2013 (8) TMI 788 - AT - Central Excise

Classification of Goods - AIDS (HIV I and II) Diagnostic Kits and Hepatitis B and Hepatitis C test kits - Heading 30.02 or Heading 30.22 - HSN based classification - Held that - A comparison of HSN heading 38.22 and Central Excise Tariff Heading 38.22 would show that except for product group certified reference materials in which is there HSN Heading 38.22 but is not there in Central Excise Tariff heading 38.22 the Central Excise Tariff Heading 38.22 and HSN Heading 38.22 are identical. From a plain reading of Central Excise Tariff heading 38.22 it will be seen that it covers those diagnostic or laboratory reagents whether or not on a backing which are not covered by 30.02. Since the goods in question are diagnostic reagents on a backing for their classification under 38.22 their classification under Heading 30.02 has to be ruled out. Product group (ii) of Central Excise Tariff Heading 30.02 is identical with product group (iv) of HSN Heading 30.02 The Revenue s plea is that the diagnostic kits in question being based on antigens or monoclonal antibodies derived from culture of micro-organism are not covered by Heading 30.02 and this heading covers only the cultures of micro-organism not the reagents derived from micro-organism cultures. This contention of the Revenue is not correct In terms of Span Diagnostics Ltd. v. CCE Surat 2007 (4) TMI 617 - SUPREME COURT OF INDIA the product group Antisera and other blood fractions in Central Excise Tariff 30.02 would also include modified immunological products whether or not obtained by biotechnological process.. HIV detection kits and Hepatitis C detection kits containing antigens obtained from micro-organism cultures immobilised on a porous immuno-filtration membrane and which work on antigen-antibody reaction (neutralisation) would be covered by Heading 30.02 as in view of the above-mentioned HSN explanatory notes this heading includes the diagnostic reagents of microbial origin other than those covered by Chapter Note 4(d) corresponding to Chapter Note 3(d) of Central Excise Tariff Chapter 30 which covers - Opacifying preparations for X-ray examination and diagnostic reagents designed to be administered to patients being unmixed products put up in measured doses or products consisting of two or more ingredients which have been mixed for such uses - and the products in question were not covered by Chapter Note 4(d) of Chapter 30 of HSN Chapter Note 3(d) of Central Excise Tariff Chapter 30 as these products are not the products meant for being administered to patients for diagnostic purposes and are diagnostic reagents of microbial origin which work on the principle of antigen-antibody reaction - For the same reason Hepatitis B detection kit which consisted of monoclonal antibodies (a reagent of microbial origin) conjugated with colloidal gold and polyclonal antibodies immobilised on a nitrocellulose strip and which also work as the principle of antigen - antibody reaction would be covered by Heading 30.02 order set aside Decided in favour of Assesse.

Summary

Issues Involved:
1. Classification of AIDS (HIV I and II) Diagnostic Kits and Hepatitis B and Hepatitis C test kits.
2. Demand of differential duty and imposition of penalty.

Issue-Wise Detailed Analysis:

1. Classification of AIDS (HIV I and II) Diagnostic Kits and Hepatitis B and Hepatitis C test kits:
The appellant classified the diagnostic kits under Heading 30.02 of the Central Excise Tariff, which includes "Antisera and other blood fractions; vaccines, toxins, cultures of micro-organisms (including ferments but excluding yeasts) and similar products," attracting a nil tariff rate. The department argued these should be classified under Heading 38.22, which includes "diagnostic or laboratory reagents on a backing, prepared diagnostic or laboratory reagents, whether or not on a backing, other than those of Chapter 30."

The main ingredients of these kits, such as recombinant antigens and monoclonal antibodies, are derived from cultures of micro-organisms. The appellant argued that these ingredients fall under Heading 30.02 as they are derived from micro-organisms, and thus, the kits should be classified under this heading. The department contended that the extracts from micro-organism cultures do not qualify as micro-organisms themselves and should fall under Heading 38.22.

The Tribunal examined the HSN explanatory notes and previous judgments, including the Apex Court's decision in Span Diagnostics Ltd. v. CCE, Surat, which held that reagents derived from cultures of micro-organisms are classifiable under Heading 30.02. The Tribunal concluded that the diagnostic kits, which work on antigen-antibody reactions and contain reagents of microbial origin, are correctly classifiable under Heading 30.02. Consequently, their classification under Heading 38.22 is ruled out.

2. Demand of Differential Duty and Imposition of Penalty:
The department issued two show cause notices demanding differential duty amounting to Rs. 77,57,189/- and Rs. 19,81,194/- along with interest and proposed a penalty under Rule 25 of the Central Excise Rules. The Commissioner, in the order-in-original, confirmed the total duty demand of Rs. 93,63,830/- with interest under Section 11AB but did not impose any penalty, acknowledging that the dispute was purely about classification.

Upon appeal, the Tribunal set aside the impugned order, concluding that the diagnostic kits are correctly classifiable under Heading 30.02, thereby ruling out any duty demand under Heading 38.22. Consequently, the appeal was allowed, and the order demanding differential duty was not sustained.

Conclusion:
The Tribunal concluded that the diagnostic kits in question are correctly classifiable under Heading 30.02 of the Central Excise Tariff, which includes products derived from cultures of micro-organisms. The demand for differential duty under Heading 38.22 was ruled out, and the appeal was allowed, setting aside the impugned order.