NOVEMBER 25, 2024

By S K Rahman, IRS, working as Principal Commissioner (AR) at CESTAT Delhi

ON 29th October 2024, the Hon'ble CESTAT Principal Bench Delhi has passed an interesting Order 2024-TIOL-1000-CESTAT-DEL on import of ELISA test kits and reagents denying the benefit of Notification as they were being imported for food testing where as benefit of Notification was available for diagnostic use

2. BRIEF FACTS OF CASE: The Appellant has imported Elisa Test Kits falling under CTH. 38220090 and reagents. They have claimed benefit of the following Notifications.

2 Two live Bill Of Entries were withheld. The description given in the Invoice/packing list was the name of test Kit or name of reagent. But the importer has declared the description in Bill of Entry as name of test Kit or name of reagent suffixed with the words "for diagnostics use only" which were not there in Invoice/packing list with intention to claim the benefit of notification which says "diagnostics test kits specified in list 4." In the list 4 at Sl. No. 32 or 36, ELISA kits exists. These imported ELISA Kits are being used for food testing which is admitted by importer and no dispute about it. The Appellant importer had been declaring the imported goods as "testing kits for food" until May, 2019. Later w.e.f. June, 2019 onwards the appellants changed the description by adding the words "for diagnostic use only". The dispute is whether the food testing kits imported by the appellant can be treated as diagnostic kits in terms of the exemption notification

3. The Counsel for appellant has argued that

i. food testing kits are covered under the definition of the term "diagnostic kits" mentioned in the exemption notifications as they are used for diagnosis of adulteration of the Food.

ii. The learned counsel relied on the decision in M.J. Pharmaceuticals Vs. Commissioner of Customs, New Delhi

4. Shri S.K. Rahman, the learned Authorised Representative submitted that

i. the impugned goods viz. kits and reagents are used exclusively for food testing kits only and are not meant for diagnostic purposes of human beings (including animals).

ii. HSN Explanatory Notes for CTH 3822, the Diagnostic reagents are used in the evaluation of physical, biophysical or biochemical processes and states in animals and humans that too for vitro purposes

5. Invoice – BE Description.:- (ref para 9) The impugned goods are actually the food testing kits and not ELISA kits for diagnostic purposes as is evident from the invoices, which do not mention that the ELISA kits are for diagnostic use though the same has been mentioned in the two B/Es.

6. Change description in BE:- (ref para 10) w.e.f. June, 2019 onwards the appellants changed the description by adding the words "for diagnostic use only". The obvious reason is that the appellant was aware that the testing kits for food are not eligible for exemption and it is only the kits, which are used for diagnostic purposes fall within the exemption notifications

7. Foreign Supplier:- (ref para 12)The overseas supplier of the appellant M/s Romer Labs, Singapore PTE Ltd. is a manufacturer of food testing kits and reagents. The information is given by them on their website - https://www.romerlabs.com. Therefore, logically the conclusion is that the goods imported by the appellant were food testing kits. Even the literature produced by the appellant in this regard establishes that the kits imported were exclusively food testing kits

8. Life Saving: (ref para 13) The emphasis in the description used in Notification No.50/2017 is on the words "life saving" as each of the clauses (A, B, C) of serial no.167 uses the expression "life saving drugs or medicines", which means that it can only be related to animal or human and not to food items.

9. Medical purpose: (ref para 14) Serial No.167(A), embraces not only the drugs or medicines, but also includes their salts and esters and diagnostics test kits as specified in List 4, which at Sl.No.32 provides, "Enzyme Linked Immuno absorbent Assay, ELISA KITS". Therefore, the adjudicating authority rightly interpreted that the expression Enzyme Linked Immuno absorbent Assay, ELISA KITS are preceded by the words in Serial No. 167(A), i.e., life saving drugs, medicines, including their salts and ester and diagnostics test kits. In simple words the notification at Sl.No.167 intends to exempt goods meant for medical purpose such as medicines/drugs and diagnosis kits.

10. HSN Explanatory Notes CTH 3822: (ref para 17)The Diagnostic reagents are used in the evaluation of physical, biophysical or biochemical processes and states in animals and humans that to for vitro purposes. Notification benefit is for "Diagnostic reagents". Diagnostic reagents are any organic or inorganic compounds that are added to an analyte or biological specimen, like urine, a blood sample, or biopsied human tissue, to determine pathogenesis or abnormalities.

11. Meaning of "Diagnostic":- The term "diagnostic" in the Oxford dictionary is defined as "connected with finding out exactly what a problem is and what caused it, especially an illness". Further in Merriam Webster dictionary, it is defined as "of, relating to, or used in diagnosis". The term "diagnosis" is defined as "the art or act of identifying a disease from its signs and symptoms. This also strengthens the above view that diagnostic means related to evaluation of physical biophysical or biochemical processes and states in animals and humans for detection of illness

12. Can diagnostic purpose be for food testing ?: (ref para 18)The contention of the learned counsel for the appellant that the diagnostic purpose can be for food testing also is unsustainable in the context of the exemption notification which has to be construed and interpreted in the light of the words/expressions used therein. The Apex Court in Union of India Vs. Ind-Swift Laboratories Ltd. = 2011-TIOL-21-SC-CX said "It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency"

13. Defination of "Diagnostic" :- The Authorised Representative has countered the arguments of the counsel for the appellant by relying upon case law of Madras High Court in Chinese University of Hong Kong and Sequenom, Inc. v. The Assistant Controller of Patents and Designs, CMA (PT) No.14 of 2023. In this case the Madras High Court has ruled that the term "diagnostic" in the Patents Act should be limited to processes that disclose pathology for the treatment of human beings. Thus, when viewed in context, the Court concluded that the word "diagnostic" should be limited to diagnostic processes that disclose pathology for the treatment of human beings.

14. The Hon'ble CESTAT has observed (ref para 19)that "the observations made by learned Authorised Representative are relevant to interpret the expression used in the notification and distinguishing the goods, which are meant for food testing."

15. Strict interpretation of Notification: The Authorised Representative submitted that the Notifications are to be interpreted strictly for giving the benefit of Notification and in this regard, the following case laws are relied upon.

The Hon'ble CESTAT has observed (ref para 20)that "following the aforesaid principles, we find that the appellant has failed to discharge the burden that ELISA kits imported by the appellant falls within the parameters of the exemption notification."

16. The Hon'ble CESTAT has observed (ref para 21)that "learned Counsel for the appellant has relied on the decision of this Tribunal in M.J. Pharmaceuticals (supra), however, we find that the said decision does not supports the case of the appellant."

17. Considering all the above the Hon'ble CESTAT has passed Order 2024-TIOL-1000-CESTAT-DEL (ref para 23) that "In view of our discussion above, we conclude that ELISA kits imported by the appellant were not used in the evaluation of physical, biophysical or biochemical processes and states in animals and humans, and as a result, they were not diagnostic reagent/kits rather they were meant to be used for food testing and, therefore, did not fulfil the criteria to avail the benefit of expression as per the notification"

18. The take aways from the above case are :

i. ELISA test kits when imported for "food testing" are not eligible for benefit of Notification No. 50/2017-Cus dt. 30.06.2017 (earlier 12/2012-Cus dt. 17-03-2012)

ii. "Diagnostic" purposes means the processes that disclose pathology for the treatment of human beings.If kits and reagents are used exclusively for food testing kits only and are not meant for diagnostic purposes of human beings (including animals).

iii. The Notifications are to be interpreted strictly for giving the benefit of Notification.

iv. Departmental officers shall compare the description of goods given in Bill of Entry and compare with description given in Invoice. They shall be alert in case the importer adds certain words to description in Bill of Entry which are not there in Invoice that too with an intention to take benefit of Notification.

(The views expressed are personal and not in official capacity)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)