TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 871
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....r import as well as supply of "Prepared Laboratory Reagents / Pharmaceutical Reference Standards (PRS)" attracting a levy of Integrated Tax at the rate of 12% or Entry No.453 to Schedule III attracting a levy of Integrated Tax at the rate of 18%? 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that they are a science based organisation conceptualized to cater to the growing analytical and regulatory requirement of the Pharmaceutical Industries and to provide solutions to the new challenges in separations and purifications faced in the Pharmaceutical and Research Institutions worldwide. With the State of the Art Research and Development Centre established at Bangalore, the applicant is a leading organisation engaged in new product development for addressing the growing challenges in the analysis and separation of pharmaceutical, biopharmaceutical and food industries. b. The applicant inter-alia imports Pharmaceutical Reference Standards (hereinafter also referred to as "PRS") from various official pharmacopeias like US Pharmacopoeia (USP), European Pharmacopoeia (EDQM), British Pharmacopoeia (BP) and supplies them to all major phar....
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....ideration, according to the applicant, is the applicability of rate of tax on import and supply of the Prepared Laboratory Reagent classifiable under Tariff Item 3822 00 90, in terms of the Rate Notification. i. The applicant submits that the only entry in the Rate Notification which covers the goods falling under Chapter Heading 3822 being "Diagnostic Kits and Reagents" is Entry No.80 of Schedule II, which provides for the rate of GST at 12%. The relevant entry reads as follows: Schedule II- 12% S.No. Chapter/Heading/ Subheading/ Tariff Item Description of Goods 80 3822 All diagnostic kits and reagents j. In the alternative, Entry No.453 to Schedule III, a residuary entry, provides applicable rate of GST @ 18% on all goods that are not specified in Schedule I, II, IV, V, V or VI. The relevant entry reads as follows: Schedule III- 18% S.No. Chapter/Heading/ Subheading/ Tariff Item Description of Goods 453 Any Chapter Goods which are not specified in Schedule I, II, IV, V or VI k. In the above factual matrix, the applicant seeks clarity on whether the PRS classifiable under Tariff Item 3822 00 90 shall be covered under Entry No.80 of Schedule II to the Notificati....
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....ic reagents are used in the evaluation of physical, biophysical or biochemical processes and states in animals and humans; their functions based upon a measurable or observable change in the biological or chemical substances constituting the reagent. Prepared diagnostic reagents of this heading may be similar in function to those designed to be administered to patients (sub-heading 3006.30), with the exception that they are used for in vitro, rather than for in vivi, applications. Prepared laboratory reagents include not only diagnostic reagents, but also other analytical reagents used for purposes other than detection or diagnosis. Prepared diagnostic and laboratory reagents may be used in medical, veterinary, scientific or industrial laboratories, in hospitals, in industry, in the field or, in some cases, in the home. . . . . The reagents of this heading should be clearly identifiable as being for use only as diagnostic or laboratory reagents. This must be clear from their composition, labelling, instructions for in vitro or laboratory use, indication of the specific diagnostic test to be performed or physical form (eg. presented on a backing or support)." 4.4 The applicant....
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....e Standards: is not defined or described in Customs Act, 1962 or Customs Tariff Act, that appeared to establish appropriate product description as early as in the year 2004, a particular reference seeking clarification on the description of "Pharmaceutical Reference Standards" was made to appropriate and competent authority in this matter, i.e., Drugs Controller General (India) under Directorate General of Health Services (Drug Division) who has vide his letter reference No. X19014/10/ 04-D dated 17-11-2004 stated as under:- ...... 7.8 Plain reading of the above letter from the Drugs Controller General (India) would clearly indicate that the Reference Standards are substances required for analytical calibrating or referencing purpose which would be required to estimate the standard of the product manufactured or consumed by the clients of the main appellants. It is to be noted that based upon the above clarification, the Central Drug Testing Laboratory Mumbai vide Letter No.80/CDTL-M/2004-OS/1469, dated 13-08-2004 clarified as under:- 7.9 Plain reading of both the communications from the competent authority to comment upon the issue seems to establish that intended use of Pha....
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....an respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as the CTA). Further, as per Explanation (iv) to the Rate Notification, the rules for interpretation of the First Schedule to the Customs Tariff Act, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. In view of the above explanations, it is evident that the classification adopted under the Customs Tariff Act can be borrowed for identifying the appropriate schedule under the IGST Act / CGST Act / State GST Acts in which particular goods are listed and also for determination of rate of tax applicable under the GST Law. 5. The applicant submits that essentially the issue under consideration in the present application is the applicability of rate of tax on supply of the Prepared Laboratory Reagent classifiable under Tariff Item 3822 00 90, in terms of the Rate Notification. 5.1 The applicant submits that the only entry in the Rate Notification which covers all diagnostic kits and reagents falling under Chapter H....
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....s, but also other analytical reagents used for purposes other than detection. Further, the HSN Explanatory Notes provides that reagents of this heading should be clearly identifiable as being for use only as diagnostic reagents or laboratory reagents which must be clear from their composition, labelling, instructions for in vitro or laboratory use, indication of the specific diagnostic test to be performed or physical form (eg. presented on backing or support). 6.3 The applicant further states that on reading of the HSN Explanatory Notes with the terms or words used in Entry 80 of the Schedule II of the Rate Notification, the description - "all diagnostic kits and reagents" includes amongst others "prepared laboratory reagents without a backing, other than those of heading 3002 or 3006." 6.4 The applicant states that the Pharmaceutical Reference Standards imported by the applicant is "prepared laboratory reagents without a backing, other than those of heading 3002 or 3006" with a proper labelling and appropriate instructions for its use and is covered under (f) supra and thus consequentially covered under the term "reagent" in Entry No.80 of Schedule II of the Rate Notification w....
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....h share and have common composition and commercial entity, and meet the popular parlance test. The applicant also places reliance on the following judgements in support of his contention: (a) Himalaya Stone Industries v. State of Uttarakhand and others [2013] 62 VST 233 = 2012 (3) TMI 376 - UTTARAKHAND HIGH COURT (b) Nandi Printers Ltd. v. State of Karnataka reported at 122 STC 164 (Kar) = 1997 (1) TMI 516 - KARNATAKA HIGH COURT 7. The applicant relies on the Circular F.No.296/07/2017 -CX.9 dated 15.06.2017 issued by the Central Board of Indirect Taxes & Customs which provides for a list of goods with reduced tax liabilities under the GST regime in comparison to erstwhile combined indirect tax rates and the applicant submits that in the erstwhile indirect tax regime, the combined rate of indirect taxes levied on the manufacture and sale of "Pharmaceutical Reference Standards" classified under Tariff Item 3822 00 90 was approximately 18% in case of "intra-state sale: and 14.5% in case of "interstate sale". Hence the intention of the Central Government was to lower the tax incidence on the specified goods in the GST regime and hence the only possible rate of tax in the GST regim....
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.... other than for diagnostic purposes are classified under 3822 00 90. The applicant also agrees that the goods in question is "Prepared laboratory reagents without a backing, other than those of heading 3002 or 3006" and is used exclusively for a specified analytical calibrating and referencing purposes and classifiable under HSN 3822 00 90. 9.3 The entry no. 80 of Schedule II of the Notification No. 01/2017 -Integrated Tax (Rate) dated 28.06.2017 which is taxable at 12% reads as under: Schedule II- 12% S.No. Chapter/Heading/ Sub-heading/ Tariff Item Description of Goods 80 3822 All diagnostic kits and reagents The entry means "all diagnostic kits and reagents" of Heading 3822 are covered under the entry 80 above. The issue here is not whether the PRS is a reagent or not as it is very clear that the same is a reagent. The issue is whether it is a diagnostic reagent or not. 9.4 The description of the entry 80 reads "all diagnostic kits and reagents" means all diagnostic kits and all diagnostic reagents. The principle of ejusdem generis is applicable and reagents of the class of diagnostic reagents are covered under the entry no.80 of Schedule II of the said Notification. Th....