JAC OLIVOL BODY OIL classified as cosmetic under Heading 3304, not medicament despite regulated ingredients

AAR West Bengal ruled that JAC OLIVOL BODY OIL is classified as a cosmetic under Heading 3304 rather than a medicament. The authority determined that despite containing ingredients regulated under the Drugs and Cosmetics Act, the product's primary purpose is skin care as evidenced by marketing claims of "soft, smooth, glowing and healthy skin" and instructions for daily application after bathing. Following SC precedent in Alpine Industries case regarding lip salve classification, the authority held that products must have therapeutic or prophylactic uses and be manufactured primarily to control or cure disease to qualify as medicaments. The product is taxed accordingly under GST Act.

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Issues Involved:
1. Classification of JAC OLIVOL BODY OIL under GST Tariff.
2. Determination of whether the product is a medicament or a cosmetic.

Issue 1: Classification of JAC OLIVOL BODY OIL under GST Tariff

The applicant sought an advance ruling on whether JAC OLIVOL BODY OIL should be classified under HSN No. 3004 (Medicaments) or HSN No. 3304 (Beauty or Make-up preparations and preparations for the care of the skin) of the GST Tariff. The product is claimed to be an Ayurvedic patent and proprietary medicine with therapeutic properties, and the applicant argued that it should fall under HSN 3004, attracting a 12% tax rate.

Issue 2: Determination of whether the product is a medicament or a cosmetic

The applicant asserted that JAC OLIVOL BODY OIL is intended to cure dry skin, relieve body aches, joint and knee pains, minor burns, and prevent blisters, thus qualifying as a medicament. They relied on various judicial precedents to support this classification, emphasizing the therapeutic properties of the ingredients used in the oil.

Observations & Findings of the Authority:

3.1-3.3: General Considerations

The authority examined the records and submissions, noting the need to determine whether the product falls under Chapter 30 (Medicaments) or Chapter 33 (Cosmetics) of the Customs Tariff Act, 1985. It was highlighted that the 'use' of the goods, not just their properties, is crucial for classification.

3.4-3.5: Applicant's Contentions

The applicant's arguments were summarized, highlighting that all ingredients are mentioned in the Ayurvedic pharmacopoeia and approved by the Drug Controller. The product is intended to cure various ailments and has substantial curative or preventive value.

3.6-3.7: Legal Definitions and Common Parlance Test

The authority referred to the definitions of 'therapeutic' and 'prophylactic' and emphasized that a product must have these uses to be classified as a medicament. The common parlance test, which considers how the product is understood by common people, was also recognized as a crucial factor.

3.8-3.9: Judicial Precedents

The authority reviewed relevant judicial precedents, including the Supreme Court's rulings in cases like Alpine Industries and Ashwani Homeo Pharmacy, which discussed the classification of products based on their primary use and how they are perceived in the market.

3.10-3.13: Application of Common Parlance Test

The authority found that JAC OLIVOL BODY OIL is primarily used for skin care rather than curing ailments. The product's label and online descriptions emphasized its use for achieving soft, smooth, and glowing skin, indicating that it is commonly understood as a cosmetic product.

3.14-3.17: Conclusion

The authority concluded that the product's primary function is "care" and not "cure," even if it has subsidiary curative properties. Therefore, it should be classified under Heading 3304 (Cosmetics) and not as a medicament under Heading 3004.

Ruling:

The product JAC OLIVOL BODY OIL intended to be manufactured and sold by the applicant would be covered under Heading 3304 of the First Schedule to the Customs Tariff Act and would be taxed accordingly under the GST Act.

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