Custom, Excise & Service Tax Tribunal
Hyderabad-Ii vs Sandor Medicaids Pvt Ltd on 4 October, 2018
(1) Appeal No: C/574/2009
C/673/2012
C/3032/2012
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No. Appellant Respondent Impugned Order No. & Date
CCCE&ST, Sandor O-I-A No. 31/2009 (H-II) Cus,
C/574/2009 Hyderabad-II Medicaids Pvt. dated 08.07.2009 passed by
Ltd. CCE, C&ST, Hyderabad-II
C/673/2012 Sandor CC, Hyderabad-II O-I-O No. 12/2011-Adjn (Cus)
Medicaids Pvt. Commissionerate (Commr.) dated 26.12.2011
Ltd. passed by CCE C&ST,
Hyderabad-II
C/3032/2012 Sandor CCE C&ST, O-I-O No. 02/2012-ACC(R),
Medicaids Pvt. Hyderabad-II dated 06.01.2012 passed by
Ltd. ACC, Hyderabad-II
Commissionerate
Appearance
Shri Arun Kumar, Dy. Commissioner/AR for the Appellant. Shri Rajeev Sindhi, Managing Director, for the Respondent Coram:
Hon'ble Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL) Hon'ble Mr. P.V. SUBBA RAO, MEMBER (TECHNICAL) Date of Hearing: 24.07.2018 Date of Decision: 04.10.2018 FINAL ORDER No: A/31245 - 31247/2018 [Order per: P. VENKATA SUBBA RAO]
1. These three appeals deal with the same issue and hence are being disposed of together. Appeal No. C/673/2012 and C/3032/2012 have been preferred by the appellant assessee against Order-in-Original No. 12/2011-
Adjn (Cus) (Commr.) dated 26.12.2011 and 02/2012-ACC(R), dated (2) Appeal No: C/574/2009 C/673/2012 C/3032/2012 06.01.2012 passed by Commissioner of Customs and Asst. Commissioner of Customs respectively, while appeal No. C/574/2009 has been preferred by Revenue against Order-in-Appeal No. 31/2009 (H-II) Cus, dated 08.07.2009 passed by Commissioner (Appeals). All these appeals involve the same issue regarding classification of "SYNVISC HYLAN G-F 20 medical device in sterile solution form for treatment of Osteoarthritis"
imported by the appellant assessee under various Bills of Entry. Show cause notice dated 17.05.2017 was issued by Commissioner of Customs in respect of 17 bills of entry dated between 18.11.2004 and 05.01.2007 as listed in the annexure to the show cause notice. Importer claimed classification of these as medical devices under Customs Tariff No. 90214090 and claimed the benefit of exemption notification No. 21/2002 (S.No. 370) and cleared the goods at nil rate of duty as applicable. It has been alleged in the show cause notice that the goods imported by appellant are nothing but Sodium Hyalauronate sterile 1% which is correctly classifiable under CTH 3004 9099, chargeable to duties as per S.No. 80 of Customs Notification No. 21/2002. It has been alleged that the imported item Sodium Hyalauronate solution 1% has not been correctly mentioned either in the description on the invoice or in the bills of entry. Thus, they have wrongly availed the benefit of exemption notification No. 21/2002 by wilfully suppressing the actual description of the goods. It was, therefore, proposed to re-assess the 17 bills of entry invoking the extended period of five years and recover duty along with interest from the appellant assessee. Further, it was also proposed to impose penalty under section 114 A of Customs Act, 1962. The assessee's appeals are against this order.
(3) Appeal No: C/574/2009
C/673/2012
C/3032/2012
2. In respect of another bill of entry No. 290445, dated 04.03.2009 filed by the assessee, they were denied of the benefit of notification by the lower authority and on appeal, the first appellate authority held that the goods are classifiable under chapter 90 under Customs Tariff and they were eligible for exemption notification No. 21/2002-Cus (S.No. 370) and allowed the appeal with consequential relief. Revenue's appeal is against this Order-in- Appeal of the first appellate authority.
3. The short point to be decided is classification of imported goods and consequently whether the differential duty is demandable or otherwise. The second point to be decided is whether the extended period of limitation can be invoked in this case alleging that the appellant had suppressed the true nature of the goods in their invoice as well as in the description given in the bill of entry. Consequently, whether penalty can be imposed under section 114A.
4. Ld. Counsel for the appellant submits that their product SYNVISC HYLAN G-F 20, Hylan Polymer is used as an implant in the knee joint space of patients suffering from Osteoarthritis. It is recognised as a device which is used for increasing viscosupplementation in Osteoarthritis patients and is marketed in a pre-filled injection form to be administered by a (4) Appeal No: C/574/2009 C/673/2012 C/3032/2012 surgeon or a physician. It is administered once a week for three weeks, only after removing synovial fluid from the knee joint. Its function is to replace the fluid which was lost or degenerated due to passage of time. Its effect lasts for at least 26 to 52 weeks. It is not a pain killer but only helps in providing the cushioning effect in the knee which reduces the pain. This Gel is made of a combination of Hyalan molecules and it acts like a thick lubricating oil. He submits that it is a medical device and it cannot be classified under the head 30 04 as a pharmaceutical. The Customs tariff heading 9021 is meant to cover orthopaedic devices including those which are implanted in the body to compensate for disability, which is what their product is. In support of their contention, they produced a certificate from the Head of Department of Rheumatology of Nizam's Institute of Medical Sciences, which reads as follows:
" TO WHOMSOEVER IT MAY CONCERN This is to certify that Synvisc Hylan G-F 20 is a viscosupplement made of Hyluarmic acid. It is a medical device used as an absorbable implant in the knee joint for pain relief and improvement of joint mobility in patients suffering with OA of the knee joint. The product is absorbed in due time by the lymphnode system of the body. The device is indicated for pain management and improvement of joint mobility of the knee joint.
Dated 6th September, 2005 Dr. G. Narasimulu"
5. He further produced before us an extract from Medical text book published by Wahid Khan and others which gives a table of classification of (5) Appeal No: C/574/2009 C/673/2012 C/3032/2012 various Implantable Medical Devices. This indicates that there are primarily three types of medical devices (a) those which give structural or mechanical support (b) those which give functional support and (c) those which give localised drug delivery. Hyaluronate acid has been classified as the one giving functional support. He further relied on the case of Jhonson & Jhonson Ltd. vs. CCE [1997(92) ELT 23 (SC)] in which it was held that surgical material should be classified under chapter heading No. 90.18 rather than heading 3005.90. He further contended that their product was classified as drug by Drug Controller General of India (DCGI) dated
9.4.2010 as it was the practice to classify all devices including steel guide wires, heart valves and many other devices as drugs. He draws our attention to the Gazette Notification S.O. No. 1448 (E), dated 06.10.2005 of the Ministry of Health and Family Welfare, classifying ten types of devices as drugs including Orthopaedic Implants. He further contends that in 2017, notification No. GSR. 78(E), dated 31.01.2017 was issued introducing a separate chapter for regulation of medical devices under the Drugs & Cosmetics Act. Ld. Counsel also contended that the show cause notice issued by Ld. Commissioner was clearly time barred because there is no evidence that they have suppressed any facts at the time of filing bills of entry and therefore the show cause notice is hit by time bar. In view of the above, he also contended that no penalty can be imposed upon them. As far as Revenue's appeal No. C/574/2009 is concerned, Ld. Counsel argues that the first appellate authority has correctly held that their products are classifiable under chapter 90 and hence the Revenue's appeal may be rejected.
(6) Appeal No: C/574/2009
C/673/2012
C/3032/2012
6. Ld. DR reiterated the arguments made by the lower authorities in the Orders-in-Original. He would argue that the goods imported by the appellant are clearly classifiable under chapter heading No. 3006 as GEL preparations designed to be used in human or veterinary medicine as a lubricant for parts of the body for surgical operations or physical examinations or as a coupling agent between the body and the medical instruments. He, therefore, argued that Ld. Commissioner has correctly confirmed the demands and imposed penalty and Ld. Commissioner (Appeals) had in his Order-in-Appeal heard in holding that goods are classified under chapter 90 and allowed consequential reliefs.
7. We have considered the arguments on both sides and perused the records. The only point to be decided is whether SYNVISC HYLAN G-F 20 imported by the appellant assessee is rightly classifiable under chapter heading No. 9021 or under chapter heading 3006 and consequently whether any differential duty liability arises. The related issue is whether the interest is payable and penalties imposable. A related question to be decided is question of limitation and whether the extended period of limitation can be invoked holding that appellant assessee had wilfully suppressed the true nature of their product in the bills of entry and the literature furnished by them. We proceed to examine the issue of classification of the imported goods. Chapter heading No. 3006 includes products such as Sterile laminaria, blood grouping reagents, diagnostic (7) Appeal No: C/574/2009 C/673/2012 C/3032/2012 reagents designed to be administered to the patients, dental cements and other dental fillings, chemical contraceptive and Gel preparations used in human or veterinary medicines as a lubricant for parts of the body for surgical operations or physical examinations or as a coupling agent between the body and medical instruments. Chapter No. 9021 covers "orthopaedic appliances including crutches, surgical belts and trusses, splints and other fracture appliances, artificial parts of the body, hearing aids and other appliances which are worn or carried, or implanted in the body to compensate for a defect or disability". We find from the expert opinion of the Professor & Head of Rheumatology of Nizam's Institute of Medical Sciences that the imported product is an absorbable implant in the knee joint for pain relief and improvement of joint mobility of the knee joints. We also find from the literature submitted by Ld. Counsel that one class of absorbable medical devices include those which provide functional support and this category includes Hylan polymer acid. We find from the literature that the product in question is described as follows:
"Synvisc (Hylan G-F 20)/ (Hylan Polymer A & B G-F 20) synvisc is supplied in a 2.25 ml glass syringe containing 2 ml hylan G-F 20.
COMPOSITION Each 1 ml contains: hylan 8.0 mg, sodium chloride 8.5 mg, disodium hydrogen phosphate 0.16 mg, sodium dihydrogen phosphate hydrate 0.04 mg, water for injection q.s.
(8) Appeal No: C/574/2009
C/673/2012
C/3032/2012
INDICATION
Hylan G-F 20 (Synvisc) is indicated
For pain management in patients suffering with osteoarthritis of the knee, hip, shoulder and ankle.
SYNVISC (hylan g-f 20) is indicated for the treatment of pain in osteoarthritis (OA) of the knee in patients who have failed to respond adequately to conservative nonpharmacologic therapy and simple analgesics. For the treatment to decrease pain and discomfort allowing more extensive movement of the knee.
The safety and efficacy of Synvisc for conditions other than osteoarthritis has not been established.
The safety and effectiveness of the use of Synvisc concomitantly with other intra-articular injectables has not been established."
8. As far as the licence issued by the Drug Controller of India is concerned, as per Drugs & Cosmetics Act, the drugs include medical devices and they were accordingly being licensed during the relevant period. We find from the Order-in-Original that Ld. Commissioner's only allegation is that the appellant had imported SYNVISC HYLAN G-F 20 which is correctly covered under a different Sl.No. 370 of the Notification No. 25/2012. There is nothing in this order to show why the goods which are imported cannot be classified as medical devices as claimed by the appellant. The literature produced by appellant as well as expert opinion produced by them clearly show that the goods in question are known as and used as implantable medical devices by doctors. Customs Tariff heading 3006 covers Gel preparations designed for humans as lubricant for parts of the body for surgical operations. This product does not appear to (9) Appeal No: C/574/2009 C/673/2012 C/3032/2012 fall in this category as the purpose of this product is to facilitate lubricant of the joints and not to facilitate lubricant during the surgical operation. It compensates a defect which arises during osteoarthritis in the form of lack of lubrication in the knees. Therefore, the product is to be correctly classifiable under Customs Tariff Heading 9021 as an implantable medical device. We, therefore, find no infirmity in the claim of classification by the importer. At any rate, even if both Customs Tariff Heading 3006 and 9021 are considered to be applicable, 9021 being the later entry prevails. In conclusion, we find that the imported goods are classifiable under Customs Tariff Heading 9021. Consequently, the demand of duty, interest and penalty do not survive. Therefore, the Order-in-Appeal No. 31/2009 (H-II) Cus, dated 08.07.2009 passed by the first appellate authority is upheld and Revenue's appeal against this Order-in-Appeal is rejected.
9. As far as the limitation is concerned, once the appellant has declared what is being imported in the invoice and the Bill of entry, they cannot be faulted for claiming a classification which, according to them is correct. Nothing prevented the assessing officer from seeking further literature and information and re-determining the classification if the classification claimed in the Bill of Entry is felt to be incorrect. Clearly, there is no evidence on record that the appellant assessee had misdeclared the nature of goods. Hence the Orders-in-Original No. 12/2011-Adj (Cus) and 02/2012-ACC(R), dated 06.01.2012 failed on this count also. These impugned orders are set aside with consequential relief to the appellant.
(10) Appeal No: C/574/2009
C/673/2012
C/3032/2012
10. Revenue's appeal C/574/2009 is rejected and appellant's appeals C/673/2012 and C/3032/2012 are allowed with consequential relief.
(Pronounced in open Court on 04.10.2018)
(P.VENKATA SUBBA RAO) (M.V. RAVINDRAN)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
VRG