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2020 (1) TMI 795 - AAAR - GSTClassification of goods - import of PRS as Prepared Laboratory Reagents - entry SI.No 80 of Schedule II of the GST rate N/N. 01/2017 IT (R) dated 28.06.2017 - Pharmaceutical Reference Standards (Prepared Laboratory Reagents) imported and supplied by the applicant - classified under Tariff Item 3822 00 90 of the Customs Tariff Act, 1975 - whether covered under Entry No. 80 of Schedule-II to Notification No 1/2017- Integrated Tax (Rate) dated 28th June 2017 attracting a levy of Integrated Tax at the rate of 12% or not? - challenge to AAR decision. HELD THAT - In the instant case, there is no dispute that the Pharmaceutical Reference Standards imported by the Appellant are Prepared laboratory reagents without a backing with a label and proper instructions for use - there are also an sample of the laboratory reagent wherein the label clearly indicates that it is for laboratory use only. It is also not in dispute that the correct classification of such laboratory reagents is Chapter Heading 3822 of the Customs Tariff. The dispute in this case is whether the description of the goods given against the entry SL.No. 80 of Schedule II applies to all reagents both diagnostic as well as laboratory reagents. When we read the description of the goods under Chapter Heading 3822 of the Customs Tariff together with the HSN Explanatory Notes for Heading 3822, we find that the said Heading covers prepared diagnostic or laboratory reagents and prepared laboratory reagents include not only diagnostic reagents, but also other analytical reagents used for purposes other than detection or diagnosis. Prepared laboratory reagents may be used in medical, veterinary, scientific or industrial laboratories, in hospitals, in industry, in the field or, in some cases. in the home - Further the reagents should be clearly identifiable as being for use only as diagnostic or laboratory reagents which must be clear from their composition, labelling, instructions for in vitro or laboratory use, indication of the specific diagnostic test to be performed or physical form (e.g., presented on a backing or support). The reagents referred to in the Heading 3822 of the Customs Tariff are both diagnostic and laboratory reagents. In the GST rate Notification No 01/2017, the entry SI.No 80 of Schedule II describes the goods under Chapter Heading 3822 as All diagnostic kits and reagents . This implies that all reagents falling under Chapter Heading 3822 are covered under the said entry SI.No 80 - the Heading 3822 of the Customs Tariff applies to both diagnostic and laboratory reagents. Therefore. the correct way to read the entry Sl.No 80 of Schedule II would be au diagnostic kits and all reagents . The interpretation given by the Authority for Advance Ruling that the entry I.No 80 covers only diagnostic kits and diagnostic reagents is not correct. The principle of ejusdem generic applied by the Authority in interpreting the entry SI-No 80 is misconstrued - the Fitment Committee which was mandated to recommend suitable GST rates for goods, have., after taking into consideration the indirect tax rates which were in existence, recommended a rate of 12% for Diagnostic or laboratory reagents . This recommendation has been implemented by entry Sl.No. 80 of Schedule II of Notification No. 01/2017 CT/IT(R) dated 28-06-2017. It is evident from the recommendations of the Fitment Committee that the legislative intent was to reduce the GST rate on all reagents from the rate which eras prevalent in the earlier tax regime. The principle of ejusdem generis has no application in this ease and all reagents which are covered under Heading 3822 would be covered under SI.No. 80 of Schedule II of the rate Notification. The Pharmaceutical Reference Standards (Prepared Laboratory Reagents) imported and supplied by the Appellant and classified under Tariff Item 3822 00 90 of the Customs Tariff Act, 1975 is covered under Entry No. 80 of Schedule-II to Notification No. 1/2017-Integrated Tax (Rate) dated 28th June 2017 attracting a levy of Integrated Tax at the rate of 12% - the ruling of AAR set aside - appeal allowed.
Issues Involved:
1. Delay in pronouncement of the ruling by the Advance Ruling Authority. 2. Classification and applicable tax rate for Pharmaceutical Reference Standards (PRS) under GST. Detailed Analysis: 1. Delay in Pronouncement of the Ruling: The Appellant argued that the Advance Ruling Authority violated Section 98(6) of the CGST Act by not pronouncing the ruling within 90 days from the date of receipt of the application. The ruling was pronounced almost 12 months after the application was filed. The Appellant cited several decisions to support the claim of a gross violation of statutory provisions. 2. Classification and Applicable Tax Rate for PRS: The core issue was the classification and applicable tax rate for PRS imported and supplied by the Appellant. a. Classification under Customs Tariff Act: The Appellant classified PRS as "Prepared Laboratory Reagents" under Tariff Entry 3822 00 90 of the Customs Tariff Act. This classification was supported by a previous decision of the CESTAT, Bangalore, and upheld by the Supreme Court of India. b. Applicable GST Rate: The Appellant sought clarity on whether PRS, classified under Tariff Item 3822 00 90, falls under Entry No. 80 of Schedule-II to Notification No. 1/2017-Integrated Tax (Rate) dated 28th June 2017, attracting a 12% tax rate. c. Advance Ruling Authority's Decision: The Karnataka Authority for Advance Rulings held that PRS, not used for diagnostic purposes, did not fall under Entry No. 80 of Schedule II but under the residuary Entry No. 453 of Schedule III, attracting an 18% tax rate. The Authority applied the principle of ejusdem generis, interpreting that only diagnostic reagents were covered under Entry No. 80. d. Appellant's Arguments: The Appellant argued that the term "reagent" in Entry No. 80 should encompass both diagnostic and laboratory reagents. They contended that the HSN Explanatory Notes for Heading 3822 include both diagnostic and other analytical reagents. The Appellant emphasized that the term "reagent" is generic and should cover all reagents under Heading 3822. They also pointed out that the GST Council recommended a 12% rate for "Diagnostic or Laboratory Reagents," indicating legislative intent to include all reagents under this rate. e. Appellate Authority's Findings: The Appellate Authority agreed with the Appellant's interpretation. It noted that Chapter Heading 3822 of the Customs Tariff includes both diagnostic and laboratory reagents. The correct interpretation of Entry No. 80 of Schedule II is "all diagnostic kits and all reagents," encompassing all reagents under Heading 3822. The principle of ejusdem generis was found inapplicable since the term "all" precedes the enumeration, not following it. The legislative intent, as indicated by the Fitment Committee's recommendation, was to reduce the GST rate on all reagents to 12%. Conclusion: The Appellate Authority concluded that PRS (Prepared Laboratory Reagents) imported and supplied by the Appellant, classified under Tariff Item 3822 00 90, is covered under Entry No. 80 of Schedule-II to Notification No. 1/2017-Integrated Tax (Rate) dated 28th June 2017, attracting a 12% tax rate. The Advance Ruling No. KAR ADRG 71/2019 was set aside, and the appeal filed by the Appellant was allowed.
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