2024 (12) TMI 365 - AT - Customs

Classification of imported insulin products - mono-component insulin or not - classified under chapter heading 3004 31 10 or not - eligibility for exemption under Notification No. 12/2012 Customs dated March 17, 2012, as they are lifesaving drugs or not - invocation of extended period of limitation under the provisions of Section 28 of the Customs Act, 1962 - HELD THAT - From the definition of the phrase mano-component from various sources, it is clear that the same is used with reference to purity of insulin rather than the source. It is also found that it is not the case of the department that the product under dispute have impurity level higher than 1PPM or that any test report has been relied upon by them, which is on record, to establish the same. It is a fact borne on record that the Commissioner independently requested the Indian Institute of Technology, Chennai vide letter dated 29.11.2019 to examine whether human insulins and insulin analogue of biosynthetic origin could be referred to as mono-component insulin , in response to which the IIT through Shri N Manoj, Department of Biotechnology, per mail dated 05.12.2019 opined that Biphasic Isophane Insulin sold by the respondent was a two-component mixture of biosynthetic human insulin and protamine treated biosynthetic insulin. Protamine, a small protein/peptide is present as a second component and the two components together could not therefore be called as mono-component mixture. Insofar as the interpretation of notification is concerned, mono component insulin would undoubtedly cover the insulin developed using r-DNA technology, which position has been accepted by the authority, namely DCGI, who is the Statutory authority approving the license for sale of insulin. The classification of the impugned goods as mono-component insulin is a content based classification and certainly not a source based classification, as in the case of porcine and bovine insulin and hence, insulin manufactured using r-DNA technology would qualify as a mono component insulin, and hence, was entitled to the benefit of exemption under the Notification/s in question. The impugned order does not call for any interference - Appeal dismissed.

Summary

Issues Involved:
1. Classification of imported insulin products as "mono-component insulin."
2. Eligibility for customs duty exemption under relevant notifications.
3. Interpretation of "mono-component insulin" in the context of technological advancements.

Issue-wise Detailed Analysis:

1. Classification of Imported Insulin Products as "Mono-component Insulin":

The primary issue was whether the imported insulin products, specifically human insulin and insulin analogues, could be classified as "mono-component insulin." The respondent claimed that these products were eligible for exemption under Notification No. 12/2012-Cus. and Notification No. 50/2017-Cus. as they were lifesaving drugs. The adjudicating authority concluded that there was no statutory definition for "mono-component insulin" and relied on expert opinions and scientific literature to classify the products under tariff entry 30043110. The products were developed using r-DNA technology, devoid of High Molecular Weight Protein (HMWP), and were thus considered "mono-component insulin."

The revenue, however, argued that the term "mono-component insulin" traditionally referred to insulin extracted from animal sources and purified using chromatographic techniques. They contended that insulin manufactured using r-DNA technology did not fit this classification and that the term "mono-component" was inconsistently used across different countries. The revenue also questioned the expert opinions relied upon by the respondent, arguing that they lacked evidentiary value.

The tribunal found that the term "mono-component" referred to the purity of insulin rather than its source. It noted that the department did not provide evidence of impurity levels exceeding the threshold for "mono-component insulin." The tribunal also considered the evolution of insulin manufacturing, including advancements in r-DNA technology, which allowed for the production of highly purified human insulin.

2. Eligibility for Customs Duty Exemption:

The respondent sought exemption from customs duty under specific notifications, claiming that their products qualified as "mono-component insulin." The revenue argued that the burden of proving eligibility for exemption rested with the respondent, citing several judicial precedents.

The tribunal emphasized that the interpretation of exemption notifications should consider technological advancements. It referred to previous judicial decisions that supported the inclusion of products developed through new technologies under existing exemption categories. The tribunal concluded that the respondent's products, developed using r-DNA technology, qualified as "mono-component insulin" and were entitled to the claimed exemptions.

3. Interpretation of "Mono-component Insulin" in the Context of Technological Advancements:

The tribunal addressed the interpretation of "mono-component insulin" by considering technological progress. It highlighted that static interpretations of tariff schedules and exemption notifications were inappropriate given the rapid advancements in technology. The tribunal relied on expert opinions and scientific literature to support its conclusion that the respondent's products met the criteria for "mono-component insulin."

The tribunal also considered the HSN Explanatory Notes, which indicated that insulin analogues, despite structural differences, could be classified under the same tariff heading as insulin. It noted that the classification was content-based rather than source-based, allowing for the inclusion of products developed through r-DNA technology.

In conclusion, the tribunal dismissed the revenue's appeal, affirming the classification of the respondent's products as "mono-component insulin" and their eligibility for customs duty exemption. The decision underscored the importance of adapting legal interpretations to accommodate technological advancements in product development.