TaxTMI 
TaxTMI 
2026 (3) TMI 1088
X X X X Extracts X X X X
X X X X Extracts X X X X
....icant's Submissions: Cipla Limited (hereinafter referred to as the "Applicant") is a pharmaceutical company incorporated in 1935. The Applicant is a leading manufacturer and supplier of pharmaceutical products. In connection with its business, the Applicant purchases and imports a wide range of Bulk Drugs after obtaining the requisite licence. The Bulk Drugs so imported are Active Pharmaceutical Ingredients (APIs). These imported ingredients are used for the manufacture of formulations i.e. dosage form of drug and occasionally for testing. clinical research and Bioequivalence study. These imported ingredients, which are active ingredients for medicines, are hereinafter collectively referred to as "bulk drugs". 2.1. Applicant submitted that Bulk drugs are classified under Chapter 28 or Chapter 29 as they are organic and inorganic chemicals. 2.3 The present application pertains to determination of IGST payable on the import of these bulk drugs. The relevant portion from the of the IGST Rate Notification (at SI. No. 226 of Notification No. 9/2025-Integrated Tax (Rate) dated 17th September, 2025) is extracted below: SI. No. Chapter/Heading/Sub- heading/Tariff item....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... portion of Schedule I (5%) to the IGST Rate Notification is extracted below: SI. No. Chapter/Heading/Sub- heading/Tariff item Description of goods 226. 30 or any Chapter All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs [other than those specified at nil at S. No. 113 of notification No. 10/2025-Integrated Tax (Rate) dated 17th September, 2025] 3.3 Sl. No. 113 of Notification No. 10/2025-Integrated Tax (Rate) dated 17.09.2025 is extracted below: SI. No. Chapter/Heading/Sub- heading/Tariff item Description of goods 113. 30 or any Chapter Drugs or medicines listed in Annexure I 3.4 The above is the entry applicable for IGST at NIL rate. The products for which the present ruling is sought are not covered under Annexure I, therefore the same is not applicable in the present case. 3.5 The Applicant submits that on import of bulk drugs, IGST @ 5% alone is applicable under the above extracted SI. No. 226 of Schedule I of Notification No. 9/2025-Integrated Tax (Rate). 3.6 For 5% IGST to be applicable, the imports should satisfy the following conditions: i. Be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in any bonafide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines; (ii) any medicine included in the Homeopathic system of medicine; and (iii) any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do not apply; " (emphasis supplied) 3.10 Section 3 of the Drugs and Cosmetics Act, 1940 provides the definition of 'drugs'. The relevant portion is extracted below: (b) "drug" includes -- (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;] (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette; (iii) all substances intended for use as co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-2007 b. Instruction F.No. 450/11/2011-Cus. IV, dated 25-2-2011 c. Circular No. 10/2016-Cus., dated 15-3-2016 d. Circular No. 28/2016-Cus., dated 14-6-2016 e. C.B.I. & C. Circular No. 44/2018-Cus., dated 13-11-2018 3.15 Thus, as the bulk drugs in question are "Drugs" under the Drugs and Cosmetics Laws of India, they must be considered as "drugs" even for purposes of IGST Notification. Even in common parlance, bulks drugs are "Drugs" 3.16 Even as per medical literature, bulk drugs are considered to be drugs only. Reference is also made to the definition of 'drug' and 'medicine' under medical dictionaries. The relevant portions are extracted below: Dictionary Definitions American Heritage Medical Dictionary * drug (drug) n. 1. A substance used in the diagnosis, treatment, or prevention of a disease or as a component of a medication. **: * Medicine *** * 4. An agent, such as a drug, used to treat disease or injury." Dictionary of Medical Terms (fourth edition) * drug. a natural or synthetic chemical substance which is used in medicine and affects the way in which organs or tissues function * ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....drugs are also drugs, and that they are defined as such under the Drugs (Prices Control) Order, 1995 also. For this purpose, the Tribunal referred to and relied upon the decision of Tribunal, Mumbai Bench, in the case of Burroughs Welcome (India) Limited, referred above. Relevant portion of the above decision reads as under: "4. ... M/s. Burroughs Wellcome (I) Ltd. had imported Polymyxin B Sulphate and used the same along with some other ingredients in the manufacture of Neosporin. M/s. Pfizer Ltd. had imported Cefoperazone Sodium and used the same for manufacture of Cefoperazone Sodium Injections. The issue before the Tribunal was whether the above parties were eligible for the benefit of exemption from payment of CVD on the items imported by them, under Sl. No. 43 (A) of Notification No. 11/97-CE and under the corresponding entries of successor Notifications. It was not in dispute that the imported items figured in List 2 appended to Sl. No. 43 (A) of the above Notification. While the Revenue classified the goods as 'bulk drugs' under Sl. No. 43(B), the assessees classified them as life saving drugs under Sl. No. 43 (A). 'The Tribunal accepted the assessees c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2]. 8.22 Though the definition of "drug" does not exist under the present Drugs (Prices Control) Order 2013, the definition of "bulk drugs" under the Drugs (Prices Control) Order 2013, and the definition of "drugs" under the Drugs and Cosmetics Act, 1940 should be read conjointly. Reliance is placed on Clause (2) of the Drugs (Prices Control) Order 2013, as extracted below: "(2) All other words and expressions used herein and not defined but defined in the Act or the Drugs and Cosmetics Act, 1940 (23 of 1940) shall have the meanings respectively assigned to them in the said Acts." 3.23 Thus, in the absence of the definition of "drugs" under the current Drugs (Prices Control) Order 2013, reference is made to the Drugs and Cosmetics Act, 1940. As submitted in the foregoing paragraphs, from a combined reading of the present definitions under the Drugs (Prices Control) Order, 2013 and the Drugs and Cosmetics Act, 1940, it is clear that bulk drugs are to be treated as drugs only. 3.24 Further, in the present case when the notification also does not define drugs or bulk drugs, and nor does it make a specific distinction between the two, it is submitted that the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ription (A) which does not involve any condition such as following the procedure of Central Excise (removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001. Therefore, entire basis of the department that such procedure was not followed is not relevant. Since, the duty demand itself is not prima facie sustainable on the company, there is no question of imposing personal penalty on the employee of M/s. Sterlling Biotech Ltd. who is the appellant herein." (Emphasis supplied) 3.26 Thus, it is submitted by the applicant that there is enough jurisprudence which treats the term "drugs" to include bulk drugs. Restricting the entry to cover only drugs and medicines for final consumption would render the entry to be redundant 3.27 From a perusal of the entry, it is clear that it covers the following: (a) all drugs and medicines; (b) salts and esters of such drugs and medicines; (c) diagnostic test kits; and (d) formulations manufactured from bulk drugs. 3.28 The usage of the semi colon (;) between "all drugs and medicines including their salts and esters and diagnostic test kits" and "formulations manufa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... entry no. (ix) nor it would refer to the expression "Iron and Steel" as each item used in entry nos. (ix) and (xv) are independent items not depending on each other at all as has been held in the case of Pyare Lal Mehrotra (supra). " 3.33 The Hon'ble High Court in TVL. Transtonnelstroy Afcons Joint Venture v. UOI, 2020 (43) G.S.T.L. 433 (Mad.) (para 41), it was every word of the statute should be given meaning and one should not construe a statute in such a way as to render certain words redundant. 8.34 Reliance is also placed on the decision of Printers (Mysore) Ltd. Vs. Asstt. Commercial Tax Officer - 1994 (2) SCC 434. The relevant extract of the said judgement is as follows: "Even apart from the opening words in Section 2 referred to above, it is well settled that where the context does not permit or where it would lead to absurd or unintended result, the definition of an expression need not be mechanically applied. [Vide T.M. Kanniyan v. Income Tax Officer, Pondicherry and Anr. 1968 20 S.C.R. 103, Pushpa Devi and Ors. v. Milkhi Ram (Dead) by his L.Rs. MANU/SC/0149/1990: [1990]1SCR278 [para 14] and Commissioner of Income Tax, Bangalore v. J.H. Gotla, Ya....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cability would rest upon the tax payer and that the benefit of any ambiguity in the Notification must be interpreted in favour of the Revenue. The Principal Commissioner committed an error in assuming that the IGST Rate Notification is an Exemption Notification. The IGST Rate Notification is at rate Notification and, therefore, a Taxing Notification. It has to be strictly construed and any ambiguity has to be interpreted in favour of the tax payer and against the Revenue as was observed by the Supreme Court in Safari Retreats." 3.40 From the above it is clear that a taxing notification, which prescribes a levy and is not prescribing an exemption, is to be interpreted in favour of the tax payer. Reliance is also placed on the decision of the Supreme Court in Commissioner of Cus. (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), whereby it established the principle that in case of an ambiguity in a taxing statute and where two interpretations can be adopted, then the benefit of interpretation is to be given to the assessee. It is only in the case of an exemption notification that it should be interpreted in favour of the Revenue. IGST Notification is a taxin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aterials and cannot be directly administered to a human being. * The concessional rate of GST is applicable only to the medicine or drugs, which are ready for administering in the human being or person. * The word "Bulk Drugs" would have been included in the entry had the intention of the Government been to extend the benefit of concessional rate to the bulk drugs/raw material. The rulings are not applicable in the present case as they have not considered the complete definition of "drugs". They have only considered clause (i) and have not considered clause (iii) (refer para 18 in Sterling Decision and para 11 in Altis decision) Furthermore, the rulings have failed to take into consideration the previous decisions and rulings on the interpretation wherein "Drugs" was time and again held to include bulk drugs. In Re: M/s. Altis Finechem Pvt. Ltd. 2021 (1) TMI 564 - AAR, Guj. ADVANCE RULING NO. GUJ/GAAR/R/61/2020 Enclosed as 'Exhibit - F'. 3.43 The above Rulings are not pertaining to the present legal position. Thus, they are not strictly applicable to the present Application. However, in the interest of completion of information, the above Rulings....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed as under. "Drug" includes- [(i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;] (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of 10[vermin] or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;] From the above, it appears that Active Pharmaceutical Ingredients (API) appears to be in ambit of the substance. Hence it appears to be come under the heading for drugs. 4.2.3 From the para 2, it appears that the API may come under the definition of bulk drugs if it is used for purpose of the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals as per the section 3(b) of the Drugs and Cosmetic Act. 1940 and the drugs appears to be at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted for the purpose of testing, clinical research and Bioequivalence study, and not for the treatment of Human or Animal - does not fall under the ambit of 'drugs' under SI. No. 226 of the Notification. 10.3 API for 'testing, clinical research and bioequivalence study' also fall under the ambit of 'drugs' and are leviable with IGST @5% 5.4 The relevant definitions from the Drugs and Cosmetic Rules, 1945 are extracted below: b) "drug" includes -- (i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;] (ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette; (iii) all substances intended fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bioequivalence studies and clinical trials would be rendered redundant if the definition of 'drugs' itself was construed to not cover the drugs which are intended for such purposes. 5.8 Thus, as long as the product in question is regarded as "Drug" by the CDSCO, irrespective of whether it is for manufacture of medicines, or for clinical trials, it must be considered to be eligible to avail benefit of SI. No. 226 of Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025. Customs Department's consistent stand is that "bulk drugs" are drugs 5.9 During the course of the Hearing it was submitted by the Applicant that Customs Department has passed various Orders in Originals holding that "bulk drugs" are 'drugs'. Reference in this regard is made to the following decisions by the JNCH Port Authorities (available in public domain): i. Order passed in the case of Show Cause Notice No. 322/2025-26/Pr. Commr. / Gr. IIAB/NSI/CAC/JNCH dated 18.06.2025 issued to M/s Unijules Life Sciences Limited. Available at: https://www.jawaharcustoms.gov.in/pdf/OIO- 2025/CC/O10%20298%20UNIJULES%20(1).pdf ii. Order passed in the case of Show Cause Notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplication filed by Cipla Limited, the written and additional submissions made by the Applicant, the comments furnished by the jurisdictional Commissioner of Customs (Import), Air Cargo Complex, Sahar, Mumbai, and the records placed before me. 7.2 At the outset, I find that the issue raised in the question in the form CAAR-1 is squarely covered under Section 28H(2) of the Customs Act, 1962, being a matter related applicability of duty (IGST rate in the present case) under the provisions of this Act. The question posed for advance ruling is: "Whether Integrated Goods and Services Tax (IGST) is leviable @ 5% on import of bulk drugs (Active Pharmaceutical Ingredients - APIs) in terms of Sl. No. 226 of Schedule I to Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025" 7.3 Statutory Framework 7.3.1 In terms of Section 3(7) of the Customs Tariff Act, 1975, any article imported into India is liable to IGST at such rate as is leviable under Section 5 of the IGST Act, 2017 on a like article supplied in India. 7.3.2 IGST rates are notified vide Notification No. 09/2025-Integrated Tax (Rate) dated 17.09.2025. Sl. No. 226 of Schedule I (5%) reads as under: SI....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CT-17 From the above produced licenses, it is evident that these are form import of drugs named Valaciclovir Hydrochloride C.P. and 'Vutrisiran Sodium' for the purposes mentioned therein. 7.4.3 Further, the applicant has submitted that there is no dispute regarding tariff classification under Chapters 28 or 29. Also, the issue raised in the present application is not regarding classification of the subject good and the question raised in the CAAR application is confined to the applicable IGST rate. 7.5 As discussed at para 11.3 above SI. No. 226 of Schedule I (5%) covers all drugs and medicines. The applicant has contended that the bulk Drugs/APIs" are covered under the expression "All Drugs and Medicines" and are covered under SI. No. 226 being drugs. Therefore, it is to be analysed: "Whether "Bulk Drugs/APIs" are covered under the expression "All Drugs and Medicines" or otherwise" 7.5.1 The expression "drugs" is not defined in the IGST Rate Notification and neither in Customs Act. In such circumstances, recourse can be taken to the relevant statute governing the goods, namely the Drugs and Cosmetics Act, 1940. 7.5.2 I observe Section 3(b) of the Drugs a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....one or more drugs with or without use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include (i) any medicine included in any bonafide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines; (ii) any medicine included in the Homeopathic system of medicine; and (iii) any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do not apply;" In view of above bulk drug refers to pharmaceutical or chemical substances used as such or as an ingredient in any formulation. Accordingly, I observe that on conjoint reading of the above definition of API with Section 3(b) of the Drugs and Cosmetics Act, bulk drugs/APIs bulk drugs falls within the statutory meaning of "drug". 11.5.4 The applicant has submitted that Prior to 2019, the definitions of 'bioavailability study', 'bioequivalence study' and 'clinical trials' were also under the Drugs and Cosmetics Rules, 1945. However, with the introduction of the New Drugs and Clinical Trials Rules, 2019, the definitions were omitted from the Drugs and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8-20) above. These decisions consistently held that bulk drugs are also drugs, particularly where the exemption/benefit entry uses the expression "drugs" without exclusion. 7.6.2 Further, in Aurobindo Pharma Ltd. - 2009 (247) E.L.T. 206 (Tri .- Bang.), it was held that where a notification does not distinguish between "drugs" and "bulk drugs", such distinction cannot be artificially introduced. 7.6.3 Advance ruling decisions: i) I observe that in Laurus Labs Ltd., 2018 (13) G.S.T.L. 472 (A.A.R. - GST) and Biocon Ltd., 2020 (43) G.S.T.L. 281 (App. A.A.R. - GST - Kar.), the Advance Ruling Authorities have taken the view that the expression "drugs" includes "bulk drugs." ii) Though in Sterling Biotech Ltd., 2021 (1) TMI 372 - AAR, Gujarat and M/s. Altis Finechem Pvt. Ltd., 2021 (1) TMI 564 - AAR, Gujarat, the Advance Ruling Authorities have taken a contrary view. It is however observed that in the aforesaid rulings, the complete and inclusive definition of "drug" under Section 3(b)(iii) of Drugs and Cosmetics Act, 1940, particularly in relation to substances used as components of a drug, has not been examined in its entirety. 7.7 Interpretation of SI. No. 22....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Tax (Rate) dated 17th September, 2025. In the instant case, M/s. Cipla Limited is importing API for the purpose of testing, clinical research and Bioequivalence study and not for the treatment of Human or Animal. Hence, the subject goods don't appear to be come under Sr. No. 226 of schedule I of Notification No. 09/2025 Integrated Tax (Rate) dated 17th September, 2025." Accordingly, I observe that the jurisdictional Commissioner has accordingly opined that APIs imported for testing, clinical research and bioequivalence studies may fall outside the scope of SI. No. 226, as they are not used for treatment. 7.8.2 The above view is not tenable for the following reasons: i) Section 3(b) of the Drugs and Cosmetics Act, 1940 defines "drug" to include substances intended for diagnosis, treatment, mitigation or prevention of disease, as well as components of a drug. ii) Clinical trials, bioavailability and bioequivalence studies are statutorily governed under the New Drugs and Clinical Trials Rules, 2019, which regulate the development and approval of drugs for therapeutic use. iii) As discussed at para 7.5 above it is clear from combined reading of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lia specialibus non derogant). Accordingly, Active Pharmaceutical Ingredients (APIs), though classifiable under Chapters 28 or 29 for tariff purposes, when they satisfy the description of "drugs", are appropriately classifiable under SI. No. 226 for the purpose of determination of applicable rate of tax. The SI. No. 226 entry is a specific entry which will prevail over the general entry of "all organic chemicals other than gibberellic acid" 7.10 Nature of the Notification 7.10.1 I observe Notification No. 9/2025-Integrated Tax (Rate) is a rate notification and not an exemption notification. 7.10.2 I observe that the applicant has placed reliance on the decision of the Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), wherein it was held that in case of ambiguity in a taxing statute, and where two interpretations are possible, the interpretation beneficial to the assessee should be adopted. However, in the case of an exemption notification, the same must be construed strictly in favour of the Revenue. I observe that the IGST Notification in question is a taxing notification and not an exemption n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dies, are covered under SI. No. 226 of Schedule I to Notification No. 9/2025-Integrated Tax (Rate) dated 17.09.2025 and attract IGST at the rate of 5%, subject to the goods not being covered under any NIL- rated entry. 7.11 To sum up: i) The definition of "drug" under Section 3(b) of the Drugs and Cosmetics Act, 1940 is wide and inclusive in nature, and expressly covers substances intended for use as components of a drug. Active Pharmaceutical Ingredients (APIs) / bulk drugs, being pharmaceutical substances used as such or as ingredients in formulations, squarely fall within the ambit of the said definition. ii) On a conjoint reading of the definition of "active pharmaceutical ingredient / bulk drug" under the Drugs (Price Control) Order, 2013 with the definition of "drug" under Section 3(b) of the Drugs and Cosmetics Act, 1940, and the definitions of "bioavailability study", "bioequivalence study" and "clinical trial" under the New Drugs and Clinical Trials Rules, 2019, it is evident that APIs, even when imported for testing, bioequivalence, bioavailability or clinical research purposes, retain their statutory character as "drugs" and are not excluded merely o....