By TIOL News Service

ERNAKULAM, JULY 22, 2016: THE petitioner, being a company engaged in manufacture of blood bags and dealers of blood transfusion apparatus, imported soft shell filter for blood bags. The item was classified under chapter heading 9018 90 99 and petitioner claimed exemption under Sl.No.309(i) of notification No. 12/2012 CE dated 17/3/2012. However, the department viewed that the goods imported by the petitioner is "filtering equipment for filtration of blood" is classifiable under Chapter heading 8421 2900 based on Note 2(a) of Chapter 90. Reference is also made to Board's Circular No. 19/2013 issued by CBEC, wherein it was clarified that filtering apparatus for filtration of blood is classifiable under chapter heading 8421 29 00. Therefore, according to the department, an additional 12% tax is leviable.

The main contention urged by the petitioner is regarding the validity of Circular No. 19/2013. Petitioner submitted that these filters which are the subject matter in issue are used in the dialysis machines and have no use other than for the aforesaid purpose. It is part of the system by which dialysis takes place, when there is a specific provision for blood purifying system in tariff item 9018 90 31, there is no reason why it should be classified under the general head of filters.

After hearing both sides, the High Court held:

+ There is no dispute about the fact that the products in question are used for the purpose of renal dialysis equipment. What was considered by the authorities in the Circular is with reference to 'Disposable Sterilized Dialyser' and 'Micro Barrier'. It is observed that the complete machine which performs the blood purifying is classifiable in sub heading 9018 90 and is covered under tariff item 9018 90 31. It is also an admitted fact that the 'Disposable Sterilized Dialyser ' and 'Micro Barrier' are part of the main equipment which is classified under sub heading 9019 90, Reference is made to 2 nd paragraph of Part III of the HS General Explanatory Note to Chapter 90 for guidance for the application of Note 2(a) of Chapter 90. It says, parts which in themselves constitute articles falling in any particular heading of Chapter 90, 84, 85 or 91 are in all cases to be classified in their respective headings.

+ But when it is apparent that these equipments are filters and qualifies as parts of blood purifying system under the sub heading 9018. 90, there is no reason to give a different interpretation unless it constitutes articles falling in any particular heading.

+ The contention urged by the respondents while supporting the Circular is that in view of the specific entry under sub heading 8421, the item cannot come under Chapter 90. But a bare reading of various tariff items coming under Chapter sub heading 8421 do not indicate that a component for filtering blood could be included in any of the items coming under 8421

+ Note 2(b) clearly applies to the fact situation since there are no entries in the tariff head items which can take care of parts and accessories of renal dialysis equipment which comes under the tariff head 9018 90 31.

+ Note 2(b) applies to the facts of the case and these components can be said to be parts or accessories suitable for use solely with the machines as stipulated under tariff item 9018 90 31.

+ Therefore, it is held that the Circular is not in terms with the statutory provisions and is liable to be set aside.

+ Accordingly, the writ petitions are allowed.

(See 2016-TIOL-1473-HC-KERALA-CUS)