9911796707
TMI Blog2022 (3) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... menstrual cycle. From the submissions of the applicant, it is seen that the active ingredients used in the product are Water absorber, Iron Powder, Activated charcoal, Vermiculite, Sodium chloride in specified doses, though the dosages of the components are not certified by any controlling agencies. The applicant has contended that product is for dysmenorrhea as a therapeutic use and the word Medicament should not have restricted meaning but include products for Therapeutic/Prophylactic use. There are many products which are naturally occurring and have therapeutic or prophylactic properties, when used in proper proportions and for particular time periods. The products like neem, turmeric, garlic etc.. all have medicinal value but the same is not considered as medicaments, when they are used as such, without subjecting to any chemical modification. Therefore, merely because a product possesses certain natural therapeutic/prophylactic properties, it cannot be said to fall under the classification of medicaments. In the case at hand, it is not established that the product has been classified as a device specified by the Central Government in any notification and therefore reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s. Lagom Labs Private Limited, 715A, 7th Floor, Spencer Plaza, Mount Road, Anna Salai, Chennai, Tamil Nadu, 600 002. (hereinafter called the Applicant) is registered under the GST Vide GSTIN 33AADCL1959K1ZC. They have sought Advance Ruling on the following question: Whether the Cramp comfort patch are to be classified under Chapter Heading 3004 attracting 12% GST under serial no. 63 or Chapter Heading 3005 attracting 12% GST under serial no. 64 in Schedule II of Notification 01/2017 - Central Tax (Rate) dated 28 June 2017 and under Serial No: 63 or 64 of Schedule II of Notification G.O. (Ms) No. 62 (NO.II(2)/CTR/532(D-4)/2017) TNGST (Rate), dated 29.06.2017, if not what would be the appropriate classification and justification for such classification? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The Applicant has stated that they are engaged in supply of various women wellness p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Notification 01/2017, wherein the description of goods under HSN 3005 falls under at 12% GST. They have extracted the details of description of goods under HSN 3005 viz, as below: i. Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), ii. Impregnated or coated with pharmaceutical substances or put up in farms or packings for retail sale for medical, surgical, dental or veterinary purposes. They have stated that in order to merit classification under heading 3005, either of the below two conditions must be fulfilled. * The first condition is impregnated or coated with pharmaceutical substance. * The other condition required to be fulfilled is that the product should be put up in form or packing for medical, surgical, dental or veterinary purposes. 2.4 The applicants understanding on the description of goods under HSN 3005 is as below: Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), They have stated that the first part of the description emphasizes on the design of the product. They have referred to the following definitions as per the Oxford Dictionary - i. A 'wadd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: * Collector of Central Excise, Shillong vs. Wood Craft Products Ltd. [1995 (77) ELT 23 (SC)] * L.M.L. Ltd. vs. Commissioner of Customs [2010 (258) E.L.T. 321 (S.C.)] The Applicant has also relied upon the nomenclature and explanatory notes issued by the World Customs Organization (WCO) for HSN 3005 in this regard and stated that the description of goods classifiable under the heading 3005 as per Notification 01/ 2017 is pari-materia with the description mentioned by WCO 2.6 They have also stated that the term retail sale has not been defined in the GST law or rules. It is a well settled principle of interpretation of statute that the word not defined in the statute must be construed in its popular sense, meaning 'that sense which people conversant with the subject matter with which the statute is dealing would attribute to it'. It is to be construed as understood in common language. The applicant has relied on the decision of the Hon'ble Supreme Court in following cases: * Indo International Industries v. CST (1981) 47 STC 359. * Oswal Agro Mills Ltd. v. Collector of Central Excise [1993 (66) ELT 37]. * CCE v. Connaught Plaza Restaurant (P.) Ltd. [2014.152 taxmann.co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing abdomen pain relief during the menstrual period. Although these ingredients are not directly called as pharmaceutical substances, the ingredients are used as a substance having therapeutic properties and hence construed as pharmaceutical substances. They have stated that Iron is an important mineral which has been used in various pharmaceutical substances. Similarly Vermiculite is a hydrous phyllosilicate mineral under goes significant expansion when hated, which is commonly called on 'clay mineral and constitutes a sub-group 'Phyllosilicate' and are widely used in the pharmaceutical industries as lubricants, desiccants, disintegrants, diluents, binders, pigments and opacifiers, as well as emulsifying, thickening, isotonic agents, and anticaking agents, and flavour correctors and carriers of active ingredients. A variety of minerals arc used as excipients. Excipients are inactive substances that serves as the vehicle or medium for a drug or other active substance. Excipients are largely used in pharmaceutical preparations because they have certain desirable physical and physico-chemical properties, such as high adsorption capacity, specific surface area, swelling capacity, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts under the heading 3005 on their website. In view of the aforementioned facts, they have submitted that the product Cramp Comfort should be classified under heading 3005. 2.8 The applicant has submitted the following facts to merit classification under the heading 3004 attracting 12% GST in terms of serial no. 63 in Schedule II of notification 01/ 2017 - central tax (rate) dated 28 June 2017. They have submitted that the product is currently sold under the HSN 3004 by them. The Heading 3004 of the Customs Tariff Act covers 'medicaments'. The term 'medicament' is not defined in the Customs Tariff Act. Thus, it is apposite to refer to the dictionaries to ascertain the natural meaning of expression 'medicament. The definition of the term 'medicament as obtained from various sources is as under:- * The term 'medicament' refers to a substance relating to medicine. The term 'medicine' has been defined in Concise Oxford English Dictionary [12th Edition (2011) Oxford University Press, refer page 888] as practice of diagnosis, treatment or prevention of a disease; and * In the case of Sujanil Chemo Industries v. CCE 2005 taxmann.com 842 (SC) (Full Bench. 3 Judges), the Apex Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F, Navidian A, Safabakhsh L, Safarzadeh A, Khazaian S, Shafie S, Salehian T. Pregnancy Health Center, Zahedan University of Medical Sciences, Zahedan, Iran. * The effects of local low-dose heat application on dysmenorrhea - Dilek Coskuner Potur and Nuran Komurcil faculty of Health Sciences, Division of Nursing, Department of Obstetrics and Gynecology Nursing, Marmara University, Istanbul, Turkey * Continuous low-level topical heat in the treatment of dysmenorrhea Akin MD, Weingand KW, Hengehold DA, Goodale MB, Hinkle RT, Smith RP - Health Quest Therapy and Research Institute, Austin, Texas, USA 2.9 In view of the above facts, the applicant has submitted that menstrual cramps called as Dysmenorrhea an illness or a disease are throbbing or cramping pains in the lower abdomen. Heat patches such as Cramp Comfort patches of Applicant works by relaxing the muscles in the uterus without increasing blood flow and ease the pain on during cramps. By using these heat patches, one can feel relief cramps up to 8 hours. Heat patches are thin, comfortable and easy to use. Lower abdomen cramp forms the cause of disease called Dysmenorrhea. The Applicant further relied on HSN Explanatory Note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualifies as prophylactic product. Since the product is used to reduce pain caused by Dysmenorrhea and provide relief to the users, the product could be classified under the HSN 3004 9099 as other medicaments used for therapeutic use. This makes amply clear that any product which is intended to prevent against the diseases and has therapeutic properties is to be classified under chapter 3005 or 3004. The applicant had required a suitable ruling on the classification of the product under HSN 3004 or HSN 3005. 3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 09.11.2021. The Authorised representative Shri Harish Bindumadhavan Putti appeared for the hearing virtually and reiterated the written submissions. He stated that the ruling sought is on the classification and applicable rate of the product 'Cramp patch'. He stated that the packaging of the product consists of measured doses of ingredients i.e. iron powder, activated c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at patches are used for treating physical and mental illness caused due to the medical condition called Dysmenorrhea. The natural ingredients such as iron, vermiculite clay are minerals used as therapeutic materials are construed as pharmaceutical substances providing relief to the pain caused due to Dysmenorrhea. * The Cramp comfort patch is biodegradable and the pouch consists of iron powder, salt activated carbon and vermiculite clay. The patch is also water absorbent. The iron powder and other ingredients are contained in a blended nonwoven material that has specific permeability characteristics. If the pouch admits more oxygen, the reaction occurs more quickly. * The chemical and medicinal purpose of each ingredient used in the product is described as under: Ingredient Concentration ranges (in %) Chemical purpose Medicinal purpose IRON POWDER 50-60 Iron powder is used instead of a chunk of iron as the large surface area of the fine powder greatly speeds up the oxidation reaction. Chloride ions in salt act as catalysts to further accelerate the oxidation. In the presence of Chloride ions, the formation of a more porous form of rust is favored. The use of high purity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct cools down, and the cooler object warms up. This is how, say, water in a pot on a stove absorbs heat: the stove heats up the bottom of the pan, and that heat is conducted into the water in the pot. Water is also the lubricant that helps in the smooth movement of our joints and allows their surfaces to slide and glide with minimal friction. 4.1 Further, as the applicant requested for another hearing they were given another opportunity to be heard in digital mode on 20.01.2022. The Authorised Representatives Shri Harish Bindumadhavan Putti and Shri Neil Killawala appeared for the hearing virtually and reiterated their earlier submissions. They stated that presently they are classifying under CTH 3004. When asked about the reference to the 'First Tier Tribunal decision & CTH 3824 in their submissions, they stated that their product cannot be covered under CTH 3824; the individual components are used in Pharma Industry as 'Medicaments' and it is for transdermal application, requiring no license under 'Drug and Cosmetics Act. They were asked to substantiate with legal provisions that their product is a medicament, put up with ingredients in 'measured doses', and do not require appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edicines but also substances intended to be used for or in the treatment of diseases of human beings or animals. The expression "substances" must be something that possess medicinal usage other than medicines which are used for treatment. The part of the definition which is material for the present case is ''substances intended to be used for or in the treatment". The appropriate meaning of the "substances" in the section is ''things". The articles had to possess those qualities which are utilised in the treatment of diseases. The predominant use of cramp comfort patches are to alleviate the pain in the abdomen caused due Dymenorrhea and its specific purpose has been abundantly sought to be made out on the aspect of abdomen pain relief during the menstrual cycle in women. Cramp Comfort patches are thus essentially items used for prophylactic purpose which in other words means preventive treatment or medicine. * Regarding clarification as to the applicant has obtained a license Under Drugs and Cosmetics Act 1940. In this regard, the applicant has submitted that there is no mandate for all the drugs/medicines to obtain license under the Drugs and Cosmetics Act 1940. Further the Cra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption for a period of two years. In contrast, OTC drugs are not defined a distinct category of drugs. Though not regulated separately, OTC drugs are still categorised as a "drug" and, therefore, the manufacture, import and sale of OTC drugs is regulated under the Drug and Cosmetics Act, 1940 and Drug and Cosmetics Rules. * Therefore, there is no such drug license obtained under Drug and Cosmetics 1940 by the applicant for the sale of cramp comfort patches. The applicant has further submitted that grant of drug license under drug and cosmetics Act 1940 is not mandatory pre-requisite condition under the GST Tariffs for classification of product under the specific HSN Code. Also, grant of license obtained under other statutory enactment other than Indirect tax laws neither alters the nature and medicinal use of the product nor determines right the classification under HSN code 3004 or 3005 of the CGST Act 2017 and TNGST Act 2017 * The Cramp comfort patches consists of the composition as under: composition/contents of the product* Chemical Name CAS No: *Concentration/Concentration ranges (wt%)) Water absorber 7732-18-5 30-40 Iron Powder 7439-89-6 50-60 Activated char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for babies and clinical diapers, which are also Taxable at 12% of GST (CGST 6% and SGST 6%) in this case also No revenue loss may arise to the Government. 5.2 The Central Jurisdictional authority has stated that there is no pending proceedings in respect of the applicant on the questions raised. They have further opined that the applicant's product cannot be classified under the heading 3004 as it is clear from the Notification 01/2017 Ct(rate) that only medicaments used for therapeutic or prophylactic purposes are covered under the heading. Further, the applicant's product may be classified under heading 3005. On perusal of the product details it is appears that the applicants' product is not a sanitary pad which are classified under heading 9619. From the pictorial details given by the applicant in their website it is not clear whether their product is made of non-woven fabric which consist of adhesive layer on one side and any other material to transform heat to the body such, to determine classification as per constituent material. They have stated that to decide whether the product falls under 3005 or 9619 or any heading physical inspection of the product along with technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no: BTOTMN/012_21-22 dated' 12.11.2021 raised by Lagom Labs Pvt Ltd Maharashtra on Lagom Labs Pvt Ltd, Tamil Nadu, the product, 'Heat Patch-(Pack of 3)' is classified under the heading 3005 1090 On perusal of the above invoices furnished by the applicant, it is seen that the product 'Bluheat NUA heat Patch' is received by Lagom Labs, Mumbai, wherein the classification of the product is HSN 3821. The invoice raised on the ultimate consumer by the Lagom Labs Mumbai, classify the product under HSN 3004 and the product is classified under HSN 3005 in the invoice raised by Lagom Labs, Mumbai on the applicant. Thus it is seen that the applicant has not furnished any invoice for the supply of the product made by them. The Lagom Labs Mumbai has classified under HSN 3005 while supplying to the applicant. The products are classified under HSN 3824 by the Vendor of the products to Lagom Labs, Mumbai. The applicant during the hearing dated 09.11.2021 has submitted that they are they are currently classifying the product under the heading 3004. Thus it is seen that the product stands classified under CTH 3824; CTH 3004; CTH 3005. It is the view of the applicant that the product merits classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reservoir which is closed by a porous membrane on the side entering into contact with the skin. The active substance released from the reservoir is absorbed by passive molecular diffusion through the skin and passes directly, into the bloodstream. These systems should not be confused with medical adhesive plasters of heading 30.05. The heading applies to such single doses whether in bulk, in packings for retail sale, etc.; or (b) In packings for retail sale for therapeutic or prophylactic use. This refers to products (for example, sodium bicarbonate and tamarind powder) which, because of their packing and, in particular, the presence of appropriate indications (statement of disease or condition for which they are to be used, method of use or application, statement of dose, etc.) are clearly intended for sale directly to users (private persons, hospitals, etc.) without repacking, for the above purposes. These indications (in any language) may he given by label, literature or otherwise. However, the mere indication of pharmaceutical or other degree of purity is not alone sufficient to justify classification in this heading. On the other hand, even if no indications are given, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitigation or prevention of disease or disorder in human beings or animals, as may be specified from to time by the Central Government by notification in the Official Gazette, after consultation with Board; In the case at hand, it is not established that the product has been classified as a device specified by the Central Government in any notification and therefore reliance on Section 3(b)(iv), to claim that the product is a 'Medicament' do not help them. It is further seen that the applicant claims the product to be a drug as per Section 3(b) (i), considering the material part of the said section to be 'substances intended to be used for or in the treatment'. It is their claim that the predominant use of the product is to alleviate the pain in the abdomen caused due to Dysmenorrhea and therefore to be considered as a 'drug'. Section 3(b)(i) of the Drugs and Cosmetics Act 1940 states that 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, including preparations applied on human body for the purpose of repel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng covers i. wadding, gauze, bandages and similar articles (for example dressings, adhesives, plasters, poultices) impregnated or coated with pharmaceutical substances for medical uses; ii. various medicated adhesive plasters, etc which may be in the piece, in discs or in any other form. The applicant has submitted that the product should fall within the ambit of 'similar articles' as the product is designed as a patch of non-woven fabric that emits heat to soothe and relax muscles during menstrual cramps. In the instant case, the active ingredients of the product are Water absorber, Iron Powder, Activated charcoal, Vermiculite, Sodium chloride which are not pharmaceutical substance, but claimed by the applicant that the product are used for therapeutic purposes. The product is put up in forms for retail sale for prophylactic uses. 7.6 Further, the applicant has made reference to the judgment issued in the case of PFIZER CONSUMER HEALTHCARE VS THE COMMISSIONERS FOR HER MAJESTY S REVENUE AND CUSTOMS, wherein the Commission Implementing Regulation (EU) 2016 classified the Pfizer's product Thermacare under CN code 3824 90 96 and the First Tier Tribunal referred the question to C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds should not be used in some cases does not call into question the finding that they, are intended to treat sores or wounds. 55 Consequently, the products covered by Implementing Regulation 2610/1140 fall within heading 3005 of the CN and thus, as is apparent from paragraph 40 of this judgment, do not fall within heading 3824 of the CN. 56 Therefore, those products must be classified in heading 3005 of the CN. Applying the ratio of the above decision, to the case at hand it is seen that the product though not notified as a 'medical device' as required Under Section 3(b)(iv) of Drugs and Cosmetics Act 1940, is still marketed as Self-heating Pain relief Patch' and can be worn anywhere for alleviating the pain. Therefore, the product merits classification under CTH 3005 as the Customs Tariff is aligned with the HSN. Further, on perusal of the invoices furnished by the applicant, as mentioned in para supra the applicant's product is currently classified under HSN 3005 which is evident from the invoice raised in November'2021. 8.1 Having decided the classification as CTH 3005, the applicable rate for the product is as per Sl.No.64 of Schedule-II of Notification No. 01/2017-C.T.(R ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
