2018 (4) TMI 811 - AAR - GST

Skin Care Products Classification: Rupam & Pailab Ayurvedic, Others Cosmetics

The Advance Ruling classified skin care products, with only Rupam (Pimple Pack) and Pailab (Anti-Crack Cream) deemed as Ayurvedic Medicaments under ... Classification of goods - medicament - common parlance test - twin test - therapeutic or prophylactic use - Heading 3004 v. Heading 3304 - Note 1(e) to Chapter 30 - Advance Ruling admissibility under section 97(2)(a)Medicament - twin test - common parlance test - therapeutic or prophylactic use - Heading 3004 v. Heading 3304 - Rupam (Pimple Pack) and Pailab (Anti-Crack Cream) are classifiable as medicaments under heading 3004. - HELD THAT: - Applying the twin test approved by the Supreme Court (common parlance and whether ingredients/formula appear in authoritative Ayurvedic texts) and focusing on the product's primary use for treatment, the Authority found that Rupam and Pailab are offered for treatment or prevention of specific skin disorders. The Authority accepted that the products are manufactured under valid drug licence and follow Ayurvedic formulations, and it applied the settled principle that a product used primarily for cure, mitigation or prevention of skin disease with sufficient therapeutic value falls within heading 3004 rather than heading 3304. [Paras 23]Rupam and Pailab are medicaments classifiable under heading 3004.Advance Ruling admissibility under section 97(2)(a) - classification of goods - No ruling pronounced on Swarnajyoti, Sunayana and Tanumitra-60 because these products have not yet come into existence. - HELD THAT: - The Applicant admitted that three named products are not yet manufactured. The Authority therefore excluded these items from substantive examination and did not pronounce any classification for them. [Paras 22]No ruling on classification of Swarnajyoti, Sunayana and Tanumitra-60.Heading 3004 v. Heading 3304 - Note 1(e) to Chapter 30 - therapeutic or prophylactic use - common parlance test - classification of goods - The remaining products in the Applicant's list are not offered primarily as medicaments and therefore are not to be included under heading 3004. - HELD THAT: - Having applied the twin test and examined labels, prescriptions and other material, the Authority concluded that besides the two identified medicaments, the other products are either specifically covered by items in heading 3304 (e.g., talcum powder, sunscreen, moisturising lotion) or are not primarily intended or perceived by consumers as medicaments. In view of the amended tariff Notes under the GST regime, skin-care preparations not meeting the medicament tests are to be classified under heading 3304 rather than 3004. [Paras 23]The remaining products are not classifiable as medicaments under heading 3004.Final Conclusion: The Authority admits the application and rules that Rupam (Pimple Pack) and Pailab (Anti-Crack Cream) are medicaments classifiable under heading 3004; no ruling is made on Swarnajyoti, Sunayana and Tanumitra-60 as they do not yet exist; the remaining products listed are not primarily medicaments and are therefore excluded from heading 3004 (to be treated under heading 3304 where applicable). Issues Involved:1. Classification of 33 skin care products manufactured by the Applicant.2. Determination of whether these products qualify as Ayurvedic Medicaments under heading 3004 or as skin care preparations under heading 3304.Detailed Analysis:1. Admissibility of Application:The Applicant sought an Advance Ruling on the classification of 33 skin care products. The application was admitted as the question raised was not pending or decided in any proceedings under the CGST/WBGST Act, 2017, making it admissible under section 97(2)(a) of the GST Act.2. Applicant's Argument:The Applicant contended that its skin care preparations are Ayurvedic Medicaments intended for therapeutic or prophylactic uses, corresponding to the description of goods under HSN 3004, and thus taxable under Schedule II.3. Product List Submission:The Applicant provided a detailed list of 33 products, including descriptions and intended uses, for review.4. Reference to Previous Rulings:The Applicant referred to a ruling by the Authority for Advance Ruling, Central Excise, Customs & Service Tax, New Delhi, in the case of M/s Guthy Renker Marketing Pvt Ltd. The ruling emphasized the 'common parlance test' for determining the classification of products, stating that products with substantial therapeutic or prophylactic use should be classified as medicaments under heading 3004.5. Common Parlance Test:The AAR highlighted that skin care preparations with recognized medical ingredients and drug licenses are considered medicaments if they have substantial therapeutic or prophylactic value. The common parlance test ceases to apply if the products are described in technical/scientific language or if the Tariff Schedule indicates otherwise.6. Contradiction in Chapter Notes:A contradiction exists between Note 1 to Chapter 30 and the language of heading 3304. The AAR resolved this by stating that skin care preparations with only incidental therapeutic value fall under heading 3304, while those with substantial therapeutic use are classified under heading 3004.7. Supreme Court Observations:The Supreme Court in Puma Ayurvedic Herbal Pvt Ltd observed that products with therapeutic properties remain cosmetics if they primarily serve beauty or makeup purposes. The classification should be based on common parlance and the user's perception of the product.8. Twin Test for Classification:The twin test involves determining whether the product is commonly understood as a medicament and whether its ingredients are mentioned in authoritative Ayurvedic texts. Products primarily used for treatment or prevention of specific ailments are classified as medicaments under heading 3004.9. Application of Twin Test:The AAR applied the twin test to the Applicant's products. Products primarily used for therapeutic or prophylactic purposes and containing ingredients from Ayurvedic texts are classified as medicaments under heading 3004.10. Exclusion of Certain Products:The AAR excluded products like talcum powder, sunscreen, and moisturizing lotion from heading 3004 as they are specifically included under heading 3304. Products not yet manufactured were also excluded from the ruling.11. Conclusion:The AAR concluded that only Rupam (Pimple Pack) and Pailab (Anti-Crack Cream) qualify as medicaments under heading 3004. Other products are classified under heading 3304 as they are not primarily offered as medicaments.Ruling:Preparations for the care of the skin, namely Rupam (Pimple Pack) and Pailab (Anti-Crack Cream), are classifiable as Medicaments under heading 3004. Products listed as Swarnajyoti, Sunayana, and Tarumitra-60 are not yet manufactured, and no rulings are pronounced on their classification. The remaining products are not offered primarily as medicaments and are classified under heading 3304. This ruling is valid until declared void under Section 104(1) of the GST Act.