2018 (8) TMI 772 - AAAR - GST

Challenge to Advance Ruling - Classification of Skin care preparations - Appellant had argued that its skin care preparations are Ayurvedic Medicaments. meant for therapeutic or prophylactic uses and put up in packaging for retail sale and entirely correspond to the description of goods under Tariff Head 3004 of Customs Tariff Act 1975 - in the Advance Ruling it was held that other than Pailab and Rupam the remaining products mentioned in the list submitted by them are not offered primarily as medicaments and therefore not to be included under heading 3004. Whether Ayurvedic Products manufactured by the Appellant are classifiable under Chapter 33 or any other Chapter or as medicaments under Chapter 30 of the Tariff? Held that - As per the descriptions of the products printed on the labels of the products when packaged for retail sale and for information to the customer it is found that the products are used mostly for brightening the skin controlling the excess oil secretion keeping skin clean glossy and free of freckles and spots beautifying the skin of sunburn and black patches etc - None of the descriptions qualify for categorising the products as medicaments or medicines as they are not used in the diagnosis treatment mitigation or prevention of disease or disorder in human beings; rather they are more in tandem with the definition of cosmetics as we find in the Drugs and Cosmetics Act 1940 because none of the problems that these products treat can be classified as Injury or ailment . Thus the 31 products discussed supplied or intended to be supplied by the Appellant are not to be classified under Chapter 30 but are to be classified under Chapter 33 (Cosmetics) or Chapter 34 (Soaps). Advance Ruling stands modified - appeal disposed off.

Issues Involved:
1. Classification of 33 skin care products.
2. Whether the products are Ayurvedic Medicaments under Chapter 30 or cosmetics under Chapter 33 of the Customs Tariff Act, 1975.
3. The applicability of the definition of "medicament" and "cosmetic".
4. The relevance of product packaging and labeling in classification.
5. The principle of "twin test" for classification.
6. The consideration of products not yet in existence for advance ruling.

Comprehensive Issue-wise Detailed Analysis:

1. Classification of 33 Skin Care Products:
The Appellant, a manufacturer of skin care preparations, sought advance ruling for the classification of 33 products. The West Bengal Authority for Advance Ruling (WBAAR) classified only two products, Rupam and Pailab, as medicaments under heading 3004, while the rest were not classified as medicaments. The Appellant challenged this ruling, arguing that all products should be classified as Ayurvedic Medicaments under Tariff Head 3004.

2. Whether the Products Are Ayurvedic Medicaments Under Chapter 30 or Cosmetics Under Chapter 33:
The core issue was whether the products should be classified under Chapter 30 (medicaments) or Chapter 33 (cosmetics). The Appellant contended that the products are Ayurvedic Medicaments meant for therapeutic or prophylactic uses. However, the WBAAR ruled that only Rupam and Pailab qualified as medicaments, while the rest did not primarily serve as medicaments.

3. The Applicability of the Definition of "Medicament" and "Cosmetic":
The judgment emphasized the definitions of "medicament" and "cosmetic" from various dictionaries and legal texts. A "medicament" is defined as a substance used for medical treatment, while a "cosmetic" is intended for cleansing, beautifying, or altering appearance. The products were analyzed based on their efficacy in treating or remedying an injury, ailment, or illness.

4. The Relevance of Product Packaging and Labeling in Classification:
The Appellant argued that classification should not rely solely on product labels. The WBAAR, however, considered the descriptions on the retail packaging, which indicated that the products were primarily for beautifying and enhancing appearance, aligning more with the definition of cosmetics.

5. The Principle of "Twin Test" for Classification:
The Appellant argued that the WBAAR did not apply the "twin test" principle, which considers the product's ingredients and its therapeutic or prophylactic use. The judgment acknowledged this principle but emphasized that the products' primary purpose, as indicated by their descriptions, was not medicinal.

6. The Consideration of Products Not Yet in Existence for Advance Ruling:
The Appellant pointed out that the WBAAR erred by not ruling on products not yet in existence, contrary to Section 95(a) of the GST Act, which includes goods proposed to be undertaken. The appellate authority included these products in its ruling.

Product-wise Analysis and Classification:
The products were individually analyzed for their intended use and ingredients. Products like Romancho (Lavender/Vanilla/Kewra) and Komal Parash, despite containing Salicylic Acid, were labeled as body talc and baby body talc, respectively, and were classified under Tariff Head 3304.91.20. Other products were classified under Chapter 33 (cosmetics) or Chapter 34 (soaps) based on their descriptions and intended uses, such as brightening skin, controlling oil secretion, and providing a feeling of freshness.

Conclusion:
The appellate authority modified the advance ruling, classifying 31 products under Chapter 33 (cosmetics) or Chapter 34 (soaps) instead of Chapter 30 (medicaments). The appeal was disposed of accordingly, and the ruling was sent to the Appellant for information.

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