In re Chromachemie Laboratory Private Limited (GST AAAR Karnataka)
The appellate authority for advance ruling set aside the ruling passed under section 98(4) of the CGST Act 2017 vide NO. KAR. ADRG 71/2019 dated 23-09-2019 i.e. Contention of the appellant is allowed where in the Pharmaceutical Reference Standards (Prepared Laboratory Reagents) imported and supplied by the Appellant and classified under Tariff Item 3822 00 90 of the Customs Tariff Act, 1975 is covered under Entry No. 80 of Schedule-II to Notification No. 1/2017- Integrated Tax (Rate) dated 28th June 2017 attracting a levy of Integrated Tax at the rate of 12%.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, KARNATAKA
(Under Section 101 of the CGST Act, 2017 and the KGST Act, 2017)
1. At the outset we would like to make it clear that the provisions of CGST, Act 2017 and SGST, Act 2017 are in parimateria and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act
2. The present appeal has been filed under section 100 of the Central Goods and Service Tax Act 2017 and Karnataka Goods and Service Tax Act 2017 (herein after referred to as COST Act, 2017 and SGST Act, 2017) by M/s. Chrornachemie Laboratory Private Limited, (herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 71/2019 Dated: 23 Sept 2019.
Brief Facts of the case:
3. The Appellant, is a leading organization engaged in new product development for the pharmaceutical, bio pharmaceutical and food industries.The Appellant inter alia imports Pharmaceutical Reference Standards (hereinafter also referred to as ‘PRS) of various official pharmacopoeias like US Pharmacopoeia (USP), European Pharmacopeia (EDQM), British Pharmacopoeia (BP) and supplies them to all major pharmaceutical companies in India.
4. PRS is a reference analytical sample provided by the official global pharmacopoeias required to be used by the pharmaceutical manufacturers to confirm that their product quality standards are in conformity with the respective monographs prescribed. The drug manufacturing companies use these PRS in their laboratory tests on all drug substances for determining the purity of medicine and identification and quantification of pharmaceutical impurities.
5. The Appellant is importing PRS as ‘Prepared Laboratory Reagent’ and classifying the same under Tariff Entry 3822 00 90 of the Customs Tariff Act, in line with the decision of Hon’ble CESTAT, Bangalore in the matter which is reported in LGC Promochem India Pvt. Ltd. v. Commissioner of Customs ct Service Tax, Bangalore,reported in 2016 (340) E.L.T. 406 (Tri. – Bang.). This decision has been upheld by Hon’ble Supreme Court of India and reported in 2018 (360) E.L.T. A173 (S.C.).
6. The Appellant filed an application for advance ruling before the Karnataka Authority for Advance Ruling, seeking a ruling on the following question:
“Whether the Pharmaceutical Reference Standards (Prepared Laboratory Reagents) imported and supplied by the applicant and classified under Tariff Item 3822 00 90 of the Customs Tariff Act, 1975 is covered under Entry No. 80 of Schedule-II to Notification No. 1/2017- Integrated Tax (Rate) dated 28th June 2017 attracting a levy of Integrated Tar at the rate of 12%?”
7. The Karnataka Authority for Advance Rulings vide order No. KAR ADRG 71/2019 dated 23.09.2019 held that the Prepared Laboratory Reagents or Pharmaceutical Reference Standards, which are not diagnostic reagents, are not covered under Entry SI. No. 80 of Schedule Il to the Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017 and the same is covered under the residuary Entry under SI. No. 453 of Schedule Ili to the Notification No. 01/2017- Integrated Tax (Rate) dated 28.06.2017 attracting Integrated Tax at the rate of 18 per cent.
8. The Advance Ruling Authority held that the Pharmaceutical Reference Standards classifiable under Tariff Item 3822 00 90 is a reagent not used for diagnostic purposes;that the description under Entry under SI. No. 80 to Schedule 11 to the Notification No. 01/2017-Integated Tax (Rate) dated 28.06.2017 means all “diagnostic kits and diagnostic reagents”;that the principle of ejusdem generis is applicable and the reagents of the class of diagnostic reagents only are covered under the Entry under SI. No. 80 to Schedule II to the Notification No. 01/2017- Integrated Tax (Rate) dated 28.06.2017 and that the word “diagnostic” is applicable not just to “kits” but also to “reagents”;that the commodities of HSN Code 3822 00 I1, 3822 00 12 and 3822 00 19 which are for medical diagnosis are covered under the Entry under SI. No. 80 to Schedule II to the Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017 and not all laboratory reagents;that the word “and” is a word of conjunction and it joins two goods “kits” and “reagents” and that they are with the common adjective of being “diagnostic” and hence joins two classes of goods “diagnostic kits” and “diagnostic reagents”;that the goods of Chapter Heading 3822 other than “diagnostic kits” or “diagnostic reagent?’ are not covered under any specific entry of Schedule I or Schedule H or Schedule IV or Schedule V or Schedule VI of the Notification No. 01/2017-Integrated Tax (Rate) dated 28.06.2017 and hence the Pharmaceutical Reference Standards gets covered under the entry under SI. No. 453 of the Schedule 111 which is taxable at 18% GST.
9. Aggrieved by the ruling of the Authority, the Appellant has filed this appeal before us on the following grounds:
9.1. At the outset, the Appellant submitted that in terms of Section 98(6) of the CGST Act, the Advance Ruling Authority should have pronounced the Ruling in writing within 90 days from the date receipt of application. In the instant case, the Appellant filed the application before the Karnataka Authority for Advance Ruling on 28.09.2018 whereas the Authority has pronounced the impugned Ruling bearing No. KAR ADRG 71/2019 dated 23.09.2019 after a period of almost 12 months from the date of application. Thus, the Appellant submits that there is an inordinate and unexplained delay in pronouncement of the Ruling by the Advance Ruling Authority. The Appellant relied on several decisions of the Courts and Tribunal to submit there is a gross violation of the statutory provisions of law as provided under Section 98(6) of the CGST Act read with Rule 106 of the CGST Rules..
9.2. The Appellant submits that Chapter 38 of the Customs Tariff Act, 1975 (hereinafter referred to as `CTA’)provides for classification of “Miscellaneous chemical products “Chapter Heading 3822 covers “Diagnostic or laboratory reagents on a backing, prepared diagnostic or laboratory reagents whether or not on a backing, other than those of heading 3002 or 3006; certified reference materials”. They submitted that Sub-heading 3822 00 covers the following goods:
