and it
reads as 
under:

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[2024] 12 S.C.R.
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Tariff Item
Description of goods
Unit
Rate of 
duty
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:
1513 11 00
-- Crude oil
kg.
8%
1513 19 00
-- Other
kg.
8%
- Palm kernel or babassu oil 
and fractions thereof:
1513 21
-- Crude Oil:
1513 21 10
--- Palm kernel oil
kg.
8%
1513 21 20
--- Babassu oil
kg.
8%
1513 29
-- Other:
1513 29 10
--- Palm kernel oil and its 
fractions
kg.
8%
1513 29 20
--- Babassu oil and its fractions 
edible grade 
kg.
8%
1513 29 30
--- Babassu oil and its fractions, 
other than edible grade
kg.
8%
1513 29 90
--- Other
kg.
8%
9.	
Section VI, pertaining to ‘Products of the Chemical or Allied Industries’, 
also underwent a change. Section Note 2 therein now read thus:
SECTION VI
PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES
Notes:
1. …..
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.
[2024] 12 S.C.R. 
903
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
10.	 Chapter 33 in Section VI was also amended. Chapter Note 3, 
pertaining to Headings 3303 to 3307, now reads as follows:
Chapter 33
ESSENTIAL OILS AND RESINOIDS, PERFUMERY, 
COSMETIC OR TOILET PREPARATIONS
Notes:
1 – 2. ….
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.
11.	 Post the amendment, Heading 3305 reads as under:
Tariff Item
Description of goods
Unit
Rate of 
duty
3305
Preparations for use on the 
hair
3305 10
- Shampoos:
kg.
16%
3305 10 10
--- Containing spirit
kg.
16%
3305 10 90
--- Other
kg.
16%
3305 20 00
- Preparations for permanent 
waving or straightening
kg.
16%
3305 30 00 
-- Hair lacquers
kg.
16%
3305 
- Other :
3305 90 11
--- Hair Oil:
---- Perfumed
kg.
16%
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 synthetic)
kg.
16%
3305 90 50
--- Hair fixers
kg.
16%
3305 90 90
--- Other
kg.
16%
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12.	 The Act of 1985 also provides rules for interpretation of the First 
Schedule thereto. Rule 1 therein provides that classification of 
goods shall be determined according to the terms of the headings 
and any relative Section or Chapter Notes. However, the admitted 
position is that the Harmonized Commodity Description and Coding 
System [Harmonized System of Nomenclature (HSN)], brought out 
by the World Customs Organization, reflects internationally accepted 
norms and is extensively used the world over for resolving disputes 
relating to tariff classification. It was adopted in 1983 and enforced 
in January, 1988. In Commissioner of Customs and Central 
Excise, Amritsar (Punjab) vs. D.L. Steels etc.,1 this Court noted 
that this multipurpose international product nomenclature harmonizes 
description, classification and coding of goods and, while the primary 
objective of the HSN is to facilitate and aid trade, it is also for other 
diverse purposes like internal taxes, monitoring import tariffs, quota 
controls, rules of origin, transport statistics, freight tariffs, compilation 
of national accounts and economic research and analysis. It was 
further noted that, in the present times, given the widespread adoption 
of the HSN by over 200 countries, it would be very difficult to deal 
with an international trade issue involving commodities, without 
adverting to the HSN. 
13.	 As a matter of fact, the Statement of Objects
and Reasons of the 
Central Excise Tariff Bill, 1985, the precursor to the Act of 1985, 
recorded that a technical study group was set up to conduct a 
comprehensive inquiry into the structure of Central Excise Tariffs 
and the tariffs that were suggested by this group for 137 items were 
based on the internationally accepted nomenclatures in the HSN. 
Significantly, the Central Excise Tariff (Amendment) Act, 2004 (Act 
5 of 2005), effected amendments in the First Schedule to the Act 
of 1985 with the sole intention of fine-tuning the tariff descriptions 
therein with the HSN. The Statement of Objects and Reasons dated 
13.07.2004 therein noted that the First Schedule to the Act of 1985 
was based on a six-digit classification code while the Department 
of Revenue had developed an eight-digit classification code based 
on the HSN for the purposes of classification of excisable goods 
in India. It was also noted that the Directorate General of Foreign 
1	
[2022] 17 SCR 151 : 2022 SCC OnLine SC 863
[2024] 12 S.C.R. 
905
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
Trade and the Directorate General of Commercial Intelligence of 
Statistics had already adopted the eight-digit classification code 
for the purpose of import trade control policy and for collection 
of statistics respectively. Reference was made to demands from 
several quarters to adopt the eight-digit classification code for Central 
Excise also in order to accommodate the demand from the trade 
and industry for adoption of a common commodity classification 
based on the internationally adopted HSN to be used for all trade-
related transactions to facilitate international and domestic trade. 
The amendment Bill, therefore, proposed to expand the six-digit 
classification in the First Schedule into an eight-digit classification, 
so as to remove difficulties arising from divergence in classification 
by different departments and would also facilitate international trade. 
It was clarified that the proposed amendments did not make any 
change in the existing rates of Central Excise duties and, hence, 
they did not involve revenue implication. 
14.	 Notably, in Collector of Central Excise, Shillong vs. Wood Craft 
Products Ltd.,2 a 3-Judge Bench of this Court held as under: 
‘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”. 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 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 the meaning of the expression 
2	
(1995) 3 SCC 454
906
[2024] 12 S.C.R.
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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 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, which has a different purpose, cannot, in case 
of a conflict, override 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 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.’
15.	 Again, in O.K. Play (India) Ltd. vs. Commissioner of Central 
Excise, Delhi-III, Gurgaon,3 another 3-Judge Bench of this Court 
affirmed that the scheme of Central Excise
Tariffs is based on the 
HSN and the Explanatory Notes appended thereto and, therefore, 
the HSN along with its Explanatory Notes provide a safe guide for 
interpretation of entries.
16.	 Ergo, in resolving disputes relating to tariff description and 
classification, a ready reckoner is the internationally accepted 
nomenclature in the HSN. That being said, we must hasten to 
reiterate what was pointed out in Wood Craft Products Ltd. (supra). 
If the headings/entries in the First Schedule to the Act of 1985 are 
different from the headings/entries in the HSN or if they are not fully 
3	
[2005] 1 SCR 1086 : (2005) 2 SCC 460
[2024] 12 S.C.R. 
907
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
aligned, reliance cannot be placed upon the HSN for the purpose of 
classifying those goods under the Act of 1985. 
17.	 To sum up, the First Schedule to the Act of 1985 is based on the 
HSN, which is an internationally standardized system developed 
and maintained by the World Customs Organization for classifying 
products, and unless the intention to the contrary is found within the 
Act of 1985 itself, the HSN and the Explanatory Notes thereto, being 
the official interpretation of the Harmonized System at the international 
level, would be of binding guidance in understanding and giving effect 
to the headings in the First Schedule. It is only when a different 
intention is explicitly indicated in the Act of 1985 itself that the HSN 
would cease to be of guidance. In effect, the legislative intention to 
depart from the HSN must be clear and unambiguous. For instance, 
in Camlin Ltd. v. Commissioner of Central Excise, Mumbai4, this 
Court found that there was an inconsistency between the Central 
Excise tariff description and the entry in the HSN and, therefore, 
reliance upon the HSN entry was held to be invalid. It was affirmed 
that it is only when the entry in the HSN and the tariff description 
in the First Schedule to the Act of 1985 are aligned that reliance 
would be placed upon the HSN for the purpose of classification of 
such goods under the
correct tariff description.
18.	 It would, therefore, be relevant to examine the HSN in the context of 
the changes made in the First Schedule to the Act of 1985 in 2005 
apropos ‘coconut oil’. Section III and Chapter 15 in the HSN are 
titled the same as Section III and Chapter 15 in the First Schedule 
and read thus:
SECTION III
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR 
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; 
ANIMAL OR VEGETABLE WAXES
CHAPTER 15
ANIMAL OR VEGETABLE FATS AND OILS AND THEIR 
CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; 
ANIMAL OR VEGETABLE WAXES
4	
[2008] 12 SCR 1223 : (2008) 9 SCC 82
908
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Chapter Notes.
1. - This Chapter does not cover:
(a) to (d) …
(e) Fatty acids, prepared waxes, medicaments, paints, 
varnishes, soap, perfumery, cosmetic or toilet preparations, 
sulphonated oils or other goods of Section VI; or
(f) …
19.	 Heading 15.13 in the HSN is identical to Heading 1513 in Chapter 
15 in Section III of the First Schedule, after its amendment, and 
reads thus:
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
1513.19 - - Other
- 
Palm kernel or babassu oil and fractions 
thereof:
1513.21 - - Crude oil
1513.29 - - Other
(A) COCONUT (COPRA) OIL
 This oil is obtained from the dried flesh or copra (as it is called) 
of the coconut (Cocos nucifera). Fresh coconut flesh can also 
be used. This non-drying oil is pale yellow or colourless and 
is solid below 250C. Coconut oil is used in soaps, in cosmetic 
or toilet preparations, for making lubricating greases, synthetic 
detergents, laundering or cleaning preparations and as a source 
of fatty acids, fatty alcohols and methyl esters.
Refined coconut oil is edible and is used for food products such 
as margarine, dietary supplements.
20.	 Section VI of the HSN is titled ‘Products of the Chemical or Allied 
Industries’ as is Section VI in the First Schedule to the Act of 1985. 
Section Note 2 therein reads as follows:
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909
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
SECTION VI
PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES
Section Notes.
1. …
2. - Subject to Note 1 above, goods classifiable in 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 
and in no other heading of the Nomenclature.
It is, therefore, identical to the amended Section Note 2 in Section 
VI in the First Schedule to the Act of 1985. The General Note under 
Section Note 2 in the HSN is of relevance and reads as follows:
Section Note 2 provides that goods (other than 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 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.
21.	 Chapter Note No. 3 in Chapter 33 of the HSN, titled Essential Oils and 
Resinoids; Perfumery, Cosmetics or Toilet Preparations’ is identical 
to the amended
Chapter Note 3 in Chapter 33 in Section VI of the 
First Schedule, and it reads as follows:
CHAPTER 33
ESSENTIAL OILS AND RESINOIDS; PERFUMERY, 
COSMETIC OR TOILET PREPARATIONS
Chapter Notes.
1. …
2. …
3. Headings 33.03 to 33.07 apply, inter alia, to products, 
whether or not mixed (other than aqueous distillates and
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Supreme Court Reports
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.
22.	 The General Notes thereunder, to the extent relevant, read thus:
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 use (see Note 3 to this 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 
deodorisers 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, 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 deodorisers; or
(b) Put up in a form clearly specialised to such use (e.g., 
nail varnish put up in small bottled
furnished with the brush 
required for applying the varnish).
23.	 Heading 33.05 in the HSN reads as follows:
33.05 – PREPARATIONS FOR USE ON THE HAIR.
3305.10 - Shampoos
[2024] 12 S.C.R. 
911
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
3305.20 - Preparations for permanent waving or 
straightening
3305.30 - Hair lacquers
3305.90 - Other
This heading covers:
(1) to (3) ---
(4) Other hair preparations, such as brilliantines; hair oils, 
creams (“pomades”) and dressings; hair dyes and bleaches 
used on the hair; cream-rinses.
24.	 Comparison of the relevant headings in the First Schedule to the 
Act of 1985, both pre-2005 amendment and post-2005 amendment, 
with the corresponding headings in the HSN reveals that Chapter 
Note 1(e) in Chapter 15 in Section III of the First Schedule remained 
the same even after the 2005 amendment and was identical to 
Chapter Note 1(e) in Chapter 15 of Section III of the HSN. This Note 
clarified that Chapter 15 would not be applicable to fatty acids, etc., 
including cosmetic or toilet preparations, which would fall in Section 
VI. However, the headings in Chapter 15 in Section III of the First 
Schedule increased to twenty-two after the amendment, with effect 
from 28.02.2005. Heading 15.03 in the pre-amended Chapter 15 dealt 
with fixed vegetable oils, excluding those named in Heading 15.02. 
Coconut oil, not being one of them, was classifiable under Heading 
15.03 and there was no issue about it, as was clarified vide Circular 
dated 31.08.1995. However, post the 2005 amendment, Heading 1513 
was created specifically for coconut oil and the other named oils.
This heading dealt with crude coconut oil and other forms of coconut 
oil and its fractions. All that was required thereunder was that the 
coconut oil should not have been chemically modified. Significantly, 
the post-2005 amendment description of coconut oil in Heading 1513 
was a replication of its description in Heading 15.13 in the HSN. 
25.	 When it comes to Section VI of the First Schedule, pertaining to 
‘Products of the Chemical or Allied Industries’, the post-2005 amended 
Section Note 2 was more or less identical to Section Note 2 in Section 
VI of the HSN. However, Chapter Note 2 of Chapter 33 in Section 
VI of the First Schedule, prior to the 2005 amendment, was more 
detailed than the corresponding Chapter Note 3 in Chapter 33 in
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Section VI of the HSN. In the HSN, this Chapter Note stated that 
Headings 33.03 to 33.07 would apply to products suitable for use as 
goods of these headings and put up in packings of a kind sold by retail 
for such use. However, the unamended Chapter Note 2 in Chapter 
33 of the First Schedule to the Act of 1985 went further by stating 
that Headings 33.03 to 33.07 would apply to products 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. There was thus a difference 
in the Chapter Note in the First Schedule and the corresponding 
Chapter Note in the HSN. 
26.	 Interestingly, the expanded Chapter Note in the First Schedule was 
a reflection of what was stated in the General Notes in Chapter 
33 of the HSN. Whatever was stated in the expanded Note with 
regard to the products being ‘put up in packings with labels, 
literature or other indications that they were for use as cosmetic 
or toilet preparations or put up in a form clearly specialized to 
such use and that products, whether or not they contain subsidiary 
pharmaceutical or antiseptic constituents or are held out as having
subsidiary, curative or prophylactic value, would also be included 
under the headings in question’, is set out in the very same words 
in the General Notes in Chapter 33 of the HSN. At that time, full 
conformity was not there between the First Schedule and the HSN 
and that was, perhaps, the reason why what was clarified in the 
General Notes in Chapter 33 of the HSN was directly incorporated in 
Chapter Note 2 in Chapter 33. Notably, in B.P.L. Pharmaceuticals 
Ltd. vs. Collector of Central Excise, Vadodara,5 this Court held 
that for a product to be classified as a cosmetic under Chapter 33 
in Section VI of the First Schedule, it must first be a cosmetic, i.e., 
it should be suitable for use as ‘goods falling under Headings 3303 
to 3308’ and it must be put in packing with a label or literature or 
other indication, showing that it is intended for use as a cosmetic 
preparation. This decision was rendered in the year 1995 and was 
5	
[1995] 3 SCR 1235 : (1995) Supp. 3 SCC 1
[2024] 12 S.C.R. 
913
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
in keeping with the then Chapter Note 2 in Chapter 33 of the First 
Schedule.
27.	 As already noted hereinbefore, Act 5 of 2005 was aimed at bringing 
about full conformity between the First Schedule to the Act of 1985 
and the HSN and amendments were made accordingly in the First 
Schedule. Post the 2005 amendment, Chapter Note 3 in Chapter 33 
in Section VI of the First Schedule was made a verbatim reproduction 
of the corresponding Chapter Note 3 in Chapter 33 in the HSN. 
However, as it is an admitted position that the Explanatory Notes in 
the HSN would also be binding once the entry in the HSN corresponds 
with the description of the goods in the First Schedule to the Act of 
1985, the General Notes in Chapter 33 in the HSN would apply. In 
consequence, what was set out earlier in Chapter Note 2 in Chapter 
33 of the First Schedule is now brought in by way of the General 
Notes in Chapter 33 of the HSN and the removal thereof from the 
Chapter Note in Chapter 33 of the First Schedule has no significance, 
except for the fact that it brought about complete parity between the 
First Schedule to the Act of 1985 and the HSN. 
28.	 Therefore, it would not be sufficient to merely show that the products 
in question are suitable for use as goods falling under Headings 
3303 to 3307 in Chapter 33 of the First Schedule and were put up 
in packings of a kind sold by
retail for such use, but it must also be 
demonstrated that such products, which are suitable for other uses 
in addition to those described and classified in Headings 3303 to 
3307, are in packings of a kind sold to consumers and are put up 
with labels, literature or other indications that they are for use as 
perfumery, cosmetic or toilet preparations or they are put up in a form 
clearly specialized to such use, for example - acetone put up in small 
bottles along with a brush for applying it, thereby indicating its use as 
nail polish remover. In consequence, all the conditions prescribed, as 
above, have to be satisfied before products suitable for multiple uses 
can be treated as goods classifiable under Headings 3303 to 3307. 
29.	 The Central Government was also conscious of the effects of the 
amendments made by the Act of 2005. Circular No. 890/10/2009-
CX dated 03.06.2009 was issued by the Central Board of Excise 
and Customs, Ministry of Finance, Government of India, in relation 
to classification of coconut oil packed in small containers. Thereby, 
the Board clarified that when ‘hair oil’ is printed on the container/
914
[2024] 12 S.C.R.
Supreme Court Reports
label, there can be no dispute that it is classifiable as hair oil under 
Chapter 33 and not as edible oil under Chapter 15. The Board 
noted that Chapter Note 2 in Chapter 33 was modified with effect 
from 28.02.2005 and the amendment was carried out to align the 
Central Excise Tariff with the internationally accepted HSN. The 
Board further noted that in view of the amendment, the clarification 
issued, vide Circular dated 31.08.1995, required modification. Having 
said so, the Board strangely concluded that coconut oil packed in 
containers of up to 200 ml may be considered as generally used as 
hair oil and that this would bring uniformity in assessment of such 
oil sold in small containers, irrespective of whether its use as hair 
oil was indicated on the containers. The Circular dated 31.08.1995 
was withdrawn and coconut oil in small quantities, up to 200 ml, was 
directed to be classified under Heading 3305. 
30.	 However, this understanding of the Board was clearly not in keeping 
with the General Notes in Chapter 33 of the HSN. Perhaps realizing 
the same, the Board then issued Circular No. 1007/14/2015-CX 
dated 12.10.2015. Therein, it was noted that decisions had been 
rendered on the issue by Tribunals/Courts holding that, just because 
the retail packs of coconut oil were in sizes of 200 ml or less, the 
same could not be presumed to be meant for use as hair oil and 
the same would not be classifiable under Heading
3305. The Board, 
accordingly, withdrew the Circular dated 03.06.2009 and left the issue 
of classification of coconut oil packed in small containers of up to 
200 ml to be decided in the field, taking into consideration judicial 
pronouncements and the facts of individual cases. 
31.	 It is also relevant to note that in Heading 1513 in Chapter 15 in Section 
III of the First Schedule, there is no mention of the size, volume or 
weight of the packaging and coconut oil, whether or not refined, is 
classifiable under this heading as long as it is not chemically modified. 
On the other hand, whenever and wherever it was intended that the 
weight of the product was a factor to be considered for classification, 
the headings provided for the same. For instance, Heading 0902 in 
Chapter IX, titled ‘Coffee, Tea, Mate and Spices’, in Section II of the 
First Schedule deals with Tea, whether or not flavoured, and the sub-
headings thereunder specifically detail the weight of the packaging 
for the purpose of classification. Similarly, Heading 1806, pertaining 
to ‘Chocolate and other food preparations containing cocoa’, in 
Chapter 18, titled ‘Cocoa and cocoa preparations’, in Section IV of
[2024] 12 S.C.R. 
915
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
the First Schedule indicates that as per the weight of the preparation, 
the classification under Sub-Heading 1806 20 00 would apply. The 
absence of weight or volume specifications in relation to ‘coconut 
oil’ in Heading 1513 is, therefore, of significance. 
32.	 Coming to the facts in the appeals on hand, Civil Appeal No. 1766 of 
2009 pertains to Madhan Agro Industries (India) Pvt. Ltd., Kangeyam, 
Tamil Nadu, which manufactures and markets coconut oil in packages 
ranging from 5 ml to 2 litres, under the name and style of ‘Shanti 
Coconut Oil’. This oil was sold as ‘edible oil’ during the relevant period, 
i.e., 01.04.2005 to 31.08.2007. Show-cause notices dated 16.02.2007, 
05.09.2007, 06.09.2007, 19.09.2007 and 28.11.2007 were issued 
to the company by the Central Excise authorities proposing to levy 
duty treating the coconut oil sold during that period as ‘hair oil’, 
classifiable under Heading 3305 in Chapter 33 in Section VI of the 
First Schedule, and not under Heading 1513 in Chapter 15 in Section 
III of the First Schedule. Interest and penalties were also proposed 
to be levied. Order-in-original dated 12.12.2007 was passed by the 
Commissioner of Customs and Central Excise, Salem, holding to 
that effect and confirming the demand for excise duty treating the 
coconut oil sold as ‘hair oil’ and also levying interest thereon along 
with redemption
fine and penalties. Aggrieved thereby, Madhan Agro 
Industries (India) Pvt. Ltd. filed Appeal No. E/111/08/MAS before the 
Customs Excise and Service Tax Appellate Tribunal, South Zonal 
Bench, Chennai. By Final Order No. 638/08 dated 25.06.2008, the 
Tribunal allowed the appeal in the light of the amendments brought 
about in the year 2005 and the Explanatory Notes in the HSN. The 
Tribunal held that the coconut oil sold during the relevant period 
was classifiable as ‘edible oil’ under Heading 1513 in Chapter 15 of 
Section III of the First Schedule to the Act of 1985.
33.	 Civil Appeal Nos. 6703 to 6710 of 2009, eight appeals in all, pertain 
to the period 28.02.2005 to 28.02.2007. Four of these appeals relate 
to M/s. Marico Ltd., Mumbai, which manufactures and markets pure 
coconut oil as ‘edible oil’ under the name ‘Parachute’. The remaining 
four appeals relate to job-workers of M/s. Marico Ltd., who receive 
its coconut oil in bulk and market the same after packing it in small 
containers, ranging from 50 ml to 2 litres. The four job-workers 
are M/s. Aishwarya Industries, M/s. Moreshwar Industries, M/s. 
Shivam Enterprises and M/s. Sowparnika Enterprises, all situated at 
Pondicherry (now, Puducherry). Show-cause notices were issued in
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[2024] 12 S.C.R.
Supreme Court Reports
July, 2007, by the Central Excise authorities proposing to treat the 
coconut oil so sold by them as ‘hair oil’, classifiable under Heading 
3305, which led to Orders-in-original being passed on 27th and 28th 
of February, 2008, confirming the demand of excise duty against 
the four job-workers and M/s. Marico Ltd., treating the coconut oil 
as ‘hair oil’ and also levying penalty and interest. However, the 
appeals filed by M/s. Marico Ltd. and its four job-workers before the 
Customs Excise and Service Tax Appellate Tribunal, South Zonal 
Bench, Chennai, were allowed, vide Final Orders No. 1068 to 1075 
of 2008 dated 30.07.2008. It is against these orders passed by the 
Tribunal that the Revenue is before us by way of these appeals filed 
under Section 35L(b) of the Central Excise Act, 1944.
34.	 Though much stress has been laid by the Revenue upon the fact 
that pure coconut oil is suitable for use as ‘hair oil’ and is, in fact, 
used as such by many people, this contention does not further the 
case of the Revenue, given the clarity of the headings in the First 
Schedule to the Act of 1985 which are in perfect alignment with 
the corresponding entries in the HSN. Once the entries are aligned 
and reflect the same position, the General/Explanatory Notes in the 
HSN would be applicable and cannot be ignored while classifying 
goods as per the headings in the First Schedule. This position is 
well settled, as pointed out by this
Court in Wood Craft Products 
Limited (supra). 
35.	 We may now deal with the next point – the ‘common parlance 
test’. A well settled principle of interpretation of taxing statutes is 
that words therein must be construed in consonance with their 
commonly accepted meaning in the trade and their popular meaning. 
When a word is not explicitly defined or there is ambiguity as to its 
meaning, it must be interpreted for the purpose of classification in 
the popular sense, which is the sense attributed to it by those who 
are conversant with the subject matter that the statute is dealing 
with. This principle, known as the ‘common parlance test’, serves as 
good fiscal policy so as to not put people in doubt or quandary about 
their tax liability. The test is an extension of the general principle of 
interpretation of statutes for deciphering the mind of the law-maker 
but it is subject to certain exceptions - for example, when there is 
an artificial definition or special meaning attached to the word in the 
statute itself, whereby the ordinary sense approach would not be 
applicable [See D.L. Steels (supra)].
[2024] 12 S.C.R. 
917
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
36.	 However, we find that the reliance presently placed by the Revenue 
upon the ‘common parlance test’ is utterly misplaced. The said 
test would have to be understood in the proper perspective and 
cannot be brought into play when there is no ambiguity and there 
is no difference in the clear heading in the First Schedule and the 
corresponding entry in the HSN. In Commissioner of Central Excise, 
New Delhi vs. Connaught Plaza Restaurant Pvt. Ltd., New Delhi,6 
this Court observed that classification of excisable goods shall be 
determined according to the headings and corresponding Chapter 
or Section Notes but where these are not clearly determinative of 
the proper classification, the same shall be effected according to the 
general rules of interpretation and according to the common parlance 
understanding of such goods. It was pointed out that fiscal statutes 
are framed at a point of time but are meant to apply for significant 
periods of time thereafter and they cannot, therefore, be expected 
to keep up with nuances and niceties. It was held that the terms 
of the statutes must be adapted to developments of contemporary 
times rather than being held entirely inapplicable and it is for this 
precise reason that Courts apply the ‘common parlance test’ every 
time parties attempt to differentiate their products on the basis of 
subtle and finer
characteristics. 
37.	 Earlier, in Alpine Industries vs. Collector of Central Excise, 
New Delhi,7 this Court observed that, in interpreting tariff entries in 
taxation statues like the Excise Act, where the primary object is to 
raise revenue and, for that purpose, various products are differently 
classified, the entries must not be understood in their scientific/
technical sense and must be construed as per their popular meaning, 
i.e., the meaning that would be attached to them by those using 
the product. However, as already noted above, this exercise would 
be undertaken when a product is not clearly defined or specifically 
dealt with in the headings in the First Schedule to the Act of 1985 
and the corresponding HSN entries. 
38.	 Long prior thereto, in Indo International Industries vs. Commissioner 
of Sales Tax, Uttar Pradesh,8 this Court held that any term or 
6	
[2012] 11 SCR 365 : (2012) 13 SCC 639
7	
[2003] 1 SCR 313 : (2003) 3 SCC 111
8	
[1981] 3 SCR 294 : (1981) 2 SCC 528
918
[2024] 12 S.C.R.
Supreme Court Reports
expression defined in a taxing statute must be understood in the 
light of the definitions given in the Act, in the absence of which the 
meaning of the term as understood in common parlance or commercial 
parlance must be adopted. 
39.	 It is also to be noted that Rule 1 of the General Rules of Interpretation 
in the First Schedule to the Act of 1985 must be applied in the first 
instance and only if classification cannot be determined thereunder, 
recourse would have to be taken to the other Rules specified in the 
General Rules. Once the determination can be made under Rule 
1, the question of applying other tests relatable to the other rules 
would not arise. In consequence, when there is no ambiguity or 
confusion about the classification of a particular product in the light 
of the clear heading in the First Schedule to the Act of 1985 and the 
corresponding entry in the HSN, resort to tools such as the ‘common 
parlance test’ would not arise. 
40.	 Presently, it is an admitted fact that pure coconut oil is suitable for 
multiple uses. That notwithstanding, when a specific heading was 
created in Chapter 15, viz., Heading 1513, for ‘coconut oil’ along 
with other oils, it would not stand excluded therefrom so as to be 
classified as a cosmetic product under Heading 3305 in Chapter 33 
in Section VI of the First Schedule, unless all the conditions required 
therefor are satisfied. As already noted, such conditions formed part
of Chapter Note 2 in Chapter VI of the First Schedule itself, prior 
to the 2005 amendment, but after that amendment, whereby the 
said Chapter Note was brought into conformity with Chapter Note 
3 in Chapter 33 of the HSN, the Explanatory/General Notes in the 
HSN in relation to the said Chapter Note would have to be fully 
satisfied. In effect, not only must the coconut oil be suitable for use 
as ‘hair oil’, but it must also be put in packaging sold in retail for 
such particular use, i.e., as hair oil. The phrase ‘suitable for such 
use’ under Headings 3303 to 3307 in Chapter Note 3 would have 
to be read in conjunction with the Explanatory Notes thereto, which 
categorically state that such packaging must be accompanied with 
labels, literature or other indications that the product is intended for 
use as a cosmetic or toilet preparation or it must be put in a form 
clearly specialized to such use - as in the case of acetone marketed 
in small bottles, along with an applicator brush, indicating its use as 
nail polish remover.
[2024] 12 S.C.R. 
919
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
41.	 The mere fact that coconut oil is also capable of being put to use 
as a cosmetic or toilet preparation, by itself, would not be sufficient 
to exclude such oil from the ambit of ‘coconut oil’ and subject it to 
classification as ‘hair oil’ as ‘coconut oil’ is name-specific. It is not in 
dispute that the packaging of the coconut oil in the cases on hand 
clearly demonstrated that it was being sold as ‘edible oil’ and all 
parameters that had to be met in that regard were duly complied with. 
Edible coconut oil requires to be packed in containers using edible 
grade plastic. The coconut oil so sold must satisfy the requirements 
of the Food Safety and Standards Act, 2006, and be packaged in 
conformity with the Edible Oils Packaging (Regulations) Order, 1998. 
Further, edible oil would have a shorter shelf life than oil meant for 
cosmetic purposes and must meet the Indian Standards Specifications 
prescribed for edible oil which are different from the standards for hair 
oil. Significantly, the Standards of Weights and Measures (Packaged 
Commodities) Rules, 1977, provide that ‘edible oil’ can be packed in 
specified sizes of 50 ml, 100 ml, 200 ml, 500 ml, 1 litre or 2 litres. 
42.	 Shanti Coconut Oil, produced and marketed by Madhan Agro 
Industries (India) Pvt. Ltd., bore ‘Agmark’ certification from the 
concerned authorities to qualify as a Grade-I
coconut oil, fit for human 
consumption. The fact that such edible coconut oil was sold in smaller 
containers would not, by itself, be indicative of it being packaging of 
a kind fit for use as ‘hair oil’. One may choose to buy one’s cooking 
oil in small quantities, be it for economic or for health reasons or due 
to the inclination to use fresh oil in one’s food preparation, and the 
smaller size of the packaging of such oil cannot be taken to mean 
that it is to be used as ‘hair oil’ without any pointer to that effect, be 
it by way of a label or literature or by any other indication that it is to 
be used as ‘hair oil’. Notably, the Board’s Circulars dated 03.06.2009 
and 12.10.2015 were issued only because of this doubt being raised 
in the field that edible oil can also be purchased in small quantities. 
43.	 Small-sized containers are a feature common to both ‘edible oils’ 
as well as ‘hair oils’. Therefore, there must be something more to 
distinguish between them for classification of such oil, be it under 
Chapter 15 or under Chapter 33, other than the size of the packing. 
Stress was also laid by the Revenue on the fact that Shanti Coconut 
Oil was marketed in containers depicting a popular film actress 
with flowing tresses and it was contended that in the light of such 
marketing, the oil sold was obviously meant for use as ‘hair oil’ and
920
[2024] 12 S.C.R.
Supreme Court Reports
not as ‘edible oil’. However, such an advertisement is not conclusive, 
in itself, to classify the oil as ‘hair oil’. Reference may be made to 
Meghdoot Gramodyog Sewa Sansthan, U.P. vs. Commissioner 
of Central Excise, Lucknow,9 wherein this Court held that the mere 
fact that the product in that case was sold in a packing depicting a 
lady with flowing hair was not determinative of such product being 
intended as a preparation for use on the hair. This Court considered 
the composition and curative properties of the product to ultimately 
conclude that the product was classifiable as a ‘medicament’ under 
Heading 3003 in Chapter 30 of the First Schedule. 
44.	 Further, registration of the trademark ‘Parachute’ by M/s. Marico Ltd. 
for ‘hair oil’ is not sufficient to classify the coconut oil sold by it, in 
its entirety, as hair oil. As rightly noted in the impugned final orders, 
‘Parachute’ trademark was also registered by the company for Edible 
Oil (Class 29), Coffee/Tea (Class 30), Pharmaceuticals (Class 5) and 
Non-Alcoholic Beverages (Class 32). Therefore, the trademark, by 
itself, does not indicate that every product sold thereunder is the 
same and meant only for one use. Significantly, M/s. Marico Ltd. 
also markets various coconut-based hair oils, containing ingredients 
such as perfumes, etc., which are manufactured under a separate 
license obtained under the Drugs and Cosmetics Act, 1940, and 
classified as
preparations for use on the hair, thereby falling under 
Heading 3305. 
45.	 The argument of the Revenue that pure coconut oil should invariably 
be classified under Heading 3305 is, therefore, liable to be rejected. 
This argument completely loses sight of the General/Explanatory 
Notes in relation to Chapter Note 3 in Chapter 33 of the HSN and 
the fact that the said Chapter Note 3 is identical to Chapter Note 3 
in Chapter 33 of the First Schedule to the Act of 1985. It is for the 
Revenue to take a stand by way of legislative action in the event 
it chooses to treat pure coconut oil marketed in small quantities 
differently from ‘Coconut oil’ in Heading 1513. Having failed to do so 
and given the fact that the relevant headings in the First Schedule to 
the Act of 1985 are corresponding with the entries in the HSN, there 
can be no distinction drawn between the two and the Explanatory 
Notes in the HSN would have to be given due effect while interpreting 
9	
(2005) 4 SCC 15
[2024] 12 S.C.R. 
921
Commissioner of Central Excise, Salem v.  
M/s Madhan Agro Industries (India) Private Ltd. 
Heading 1513 in the First Schedule to the Act of 1985. In consequence, 
the coconut oil marketed and sold by the respondents during the 
relevant period must necessarily be classified as edible oil. 
46.	 Pertinently, in Dunlop India Ltd. vs. Union of India and others,10 a 
3-Judge Bench of this Court pointed out that it is good fiscal policy to 
not put people in doubt and quandary about their liability to pay duty 
and that when an article has, by all standards, a reasonable claim 
to be classified under an enumerated item in the Tariff Schedule, it 
would be against the very principle of classification to deny it that 
parentage and consign it to an orphanage of the residuary clause. 
Applying that standard, once a specific heading was created for 
coconut oil in the First Schedule, something more would be required 
before such oil can be excluded therefrom and classified under 
the general heading pertaining to toilet and cosmetic preparations. 
Equally important is certainty and consistency in the stand of the 
Revenue.
47.	 Reliance placed by the Revenue on State of Haryana vs. Dalmia 
Dadri Cement Ltd.,11 in support of its contention that the expression 
‘for use’ can only mean ‘intended for use’ and not ‘actual use’, is 
misplaced as that decision turned upon the language of Section 
5(2)(a)(iv) of the Punjab General Sales Tax Act, 1948, and the said
interpretation cannot be applied mutatis mutandis in the present case, 
as the wording of the provisions presently under consideration and 
the rules of interpretation applicable thereto are entirely different. 
The argument of the Revenue 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 with 
nothing further. As pointed out by this Court in HPL Chemicals Ltd. 
vs. Commissioner of Central Excise, Chandigarh,12 classification 
of goods is a matter relating to chargeability and the burden of proof 
is squarely upon the Revenue if it intends to classify the goods under 
a particular heading or sub-heading different from that claimed by 
the assesses. In such an event, the Revenue had to adduce proper 
evidence and discharge that burden of proof in the context of the 
10	
[1976] 2 SCR 98 : (1976) 2 SCC 241
11	
[1988] 2 SCR 1 : AIR 1988 SC 342
12	
[2006] Supp. 1 SCR 125 : (2006) 5 SCC 208
922
[2024] 12 S.C.R.
Supreme Court Reports
classification entries, which it failed to do satisfactorily in the cases 
on hand.
48.	 On the above analysis, we are of the opinion that pure coconut oil 
sold in small quantities as ‘edible oil’ would be classifiable under 
Heading 1513 in Section III-Chapter 15 of the First Schedule to the 
Central Excise Tariff Act, 1985, unless the packaging thereof satisfies 
all the requirements set out in Chapter Note 3 in Section VI-Chapter 
33 of the First Schedule to the Central Excise Tariff Act, 1985, read 
with the General/Explanatory Notes under the corresponding Chapter 
Note 3 in Chapter 33 of the Harmonized System of Nomenclature, 
whereupon it would be classifiable as ‘hair oil’ under Heading 3305 
in Section VI-Chapter 33 thereof.
49.	 The impugned orders, holding to that effect, therefore do not brook 
interference on any count. The appeals are bereft of merit and are 
accordingly dismissed. 
Parties shall bear their own costs.
Result of the case: Appeals dismissed.
†Headnotes prepared by: Nidhi Jain