TaxTMI 
TaxTMI 
2025 (10) TMI 820
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....fiable under Customs Tariff Item [CTI] 3822 00 90 of the Customs Tariff Act, 1975 [the Tariff Act] and would not be eligible for benefit of Notification No. 50/2017-Cus dated 30.06.2017 [the Exemption Notification] and Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017 [the IGST Rate Notification] . 2. The appellant claims to be engaged in the business of import and supplies of the imported test kits and reagents which are supplied to medical institutions like AIIMS Delhi, AIIMS Rishikesh, CMC Vellore, PGI Chandigarh and Sri Gangaram Hospital in India. The appellant has been importing these imported test kits from its foreign supplier M/s Grifols (HK) Limited. The imported test kits are used at hospitals and blood banks for screening of blood for the purpose of detecting HIV and Hepatitis. 3. The appellant cleared the imported test kits by claiming benefit of 'Nil' Basic Customs Duty [BCD] and 5% IGST. According to the appellant, the imported test kits are eligible for exemption from BCD under Serial No. 167(A) of the Exemption Notification and concessional rate of 5% IGST under Serial No. 180 of Schedule I to the IGST Rate Notification. 4. The relevant ....
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....otification: 1/2017-Integrated Tax (Rate) dated 28-Jun-2017 Rate of IGST on specified goods- Schedule I to VI In exercise of the powers conferred by sub-section (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/Head ing/Subheading/ 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 8. The releva....
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....osis of infection with HIV, HCV or HBV. iii. Detection of HIV Antibodies can be done by tests such as Enzyme linked immunosorbent Assays (ELISAs), Rapid Tests, Western Blots, Chemiluminescence Immunoassays (CIA), ImmunoFloresent Assays and Line Immunoassays. The impugned Kits do not fall under any of these categories of tests. These Kits are nucleic acid amplification (NAT) test and are not meant for detecting HIV Antibodies. iv. The impugned test Kits are not classified as test for detection of HIV Antibodies by National AIDS Control Organisation, Ministry of Health and Family Welfare (NACO)." (emphasis supplied) 9. Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals) and as noted above, the appeal was dismissed and the order dated 18.10.2021 passed by the Assistant Commissioner was upheld. The relevant portions of the order passed by the Commissioner (Appeals) are reproduced below: "5.2 The issues to be decided are: whether the Adjudicating Authority was correct in rejecting the claim of the Appellant that the impugned goods being medical diagnosis devices are classifiable under CTH 382200....
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....e customers use the impugned goods only for screening the presence of HIV-1, HIV-2, HCV or HBV and not as a diagnostic kit for the HIV. ***** 5.16 The Appellant had claimed that they are entitled for BCD exemption benefit under notifications 050/2017-Cus dated 30.06.2017, S. No. 167(A), (List 4, S. No. 28) and S. No. 180 of IGST Schedule-I of notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017 (List 1, S. No. 150). Before proceeding further, it would be helpful to reproduce the relevant portion of the said Notifications, which is as under: - ***** 5.17 From the above it is clear BCD exemption under Sr. No. 167 of the Notification No. 50/2017 under 'life saving diagnostic test kits' is available to the import of 'diagnostic kits for detection of HIV antibodies' only. In the 'National Guidelines for HIV Testing' published by National AIDS Control Organization (NAACO), Government of India in 2015, Serological Tests and Nucleic Acid Amplification Test (NAAT) has been discussed as two distinct category of diagnosis test of HIV. Thus, BCD exemption under the Notification admissible only for the import of "Diagnostic kits for detection of HIV antibod....
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....inatory assay are part of the same product i.e. Procleix Ultrio Kits but are employed differently in the second step. 12. After the second step of testing, if any specimen is detected with any of the viruses (HIV, HCV, or HBV), the diagnose or assessed person from whom such specimen has been collected is informed and referred for further treatment. In this regard, 'Guidelines for blood donor selection and blood donor referral' issued by National Aids Control Organization [NACO], Ministry of Health and Family Welfare - Government of India, also mandates that all donors detected with HIV are referred to integrated Counseling and Testing Center [ICTC]. 13. The appellant further claims that the imported test kits are a multiplex (combo) assay; hence it is cheaper, faster and convenient to screen for HIV, HCV and HBV together so that infected specimens are discarded and are not transfused. Further, only positive cases are sent for discriminatory testing where particular virus is detected and concerned person is referred for further treatment or test. Since, Ultrio Elite test detects the viruses, it is also used by hospitals to confirm the antibody test results. Procleix Ultrio tes....
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....) The Commissioner (Appeals) has incorrectly relied on the Import License and contents of the Package Insert [PI] to conclude that the imported test kits are not intended for use as an aid in diagnosis of infection with HIV-I, HIV-II, HCV or HBV without considering the meaning and scope or the word "medical diagnosis" in the Chapter Heading; (viii) The Commissioner (Appeals) failed to appreciate the technical evidence produced by the appellant that use of such kits in blood banks and hospitals for screening and detection would qualify as "medical diagnosis" as contemplated under the Exemption Notification; (ix) It is well settled proposition of law that the onus to impose a particular classification rests with the department; and (x) The benevolent Exemption Notifications achieves larger public good and has, therefore, to be interpreted liberally keeping in mind the advancement of technology. 16. Shri S.K. Rahman, learned authorized representative appearing for the department, however, supported the impugned order passed by the Commissioner (Appeals) and made the following submissions: (i) The imported test kits are not for detection of ....
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.... by Nucleic Acid Amplification Test (NAAT) to detect HIV nucleic acids as explained below: (a) Serological Tests: HIV antibody tests only look for antibodies to HIV in blood or oral fluid. Enzyme linked immunosorbent assays (ELISAs), rapid tests and western blots (WBs) are the common tests for detecting HIV antibodies. Antibody tests can usually take 23 to 90 days to detect HIV infection after an exposure. A combination of both antigen and antibody test looks for both HIV antibodies and antigens. Antibodies are produced by immune system when one is exposed to viruses like HIV. Antigens are foreign substances that cause immune system to activate. If one has HIV, an antigen called p24 is produced even before antibodies develop. An antigen/antibody test performed on blood can usually detect HIV infection 18 to 45 days after an exposure. (b) Molecular Tests: These are sensitive tests for diagnosis of HIV infections on the basis of PCR (polymerase chain reaction) or NASBA (nucleic acid sequencebased amplification). These tests look for the actual virus in the blood and involves drawing blood from a vein. The test can either tell if a person has HIV....
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....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 antibodies. 21. Having considered the aforesaid facts, it would be appropriate to examine the case of the appellant. 22. An Import License dated 12.05.2020 was issued to the appellant for the brand name "Procleix Ultrio Elite" and the Generic Name "Procleix Ultrio Elite Assay Kit (A qualitative-In-Vitro nucleic acid amplification test for the detection of HIV 1 & 2 RNA, HCV RNA and HBV DNA in plasma and serum specimens from human donors)" under the provisions of the Medical Device Rules 2017. 23. Form MD-15 deals with License to Import Medical Device. The relevant portion of the Form is reproduced below: FORM MD-15 [See sub-rule (1) of rule 36] Licence to Import Medical Device Licence No.: IMP/IVD/2020/000479 1. M/s Hemogenomics Private Limited, No. 26, 3rd Floor, ITI Layout New BEL Road, Mathikeri, Bangalore, Bengaluru (Bangalore) Urban, ....
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.... of whole blood, blood components, hematopoietic stem/progenitor cells sourced from bone marrow, peripheral blood or cord blood, and from donors of donor lymphocytes for infusion. It is also intended for use in testing pools of human plasma composed of equal aliquots of not more than 96 individual donations from donors of source plasma. This assay is intended to be used in conjunction with licensed tests for detecting antibodies to HIV-1, HIV-2, HCV, and hepatitis B core antigen, and with licensed tests for hepatitis B surface antigen (HBsAg). This assay is not intended for use as an aid in diagnosis of infection with HIV-1, HIV-2, HCV or HBV. The Procleix(r) Ultrio Elite Assay can be considered a supplemental test that confirms HIV infection for specimens that are repeatedly reactive on a licensed donor screening test for antibodies to HIV, and reactive on both the Procleix(r) Ultrio Elite Assay and on the Procleix(r) Ultrio Elite HIV Discriminatory Assay." (emphasis supplied) 25. It would also be useful to examine the National Guidelines for HIV Testing containing information regarding different types of tests for HIV published in July, 2015....
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....DNA viral nucleic acid. The test is discussed in detail in chapter four." (emphasis supplied) 28. 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) from infected mothers to their babies during pregnancy. HIV antibody tests are reactive in most infants born to HIV positive mothers, though the ....
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....n 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. 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 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 fighting the epidemic of HIV, which is the sole intention behind introducing the exemption benefit to life-saving drugs/medicines and diagnostic kits for HIV. 31. As noted above, the Exemtion Notification dated 30.06.2017 exempted duty of customs and i....
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....d 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. 34. 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. Earlier, HIV diagnosis was made through serological tests only to detect HIV specific antibodies, but these HIV antibody tests only look for antibodies and it takes about 23-90 days to detect HIV infection after an exposure. On the other hand, molecular tests look for the actual virus in the blood and the test can tell whether a person has HIV and if so, how much virus is present in the blood. Such tests can have a very reduced window period for detecting of HIV infection. The antibodies tests, therefore, have inherent limitations. The antibodies are not dete....
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....s, 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 time of publication of the Import Policy for the relevant year, namely 1977, and that these words could not be said to include any other type of switch even if such other type of switch could be used in the manufacture of hearing aids. The Division Bench observed, in our view, very rightly, that such an interpretation overlooked that industry was not static and that there was continuous technical progress therein. New processes and new methods developed from time to time and new material and components or types of components superseded others. It was unreasonable to give a static interpretation to words used in a tariff schedule ignoring the rapid march of technology. Havin....
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....y 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) 38. It is not in dispute that the test kits imported by the appellant also detect 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 test kits imported by the appellant for detection of HIV should be denied exemption. 39. Learned authorized representative appearing for the department however, submitted that in view of the judgment of the Supreme Court in Commissioner of Cus. (Import), Mumbai vs. Dilip Kumar & Company - 2018 (361) E.L.T. 577 (S.C.), the Exemption Notification has to be strictly construed, and if a person claiming exemption does not fall strictly within the description indicated in the Notification, he cannot claim exemption. The Supreme Court, after considering number of decisions, ultimately held: "52. To sum up, we answer the reference holding as under- (1) Exe....
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.... 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 ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench." (emphasis supplied) 42. It is seen that in Mother Superior the Supreme Court held that the beneficial purpose of an exemption must be given full effect to and the question that is needed to be asked is what is the objective sought to be achieved by the provision and then the exemption has to be construed in terms of such an object. 43. In the present case, the test kits imported by the appellant ....