There are many, but this one comes to mind. 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:
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.
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.
Even today, look at this page from their website, which talks about their brand as a “coconut oil” and does not even once mention that it is useful for your hair. In fact, look at their commercial which talks about everything in the coconut oil, including the “purity” and “strength” of the oil, but not it’s application for hair care. You can see it here –
Notice also that the company is branding it’s other products specifically for hair application. For example, they have the brand of “Parachute Advansed”  which covers a range of hair care products. Here is a photo of their other brand –
See that this product clearly brands it as a “hair oil”. In fact, it even shows the beautiful hair of the actress to reiterate the fact.
This answer is about the first one – Parachute Coconut Oil – the simplest and best selling product of Marico, which does not mention that it’s a hair oil.
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 –
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.
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.
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!
I like this case because it is a landmark dispute about how things should be classified. In accounting, we have this concept of “substance over form” – which says that outside appearance can often be misleading and therefore we must look into the reality and then take a call. In case of the coconut oil, the reality was that it was widely used as a cosmetic product, and it was only the outside appearance which deceived everyone.
Well, legal hassles can often be interesting!
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