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TMI Blog2021 (7) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... and according to the formula prescribed in the Pharmacopeia, it cannot be classified as a medicament under Heading 3004 unless it is meant for therapeutic or prophylactic uses - the alcohol-based hand sanitizers viz. Isopropyl Rubbing Alcohol and Chlorhexidine Gluconate and Isopropyl Alcohol solution, cannot be considered as a `medicaments' classifiable under Chapter Heading 3004. The hand sanitizers do not serve as a replacement for through handwashing with soap and water. Instead, the alcohol-based hand sanitizers are thought to bring the consumers some of the benefits of handwashing when washing hands with soap and water is not practical in certain settings. In fact, alcohol-based hand sanitizers are usually preferred to handwashing with soap in occupational health care setting and in community settings. They are faster, more efficient and easier on the skin than repeated handwashing with soap and water. However, hand sanitizers are not suitable for all settings. Classification of goods is to be determined based solely on the description of goods given in the First Schedule to the Customs Tariff Act read together with the relevant Section Notes and Chapter Notes. Moreo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... combat the situation arising on account of pandemic COVID-19: a) Isopropyl rubbing alcohol IP (Composition- Isopropyl Alcohol IP 70% v/v Excipients: Purified water IP QS) b) Chlorhexidine Gluconate and Isopropyl Alcohol solution (Composition: Chlorhexidine Gluconate solution IP 2.5% v/v equivalent to 0.5% w/v of Chlorhexidine Gluconate Isopropyl Alcohol IP 70% v/v Purified water IP QS) The Appellant has been manufacturing the above said products for a significant period of time and the products were classified under the HSN 3808 upon which the levy of GST was 18%. However, it is the Appellant's understanding that the said goods would fall under HSN 3004 with a GST rate of 12%. 4. In order to obtain a clarification regarding their understanding, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following question: What is the appropriate classification of the hand sanitizer for the purpose of GST? What is the applicable rate of GST? 5. The AAR vide its order KAR ADRG No 07/2021 dated 26th February 2021 held as under: Isopropyl rubbing alcohol IP and Chlorhexidine Gluconate Isopropyl Alcohol solution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nti-infective in nature and hence the same would qualify as a product used for prophylactic use and in turn merits classification as Medicament under Chapter Heading 3004. 6.3. They drew attention to the Tariff entry 3808 of the Customs Tariff and the explanatory Notes to emphasis that the disinfectants referred in Chapter Heading 3808 are agents that destroy or irreversibly inactivate undesirable bacteria, viruses or other micro-organisms, generally on inanimate objects; that the use of the phrase 'generally on inanimate objects' also indicates the intention to include only such items which are used as cleaning agents on non-living objects and if they are used on living objects, they would not qualify as disinfectants as they are in the nature of medicaments; that it is clarified in the explanatory notes that disinfectants referred in Chapter 3808 are used in hospitals for cleaning walls, etc or sterilising instruments; that the disinfectants having the essential character of medicaments, including veterinary medicaments are to be classified under the respective heading and not under Chapter 3808. They submitted that the hand sanitiser supplied by them is a product spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Heading 3808.94 are Insecticides, Rodenticides, Fungicides, Herbicides, Disinfectants and other similar products which are not intended for contact with human skin; that since the product supplied by the Appellant is intended for human skin contact, the said HSN cannot be made applicable to the same. Therefore, the Appellant submitted that the alcohol-based Hand Sanitizers are classifiable under Heading 3004 and it is the intention of the DGFT to identify the same as Medicaments. 6.6. The Appellant submits that in the efforts to combat the ongoing COVID-19 pandemic, many variants of Hand Sanitizer were manufactured and distributed. However, with an intention to manufacture and distribute inexpensive and effective products, the Appellant had obtained the requisite license from the Drugs Control Department under the Drugs and Cosmetics Act, 1940 for manufacturing the alcohol-based hand sanitizer which is an approved drug; that they had been granted a fresh manufacturing license in this regard; that subsequently, the Ministry of Health and Family Welfare had issued a Notification dated 27-07-2020 wherein they had expressly exempted a drug from the requirement of sale licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entified to be a disinfectant in respect of application on human skin. 6.8. The Appellant submits that in the case of Commissioner of Sales Tax vs S.S Balsara Hygiene Products Ltd - 1986 UPTC 367 -, the Court has held that Odomas is a medicament as it prevents several dangerous diseases and infections caused by mosquito bites and that it is a medicament though it does not cure the disease since it is a preventive measure; that it also held that the manufacturing of this commodity was also controlled by the authorities under the Drugs and Cosmetics Act, 1940 and hence it lends support to the assessee that it is used like a medicine. Hence they submitted that as the product in question is also being manufactured under the control of the authorities under the Drugs and Cosmetics Act, 1940 and that the chemical composition is also as per the prescribed proportions as per the Indian Pharmacopoeia 2018, the hand sanitizer can be classified under Heading 3004. 6.9. In view of the above, the Appellant submits that the appropriate classification for alcohol-based hand sanitizer would be under Heading 3004 and the applicable GST rate on the Hand Sanitizer would be 12% in terms of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y classifiable as a `medicament' under Chapter Heading 3004. DISCUSSIONS AND FINDINGS 8. We have gone through the records of the case and considered the submissions made by the Appellant in their grounds of appeal, the additional submissions as well as the submissions made at the time of personal hearing. 9. The Appellant has sought for condonation of delay in filing the present appeal citing the reason that there was a delay in communicating the advance ruling to the concerned department and also that the authorised signatory was himself under quarantine. In terms of Section 100(2) of the CGST Act, every appeal to this Authority should be filed within a period of 30 days from the date on which the Advance Ruling order is communicated to the aggrieved party. The proviso to Section 100(2) empowers this Authority to condone the delay in filing the appeal by another period of 30 days. In this case, the Appellant received the order of advance ruling on 03.03.2021. The statutory due date for filing an appeal against the advance ruling order was 02.04.2021. However, the appeal has been filed on16-04-2021 after a delay of 14 days from the due date. Considering the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as hospitals and healthcare facilities. However, the onset of the COVID-19 pandemic has popularised the use of hand sanitizer and made it into a household name. This is primarily on account of the WHO guidelines stating that hand hygiene is the primary measure proven to be effective in preventing the spread of the COVID-19 virus. The WHO has also issued guidelines for improving hand hygiene practices and this includes the use of alcohol-based hand rubs/sanitizers to be used for 20-30 seconds when hands are not visibly dirty. In line with these guidelines, various governments around the world, including India, have promoted the use of ethyl alcohol or isopropyl alcohol-based hand sanitizers for hand hygiene. In the current pandemic scenario, the use of a hand sanitizer is a recommended and acknowledged method of hand hygiene. 12. Chapter 3004 of the Customs Tariff covers medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses. Though the terms 'therapeutic and prophylactic' have not been defined in either the Customs Tariff or the GST law, a common understanding of the term 'therapeutic' is treatment of a disease whereas 'pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alcohol-based hand sanitizers. 13. The Appellant has laid much stress on the fact that they have been issued a license under the Drugs and Cosmetics Act, 1940 for the manufacture and sale of 'Isopropyl Rubbing Alcohol and Chlorhexidine Gluconate and Isopropyl Alcohol solution'. The primary objective of the Drugs Cosmetics Act is to ensure that the drugs and cosmetics sold in India are safe, effective and conform to the quality standards as prescribed in the Second Schedule of the said Act. Regulation under the Drugs Act does not ipso facto mean that the product automatically becomes a medicine. They have also relied on the Notification dated 27.07.2020 issued by the Ministry of Health and Family Welfare to advance their argument that the impugned products are drugs and therefore to be considered as medicaments. The term 'drug' which is defined in Section 3(b) of the said Drugs Cosmetics Act includes not only medicines but also any substance which is used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals. While all medicines are drugs, all drugs are not medicines. There are a number of substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during the Covid pandemic. Therefore, applying this test of common parlance and the fact that the impugned products do not have any therapeutic or prophylactic properties, we hold that the alcohol-based hand sanitizers viz. Isopropyl Rubbing Alcohol and Chlorhexidine Gluconate and Isopropyl Alcohol solution, cannot be classified as a medicament under Chapter Heading 3004 as claimed by the Appellant. 14. Having concluded that the product Isopropyl Rubbing Alcohol and Chlorhexidine Gluconate and Isopropyl Alcohol solutionis not classifiable under Chapter Heading 30.04, we move on to determine the Chapter Heading under which the said products can be classified. Chapter Heading 38.08 of the Customs Tariff covers a range of products intended to destroy pathogenic germs and which do not qualify as medicaments under heading 30.03 and 30.04. The products under Heading 38.08 are divided into the following groups: (a) Insecticides (b) Fungicides (c) Herbicides, anti-sprouting products, plant growth regulators; and (d) Disinfectants The Explanatory Notes to the HSN Heading 38.08 states that disinfectants are agents which destroy or irreversibly inactivate undesirab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usually preferred to handwashing with soap in occupational health care setting and in community settings. They are faster, more efficient and easier on the skin than repeated handwashing with soap and water. However, hand sanitizers are not suitable for all settings. They are not recommended for use on hands that are soiled with visible amounts of dirt or grease and are also found to be ineffective at removing some kinds of pathogens. In such instances, handwashing with soap and water is the recommended method to clean hands. Therefore, we disagree with the lower Authority's observation that hand sanitizer is an alternative to soap. Both 'hand sanitizer' and 'soap and water' are recommended methods in hand hygiene practices and each method is effective in certain situations. 16. The Appellant has also attempted to advance his case by claiming support from the DGFT Notification dated 6-5-2020 which prohibits the export of Alcohol-based hand sanitizers falling under ITC HS Codes 3004, 3401, 3402 and 3808.94. It is their claim that Chapter Headings 34.01 and 34.02 pertains to soaps and other organic surface-active products used for washing the skin and Chapter H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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