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2019 (12) TMI 806 - AAAR - GSTClassification of goods - rate of tax - Nicotine Polacriliex Lozenge - 100% EOU - applicability of N/N. 012017-Central Tax (Rate) dated 28.06.2017 - Condonation of delay in filing appeal - Section 100(2) of the CGST Act - the AAR held that the only alternative left for the classification of the instant product is Chapter Heading 38.24 - HELD THAT - The provisions of Section 100(2) of the CGST Act mandates that an appeal should be filed within 30 days from the date of communication of the advance ruling order that is sought to be challenged. However, in terms of the proviso to Section 100(2) of the said Act, the Appellate Authority is empowered to allow the appeal to be presented within a further period of 30 days if it is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the initial period of 30 days - In the instant case, the appeal filed against the Advance Ruling order dated 07 08.2019 is evidently belated by 57 days. The appellant, however, has not explained the reason for the delay in filing the appeal. Be that as it may, in the interest of justice, and considering the fact that the delay is within the condonable powers of this Authority, we are inclined to suo moto condone the delay in filing this appeal and proceed with a decision on the merits of this case. Classification of goods - whether the product can be considered as a medicament having therapeutic and prophylactic uses? - HELD THAT - The word medicament has not been defined in the Customs Tariff Act or in the Drug and Cosmetics Act. A common understanding and dictionary meaning of medicament is a substance which treats illness and diseases - Nicotine Polacrilex is used as a stop smoking aid which reduces withdrawal symptoms, including nicotine craving, associated with quitting smoking It is pertinent to note that the use of Nicotine Polacrilex is indicated as merely an aid to stop smoking and a drug which reduces withdrawal symptoms in those who desire to quit smoking. It appears that the drug Nicotine Polacrilex does not in any way treat the symptoms of nicotine cessation. For a drug to be a medicament, it is essential that there should be a treatment of the illness or disease - In the instant case, the product Nicotine Polacrilex Lozenge is only a preparation which assists smokers to stop smoking It is a replacement therapy for addicted smokers to wean them away from the smoking habit Use of Nicotine Polacrilex lozenge will satisfy the nicotine craving of the smoker as measured doses of nicotine are administered into the blood stream The Nicotine replacement therapy ensures that the harmful effect of cigarette smoking is minimized in a smoker who will gradually stop the smoking habit. Classification of the product Nicotine Polacrilex Lozenge - HELD THAT - While the Rate Notification under GST provides the rate of tax on goods and services, in order to interpret these Rate Notifications for purposes of levy of GST, one has to read the same along with the First Schedule of the Customs Tariff Act, 1975 (including the Section and Chapter Notes and General Explanatory Notes). The Customs Tariff is structured into Sections, Chapters and sub-chapters, Headings and sub-headings. Chapter 30 of the Customs Tariff Act, 1975 relates to Pharmaceutical products . Chapter Note 1 to Chapter 30 lists out the goods which are excluded from the purview of Chapter 30. As per Chapter Note 1(b), Chapter 30 does not cover preparations, such as tablets, chewing gum or patches (transdermal systems) intended to assist smokers to stop smoking (heading 2106 or 3824) Therefore, any preparation which is intended to assist smokers to stop smoking is excluded from the coverage of Chapter 30. The preparations may be in the form of tablets, chewing gum or patches. In this case, the impugned product is in the form of a Lozenge - Admittedly a lozenge is not a tablet or chewing gum or a patch However, the use of the words such as in the Chapter Note 1(b) signifies that it is only indicative and not exhaustive. The active ingredient in Nicotine Polacrilex Lozenge is Nicotine which is a natural alkaloid. Nicotine is bound to an ion-exchange resin (polymethacrilic acid) and administered in the form of tablets, chewing gum, lozenge or patches The chemical formulation of the nicotine bound to the resin polacrilexis such that it provides the user of the product blood nicotine levels via buccal absorption that will approximate those produced by the inhalation of tobacco smoke - the Nicotine Polacrilex Lozenge is a chemical preparation and hence is more aptly classifiable under Chapter Heading 38.24 of the Customs Tariff Act, 1975. In the GST rate Notification No 01/2017-Central Tax (Rate) dated 28.06.2017, the Prepared hinders for foundry moulds or cores; Chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included falling under Chapter Heading 38.24 are covered under entry SI.No 97 of Schedule III with a GST rate of 18%. The ruling of AAR upheld.
Issues Involved:
1. Classification of Nicotine Polacrilex Lozenge under GST. 2. Applicable GST rate for Nicotine Polacrilex Lozenge. 3. Delay in filing the appeal. Detailed Analysis: Classification of Nicotine Polacrilex Lozenge under GST: The primary issue revolves around the appropriate classification of Nicotine Polacrilex Lozenge (NPL) for GST purposes. The appellant, a pharmaceutical company, argued that NPL should be classified under Chapter 30.04 as a medicament, attracting a 12% GST rate. They contended that NPL is used for therapeutic purposes to aid in nicotine consumption cessation and has multiple medicinal benefits, including safeguarding against life-threatening diseases. The Advance Ruling Authority (AAR) had previously ruled that NPL should be classified under Chapter Heading 38.24, attracting an 18% GST rate. This was based on Chapter Note 1(b) to Chapter 30, which excludes preparations intended to assist smokers to stop smoking from Chapter 30. The Appellate Authority upheld this ruling, noting that NPL is primarily an aid for nicotine replacement therapy and does not treat any illness or disease, thus not qualifying as a medicament. Applicable GST Rate for Nicotine Polacrilex Lozenge: The appellant sought a ruling on the appropriate GST rate for NPL. The AAR had determined that NPL falls under Chapter Heading 38.24, which attracts an 18% GST rate as per SI.No 97 of Schedule III of Notification No 01/2017-CT (Rate) dated 28.06.2017. The Appellate Authority upheld this classification and GST rate, rejecting the appellant's argument that NPL should be taxed at 12% under Chapter 30.04. Delay in Filing the Appeal: The appeal was filed 57 days after the receipt of the AAR's order, exceeding the initial 30-day period allowed under Section 100(2) of the CGST Act. The Appellate Authority noted that the appellant did not provide reasons for the delay but decided to condone the delay in the interest of justice, as it was within their condonable powers. Conclusion: The Appellate Authority upheld the AAR's ruling that Nicotine Polacrilex Lozenge is classifiable under Chapter Heading 38.24, attracting an 18% GST rate. The appeal was dismissed on all accounts, and the delay in filing the appeal was condoned.
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