Diagnostic kits for laboratory diagnosis held to be medicines, not scientific instruments, under the taxing classification entry.

Diagnostic kits used in laboratory diagnosis, even when not applied on the human body, were held to fall within the medicines entry for medicinal formulations or preparations for diagnosis. The Court rejected a narrow reading of "externally" as limited to use on the surface of the body, relying on the long-settled construction that diagnostic reagents used for laboratory testing are covered by that entry. Because the goods were classified as medicinal formulations, they could not also be treated as scientific or laboratory instruments or equipment. The kits were therefore classifiable under the medicines entry and not under the laboratory instruments entry.

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Issues: (i) Whether diagnostic kits used for laboratory diagnosis of diseases, though not applied on the human body, fall within entry C-II-37 as medicinal formulations or preparations for diagnosis. (ii) Whether such diagnostic kits can be classified under entry C-II-106 as scientific and laboratory instruments or equipment.

Issue (i): Whether diagnostic kits used for laboratory diagnosis of diseases, though not applied on the human body, fall within entry C-II-37 as medicinal formulations or preparations for diagnosis.

Analysis: The entry had, for a long period, covered medicinal formulations or preparations ready for use internally or externally for diagnosis, treatment, mitigation or prevention of disease. The Court relied on the settled interpretation that diagnostic reagents used in laboratory testing for diagnosis were covered by the medicines entry, and noted that this view had held the field for more than two decades. It held that the restrictive reading confining "externally" to use on the surface of the human body was unwarranted, especially when the earlier administrative and tribunal decisions had accepted laboratory use for diagnosis within the entry.

Conclusion: Yes. Diagnostic kits used for diagnosis outside the body are covered by entry C-II-37.

Issue (ii): Whether such diagnostic kits can be classified under entry C-II-106 as scientific and laboratory instruments or equipment.

Analysis: Once the goods were found to be medicinal formulations or preparations covered by entry C-II-37, they could not be treated as instruments, implements or tools under entry C-II-106. The Court held that medicinal formulations cannot be equated with scientific instruments merely because they are used in laboratories for diagnostic testing.

Conclusion: No. The diagnostic kits are not classifiable under entry C-II-106.

Final Conclusion: The reference was answered against the Revenue, and the diagnostic kits were held classifiable as drugs or medicines under entry C-II-37 rather than as laboratory instruments under entry C-II-106.

Ratio Decidendi: Where a taxing entry covering medicinal formulations for diagnosis has been judicially accepted for a long period, that settled construction should not be displaced without compelling reasons, and laboratory diagnostic kits used for diagnosis outside the body remain within the medicines entry.

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