We are all aware of Parachute Coconut Oil. It’s perhaps the most famous hair oil used since several generations in many Indian families and you can get the same from small kirana store to giant retail store.
But here is the interesting story Parachute mention “Coconut Oil” instead of “Hair Oil” though we all use the same as hair oil
Coconut oil is an edible product, and it was not liable for excise duty.
Hair oil is a cosmetic product, and it is liable for excise duty.
Here is the KBC time, is Parachute Oil an edible product or a cosmetic product?
Now the question arises what’s the problem with this kind of advertisement? If you notice carefully Parachute bottles it doesn’t have hair oil written on it.
The reason is quite simple. Edible oil carries a low tax rate. Cosmetic hair oil is taxed at a higher rate. So if you were a prudent business person, you’d choose to classify the product based on this little detail. But the authorities did not agree with this classification.
For years, the government and the company have been fighting over it. The government said that this product is a cosmetic item and therefore should be liable for tax. As a counter, the company (Marico) said that the packaging does not mention this product as a hair oil and is actually intended to be used as an edible item.
Government relied on substance over form as they believed customers who purchased “coconut oil” in small containers primarily used the product as hair oil and not edible oil.After all, in common parlance people often referred to Parachute oil as hair oil.
However the Tribunal disagreed. Merely because the product is packed in small containers and used by some sections of the customers as hair oil cannot be the valid basis for classification. There must be a clear nexus between the two.
So Tribunal was on the side of Marico and Parachute Oil is still under category of Edible Oil
The case of Marico tax planning was a classic case of well-coordinatedbusiness men minds which takes even smallest details into the business aspects, whether it is financial planning, understanding complex legal and regulatory dynamics
Well, legal hassles can often be interesting!