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2019 (3) TMI 1407 - AAR - GSTClassification of products - to be classified as Medicaments or not - whether the products are meant for therapeutic or prophylactic use - Applicant himself has labeled in the category of dietary/health supplements - whether classified under HSN 2106 or under HSN 3004? - Held that - Classification refers to determination of the nature and character of the goods being supplied. The purpose of the exercise is to ascertain the applicability of any entry of the notifications issued under the GST Act, specifying the rate of tax or exemption from payment of tax - Explanation to the Rate Notification clearly mentions that Tariff item, subheading, heading and Chapter in the Rate Notification refer to those specified in the First Schedule to the Customs Tariff Act, 1975. For the purpose of interpreting the Rate Notification, so far as may be, the Rules of Interpretation, Section and Chapter Notes and the General Explanatory Notes to the Tariff Act may be applied. The term Medicament is not defined in the GST Act or in the Tariff Act. The meaning and scope of Medicaments and, more specifically, of HSN 3004 need, therefore, to be ascertained from judicial observations in this regard - In HSN 3004 the emphasis is on therapeutic or prophylactic uses. Even if a product is manufactured using ingredients and according to the formula prescribed in the Pharmacopeia, it should not be classified as a medicament under heading 3004 unless it is meant for therapeutic or prophylactic uses. Its curative or preventive value must be substantial, and the product must be manufactured primarily to control or cure a disease, and the consumers use it primarily for treatment, mitigation, cure or prevention of specific disease or disorder. The emphasis clearly, therefore, lies in the user s perception of a particular product. If the user consumes the product primarily for cure from or treatment or mitigation of or for prevention of a disease or disorder, it should be treated as a medicament classifiable under HSN 3004. The products are being offered as food supplements and sometimes with specific declaration that they are not meant for use as medicine for treatment of any disease. Note 1(a) of Chapter 30 excludes food supplements from Chapter 30. These products are not, therefore, classifiable as medicament under HSN 3004 - Moreover, according to section 3(b) of the Drugs and Cosmetics Act, 1940, drug includes inter alia all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals. Section 18(c) of the said Act prohibits manufacture, stocking or sale of any drug without a license procured under the Act. The Applicant has failed to show any such license for the manufacture and sale of the products mentioned under Sl Nos. 2 to 13 of the above table. These products cannot, therefore, be lawfully offered to the consumers as medicines having therapeutic or prophylactic uses. The Application has been admitted for classification of the products mentioned in Table I of the Application that are labelled as dietary/health supplements - Products mentioned under Sl Nos. 2 to 13 are classifiable under HSN 2106, and taxable under Sl No. 23 of Schedule III of Notification No. 1/2017-CT (Rate) dated 28/06/2017 of the Centre (corresponding State Notification No. 1125-FT dated 28/06/2017), as amended vide Notification No. 41/2017-CT(Rate) dated 14/11/2017 (corresponding State Notification No. 2019-FT dated 14/11/20174).
Issues Involved:
1. Admissibility of the Application 2. Classification of the Products as Medicaments or Food Supplements 3. Submissions of the Applicant 4. Submissions of the Revenue 5. Observations and Findings of the Authority Issue-wise Detailed Analysis: 1. Admissibility of the Application: The Applicant, a manufacturer of pharmaceuticals, seeks a ruling on the classification of fifteen products. The application is admissible under section 97(2)(a) of the GST Act, which allows for the classification of goods or services. The Applicant declares that the issue is not pending or decided in any other proceedings under the GST Act. Despite the West Bengal Appellate Authority for Advance Ruling (WBAAAR) cautioning against accepting a single application for multiple products, the Applicant argues that the GST Act does not prohibit such applications. The Authority, however, decides to follow the instruction of the WBAAAR to limit the ruling to a single category of goods or services. 2. Classification of the Products as Medicaments or Food Supplements: The products listed under Sl Nos. 2 to 13 are labeled as dietary/health supplements. The Applicant claims these products have therapeutic or prophylactic uses, are sold at pharmacies, and are prescribed by physicians. However, the Authority notes that the labels of these products specifically mention that they are not intended to diagnose, treat, cure, or prevent any disease. According to Note 1(a) of Chapter 30, food supplements are excluded from being classified as medicaments under HSN 3004. Additionally, the Applicant has not shown any license for the manufacture and sale of these products as required under the Drugs and Cosmetics Act, 1940. 3. Submissions of the Applicant: The Applicant argues that the products have therapeutic or prophylactic uses and are prescribed by medical practitioners. They refer to judicial pronouncements to support the classification based on how customers use the products, emphasizing the common parlance test. The Applicant concludes that the products should be classified under HSN 3004. 4. Submissions of the Revenue: The concerned officer from the Revenue submits that the therapeutic or prophylactic use of the products needs to be ascertained from experts in the field of medicine and the Drug Control Authority. The officer also points out that some invoices classify the products under HSN 2106. 5. Observations and Findings of the Authority: The Authority observes that classification should be based on the nature and character of the goods, focusing on their therapeutic or prophylactic uses. The products labeled as dietary/health supplements are not considered medicaments under HSN 3004. The labels and the lack of a manufacturing license for these products further support this conclusion. The products are classified under HSN 2106 as food preparations not elsewhere specified or included, and are taxable under Sl No. 23 of Schedule III of the Rate Notification. RULING: The Application is admitted for the classification of products labeled as dietary/health supplements. Products mentioned under Sl Nos. 2 to 13 are classified under HSN 2106 and are taxable under Sl No. 23 of Schedule III of Notification No. 1/2017-CT (Rate) dated 28/06/2017, as amended. This ruling is valid subject to the provisions under Section 103 until declared void under Section 104(1) of the GST Act.
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