2023 (9) TMI 125 - AAR - GST

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

In Re: Indranil Chatterjee

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 ... Classification of goods - JAC OLIVOL BODY OIL - Whether the product falls within the category of medicaments or cosmetics? HELD THAT:- A product cannot be classified as a medicament only for the reason that it is manufactured using ingredients regulated under the Drugs and Cosmetics Act. There must be therapeutic or prophylactic uses of the product and the product must be manufactured primarily to control or cure a disease. In ALPINE INDUSTRIES VERSUS COLLECTOR OF CENTRAL EXCISE, NEW DELHI [2003 (1) TMI 103 - SUPREME COURT] the issue before the Hon’ble Apex Court was to decide classification of the product ‘Lip Salve’, manufactured in accordance with the defence services specifications and supplied entirely to military personnel. The Hon’ble Supreme Court, held the item as a preparation for protection of lips and skin and is not a 'medicament'. In the instant case, the primary use of the product Jac Olivol Body Oil, as it appears from the label representing the product, is to care for skin - the product is described as ‘For soft, smooth, glowing and & healthy skin’ - the product label, as submitted by the applicant in paper copy is not identical with what the authorized advocate sent through e-mail on 28.07.2023. When the product itself proclaims to ‘apply daily before or after bath all over your body’, it is difficult for us to accept that people ordinarily buys it for treating of an ailment - the item namely JAC OLIVOL BODY OIL is commonly understood as a ‘preparations for the care of skin’ thereby considered to be a cosmetic product used to get soft and smother skin and not considered as a medicament used for the treatment or prevention of any disease or ailment. The product JAC OLIVOL BODY OIL intended to be manufactured & 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. 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 TariffThe 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 cosmeticThe 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 ConsiderationsThe 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 ContentionsThe 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 TestThe 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 PrecedentsThe 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 TestThe 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: ConclusionThe 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.