TMI Blog2019 (12) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... e reason for the delay in filing the appeal. Be that as it may, in the interest of justice, and considering the fact that the delay is within the condonable powers of this Authority, we are inclined to suo moto condone the delay in filing this appeal and proceed with a decision on the merits of this case. Classification of goods - whether the product can be considered as a medicament having therapeutic and prophylactic uses? - HELD THAT:- The word medicament has not been defined in the Customs Tariff Act or in the Drug and Cosmetics Act. A common understanding and dictionary meaning of medicament is a substance which treats illness and diseases - Nicotine Polacrilex is used as a stop smoking aid which reduces withdrawal symptoms, including nicotine craving, associated with quitting smoking It is pertinent to note that the use of Nicotine Polacrilex is indicated as merely an aid to stop smoking and a drug which reduces withdrawal symptoms in those who desire to quit smoking. It appears that the drug Nicotine Polacrilex does not in any way treat the symptoms of nicotine cessation. For a drug to be a medicament, it is essential that there should be a treatment of the ill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence is more aptly classifiable under Chapter Heading 38.24 of the Customs Tariff Act, 1975. In the GST rate Notification No 01/2017-Central Tax (Rate) dated 28.06.2017, the Prepared hinders for foundry moulds or cores; Chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included falling under Chapter Heading 38.24 are covered under entry SI.No 97 of Schedule III with a GST rate of 18%. The ruling of AAR upheld. - KAR/AAAR/Appeal-04/2019-20 - - - Dated:- 3-12-2019 - SHRI. D.P. NAGENDRA KUMAR, AND SHRI. M.S. SRIKAR, MEMBER Represented by: Mr. Abhi Paresh, Chartered Accountant PROCEEDINGS (Under Section 101 of the CGST Act, 2017 and the KGST Act, 2017) At the outset, we would like to make it clear that the provisions of both the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act, 2017 and KGST Act, 2017) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rate Schedule-II 63 3004 Medicaments (excluding goods of heading 30.02, 30.05 or 30.06) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale, including Ayurvedic, Unani, homoeopathic siddha or Bio-chemic systems medicaments, put up for retail sale 12% Schedule III 41 30 Nicotine polacrilex gum 18% 6. In view of the above entries in the GST rate notification, the appellant filed an application on 16.05 2018 before the Karnataka Authority for Advance Ruling under Section 97 of CGST/KGST Act,2017 read with Rule 104 of CGST / KGST Rules, 2017 in form GST ARA-01, seeking a ruling on the following question What is the appropriate classification of Nicotine Polacriliex Lozenge (hereinafter referred to as NCT ) manufactured by the Company and rate of tax applicable thereupon under Notification 012017-Central Tax (Rate) dated 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stems) intended to assist smokers to stop smoking, are excluded from Chapter 30; that the product manufactured by the appellant is a lozenge which does not fall under the above category and hence the product manufactured is not excluded from Chapter 30. They submitted that the product manufactured by the Appellant has many more medicinal benefits and is not limited to assist the consumer to stop smoking, that the restriction under Chapter Note 1(b) is not absolute since Nicotine Polacrilex Gum is specifically included under Tariff head 3004 49 90. Given the same, the restriction under Chapter Note 1(b) is not binding and applicable in the present case. 8.3. They submitted that the term such as used in the entry at clause 1(b) of Chapter Notes to Chapter 30 is a specific term which restricts the scope of the entry and is to be interpreted to mean that only the items included under the said entry would be covered They submitted that the product manufactured has therapeutic uses and is hence classifiable under Chapter 30 and is subject to GST at 12%; that the product is a lozenge but not a gum which is used for therapeutic or prophylactic purpose of nicotine consumption cessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Polacrilex Lozenge manufactured by them is a medicinal product classifiable under Chapter 30 of the GST Tariff and subject to 12% GST rate under Chapter 3004 by virtue of Notification 11/2017-Central tax (rate) dated 1-7-2017 [Entry 63]; that, composition certificate issued by head of Quality Assurance, clearly states that NPL is medically approved, has therapeutic uses since it forms part of the Nicotine replacement therapy recommended by WHO and USFDA; that, composition certificate issued for NPL states that NPL has US Pharmacopeia standards; that, NPL is a drug approved under the Drugs and Cosmetics Act 1940 and Rules 1945 They submitted that the definition of a drug as per Section 2(b) the said act 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that another hearing would not bring forth any fresh facts or evidences which have a bearing on this matter and hence we are not inclined to grant another opportunity for hearing but proceed to decide the case on the basis of the submissions made and documents placed on record. 12. Before we proceed with the main issue of classification of the product Nicotine Polacrilex Lozenge, we find that there has been a delay in filing the present appeal. The order of the Authority of Advance Ruling dated 07.08.2019 = 2019 (8) TMI 855 - AUTHORITY FOR ADVANCE RULING - KARNATAKA was admittedly received by the appellant on 7th August 2019. The appeal was filed before this Appellate Authority on 3rd October 2019 after a period of 57 days from the date of receipt of the order of the AAR. 13. The provisions of Section 100(2) of the CGST Act mandates that an appeal should be filed within 30 days from the date of communication of the advance ruling order that is sought to be challenged. However, in terms of the proviso to Section 100(2) of the said Act, the Appellate Authority is empowered to allow the appeal to be presented within a further period of 30 days if it is satisfied th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of a small, candy-like, tablet in different flavors. When a nicotine lozenge is placed in the mouth and allowed to dissolve over the course of 20 to 30 minutes, nicotine is absorbed into the bloodstream, relieving the short-term cravings to smoke. 17. As seen from the documents submitted by the Appellant, the active ingredient in the product Nicotine Polacrilex Lozenge is Nicotine Polacrilex USP. The US Pharmacopeia describes Nicotine Polacrilex as a nicotine bound ion-exchange resin which is prepared from methacrylic acid and divinylbenzene. This nicotine containing resin contains not less than 95% and not more than 115% of the labelled amount of nicotine. This is blended with inactive ingredients and delivered in the form of tablets, chewing gum, lozenges or transdermal patches. In the instant case, the Nicotine Polacrilex 2mg and 4mg Lozenge contains the active ingredient Nicotine Polacrilex USP and inactive ingredients like Aspartame (sweetner). Colloidal anhydrous silica (glidant). Flavor modulator. Flavour peppermint, menthol (all flavoring agents), Hydroxy propyl methyl cellulose (release modifier/binder), magnesium stearate (lubricant), sodium bicarbonate ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only an aid for cessation of smoking and helps to reduce the withdrawal symptoms. Therefore, the Nicotine Polacrilex Lozenge cannot be considered as a medicament 19. Coming to the classification of the product Nicotine Polacrilex Lozenge , it is the case of the Appellant that the impugned products should be classified under Chapter 30.04 as a Medicament. The Central Government, on the recommendations of the GST Council, has issued Rate Notification Number 01/2017-CT (Rate) dated 28.06.2017 prescribing different rates of tax in Schedules for specified goods. The Explanation to the Rate Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 states thus: For the purposes of this Notification: ... (iii) Tariff item , sub-heading heading and Chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified m the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rides for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exhaustive. The Hon ble Supreme Court in Good Year India Ltd v Collector of Customs 1997 (95) ELT 450 = 1997 (9) TMI 100 - SUPREME COURT on the issue of classification of innci tube valves held that: ...The words such as stainless steel, nickel monel, incoloy, hastelloy in subheading (2) are only illustrative of the various metals from which valves can be made but the said description is not exhaustive of the metals.... Therefore, the term such as used in Chapter Note 1(b) to Chapter 30 establishes that whatever goods are enumerated in the note are only illustrations of a particular kind of goods and are not exhaustive of it and cannot be construed restrictively By applying this well settled principle of interpretation, it is clear that, the mention of preparations such as tablets, chewing gum or patches referred to in Chapter Note 1(b) to Chapter 30, would also cover within its purview lozenges In the instant case, the product Nicotine Polacrilex Lozenge is a preparation intended to assist smokers to stop smoking and hence it clearly stands excluded from being classified under Chapter 30 of the Customs Tariff. 24. The appellant has made out an argument t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. Having concluded that the product Nicotine Polacrilex lozenge is not classifiable under Chapter 30, w e move on to determine the Chapter under which the product can be classified The Chapter Note 1(b) to Chapter 30, while excluding from its purview preparations intended to assist smokers from smoking, proposes to classify such preparations under either 21.06 (Food preparation not elsewhere specified) or under 38.24 (Miscellaneous chemical products).Chapter 21 pertains to miscellaneous edible preparations and Chapter heading 21.06 covers food preparations not elsewhere specified In this case, the impugned product contains the active ingredient Nicotine Polacrilex which, as already stated earlier, is a substance comprising of nicotine which is bound by a resin (Polacrilex). Clearly, the combination of these ingredients cannot be considered as a food preparation. Hence, Nicotine Polacrilex Lozenge is not classifiable under Chapter Heading 21.06. 26. The other alternative chapter heading provided in Chapter Note 1(b) to Chapter 30 for classifying preparations which assist smokers to stop smoking, is Chapter Heading 38.24.Chapter 38 of the Customs Tariff Act relates to Miscel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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