Per V.K. Agrawal :

The issues involved in these two appeals, arising out of a common Order, are whether the process of repacking of coconut oil into small containers amounts to manufacture and such re-packed coconut oil is classifiable under Subheading 3305.99 of the Schedule to the Central Excise Tariff Act (C.E.T.A.).

2. Shri R. Swaminathan, learned Consultant, submitted that the Appellants, M/s Kothari Products Ltd. purchase coconut oil in bulk pack i.e. 12 Kgs and 15 Kgs pack which is classifiable under Heading 15.03 CETA as a fixed vegetable oil; that they re-pack it into small containers of 100 ml, 200 ml, etc. and is sold in the market in the Brand name "7-up," that the Commissioner, Central Excise, under the impugned Order, confirmed the demand of duty and imposed penalty on both the Appellants holding that after repacking into retail pack, the impugned goods is classifiable under sub-heading 3305.99 as "preparations for use on the hair" in terms of Note 4 to Chapter 33 of the Tariff. The learned Consultant, further, submitted that there is no manufacture in repacking coconut oil, a fixed vegetable oil falling under Chapter 15 of CETA; that there is no Chapter Note in Chapter 15 Construing repacking as amounting to manufacture; that there is no dispute that coconut oil received by them does not undergo any change in the hands of the appellants except that it is repacked in small containers; that the name, character or the use of the coconut oil remains the same; that the use of such coconut oil for application on hair is also the natural and inherent quality of the coconut oil itself and any such quality is not imparted by the Appellants at all; that the Note to Chapter cannot be applied to construe re-packing as manufacture; that the words "in relation to products of Heading No. 33.03,33.04 and 33.05" are significant and the process specified in the Note should have been undertaken on a product falling under the said Headings; that if these process are undertaken on a product falling under any other heading, the said Note would have no application. He relied upon the decision in the case of Western India Spg. Mfg. Mills Vs C.C.E. 1999 (112) ELT 443 (T) wherein it was held that by application of Note 6 (Now Note 7) to Chapter 32, it was only subjecting goods classified under Heading 32.04 to any of the process specified in that Note that would amount to manufacture; that the Tribunal held that "Hence these processes if applied to products not classifiable under Heading 32.04 would not amount to manufacture."

3. The learned Consultant also referred to Board's Circular No. 145/56/95-CX dated 31.8.95 in which it was clarified that to enable the classification of Coconut oil packed in small containers "as a product falling under Chapter 33 it must satisfy the requirements of Note 2 and 6 of Chapter 33 of CETA." The Board observed that the label/literature on the packing of coconut oil do not meet criteria of Note 2. Regarding Note 6, Board found that 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 purpose 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 3305.90 simply because they were packed in small containers and applied by same sections of the society on the hair. The learned Consultant submitted that a further clarification was issued by the Board vided Circular No. 166/79/95- CX, dated 29.12.95 wherein it was clarified that the use of anti-Oxidants will not alter the classification if they are meant only for preventing the rancidity of the oil. The learned Consultant also contended that the Adjudicating Authority had relied upon the advertisement and marketing strategy for selling the coconut oil as these advertise