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TMI Blog2022 (11) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant") against the Advance Ruling No GST-ARA-98/2019-20/B-72 dated 11.10.2021., pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as "MAAR"). BRIEF FACTS 3. M/s. Accurex Biomedical Private Limited having its corporate office at 212, Udyog Mandir, Bhagoji Keer Marg, Mahim West, Mumbai - 400016, is, inter-alia, engaged in the business of supply of various diagnostic reagents. The Appellant have obtained registration and holding valid registration certificate issued under CGST Act, 2017. 4. Out of the various range of products, the Appellant sought ruling in respect of the classification of the following two products:- (A) Turbilatex CRP Infinite (B) HbA1c Infinite In the above, the word "Infinite" is brand name of the Appellant. 5. (A) Infinite Turbilatex CRP 5.1 Infinite Turbilatex CRP (hereinafter referred to as "CRP Test Kit") is supplied by the Appellant under the brand name "Infinite". This product is meant for in-vitro diagnostic use only. Use or Purpose 5.2 CRP Test Kit is used for the quantitative determination of C-Reactive Protein (CRP) in human serum for medical diagnosis of inflammation and infections. 5.3 CRP Test kit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performance characteristics, effectiveness and intended use. The principle underlying usage of all the aforesaid products is also same. Because of similarity in the characteristics and usage of the above-mentioned products, hereinafter, the said products are collectively referred to as "HbA1c Test Kit". Use or Purpose 6.3 HbA1c Test Kit is used for the quantitative determination of hemoglobin A1c (HbA1c) in human blood and monitoring of glycemic control in diabetic patients. 6.4 HbA1c Test Kit contains the following components: Components Description R1 Latex reagent R2 Buffered antibody reagent R3 Hemolysis Reagent R4 Optional - Calibrator made from human blood 6.5 Principle on which the product is based. (i) HbA1c Test Kit is based on agglutination principle by antigen-antibody interaction to directly determine the HbA1c concentration in the whole blood. (ii) HbA1c assay is based on antigen-antibody interaction to directly determine the HbA1c concentration in whole blood. Total haemoglobin and HbA1c have the same unspecific absorption rate to latex particles. When mouse antihuman HbA1c monoclonal antibody is added, latex- HbA1c-mouse antihuman HbA1c antibody co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Hb1Ac kit do not fall under HSN code 3002, whereas the same are covered by HSN Code 3822 based on the following observation:- (i) Entry No.125 of List 1 of Sr.No. 180 of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28.6.2017, mentions the word "Agglutinating Sera". The said Entry does not mention the word 'diagnostic kits'. Whereas, there are other entries in the same List 1 wherein there is a specific mention of diagnostic kit. Therefore, "Agglutinating Sera" listed under Sr. No. 125 of List 1 of Schedule I covers agglutinating sera as an individual product and not as a diagnostic kit which works on the principle of "Agglutinating Sera". (ii) It was the submission of the Appellant that both CRP kit and Hb1Ac kit fall under HSN Code 30.02 since both products work on the principle of Agglutinating Sera. The Appellant have not substantiated their contention either with any detailed submissions on the matter or on the basis of actual evidence. The Appellant have not given any submission with respect to the component of the kits which governs to the greatest extent the specificity of the test procedure. Therefore, the subject product cannot be covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otechnological processes; vaccines, toxins, Cultures of micro-organisms (excluding yeasts) and similar products. 3822 Diagnostic or laboratory reagents on a backing, prepared diagnostic or Laboratory reagents whether or not on a backing, other than those of heading 3002 or 3006; 10.2 In view of above, it can be said that only those diagnostic/laboratory reagents (whether or not on a backing) which cannot appropriately be classified under CSH 3002 will fall under CSH 3 822.Therefore, it is to be examined whether the CRP Test Kits and Hb1Ac Test Kits in the instant case can be appropriately classified under CSH 3002.As can be seen from above, CSH 3002 covers, inter-alia, 'antisera and other blood fractions whether or not modified or obtained by means of biotechnological processes'. 10.3 To analyse the CSH 3002, reliance is placed on the Explanatory Notes to the Harmonized Commodity Description and Coding system of CSH3002, wherein it has been explained as follows: (C) Antisera, other blood fractions and immunological products, whether or not modified or obtained by means of biotechnological processes. These products include: (I) Antisera and other blood fractions, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dium lactate dehydmgenase) are for instance classified here. The essential character is given by that single component which governs to the greatest extent the specificity of the test procedure." [Emphasis supplied] 10.8 In the present case, antibodies used in CRP Test Kit supplied by the Appellant have been derived from Latex particles coated with anti-CRP antibody /mice antisera which is classifiable under CSH 3002. The essential component of the CRP Test Kit is R2 i.e., latex particles coated with specific anti human CRP since without which reaction with CRP in the sample/ specimen could not take place and hence, quantitative determination of CRP in the human serum could not be determined. In fact, around 85% of the total cost of the CRP Test Kit is attributable to component R2. Thus, it is evident that the essential character of CRP Test Kit is given by 'antisera' which is classifiable under CTH 3002. 10.9 Further, antibodies used in Hb1Ac Test Kit supplied by the Appellant have been derived from Mouse anti-human HbA1c monoclonal antibody & Goat anti-mouse IgG polyclonal antibody which is classifiable under CSH 3002. The essential component of the HbA1c Test Kit is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , antibodies are produced in the blood of the rabbit or goat. After sufficient period of time, the antibody for HCG is extracted and is used in the PTKs. PTKs themselves may be of different varieties like in the form of liquid, in the form of strip of paper, in the form of antisera or anti body or anti HCG dispersed on membrane as coated, or in the form of test kit card where also antisera antibody for HCG is coated. The test line in the strip of paper or on the card is an antisera antibody for HCG." 11.3 In the above case, the assessee was clearing the pregnancy test kits under CSH 3002, whereas the department contended that the same would fall under CSH 3822 as "diagnostic or laboratory reagent". The Hon'ble Tribunal after analyzing the HSN Explanatory notes and the characteristics of the products in dispute, concluded that the said products are "antisera" which is covered by CSH 3002 and since it is covered by that Heading, CSH 3822 will not apply. The relevant para from the decision is extracted hereunder: "4.4.... ........... The anti-HCG antibodies used in the PTKs were derived from goat antisera classifiable under Heading 30.02. It follows that the PTKs, which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of hCG hormones in urine, as a test for pregnancy. The three products are meant for in-vitro diagnostic use only. According to the assessee, Chapter Heading 30.02 covers antisera of all forms. 19. On the other hand, it was argued on behalf of the Department that although PTK was an antisera, the above three products were classifiable as diagnostic or laboratory reagents under Chapter Heading 38.22 as they were used exclusively in laboratory for diagnostic purposes. According to the Adjudicating Authority, Chapter Heading 30.02 applied only to crude antisera and since the above three products were refined antisera, they did not fall under Chapter Heading 30.02. ..... 21. As stated above, Chapter Heading 30.02 refers to antisera and other blood fractions. According to the Explanatory Note in HSN (Seventh Edition), antisera is obtained from the blood of humans or animals which are immune against diseases. Antisera is used for diagnostic purposes, including in-vitro tests. There is nothing like crude antisera and refined antisera. In the present case, even according to the Department, PTK is an antisera, however, according to the Department, PTK is a refined antisera. As state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed on the decision of Span Diagnostics Ltd. Vs. CCE -2007 (211) ELT 521 (SC), wherein, in the context of another item of CSH 3002 i.e., "Blood Fraction", the Hon'ble Supreme Court at para 36 of the judgement held that "Once an item is a "blood fraction" it falls under Heading 30.02 of Central Excise Tariff & merely because medium used is latex (rubber) or paper, will not bring the items under Heading 38.22 ibid - Medium is irrelevant." The medium could be paper or rubber. Configuration of product and function are important for classification. 12.5 Further, the Hon'ble CESTAT in the case of J. Mitra & Co. Ltd. Vs. CCE -2002 (140) ELT 524 (T) after examining the HSN Explanatory Notes to Heading 30.02 held that the term antisera in Heading 30.02 would also include purified/refined forms of the antiserum fraction of blood. Based on this observation, the Hon'ble Tribunal held that anti-HCG antibodies used in the Pregnancy Test Kits were derived from goat antisera classifiable under Heading 30.02. 13. In any case, the kits under consideration supplied by the Appellant is a composite supply and hence, the same would be classifiable under CSH 3002. 13.1 Kits under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R2 is the predominant component of the Hb1Ac Test Kit and hence, component R2 would constitute as 'Principal supply'. 13.8 As per Section 8 of the CGST Act, the composite supply will be treated as the supply of the principal supply. Therefore, tax liability applicable to the principal supply would apply to the entire composite supply. 13.9 In view of the above, supply of kits being composite supply, tax rate applicable to the principal supply i.e., component R2 would apply to the entire amount charged towards supply of kits under consideration. 13.10 In the present case, component R2 in both CRP Test Kit as well as Hb1Ac Test Kit is "antisera" which is covered under Entry No.125 of List 1 of Sr. No. 180 of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated 28.6.2017 chargeable to 5% rate of GST. Therefore, GST rate @ 5% applicable to component R2 would apply to the entire amount charged towards supply of kits under consideration. 14. Reliance placed on Sr. No. 7 of Notification No. 05/2021-Central Tax (Rate) dated 14.6.2021 for deciding classification of the kits under CSH 3822, is absurd and perverse. 14.1 As per MAAR, vide the said notification, the GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sub-Heading 3002 attributable to the "Agglutinating Sera" enumerated at Entry No.125 of List 1 of Sr. No 180 of Schedule-I to the Notification No.1/2017-Central Tax (Rate), dated 28.6.2017. In support of his contention, he referred to the Explanatory Notes in which the meaning and scope of Antisera have been dealt with. He further referred to the Explanatory Note (E) to Chapter Heading 30.02 which states that Diagnostic kits are classified here when the essential character of the kit is given by any of the products of this heading. The said explanatory note also states that the essential character is given by that single component which governs, to the greatest extent, the specificity of the test procedure. He also relied upon the Hon'ble Supreme Court case of Span Diagnostics Ltd. Vs. CCE - 2007 (211) ELT 521 (SC) along with some other cases. Additional Submissions dated 22.09.2022 17. The Appellant also filed an additional submissions dated 22.09.2022, wherein they reiterated their earlier written submissions with respect to the classification of the impugned products, including reference to the Supreme Court Judgment in the case Span Diagnostics Ltd. Vs. CCE - 2007 (211) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igens of the pathogenic organism (bacteria, virus, etc.) is introduced into an animal body to produce antibodies. Then the antibodies created in the animal are extracted & introduced them into human body. These are known as antisera. 21. Now, we would like to examine the constitution, working principles, and functionalities of the impugned products, i.e., CRP Test Kit and Hb1Ac Test Kit, as per the product literature submitted by the Appellant. 21.1 According to the product literature pertaining to CRP Test Kit, which is also known as Turbilatex CRP, is a reagent set for quantitative determination of C-Reactive Protein in human serum based on Turbidimetric method. It is used to detect the inflammation and infection in the human body. It comprises of three components, which are (i) Buffer Reagent, (ii) Latex Reagent, and (iii) Calibrator Lyoph Serum Vial. CRP Test Kit is based on agglutination principle between latex particles coated with specific anti-human CRP and CRP present in the human serum to determine CRP in the sample, which is detected by a spectrophotometer device. It is submitted by the Appellant that the essential component of the CRP Test Kit is the latex particles c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Test Kit as discussed earlier and the reaction which occurs in the subject test kit is agglutination. Further, as has been discussed earlier, the essential character of the subject kit is given by the latex particles coated with antihuman CRP antibody, i.e., antisera, as it is the determining component for the agglutination which is the essentially the specificity of the test procedure. Therefore, the subject CRP Test Kit, being in the nature of a diagnostic kit for determining inflammation and infection in the human body, and satisfies all the conditions prescribed under the said explanatory note (E) to the Chapter heading 30.02, would aptly be covered under the Chapter Heading 30.02. 21.4 The explanatory note by World Customs Organization to Chapter 38.22 also clarifies that, Reagents of this heading may also be put up in the form of kits, consisting of several components, even if one or more components are separate chemically defined compounds of Chapter 28 or Chapter 29, synthetic colouring matter of heading 32.04 or any other substance which, when presented separately, would be classifiable under another heading. Examples of such kits are those for testing glucose in blood, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter Heading 38.22." 22.3 After applying the ratio of the aforesaid judgment of the Hon'ble Supreme Court, it is observed that CRP Test Kit, the impugned product, whose principal component is the latex particles coated with the anti-human CRP antibody obtained from the mice antisera, will aptly be construed as antisera. Accordingly, it will be classified under the Chapter Heading 30.02, and not under the Chapter Heading 38.22 owing to its description wherein it is categorically mentioned that a diagnostic or laboratory reagents which are not falling under the Chapter Heading 30.02 will be covered under the Chapter Heading 38.22. The SC in the case of Span (cited supra) has held that "merely because the medium used in latex (rubber) or paper will not bring the items under Chapter Heading 30.02". Since, the product under question is aptly classifiable under the Chapter Heading 30.02, therefore, the said impugned product, i.e., CRP Test Kit, will not be classified under the Chapter Heading 38.22. 23. Now, we proceed to decide the moot issue as to whether the impugned product, i.e., CRP Test Kit, can be construed as "agglutinating sera" mentioned at SI. No. 125 of the List I ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of diagnostic kit. Therefore, the observation of the MAAR that the agglutinating sera mentioned under the said list 1 is an individual product and cannot be construed as diagnostic kit is not correct. 24.3 The MAAR had deduced that since the GST rate on certain products, including CRP (C-Reactive Protein), was reduced to 5% as per Sr. No. 7 of Notification No. 05/2021 -Central Tax (Rate) dated 14.6.2021, and the notification was in operation up to 30.9.2021, the rate of CRP kit was 12%. Though such notification was indeed in operation for certain period, the MAAR has failed to appreciate that the notification covered both the Chapter Headings i.e.3002 and 3822. 25. In view of above discussion and findings in above paras, we hold that the impugned product will fall under entry "agglutinating sera" at SI. No. 125 of the list I appended to the Schedule I to the Notification No 01/2017-C.T. (Rate) dated 28.06.2017. The said product, CRP Test Kit, will attract GST at the rate of 5% (CGST @ 2.5%[email protected]%) in terms of the entry at SI. No. 180 of Schedule I to the Notification No. 01/2017-C.T. (Rate) dated 28.06.2017 26. We will now proceed to examine the classification and rate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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