Classification of herbal smokes as cigarette substitutes under Chapter 24 sustained despite claimed medicinal character.

The pandemic-related exclusion of the COVID-19 period was applied to the appeal filing timeline, so the appeal was treated as within limitation. On classification, herbal smokes marketed as cigarette substitutes were held not to be medicinal cigarettes under Chapter 30 because the manufacturer did not establish production in accordance with authoritative Ayurvedic texts or a valid Ayurvedic medicine licence. The absence of tobacco or nicotine was not sufficient to shift the product into Chapter 30, and the chapter notes and HSN guidance supported classification as cigarettes of tobacco substitutes under Chapter 24. The advance ruling on GST liability was therefore sustained.

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Issues: (i) Whether the appeal was filed within limitation in view of the exclusion of the COVID-19 period; (ii) Whether Aorom Herbal Smokes were classifiable as medicinal cigarettes under Chapter 30 or as cigarettes of tobacco substitutes under Chapter 24, and the consequent GST rate applicability.

Issue (i): Whether the appeal was filed within limitation in view of the exclusion of the COVID-19 period.

Analysis: Section 100 of the Central Goods and Services Tax Act, 2017 prescribes the normal appeal period, but the extended limitation directions issued by the Supreme Court excluded the relevant pandemic period for judicial and quasi-judicial proceedings. On that basis, the appeal was treated as filed within time.

Conclusion: The issue was decided in favour of the appellant.

Issue (ii): Whether Aorom Herbal Smokes were classifiable as medicinal cigarettes under Chapter 30 or as cigarettes of tobacco substitutes under Chapter 24, and the consequent GST rate applicability.

Analysis: The product was found to be marketed and presented as a substitute for cigarettes. The appellant failed to establish that the goods were manufactured in accordance with authoritative Ayurvedic texts or that a valid licence existed for manufacture of Ayurvedic medicine. Absence of tobacco or nicotine did not, by itself, bring the product within Chapter 30, and the chapter notes and HSN explanatory notes supported classification of cigarettes of tobacco substitutes under Chapter 24. The product was therefore held not to be medicinal cigarettes and the rate determined by the advance ruling was upheld.

Conclusion: The issue was decided against the appellant.

Final Conclusion: The appeal failed on the classification and taxability issue, and the advance ruling on GST liability for the product was sustained.

Ratio Decidendi: A product marketed as a cigarette substitute, for which medicinal manufacture is not established, is classifiable as a cigarette of tobacco substitute under Chapter 24, and the mere absence of tobacco or nicotine does not make it a medicinal product under Chapter 30.

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