The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that food testing ELISA kits are not for diagnostic purposes on humans and animals, therefore no customs duty exemption is applicable on ELISA kits.
Ilishan Biotech (P) Ltd, the appellant/assessee is importing ‘ELISA Test Kits and Reagents for food testing’ and claimed exemption under Notification No.12/2012-Cus dated 17.03.2012, subsequently under Notification No.50/2017-Cus dated 30.06.2017. The goods imported were put under preventive check on 19.05.2020 by SIIB, Air Cargo Complex (Import), New Delhi on the allegation that the goods declared as “ELISA kits for diagnostic use‟ in Bills of Entry are actually ‘food testing kits’, and to ascertain the correct description/classification of the goods and their eligibility for exemption under Notification No.50/2017-Cus. (Entries 167 & 249A) read with S.No.32 of List 4 of the notification, and applicability of the IGST under Notification No.1/2017-Integrated Tax (Rate) dated 28.06.2017 (Entry 180 of Schedule I & Entry 80 of Schedule-II).
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Goods imported under the 2 BEs were seized and were later provisionally released on execution of bond with bank guarantee. Statement of Ashish Bhandari, Managing Director (MD) of the appellant was recorded on 17.09.2020. The Adjudicating Authority confirmed the differential duty demand against BEs for the period with interest dropped demand against BEs for the period from 11.05.2015 to 31.03.2018 as being time barred.
The Adjudicating Authority allowed redemption, imposed penalty under Section 112(a), dropped imposition of penalty under Section 114A, ordered enforcement of bank guarantee towards recovery of dues and imposed penalty on appellant‟s Managing Director under Section 114AA.
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The appellant contended that food testing kits are covered under the definition of the term ‘diagnostic kits’ mentioned in the exemption notifications. The term ‘diagnostic’ is used from 12.06.2019 only. The invoices and contracts show that the goods are used for food testing. They have amplified the description as ‘Elisa Kits for diagnostic use only’ as they are used for diagnosis of adulteration of the Food.
The appellant argued that the goods were not mis-declaring the description of the goods. It is only the intended use of the goods. Claim of classification and claim of exemption is not mis-declaration of goods.
It was contended that it is wrong to say that exemption applies to only life-saving drugs. Life-saving drugs do not merit classification under Chapter 38. If exemption is limited to life-saving drugs, then notification would be rendered superfluous.
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The department contended that as per 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 to for vitro purposes. Notification benefit is for “Diagnostic reagents”, which are any organic or inorganic compounds that are added to an analyte or biological specimen, like urine, blood sample, or biopsied human tissue to determine pathogenesis or abnormalities.
On the other hand, the department contended that goods are for testing of food and not for diagnostic purposes of human beings (including animals). Main allegation is of importing goods “ELISA Test Kit for food testing” but declaring them as “ELISA Test Kit for diagnostic use only”.
The two member bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed 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.
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While dismissing the appeal, the tribunal held that appellant is not entitled to the benefit of the exemption notification in respect of the kits imported by him for food testing in terms of the expression used in the notification and also keeping in view the intention under which the notification has been issued, i.e., to grant exemption to the goods related to medical treatment and diagnosis.
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