CUSTOMS AUTHORITY FOR ADVANCE RULINGS

NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAD 400 001

E-MAIL: cus-advrulinqs.mum@gov.in

Application No. CAAR/CUS/APPL/80/2023 - O/o Commr-CAAR-MUMBAI

Ruling

M/s. Bio-Rad Laboratories India Limited (having IEC No. 0596039981 and hereinafter referred to as 'the applicant', in short) filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 07.07.2023 along with its enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the 'Act' also). The applicant is seeking advance ruling on the classification of 'bovine serum albumin' (the 'Products') for imports through the Air Cargo Complex, Chennai.

2. Applicant has stated as follows in their statement of relevant facts having a bearing on the question(s) raised enclosed with the CAAR-1 application:

2.1. The Applicant inter alia has been importing certain products constituting 'bovine serum albumin' for research purposes ('the products'). Such products are albumin proteins used for laboratory purposes such as for Bradford assay or the colorimetric technique for measuring the total protein concentration in a sample. Bradford assay method is a rapid and sensitive method for the quantification of microgram quantities of protein utilizing the principle of protein-dye binding. The products imported by the Applicant are for non-medical use and are not used for therapeutic or prophylactic purpose. List of Bovine Serum Albumin imported by the Applicant for research use is as follows:

2.2. The description for US code 3003 9031 in the First Schedule to the Customs Tariff Act, 1975 mentions 'Bovine albumin and drugs of animal origin'. An extract of the relevant entry of the Customs Tariff is reproduced below for ready reference:

2.3. However, according to the Applicant, the products are more appropriately classifiable under HS code 3502 9000. Relevant entries of heading 3502 arc reproduced below for ease of reference:

2.4. The rates of Basic Customs Duty ('BCD') and Integrated Tax (IGST) applicable on products imported under the relevant HS codes are as under:

3. The applicant has further submitted their interpretation of law as follows:

The products fall under the category of 'bovine serum albumin'. Albumin is a type of protein that is soluble in water and half saturated with a salt such as ammonium sulfate. Serum albumin is a component of blood scrum. Hence, the products imported by the Applicant qualify as 'blood albumin'. Further, the products are not used for therapeutic or prophylactic purpose post-importation. Note 1(h) of Chapter 30 of the Customs Tariff specifically excludes 'blood albumin not prepared for therapeutic or prophylactic uses'. The terms 'therapeutic' and prophylactic' has not been defined under the tariff entry. Observing the same, Hon'ble Supreme Court, in the case of Commissioner of Central Excise vs Wockhardt Life Science Ltd. [2012 (277) ELT 299] placed reliance on the dictionary meaning, as per which meaning of the said term is:

"To prevent, to guard against it, before, in medicine, preventive protecting against disease." ; "Guarding against disease, a preventive of disease; a condom; preventive treatment against disease." and "Serving to cure or heal, Curative concerned in discovering and applying remedies for disease."

Note (h) of Chapter 30 read with the aforesaid meaning of the terms 'therapeutic or prophylactic' makes it emphatically clear that a blood albumin not prepared for the purpose of preventing, protecting or guarding against a disease and used for curing or healing, cannot be classified under Chapter 30. Therefore, the products arc covered under the exclusion specified under Note 1(h) of Chapter 30 and cannot be classified thereunder.

Reference is invited to the ruling of Subhash Photographies vs Union of India [1992 (62) ELT 270] wherein the Bombay High Court emphasized the importance of Chapter Notes for interpretation of tariff headings. The Court held that Chapter Notes in the Customs Tariff Act, 1975 are part of the Act itself. They are intended to provide mechanism for resolving controversy regarding classification of goods. Relevant extract of the judgment is reproduced below for ready reference:

"The next point that arises for consideration relates to the value of the Chapter Notes for the purposes of interpretation of tariff headings. In this connection it may be pertinent to observe that the Chapter Notes in the Customs Tariff Act are part of the Act itself. They are intended to provide mechanism for resolving controversy regarding classification of goods. The Customs Tariff Act, 1975 itself lays down elaborate rules of interpretation of First Schedule and classification of goods therein. These rules, in the form of principles, are laid down in the beginning of the First Schedule itself as well as in each Chapter. Every heading therefore, has to be interpreted in the light of the relevant principles of interpretation, section notes and chapter notes All the relevant rules of the interpretation in the import tariff are to be applied for classification of goods. The classification, therefore, has to be determined according to the terms of the headings read with the relevant chapter notes and rules of interpretation."

It is a settled principle of interpretation that something which is specifically excluded from a chapter cannot be included therein. In this context, reliance is placed on case of Intel Design Systems (India) Pvt. Ltd. vs. Commissioner of Customs, Supreme Court [2008 (223) E.L.T. 135 (S.C.)], wherein the Hon'ble Supreme Court held that if any goods fall under the category of chapter exclusions, it cannot be classified thereunder even if there is a specific entry for such goods at 8-digit level.

Further, in the case of Hero Molorcorp Ltd. vs. Commissioner of Customs, CESTAT Mumbai (2021 (12) TMI 490], it was held that even if description of a tariff item corresponds to description of goods, it will not be accepted if such goods are excluded from Section Notes based on 'end use'.

Reference is invited to the ruling in the case of A. N. Instrument vs Collector of Customs [1999 (110) ELT 823] wherein Delhi Tribunal pointed out that (in relation to product under dispute in that case), heading 73.20 has an exclusion clause. In the said case, the departmental officers had missed the fact that the customs case is hit by this exclusion clause directly and once it gets excluded from Heading 73.20 of HSN (and corresponding tariff heading of Customs Tariff), the case gets covered by other relevant chapter note/heading. Therefore, in view of the above, the applicant has submitted that the products being in the nature of 'bovine scrum albumin' that are not for therapeutic or prophylactic use are specifically excluded from the scope of Chapter 30 of the Customs Tariff Hence, they cannot be classified under FIS code 3003 9031 'Bovine albumin and drugs of animal origin'.

The description of chapter heading 3003 of the Customs Tariff reads as:

On bare perusal of the description contained in heading 3003, it may be inferred that it only covers specified 'medicaments for therapeutic or prophylactic uses'. The First Schedule to the Customs Tariff Act, 1975 is based on the Harmonized System of Nomenclature ('HSN') issued by World Customs Organization ('WCO') and updated from time to time. In addition to the HSN schedule, the WCO also issues explanatory notes outlining the rationale behind classification of goods under each chapter, heading and sub-heading. The WCO Explanatory Notes act a guide and has a highly persuasive value while deciding classification by customs formations across the world.

In this regard, reliance may be placed on the WCO Explanatory Notes to heading 3003 (Medicaments) which stipulates that, "This heading covers medicinal preparations for use in the internal or external treatment or prevention of human or animal ailments."

Therefore, for a product to qualify classification under heading 3003, it is required to be a 'medicament', necessarily used for treatment or prevention of diseases and ailments. It is submitted by the applicant that the products imported by them are manufactured and intended for use for research purposes only. Therefore, the products are imported for non-medical use and at no point are used for treatment or prevention of diseases and ailments. Hence, they are not includible in the term 'Medicaments', which forms the underlying qualification for any goods to be classified under heading 3003.

In the case of Commissioner of Central Excise vs. M/s. Ciens Laboratories, Supreme Court [2013 (295) ELT 3], it was held by the Hon'ble Supreme Court that even if a product constitutes pharmaceutical ingredients having therapeutic or prophylactic properties, it will not be construed as a 'medicament' covered under heading 3003, if it is not used primarily for curing or treating ailments or diseases. Relevant extract of the judgment is reproduced below for case of reference:

"Firstly, when a product contains pharmaceutical ingredients that have therapeutic or prophylactic or curative properties, the proportion of such ingredients is not invariably decisive. What is of importance is the curative attributes of such ingredients that render the product a medicament and not a cosmetic. Secondly, though a product is sold without a prescription of a medical practitioner, it does not lead to the immediate conclusion that all products that are sold over/across the counter are cosmetics. There are several products that are sold over-the-counter and are yet, medicaments. Thirdly, prior to adjudicating upon whether a product is a medicament or not, Courts have to see what the people who actually use the product understand the product to be. If a product's primary junction is "care" and not "cure", it is not a medicament. Cosmetic products are used in enhancing or improving a person's appearance or beauty, whereas medicinal products are used to treat or cure some medical condition. A product that is used mainly in curing or treating ailments or diseases and contains curative ingredients even in small quantities, is to be branded as a medicament."

Similar view was followed by the Tribunals in the following cases:-

- DXN Manufacturing (India) Pvt. Ltd. vs. Commissioner of Central Excise, CESTAT Chennai [2017 (11) TMI 608]

- Commissioner of Customs vs. Daxen Agritech (India) Pvt. Ltd., CESTAT New Delhi [2018 (1) TMI 572]

Further, in the case of K-Link Healthcare (India) Pvt. Ltd. vs. Commissioner of Customs, CESTAT Chennai [2018 (364) ELT 476], Chennai Tribunal held that in order to merit classification of products as medicine or medicaments, the nature and intended use of the product must be looked into. Also, the when the products arc packed and marketed with the label that 'these are not drugs and not intended to diagnose, treat, cure or prevent any disease', they cannot be said to have therapeutic or prophylactic value. Hence, such products cannot be categorized as 'medicaments' under Chapter 30. Relevant extract of the judgment is reproduced below for ready reference:

"These products were sought to be classified under Chapter 30 as medicines by the appellant-assessee. The original authority had examined the product literature, the contents and the usage of the said products and concluded that these are to be correctly classified under Chapter 33 which covers essential oils and resinoides; perfumery, cosmetics or toilet preparations. We have perused the product literature and samples of the impugned goods. None of these products merit classification as medicines or medicaments. These are not having any therapeutic or prophylactic value. K-Link Puyikang/Puyikang Takara is basically for ladies hygiene. There is no curative or therapeutic value for these products. At the best, some of these products have effect of removing toxins, overall enhancing the well-being of the person consuming or using them. The appellant-assessee themselves clearly printed in the literature as well as on the product package that these are not drugs and not intended to diagnose, treat, cure or prevent any disease. The product as packed and marketed should be considered for classification. When the appellant-assessee themselves claimed that these are not for curing or treating any disease, the question of considering them as medicaments does not arise. "

Similar view was taken by the judiciary in the following cases:-

- Supreme Enterprises vs. Commissioner of Customs, CESTAT Mumbai [2015 (316) E.L.T. 274 (Tri. - Mumbai)]

- M/s Focus Brands Trading (India) Pvt. Ltd. vs. Union of India, Delhi High Court 12019(5) TMI 793]

The Applicant submits that the products are manufactured, imported and intended to be supplied for 'research use only' and not for medical use. Hence, classification of the products cannot be considered under the category of 'medicaments' as provided under heading 3003. Supplier's declaration stating that the products are for 'Research Use Only (RUO)' is enclosed with the application.

Reliance is placed in the case of Hero Motorcorp Ltd. vs. Commissioner of Customs, supra, wherein it was held that the imported goods must first conform to the tariff description at the heading level, and then to the description of sub-heading or tariff item. Relevant extract of the judgment is reproduced below for case of reference:

"One of the fundamental principles of classification is that the identified tariff item should describe, as nearly as possible, the goods as presented. Usage as determinant, or subsuming within broader descriptions, must have specific sanction of the notes as laid down in rule 1 of the General Rules for Interpretation of Import Tariff. It is also clear from the Rules that the comparison should be at 'heading' level before proceeding within the more appropriate of the two for identification of the applicable sub-heading and tariff item."

Thus, in view of the above, the products imported by the Company are clearly outside the purview of HS code 3003 9031 on account of dual grounds of non-conformity with description of tariff heading, i.e., 'Medicaments' and specific exclusion of the products in Chapter Notes (blood albumin not prepared for therapeutic or prophylactic uses). Note 1(h) of Chapter 30 of the Customs Tariff specifically provides that blood albumins that are not prepared for therapeutic or prophylactic uses would warrant classification under heading 3502. The products in the nature of 'bovine serum albumin' imported by the Company are neither egg albumin nor milk albumin. Hence, in the Applicant's view, they would be appropriately classified under the category of 'Other Albumins', i.e., HS code 3502 9000. India being a signatory to the WCO convention, it is bound to align its Customs Tariff with the Harmonized Schedule released by WCO at 6 digits, i.e., sub-heading level. Similarly, other signatory countries are also required to follow the same practice. In this regard, reliance can be placed upon a US Tariff Classification Ruling N144322, wherein an identical product imported by the Company, i.e., 'bovine serum albumin' was classified under sub-heading 350290. The said US Ruling is enclosed with the application.

The applicant further submits that notwithstanding the above submissions and without prejudice to each other, even if a view is taken that the products may warrant classification both under HS code 3003 9031 as well as HS code 3502 9000, then also the appropriate entry for the products will be latter. In this regard, it is pertinent to mention Rule 3(c) of the General Rules of Interpretation to the Customs Tariff The said Rule 3(c) thereof states that when goods are prima facie, classifiable under two or more headings, they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Applying the said principle provided in the Rules, the most appropriate tariff heading for the products imported by the Applicant would be HS code 3502 9000, as it numerically occurs last among the relevant HS codes.

4. The Jurisdictional Commissionerate has submitted their comments dated 18.01.2024 in the office of the CAAR. Mumbai on the application as follows:

"As per available records applicant has a valid IEC code IEC No. 0596039981 vide which they carry out import export business from India. Hence, they eligible of being applicant in terms of section 28-E (c) of the Act. The nature of activity on which advance ruling has been sought by the importer is import of "bovine serum albumin "for research purpose. Based on the documents shared by AAR, Mumbai, this office (Air Cargo Complex, Chennai) has no adverse averment on the claim made by the importer in this regard. As per the available records, applicant M/s Bio Rad Laboratories (India) Pvt. Ltd. cases pending with this office is as follows: Show Cause Notice dated 20.12.2023 issued under section 28(1) over classification issue of "CHEM ASSAYED 1 LYPH 12X5ML-C310-5(89701)" under CTH 30021290. It appears that their product "Bovine serum albumin"(BSA) is a protein derived from cows and used as protein concentration standard in lab experiments. They are serum albumin which is a component of blood serum. BSA is often used as a model for other serum albumin proteins, especially human serum albumin, to which it is 76% structurally homologous. BSA is also commonly used to determine the quantity of other proteins, by comparing an unknown quantity of protein to known amounts of BSA (see Bradford protein assay). However, there is no mechanism with this office to monitor the end use of the imported goods. Note 1(h) of Chapter 30 of the Customs Tariff specifically excludes 'blood albumin not prepared for therapeutic or prophylactic uses" & specifically provides that blood albumins that are not prepared for therapeutic or prophylactic uses would warrant classification under heading 3502. CTH 3003 stipulates that this heading covers medical preparations for use in the internal or external treatment, or prevention of human or animal ailments. Therefore CTH 3003 which covers medicaments used for therapeutic or prophylactic purpose may not be appropriate if the goods imported are used for research purpose only & not for medicaments. CTH 3502 9000 under 'Others' appears more appropriate. Importer has also placed reliance on global practices. Though US Tariff Ruling N144322 doesn't pertain to any of the products listed by the importer in their application to the CAAR, Mumbai, but an identical product with another product number "bovine scrum albumin" imported by the company from France was classified under sub-heading 3502 90.

5. A personal hearing in the matter was conducted on 01.02.2024 in office of the CAAR, Mumbai. During the personal hearing the authorized representative of M/s. Bio-Rad Laboratories India Limited, Shri Ashutosh Nath reiterated their submissions made in the application to CAAR, Mumbai. He explained the subject import goods as 'Bovine Scrum Albumin' which is not to be used for therapeutic or prophylactic purposes and to be used as laboratory/research purpose only. He gave references of Chapter note 1(h) of Chapter 30 and submitted that subject import goods merit classification under CTI 3502 9000 and not under chapter 30. He also relied upon the General Interpretation Rule (latter the better). He also relied upon the case laws in the matter of Commissioner of Customs vs. Ciens laboratories (SC), Intel design system Pvt. Ltd. Vs. Commissioner of Customs (SC) and US ruling No. N144322.

Shri Rajesh V. Shelke, Addl. Commissioner of Customs, Air Cargo Complex, Chennai attended the said personal hearing through online video conferencing. He submitted that the said goods can be classified under CTI 3502 9000 only if the same are not used for therapeutic or prophylactic purposes.

6. I have taken into consideration all the materials placed on record in respect of the subject goods including the submissions made by the applicant and Shri Rajesh V. Shelke, Addl. Commissioner of Customs, representative of Air Cargo Complex, Chennai during the course of personal hearing. I have also gone through the response from the Chennai Customs. I therefore proceed to decide the present application regarding classification of 'Bovine Serum Albumin' on the basis of the information on record as well as the existing legal framework having bearing on the classification of the 'Bovine Scrum Albumin' under the first schedule of the Customs Tariff Act, 1975.

In light of the first schedule of the Customs Tariff Act, 1975 only two headings seem relevant for consideration to answer the question of classification of the product in question i.e. 'Bovine Serum Albumin'. These two headings are 3003 and 3502. The CTI 3003 9031 specifically covers "---- Bovine albumin and drugs of animal origin". Heading 3003 is reproduced as follows:

There is no any iota of doubt either from the applicant or from the Jurisdictional representative of the Air Cargo Complex, Chennai that the subject import is 'Bovine Serum Albumin'. These products are albumin proteins derived from cows, often used as a protein concentration standard in lab experiments. I am of the view that classification of import goods is to be determined according to the heading as well as the section and chapter notes. On plain reading of chapter note 1(h) of the chapter 30 it is seen that chapter 30 does not cover blood albumin not prepared for the therapeutic or prophylactic uses (heading 3502). This chapter note specifically excludes 'Bovine Serum Albumin' meant not for therapeutic or prophylactic uses and specifically arrange it under chapter heading 3502.

Heading 3502 is reproduced as follows:

Albumin proteins are also covered here under heading 3502, however, albumin under consideration is not egg albumin or milk albumin. Further chapter note 1(b) of the chapter 35 states that chapter 35 does not cover blood fractions (other than blood albumin not prepared for therapeutic or prophylactic uses), medicaments or other products of Chapter 30.

From the above it is amply clear that chapter 35 does not cover blood fractions of chapter 30, although, blood albumin can be covered under chapter 35 if they are not prepared for therapeutic or prophylactic uses.

Further, it is most pertinent to mention that it is nobody's contention, either of the applicant or of the Jurisdictional representative of the Air Cargo Complex, Chennai, that the product under consideration in the instant application i.e. 'Bovine Serum Albumin' is proposed to be imported by the applicant is for the therapeutic or prophylactic uses. Conversely, the applicant has plainly and truely declared that 'Bovine Serum Albumin' proposed to be imported by them is not for the therapeutic or prophylactic uses. The applicant has specifically declared/submitted in the instant application that the products 'Bovine Serum Albumin' proposed to be imported by them arc for non-medical use and are not used for therapeutic or prophylactic purpose. It has been submitted by the applicant that the products imported by them are manufactured and intended for use for research purposes only.

Further, the applicant has elaborated the terms therapeutic or prophylactic uses, medicaments at a great length. As discussed above, condition of chapter note 1(b) of the chapter 35 is duly satisfied to cover the 'Bovine Serum Albumin' proposed to be imported by the applicant.

7. On the basis of foregoing discussions and findings, I have come to the conclusion that 'Bovine Serum Albumin' proposed to be imported by the applicant not for therapeutic or prophylactic uses merit classification under Custom Tariff Heading 3502, more specifically under CTI 3502 9000 of the First Schedule of the Customs Tariff Act, 1975, and I rule accordingly.

(PRABHAT KAMAL RAMESHWARAM)

Customs Authority for Advance Rulings, Mumbai.