Parachute Oil Excise Case Law [ Marico Industries ]

Read the Amazing story of the well known Parachute Hair Oil (Sorry, Coconut Oil) and how the company has been going around the excise department in an intelligent way. Parachute Hair Oil has been a household name for the past few decades, among the Indian families. All we know is that, Parachute is a Hair Oil. However, the company does not claim so. See the amazing trick company is playing on the excise Department.

Did you notice that the bottle of Parachute  Hair Oil does not write “hair oil” on it?

Coconut oil is an edible product, and it was not liable for excise duty.

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.

Tell me, is Parachute Oil 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:

The Government further raised a question that if indeed the coconut oil

I mean, who uses cooking oils in such small packets? The government therefore wanted to prove that the product is indeed intended to be sold as a hair oil.

What happened then?

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., and we are back in the game!

[This Article has been originally authored by Mr.CA Palkesh Asawa]

19 COMMENTS

  1. Guys… The company has 2 separate products… Parachute oil and Parachute Advance Hair Oil…. The later is been promoted across all media. You would have never seen an ad for the first product which is the traditional blue bottle. Some of you can go back to you tube and check the ads.
    As far as legality is concerned, most products have dual consumption. Go to Bihar & UP, you will find Sarson oil been used as cooking as well as hair oil. So is the case in rest of India especially southern part where coconut oil has dual use.
    So the company is well within its rights to have separate product as coconut oil and hair oil and the existing tax rates get applicable basis government norms.