Custom, Excise & Service Tax Tribunal
Reckon Diagnostics P Ltd vs Vadodara-I on 17 August, 2018
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Appeal No.E/1056-1057/2010-DB
[Arising out of OIA-COMMR-A-/10&11/VDR-I/2010 Dated 29.01.2010 passed by Commissioner of
Central Excise, Customs and Service Tax-VADODARA-I]
M/s Reckon Diagnostics P Ltd Appellant
Vs
C.C.E. & S.T.- Vadodara-i Respondent
Represented by:
For Appellant: None For Respondent: Shri K.J. Kinariwala (AR) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing: 07.08.2018 Date of Decision: 17.08.2018 Final Order No. A / 11778-11779 /2018 Per: Ramesh Nair The short issue involved in the present case is classification of the goods namely, Diagnostics Kits that whether it is classifiable under chapter head 3822.00 or 3002.00 of first schedule to the Central Excise Tariff Act, 1985. The fact of the case is that the assessee have procured "SALMONELLA ANTIGENS" from M/s Beacon Diagnostics (P) Ltd., GIDC., Kabilpore, Navsari (Distt Valsad) in bulk pack under the cover of Central Excise invoices falling under chapter Ch.Sh.No. 3002.00. It was noticed that on receipt of "SALMONELLA ANTIGENS", its sample is tested for approval and RDA report is maintained for the same. The appellant affixed the label/ wrapper IMMUNO PACK Widal 2+2*5 ml and 4*5 ml "SALMONELLA ANTIGENS" set on each vial/bottle and then packed along
2|Page E/1056-1057/2010-DB with glass for rapid slide and tube test. On Carton / Box appellant was mentioning that "NOT FOR MEDICINAL USE FOR IN VITRO USE ONLY". The appellant were maintain batch register for the same, they have neither declared such product to the department and nor they have paid Central Excise duty on the said goods. Accordingly, the SCN was issued and the demand was confirmed, classifying the goods under chapter heading 3822.00. After aggrieved by the Order in Original, appellant filed appeal before Ld. Commissioner (Appeals) who by passing a detailed order upheld the Order in Original and rejected the appeal filed by the appellant therefore, the present appeal.
2. None appeared on behalf of the appellant, further written submission was filed by the appellant wherein, it was urged that in the appellant's own case this Tribunal passed the order, whereby the issue is settled in their favour and goods accordingly, correctly classifiable under chapter heading 3002.00, as the goods are meant for Diagnostics use.
3. Sh. K.J. Kinariwala Ld. Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. On careful consideration of the submission made by the both the sides, We find that this Tribunal has considered the same issue in the appellant's own case and decided that the product in question is classifiable under chapter heading 3002.00 and not under 3822.00. The relevant order of this Tribunal as cited above, reproduced below:
Since these two appeals are of the same assessee and involving same issue, they are being disposed of by a common order.
2. The relevant fact that arise for our consideration are that appellant herein was purchasing "Pure Water", classifiable under Chapter Heading 2201.19. After purchasing the said pure water from M/s. Gujarat State Fertilizer Company Limited (GSFC for short), in bulk pack/in tanker load, appellant used to re-pack into 5 litres Jars and carboys and affixing the same with label as "Pure Water". Revenue authorities felt that this amounts to manufacture and word „Pure Water‟ used by the appellant, would fall into the ambit of Brand Name as given in Chapter 3 of Chapter 22 and accordingly the product will attract duty. Another issue raised in this case is whether „WIDAL-
3|Page E/1056-1057/2010-DB SALMONELLA ANIGENS KIT‟ would fall under Chapter Heading No. 30.02 as claimed by the assessee or under 38.22, as held by adjudicating authority.
3. Adjudicating authority did not accept the contentions of raised by the appellant and confirmed the demands raised on the appellant by discarding the defence of the appellant, in respect of both the issues. Aggrieved by the order-in-original, appellants preferred appeal to the first appellate authority, who also concurred with the views of the adjudicating authority and confirmed the demands on the appellant. Hence these appeals.
4. Learned counsel appearing on behalf of the appellants would submit that, as regards „Pure Water‟, the issue is very well settled by the decision of the Hon‟ble Supreme Court in the case of Tata Tea Limited - 2002 (142) E.L.T. 3 and the decision of the Tribunal in the case of Nestle India Limited - 2004 (170) E.L.T. 474, C.C.E. v. Kamani Foods - 1999 (114) E.L.T. 644 and Zeneca ICI Agro Chemicals Limited v. C.C.E. - 2009 (238) E.L.T. 770. It is his submission that all these decided case laws clearly indicate that the product‟s name should be considered at the time when it was cleared and in the case in hand, he submits that purchase water in bulk, received invoices in the name of Pure Water and after repacking the same in 5 Litres and 20 Litres, the label affixed is also „Pure Water‟. It is his submission that words „Pure Water‟, by any stretch of imagination cannot be considered as brand name. He would submit that, the very same was considered in the Kamani Food wherein, it is dearly held that Pure Water is classifiable under Chapter 22.01.90.
5. As regards the classification of „WIDAL-SALMONELLA ANIGENS SET‟, it is his submission that the said issue is also now well-
settled by the Hon‟ble Supreme Court in the case of Span Diagnostics Limited - 2007 (211) E.L.T. 521. He takes us through the entire case law and submits that the Hon‟ble Supreme Court has specifically, in paragraph 21, has clearly held that „WIDAL-SALMONELLA ANIGENS SET‟ falls under Chapter Heading 30.02. He also takes us through the decisions of the Tribunal in the appellant‟s own case as reported - 2008 (222) E.L.T. 54 and submits that Tribunal has taken a view that term „Diagnostic or Laboratory Agent‟ occurs only in Chapter 38.22 and not in Heading 30.02 and hence, Diagnostic or Laboratory Agents fall under Chapter Heading 30.02 as well. He would also take us through the HSN Notes of Chapter 30 for the relevant period and HSN Notes 38.22, to draw distinction with their products, that „WIDAL- SALMONELLA ANIGENS‟ would fall under the category of sub-heading 30.02.
6. Learned SDR, on the question of classification of "Pure Water", reiterates the findings of adjudicating authority as well as the Commissioner (Appeals). As regards the classification of „WIDAL- SALMONELLA ANIGENS SET‟, it is his submission that the said classification has already been settled by the Tribunal decision in the case of J. Mitra& Company Limited v. C.C.E., New Delhi - 2002 (140) E.L.T. 524. He would specifically takes us through the findings of initiated in the Para 5 of the said judgment.
7. In rejoinder, learned Counsel would submit that J. Mitra& Company Limited and Company‟s decision has been over-ruled by the judgment of the Hon‟ble Supreme Court in the case of Span Diagnostics, for which he draws our attention to Para-1, wherein specifically, the appeal numbers are mentioned. It is his submission that Span Diagnostics decision holds good even today.
8. On careful consideration of the submissions made by both sides, we find that the issue involved is regarding classification of two different products, which we intend to deal separately.
9. As regards, the classification of „Pure Water‟, the Revenue authorities are of the view that the appellant having repacked the said water from tanker or bulk water purchased from M/s. GSFC, will fall under the category of deemed manufacture, as provided in Chapter 3 of Chapter 22. Learned Commissioner (Appeals) has recorded following findings :-
"In this regard, I find no merit in the submissions of the
4|Page E/1056-1057/2010-DB appellants that the process undertaken by them does not result in the manufacture of a new product and that the label "Pure Water" cannot be regarded as a brand. I find from the invoice of M/s. GNFC that the product sold by them has been described as DM Water, i.e. De- mineralized Water, whereas the product sold by the appellants is in the name and style of "Pure Water". As per the appellant‟s own submission, the product is used by doctors, laboratories and pharmaceutical industry and thus the product has a distinct market. To identify its product in the market, I find that the appellants have invented the word "Pure Water" and accordingly marketed the product. The use of the label "Pure Water" is nothing but the use of a brand name and therefore, it meets with the definition of "Brand Name" as given in Chapter note 3 of Chapter 22 of the CETA, schedule. In view of above, I find that the "Pure Water" in 5 litre retail pack is a product distinct from the De-mineralised Water in bulk procured by the appellants and the process of conversion of de-mineralised in bulk to the product "Pure Water" in 5 litre retail packs amounts to the manufacture of a new product, viz. "Pure Water" (branded) falling under sub-heading 2201.19 of the CETA schedule. Therefore, I hold that the order of the adjudicating authority classifying the product "Pure Water" under sub-heading 2201.19, attracting excise duty @ 16% adv. and attracting the provisions of Section 4A of Central Excise Act, 1944 by virtue of Notification 43/2000-C.E. (N.T.), dated 22-6- 2000 as amended from time to time, is sustainable in law. The confirmation of demand of duty under the proviso to Section 11A of the Central Excise Act, 1944 by invoking the extended period is in order as the appellants have deliberately mis-declared the goods with intent to evade duty. The demand of interest under Section 11AB ibid is in order and hereby upheld.
It can be seen from the above reproduced findings that the lower authorities have not recorded anything new. Factually the water is repacked into 5 Litre jars and the appellant has fixed the labels of „Pure Water‟. We are unable to appreciate the findings of the adjudicating authority as well as the first appellate authority that how this product i.e. „Pure Water‟ when packed into 5 Litres jars is distinct from demineralised water in bulk procured by the appellant. First and foremost, there is no dispute that the appellants were receiving demineralised water from GSFC as „Pure Water‟ and the classification of the said product was under sub-heading No. 22.01.19, attracting nil rate of duty. We find that the said classification would also get attracted to the product packed by the appellant into 5 litre‟s pack, as there cannot be any claim as „Pure Water‟ is brand of any person. Pure water remains pure water and it cannot be considered as branded product. We are fortified in our views by the judgment of the Hon‟ble Supreme Court in the case of Tata Tea Limited, wherein their Lordships, in Para 6 has clearly enunciated the law, which reads as under :-
6. In order to satisfy the definition of „tea‟ under Section 3(n), a product should be commercially known as tea and it should be made from the leaves of the plant of Camellia Sinensis (L) O. Kuntze.
„Instant tea‟ satisfies both these conditions. By the very name, the product namely „instant tea‟ conveys that it is a „tea‟. The term „instant tea‟ is not the brand name of the product manufactured by the assessee but the name of the product itself. It is a variety of tea. Further, the term „instant tea‟ gives a meaning that it is a „tea‟, which can be prepared/used instantaneously. Merely because the product is known as „instant tea‟, it does not cease to be known commercially as „tea‟. Whether tea is consumed as hot beverage or a cold beverage depending upon one‟s liking and taste, it does not make any difference in deciding whether it is a tea falling within the definition of Section 3(n) of the Act. In our view, the manner of preparation of tea and the process of manufacture of „instant tea‟ powder cannot take away „instant tea‟ out of definition of „tea‟ under the Act. Ultimately „instant tea‟ is produced from the leaves of the plant Camellia Sinensis (L) O. Kuntze. In these circumstances, the „instant tea‟ is covered by the definition of tea within the meaning of Section 3(n). Once „instant tea‟ falls within the definition of Section 3(n), a cess can be levied on it under Section 25 of the Act. In our view, the Commissioner (Appeals)
5|Page E/1056-1057/2010-DB was right in upholding the order of the Assistant Commissioner but the Tribunal went wrong in holding that „instant tea‟ is different from „tea‟ and it fell outside the scope of Section 3(n) of the Act referring to Prevention of Food Adulteration Rules, 1955 and the Tea Waste (Control) Order, 1959. When the Act defined „tea‟ specifically, the Tribunal ought not to have strained itself by referring to other enactments to construe „instant tea‟ as the product not included within the definition of „tea‟ under the Act.
10. It can be seen from the above reproduced paragraph of the Apex Court‟s decision in Tata Tea Limited, wherein their Lordships have clearly held that term „Instant Tea‟ is not a brand name of the product manufactured by the assessee therein, it is nothing but a name of the product itself. In our considered view, this ratio will clearly cover the issue before us, „Pure Water‟, by any stretch of imagination cannot be considered a brand name. There is no evidence on record brought by the Revenue as to hold that word „Pure Water‟ was registered as brand name. In the absence of any such evidence, we have to hold that classification of the product sought by the appellant under Chapter Heading No. 2201.11, is correct and the classification done by the Revenue authorities under Chapter Heading No. 2201.19 is, incorrect. The impugned order, to that extent is liable to be set aside and we do so.
11. As regards the classification of the product „WIDAL- SALMONELLA ANIGENS SET‟, the Commissioner (Appeals) has held that the classification of this product would fall in Chapter Heading No. 3822, as against claimed by the assessee of 3002, by recording following findings :-
"With regard to the product, viz. "Widal Salmonella Anigens Set", it is observed that the adjudicating authority has given a detailed finding by relying upon the product description, technical literature, elements contained in the products, their recognition in common parlance and their specific uses for specific purposes under specific atmosphere by the laboratory and clinic and come to the conclusion that the product was classifiable under sub-heading 3822.00 of the CETA schedule. In this regard, I am in agreement with the observations of the adjudicating authority as under :-
"In view of the above discussion and findings, I find that "Widal- SALMONELLA ANIGENS SET" Blood Chemistry Reagent Kits manufactured by them and mentioned in drugs licence by issuing authority, is a composite product and the same is known as diagnostic reagent SET ordinarily. The testing method mentioned above of the product can be followed only by a qualified person and in clinic or pathological laboratory and the most important fact is that the Widal test is for identification of fever (P.U.O.) as enteric as well as one of the screening test for potential carriers of the disease is not itself a micro organism. So "WIDAL-SALMONELLA ANIGENS SET", is to be composite product falling in the category of "prepared diagnostic or laboratory reagents."
In this regard the argument of the appellants that the product falls under Heading 3002.00 of the CETA schedule is not correct as the said heading covers antisera and other blood factions, vaccines, toxins and cultures of micro organisms and similar products, which can be regarded as pharmaceutical products and medicaments whereas the product under consideration is clearly not for medicinal use and is a composite blood chemistry reagent kit. Further, the activity undertaken by the appellants - of putting four different varieties of Salmonella Antigens procured in bulk packs into four separate ampoules of 4 ml each and putting the same in a box/carton for sale as a composite WIDAL-SALMONELLA ANIGENS SET of 4 or 2 Antigens
- is nothing but labelling/relabeling of container and repacking from bulk pack to retail pack or adopting of any other treatment to render the product marketable to the consumers and thus amounts to manufacture in terms of clause (ii) of Section 20(f) of the Central Excise Act, 1944 read with Chapter Note 5 of Chapter 38 of the CETA schedule. The order of the adjudicating authority holding the activity as amounting to manufacture and classifying the product under sub- heading 3822.00 of the CETA schedule is therefore in order. The order
6|Page E/1056-1057/2010-DB of confirmation of demand by invoking the extended period on grounds of suppression of facts etc., with intent to evade duty is sustainable as also the order for recovery of interest thereon."
12. It can be seen from the above reproduced findings of the learned Commissioner (Appeals) that he has come to the conclusion that the product manufactured by the appellant would not fall under Heading 30.02, by holding that heading 30.02 covers antigens and other vaccines and excludes diagnostic kits. The case of the appellant before the lower authorities was very same. The appellants have always argued that antigens remain antigens as received from the supplier and goods were received under Chapter Heading No. 30.02 from the bulk supplier. The bulk supplier had classified the product under Chapter 30.02 and the said classification of the bulk supplier has not been challenged or changed by the Revenue till date and it remains the same. It is also seen from the record that this factual matrix is not disputed by the Revenue. On perusal of HSN Notes under Chapter 30, as correctly pointed out by the learned counsel that product "Diagnostic Kits" has been classified under Chapter Heading 30, which the answer to the following description, we reproduce the same :-
"(E) Diagnostic Kits.
Diagnostic kits are classified here when the essential character of the kit is given by any of the products of this heading. Common reactions occurring in the use of such kits include agglutination, precipitation, neutralization, binding of complement, haemagglutination, enzyme-linked immunosorbent assay (ELISA), etc. The essential character is given by that single component which governs to the greatest extent the specificity of the test procedure." It can be seen that, groups which answer to the description of "Agglutination" would fall under Chapter 30. On perusal of show cause notice, we find that the show cause notice starts with the premise that the „WIDAL-SALMONELLA ANIGENS KIT, is functioning on the parameters of agglutination of the blood in order to test whether the patient/person is infected with typhoid or not. We also find that the HSN explanatory notes under Chapter 38.22 clearly exclude those, which are falling under Chapter Heading 30.02 or 30.06. It has been amply demonstrated before us by the learned counsel that the „WIDAL-SALMONELLA ANIGENS KIT‟ is nothing but antisera and other blood fractions. We find that the Apex Court in the case of Span Diagnostics had an occasion to look into the rival entries of 30.02 and 38.22 for classification of such antisera and other blood fractions. We may respectfully reproduce the ratio of their Lordships, which is found in Paras 21 and 22 :-
21. As stated above, Chapter Heading 30.02 refers to antisera and other blood fractions. According to the Explanatory Note in HSN (Seventh Edition), antisera is obtained from the blood of humans or animals which are immune against diseases. Antisera is used for diagnostic purposes, including in-vitro tests. There is nothing like crude antisera and refined antisera. In the present case, even according to the Department, PTK is an antisera, however, according to the Department, PTK is a refined antisera. As stated, antisera falls under Chapter Heading 30.02. In the circumstances, "antisera" is covered by Chapter Heading 30.02 and since it is covered by that Heading, Chapter Heading 38.22 will not apply. If one reads Chapter Heading 38.22, it becomes clear that there could be diagnostic or laboratory reagents which could fall under Chapter Heading 30.02 and also under Chapter Heading 38.22. However, if a diagnostic or laboratory reagent like antisera falls under Chapter Heading 30.02 then it stands excluded from Chapter Heading 38.22.
22. Before concluding we may record the statement made on behalf of M/s. J. Mitra& Co. Ltd. that they have closed down their business in producing the following two items, namely, Syphilis RPR (VDRL) and Salmonella Antigens. Hence, they do not seek to press the classification issue concerning the said two items."
13. It can be seen from the above reproduced ratio of their Lordship‟s judgment, the product in question in this case gets covered
7|Page E/1056-1057/2010-DB under Chapter Heading No. 30.02. The learned SDR‟s reliance placed on J. Mitra& Company‟s case is also over ruled by the Apex Court in the case of Span Diagnostic case.
14. In view of the foregoing, we hold that the classification of product „WIDAL-SALMONELLA ANIGENS KIT‟ would be correctly classified under Chapter Heading 30.02, as claimed by the assessee.
15. In sum, the impugned orders are set aside and appeals are allowed with consequential relief, if any.
5. In view of the above Tribunal order in the appellant's own case the issue is no longer Res-integra, accordingly, following the ratio of the above said judgment we set aside the impugned order and allow the appeals.
(Pronounced in the open court on 17.08.2018)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Seema