Supreme Court Clarifies Excise Classification of Pure Coconut Oil in Sachets: Edible Oil, Not Hair Oil [Read Judgement]

The Supreme Court of India has delivered a landmark judgment on the excise classification of pure coconut oil sold in sachets and small packages, resolving a contentious debate. The apex court ruled that such products should be classified as “edible oil” under Heading 1513 of the Central Excise Tariff Act, 1985, and not as “hair oil” under Heading 3305, unless specific indications on the packaging explicitly point to cosmetic or toiletry use.

This ruling arose from appeals involving manufacturers like Madhan Agro Industries and Marico Ltd., who sold coconut oil in packages ranging from 5 ml to 2 liters. The Revenue authorities argued that smaller packaging was indicative of cosmetic usage and sought to classify the products under "hair oil," attracting a higher excise duty.

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The manufacturers contended that their products were sold as edible oil and adhered to all standards required for food products, including Agmark certification.

The court meticulously examined the alignment of Indian excise classifications with the internationally recognized Harmonized System of Nomenclature (HSN). It noted that Heading 1513 under Chapter 15 specifically covers coconut oil for edible purposes, irrespective of packaging size. Conversely, Heading 3305 under Chapter 33 applies to preparations for use on hair, but only when packaging, labels, or accompanying literature clearly indicate such use.

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The judgment emphasized that small packaging alone cannot justify reclassification as "hair oil." It pointed out that consumers may purchase edible oil in small quantities for economic or practical reasons, such as ensuring freshness. The court further ruled that the Revenue must prove the intended use as a cosmetic product, including explicit indicators like labeling or specialized packaging, to classify coconut oil under Chapter 33.

The court also dismissed reliance on the "common parlance test," stressing that classification must be guided by clear legislative provisions and internationally accepted norms. The judgment noted that unless the packaging explicitly indicated cosmetic use, pure coconut oil—even when sold in sachets—falls under the scope of edible oil.

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The Bench of Chief Justice of India Sanjiv Khanna, Justice Sanjay Kumar and Justice R Mahadevan noted that, “, 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.”

To Read the full text of the Order CLICK HERE

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