AAAR splits on JAC OLIVOL BODY OIL classification: medicament HSN 3004 versus cosmetic HSN 3304 under Section 101(3)

The AAAR considered classification of JAC OLIVOL BODY OIL under HSN 3004 (medicament) or HSN 3304 (cosmetic) for GST purposes. One member held the product satisfied the ingredients test for medicament classification under HSN 3004, citing drug license approval and medicinal constituents. The other member applied the common parlance test, distinguishing between "cure" and "care," concluding the product functions as skincare rather than medicine, warranting HSN 3304 classification. Due to disagreement between members, no advance ruling could be issued under Section 101(3) of GST Act, rendering the original ruling inoperative.

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Issues Involved:
1. Classification of JAC OLIVOL BODY OIL under GST Tariff.
2. Applicability of HSN 3004 (medicament) vs. HSN 3304 (cosmetic).

Summary:

Issue 1: Classification of JAC OLIVOL BODY OIL under GST Tariff
The appellant sought an advance ruling on the classification of JAC OLIVOL BODY OIL, arguing it should be classified under HSN 3004 as a medicament attracting 12% GST. The WBAAR ruled that the product falls under Heading 3304, classifying it as a cosmetic, which was contested by the appellant.

Issue 2: Applicability of HSN 3004 (medicament) vs. HSN 3304 (cosmetic)
The WBAAR observed that for a product to be classified as a medicament, it must have therapeutic or prophylactic uses and be manufactured primarily to control or cure a disease. They applied the common parlance test and referred to various judicial precedents, concluding that the product is commonly understood as a cosmetic rather than a medicament.

Appellant's Arguments:
1. The product has been marketed as an Ayurvedic proprietary medicine for over two decades.
2. It is used for curing skin ailments and reducing muscle and joint pains.
3. Ingredients are listed in authoritative Ayurvedic texts and approved by the Drug Controller.
4. The product has therapeutic properties and should be classified under HSN 3004.
5. The appellant cited several judgments supporting the classification of products with curative properties as medicaments.

WBAAR's Reliance on Judicial Precedents:
1. The common parlance test and the perception of the product by consumers are crucial in determining classification.
2. The mere fact that a product has some curative effect or is manufactured under a drug license is not enough to classify it as a medicament.
3. The product's primary function should be care rather than cure to be classified as a cosmetic.

Appellate Authority's Findings:
1. The product's ingredients are listed in the Ayurvedic Pharmacopoeia of India, indicating its medicinal properties.
2. The common parlance test is not the sole criterion for classification; the product's therapeutic properties and the ingredients used are also significant.
3. The product satisfies the "Ingredients test" for classification as a medicament.
4. The judgment in the case of Commr. Of Central Excise, Delhi vs M/S. Ishaan Research Lab. (P) Ltd. & Ors highlighted that the common parlance test is not the exclusive criterion for classifying a product.

Separate Judgments:
- Mr. Navneet Goel held that the product should be classified under HSN 3004 as a medicament.
- Mr. Devi Prasad Karanam held that the product should be classified under HSN 3304 as a cosmetic, emphasizing the common parlance test and the product's use for care rather than cure.

Conclusion:
As the members of the Appellate Authority differed on the classification, it was deemed that no Advance Ruling could be issued. Thus, the Advance Ruling No. 19/WBAAR/2023-24 dated 10.08.2023 is deemed to be not in operation.

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