TaxTMI 
TaxTMI 
2026 (6) TMI 1478
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....Custom duty benefit? Essentially these include all goods imported for the stage prior to manufacture of Exhibit Batch. iii. Whether the R&D goods imported by the Applicant for the Exhibit Batch are eligible for availing the concessional Customs duty benefit under Notification 45/25? 3. Submission by Applicant- 3.1. OVERVIEW OF BUSINESS 3.1.1. Lupin Limited (hereinafter referred to as the 'Applicant') is an Indian multinational pharmaceutical company engaged in the manufacture and supply of a pharmaceutical formulations and allied products. The Applicant holds a valid Importer Exporter Code ('IEC') bearing no. 0391156853. 3.1.2. Recognizing innovation as a key driver for long-term growth, the Applicant has consistently invested in Research and Development ('R&D') activities. Such activities are undertaken by the Applicant from its dedicated in-house R&D facilities located in Pune & Aurangabad ('R&D units'). These R&D units are duly registered and recognized by the Department of Scientific and Industrial Research ('DSIR'). 3.1.3. In the course of carrying out such R&D activities, the Applicant procures various goods from....
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....ses, the Applicant is required to obtain a Test License in Form 29. The scope of such Test License is confined to limited-scale manufacture, exclusively for R&D and testing purposes, and does not extend to commercial production. 3.2.6 The application for grant of a Test License is submitted in Form 30/ CT-11 inter alia specifying the relevant R&D facility and the products proposed to be developed. The application inter alia sets out particulars of R&D facility, details of drug proposed to be manufactured for examination, test and analysis, etc. Upon evaluation, the Licensing Authority grants the Test License for a specified period of validity. STAGE 3 - IMPORT LICENSE 3.2.7 As stated above, for undertaking R&D activities, the Applicant is required to import R&D Goods that are essential for formulation development and analytical testing. Such requirements are duly certified by the Head of Applicant's R&D units i.e., procurement anticipated & essential for research purposes. 3.2.8 Under the extant Foreign Trade Policy ('FTP 2023'), the import of several R&D Goods including API(s) and RLD(s) may be categorized as restricted and the imports of the same are permi....
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.... comparative studies, including dissolution profiling, stability assessment, impurity characterization, and performance testing, in order to establish equivalence with the proposed formulation. The RLD samples are entirely consumed during testing and analysis, with no recoverable quantity remaining post-use. 2 API(s) API(s) are utilized as the core component in pre-formulation and formulation development activities. The API(s) are employed in solubility, stability, and compatibility studies with excipients, followed by incorporation into laboratory- scale formulations and trial or development batches to evaluate dosage form, bioavailability, and stability parameters. During processing and testing, the API(s) undergo physical and chemical transformation and are fully consumed in the R&D process, leaving no residual material capable of recovery or reuse. 3 Impurities Imported impurity standards are utilized for development, identification, and quantification of the impurity profile of the trial formulation. These materials are used during analytical method development, calibration exercises, validation studies, and stability testing. The impurities are cons....
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....stages of R&D inter alia for sample preparation, formulation development, analytical testing, method validation, process optimisation, and stability and performance studies, strictly in accordance with approved study protocols and internal standard operating procedures. By their very nature, these R&D goods are used only for experimental, testing, and analytical purposes and are entirely consumed, depleted, or rendered unusable during the course of the R&D process. 3.2.12 During the development stage, the imported R&D Goods are subjected to various processing, formulation, and reaction stages, as a result of which their physical and chemical characteristics undergo transformation in the course of the R&D activities. Further, certain imported goods are meant for bulk or unit storage of the drug at different stages, which once used for this purpose and are not re-usable again and hence, are fully expended or consumed in this process thus overall contributing to the R&D project as such. 3.2.13 In view of the above, the imported R&D Goods are consumed during the development stage. Any quantities remaining unutilized are securely stored within the R&D unit-as per internal SOPs.....
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....nit, the Factory is required to obtain a license to manufacture for test and analysis purposes. In accordance with the applicable regulatory protocol and Good Manufacturing Practices ('GMP') requirements, the materials used for manufacturing the Exhibit Batch are imported directly by the Factory although the list of goods to be imported are approved by the Head of the R&D institution or units (a re-confirmation or corroboration that the manufacturing is being done at behest and for the R&D unit and not on manufacturing unit's own account). Where such procurement involves imports, the Factory files a separate application for an Import License (if applicable). The import of overall approved list of goods (whether or not requiring an import license) is effectuated on behalf of the R&D unit. 3.2.19 The Exhibit Batch is thereafter subjected to the prescribed testing, including analytical. dissolution, stability and, where applicable, bioequivalence studies, some of which may be undertaken at the factory site itself and remainder at the R&D unit or at any Contract Site (Research Unit or Testing lab). The results are later, in totality, compiled at the R&D unit and the data....
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.... off as per applicable regulations, if any. The entire process reinforces that the goods once imported by the Applicant for R&D purposes, are not applied to any other purpose in any circumstance. 4. CONTEXTUAL CUSTOMS DUTY EXEMPTION / CONCESSION 4.1. The Central Government, vide Notification No. 51/1996 - Customs dated July 23, 1996 ('Notification 51/96'), offered concessional Customs duty benefit to DSIR-recognized R&D institutions, for the import of specified goods. The said notification has recently been subsumed and continued into a master Notification No. 45/2025-Customs dated October 24, 2025, effective from November 1, 2025 ('Notification 45/25'). 5. Applicants' interpretation of Law :- 5.1. The Applicant firmly believes that the R&D Goods imported by the Applicant for the purposes of carrying out R&D activities, either at the R&D unit or at Factory, are eligible for the concessional Customs duty rate as per Notification 45/25. 5.2. In the ensuing paragraphs, the Applicant submits its interpretation of the law and the justification as to why the Applicant is entitled to avail concessional Customs duty benefit on the import of the R&D Goods.....
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....ed with the Government of India in the Department of Scientific and Industrial Research; (ii) produces a certificate from the Head of the institution, in each case of import, certifying that the said goods are essential for research purposes and will be used for the stated purpose only; (iii) ..... (2) The goods falling under (1) above shall not be transferred or sold for a period of five years from the date of importation; (B) Explanation. - For the purposes of this entry, the expression, - .... (C) "Head" means - in relation to an institution, the Director thereof (by whatever name called); 5.5. From the above, it can be observed that in order to avail concessional Customs duty benefit under Notification 45/25, the importer is required to satisfy the following key conditions: * Qualification as a Research Institution (other than hospital) registered with DSIR; * The imported goods should qualify as scientific instruments, equipment, parts, consumables, software or prototype (within specified value limit); * A certificate from the Head of the Institution (i.e., the Director), certifying th....
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....ustoms Act, 1962. Accordingly, its interpretation shall be derived through settled principles of statutory construction, which entail making reference to external aids such as allied regulations, dictionaries and judicial pronouncements. 5.9.3 Etymologically, the term "consumable" originates from the Latin word "consumer", meaning "to use up" or "eat" or "exhaust". According to the Chambers Dictionary (Deluxe Edition), consumable denotes "something that can be consumed", while the term consume connotes "to use up; to devour; to exhaust or spend ;..., etc.". Thus, the word consume contemplates either complete exhaustion of goods in the process or losing their identity completely. 5.9.4 Further, the FTP 2023 defines "consumables" as: "11.11 "Consumables" means any item, which participates in or is required for a manufacturing process, but does not necessarily form part of end-product. Items, which are substantially or totally consumed during a manufacturing process, will be deemed to be consumables." 5.9.5 Thus, the term "consumable" refers to any article, material or substance that is used or expended in the course of a process. The use of the expression "not neces....
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....ope of exemption should also be of wide import and broad connotation such that effect of the exemption could be maximized. In our view, it includes all items essential to a process, whether directly contributing to the outcome or merely assisting it including say items meant to be used for or assess storage, etc., whose use results in their exhaustion or loss of functional character or reusability, while yielding information regarding sustainability of the API/ Drug/ Formulation being worked or researched upon. In an R&D setting, this covers all materials used up during experimentation, testing, or analysis, where the objective is to generate scientific knowledge. During the R&D process, the imported R&D Goods are completely consumed in the manner specified hereinafter: No Product Manner of utilization 1 RLD(s) The RLD(s) are utilized as approved benchmark products for comparative testing to establish equivalence evaluation of the developed formulation. Samples of RLD(s) are subjected to detailed analytical and comparative studies, including dissolution profiling, stability assessment, impurity characterization, and performance testing, in order to establish eq....
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....R&D process, as they are required to assess container-closure integrity, product-pack interaction, protection against environmental factors, and overall suitability of the packaging configuration in alignment with the TPP and applicable regulatory expectations. Such packaging materials are utilized strictly in accordance with approved development and testing protocols during trial and development batches, stability studies, and performance evaluations. They are used for filling, sealing, storage, and testing under prescribed conditions and are, by their nature, fully consumed in the R&D process. These goods are incapable of reuse or diversion for commercial purposes and are exhausted entirely during formulation development, analytical testing, and stability assessments. 7 Other consumable goods including Vials, Canister, Enzyme Powder, Reagents Other consumable goods inter alia include vials, canisters, enzyme powders and reagents, are utilized as essential inputs in the R&D process. These goods are employed at various stages of R&D inter alia for sample preparation, formulation development, analytical testing, method validation, process optimisation, and stability and ....
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....iling the concessional Customs duty benefit under Notification 45/25? 5.10.1 As previously stated, once the development stage is successfully concluded, the Exhibit Batch process is required to be executed under manufacturing conditions in order to assess its scalability and reproducibility. For this limited and specific purpose, the R&D unit engages its own Factory (in a pseudo job worker/ contract manufacturer capacity) to undertake manufacture of the Exhibit Batch in accordance with the specifications, process parameters, and controls documented in the Lab Report. Such manufacture is undertaken under the technical supervision, direction, and oversight of the R&D units, with the Factory merely serving as the execution site for scale-up, process validation, and confidence building, and not as a commercial manufacturing unit for the said manufacture. Upon completion of manufacture and prescribed testing, the outcomes and data generated are, in totality, compiled at the R&D unit and the data so generated forms the basis for regulatory submission by the R&D unit for eventual approval by the regulatory authorities. 5.10.2 The development and manufacture of the Exhibit Batch, in ....
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....nce an advance ruling on the questions raised herein, in light of the attendant facts, applicable statutory provisions, and the prevailing legal and judicial position; * pass such further or other orders as this Hon'ble Authority may deem fit and proper in the facts and circumstances of the case, in the interest of justice, equity and good conscience; and * direct that the contents of the present application, including factual disclosures, technical processes, supporting documents and the final order passed thereon, be treated as confidential and not be disclosed, published or uploaded in the public domain, as the same contain sensitive and proprietary business information/ document and document references, disclosure of which may materially and adversely affect the Applicant's commercial interests. 6. Port of Import and reply from jurisdictional Commissionerate: The applicant in their CAAR-1 indicated that they intend to import the subject goods from O/o the Office of the Principal Commissioner of Customs (Imports), Jawaharlal Nehru Customs House ('JNCH'), Nhava Sheva-I Taluka-Uran, Raigad, Maharashtra. The application was forwarded to the j....
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.... Chapter Notes, and the conditions prescribed in the exemption notification itself. It is a settled principle of law that an exemption notification must be construed strictly and the burden lies upon the person claiming the exemption to establish that its case falls squarely within the terms of the notification. The Constitution Bench of the Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company [2018 (361) ELT 577 (SC)] has authoritatively held that eligibility to an exemption must be demonstrated strictly in accordance with the language employed in the notification and all substantive conditions prescribed therein must be satisfied. 8.4 The applicant is engaged in pharmaceutical research and development and operates in-house Research and Development Centres situated at Pune and Aurangabad. The said facilities have been recognized by the Department of Scientific and Industrial Research (DSIR), Ministry of Science and Technology, Government of India. The applicant seeks a ruling on the applicability of Notification No. 45/2025-Customs dated 24.10.2025 in respect of various categories of goods proposed to be imported for research and dev....
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....vided further that nothing contained in this S. No. shall have effect after the 31st March, 2029 5% - 24 Condition 24 If,- (A) (1) The importer - (i) is registered with the Government of India in the Department of Scientific and Industrial Research; (ii) produces a certificate from the Head of the institution, in each case of import, certifying that the said goods are essential for research purposes and will be used for the stated purpose only; (iii) ..... (2) The goods falling under (1) above shall not be transferred or sold for a period of five years from the date of importation; (B) Explanation. - For the purposes of this entry, the expression, - .... (c) "Head" means - in relation to an institution, the Director thereof (by whatever name called); 8.6 A conjoint reading of SI. No. 70 and Condition No. 24 makes it evident that the exemption is not available merely because an importer possesses DSIR recognition. The notification envisages satisfaction of multiple substantives as well as procedural requirements, all of which are cumulative in nature. 8.7 A plain reading....
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....red with the Department of Scientific and Industrial Research. Upon examination of the documents placed on record, I find that the applicant's R&D Centres possess valid DSIR recognition and registration during the relevant period. No material has been placed before me to indicate that such recognition has been suspended, withdrawn or subjected to any restriction affecting eligibility under the notification. 8.12 Accordingly, I observe that the applicant's DSIR-recognized Research and Development Centres situated at Pune and Aurangabad satisfy the institutional eligibility requirement prescribed under Notification No. 45/2025-Customs and qualify as eligible research institutions for the purposes of the said notification. However, satisfaction of the institutional eligibility requirement does not by itself confer entitlement to the exemption. The applicant must further establish that the goods proposed to be imported are covered by the notification, are essential for research purposes, and satisfy all other substantive and procedural conditions prescribed therein. Whether goods imported by the R&D units prior to Exhibit Batch manufacture are eligible for the benefit?....
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....institution would automatically qualify for exemption. The eligibility of the goods must necessarily be examined with reference to the nature and intended use of each import. The importer is required to establish: * that the goods fall within the scope and description contemplated under the notification; * that the goods are required and essential for the approved research and development activities of the institution; * that the certificate and other documentary requirements prescribed under Condition No. 24 are duly fulfilled; and * that the goods are actually used for the stated research purposes. 8.17 In view of the foregoing, I observe that goods such as Reference Listed Drugs (RLDs), Active Pharmaceutical Ingredients (APIs), impurities, chemicals, reagents, enzyme powders and other similar materials imported by a DSIR-recognized R&D unit, which are consumed or substantially utilized in research, testing, analytical evaluation, formulation development, validation and stability studies, would generally fall within the scope of the term "consumables" for the purposes of Notification No. 45/2025-Customs. However, the benefit would remain sub....
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....ulatory approval process. The material placed on record indicates that such batches are manufactured for evaluating scalability, reproducibility, process robustness and regulatory compliance, and are not intended for commercial sale. However, the issue before this Authority is not whether the Exhibit Batch forms part of the broader research and development lifecycle. The issue for determination is whether imports associated with such manufacture satisfy the specific conditions prescribed under Notification No. 45/2025-Customs. The notification grants concessional duty only in respect of specified goods imported by a research institution registered with the Department of Scientific and Industrial Research (DSIR) and certified by the Head of such institution as being essential for research purposes. The exemption is institution-specific and conditional. It does not provide that every import connected with a research project automatically qualifies for the benefit irrespective of the identity of the importer or the manner in which the imported goods are subsequently deployed. 8.21 Entry No. 70 read with Condition No. 24 of Notification No. 45/2025-Customs, inter alia, requires t....
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....ity for manufacture of the Exhibit Batch. In such cases, the importer is not the DSIR-recognized research institution contemplated under the notification, but the manufacturing facility itself. While the Exhibit Batch may be manufactured exclusively for developmental, validation, testing or regulatory purposes, the notification does not grant exemption merely on the basis of the end-use of the imported goods. The notification specifically requires that the importer itself must be an eligible DSIR-recognized research institution and must independently satisfy all prescribed conditions. Therefore, the exemption cannot be extended merely because the manufacturing activity is undertaken under the supervision or guidance of the R&D unit. 8.25 It is well settled that exemption notifications are required to be construed strictly. In Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company [2018 (361) ELT 577 (SC)], the Constitution Bench of the Hon'ble Supreme Court held that the burden lies upon the claimant to establish that its case falls squarely within the terms of the exemption notification and that any ambiguity must be resolved in favour of the Revenue. Simil....
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....ecognized research institution and thereafter transferred, supplied or moved to a manufacturing facility for manufacture of an Exhibit Batch cease to satisfy the requirements of Condition No. 24(A)(2), which expressly prohibits transfer or sale of the imported goods for a period of five years from the date of importation. Consequently, such goods are not eligible for the benefit of the notification. (iii) Where the goods are imported directly by a manufacturing facility for manufacture of an Exhibit Batch, the benefit of Notification No. 45/2025-Customs is not available ab initio, since the importer itself is not a DSIR-recognized research institution and therefore does not satisfy the primary eligibility condition prescribed under Entry No. 70 read with Condition No. 24 of the notification. (iv) Accordingly, goods imported for manufacture of an Exhibit Batch do not qualify for the benefit of Notification No. 45/2025-Customs in either of the above situations. As the benefit of Notification No. 45/2025-Customs is available only where the importing entity itself is an eligible DSIR-recognized research institution and independently satisfies all substantive condition....