In re Indranil Chatterjee (GST AAR West Bengal)
Introduction: In a recent decision by the Goods and Services Tax Appellate Authority for Advance Ruling (GST AAR) in West Bengal, the classification of Jac Olivol Body Oil under Indian customs law has come into focus. The central question revolves around whether the product should be categorized as a ‘medicament’ or a ‘cosmetic,’ thereby affecting its tax liability and regulatory requirements.
Core Issue: Medicament or Cosmetic?: The applicant, represented by their legal advocate, argued that Jac Olivol Body Oil primarily aims to cure dry skin, relieve body aches, and prevent blisters among other therapeutic uses. They claim that all the ingredients used meet the criteria set by the Ayurvedic pharmacopoeia and are approved by the Drug Controller.
Customs Tariff Act Classifications: Under the Central Excise Tariff Act, a product is classified as a medicament under Chapter 30 if it has therapeutic or prophylactic uses. On the other hand, cosmetics fall under Chapter 33 and cover preparations for skin care rather than treatment of ailments. The distinction hinges on the ‘use’ of the product and not its inherent properties.
Legal Precedents and Judgments: The applicant referenced various judgments, most notably a recent Supreme Court case where a product, Aswani Homeo Arnica Hair Oil, was classified as a ‘medicament.’ The court applied the ‘common parlance test’—how a product is generally understood by the public—to make its determination.
Inconsistency in Product Labeling: The authority found inconsistencies in the description of Jac Olivol Body Oil across various platforms. While some descriptions emphasize its therapeutic properties, others focus more on its cosmetic benefits like promoting soft, smooth, and glowing skin.
Online Portrayal: Further diluting the applicant’s case, the product descriptions on online marketplaces like Amazon and Big Basket highlight the cosmetic properties of Jac Olivol Body Oil, emphasizing its ability to make the skin soft, smooth, and radiant.
Conclusion: Based on the above analysis, the GSTAAR in West Bengal determined that Jac Olivol Body Oil primarily serves as a ‘preparation for the care of skin’ and should thus be classified as a cosmetic under Chapter 33 of the Central Excise Tariff Act. Despite the applicant’s claims and legal precedents, the primary use and marketing of the product point towards its cosmetic nature.
This case serves as a landmark ruling, providing insights into how a product’s classification can impact its regulatory requirements and taxation. As the line between medicaments and cosmetics continues to blur, more comprehensive guidelines may be needed to clear such ambiguities in the future.
Read AAAR Order: Classification of Jac Olivol Body Oil: HSN 3004 or HSN 3304? No Ruling by AAAR
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, WEST BANGAL
1.1 At the outset, we would like to make it clear that the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression ‘GST Act’ would mean the CGST Act and the WBGST Act both.
1.2 The applicant intends to produce JAC OLIVOL BODY OIL classified as Ayurvedic patent & proprietary Medicine and inter alia the applicant is in advanced stages of entering in to contract manufacturing agreement with the trade name owners of the said product.
1.3 The applicant submits that JAC OLIVOL BODY OIL is in the market for more than two decades, being granted with a licence under section 3(4) of the Drug and Cosmetic Act, 1940, inter alia, an ayurvedic patent and proprietary medicine.
1.4 The applicant has made this application under sub-section (1) of section 97 of the GST Act and the rules made there under seeking an advance ruling as to whether the product manufactured & sold by the applicant shall fall under HSN No. 3004 or under HSN 3304 of the GST Tariff.
1.5 The aforesaid question on which the advance ruling is sought for is found to be covered under clause (a) of sub-section (2) of section 97 of the GST Act.
1.6 The applicant states that the question raised in the application has neither been decided by nor is pending before any authority under any provision of the GST Act.
1.7 The application is, therefore, admitted.
2. Submission of the applicant
The submission of the applicant is that:
2.1 The product intended to be manufactured i.e. Jac Olivol Body Oil is an ayurvedic patent & proprietary medicine which is clearly described in its label, incidentally protected by copyright and trademarks.
The label representing the product in question, as incorporated in the written submission and sent by the authorised advocate of the applicant through e-mail on 28.07.2023.
2.2 The product in question is being used as an ayurvedic patent and proprietary medicine and that all ingredients used to produce the material are mentioned in the Ayurvedic pharmacopoeia and authoritative textbooks of Ayurveda (Bhavprakash) and inter alia approved by the Drug Controller.
2.3 The applicant states that as per the prevailing rate structure, the best classification of the product has to be done under HSN 3004 thereby attracts tax @ 12% of goods specified in Schedule II as below:
