Case Law Details
In re Cipla Limited (CAAR Mumbai)
The applicant filed applications before the Customs Authority for Advance Ruling (CAAR), Mumbai, seeking clarification on whether Integrated Goods and Services Tax (IGST) at 5% is applicable on the import of bulk drugs (Active Pharmaceutical Ingredients—APIs) under Sl. No. 226 of Schedule I of NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE) dated 17.09.2025.
The applicant is a pharmaceutical company engaged in manufacturing and supplying pharmaceutical products. It imports bulk drugs, which are APIs used in the manufacture of formulations and, in certain cases, for testing, clinical trials, bioavailability, and bioequivalence studies. These imports are undertaken under licenses issued under the Drugs and Cosmetics Act, 1940 and the New Drugs and Clinical Trials Rules, 2019.
The applicant submitted that bulk drugs are classifiable under Chapters 28 or 29 of the Customs Tariff but qualify as “drugs” for the purpose of IGST rate notification. It relied on Sl. No. 226 of Schedule I of Notification No. 9/2025, which prescribes IGST at 5% for “all drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs,” excluding those covered under the NIL-rated entry in Sl. No. 113 of Notification No. 10/2025.
The applicant contended that bulk drugs satisfy the conditions for applicability of 5% IGST: (i) they fall under “any Chapter,” (ii) they qualify as “drugs or medicines,” and (iii) they are not covered under the NIL-rated category. It argued that bulk drugs, being APIs, are substances used as components of drugs and are treated as drugs under the Drugs and Cosmetics Act, 1940. Further, it submitted that the term “drugs” should be interpreted broadly to include bulk drugs, supported by definitions under the Drugs (Price Control) Order, 2013 and judicial precedents.
The applicant also argued that the structure of Sl. No. 226, separated by a semicolon, indicates two distinct categories: (i) all drugs and medicines, and (ii) formulations manufactured from bulk drugs. It submitted that restricting “drugs” to finished formulations would render part of the entry redundant. It further contended that the entry applies to goods under “Chapter 30 or any Chapter,” thereby covering APIs classified under Chapters 28 or 29. Additionally, it argued that where multiple entries exist, the specific entry relating to “drugs” should prevail over general entries relating to organic or inorganic chemicals.
The jurisdictional Commissionerate acknowledged that APIs may fall within the definition of “drug” if used for diagnosis, treatment, mitigation, or prevention of disease. However, it opined that APIs imported for testing, clinical research, or bioequivalence studies may not qualify under Sl. No. 226, as they are not directly used for treatment.
In response, the applicant submitted that APIs used for clinical trials and related studies still qualify as “drugs,” as such activities are integral to the development and approval of medicines. It relied on definitions of “drug,” “bioavailability study,” “bioequivalence study,” and “clinical trial” under applicable laws to argue that the intended use does not alter the intrinsic nature of APIs as drugs.
The Authority examined the statutory provisions, including Section 3(7) of the Customs Tariff Act, 1975, and the relevant IGST rate notification. It observed that Sl. No. 226 of Schedule I covers “all drugs and medicines” without restriction to finished products and applies to goods under any chapter. The Authority noted that the term “drug” is not defined in the IGST notification or Customs law and therefore referred to the Drugs and Cosmetics Act, 1940.
Under Section 3(b) of the Drugs and Cosmetics Act, “drug” includes substances intended for use in diagnosis, treatment, mitigation, or prevention of disease, as well as substances used as components of a drug. The Authority observed that APIs are substances used as components of drugs and are regulated and licensed as such under the statutory framework. It also referred to the Drugs (Price Control) Order, 2013, which defines bulk drugs as pharmaceutical substances used as such or as ingredients in formulations.
The Authority held that, on a combined reading of these definitions, bulk drugs/APIs fall within the scope of “drugs.” It further noted that the definitions of clinical trials and related studies demonstrate that such activities are part of the drug development process and do not alter the character of APIs as drugs.
The Authority rejected the view that APIs imported for testing or research fall outside the scope of Sl. No. 226. It held that the intended use at the time of import does not change the essential character or statutory recognition of the goods as drugs. It also emphasized that Sl. No. 226 is a specific entry based on description and therefore prevails over general entries covering chemicals under Chapters 28 and 29.
The Authority further observed that Notification No. 9/2025 is a rate notification and not an exemption notification, and therefore, any ambiguity should be interpreted in favour of the taxpayer.
Based on the analysis, the Authority concluded that bulk drugs/APIs, including those imported for manufacture, testing, clinical trials, bioavailability, or bioequivalence studies, qualify as “drugs” under Sl. No. 226 of Schedule I and are subject to IGST at 5%, provided they are not covered under the NIL-rated entry.
Accordingly, the Authority ruled that IGST at 5% is applicable on the import of such bulk drugs.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
1. A copy of this order made under sub-section (2) of Section 28-I of the Customs Act, 1962 is granted to the concerned free of charge.
2. Any appeal against this Advance Ruling order shall lie before the jurisdictional High Court of concerned jurisdiction, within 60 days from the date of the communication of such ruling or order.
3. The advance ruling pronounced by the Authority under Section 28 – I shall remain valid for five years or till there is a change in law or facts on the basis of which the advance ruling has been pronounced. whichever is earlier.
4. Where the Authority finds that the advance ruling was obtained by the applicant by fraud or misrepresentation of facts, the same shall be declared void ab initio.
Advance Ruling
Cipla Limited (1EC No. AAACC1450B) (hereinafter referred to as ‘the Applicant’) filed two applications (CAAR-1) for advance ruling in the Office of Secretary, Customs Authority for Advance Ruling (CAAR) Mumbai. The said applications were received in the secretariat of the CAAR, Mumbai on 16.12.2025 and 22.12.2025 along with its enclosures in terms of Section 28H(1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act also’). The Applicant is seeking clarification on whether Integrated Goods and Services Tax (hereinafter referred to as “IGST”) is leviable @5% for the import of “bulk drugs” in terms of Si. No. 226 of Schedule I of Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025 under the Customs Tariff Act, 1975.
2. Applicant’s Submissions:
Cipla Limited (hereinafter referred to as the “Applicant”) is a pharmaceutical company incorporated in 1935. The Applicant is a leading manufacturer and supplier of pharmaceutical products.
In connection with its business, the Applicant purchases and imports a wide range of Bulk Drugs after obtaining the requisite licence. The Bulk Drugs so imported are Active Pharmaceutical Ingredients (APIs). These imported ingredients are used for the manufacture of formulations i.e dosage form of drug and occasionally for testing, clinical research and Bioequivalence study. These imported ingredients, which are active ingredients for medicines, are hereinafter collectively referred to as “bulk drugs”.
2.1. Applicant submitted that Bulk drugs are classified under Chapter 28 or Chapter 29 as they are organic and inorganic chemicals.
2.3. The present application pertains to determination of IGST payable on the import of these bulk drugs. The relevant portion from the of the IGST Rate Notification (at SI. No. 226 of NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE) dated 17th September, 2025) is extracted below:
| Sl. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 226. | 30 or any Chapter | All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs [other than those specified at nil at S. No. 113 of notification No. 10/2025-Integrated Tax (Rate) dated 17th September, 2025] |
2.4 SI. No. 113 of NOTIFICATION NO. 10/2025-INTEGRATED TAX (RATE)dated 17th September, 2025 is extracted below:
| SI. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 113. | 30 or any Chapter | Drugs or medicines listed in Annexure I |
2.5 The above is the entry applicable for IGST at NIL rate. The products for which the present ruling is sought are not covered under Annexure I, therefore the same is not applicable in the present case.
2.6 The bulk drugs in question are imported after procuring the following licenses under the Drugs and Cosmetics Act, 1940:
| Form No. / License No. | Title of License Issued | Illustrative Copy enclosed herewith as “Exhibit-G” |
| Form CT-17 | License to Import New Drug or Investigational New Drug for the purpose of Clinical Trials or Bioavailability or Bioequivalence study or for examination, test and analysis |
License No. SW/ND/CT-17/2025/0000012888 dated 14.10.2025 |
Recently, the Applicant has effected import of bulk drug (Vutrisiran Sodium) and claimed the benefit of NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE)-IGST (Rate) dated 17.09.2025 with specific reference to Serial No.226 of Schedule I appended to said notification. The benefit has been extended by Customs authorities without any dispute.
3. Applicant’s interpretation of Law:
3.1 The levy of IGST on imports into India follows from Section 3 (7) of the Customs Tariff Act, The relevant portion is extracted below:
“SECTION 3. Levy of additional duty equal to excise duty, sales tax, local taxes and other charges. —
***
(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent. as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) 8[or sub-section (8A), as the case may be.”
3.2 IGST Rates are notified vide NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE). The relevant portion of Schedule I (5%) to the IGST Rate Notification is extracted below:
| Si. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 226. | 30 or any Chapter | All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs [other than those specified at nil at S. No. 113 of notification No. 10/2025-Integrated Tax (Rate) dated 17th September, 2025] |
3.3 Sl. No. 113 of NOTIFICATION NO. 10/2025-INTEGRATED TAX (RATE)dated 17.09.2025 is extracted below:
| Si. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 113. | 30 or any Chapter | Drugs or medicines listed in Annexure I |
3.4 The above is the entry applicable for IGST at NIL rate. The products for which the present ruling is sought are not covered under Annexure I, therefore the same is not applicable in the present case.
3.5 The Applicant submits that on import of bulk drugs, IGST @ 5% alone is applicable under the above extracted 51. No. 226 of Schedule I of NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE).
3.6 For 5% IGST to be applicable, the imports should satisfy the following conditions:
i. Be classified under Chapter 30 or any other Chapter;
ii. Be Drugs or medicines; and
iii. Not be covered under Sl. No. 113 of NOTIFICATION NO. 10/2025-INTEGRATED TAX (RATE)dated 17.09.2025
3.7 The bulk drugs in question satisfy all the above conditions. The submissions in this regard are set out in detail below:
Condition i: The entry is applicable to goods irrespective of the classification adopted for the goods under any chapter. Chapter 30 is merely indicative and goods falling under any chapter can fall under this entry.
3.8 As per Sl. No. 226 of the Schedule I, drugs and medicines classified under any Chapter fall under its ambit and are subject to levy of IGST @5%. The bulk drugs in question are generally classified under Chapter 28 or 29. It is clear that these bulk drugs, even if not classified under Chapter 30, still fall under the ambit of the entry as it is applicable to drugs and medicines of any Chapter. Therefore, the first condition is met.
Condition ii: From a combined reading of the definitions of bulk drugs and drugs under various laws and literature, it is clear that the term “All Drugs and medicines” is inclusive of bulk drugs and hence, levy of IGST in terms of Sl. No. 226 of Schedule Ito the Notification shall apply to bulk drugs.
3.9 It is submitted by the applicant that the term “all drugs and medicines” is not defined under the Notification or under the Customs Tariff. Considering the nature of the products in question, the same should be interpreted by considering the relevant provisions under the Drugs Laws of India. Reference is made to the definitions under the Drugs (Price Control) Order, 2013. The relevant extracts are as below:
“(b) “active pharmaceutical ingredients or bulk drug” means any pharmaceutical, chemical, biological or plant product including its salts, esters, isomers, analogues and derivatives, conforming to standards specified in the Drugs and Cosmetics Act, 1940 (23 of 1940) and which is used as such or as an ingredient in any formulation;
* * *
“(i) Yormulation” means a medicine processed out of or containing one or more drugs with or without use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include-
(i) any medicine included in any bonafide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines;
(ii) any medicine included in the Homeopathic system of medicine; and
(iii) any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do not apply; “
… (emphasis supplied)
3.10 Section 3 of the Drugs and Cosmetics Act, 1940 provides the definition of ‘drugs’. The relevant portion is extracted below:
(b) “drug” 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 for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;
(iii) all substances intended for use as components of a drug including empty gelatin capsules; and
(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;
… (emphasis supplied)
3.11 Thus, from a combined reading of the definition of bulk drugs under the Drugs (Price Control) Order, 2013 and the definition of drugs under the Drugs and Cosmetics Act, 1940, it is clear that that “drugs” includes substances used as components of a drug i.e. as an ingredient of a drug. When even a gelatin capsule is treated as a drug, it goes without saying that the API on account of which the final medicine is effective, too is nothing but a drug.
3.12 Furthermore, under the Drugs and Cosmetics Act and Rules, for import of a bulk drug, the importer needs to procedure numerous licenses and registrations which are applicable to drugs. That is, for purpose of licensing under the Drugs laws of India, bulk drugs are treated as drugs only. This is evident from the following licenses/ registrations issued to the Applicant for import of bulk drugs:
| Form No and Licence/Registration Issued under Section / Provision | Relevant extracts from the Section/Provision |
| Form CT -17
(Rule 68 to 72 of the New Drugs and Clinical Trials Rules, 2019) |
Rule -68 – Grant of license for import of new drug or investigational new drug for clinical trial or bioavailability or bioequivalence study or for examination, test and analysis. |
3.13 There is no definition of “bulk drug” in the Drugs and Cosmetics Act, 1940. The fact that the Drugs and Cosmetics Act, 1940 does not differently define bulk drugs, and does not make a distinction between bulk drugs and drugs for final consumption, entails that the two are treated at par only.
3.14 CBIC has reiterated time and again that when it comes to import of Drugs and Medicines, the provisions of the Drugs & Cosmetics Law and the Licenses/Registrations issued by Central Drugs Standard Control Organization (hereinafter referred to as `CDSCO’) must be considered even for interpretating Tax provisions. This is evident from the following Circulars/Communications issued by CDSCO:
a. Letter F.No. 450/8/2007-Cus. IV, dated 22-1-2007
b. Instruction F.No. 450/11/2011-Cus. IV, dated 25-2-2011
c. Circular No. 10/2016-Cus., dated 15-3-2016
d. Circular No. 28/2016-Cus., dated 14-6-2016
e. B.I. & C. Circular No. 44/2018-Cus., dated 13-11-2018
3.15 Thus, as the bulk drugs in question are “Drugs” under the Drugs and Cosmetics Laws of India, they must be considered as “drugs” even for purposes of IGST Notification.
Even in common parlance, bulks drugs are “Drugs”
3.16 Even as per medical literature, bulk drugs are considered to be drugs only. Reference is also made to the definition of ‘drug’ and ‘medicine’ under medical dictionaries. The relevant portions are extracted below:
| Dictionary | Definitions |
| American Heritage Medical Dictionary |
|
| Dictionary of Medical Terms (fourth edition) | drug.
|
| Stedman’s Dictionary: Medical |
|
3.17 Thus, it is clear that the term “drugs” generally includes all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings; and also include substances intended for use as components of a drug. Therefore, it is submitted that bulk drugs such as active pharmaceutical ingredients also fall under the ambit of drugs only.
Even as per judicial precedents, the term “drugs” is inclusive of bulk drugs
3.18 It is submitted by the applicant that there is plethora of decisions that hold that the term “drugs” is inclusive of “bulk drugs”. The Tribunal in Burroughs Wellcome (I) Ltd vs Commissioner of C. Ex. and Cus., Mumbai [2007 (216) E.L.T. 522 (Tri-Mum)J, in the context of exemption benefit for life saving drugs, held that the phrase can include bulk drugs as well. The Tribunal observed that the term life saving drugs was not defined in the exemption notification, but upon the term of “drugs” under the Drugs (Prices Control) Order included “bulk drugs”, and accordingly the same was applied to the term life saving drugs.
3.19 The definition of “drugs” under the erstwhile Drugs (Prices Control) Order, 1995 was as below:
“(i) “drug” includes
(ii) 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;
(iii) such substances, intended to affect the structure or any function of the human or animal body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Government by notification in the Official Gazette; and
(iv) bulk drugs and formulations; “
3.20 Relying on the above-mentioned decision and the definition of drugs (extracted above), the Tribunal in Cipla Ltd. v. Commissioner of Customs, Chennai [2007 (218) E.L.T. 547 (Tri. – ChennaW held that it is beyond doubt that bulk drugs are also drugs, and that they are defined as such under the Drugs (Prices Control) Order, 1995 also. For this purpose, the Tribunal referred to and relied upon the decision of Tribunal, Mumbai Bench, in the case of Burroughs Welcome (India) Limited, referred above. Relevant portion of the above decision reads as under:
“4. … M/s. Burroughs Wellcome (I) Ltd. had imported Polyrnyxin B Sulphate and used the same along with some other ingredients in the manufacture of Neosporin. M/s. Pfizer Ltd. had imported Cefoperazone Sodium and used the same for manufacture of Cefoperazone Sodium Injections. The issue before the Tribunal was whether the above parties were eligible for the benefit of exemption from payment of CVD on the items imported by them, under Sl. No. 43 (A) of Notification No. 11/97-CE and under the corresponding entries of successor Notifications. It was not in dispute that the imported items figured in List 2 appended to SI. No. 43 (A) of the above Notification. While the Revenue classified the goods as ‘hulk drugs’ under Si. No. 43(B), the assessees classified them as life saving drugs under Sl. No. 43 (A). The Tribunal accepted the assessees contention and held that the drugs imported by them were to be categorized under Si. No. 43(A) inasmuch as they found mention in List 2. It was further held that, as SI. No. 43 (A) was more beneficial than 43 (B), the assessee was not precluded from claiming such benefit at a later stage. It is settled law that, where two exemption Notifications are applicable to a given goods which is otherwise chargeable to duty, the assessee is entitled to avail the benefit of that Notification which is more beneficial vide Indian Oil Corporation Ltd. v. CCE – 1991 (53) 347 (Tribunal), CCE v. Indian Petrochemicals – 1997 (92) E.L.T. 13 (S.C.) and H. C.L. Ltd. v. CC – 2001 (130) E.L.T. 405 (S.C.). Applying the same principle, we hold the view that, if two entries in an Exemption Notification are applicable to a given goods, the assessee can legitimately claim under the more advantageous entry. Therefore, we are inclined to follow, with approval, the view taken by the co-ordinate Bench in the case of Burroughs Wellcome (I) Ltd. & Pfizer Ltd.
5. In the instant case, admittedly, the ‘bulk drugs’ imported by the appellants were specifically mentioned in List 3 appended to Sl. No. 80(A) of Customs Notification No. 21/02 and are liable to be considered as ‘drugs’ mentioned at 80(A). It is beyond doubt that ‘bulk drugs’ are also ‘drugs.’ They are so defined under the Drugs (Prices Control) Order, 1995 also. The imported goods, which are specified in List 3, must fall within the coverage of ‘drugs specified in List 3 ‘ and consequently the benefit of Sl. No. 80(A) would be admissible to them in relation to BCD. It would follow that, insofar as CVD is concerned, the benefit of Sl. No. 47(A) of the Central Excise Notification would be available to the goods. We have taken this view upon strict interpretation of the language used in the description of goods under the relevant entries of the Notification, in terms of the Apex Court ‘s ruling in Gujarat State Fertilisers Co. v. CCE – 1997 (91) E.L.T. 3 (S.C.) and other cases cited by learned DR. In the result, all the appeals filed against the appellate Commissioner’s order on merits are bound to succeed.
3.21 The aforesaid decisions were followed by the Tribunal in Astrix Laboratories Ltd. v. CCE & Cus., Hyderabad-I [2009 (233) E.L.T. 372 (Tri. – Bang)] [Refer Para 5, 5.1 and 5.2].
8.22 Though the definition of “drug” does not exist under the present Drugs (Prices Control) Order 2013, the definition of “bulk drugs” under the Drugs (Prices Control) Order 2013, and the definition of “drugs” under the Drugs and Cosmetics Act, 1940 should be read conjointly. Reliance is placed on Clause (2) of the Drugs (Prices Control) Order 2013, as extracted below:
“(2) All other words and expressions used herein and not defined but defined in the Act or the Drugs and Cosmetics Act, 1940 (23 of 1940) shall have the meanings respectively assigned to them in the said Acts.”
3.23 Thus, in the absence of the definition of “drugs” under the current Drugs (Prices Control) Order 2013, reference is made to the Drugs and Cosmetics Act, 1940. As submitted in the foregoing paragraphs, from a combined reading of the present definitions under the Drugs (Prices Control) Order, 2013 and the Drugs and Cosmetics Act, 1940, it is clear that bulk drugs are to be treated as drugs only.
3.24 Further, in the present case when the notification also does not define drugs or bulk drugs, and nor does it make a specific distinction between the two, it is submitted that the interpretation that bulk drugs are drugs should be adopted. Reliance in this regard is placed on the Tribunal decision in Aurobindo Pharma Ltd. v. CCE, Hyderabad-I [2009 (247) E.L.T. 206 (Tri. – Bang.)], wherein it was held that when the notification does not distinguish between bulk drugs, drugs or medicines, then exemption is to be granted is to bulk drugs as well.
3.25 Further, reference is also made to the recent decision of the Hon’ble CESTAT, Ahmedabad in the case of Shri Baser v. CCEx & St — 2024 (12) TMI 270 wherein reliance was placed on the decisions of Cipla Ltd (supra) and Hetero Drugs Ltd. v. CC (Airport) — 2017 (9) TMI 1275-CESTAT Chennai to hold that drugs and bulk drugs are one and the same. Thus, the exemption benefit under Si. No. 108(A) of Notification No. 12/2012-Cus dated 17.03.2012 was extended to the alleged bulk drugs imported by the Company. The relevant portion of the said decision is extracted hereunder:
“4.1 On examination of the case on merit of M/s Sterlling Biotech Ltd, we find that the dispute is on the exemption entry of the goods in question whether the same would fall under description (A) or (B) of Sr. No. 108 of Notification No. 12/2012-Customs. We find that description (A) grants exemption to drugs and medicines specified in the list No. 3 and 4 of Customs Exemption Notification 12/2012-Cus and description (B) provides exemption to bulk drugs used in the manufacture of goods mentioned at (A). The point of dispute is only that whether the drug mentioned at description (A) covers the bulk drugs manufactured by the appellant namely Idarubicin hydrochloric acid, Doxorubicin hydrochloric acid, Daunorubicin hydrochloric acid, Epirubicin hydrochloric acid, Zoledronic Acid. This issue has been considered in various judgments which are given below: –
a) In the case of Cipla Ltd (Supra), Tribunal Chennai has given the following findings: –
….
b) In the case of Hetero Drugs Ltd (Supra), this Tribunal has considering the same issue whether the bulk drug and drug is same or otherwise. The relevant part of the order is reproduced below:-
….
From the above judgments, it is clear that drugs and bulk drugs are one and the same. Therefore, the company M/s. Sterlling Biotech Ltd was entitled for exemption Notification No. 12/2012-Customs entry Sr. No. 108 description (A) which does not involve any condition such as following the procedure of Central Excise (removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001. Therefore, entire basis of the department that such procedure was not followed is not relevant. Since, the duty demand itself is not prima facie sustainable on the company, there is no question of imposing personal penalty on the employee of M/s. Sterlling Biotech Ltd. who is the appellant herein.”
(Emphasis supplied)
3.26 Thus, it is submitted by the applicant that there is enough jurisprudence which treats the term “drugs” to include bulk drugs.
Restricting the entry to cover only drugs and medicines for final consumption would render the entry to be redundant
3.27 From a perusal of the entry, it is clear that it covers the following:
(a) all drugs and medicines;
(b) salts and esters of such drugs and medicines;
(c) diagnostic test kits; and
(d) formulations manufactured from bulk drugs.
3.28 The usage of the semi colon (;) between “all drugs and medicines including their salts and esters and diagnostic test kits” and “formulations manufactured from bulk drugs” indicated that these are two separate items covered under the entry.
3.29 Reliance is placed on the Tribunal decision of Hari and Co. v. Collector of Customs, 1991 (53) E.L.T. 336, wherein the semi-colon was interpreted to separate the former group from the latter group. The decision was maintained by the Supreme Court in Collector of Customs v. Hari and Co., 1997 (96) E.L.T. 503 (S.C.). Reference is also made to the Tribunal’s decision in Heildelberg Cement (India) Ltd. v. Commr. of C. Ex., Nagpur & Raigad, 2015 (315) E.L.T. 53 (Tri. – Mamba’. ), wherein it was held clauses separated by a semi-colon are to be read disjunctively and not conjunctively.
3.30 From the fact that (d) “formulations manufactured from bulk drugs”, are mentioned separately, it can be inferred that (a) “all drugs and medicines” intends to cover ‘bulk drugs’ only, while (d) covers the formulations, drugs and medicines which are manufactured from such bulk drugs. If (a) and (d) were intended to mean the same, i.e. that only drugs and medicines for final consumption are covered under the entry, then it would render (a) to be redundant, as (d) already covers such final formulations (often classified under Chapter 30).
3.31 Furthermore, all ready to use drugs are covered under Chapter 30 of the Customs Tariff. The fact that the Notification entry covers goods falling under “chapter 30 or any other chapter” entails that it is not restricted to formulations for final consumption, as those would necessarily be classified under chapter 30. Thus, drugs under any other chapter are also covered under the entry.
3.32 It is a settled principal of law that no such interpretation shall be adopted that renders an entry
redundant. Reliance in this regard is placed on the Hon’ble Supreme Court in Bansal Wire Industries Ltd. v. State of U.P., 2011 (269) E.L.T. 145 (S.C.). The relevant portion is extracted below:
“It is a settled principle of law that the words used in the section, rule or notification, should not be rendered redundant and should be given effect to. It is also one of the cardinal principles of interpretation of any statue that some meaning must be given to the words used in the section. Expression “Wire rods and wires” which is mentioned in item no. (xv) would not and cannot cover the expression “tools, alloy and special steels” of entry no. (ix) nor it would refer to the expression “Iron and Steel” as each item used in entry nos. (ix) and (xv) are independent items not depending on each other at all as has been held in the case of Pyare Lal Mehrotra (supra).”
3.33 The Hon’ble High Court in TVL. Transtonnelstroy Afcons Joint Venture v. UOI, 2020 (43) G.S.T.L. 433 (Mad.) (para 41), it was every word of the statute should be given meaning and one should not construe a statute in such a way as to render certain words redundant.
8.34 Reliance is also placed on the decision of Printers (Mysore) Ltd. Vs. Asstt. Commercial Tax Officer – 1994 (2) SCC 434. The relevant extract of the said judgement is as follows:
“Even apart from the opening words in Section 2 referred to above, it is well settled that where the context does not permit or where it would lead to absurd or unintended result, the definition of an expression need not be mechanically applied. [Vide T.M. Kanniyan v. Income Tax Officer, Pondicherry and Anr. 1968 20 S.C.R. 103, Pushpa Devi and Ors. v. Milkhi Ram (Dead) by his L.R. MANU/SC/0149/1990: [1990] 1SCR278 [para 14] and Commissioner of Income Tax, Bangalore v. Gotla, Yadagiri MANU/SC/0126/1985: [1985]156ITR323(SC).”
3.35 Therefore, the entry should be interpreted in such a manner that it is not rendered redundant. Accordingly, the term “drugs” should also cover bulk drugs.
The bulk drugs classified under Chapter 28 or Chapter 29 are still rightly subject to levy under Si. No. 226 of Schedule I, and not under Si. No. 35 or 36 of Schedule II to the IGST Rate Notification. In case of any ambiguity in the IGST Rate Notification, it should be interpreted in favour of the taxpayer
3.36 Sl. No. 35 and 36 of Schedule II to the IGST Rate Notification cover goods of Chapter 28 and
| Si. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 35. | 28 | All inorganic chemicals [other than those specified in Notification No. 9/2025-Central Tax (Rate)dated 17th September 2025 or other Schedules of this notification] |
| 36 | 29 | All organic chemicals other than gibberellic acid |
3.37 51. No. 226 of Schedule Ito the IGST Rate Notification is extracted again for reference:
| Si. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 226. | 30 or any Chapter | All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs [other than those specified at nil at S. No. 113 of Notification No. 9/2025-Central Tax (Rate)dated 17th September, 2025] |
3.38 Furthermore, it is submitted that SI. No. 226 of Schedule I is a more specific entry as opposed to the generic entry of SI. No. 35 or 36 of Schedule II, and thus the specific entry would prevail.
3.39 It is submitted that in case of any ambiguity in the interpretation of the IGST Rate Notification, such as various applicable entries, it should be interpreted in favour of the taxpayer. Reliance in this regard is placed on the Tribunal decision of Samsung India Electronics Pvt. Ltd. v. Principal Commissioner of Customs, New Delhi, 2025 (7) TMI 229 — CESTAT New Delhi. The relevant portion of the decision is extracted below:
“The Principal Commissioner, however, in paragraph 43 of the impugned order considered the IGST Rate .Notification as an Exemption Notification and observed that the benefit of the IGST Rate Notification should be interpreted strictly and the burden to prove applicability would rest upon the tax payer and that the benefit of any ambiguity in the Notification must be interpreted in favour of the Revenue. The Principal Commissioner committed an error in assuming that the IGST Rate Notification is an Exemption Notification. The IGST Rate Notification is at rate Notification and, therefore, a Taxing Notification. It has to be strictly construed and any ambiguity has to be interpreted in favour of the tax payer and against the Revenue as was observed by the Supreme Court in Safari Retreats.”
3.40 From the above it is clear that a taxing notification, which prescribes a levy and is not prescribing an exemption, is to be interpreted in favour of the tax payer. Reliance is also placed on the decision of the Supreme Court in Commissioner of Cus. (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), whereby it established the principle that in case of an ambiguity in a taxing statute and where two interpretations can be adopted, then the benefit of interpretation is to be given to the assessee. It is only in the case of an exemption notification that it should be interpreted in favour of the Revenue. IGST Notification is a taxing statute and not an exemption notification. Thus, even on applying the decision of Dilip Kumar the interpretation should be in favour of the Applicant.
Few GST Advance Rulings on this issue
3.41 The Applicant would like to submit that prior to the NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE)dated 17.09.2025, there wasNotification No. 1/2017-Integrated Tax (Rate) dated 28.06.2017 effective from 01.07.2017 to 21.09.2025. The two Sl. Nos. therein which were relevant to Drugs are extracted below:
| SI. 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 appended to this Schedule. |
| 181. | 30 | Formulations manufactured from the bulk drugs specified in List 2 appended to this Schedule. |
3.42 With regard to the above, to the best ofthe Applicant’s knowledge, there are 4 Advance Rulings dealing with the question whether “Drugs” in Sl. No. 180 above includes “bulk drugs”. 2 of them are in favour of the Applicant and 2 are against. The same are analysed below:
| Sl. No. | Ruling / Decision reference | Ratio | Whether Applicable in the present case |
| In Re: Laurus Labs Ltd., 2018 (13) G.S.T.L. 472 (A.A.R. – GST)
Enclosed as ‘Exhibit – C’. |
|
Squarely applicable as the decision examines the levy for bulk drugs in light of the entry for Chapter 29. | |
| Re: Biocon Ltd. 2020 (43) G.S.T.L. 281 (App. A.A.R. – GST – Kar.)
Enclosed as ‘Exhibit -D’. |
|
Squarely applicable in the present case as it has examined the definition of “drugs”. | |
| In Re: Sterling Biotech Ltd., 2021 (1) TMI 372 – AAR, Guj. |
|
The rulings are not applicable in the present case as they have not considered the complete definition of |
–
3.43 The above Rulings are not pertaining to the present legal position. Thus, they are not strictly applicable to the present Application. However, in the interest of completion of information, the above Rulings have been highlighted to the Hon’ ble Authority.
Condition iii: Not be covered under SI. No. 113 of NOTIFICATION NO. 10/2025-INTEGRATED TAX (RATE) dated 17.09.2025.
3.44 SI. No. 113 to NOTIFICATION NO. 10/2025-INTEGRATED TAX (RATE) dated 17.09.2025 covers “Drugs or medicines listed in Annexure I”. As submitted in the foregoing paragraphs, the products imported by the Applicant do not figure in Si. No. 113, by virtue of not falling under Annexure I to that notification. Therefore, condition iii is also met.
3.45 In light of the above, it is clear that bulk drugs used for manufacture of formulations should be subject to levy @5% in terms of S. No. 226 of Schedule I to the IGST Rate Notification and no other entry.
4. Port of Import and reply from jurisdictional Commissionerate:
4.1 The applicant in their CAAR-1 indicated that they intend to import the subject goods from jurisdictional Commissionerate of the The Commissioner of Customs (Import), Air Cargo Complex, Sahar, Andheri East, Mumbai — 400099 and The Commissioner of Customs, Nhava Sheva-1, Jawaharlal Nehru Customs House, Nhava Sheva, Tal: Uran, Dist- Raigad, Maharashtra-400707. The application was forwarded to the jurisdictional of Commissionerate of the Commissioner of Customs, Nhava Sheva-I, Jawaharlal Nehru Customs House, Nhava Sheva for their comments on 22.12.2025, 16.01.2026, 02.02.2026 and 17.02.2026.
However, no response was received from the concerned Jurisdictional Commissionerate.
4.2 The application was also forwarded to the jurisdictional of The Commissioner of Customs (Import), Air Cargo Complex, Sahar, Andheri East, Mumbai — 400099 for their comments on 30.12.2025. The comments were received vide letter dated 12.01.2026 wherein it was submitted that:
4.2.1 The term “bulk drugs” as per Drugs (prices control Order), 1979 is reproduced as under. (f1) “bulk drug” means any substance including pharmaceutical, chemical biological or plant product or medicinal gas conforming to pharmacopoeial or other standards accepted under the Drugs and cosmetic Act, 1960 which is used as such or as an ingredient in any formulations;
From the above, it appears that bulk drugs are raw material/ ingredient of pharmaceutical which includes active pharmaceutical ingredients (API) of the medicine.
4.2.2 Further, the definition of word “drug” as per CDSCO Act, 1940 is reproduced as under. “Drug” 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 ;.1
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of 10[vermin] or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;
From the above, it appears that Active Pharmaceutical Ingredients (API) appears to be in ambit of the substance. Hence it appears to be come under the heading for drugs.
4.2.3 From the para 2, it appears that the API may come under the definition of bulk drugs if it is used for purpose of the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals as per the section 3(b) of the Drugs and Cosmetic Act, 1940 and the drugs appears to be attracting IGST rate as per Sr. No. 226 of schedule I ofNOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE) dated 17th September, 2025.
In the instant case, M/s. Cipla Limited is importing API for the purpose of testing, clinical research and Bioequivalence study and not for the treatment of Human or Animal. Hence, the subject goods don’t appear to be come under Sr. No. 226 of schedule I of NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE)dated 17 th September 2025.
5. Further, the applicant vide his additional submission dated 26.02.2026 submitted that the question for determination is whether the levy of IGST on bulk drugs used in manufacture of formulations will be @5% in terms of Sl. No. 226 of Notification No. 9/2025- Integrated Tax (Rate) dated 17.09.2025. The relevant portion of the Notification is extracted below:
| SI. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 226. | 30 or any Chapter | All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs [other than those specified at nil at S. No. 113 of notification No. 10/2025-Integrated Tax (Rate) dated 17th September, 2025] |
Thus, in order to fall under Si. No. 226, the goods must be ‘drugs’ or ‘medicines’.
5.1 Response to Department’s Comments: As per the Department’s response dated 12.01.2026, they have clearly noted in paragraph 3 as follows:
“3. From the para 2, it appears that the API may come under the definition of bulk drugs if it is used for purpose of the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals as per the section 3(b) of the Drugs and Cosmetic Act, 1940 and the drugs appears to be attracting IGST rate as per Sr. No. 226 of schedule I of Notification No. 09/2025-Integrated Tax (Rate) dated 17th September, 2025. In the instant case, M/s. Cipla Limited is importing API for the purpose of testing, clinical research and Bioequivalence study and not for the treatment of Human or Animal. Hence, the subject goods don’t appear to be come under Sr. No. 226 of schedule I of NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE) dated 17th September, 2025.
5.2 Thus, Department has accepted that Bulk Drugs are also drugs when imported for purpose of manufacturing drugs. However, they have stated that API imported for the purpose of testing, clinical research and Bioequivalence study, and not for the treatment of Human or Animal — does not fall under the ambit of ‘drugs’ under Si. No. 226 of the Notification.
10.3 API for `testing, clinical research and bioequivalence study’ also fall under the ambit of `drugs’ and are leviable with IGST @5%
5.4 The relevant definitions from the Drugs and Cosmetic Rules, 1945 are extractedbelow:
b) “drug” 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 mosquitoesi;]
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;
(iii) all substances intended for use as components of a drug including empty gelatin capsules; and
(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;
5.5 Prior to 2019, the definitions of ‘bioavailability study’, ‘bioequivalence study’ and ‘clinical trials’ were also under the Drugs and Cosmetics Rules, 1945. However, with the introduction of the New Drugs and Clinical Trials Rules, 2019, the definitions were omitted from the Drugs and Cosmetics Rules 1945. The relevant definitions from the New Drugs and Clinical Trials Rules, 2019 are extracted below:
“2. Definitions. — (1) In these rules, unless the context otherwise requires, —
***
(e) “bioavailability study” means a study to assess the rate and extent to which the drug is absorbed from a pharmaceutical formulation and becomes available in the systemic circulation or availability of the drug at the site of action;
(f) “bioequivalence study” means a study to establish the absence of a statistically significant difference in the rate and extent of absorption of an active ingredient from a pharmaceutical formulation in comparison to the reference formulation having the same active ingredient when administered in the same molar dose under similar conditions
***
(j) clinical trial” in relation to a new drug or investigational new drug means any systematic study of such new drug or investigational new drug in human subjects to generate data for discovering or verifying its, —
(i) clinical or;
(ii) pharmacological including pharmacodynamics, pharmacokinetics or;
(iii) adverse effects,
with the objective of determining the safety, efficacy or tolerance of such new drug or investigational new drug; “
5.6 It is submitted that from a combined reading of the definitions of ‘drugs’, ‘bioavailability study’, ‘bioequivalence study’ and ‘clinical trials’, it is clear that drugs cover even those products which are for bioavailability or bioequivalence studies, or clinical trials.
5.7 It is submitted that the definitions of bioavailability study, bioequivalence studies and clinical trials would be rendered redundant if the definition of ‘drugs’ itself was construed to not cover the drugs which are intended for such purposes.
5.8 Thus, as long as the product in question is regarded as “Drug” by the CDSCO, irrespective of whether it is for manufacture of medicines, or for clinical trials, it must be considered to be eligible to avail benefit of Sl. No. 226 ofNOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE)dated 17.09.2025.
Customs Department’s consistent stand is that “bulk drugs” are drugs
5.9 During the course of the Hearing it was submitted by the Applicant that Customs Department has passed various Orders in Originals holding that “bulk drugs” are ‘drugs’. Reference in this regard is made to the following decisions by the JNCH Port Authorities (available in public domain):
i. Order passed in the case of Show Cause Notice No. 322/2025-26/Pr. Commr. / Gr. IlAWNSI/CAC/JNCH dated 18.06.2025 issued to M/s Unijules Life Sciences Limited.
Available at: https://wwwjawaharcustoms.gov.in/pdf/OIO-2025/CC/OIO%20298%20UNIJULES%20(1).pdf
ii. Order passed in the case of Show Cause Notice No. 1256/24-25/Commr./Gr.IIAB/NS-1/CAC/JNCH dated 15.10.2024 issued to M/s. J B Chemicals and Pharmaceuticals Limited.
Available at: https://www.jawaharcustoms.gov.in/pdf/010-2025/CC/oio%20jb%20chemical%20288%20(1).pdf
iii. Order passed in the case of SCN No. 1643/2024-25/Commr./GrIl(A-B)/NS-I/CAC/JNCH dated 24.01.2025 issued to M/s. Siddhambika Impex. Available at: https://jawaharcustoms.gov.in/pdf/Ol0-2026/CC/oio%20362%20siddhambika%20impex%20%20%20(1).pdf
Details of Personal Hearing:
6. Ms. Srinidhi Ganeshan Advocate and authorized representative, and others appeared for PH held in the matter. They reiterated the contention filed with the application that the applicant is a reputed pharmaceutical company. It imports a wide range of bulk drugs after obtaining requisite licenses. These bulk drugs so imported are Active Pharmaceutical Ingredients (APIs). That these ingredients are used for manufacture of formulation doses form and also used for testing clinical research purposes. That these goods are bulk drugs in terms of definition given in Section 3 of Drugs and Cosmetics Act 1940; Drug (price control) order 2013.
They contended that Notification 09/2025 Sr. No. 226 provides IGST @5% on the satisfaction of the following conditions and that the same is satisfied in their case: –
a) Be classified under Chapter 30 or any other chapter.
b) Be drugs or medicines, and
c) Not covered under Sr. No. 113 of Notification 10/2025 IGST Rate dated 17.09.2025.
That they import the said bulk drug under license issued by CDSCO, Ministry of Health, Government of India under the procedure/ proforma Form 10 and CT-17. In support of their claim they relied upon various case laws: –
a) Astrix Laboratories Ltd. v. CCE & Cus., Hyderabad-1 [2009 (233) E. – Bang.)
b) Aurobindo Pharma Ltd. v. CCE, Hyderabad-1 [2009 (247) E.L. T. 206 (Tri. – Bang.)
c) Samsung India Electronics Pvt. Ltd. v. Principal Commissioner of Customs, New Delhi, 2025 (7) TMI 229 — CESTAT New Delhi.
d) Commissioner of Cus. (Import), Mumbai u Dilip Kumar & Company, 2018 (361) E.L. 7. 577 (S.C.)
e) Cipla Ltd. v. Commissioner of Customs, Chennai [2007 (218) E.L,T. 547 (Tri. – Chennai)
Nobody appeared for PH from the department side.
7. Discussion and Findings
7.1 I have carefully considered the application filed by Cipla Limited, the written and additional submissions made by the Applicant, the comments furnished by the jurisdictional Commissioner of Customs (Import), Air Cargo Complex, Sahar, Mumbai, and the records placed before me.
7.2 At the outset, I find that the issue raised in the question in the form CAAR-1 is squarely covered under Section 28H(2) of the Customs Act, 1962, being a matter related applicability of duty (IGST rate in the present case) under the provisions of this Act. The question posed for advance ruling is:
“Whether Integrated Goods and Services Tax (IGST) is leviable @ 5% on import of bulk drugs (Active Pharmaceutical Ingredients — APIs) in terms of Sl. No. 226 of Schedule I to NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE) dated 17.09.2025 “
7.3 Statutory Framework
7.3.1 In terms of Section 3(7) of the Customs Tariff Act, 1975, any article imported into India is liable to IGST at such rate as is leviable under Section 5 of the IGST Act, 2017 on a like article supplied in India.
7.3.2 IGST rates are notified vide NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE) dated 17.09.2025. Sl. No. 226 of Schedule I (5%) reads as under:
| Sl. No. | Chapter/Heading/S ub-heading/Tariff item | Description of goods |
| 226. | 30 or any Chapter | All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs [other than those specified at nil at S. No. 113 of notification No. 10/2025-Integrated Tax (Rate) dated 17th September, 2025] |
I observe that form the perusal of the above entry it is clear 51. No. 226 of Schedule I (5%) covers the following:
(a) all drugs and medicines;
(b) salts and esters of such drugs and medicines;
(c) diagnostic test kits; and (d) formulations manufactured from bulk drugs.
7.3.3 SI. No. 113 of Notification No. 10/2025—Integrated Tax (Rate) grants NIL rate to “Drugs or medicines listed in Annexure I.” The relevant portion of notification is as below:
| SI. No. | Chapter/Heading/Sub- heading/Tariff item | Description of goods |
| 113. | 30 or any Chapter | Drugs or medicines listed in Annexure I |
It is not disputed that the subject goods i.e Vutrisiran Sodium are not covered under Annexure-I. 7.4 Nature of the Goods
7.4.1 The Applicant imports bulk drugs, i.e., Active Pharmaceutical Ingredients (APIs), classifiable under Chapter 28 or Chapter 29 of the Customs Tariff. These APIs are used:
(i) in manufacture of pharmaceutical formulations; and
(ii) in certain cases, for testing, clinical trials, bioavailability and bioequivalence studies.
7.4.2 The imports are effected under valid licences such as Form CT-10 and Form CT-17 issued under the New Drugs and Clinical Trials Rules, 2019 framed under the Drugs and Cosmetics Act, 1940. The applicant has submitted a copy of Form CT-10 and Form CT-17 issued by Central Drugs Standard Control Organization (CDSCO). The Form-10 is regarding ‘Licence to import drugs (excluding those specified in Schedule X) to the Drugs and Cosmetics Rules, 1945’ in respect of drug named Valaciclovir Hydrochloride C.P.. The Form CT-17 is regarding ‘licence to import new drug or investigational new drug for the purpose of clinical trial or bioavailability or bioequivalence study or for examination, test and analysis’ in respect of drug named Vutrisiran Sodium’.
The relevant part of both the licence Form 10 as well as Form CT-17 is produced below for reference:
i) Form 10:
From the above produced licenses, it is evident that these are form import of drugs named Valaciclovir Hydrochloride C.P. and Vutrisiran Sodium’ for the purposes mentioned therein.
7.4.3 Further, the applicant has submitted that there is no dispute regarding tariff classification under Chapters 28 or 29. Also, the issue raised in the present application is not regarding classification of the subject good and the question raised in the CAAR application is confined to the applicable IGST rate.
7.5 As discussed at para 11.3 above SI. No. 226 of Schedule I (5%) covers all drugs and medicines. The applicant has contended that the bulk Drugs/APIs” are covered under the expression “All Drugs and Medicines” and are covered under Si. No. 226 being drugs. Therefore, it is to be analysed:
“Whether “Bulk Drugs/APIs” are covered under the expression “All Drugs and Medicines” or otherwise”
7.5.1 The expression “drugs” is not defined in the IGST Rate Notification and neither in Customs Act. In such circumstances, recourse can be taken to the relevant statute governing the goods, namely the Drugs and Cosmetics Act, 1940.
7.5.2 I observe Section 3(b) of the Drugs and Cosmetics Act, 1940 defines “drug” . The said definition of drugs is produced as below:
drug 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 pui pose of repelling insects like mosquitoesd
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of 6 [vermin] or insects which cause disease in human beings or animals, as may be specified .from time to time by the Central Government by notification in the Official Gazette;] 7
(iii) all substances intended for use as components of a drug including empty gelatin capsules; and
(iv) such devices * intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time
From the above definition of drugs it is evident that drugs covers:
-
- all medicines for internal or external use;
- all substances intended for diagnosis, treatment, mitigation or prevention of disease; and
- all substances intended for use as components of a drug.
7.5.3 I observe Active Pharmaceutical Ingredients (APIs) are substances used as components of a drug. They are regulated under the Drugs and Cosmetics Act and require statutory licences for import. The jurisdictional Commissionerate has also observed that APIs appear to fall within the ambit of “drug” under Section 3(b).
7.5.4 I observe that the bulk drugs are not specifically defined in Drugs and Cosmetics Act, 1940. Therefore, reference is made to the definitions under the Drugs (Price Control) Order, 2013. The relevant extracts are as below:
“(b) “active pharmaceutical ingredients or bulk drug” means any pharmaceutical, chemical, biological or plant product including its salts, esters, isomers, analogues and derivatives, conforming to standards specified in the Drugs and Cosmetics Act, 1940 (23 of 1940) and which is used as such or as an ingredient in any formulation;
***
“(i) Vormulation” means a medicine processed out of or containing one or more drugs with or without .use of any pharmaceutical aids, for internal or external use for or in the diagnosis, treatment, mitigation or prevention of disease and, but shall not include-
(i) any medicine included in any bonafide Ayurvedic (including Sidha) or Unani (Tibb) systems of medicines;
(ii) any medicine included in the Homeopathic system of medicine; and
(iii) any substance to which the provisions of the Drugs and Cosmetics Act, 1940 (23 of 1940) do not apply; “
In view of above bulk drug refers to pharmaceutical or chemical substances used as such or as an ingredient in any formulation. Accordingly, I observe that on conjoint reading of the the above definition of API with Section 3(b) of the Drugs and Cosmetics Act, bulk drugs falls within the statutory meaning of “drug”.
11.5.4 The applicant has submitted that Prior to 2019, the definitions of ‘bioavailability study’, `bioequivalence study’ and ‘clinical trials’ were also under the Drugs and Cosmetics Rules, 1945. However, with the introduction of the New Drugs and Clinical Trials Rules, 2019, the definitions were omitted from the Drugs and Cosmetics Rules 1945. The relevant definitions from the New Drugs and Clinical Trials Rules, 2019 are extracted below:
“2. Definitions. — (1) In these rules, unless the context otherwise requires, —
***
(g) “bioavailability study” means a study to assess the rate and extent to which the drug is absorbed from a pharmaceutical formulation and becomes available in the systemic circulation or availability of the drug at the site of action;
(h) “bioequivalence study” means a study to establish the absence of a statistically significant difference in the rate and extent of absorption of an active ingredient from a pharmaceutical formulation in comparison to the reference formulation having the same active ingredient when administered in the same molar dose under similar conditions
***
(k) “clinical trial” in relation to a new drug or investigational new drug means any systematic study of such new drug or investigational new drug in human subjects to generate data Ibr discovering or verifying its, —
(i) clinical or;
(ii) pharmacological including pharmacodynamics, pharmacokinetics or;
(iii) adverse effects,
with the objective of determining the safety, efficacy or tolerance of such new drug or investigational new drug; “
7.5.6 I observe that a combined reading of the definitions of “drugs”, “bioavailability study”, “bioequivalence study” and “clinical trial” makes it evident that the term “drugs” is wide enough to include products intended for use in bioavailability or bioequivalence studies, as well as for clinical trials. Therefore, the mere fact that the API is imported for testing or research purposes, and not for direct therapeutic use, does not, by itself, exclude it from the ambit of “drugs” under the applicable legal framework.
7.6 Judicial Precedents
7.6.1 The Applicant has relied upon various Tribunal decisions wherein it has been held that bulk drugs are also drugs or “drugs” is inclusive of “bulk drugs” including:
i) Burroughs Wellcome (I) Ltd. — 2007 (216) E.L.T. 522 (Tri.-Mum.)
ii) Cipla Ltd. v. Commissioner of Customs, Chennai — 2007 (218) E.L.T. 547 (Tri.-Chennai)
iii) Astrix Laboratories Ltd. — 2009 (233) E.L.T. 372 (Tri.-Bang.)
The relevant paras and details of the above-mentioned decisions are mentioned at para 3(18-20) above. These decisions consistently held that bulk drugs are also drugs, particularly where the exemption/benefit entry uses the expression “drugs” without exclusion.
7.6.2 Further, in Aurobindo Pharma Ltd. —2009 (247) E.L.T. 206 (Tri.-Bang.), it was held that where a notification does not distinguish between “drugs” and “bulk drugs”, such distinction cannot be artificially introduced.
7.6.3 Advance ruling decisions:
i) I observe that in Laurus Labs Ltd, 2018 (13) G.S.T.L. 472 (A.A.R. — GST) and Biocon Ltd., 2020 (43) G.S.T.L. 281 (App. A.A.R. — GST — Kar.), the Advance Ruling Authorities have taken the view that the expression “drugs” includes “bulk drugs.”
ii) Though in Sterling Biotech Ltd., 2021 (1) TMI 372 — AAR, Gujarat and M/s. Altis Finechem Pvt. Ltd., 2021 (1) TMI 564 — AAR, Gujarat, the Advance Ruling Authorities have taken a contrary view. It is however observed that in the aforesaid rulings, the complete and inclusive definition of “drug” under Section 3(b)(iii) of Drugs and Cosmetics Act, 1940, particularly in relation to substances used as components of a drug, has not been examined in its entirety.
7.7 Interpretation of Sl. No. 226
7.7.1 Sl. No. 226 employs the expression:
“All Drugs and medicines including their salts and esters and diagnostic test kits; formulations manufactured from bulk drugs”. The presence of a semi-colon clearly demarcates two independent and distinct categories of goods, namely:
(i) All drugs and medicines (including salts, esters and diagnostic kits); and
(ii) Formulations manufactured from bulk drugs.
7.7.2 If the phrase “All drugs and medicines” were to be construed as being confined solely to finished dosage forms ready for retail consumption, the subsequent and specific reference to “formulations manufactured from bulk drugs” would be rendered redundant and superfluous. It is a settled canon of statutory interpretation that an entry must be construed in a manner that gives meaning and effect to every word used therein, and avoids any interpretation that would render a part of the provision otiose.
7.7.3 Moreover, the entry applies to goods falling under “Chapter 30 or any Chapter.” The careful use of the expression “or any Chapter” manifests a clear legislative intent to extend the scope of coverage beyond Chapter 30, thereby encompassing drugs and drug substances classifiable under other Chapters, including Active Pharmaceutical Ingredients (APIs) falling under Chapters 28 and 29.
7.7.4 In view of the above discussion as well as on conjoint reading of definition of drugs given in Section 3(b) of Drugs and Cosmetics Act, 1940, API as mentioned in Drugs (Price Control) Order, 2013 and reading of the definitions of “bioavailability study”, “bioequivalence study” and “clinical trial” as mentioned in New Drugs and Clinical Trials Rules, 2019, it can be clearly concluded that the bulk drugs/APIs falls within the statutory meaning of “drug” and that they are drugs naturally.
7.8 Whether APIs imported for Clinical Trials / Bioequivalence Studies are excluded: 7.8.1 I observe that the jurisdictional Commissionerate has submitted that:
“it appears that the API may come under the definition of bulk drugs if it is used for purpose of the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals as per the section 3(b) of the Drugs and Cosmetic Act, 1940 and the drugs appears to be attracting IGST rate as per Sr. No. 226 of schedule I of Notification No. 09/2025-Integrated Tax (Rate) dated 17th September, 2025. In the instant case, M/s. Cipla Limited is importing API for the purpose of testing, clinical research and Bioequivalence study and not for the treatment of Human or Animal. Hence, the subject goods don’t appear to be come under Sr. No. 226 of schedule I of Notification No. 09/2025 Integrated Tax (Rate) dated 17th September, 2025.”
Accordingly, I observe that the jurisdictional Commissioner has accordingly opined that APIs imported for testing, clinical research and bioequivalence studies may fall outside the scope of 51. No. 226, as they are not used for treatment.
7.8.2 The above view is not tenable for the following reasons:
i) Section 3(b) of the Drugs and Cosmetics Act, 1940 defines “drug” to include substances intended for diagnosis, treatment, mitigation or prevention of disease, as well as components of a drug.
ii) Clinical trials, bioavailability and bioequivalence studies are statutorily governed under the New Drugs and Clinical Trials Rules, 2019, which regulate the development and approval of drugs for therapeutic use.
iii) As discussed at para 7.5 above it is clear from combined reading of the definitions of ‘drugs’, ‘bioavailability study’, ‘bioequivalence study’ and ‘clinical trials’, that drugs cover even those products which are for bioavailability or bioequivalence studies, or clinical trials.
iv) Aso, definitions of bioavailability study, bioequivalence studies and clinical trials would be rendered redundant if the definition of ‘drugs’ itself was construed to not cover the drugs which are intended for such purposes. This is the process of invention/ development of new drugs and its standardization.
v) Such studies are an integral and mandatory part of the drug approval process and are undertaken solely to establish the safety, efficacy and therapeutic equivalence of drugs intended for human or veterinary use.
11.8.3 The essential character of the product as a `’drug” does not undergo any transformation merely because, at the time of import, it is intended for clinical evaluation rather than immediate therapeutic administration. The temporary stage of use does not alter the intrinsic nature or statutory recognition of the product.
11.8.4 Once a product is recognised and licensed as a drug under the Drugs and Cosmetics Act, 1940, its character as a drug remains unchanged for the purposes of classification and applicable rate under the IGST Rate Notification. The end-use at a particular stage cannot override the statutory identity and essential character of the goods.
7.9 Specific Entry vis-a-vis General Entry
7.9.1 I observe that Si. Nos. 35 and 36 of Schedule II cover “All inorganic chemicals” falling under Chapter 28 and “All organic chemicals” falling under Chapter 29 respectively. These entries are broad and generic in nature, as they encompass all goods classifiable under the said Chapters without any restrictive description.
7.9.2 In contrast. SI. No. 226 specifically covers “All drugs and medicines…”, without being confined to any particular Chapter of the Tariff. The scope of this entry is description-based rather than Chapter-based, and therefore it operates as a specific entry covering goods answering to the description of drugs and medicines.
7.9.3 It is a well-settled principle of classification that when a product is covered by both a general entry and a specific entry, the specific entry shall prevail over the general entry (generalia specialibus non derogant). Accordingly, Active Pharmaceutical Ingredients (APIs), though classifiable under Chapters 28 or 29 for tariff purposes, when they satisfy the description of “drugs”, are appropriately classifiable under SI. No. 226 for the purpose of determination of applicable rate of tax. The Si. No. 226 entry is a specific entry which will prevail over the general entry of all organic chemicals other than gibberellic acid”
7.10 Nature of the Notification
7.10.1 I observe Notification No. 9/2025—Integrated Tax (Rate) is a rate notification and not an exemption notification.
7.10.2 I observe that the applicant has placed reliance on the decision of the Hon’ble Supreme Court
in Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Company, 2018 (361) E.L.T. 577 (S.C.), wherein it was held that in case of ambiguity in a taxing statute, and where two interpretations are possible, the interpretation beneficial to the assessee should be adopted. However, in the case of an exemption notification. the same must be construed strictly in favour of the Revenue.
I observe that the IGST Notification in question is a taxing notification and not an exemption notification. Therefore, applying the ratio laid down in Dilip Kumar & Company, the subject goods of the applicant are appropriately classifiable under SI. No. 226 of Schedule Ito Notification No. 9/2025—Integrated Tax (Rate) dated 17.09.2025, which is a taxing entry and not an exemption entry.
i) The definition of “drug” under Section 3(b) of the Drugs and Cosmetics Act, 1940 is wide and inclusive in nature, and expressly covers substances intended for use as components of a drug. Active Pharmaceutical Ingredients (APIs) / bulk drugs, being pharmaceutical substances used as such or as ingredients in formulations, squarely fall within the ambit of the said definition.
ii) APIs are regulated and licensed as “drugs” by the Central Drugs Standard Control Organization (CDSCO) under the statutory framework of the Drugs and Cosmetics Act, 1940 and the New Drugs and Clinical Trials Rules, 2019, including for import under Forms CT-10 and CT-17. Their regulatory recognition as drugs reinforces their statutory character.
iii) Judicial precedents and advance ruling authorities have consistently held that, in the absence of any restrictive language, the expression “drugs” includes “bulk drugs”, and no artificial distinction can be introduced between the two where the notification does not provide so.
iv) The wording of SI. No. 226 of Schedule Ito Notification No. 9/2025—Integrated Tax (Rate) is broad and description-based, covering “All drugs and medicines…” without restriction to finished formulations, and further extends to goods falling under “Chapter 30 or any Chapter”, thereby encompassing APIs classifiable under Chapters 28 and 29.
v) SI. No. 226 is a specific entry describing goods by their essential character as “drugs”, and therefore prevails over the general entries covering “all inorganic chemicals” or “all organic chemicals” under Chapters 28 and 29.
vi) The character of APIs as “drugs” does not change merely because they are imported for clinical trials, bioavailability or bioequivalence studies. Such studies are integral to the drug approval process and do not alter the intrinsic statutory identity of the goods.
In view of the forgoing discussion it is evident that Active Pharmaceutical Ingredients (bulk drugs), including those imported for clinical trials, bioavailability or bioequivalence studies, are covered under Si. No. 226 of Schedule I to Notification No. 9/2025—Integrated Tax (Rate) dated 17.09.2025 and attract IGST at the rate of 5%, subject to the goods not being covered under any NIL-rated entry.
7.11 To sum up:
i) The definition of “drug” under Section 3(b) of the Drugs and Cosmetics Act, 1940 is wide and inclusive in nature, and expressly covers substances intended for use as components of a drug. Active Pharmaceutical Ingredients (APIs) / bulk drugs, being pharmaceutical substances used as such or as ingredients in formulations, squarely fall within the ambit of the said definition.
ii) On a conjoint reading of the definition of “active pharmaceutical ingredient / bulk drug” under the Drugs (Price Control) Order, 2013 with the definition of “drug” under Section 3(b) of the Drugs and Cosmetics Act, 1940, and the definitions of “bioavailability study”, “bioequivalence study” and “clinical trial” under the New Drugs and Clinical Trials Rules, 2019, it is evident that APIs, even when imported for testing, bioequivalence, bioavailability or clinical research purposes, retain their statutory character as “drugs” and are not excluded merely on account of their stage or purpose of use.
iii) APIs are regulated and licensed as “drugs” by the Central Drugs Standard Control Organization (CDSCO) under the statutory framework of the Drugs and Cosmetics Act, 1940 and the New Drugs and Clinical Trials Rules, 2019, including for import under Forms 10 and CT-17. Their regulatory recognition as drugs reinforces their statutory character.
iv) Judicial precedents and advance ruling authorities have consistently held that, in the absence of any restrictive language, the expression “drugs” includes “bulk drugs”, and no artificial distinction can be introduced between the two where the notification does not provide so.
v) The wording of Si. No. 226 of Schedule I to Notification No. 9/2025—Integrated Tax (Rate) is broad and description-based, covering “All drugs and medicines…” without restriction to finished formulations, and further extends to goods falling under “Chapter 30 or any Chapter”, thereby encompassing APIs classifiable under Chapters 28 and 29.
vi) SI. No. 226 is a specific entry describing goods by their essential character as “drugs”, and therefore prevails over the general entries covering “all inorganic chemicals” or “all organic chemicals” under Chapters 28 and 29.
vii) The character of APIs as “drugs” does not change merely because they are imported for clinical trials, bioavailability or bioequivalence studies. Such studies are integral to the drug approval process and do not alter the intrinsic statutory identity of the goods.
8. In view of the above facts and circumstances of the case, I reach to conclusion that:
8.1 Bulk drugs/Active Pharmaceutical Ingredients (APIs), whether imported for manufacture of formulations or for testing, clinical trials, bioavailability or bioequivalence studies, qualify as “All Drugs” under Sl. No. 226 of Schedule I to NOTIFICATION NO. 9/2025-INTEGRATED TAX (RATE)dated 17.09.2025, provided they are not covered under Si. No. 113 of NOTIFICATION NO. 10/2025-INTEGRATED TAX (RATE)
I rule accordingly.
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