Fludeoxyglucose or FDG classifiable as radioactive isotopes & compounds: AAR

In re Nueclear Healthcare Limited (AAR Maharashtra)

Applicant is engaged in the business of manufacturing of fludeoxyglucose F 18, also commonly called FDG, radiopharmaceutical used in the medical imaging modality positron emission tomography (PET). Nueclear Healthcare Limited, the applicant, seeking an advance ruling in respect of the following questions :

1. Whether the product ‘Fludeoxyglucose’ or ‘FDG ‘ can be classifiable under Chapter 3006 3000 of the Central Excise Tariff Act, 1985 ?

2. Whether chemicals used as pharmaceuticals that are inorganic or/ and of organic nature shall merit classification only under Chapter 28 & 29 and not under Chapter 30 which has been specifically carved out for chemical pharmaceuticals by makers of law ?

We have gone through the facts of the case. The issue put before us is the classification of duct ‘Fludeoxyglucose’ or `FDG’. It has been queried as to whether the impugned product can be classified under Chapter 3006 3000 of the Central Excise Tariff Act, 1985. We have seen the invoices issued by the applicant wherein the product “¹⁸F-FDG (Fluorodeoxyglucose)”is mentioned as falling under the HSN Code of 28444000 and attracting GST @18%. The applicant has also submitted the invoice issued by the Board of Radiation and Isotope Technology wherein the product “FDG 18″ is shown as falling under HSN Code 30063000” and attracting GST @12%. The reason to mention the aforesaid is the applicant’s humble plea during hearing to clear the controversy surrounding the classification so as to have a uniform tax discharge by all dealing with the said commodity. However, it is seen that the applicant has given an elaborate submission in favour of the product falling under Central Excise Tariff Heading 30063000. Further, it is seen that the applicant has contended that classification under Chapter Subheading 2844 of the Central Excise Tariff Act, 1985, suffers with legal infirmity, mis-appreciation of facts and wrong invocation of statutory provisions.

To understand which of the Headings would cover the impugned product, we need to understand the product and the principles of interpretation. The applicant has preferred to refer to Wikipedia to explain us the impugned product.

We have certain inferences from the above that –

• Fluorine has the chemical symbol F and atomic number 9 and is the most electronegative element.
• 18F is a radioisotope.
• 18F is a positron-emitting radioisotope and is used in radiopharmaceutical imaging such as PET scanning.
• Two compounds, namely fluorodeoxyglucose (1SF-FDG) and derivatives of ‘SF choline, are under intense clinical investigation and/or use.

Thus, it can be seen that Chapter 10 is about “Radioactive Compounds” and 18F-FDG is a compound of the radioisotope 18F. In this background, we see the Customs Tariff Heading 2844 which is for “RADIOACTIVE CHEMICAL ELEMENTS AND RADIOACTIVE ISOTOPES /INCLUDING THE FISSILE OR FERTILE CHEMICAL ELEMENTS AND ISOTOPES) AND THEIR COMPOUNDS; MIXTURES AND RESIDUES CONTAINING THESE. PRODUCTS^“ . Thus, the Heading 2844 covers radioactive isotopes and their compounds. 18F-FDG being a compound of the radioisotope 18F, it would fall in this Heading 2844.

However, it has been argued that the impugned product being a chemical pharmaceutical, falls in the Heading 30.06. Since the whole gamut of the arguments revolve around the Harmonized Commodity Description and Coding System Explanatory Notes (HSN).

We have referred to many an informative articles to understand the dispute at hand. We have seen above that 18F is a radioisotope AND fluorodeoxyglucose (18F-FDG) is a compound. And since all point to the impugned product being a compound of the radioisotope 18F, the Tariff Heading which covers the situation is Heading 2844 which is for “RADIOACTIVE CHEMICAL ELEMENTS AND RADIOACTIVE ISOTOPES (INCLUDING THE FISSILE OR FERULE CHEMICAL ELEMENTS AND ISOTOPES) AND THEIR COMPOUNDS; MIXTURES AND RESIDUES CONTAINING THESE PRODUCTS”. Heading 2844 covers compounds of radioactive isotopes. And it has been specifically provided that –

– All radioactive chemical elements and radioactive isotopes, and compounds of such elements and isotopes (whether inorganic or organic, and whether or not chemically defined), are classified under heading 28.44, even though they could also fall under some other heading of the Nomenclature.

– Goods (other than radioactive ores) answering to a description in heading 28.44 or 28.45 are to be classified in those headings and in no other heading of the Nomenclature.

– The Heading 2844 itself acknowledges the fact that

• the radioactive chemical elements and isotopes of the heading 2844 are often used in the fbrm of compounds or products which are “labelled” (i.e., contain molecules with one or more radioactive atoms). Such compounds remain classified in this setting, even when dissolved or dispersed in, or mixed naturally or artificially with, other radioactive or non-radioactive materials.
• artificial radioactive isotopes and their compounds are used in medicine, e.g., for diagnosing or treating certain diseases (cobalt 60, iodine 131, gold 198, phosphorus 32, etc.).

The applicant has informed that the impugned product is transported in specialised shielded tungsten containers. Articles from the Internet also reveal that radioactive isotopes and the compounds are packed in anti-radiation metal outer containers. In view of all above, we do not have an iota of doubt that the impugned product, a compound of the radioisotope 18F, is covered by the Heading 2844.

We see that the applicant’s argument revolves around the point that ‑

• A chemical pharmaceutical, falls in the Heading 30.06.
• Heading 3006 covers diagnostic reagents.
• Diagnostic reagents (including microbial diagnostic reagents) covered by the heading are those administered by Ingestion, Injection, etc.
• Diagnostic reagents not designed to be administered to the patient (e.g. those for carrying out tests on blood. Urine etc., samples taken from a patient or for use as laboratory reagents) are excluded; they fall in the headings appropriate to the materials of which they are made (e.g. Chapter 28, Chapter 29 or heading 30.02 or 38.22).

While relying on the above, the applicant seems to ignore the inherent differentiation as has been laid down in the HSN (HSN forms the basis for Customs Tariff) and which is –

• General Note 1 of Section V I [PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES’ provides that all radioactive chemical elements and radioactive isotopes, and compounds of such elements and isotopes (whether inorganic or organic, and whether or not chemically defined), are classified under heading 28.44, even though they could also fall under some other heading of the Nomenclature.
• General Note 2 of Section VI [PRODUCTS OF THE CHEMICAL OR ALLIED 1NDUSTR1ES1 provides that goods (other than those described in heading 28.43 to 28.46 or 28.52) which are covered by /wading 30.04, 30. 05, 30.06, 32.12, 33.03, 33.04, 33.05, 33.06, 33.07, 35.06, 37. 07 or 38.08 by reason of being put up in measured doses or for retail sale, are to be classified in those headings notwithstanding that they could also fall in some other heading of the Nomenclature. While reading this Note, we cannot forget the words in the bracket and which are “other than those described in heading 28.43 to 28.46 or 28.52″. Here also, exception is made to goods falling in Heading 28.44.

Therefore, even if the compounds of radioactive isotopes may have uses in medicine, they fall in Heading 2844 only. We very determinedly feel that we need not enter into any discussion or any case law as to what would be a medicament and the properties thereof. 18F-FDG is a radioactive compound (Essentials of Inorganic Chemistry: For Students of Pharmacy, Pharmaceutical Sciences and Medicinal Chemistry by KATJA A. STROHFELDT – Chapter 10 – Radioactive Compounds and Their Clinical Application) and we are guided by the Notes which unambiguously make it clear that ‑

• Heading 2844 covers radioactive isotopes and their compounds. 18F-FDG being a compound of the radioisotope 18F, it would fall in this Heading 2844.
• All radioactive chemical elements and radioactive isotopes, and compounds of such elements and isotopes (whether inorganic or organic, and whether or not chemically defined), are classified under heading 28.44, even though the^y could also fall under some other heading of the Nomenclature.

The Tariff item 28444000 reads “Radioactive elements and isotopes and c.ompounds other than those of sub‑heading 2844 10, 2844 20 or 2844 30; alloys, dispersions (including cermets), ceramic products and mixtures containing these elements, isotapes or compounds; radioactive residues”. Hence, the impugned product would fall in the aforesaid Tariff item.

The applicant has placed an argument that medicaments have been consciously place in Chapter 30 of the Tariff and hence, the same principle should be followed in the case of the instant product. The applicant has also put forth a point that certain other supplier is classifying the impugned product as falling in Chapter 30 (Heading 30.06). With regard to this, we feel that it would have to be appreciated that classification is based on the applicable provisions and not on treatment by suppliers of similar goods. In the present proceedings, we remain unaffected by any mis-classification. For the present, we are convinced in our view that the impugned product merits classification in Heading 2844.

In view of the deliberations held hereinabove, we answer the questions thus –

Question 1

Whether the product ‘Fludeoxyglucose’ or `FDG’ can be classifiable under Chapter 3006 3000 of the Central Excise Tariff Act, 1985?

The product ‘Fludeoxyglucose’ or ‘FDG’ is not classifiable under Chapter 3006 3000 of the Central Excise Tariff Act, 1985 or the Customs Tariff Act, 1975 (51 of 1975).

Question 2

Whether chemicals used as pharmaceuticals that are inorganic or/ and of organic nature shall merit classification only under Chapter 28 & 29 and not under chapter 30 which has been specifically carved out for chemical pharmaceuticals by makers of law?

It needs to be observed herein that the classification of every product is distinct. A product is to be classified as per the Tariff, Rules of interpretation and other provisions in respect of classification as applicable. The question is of a very general nature and is not for classification of any specific product. In view thereof, this question cannot be entertained under the provisions of section 98 of the GST Act.