TMI Blog2020 (11) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... Micafungin Sodium supplied by them is solely for the purpose of injection and hence is covered under the item No 114 of List I. The lower Authority has taken a stand that the impugned product is supplied as a bulk drug and bulk drugs are not covered under the entry SL.No 180. It is also observed from the invoice placed on record that the impugned product is classified by the Appellant under Chapter sub-heading 294190 90. We have also perused the technical write up of the product Micafungin Sodium . The terms bulk drug and drug have not been defined either in the rate notifications or in the GST laws - In this case, Micafungin Sodium is the sodium salt form of the antifungal drug Micafungin which is used in the treatment of internal fungal infections. It is the active pharmaceutical ingredient in the manufacture of the drug Mycamine which is the brand name for the antifungal injection. We find that the Central Drugs Standards Control Organisation (CDSCO), the authority which approves new drugs in India, has granted approval for the drug Micafungin Sodium for Injection of strength 50mg and 100mg, for the treatment of patients with candidemia, acute disseminated candidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th KM, Hosur Road, Electronic City, Bangalore 560100(herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 31/2020 Dated: 4 th May 2020 = 2020 (5) TMI 222 - AUTHORITY FOR ADVANCE RULING, KARNATAKA . Brief Facts of the case: 3. The Appellant is registered as a public company under the Companies Act, 1956. The Appellant has GST registrations for its SEZ unit bearing GSTIN 29AAGCB0811M2ZM for its office situated at Plot No 2 and 3, Phase IV BIA, Bommasandra Industrial Area, Jigani Link Road, Bangalore - 560100(hereinafter referred to as Biocon SEZ or SEZ unit ). Further, the Appellant has a separate registration for its unit in the DTA bearing GSTIN 29AAACB7461R1ZZ located at 20th KM, Hosur Road, Electronic City, Bengaluru, Karnataka 560100 (hereinafter referred to as Biocon DTA or DTA unit ). 4. The Appellant is engaged in manufacturing of generic active pharmaceutical ingredients (APIs), novel biologics, biosimilar insulins and antibodies. In the present case, the SEZ unit of the Appellant manufactures Micafungin Sodium and sells the same as bulk drug to third party DTA units, who in turn use it for injections. Entry No. 180 of Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to be used in the manufacture of a drug product and that, when used in the production of a drug, becomes an active ingredient of the drug product. They submitted that the United States Food and Drug Administration Regulations defines bulk drug as any substance that is represented for use in a drug and that, when used in the manufacturing, processing, or packaging of a drug, becomes an active ingredient or a finished dosage form of the drug, but the term does not include intermediates used in the synthesis of such substances. 7.3. The Appellant relied on the case of In Re: Laurus Labs Ltd. 2018 (13) GSTL 472 (AAR-GST) = 2018 (6) TMI 460 - AUTHORITY FOR ADVANCE RULING-ANDHRA PRADESH , which has been passed in reference to Pharmaceuticals products in the form of bulk drug, held to be covered under List 1 under Sl. No. 180 of Schedule Ito Notification No.1/2017-C.T. (Rate) and taxable at 5% GST. They submitted that in the present case, it is clear that Micafungin Sodium cleared as bulk drugs by the Appellant to its customers, is still covered as a drug under List 1 under Sl. No. 180 of Schedule Ito Notification No. 1/2017-C.T. (Rate) and thereby, taxable at 5% GST. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July 16, 2003 , it was clarified that the terms drugs and medicines, referred to in Sl. 80(A) of Notification No. 21/2002-Cus. include their salts esters as well. Therefore, the Notification No. 21/2002-Cus., Sl. 80(A), covers not only drugs or medicines specified in list 3 but also their salts esters. 7.5 The Appellant also states that for sale of Micafungin sodium to be covered under Serial No. 114 of the list specified under Entry No. 180 of the Rate Notification as Micafungin Sodium for Injection , such bulk drugs should be utilized for injection; that in the present case, Micafungin Sodium supplied by the Appellant would be used by the recipient customers to manufacture formulations or vials of Micafungin Sodium; that these vials would be labelled as Micafungin Sodium for Injection as per the nomenclature requirement. They submitted a declaration given by their customer M/s Crenza Pharmaceuticals Pvt Ltd holding that the Micafungin Sodium procured from the Appellant will be used solely for Micafungin Injection. They also submitted that the U.S. Food Drug Administration has also acknowledged that Micafungin Sodium is administered in the form of injection only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 CT (R) dt 28.06.2017 7.8. In view of the aforesaid submissions, the Appellant pleaded that the impugned order deserves to be set aside. PERSONAL HEARING 8. The appellant was called for a virtual personal hearing on 6th October 2020 but they sought an adjournment. Accordingly, the Appellants were called for another virtual hearing on 14th October 2020. 8.1. The hearing on 14th October 2020 was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 21 st August 2020. The Appellant was represented by their Advocates Shri. Harish Bindumadhavan and Ms Disha Gursahaney who explained that the Appellant is engaged in the manufacture of active pharmaceutical ingredients in the form of bulk drugs. One such bulk drug is Micafungin Sodium which is manufactured at their SEZ unit. The same is cleared to the DTA unit and from the Appellant s DTA unit it is cleared to third party customers. 8.2. The Appellant explained that the drug, Micafugin Sodium is an antibiotic and is used for anti-fungal treatment. It is always used for invasive treatment and is administered intravenously in the form of an injection. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r administering intravenously. 8.5. In view of the above submissions he pleaded that the product Micafungin Sodium is eligible for GST rate of 5% in terms of SI.No 180 of Schedule I as the product supplied by the Appellant is listed at SI.No 114 of List I to the Schedule I. Accordingly, he prayed that the appeal be allowed DISCUSSIONS AND FINDINGS 9. We have gone through the records of the case and considered the submissions made by the Appellant in the grounds of appeal as well as at the time of the virtual personal hearing. 10. The short point for determination is whether the product Micafungin Sodium supplied by the Appellant is eligible for the benefit of GST rate of 5% in terms of entry No. 180 of Schedule Ito Rate Notification No 01/2017 IT (R) / CT (R) dated 28-06-2017. The relevant extract of the Notification is reproduced below: Schedule I - 5% S.No. Chapter /Heading / Sub-heading / Tariff item Description of goods 180 30 or any Chapter Drugs or medicines including their salts and esters and diagnostic test kits, specified in List 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) bulk drugs and formulations ; (Emphasis supplied) 13. It is seen from the above that the term drug also includes bulk drug . A common understanding of the term bulk drug means a licenced product which is manufactured for use as an active pharmaceutical ingredient. In this case, Micafungin Sodium is the sodium salt form of the antifungal drug Micafungin which is used in the treatment of internal fungal infections. It is the active pharmaceutical ingredient in the manufacture of the drug Mycamine which is the brand name for the antifungal injection. We find that the Central Drugs Standards Control Organisation (CDSCO), the authority which approves new drugs in India, has granted approval for the drug Micafungin Sodium for Injection of strength 50mg and 100mg, for the treatment of patients with candidemia, acute disseminated candidiasis, abscess and esophageal candidiasis, etc. The approval given is for the drug which is to be administered only as an injection.Therefore, although Micafungin Sodium is a bulk drug, its use can be only by way of injection as there is no statutory approval given for using the drug in any other form. 14. We also take note of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which in this case is Sodium Chloride. Therefore, the Micafungin Sodium supplied by the Appellant is the drug Micafungin Sodium for Injection . As already stated, the phrase for injection used in the Notification is only an indication of the form in which the drug is supplied i.e. in a dry solid form. 16. We also take note that the Customs Tariff provides a similar concessional rate of 5% for Micafungin Sodium for injection when imported in India in terms of Customs Notification No 12/2012 dated 17th March 2012. The relevant extract of the Notification is reproduced below: S.No. Chapter or Heading or sub-heading or tariff item Description of goods Slandered rate Additional duty rate Conditions No 147 28,29 or 30 The following goods, namely:- (A) Drugs, medicines, diagnostic kits or equipment specified in List 3 5% - - (B) Bulk drugs used in the manufacture of drugs or medicines at (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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