TMI Blog2021 (7) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... ic or prophylactic properties, we hold that the alcohol-based hand sanitizer cannot be classified as a medicament under Chapter Heading 3004 as claimed by the Appellant. Classification under HSN Heading 38.08 - HELD THAT:- A DGFT Notification is not an authority for determining the classification of goods under GST law. Classification of goods is to be determined based solely on the description of goods given in the First Schedule to the Customs Tariff Act read together with the relevant Section Notes and Chapter Notes. Moreover, the conditions and restrictions contemplated by one statute having a different object and purpose should not be mechanically imported and applied to a fiscal statute. The reference to the ITC HS Code for Alcohol-based hand sanitizers which has been made in the DGFT Notification dated 6-5-2020 is not a standard for interpreting the classification of goods as per the Customs Tariff Act. Rate of tax - HELD THAT:- The goods falling under Chapter Heading 3808 attract a tax rate of 9% CGST and 9% SGST in terms of entry Sl.No 87 of Schedule III of Notification No 11/2017 CT (R) dated 28-06-2017. With effect from 14th June 2021 up to 30th September 2021, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sanitizers are classifiable under Heading 3808 under the Customs Tariff Act. The hand sanitizers are liable to tax at the rate of 9% under CGST Act and at the rate of 9% under the KGST Act. 6. Aggrieved by the ruling given by the AAR, the Appellant has filed this appeal on the following grounds. 6.1. The Appellant submitted that they had obtained a drug licence under the provisions of the Drugs and Cosmetics Act, 1940 for the purpose of manufacturing and selling the product Alcohol-based hand sanitizer; that the hand sanitizer manufactured by the Appellant contains 95% v/v of ethyl alcohol, which is within the standard prescribed by the Indian Pharmacopoeia; that the said hand sanitizer is meant for use as an antibacterial gel to keep hands clean and protected having a property to kill 99.99% of germs; that on perusal of the Tariff entry and Explanatory Notes, Chapter Heading 3004 is the most appropriate chapter heading to cover medicaments which are used for therapeutic or prophylactic value; that the term therapeutic and prophylactic has not been defined under the Tariff or Explanatory Notes and hence they place reliance on the definition as contained in P Rama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respective heading and not under Chapter 3808. They submitted that the hand sanitiser supplied by them is a product specifically used by living beings for killing bacteria and would clearly fall outside the ambit of 'disinfectants' referred to in Chapter Heading 3808. 6.4. The Appellant submitted that common parlance test must be conducted before classifying goods under a particular heading; that goods must be classified based on the common understanding of the purpose of the product which results in eliminating any confusion regarding the nature and purpose of the said product. In this regard, they placed reliance on P Ramanatha Aiyar's Advanced Law Lexicon wherein the term Common Parlance test is defined as follows: Common Parlance Test - It is settled position in law that while interpreting the entry for the purpose of taxation recourse should not be made to scientific meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them, by those dealing in them. It is known as Common Parlance Test . They also relied on the decisions rendered in the case of Commissioner of Customs Excise, Nagpur vs Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad issued a Notification dated 27-07-2020 wherein they had expressly exempted a drug from the requirement of sale license as per the Drugs and Cosmetics Act, 1940 since it was necessary for widespread availability; that the said drug was the same alcohol-based hand sanitizer the Appellant had begun to manufacture and distribute. They submitted that it is clear from the Notification that the Ministry of Health and Family Welfare considers the product in question to be a drug under the Drugs and Cosmetics Act and that its availability in the market is critical in the combat of the COVID-19 pandemic. 6.7. The Appellant submits that as per SLNo 63 in Schedule II of Notification No 01/2017-CT Rate), the products covered under the Heading 3004 are subject to tax at a rate of 6% under CGST and SGST respectively. They further placed reliance on the judgment rendered in the case of Commissioner of Sales Tax vs S.S. Balsara Hygiene Products Ltd - 1986 UPTC 367 wherein it was held that a product which saves the human skin from being infected, is a drug as per the Drugs and Cosmetics Act, 1940. They also submitted that the lower Authority's comparison of the product in question as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sanitizer would be under Heading 3004 and the applicable GST rate on the Hand Sanitizer would be 12% in terms of Sl.No 63 of Schedule II of Notification No. 01/2017-CT (Rate) dated 28-06-2017. 6.10. The Appellant also made an application for condonation of 12 days delay in filing this appeal on the grounds that due to the ongoing 2nd wave of the pandemic, there was a delay in communicating the impugned order to the relevant department of the Appellant and the Authorised signatory was himself under quarantine and therefore there was a delay in filing of the appeal. PERSONAL HEARING 7. The appellant was granted a virtual hearing on 25th June 2021. The hearing was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 215t August 2020. The Appellant was represented by Shri. G. Shivadass, Senior Advocate and Shri. Rishab J, authorised representative. 7.1. The Advocate sought for condonation of 12 days delay in filing the appeal. On the merits of the matter under appeal, he explained the facts of the case and submitted that dispute is with regard to classification of hand sanitizer i.e whether under H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The statutory due date for filing an appeal against the advance ruling order was 04.04.2021. However, the appeal has been filed on 16-04-2021 after a delay of 12 days from the due date. Considering the submissions made by the Appellant, the delay in filing the appeal is hereby condoned in exercise of the power vested in terms of the proviso to Section 100(2) of the CGST Act. 10. The issue for determination in this appeal is the classification of the product Alcohol-based hand sanitizer . The lower Authority has held that the said product is classifiable under Chapter Heading 3808.94 and this has been assailed by the Appellant who has argued that the product would merit classification under Chapter Heading 3004 as a medicament. The primary reason for the appellant's claim to classify the product under Chapter Heading 3004 is on account of its characteristics and operating procedure and the fact that they have been granted a licence to manufacture the same in terms of the Drugs Cosmetics Act, 1940. In addition, they have placed reliance on judgments rendered in classification matters wherein it has been held that common parlance test takes precedence over scientific and te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of the term 'therapeutic' is treatment of a disease whereas 'prophylactic' is preventing the onset or progression of a disease. For a product to be classified as a medicament under Chapter Heading 3004, it is important that the product has either of the two qualities i.e therapeutic or prophylactic. Even if a product is manufactured using ingredients regulated under the Drugs and Cosmetics Act and according to the formula prescribed in the Pharmacopeia, it cannot be classified as a medicament under Heading 3004 unless it is meant for therapeutic or prophylactic uses. Its curative or preventive value must be substantial, and the product must be manufactured primarily to control or cure a disease, and the consumers use it primarily for treatment, mitigation, cure or prevention of specific disease or disorder. We find that the alcohol-based hand sanitizer does not have either therapeutic or prophylactic properties. It is at best a substance which has disinfectant properties as it prevents the spread and transmission of germs/bacteria/viruses. Prevention of transmission of disease-causing micro-organisms is not the same as preventing the onset or progression of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cines. The hand sanitizer manufactured by the Appellant contains the drug ethyl alcohol in a concentration of 95% v/v, which is within the standard prescribed by the Indian Pharmacopoeia. But the presence of a drug by itself will not make the impugned product a medicament. For this one has to apply the test of common parlance to arrive at the identity of the product i.e whether it is a medicine. In matters of classification of goods under taxation statutes, all the judicial forums, including the Apex Court, have stressed upon the importance of the identity of the goods in common parlance and there is a plethora of case laws which hold that for classification of goods under statutes for taxation of commercial supplies thereof, the primary test is their identity in the market, or in other words, in common parlance. Some such judgments are as follows : (i) Deena JeeSansthan v. CCE, Meerut [2019 (365) E.L.T. 353 (S.C.)] (ii) CCE, New Delhi v. Connaught Plaza Restaurant (P) Ltd. [2012 (286) E.L.T. 321 (S.C.)] (iii) CCE, Nagpur v. Shree BaidyanathAyurved Bhawan Ltd. [2009 (237) E.L.T. 225 (S.C.)] In fact, the Appellant has also advanced the plea of 'common par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re used on inanimate objects where contact with the skin is not involved; that since the impugned product is used on human skin, it will not get covered under this group as a disinfectant. We are unable to appreciate this argument. The use of the phrase generally on inanimate objects in the Explanatory Notes does not mean that a product having disinfecting properties which is made suitable for use on human skin is not disinfectant. We draw support from the judgement of the Kerala High Court in the case of Reckitt Benckiser (India) Ltd. [2011 (270) ELT 25 (Ker). In the said case, the question that arose was whether `Dettol' is a Disinfectant. The Kerala High Court after considering other precedents and authorities, ultimately held that Dettol is indeed a Disinfectant. The Hon'ble High Court also remarked that no doubt the function of a 'Disinfectant' is the destruction of micro-organisms particularly on inanimate objects, but that does not mean that a Disinfectant could be used only on inanimate objects and the moment it could be used on animate objects also, it ceases to be a 'Disinfectant'. The Court observed that its use on animate objects is only ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determining the classification of goods under GST law. Classification of goods is to be determined based solely on the description of goods given in the First Schedule to the Customs Tariff Act read together with the relevant Section Notes and Chapter Notes. Moreover, the conditions and restrictions contemplated by one statute having a different object and purpose should not be mechanically imported and applied to a fiscal statute. The reference to the ITC HS Code for Alcohol-based hand sanitizers which has been made in the DGFT Notification dated 6-5-2020 is not a standard for interpreting the classification of goods as per the Customs Tariff Act. We therefore, reject the submission of the Appellant. 17. As regards the rate of tax on alcohol-based hand sanitizer, the goods falling under Chapter Heading 3808 attract a tax rate of 9% CGST and 9% SGST in terms of entry Sl.No 87 of Schedule III of Notification No 11/2017 CT (R) dated 28-06-2017. With effect from 14th June 2021 up to 30th September 2021, the GST rate on hand sanitizer falling under Chapter Heading 3808.94 has been reduced to 5% GST (i.e 2.5% CGST and 2.5% SGST) vide Notification No 05/2021 CT (R) dated 14th Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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