TaxTMI 
TaxTMI 
2025 (6) TMI 1899
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....n (Cus.) dated 17.03.2012 (Serial No. 148) during the period up to 30.06.2017 and Notification (Cus.) dated 30.06.2017 (Serial No. 167) w.e.f 01.07.2017 has been denied to the appellant. Exemption from additional duty [CVD] equivalent to excise duty leviable under section 3(1) of the Customs Tariff Act, 1975 as provided for under Notification (C.E.) dated 17.03.2012 (Serial No. 108) for the period up to 30.06.2017 has also been denied to the appellant. Integrated Goods and Service Tax [IGST] with effect from 01.07.2017 @ 5% under IGST Rate Notification dated 28.06.2017 [IGST Rate Notification] (Serial No. 180) of Schedule I has also been denied to the appellant. The order, therefore, confirms the proposed duty under section 28(4) of the Customs Act, 1962 [the Customs Act] with interest under section 28AA of the Customs Act. The order also confiscates the goods imported through 85 Bills of Entry under section 111(m) of the Customs Act, but as the goods were not available for confiscation, redemption fine has not been imposed. The order also imposes penalty upon the appellant under section 114A of the Customs Act. 2. The appellant is a part of the Cepheid Group, which is a Corpora....
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....luation Branch [SVB] investigation. These two issues shall be dealt with separately. A. Eligibility of Exemption Benefit to HIV-1 Viral Load Test Kits 6. On the basis of intelligence developed by Special Investigation and Intelligence Branch [SIIB], one consignment of HIV-viral load test kits imported by the appellant through a Bill of Entry dated 10.03.2021 was seized under section 110 of the Customs Act on the allegation that the appellant had wrongly availed exemption from BCD under Notification dated 30.06.2017 and lower rate of IGST under Notification dated 28.06.2017 by treating such goods as kits for detection of 'antibodies', though they were used for detection of 'viral load' for which no exemption from customs duty was available. 7. It would, therefore, be appropriate to refer to the relevant Notifications. 8. The relevant portion of Notification (Cus.) dated 17.03.2012 in report of BCD and CVD is reproduced below: ***** Notification: 12/2012-Cus. dated 17-Mar-2012 the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below or....
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....t), as are given in the corresponding entry in column (2) of the said Table, from so much of the duty of excise specified thereon under the First Schedule to the Excise Tariff Act, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table and subject to the relevant conditions annexed to this notification, if any, specified in the corresponding entry in column (5) of the Table aforesaid: Sl.No. Chapter or Heading or Sub-heading or tariff item Description of excisable goods Rate Condition No. (1) (2) (3) (4) (5) 180 28,29,30 or 38 The following goods, namely, (A) Drugs or medicines including their salts and esters and diagnostic test kits, specified in List 3 or List 4 appended to the notification of the Government of India in the erstwhile Ministry of Finance (Department of Revenue), No. 12/2012- Customs, dated the 17th March, 2012) Nil - (B) Bulk drugs used in the manufacture of the drugs or medicines at (A) Nil - (emphasis supplied) 11. The relevant portion of the Notification (Cus.) dated 30.06.2017 dealing with BCD and IGST is reprod....
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.... (1) of section 5 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the rate of the integrated tax of- (i) 5 per cent in respect of goods specified in Schedule I ******* appended to this notification (hereinafter referred to as the said schedules), that shall be levied on inter-State supplies of goods, the description of which is specified in the corresponding entry in column (3) of the said Schedules, falling under the tariff item, sub-heading, heading or Chapter, as the case may be, as specified in the corresponding entry in column (2) of the said Schedules. Schedule 1-5% S.No. Chapter/Heading/Sub-heading/Tariff item Description of Goods (1) (2) (3) 180. 30 or any chapter Drugs or medicines including their salts and esters and diagnostic test kits, specified in List 1 appended to this Schedule 14. The relevant portion of List I referred to above is reproduced below: "List 1[See S. No. 180 of the Schedule I] (150) Diagnostic Kits for detection of HIV antibodies." 15. Coming back to the factual a....
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....r of 93.93% after allowing a discount at 20% to the appellant for importing goods in higher quantities. The appellant filed a reply dated 16.04.2021 but adjudication order has not been passed as yet. 21. After the filing of the reply, it was noticed that out of more than 900 Bills of Entries filed by the appellant during August 2016 to February 2021, 85 Bills of Entry were cleared on final assessment basis instead of provisional assessment. Therefore, another show cause notice dated 14.08.2021 was issued to the appellant with respect to such 85 finally assessed Bills of Entry. The adjudication of this show cause notice is the subject matter of this appeal. 22. The appellant filed a reply dated 14.01.2022 to the show cause notice and denied the allegations. The Principal Commissioner, however, confirmed the demand by the order dated 30.06.2022. The Principal Commissioner denied the benefit of BCD and CVD, which the appellant had claimed. The Principal Commissioner also held that the appellant had wrongly paid IGST @ 5% under the IGST Rate Notification dated 30.06.2017. After rejecting the declared value of the imported goods, the Principal Commissioner re-determined the value ....
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....in decisions to which reference shall be made at the appropriate stage; (ii) It is not the case of the appellant that antibody test is based on an outdated technology which is no longer in use. Instead, since the initial development of antibody test, other tests capable of and used for detection and prognosis of HIV have also been introduced, which should be treated at par with antibody tests while extending benefit under the Exemption Notification; (iii) The exemption benefit under the category of "life-saving drugs/medicines" has to be offered a purposive interpretation and hence the benefit should be extended to not only the diagnostic kits for detection of HIV antibodies but also to other diagnostic kits used for detection and prognosis of HIV, which serve the same purpose; (iv) HIV-VL test kits are indeed "lifesaving diagnostic kits" and used for detection and prognosis of HIV virus in a human body. These kits not only detect the presence of HIV infection, but being more sensitive and accurate, are used for regular monitoring of the spread of HIV infection in the body and for identifying the failure of first course of treatment so as ....
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....ces of the appellant are appropriately valued and have not been influenced by the relationship. Penalty and Interest (i) Penalty under section 114A of the Customs is attracted only when short levy is caused by reason of collusion or willful misstatement or suppression of facts. In the present case, none of these circumstances exist to warrant the levy of penalty. Without prejudice to the fact that there has been no infraction of the law on the part of the appellant, in the event there has been any infraction, the same is completely unintended and bona fide and without any intent to evade duty; (ii) Penalty is not imposable if the issue involved is one of interpretation; (iii) Where the duty demand is itself not sustainable, no penalty can be leviable; and (iv) Since demand itself is not sustainable, no interest can be demanded. 24. Shri S.K. Rahman, learned authorized representative appearing for the department, however, supported the impugned order and made the following submissions: Jurisdictional issues (i) The appellant is not justified in asserting that when the issue is pending before SVB, this adjudication which includes ....
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....instant case, as the importer and the foreign supplier are related, the Transaction value cannot be accepted; (ii) The relationship has influenced the Transaction Value. Hence, the declared Transaction Value cannot be accepted; (iii) The foreign supplier has entered into "Purchase and Distribution Agreement effective 01.01.2019" between the importer and the Cepheid USA". The prices adopted for import of impugned goods is as per this agreement, which are different from Transaction Value between the same foreign supplier and unrelated buyer (importer) in India. As per Explanation (1)(iii)(c) of rule 12 of the 2007 Valutaion Rules, the Transaction Value can be rejected if sales invoices offer special discounts to exclusive Agents; (iv) The reasons for rejection of Transaction Value have been communicated to the appellant in the show cause notice dated 14.08.2021; (v) In the instant case, it appears that the same foreign supplier has supplied goods to the appellant importer (being related party) and to unrelated third party (Independent Importer) also. Hence, the Transaction Value between foreign supplier and unrelated third party (Independe....
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.... integral to HIV prevention, treatment and care. Thus, knowledge of HIV status is important for preventing spread of disease. The appellant has elaborately described the aforesaid in the following manner: (i) HIV is a lentivirus that infects and destroys cells in the immune system. There are two HIV types, HIV-1 and HIV-2. HIV-1 is the most prevalent type throughout the world. Early knowledge of HIV status is critical for linkage to medical care and treatment so that it can reduce mortality and improve quality of life. It is this critical clinical encounter that serves as the starting point for diagnosing and treating persons who are infected and delivering preventive services to those who are uninfected. HIV diagnosis is made by either demonstrating the presence of virus or viral products in the host or alternatively by detecting host response to the virus. (ii) Thus, over a period, different technologies have evolved with respect to HIV testing, as per which HIV diagnosis is commonly made through serological assays to detect HIV specific antibodies; or by Nucleic Acid Amplification Test (NAAT) to detect HIV nucleic acids as explained below: (a) Serologi....
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....characterization in developed countries. (emphasis supplied) 29. It would also be useful to consider customs duty exemptions offered to life-saving drugs, medicines or equipment including HIV-test kits. As regard HIV test kits, the entry relating to "Diagnostic kits for detection of HIV antibodies" was added to the list of life saving drugs or medicines in 1989 when the HIV cases started increasing and attracted attention, both nationally and internationally. A tabular summary of Customs duty exemptions awarded to "life-saving drugs, medicines or equipment" including 'HIV test kits' is contained in the following Chart: S.N. Year Notification Number Relevant Entry Description of list covering HIV kits 1. 1981 Notification No. 208/81-Cus. dated 22.09.1981 Life-saving drugs or medicines - 2. 1989 Notification No. 209/89-Cus. dated 17.07.1989 Life-saving drugs or medicines 218. Diagnostic kits for detection of HIV antibodies 3. 1995 till date Various notifications Life Saving drugs or medicines including diagnostic test Kits Specific List Number under different notifications included Diagnostic kits for detection of HIV ....
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....ically- trained healthcare workers. The Xpert HIV-1 VL assay is not intended to be used as a donor screening test for HIV-1 or as a diagnostic test to confirm the presence of HIV-1 infection. (emphasis supplied) 33. It would also be useful to refer to the Product Catalogue published by the appellant and the relevant portion is reproduced below: "3. Intended Use The Xpert HIV-1 VL assay is an in vitro reverse transcriptase polymerase chain reaction (RT-PCR) assay for the detection and quantification of Human Immunodeficiency Virus type 1 (HIV-1) RNA in human plasma from HIV-I infected individuals, using the automated GeneXpert Instrument Systems. The assay can quantify HIV-1 RNA over the range of 40 to 10,000,000 copies/mL. The Xpert HIV-1 VL assay is intended for use in conjunction with clinical presentation and other laboratory markers for disease prognosis and for use as an aid in assessing viral response to antiretroviral treatment as measured by changes in plasma HIV-1 RNA levels. The assay is intended to be used by laboratory professionals or specifically-trained healthcare workers." (emphasis supplied) 34. It would also be useful to e....
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....iagnosis (see Chapter4). NACO is now promoting the use of the DBS technique for early infant diagnosis, based on the detection of HIV 1 DNA viral nucleic acid. The test is discussed in detail in chapter four." (emphasis supplied) 37. Chapter 4 of the Guidelines deal with Molecular and Other Assays for the Diagnosis of HIV Infection and the relevant portion is reproduced below: "Introduction Serological assays for the diagnosis of HIV infections. In certain situations, such as patients in the window period and infants born to HIV positive mothers antibody detection assays cannot be relied upon. In these situations, the diagnosis of HIV infections is established using molecular assays to detect viral genomes. This chapter describes molecular assays, assays for virus isolation, and detection of virus core proteins (p24). Diagnosis of Paediatric HIV Infection (<18 months) The standard diagnostic method for HIV infection in adults (i.e., testing for antibodies) has limited utility in newborns, infants, and children less than 18 months of age. This is due to the transplacental transfer of maternal IgG (including HIV-specific antibodies) fro....
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....logies have evolved with respect to HIV testing. HIV diagnosis is commonly made through serological assays to detect HIV specific antibodies. On the other hand, NAAT looks for actual virus in the blood. This test can not only determine whether a person has HIV but can also determine how much virus is present in the blood. HIV-viral load test can detect HIV infection within 10 to 33 days after exposure. Diagnosis in a child less than 18 months cannot be done by using antibody assays. Therefore, up to the age of 18 months, the diagnosis of HIV infection can only be done by NAAT test. Further, mere detection of HIV is not enough for treatment of HIV infection in a body. It is equally important to continuously monitor the spread of HIV infection in the body for determining the course of treatment. It is for this reason that the use of immunologic tests and virological tests and viral load test kits have assumed importance. These kits not only detect the presence of HIV infection, but being more sensitive and accurate, are used for regular monitoring of the spread of HIV infection in the body. Thus, these kits are required for identifying the course of treatment of HIV and thereby fight....
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.... however, submitted that the exemption under Exemption Notifications is restricted only to diagnostic kits for 'detection of HIV antibodies', whereas the appellant has imported diagnostic kits for 'detection of HIV viral load'. Such an exemption has to be interpreted strictly and technological advancements cannot be considered unless the Notifications are suitably amended. Learned authorized representative, therefore, submitted that when various methods of detecting HIV are present, it is only the method of detection of HIV antibodies that has been exempted and no other method has been exempted. 43. The submissions advanced by the learned senior counsel for the appellant and the learned authorized representative appearing for the department on this issue have been considered. 44. As noticed above, the first HIV antibody test was developed in 1985. Since then, on account of technological breakthroughs, different types of testing methods have evolved over a period of time and the subsequent generation tests have not only reduced the detection window period considerably, but have also enabled ascertainment of virus load to determine whether the patient has an acute infection. Ea....
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.... This understanding of the department was not accepted by the Supreme Court and the relevant paragraphs of the judgment are reproduced below: "2. The respondent had imported miniaturised switches for use in electronic hearing aids which it manufactured. It appears that there are two types of such switches, the conventional one then being wafer switches and the other, newly innovated, being reed switches. It was the latter type of switch which was imported. The Customs authorities took the view that the respondents' import licence did not cover reed switches and they were not entitled to the concessional rate of import duty. The stand of the Customs authorities was, ultimately, assailed in the writ petition filed by the respondent before the High Court. The Writ petition was allowed. An appeal was preferred and it is the judgment in appeal which is under challenge before us. 3. The High Court in the impugned order noted that the stand of the Customs authorities was that the words "switches, miniaturised" as component parts of hearing aids should be understood to mean only those types of switches which were generally used in the manufacture of hearing aids at the ti....
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....the ambit of the description in the notification namely, "Elisa Diagnostic Tests". The answer has to be given clearly in the negative. The reason being that "Elisa Test" refers to pregnancy test carried out on the urine of a pregnant woman. The improvement has been made to make the test more clear and to make the results more positive. The experts have clarified and amplified that the imported item is an advancement in technology of "Elisa Test". This factor has been recognised by the Drug Controller, as noted by us and the Drug Licence itself clearly states that the item is a "Elisa Test". There has been a clarification also from Dr. S.K. Das, Asstt. Commissioner (BHS) Ministry of Health & Family Welfare to the effect that "Cards + O.S.HVG - urine from Pacific Biotech INC" is an immunoassay and works on the principle of Elisa. Thus it is a Rapid Elisa Diagnostic Test for Pregnancy Test." (emphasis supplied) 48. It is not in dispute that the kit imported by the appellant also detects HIV and is based on an advanced technology. When the intention of the Exemption Notification was to grant exemption to diagnostic kits for HIV antibodies, there is no good reason why the....
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....-Judge Bench judgment did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub-silentio the line of judgments qua beneficial exemptions has been done away with by this 5-Judge Bench. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it [see Quinn v. Leathem - [1901] AC 495 as followed in State of Orissa v. Sudhansu Sekhar Misra - (1968) 2 SCR 154 at 162, 163]. 24. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambig....
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....ellant from the foreign suppliers were influenced by such relationship. 56. Since the appellant and its foreign suppliers were related persons, the case of the appellant was registered with the SVB for examining as to whether the declared import prices had been influenced by the relationship between the parties. In the report dated 22.10.2019, the SVB suggested that the declared invoice value was influenced by the relationship and, therefore, the assessable value was required to be determined by loading 93.93% on the declared value. Accordingly, a show cause notice dated 13.01.2020 was issued to the appellant alleging that the imports made by the appellant from August 2016 from its related foreign suppliers were influenced by the relationship. The show cause notice, therefore, proposed a loading factor of 93.93%, after allowing a discount of 20% to the appellant for importing goods in higher quantities. The appellant claims that though, it filed a reply to the show cause notice on 16.04.2021 but the matter has not been adjudicated upon as yet. 57. Learned senior counsel for the appellant contended that the present show cause notice and the impugned order passed by the Princip....
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....ipment - 66% to 95% Table IIIA: Spares/ assemblies- 8% to 136% Imported item for which similar goods are available as per the Respondent Rule 5 Table IB: Test Kits- 15% to 25% o MTB-IN-50- 15-17% o MTB-IN-10- 0%-25% Table IIB: Equipment-322% For remaining items, for which identical or similar goods are not available as per the Respondent Rule 9 Table IC: Test Kits- 56.10% Table IIC: Equipment-85.78% Table IIIB: Spares/ assemblies- 111.99% 61. The contention that has been advanced by the learned senior counsel for the appellant is that though the show cause notice had proposed a loading factor of 93.93% after allowing a discount of 20% to the appellant for importing goods in higher quantities, the impugned order passed by the Principal Commissioner has applied different loading percentages ranging from 0 to 822%. It has, therefore, been submitted that the impugned order has travelled beyond the show cause notice. 62. Learned authorized representative appearing for the department, however, contended that good and cogent reasons have been given by the Principal Commissioner for applying various loading percentages and there is no g....
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....ve appearing for the department, however, submitted that the Principal Commissioner has very meticulously applied rules 4 in cases where identical goods were available, rule 5 where similar goods were available and rule 9 when rules 4 and 5 were not available. 69. The Principal Commissioner was obliged to re-determine the value only in accordance with the allegations made in the show cause notice and in case the show cause notice referred to rule 5 of the 2007 Valuation Rules, it was imperative for the Principal Commissioner to have confined the order only to rule 5 of the 2007 Valuation Rules. 70. The result of the aforesaid discussion on this issue is that it will not be possible to sustain the re-determination of the value of the imported goods undertaken by the Principal Commissioner under the 2007 Valuation Rules. The matter would, therefore, have to be remitted to the adjudicating authority to examine this issue afresh after supplying a copy of the SVB report to the appellant and in terms of the allegations made in the show cause notice dated 14.08.2021. CONCLUSION 71. What follows from the aforesaid discussion is that the HIV-VL test kits imported by the appellan....