2022 (5) TMI 123 - AAAR - GST

Classification of goods - rate of GST - Dry Powders containing Protein Powder with Vitamins Minerals - to be classified under HSN 2106 or under chapter 3004 of the GST Tariff Act, 2017? - HELD THAT - As regard to the Prophylactic use of the product in question, on examination of the appellant s label on the product, it is found that the product in question viz Protowits is undoubtedly described more like a food product than the medicine. The product is described as Chocolate flavour. The picture of the product on the label showing a glass containing the preparation of the said product clearly gives the image of a food beverage like Bournvita or Coffee and other various product available in market now-a-days. Taking into view the totality of the label, the whole thrust is on the food value of the product, it s flavour, deliciousness, richness, nourishment, attractiveness and all other qualities for which normal people look to the food for their health, growth and taste. Easy preparation of the said product is also emphasized - The word prophylactic means the medicines or course of action taken for preventing disease. If the broader sense of prophylactic use is taken, then all foods are prophylactic in nature, as all proper food prevents the diseases by providing necessary energy, strength and nutrition to the body which are essential for preventing the diseases. But in the context of medicines, prophylactic medicines are only those, which prevent the specific diseases by enhancing fighting and resistance capacity to the body or by providing safety mechanism. That some foods or beverages can be akin to the prophylactic medicines are recognized in Chapter 30 of the GST Tariff Act, 2017 and to avert the confusion on this point Note 1(a) in Chapter 30 is inserted for exclusion of such food supplements from the purview of medicaments of Chapter 30. On scrutiny of Chapters 16 to 24 covered by Section IV, it is found that there is no other Chapter more appropriate than Chapter 21 (Miscellaneous Edible Preparations) and as such the product in question viz Protowits should be classified under Chapter 21 only.

Summary

Issues: Classification and Rate of Applicable GST on product manufactured by the applicant

Detailed Analysis:
1. Classification under Chapter 3004:
- The applicant sought clarification on the classification of "Dry Powders containing Protein Powder with Vitamins & Minerals."
- The applicant contended that the product should be classified under Chapter 3004 due to its approval by the Drug Controlling & Licensing Authority.
- However, discrepancies were found in the ingredients listed in Serial No. 138 under Category C of the Drugs & Cosmetics Act, leading to the rejection of the certificate provided by the applicant.
- The product's prophylactic use was deemed irrelevant as it holds an FSSAI license, indicating it is a food product under the jurisdiction of the food department.
- The mere issuance of a drug license does not automatically classify the product as a medicament, as per established legal principles.

2. Prophylactic Use and Classification:
- The product's label and description indicated it is more aligned with a food product rather than a medicine, emphasizing its flavor, nourishment, and ease of preparation.
- The term "prophylactic use" on the label did not specify any diseases or ailments the product could prevent or cure, leading to the conclusion that it functions more as a food supplement.
- The General Rules for the Interpretation of the Harmonized System support the classification of food supplements under Section IV, excluding them from the scope of medicaments in Chapter 30.
- Rule 3(b) further clarifies that mixtures or composite goods should be classified based on the material giving them their essential character, leading to the classification of the product under Chapter 21 due to its nature as a food supplement.

3. Rejection of Additional Grounds:
- The applicant's reliance on previous rulings and invoices was dismissed as irrelevant to the present case, as the focus was on the specific facts and details of the current situation.

Conclusion:
Based on the detailed analysis and findings, the ruling of the Authority of Advance Ruling of Uttarakhand, upholding the classification of the product under Chapter 21, was deemed appropriate and upheld.