How Marico Limited evaded Excise duty on Parachute Oil

We are all aware of Parachute Coconut Oil. It’s perhaps the most famous hair oil used since several generations in many Indian families. Here is a photo that will remind you of many memories:
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Did you notice that the bottle does not write “hair oil” on it?
It just writes “coconut oil”, even though majority of consumers use it like a hair oil. 
Actually -

  • 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.

So what is Parachute Oil ? Is it an edible product or a cosmetic product?

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.
So when the Government claimed that parachute coconut oil is in fact a hair oil (which, by the way, for all practical purposes, it is); the company refuted the claim by saying that it is neither branded nor marketed as a hair oil. And the company is not accountable for how the consumers are actually using it.

The Government further raised a question that if indeed the coconut oil was an edible product, then why would the company package it in sachets, such as these -
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The government wanted to prove that the product is indeed intended to be sold as a hair oil.
In response to this, the company said that such smaller packing was useful for students and other such people who wanted to use the cooking oil for small purposes and not store it. And in this whole case, the company was constantly avoiding the payment of tax on a product which was obviously used as hair oil in most of the country.

The government came out with a simple solution: they changed the law!
New law said that any coconut oil with a packaging lesser than 200 ml would be treated as a cosmetic product; and any size above that would be treated as an edible item.
This circular affected the company a lot, since a big portion of their sales was in the below 200 ml segment, which was now liable for tax. Obviously, the company decided to appeal against this circular to the higher authorities.
There were a lot of cases in the Tribunal and also the courts, which said that merely because the packing is smaller, it cannot be classified as a hair oil. In view of the same, the Government then withdrew that circular.
Note:

  • Parachute Coconut Oil even has an FSSAI approval, is necessary for edible products.                                   clip_image003
  • It also has the green vegetarian symbol on it which denotes that it is a vegetarian edible item.



















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